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Hi JD, Re: v-Wave this week......................
I chopped off a calendar year as I think we're tired of being reminded of Covid. In doing so, it shows us more differentiation between the short and longer term v-Waves.
Right now the 3-5 year v-Wave is sitting right on the Median value. The shorter term v-Wave has been rising in risk profile but is still borderline bullish.
Best wishes,
OAG Tom
... on second thoughts !!! ...
The stock/gold ratio at the start date was pretty low and as such it would have been more sensible to start with a relatively high stock weighting/low gold weighting. Adjusting for that (to a 25% initial gold weighting) and AIM excelled constant weighted, averaged near 40% average gold over the total period, and to more recent lagged 100% all-stock total returns by just 0.7% annualized. It did lag all-stock in the 1990's big stock up-run, but has subsequently closed down that gap.
UK FT250 is much like US small cap value and I've noticed that partners well with gold, tending to both have similar levels of volatility and a degree of multi-year low/inverse correlation. US data for SCV/gold is also noted as giving 100% Total Stock Market a good run for its money, with less risk (portfolio volatility) PV US example for the similar years. And considerably better if you adjust that PV example start date back to 1972 (the oldest data that PV has available).
Monte Carlo sim was also significantly better
MC for 60/40 SCV/gold 4% 30 year SWR and ditto for 100% Total Stock Market MC suggests differences of >99% success rate compared to 86% success rate respectively.
Indicative of how the likes of the vWave as a indicator of initial loading/weightings can make a relatively large overall difference in outcome.
Clive
AIM of stock/gold ratio
Similar to the Dow/Gold ratio I loaded UK FT250/gold ratio (midcap stock index price to gold ratio) and AIM'd that with default settings (initial 50% 'cash, 10% SAFE, but did opt for a higher 10% minimum trade size).
For monthly reviews ...
Using AIM indicated %CASH I set that as each months percentage gold weighting, the rest being in stock (total accumulation index that includes dividend being reinvested), and that broadly averaged 50% AIM cash having been indicated. I then compared that to the monthly constant 50/50 stock/cash total returns.
Generally a high Dow/Gold ratio (stock/gold ratio) is suggestive of high stock prices/low gold prices, and equally a low ratio suggests low stock prices/high gold prices. Adjusting stock and gold weightings in reflection of that as directed by AIM resulted in inconclusive overall benefit/or-not. For the earlier years that had relatively high AIM %cash (and hence gold weighting), but then in around 2009 the stock/gold ratio dived and had low/no gold being suggested (all stock), a great time to have rotated into that (Financial Crisis lows).
So broadly lagged, but then jumped to lead. Overall is winning, to the more recent date, but could be argued either way as having been good/not-so-good.
At one point the AIM directed / constant weighted was lagging by a 0.8 factor (so in total having a -20% lower $$$ portfolio value). As of recent that has spiked to it leading by around a 1.4 factor (so in total having a 40% higher $$$ recent portfolio value compared to constant weighted.
Pushed to approximate recent relative values and I'd agree with AIM, with FT250 stock index values being relatively low, gold values being relatively high, so AIM in that sense has made a reasonable call, given no more than just historic prices data.
Just thought I'd share the observation.
Happy Easter to all
Clive.
Re: Augusta Moments....
If a tree falls on a golf course
does it make any noise????
OAG Tom
Wave 3.0*
Suggested Starting Cash Value For New AIM Accounts/Positions
Individual Stocks
High Risk: At or above 51%
Neutral: Between 37 and 50%
Low Risk: At or below 36%
Diversified Funds
High Risk: At or above 34%
Neutral: Between 25 and 33%
Low Risk: At or below 24%
_________________________
Week of April 14th
_________________________
Short Term (18 Months)
Individual Stocks: 50% (Up 10 from previous week)
Diversified Mutual Funds
or Portfolio: 33% (Up 6 from previous week)
__________________________
Long Term (3-5 Years)
Individual Stocks: 45% (Up 2 from previous week)
Diversified Mutual Funds
or Portfolio: 30% (Up 1 from previous week)
Oscillator: .79 (Up 1.33 from previous week)
*See posts #44585 and #4458
VWave
As of 9:00 AM PST, the current issue of Value Line is still
unavailable. When that occurs, I will post this week's VWave.
