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PORTFORMULAS
Formulaic Trending Monthly Abstract
October 14, 2013 RAM Score
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RAM Score is a proprietary trending tool that takes into account several dynamic components related to the U.S. markets and economy. It features a core baseline which allows for correlation between these multiple components so that they may be added together for an overall Ram Score. As a trending tool, we believe that a positive RAM Score indicates that the odds are stacked in favor of equity investments and a negative RAM Score indicates that odds are stacked Mapper Score TM is a proprietary trending tool that takes into account several dynamic components related to the underlying against equity investments. stocks represented within an index. It identifies certain strengths of individual stocks contained within an index and tracks how many meet minimum Our scoring requirements. As a trending tool, we believe that the higher the percentage of qualifying stocks, the greater the strength of the overall index. mechanisms do not guarantee that the markets will increase when scores are strong or decrease when the scores are weak. But we believe the long term TM with our Portformulas intricate Formulaic correlation may be valuable for investing... combining our trending features of RAM Score & Mapper Score TM Strategies results in a uniquely logical approach to investing that is exclusively available through Portformulas. Investing

The overall RAM Score has decreased from +63.84 to +63.09 this month... as the Mapper ScoreTM of 10 increasing. The two looming questions... 1. 2.

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How will the markets continue to react to the U.S. government partial shutdown? How will the markets continue to react as we rapidly approach the U.S. government debt ceiling?

First off, understand that both of these issues are man-rnadepoliticalcrisis,meaning that these battles have only an indirect direct) relation to any typical underlying market or economic indicators. As such, they create a bit of a conundrum in that the underlying indicators have no way to directly measure anything related to these two fabricated lines-in-the-sand (the government shutdown and government debt ceiling) as the indicators do not acknowledge the existence of such fabricated lines.
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For example, the market and corporate fundamentals are fairly strong these days, and that strength does not really care if the government is open for business or not. However, human emotion does care. So as the humans react, volatility goes up. The heightened volatility can then be tracked as an indicator, but since the heightened volatility is not a result of, say poor fundamentals, the increased volatility then is really an indirect reaction to the governmental fabricated lines-in-the-sand. So, although the media headlines would lead you to believe that the government shutdown had significant impact on the market that simplsnotsupj.gd graphically. Below is a weekly chart for the S&P 500 going back to year 2007, and as you can see, we are still within the upper-end of the trading channel that has been developing since the end of the crisis.

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So, back to the first question... How will the markets continue to react to the U.S. government partial shutdown? Well, the shutdown is the result of Congress not agreeing to pass a budget or a continuing resolution to fund our government. By lack of passing such, this prohibits the governments discretionary spending, but not its mandatory spending or debt service. This would be akin to a family deciding to halt spending on new cloths, vacations and entertainment but agreeing to continue to buy food, pay the utility bills and the mortgage. And although the shutdown initially shook the markets, the focus quickly shifted to the looming debt limit debate, with the limit targeting the October 17 debt payment deadline. Generally, the shutdown was considered negligible as the S&P 500 remained relatively unchanged over the first week or more of the shutdown (even though volumes were reduced while volatility increased). And now, back to the second question... How will the markets continue to react as we rapidly approach the U.S. government debt ceiling? Based upon the fact that a U.S. default on debt (stopping payment to creditors like the mortgage payment in the previous example) would be so astr ic that it would immediately disrupt the global economy, most experts agree that the risk of such default is highly unlikely (keeping in mind that one must then assume a certain amount of trust in Congress). To put this in perspective, the U.S. dollar represent f the $5 trillion worth of daily global currency trading. If the U.S. 6 defaults it would be similar to having 75% of the currency trading freeze up instantly. Again, most experts cant fathom such stupidity prevailing. However, if such were to actually occur, it would trigger a deflationary event (not inflationary as some believe). This is because there would be less money in the system. But one must then also recognize that unlike Greece, which was dependent upon the Euro, we control our own printing press for money. So most experts would then anticipate an extreme ramp-up of what we already know as quantitative easing. So, in summary, market fundamentals are strong... And as such, a governmental shutdown hurts very little (some argue it even helps), but a default on debt would be catastrophic Although highly unlikely. And this unlikeliness is exactly why the markets rallied the end of last week. This is also why our RAM Score and Mapper Score indicators continue to suggest Portformulas models remain invested in equities. Please check out the following graphic pages for more interesting details. For more information you can visit www.portformulas.net or speak with your Financial Advisor.

