Pricey system touts investment riches JAMES DAW Bob Larmour recently spent $10,000 to take control of his investment future. But the odds are not in his favour, warns finance professor Moshe Milevsky of York University's Schulich School of Business. Larmour, a former factory maintenance manager, has bought a computer software disc, three years of access to daily and historical stock-market data and some telephone tutorials to help get him started. The package from CanRich Corp. of Winnipeg is one of several high-priced investing systems now being marketed in Canada. This week the Ontario Securities Commission warned investors to read the fine print about the lack of guarantees before buying such software, and to ask themselves a simple question: "If the software could consistently predict the future performance of investments, would the software developers need to make money selling the program?" Larmour took the leap after he and his wife realized they had less money in their mutual fund portfolio than they had contributed during the past 14 years. Marketers of the four-year-old "wealth building system" he chose claim it will provide him with inside knowledge on the art of making money in the stock market. "By using the CanRich Self-Directed Wealth Building System you could: Grow $10,000 into as much as $800,000 in 10 years," a sales pamphlet states. Larmour paid the fee after much hesitation. Each Monday for several weeks he dialled into conference calls arranged by CanRich. He listened carefully to farmers, truck drivers and chartered accountants introduced by their first names tell about their successes. He also received several calls from CanRich salesman John Dingle, who said he has been promised a copy of the software as part of his sales commission. Dingle is a former lawyer who was suspended from practising in Ontario in 1994 for not paying for errors and omissions insurance. He insisted yesterday the CanRich system is not a get-rich-quick scheme, but rather a conservative strategy based on looking for a 1 per cent gain per week by choosing a conservative blue-chip stock that seems headed for a bounce in price. "Ten years is a long time" to turn $10,000 into $800,000, he argued. In fact, to achieve such an ambitious goal, one would have to earn an average annual return of 55 per cent, after fees for numerous stock trades and taxes. Average stock-market gains are a fraction of this level, as are the historic returns of U.S. billionaire and star investor Warren Buffett. Larmour said the CanRich software provides him with standard financial ratios, such as price to earnings, and a graph that compares the 50-day, moving-average price of a stock with the 10-day average price. Various technical analysts use such graphs in their work, but many other factors influence price movements. Several people urged Larmour not to sign up with an unregulated, unsupervised and untested software marketer such as CanRich. But he said it was the testimonials from existing clients that won him over. "There is a fellow in Nova Scotia who claims to be able to make 300 per cent on investments this year doing it full time," he said. "I realized I was going out on a limb, but basically I am going into it to increase the meagre wealth we have been able to accumulate in the last 30 years," he said this week. Professor Milevsky said supposed investing systems are brought almost monthly to his Individual Finance and Insurance Decisions Centre, part of the Fields Institute, a centre for mathematical research sponsored by universities and corporations. "When I have someone come in and say they have a system that will earn 50 per cent a year, I throw them out," he said. Milevsky said he regularly offers to have graduate students test the reliability of new stock-trading systems at no charge. "Without fail, we never hear from them again," he said. He said he would extend the same offer to CanRich to track the performance of the company's system, and report the results. "That would be a fun horse race," he said. "Let us get their exact rule, and let's track it over a few months, and let them live or die with the consequences." A spokesperson for CanRich said its president Franklin Massey would be unavailable to talk to a reporter until next Thursday. We'll see then how he reacts to the professor's offer.
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