Jon
Quote from Elaine G:
"The markets don't go down because of (only) overvaluation. You have to have the FED tighten as well....."
Well, what does this say about the current situation? We have seen a year of FED tightening and a market that's been, by Elaine's consideration, overvalued. Maybe that's why 2022 was the way it was!
In the words of Paul Carrack:
.....and don't forget Toonces The Driving Cat!........
Re: SNL,
What? No Mr. Bill in it? " Here comes Mr Bill"....
RE: AXAS.....
I wasn't in very long, and that was years ago...
Thanks for your thoughtful reply karw.
Answered perfectly.
I follow a similar approach to yours in my "income" engines.
I allocate $20,000 per engine - only as a rough initial guide.
I usually start with 20-30% (plus virtual) and let AIM work it's magic.
Somewhat conservative but it works for my most of my portfolio.
I do have 3 stocks that have low beta with no realistic buy or sell opportunities on the horizon.
I suppose that's OK if I just wanted to sit back and collect only dividends.
I would like some degree of volatility capture so your "beta" adjustment appears to be a possible solution. Thanks again for sharing.
All the best,
John
Hi Ken.
Are you still with AXAS?
Unfortunately yes. But they're close to being gone.
Hi John,
adjust your initial AIM program size as well?
Using a kind of 'Risk Parity' approach? That would be nice in a 'equilibrium' type of situation.
Quite often I use the following approach: try to determine something of quality that is going down. Take a small real or virtual machine size and use AIM's buying to buildup the machine, using a situation where all equilibrium is gone. The size of the eventual machine will then be determined by the market dislocation and AIM's buying.
Hope to have answered your question.
Kind Regards, K
Re: wall street week
sage advice never grows old.
Toofuzzy
Greetings karw.
Thanks for presenting your "beta" strategy. Quite intriguing.
As a follow-up, do you also adjust your initial AIM program size as well?
For example, beta >1.5 ($10,000), beta =1 ($20,000), beta <0.5 ($30,000).
All the best,
John
W$W Spoof!
Hi Tom
I believe interest rates revert to the mean also , so while a lot of investors like low interest rates, I like to buy when interest rates peak, especially after a first Fed rate cut.
Toofuzzy
Hi Steve,
Good to hear from you... Looks like OPEC just shot oil prices back up... Are you still with AXAS? Best regards, Ken
Hi Tom, Re: 20
That was a great idea then, and still is today... Looking at Lou as I type this so I hope he's smiling down on all of us... He was a true professional in every way... Great to see you've stuck with the 20 idea all these years, and even adjusted on it a bit to meet real world scenarios... Best regards, Ken
Hi Ken.
I see you've noticed the drop off in participation on this board. Well, that didn't happen overnight, but clearly it has dropped way off. My own personal take on it is this happened slowly over time when our favorite little book went out of print
Could be, but my note was just that the recent daily activity just kind of disappeared suddenly.
No matter. The lack of new interest in Lichello's work is understandable. So much more available with the internet, it's hard to break through. Maybe we need to advertise!
I never got into Wall Street Week.way back whenever.
Wasn't actively investing at the time.
Or any other business centered show.
Once we got cable (1984-ish), I frequented CNBC for a while but kind of soured on it. Hosts were making it all about them, or being too 'theatrical' like Jim Cramer.
But I always liked Stuart Varney. I happened to be home sick on Black Monday, 1987 and was watching him report on it. Kind of scary...
The 1987 stock market crash, or Black Monday, is known for being the largest single-day percentage decline in U.S. stock market history. On Oct. 19, the Dow fell 22.6 percent, a shocking drop of 508 points
...but 500+ point swings are pretty common nowadays +/-2%.
But not 22.6% drops! With the Dow @ 33,500 right now, that would equate to over 7500 points!
Both Varney and Maria Bartiromo are on Fox Business now and I tune them in on TV or Sirius XM almost every day. At least for a little while.
Hi K, Re: Activity........................
We bought in the Financial sector, too. I guess I can include Schwab (SCHW) in Financials and it, too, triggered some effective buys.
Linking BETA to minimum transaction size is a clever idea. Thanks for posting it.
Best wishes,
OAG Tom
Hi Toof, Re: Value LIne Price Earnings value....................