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RAM Score is a proprietary trending tool that takes into account several dynamic components related to the U.S. markets and economy. It features a core baseline which allows for correlation between these multiple components so that they may be added together for an overall Ram Score. As a trending tool, we believe that a positive RAM Score indicates that the odds are stacked in favor of equity investments and a negative RAM Score indicates that odds are stacked against equity investments.
RAM Score (Lifetime)
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TM is a proprietary trending tool that takes into account several dynamic components related to the underlying stocks Mapper Score represented within an index. It identifies certain strengths of individual stocks contained within an index and tracks how many meet minimum requirements. As a trending tool, we believe that the higher the percentage of qualifying stocks, the greater the strength of the overall index.

(NOTE: As such, we do not believe that all stocks within an index are automatically worthy of ownership. In the FREEDOM SERIES, we seek to TM illustrates how many stocks we view worthy of consideration.) only own the stocks that meet our qualification criteria. The Mapper Score

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Mapper Score for S&P 500 Stocks Mapped 157 MapperScore 31.40%

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Mapper ScoreTM for Dow 30 Stocks Mapped 9 Mapper Score 30.00%

TM for Russell 2000 Mapper Score Stocks Mapped 136 Mapper Score 6.80%

Mapper ScoreTM for S&P 100 Stocks Mapped 33 Mapper Score 33.00%

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Mapper Score TM for Russet 3000 Stocks Mapped 387 Mapper Score I 2.90%

Mapper Score 1M for S&P 400 Stocks Mapped 87 Mapper Score = 21.75%

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Mapper Score TM for Russell 1000 Stocks Mapped = 252 Mapper Score 25.20%

Mapper Score TM for S&P 600 Stocks Mapped 71 Mapper Score 11.83%

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0 Our scoring mechanisms do not guarantee that the markets will increase when scores are strong or decrease when the scores are weak. TM But we believe the long term correlation may be valuable for investing.. Combining our trending features of RAM Score & Mapper Score TM Strategies results in a uniquely logical approach to investing that is exclusively available with our Portformulas intricate Formulaic Investing through Portformulas.
Please note that there are a number of important disclosures that must be considered before investing in Portformulas. Please read the information and disclosures contained in Portformulas hypothetical carefully before investing. Any performance figures referenced herein are hypothetical and are not indicative of future results. Purchases and sales of securities within Portformulas various strategies may be made without regard to how long you have been invested which could result in tax implications.
RAM Score and Mapper Score General Disclosures

The RAM Score and Mapper Score illustrations do not represent any particular Portformula strategy nor are they intended to recommend any Portformula strategy or the RAM Score feature. The information contained herein simply attempts to illustrate how our firms RAM Score feature and Mapper Score operate. The RAM Score feature can be applied to many Portformula models at no additional cost. The Mapper Score is simply an analytical informational tool. RAM Score was not developed until January 2010. Prior to January 2010, clients were utilizing RAM Scores predecessor, RAM. Clients utilizing RAM may have had different results than those reflected above. RAM Score movement prior to 2010 is hypothetical and based on retroactive application of RAM Scores indicators to market and economic conditions existing at the time. Portformulas was not managing assets prior to 2007. It is important to understand that RAM Score is only a tool designed to assist our firms management of your account. RAM Score does not guarantee any specific results or performance and even with RAM Score on your account, it is possible that your account will lose value. RAM Score moves assets into or out of the market based on various economic and market indicators. It is possible that the market will move positively while you are not invested or negatively while you are invested, resulting in losses. Any Portformula strategy may underperform or produce negative results. Just because Portformulas maps a stock does not mean that the stock will be held in a model. Client accounts may hold less stocks than those referenced in the Mapper Score illustration. Mapper Score has no impact on performance. The RAM Score illustration utilizes the S&P 500 index because it is a well-known index and provides a recognizable frame of reference. The Mapper Score analysis uses the referenced indices because they are relevant comparisons across certain Portformula models. The indices referenced herein are not publicly available investment vehicles and cannot be purchased. Furthermore, none of the indices referenced herein have endorsed Portformulas in any way.

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