They calculate the median of all stocks "with earnings."
I like the Value Line P/E in that their database is of ~1700 stocks instead of the S&P500 or Dow 30.
As we head toward expected poorer earnings with the inflation and higher interest rates, there will be a difference in how many companies are included each week. I don't have access to that info, however. Some companies will experience reduced positive earnings and some will report losses. Of course, some will show improved earnings, too.
I find it informative that 26 weeks ago the median P/E was 14.4, at the market low of 3/23/2020 it was 11.0 and at the 2022 market high it showed 19.3. Part of the reason Ms Garzarelli's index is so good is it doesn't depend just on P/E but the combination of "risk free rate of return" plus Price to Earnings. In her study (and mine) she showed that a neutral risk market was "20" with 18 and below being bullish and 22 and above being bearish. Now, that "20" could be a combination of a P/E of 19.5 plus 0.5% interest. Or, it could be a P/E of 10 and interest rates of 10.
Most people only look at the P/E and could be fooled by a 10 P/E and think it's bullish or 19.5 and think it is bearish. Only with the combination does one see that the 10 or 19.5 P/Es are just neutral in my example above.
When I put in the CPI inflation rate as a potential substitute for interest rates the Relative Valuation Index corrected itself from the mischief of the Federal Reserve Bank's manipulations. The spreadsheet uses the larger of either the 13 Week Treasury or the CPI inflation value. The result shows RV has been in its Caution zone almost continuously since the start of 2021.
But, my Market Risk Indicator isn't dependent upon just the RV. There are the other three risk components included in the MRI. Of those, two are neutral and one is bullish. The bullish one helps cancel the bearish one and the other two are adrift in the sea of doldrums. Overall, my Market Risk Indicator is currently on the higher end of its neutral range.
Thanks for the question,
OAG Tom
Hi Toofuzzy,
My buy activity was in the finance sector this time and only one day or so.
I had 4 buys that had a transaction size of 12% and 1 buy of 6%.
Safe values were 10%.
I guess a nice strategy could be:
stocks with beta > 1.5 , buy transaction size 12%
stocks with beta = 1 , buy transaction size 6%
stocks with beta < 0.5, safe <10% and safe + transaction size smaller than 10%+6%
Kind Regards, K
Hi Toof,
I've not had much activity in either the Purchasing or Sales Departments. I'll post my Q1 portfolio results later but need to update the graphs through March 31.
Best wishes,
OAG Tom
Tom
How do you get an average P/E when some earnings are negative ?
Toofuzzy
Hi Tom
Re: trading range.
I guess that is why I am not doing any trades.
Toofuzzy
Hi Ken and John, Re: W$W................
It was just before the crash of '87 when Elaine Garzarelli was a W$W guest and brought to my attention her "Magic Number" of 20 as the long average value of P/E + ST Interest Rates. I tested it and then added it to my weekly data collection for market risk. I still call it "Relative Valuation" and here's what it looks like currently:
With its color coordinated border, it's not hard to see that Elaine is probably a bit worried at this time. However, please note that my Relative Valuation Index is slightly different from Elaine's. She used just the 13 Week Treasury in her assessment. Starting early in the New Millennium and the FED's crazy easy money policies I added an "either/or" statement to my spreadsheet. It was to compensate for the FED insanity. I put in "the larger of either Interest Rates or CPI Inflation" as the adder to Price / Earnings instead of just ST interest rates. Historically ST rates have almost always been above CPI Inflation. So, when the FED pushed ST rates below inflation it felt 'unholy' to me. So, the histogram shown above is using the larger of the two, CPI Inflation, for this period since it was a higher value than ST rates.
21.75 is the "Caution" level for my Rel Val index. The current value is 23.77 with my modification. 20 is still the median and below 18 is the classic "Proactive" value. We're a long way beyond that right now.
Elaine's method would put her index at 21.51 or on the high side of its neutral range. (16.7 P/E from Value Line plus 4.81%/yr for the 13 Week Treasury) Mine is higher since CPI Inflation is a greater number than current interest rates.
My modified version of Elaine's excellent work now takes into account the lack of real world thinking by the FED. If short term interest rates were still more market driven I wouldn't have to do this. I'll have to remember to post a note when interest rates return to being something above the inflation rate. It's been a very long time.
Thanks for the Memories about LR and W$W in Review,
OAG Tom
Hi Ken, Re: W$W with Lou Rukeyser..........................
It was a classy show with very interesting guests every week - through thick and thin.
Those collectables are nice things to keep around!
Best wishes,
OAG Tom
Hi John,
Thanks for the kind words and congratulations on your AIM- ing... Yes, Marty Zweig was my favorite as well... Today's interviews are just agenda pushing, and don't come close to the interviews Louis had back in the day... I too, miss that era... Stated again, when the book went out of print, this board has lost some steam... Best regards, Ken
Hi Ken
Thanks for the nice flashback. Brought a smile to my face on a day when I needed it.
I was a regular viewer for many years. Marty Zweig was my favorite guest.
He always seemed to be worrying about something. Matched my own personality.
I currently have 10 AIM "Income" engines running. Not much to say other than AIM is doing it's job magnificently. Almost all are right in the middle of their respective holding zones.
Dividends keep rolling in. Patience is truly a virtue.
All the best,
John
OT : TWX In 12 Bars (Donald Swartz),
We need a little music around here so look up ,"TWX In 12 Bars (Donald Swartz)". That's from the best half hour show ever about money, stocks, bonds, and Wall Street. I have a autographed picture of Louis Rukeyser and a autographed book sitting here in this room. By far he is my favorite personality of all time for info on the stock market. It's just not the same, and by that I mean "professionalism". Saying that Steve, I see you've noticed the drop off in participation on this board. Well, that didn't happen overnight, but clealy it has dropped way off. My own personal take on it is this happened slowly over time when our favorite little book went out of print. So youtube ---->" PBS's 'Wall $treet Week' with Louis Rukeyser, TWX in 12 Bars" and I'll leave you with this quote from a printed transcript #1627 I own..
" For a printed transcript of this program, send $3.00 to Transcripts, Wall $treet Week, Owings Mills , Maryland 21117. That's $3.00 to Transcripts, Wall $treet Week, Owings Mills, Maryland 21117. Maryland residents please add fifteen cents sales tax. "
Best regards, Ken
Wave 3.0*
Suggested Starting Cash Value For New AIM Accounts/Positions
Individual Stocks
High Risk: At or above 51%
Neutral: Between 37 and 50%
Low Risk: At or below 36%
Diversified Funds
High Risk: At or above 34%
Neutral: Between 25 and 33%
Low Risk: At or below 24%
_________________________
Week of April 7th
_________________________
Short Term (18 Months)
Individual Stocks: 40% (Up 8 from previous week)
Diversified Mutual Funds
or Portfolio: 27% (Up 5 from previous week)
__________________________
Long Term (3-5 Years)
Individual Stocks: 43% (Up 1 from previous week)
Diversified Mutual Funds
or Portfolio: 29% (Up 1 from previous week)
Oscillator: -.54 (Up 1.45 from previous week)
*See posts #44585 and #4458
Wave 3.0*
Suggested Starting Cash Value For New AIM Accounts/Positions
Individual Stocks
High Risk: At or above 51%
Neutral: Between 37 and 50%
Low Risk: At or below 36%
Diversified Funds
High Risk: At or above 34%
Neutral: Between 25 and 33%
Low Risk: At or below 24%
_________________________
Week of March 31st
_________________________
Short Term (18 Months)
Individual Stocks: 32% (Up 2 from previous week)
Diversified Mutual Funds
or Portfolio: 22% (Up 2 from previous week)
__________________________
Long Term (3-5 Years)
Individual Stocks: 42% (Unchanged from previous week)
Diversified Mutual Funds
or Portfolio: 28% (Unchanged from previous week)
Oscillator: -1.99 (Up .15 from previous week)
*See posts #44585 and #4458
Thanks Jon, Re: v-Wave dipping in risk.......................
It's nice to see both the shorter and longer term v-Wave values drift toward lower risk. The 3-5 year forecast is currently one point below its Median value. This is in contrast to all the headlines in the financial press recently. On "Laugh In" years ago they would have said, "You bet your Bippie" but today we say, "You bet your Bitcoin!!!" What's been bad news for one area of the market is shifting $$$ to more traditional investments thereby making it good news for other sectors.
Best wishes,
OAG Tom
VWave 3.0*
Suggested Starting Cash Value For New AIM Accounts/Positions
Individual Stocks
High Risk: At or above 51%
Neutral: Between 37 and 50%
Low Risk: At or below 36%
Diversified Funds
High Risk: At or above 34%
Neutral: Between 25 and 33%
Low Risk: At or below 24%
_________________________
Week of March 24th
_________________________
Short Term (18 Months)
Individual Stocks: 30% (Down 17 from previous week)
Diversified Mutual Funds
or Portfolio: 20% (Down 12 from previous week)
__________________________
Long Term (3-5 Years)
Individual Stocks: 42% (Down 3 from previous week)
Diversified Mutual Funds
or Portfolio: 28% (Down 2 from previous week)
Oscillator: -2.14 (Down 2.62 from previous week)
*See posts #44585 and #4458
Hi Tom
He thinks he has it tough!!! I have a Triple Mandate!
1) Price Appreciation over Time
2) Dividend Capture over Time
3) Profitable Volatility Capture over Time
That's where the 3X leveraged funds don't cut it. No #2, Questionable #1 while working #3 as hard as possible. Plus high annual expense ratios.
Thanks for that new Greatest Hits from the Fed!
OAG Tom
The reason the 3x funds are problematic is they can move more than AIM can handle.
Also a 33% drop in the underlying can make the 3x fund ZERO.
Trading MORE often just makes things worse. AIM doesn't like trading more often.
The 2x funds are just less risky but give you more volatility ( that AIM likes within reason ) than an non leveraged fund.
So a fund removes the risk of an individual stock but reduces volatility.
The 2x fund increases that volatility to a point AIM likes as long as you avoid very narrow risky sectors.
Toofuzzy
Climate change
The selling climate of January/February changed suddenly to a buying climate in March.
All buy settings were reviewed, and because the first buy should have a nice gap from the last sell, I copied Tom in setting the buy percentages to 12%. The save settings stay at 10%. One buy was executed, others are getting close. For my airline stock I have set the first buy percentage to 16%.
No activities in the ETF department yet.
Kind Regards, K
Re: AIM Yoyo string..............................
After 2022 I looked at the strings of my AIM Yoyo and it was looking a bit frayed. So, I restrung it with a new Carbon Fiber string with even stronger tensile peak. These last couple of weeks the Yoho has been very busy but the new string is holding up well.
Instead of a Dead Cat Bounce, I'm working on my "Cat's Cradle."
OAG
Hey Will,
All I did was use a spreadsheet and copypasta the 5 year backdated data for the 3x leveraged ETF. I found the 3x leveraged seem to give the best "return" but you always seem to run out of cash and as soon as you inject any, your returns seem to become abysmal at that point. It's worth playing around with but I'm not sure if I am confident that 3x (at least the ones I used) are the best option.
I assume (perhaps wrongly) that monthly evaluations would likely not be optimal with anything leveraged. My backtesting seems to suggest that as well.
Would you suggest evaluating and trading daily with the 2X leveraged or would weekly be better?
Nice move Steve,
It's pretty quiet today at V.I.E.W. The Sales Dept is taking an extended break while it waits for IAU (Gold surrogate) to climb another 10% or so.
Over in the Purchasing Department there's a lot of phone activity as those looking for liquidity are begging us to take some stock shares off their hands. We're holding tough on our cost targets for adding more inventory, however. Exceptions have been in the Energy and Financial Sector ETFs where on Monday we made some 6% purchases. The 30 Day Rule has been discussed and implemented for sequential buys.
Volatile International Equity Warehouse (VIEW) has performed okay for the year to date but the recent slippage is noticeable. The International division had been doing well but the recent "Drone vs Fighter" action seems to have upset that marketplace. That division has been down almost daily since the start of March. Even so, there's still some discount desired before we start to rebuild inventory.
Keep up the good work,
OAG Tom
Sell on SLV this morning pre-market
No surprise given the banking situation.
Flight to Safety?
Next GTC Sell set at $25.
Highest Sell during Covid was at 27.42
Happy pie day everyone!
Had to get the shipping department in on the worst snow day of the year in the Hudson Valley.
Sold some VET, WPM calls I had previously bought in liu of stock, SCCO,.
An order to buy PINE didn't fill.
Bought (1) KRE $25 call leap in liu lof buying the stock. I should have done this yesterday afternoon but didn't know when banks would stop sinking.
Toofuzzy
Deep Diver.
Very fortunate. Was aiming a couple of Canadian Banks - also listed in NY - mostly for the dividends.
Had some nice buys and then they jumped up from mid-Dec to mid-Feb and hit a sell.
I liquidated my positions with a nice profit (around 13-15% I think).
This allowed me to dump my deep diver at a loss. All in all, came out nicely ahead.
Of course, the story can't end there. Another deep diver has reared its ugly head.
Natural gas - 2X. What a ride down. Voyage down to the bottom of the sea.
Current buy safe at 120%. Still have money to deploy if it goes lower.
Viva Las Vegas!!!
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Assistants The Grabber Toofuzzy |
Here's a handy "Quick AIM Calculator" for finding the next AIM directed Buy and Sell prices for your portfolio holdings:
A.I.M. Users Bulletin Board (AIMUSERS): Thanks LC, Now they can use the "calculator" again! (advfn.com)
While the AIM book is no longer being reprinted, it is available from Amazon for their Kindle for $5.99.
http://www.amazon.com/How-Make-Stock-Market-Automatically-ebook/dp/B002VKJ1EI/ref=sr_1_1?s=books&ie=UTF8&qid=1395757939&sr=1-1&keywords=lichello
Mr. Lichello wrote the book on AIM in 1977. In the mid-'80s he put an infomercial on AIM on late night TV and attempted to sell his workbook and audio tapes.
(1) How To Make $1Million In The Stockmarket Infomercial - 1985 - YouTube
It's a reasonable review of the AIM method for those who are unfamiliar.
Run A Successful Equity Warehouse
Welcome to the AIM Users Bulletin Board. This is the thread to post your thoughts, questions and comments on the use of Robert Lichello's Automatic Investment Management for handling the risk of being involved in the Equities markets.
The AIM strategy gives the user LIFO gains of 20% minimum if the method is followed "by the book." It is ideally suited to those seeking long term investment growth while managing the risk of being invested.
Thoughts on being a successful Individual Investor
I wrote this book review a long time ago. It's a trader's interpretation of
Sun Tzu's "Art Of War." I related it to AIM as best I could.
------------------------------------------------------------------------
Mr. Lundell says, "Today's financial markets are the last bastion of unabashed conflict.....
To participate, you must be your own general, devising a strategy, gathering information, executing your plan, and adapting to the situation."
How can we use AIM and the v-Wave for strategic and tactical planning to carry out Mr. Lundell’s requirements to participate in the Equity Markets?
"Be your own general"
You are in charge. You are responsible. When you win, you benefit. When you lose, only you are to blame.
a) Broad trends persist. Discover them. They will survive boom and bust.
b) Don't contemplate engaging in war while beholden to another. They could become your ruler!
To me this means "Stay away from Margin Buying unless you are certain of victory."
c) Establish and maintain a "Baseline of Survival" for your command.
This is the "income" side of my overall portfolio.
d) Know that reality is governed by Darwinism; Long Term Survival belongs to the fittest.
"Devise a Strategy"
Our strategy is to sell inventory into market strength and to buy into market weakness. Robert Lichello's AIM algorithm provides us with a systematic approach to follow that employs this strategy.
a) Sell quality merchandise to all those willing to pay.
b) Buy quality merchandise when the price offers reasonable hope to resell at a profit.
c) Let the allocation of resources and inventory be governed by the course of the market and AIM's guidance.
"Gather Information"
Today there is no excuse for not being informed.
a) Differentiate between information VOLUME and QUALITY.
b) Differentiate between FACTS and OPINION.
c) Find good sources of judgement where you cannot act as judge.
d) Information is trusted only when provided by those proved trustworthy.
"Adapt to the Situation at Hand"
The v-Wave measures general U.S. Market Risk (and may be sensitive to world market risk) from low to average to high. This helps you gauge the situation by:
a) Gauging your initial cash reserve requirements on new investments
b) Gauging your on-going cash reserve requirements on established investments
c) Judging whether to establish a bias for accumulation or distribution
d) Possibly starting no new AIM accounts when the v-Wave is showing High Risk
e) Possibly ignoring all AIM Buy Signals during v-Wave High Risk events.
f) Following all AIM buy and sell signals during v-Wave Average Risk events
g) Possibly ignoring all AIM Sell signals during v-Wave Low Risk events
h) Re-assessing your "Baseline For Survival" at times when AIM has your account heavily in Cash
i) Always attempting to beat measured inflation by 5 basis points minimum after all taxes and living expenses are paid. If you do this consistently, in good and bad markets, you will be winning long term
j) Possibly using "vealies" when your positions are cash rich relative to the v-Wave. Limiting supply helps to keep Momentum player’s Demand high.
"Execute your Plan"
Set the plan in motion; know that it takes time for realization. Follow the plan without hesitation allowing the goals to be realized. The strategy is sound so execution is all that is required.
a) Buy when the plan says
b) Sell when the plan says
c) Be very patient when no buy or sell signals are being generated
Reading Mr. Lundell's interpretation of Sun Tzu's work will help you focus on your own plan. It will arm you with knowledge of what others not using AIM are doing in the market. Understanding Short Term Trader's strategy and tactics is like having a spy in the enemy's camp. AIM users can profit by knowing just how these people think and act. AIM acts as almost a mirror image of what goes on in a trader's mind.
-------------------------------------------------------------------------------------------------------------
The v-Wave........
Mr. Lichello used fixed cash starting levels; first it was 50/50 then 67/33 and in the last edition of his book 80/20 for the Equity/Cash ratio. This "one size fits all" approach is like a broken watch that shows the correct time twice a day but is wrong the rest of the time!
Minstrlman, a regular contributor here, helped gather data from Value Line and formed a highly capable risk-cash indicator for our use. Since then, J Derb continued his work each week. As an adjunct to the AIM methodology we now have a Cash Indicator which helps guide our starting and ongoing Cash Reserve level of AIM relative to measured market risk. It can be used as a general market barometer or specifically with the AIM method. The v-Wave (or VW) is derived from the Value Line "Appreciation Potential - Next 3-5 Years" (VLAP) indicator shown weekly in their Summary and Index Section for their 1700 stock edition. Looking back through V/L's history we find the peak Appreciation Potential occurred 12/23/1974 at +234%. Our continuous database starts January of 1982 and we scaled our "zero cash" to the market risk low point of early that year. We take the VLAP and manipulate it to get an indication of how much cash should be reserved for diversified mutual fund AIM accounts. It should be multiplied by your stock or portfolio's BETA to get the cash reserve level of less diversified or more aggressive holdings.
v-Wave Weekly Cash Reserve Indicator For AIM Users
Current years of the v-Wave:
For diversified portfolios the Median value for the v-Wave is 29.5%. High Risk is 34% cash or higher for individual company stocks. Low Risk is 24% cash or lower.
To get a more proper cash level for individual company stocks multiply the current "Diversified" value by 1.5. This gives us 51% as the high risk threshold and 36% for the low risk boundary.
Looking at the cumulative risk of the v-Wave gives another perspective:
Cumulative v-Wave is calculated by taking each week's v-Wave Stock value, subtracting the median value from it and adding it to the previous total.
Significant historical events are shown nicely here and the v-Wave's response at those times.
v-Wave Calculations can be found at #30219. The data are a work-in-progress for now.
TooFuzzy provided us with a handy "Quick AIM Calculator" Here's a link to that page:
A.I.M. Users Bulletin Board (AIMUSERS): Thanks LC, Now they can use the "calculator" again! (advfn.com)
(follow the link on the above page)
AIM has a predictable pattern of "cash burn" in a declining market. Depending upon the SAFE settings AIM will generate new buy orders sequentially as share prices decline. It can be helpful to know in advance about how deeply AIM is going to draw down one's cash reserves. This link is to the "Cash Burn" AIM page. It shows various end points based upon the starting cash reserve level. Here's a link to that page:
"" rel="nofollow noopener noreferrer ugc" target="_blank">http://www.aim-users.com/cashburn.htm"; rel="nofollow noopener noreferrer ugc">A.I.M. Cash Burn Rate (archive.org)
Best wishes,
Old AIM Guy
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