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Hi Ls7550,
I have subscribed to the RBS rights issue and hope for the best.
Your chart is very informative and I am happy to see (AIM wise) that RBS is down the most. Also I read that Barclays is looking for money from the Country funds.
I have the feeling that the banking sector is down now for the second time in this downwave. By the way i had a June buy in the ishares Europe Dividend fund, which may be connected to this.
Kind Regards,K
Hey,
When RBOS acquired ABN/Amro i got a few RBOS shares.
Last week i got a dividend from RBOS and to my surprise it was more than 9% of value.
That is very good but the question arises: why so high?
I know that the share value is depressed because new shares are sold to existing shareholders.
Is there any information about RBOS one needs to know ? ( and someone outside the UK doesnt know?)
Kind Regards, K
Hi Adam,
used to split stocks among more than one account--have a part of the stock position in one account and a part in another, as a way of distributing the cash.
assuming that stock in a machine 'own' their cash part, you can distribute the stock part over several machines with the objective of spreading the cash.
1- I have done this as well to give cash to poor machines. In every machine there are 2 numbers very important: PC/share to manage PC and the Cash per share to know how much cash is migrating together with the shares.
2- Another way of managing cash on an inter-machine level is to have a central bank with 3 transaction books, one for dividends, rents, costs etc to be allocated to income and equity, one for income producers and one for the equity.
The cash on these transaction books can be allocated using allocation strategies.
But I found updating too complicated
I have 2 type of spreadsheets:
1- one stock machine
2- multiple stock machine
You can even use a Multiple stock spreadsheet with below it 'one stock spreadsheets to manage the details and overall.
The major source of errors it seems to me is the migration of cash/shares/PC over several machines. That's why i also have some Grand Totals to check that the overall numbers(checksums) are not violated after a moving operation.
keep things as simple as possible.
Fully agree, but you dont want to limit your operations :)
Kind Regards,K
ETF costs
I was looking at the managament fees for ETFs on NYSE euronext Paris. There are 3 big groups, ishares(Barclays), EasyETF(AXA/Paribas) and Lyxor(SocGen).
NYSE euronext Amsterdam only trades ishares. Deutsche Bank also has ETFs. I didnt look at all bourses in europe.
These groups have similar ETFs, but there are also differences. For example Lyxor and EasyETF have european sector funds based on the DJ600 index, similar to the US sectorfunds.
What caught my eye was that the management fees for ishares seem higher than for the other 2 groups.
We often talk about ishares here on this forum. I dont know how the costs compare in the US for different suppliers.
When having Buy signals, I could start buying the Lyxor and EasyETF ones, and on sell signals selling the ishares.
Having more suppliers adds to diversification as well. Which could be wise considering that the UK central bank has helped UK banks lately. What they did, will not be disclosed 30 years from now, which only happens for the greatest government secrets.
Kind Regards,K
Hey,
When checking my machines at the end of April, i saw in most machines a Macro Aim Buy signal.
I have done my last buy that was still open. Hopefully we will have sells soon.
Kind Regards,K
Re: Question
I think it is not too OT for this board and think it is OK to post periodic updates.
Kind Regards,K
Hello Jonathan,
These funds have costs, maybe 1.5% per year. Then they have costs you cant see.
I would prefer to have the ING shares.
Kind Regards,K
Hi Ls7550,
You see cash and stock as two equal partners in the machine?
Each one could be measured on its own success.
If therefore I had a buy signal in the first (80/20) but for whatever reason decided to buy more of the second (20/80) it would appear to make sense to instead not buy as much stock in that second account (proportionately) than would have been bought in the first account.
The proportion is relative to the cash level?
The buy in the second machine would be great for rebalancing the second machine and lowering PC in the first machine.
Kind Regards,K
Hi Jonathan,
Something like that. It is not AIM By The Book.
It is also purely hypothetical, i don't do it like that. Its just an idea.
It is probably not something you want to incorporate into your program:)
Kind regards,K
Hi Ls7550,
Sell MO stock in M2, decrease M2's PC by MO, increase M1's PC by MO ?
Could do it like that :)
Depends a bit where you want PC in both machines.
At the moment i have only buys)
I guess at the 1 April review, i get a lot of buys in different machines, small buys and large buys.
I am thinking of taking all buys together and setup a new machine, rather than buy in all the machines. All machines will get an update to PC and lose some cash.
I could change my mind in the mean time)
Kind Regards,K
Capturing the single stock type volatility AIM benefits whilst employing RS/RW techniques
When you have a downwave one can model that as the valley of a sinus function, Lichello does that in his book.
AIM buys on the left side of the valley and sells on the right side of the valley.
The valley is symmetric, so you can move the buys from the left side of the valley to the right side. When you do this, its obvious that new buying management techniques can be advantageous.( for example using virtual buys, several virtual buys could be replaced by one real buy)
In the COGNEX graph posted by TOM in msg 26845 the six buys could be virtual and be replaced by a lesser number of buys or where the sell happened at 21, the first 3 buys could be actuated.
This technique could be used for RS scenarios, but seems less appropriate for side ways movement.
Kind Regards, K
Aim cash
When you have a multistock machine you have 1 cash component.
When you have N one stock machines you have N cash components.
When you have N stock machines where each buy can
- add to one of the other N-1 machines
- increase N to N+1 machines
would you then have 1 cash component or more than 1?
Each one stock machine has its PC/SV ratio or PC per share and this ratio determines if we get a trade.
PC/C or SV/C is not an active ratio in the calculation of the trades.
For these reasons i tend to consider cash as a general in-active resource which can flow from machine to machine wherever it does the most good.
Also in the many-1-stock-machine environment, money management is not needed when you have the 'rule' to buy something new when a trade signal arises. Deep divers dont occur.
If a stock dives, that machine can be combined with another machine. I prefer to have one machine with multiple stocks which can be used for this reason.
Kind Regards,K
Hi Ls7550,
This is interesting, the flexibility of a multistock machine together with the volatility of a one stock machine !
It works when buying as well as when selling!
I like your comments on the target/receiving machine:
If the target has a current stock/cash blend of say 50/50 then rather than adding 3K stock and 1.55K cash I would have thought keeping it proportional and adding (3+1.55)/2 to stock and (3+1.55)/2 to cash - and increase PC by (3+1.55)/2 - would keep the machines better aligned with that particular AIM accounts workings.
Comments:
1-The balancing is a very nice feature
2-I like to conserve PC, so that it is not destroyed and not created, other than by legitimate AIM procedures.
3-in the example the buying machine(M1) loses 1.5K PC, has the same stock and spent 3K + 1.55 K = 4.55K
4-M1 has a different PC now(minus 5%) so the balance is changed, its not 60/40 anymore, but 30/15.45= 60/30.9
5-the receiving machine(M2) has a 50/50 balance, in your original post 25K/25K = 1.0 = 50/50
6- M2 receives 3K stock, 3K PC and 1.55K cash, the balance is now 28K/26,55K = 1.055 = 53/50
7 - M2 has PC now of (lets assume the start PC was 25K) 25+3 = 28K PC.
8 - Using (3+1.55)/2 = 2.275 M2 will have : 27,275K stock, 27,275 PC plus 27,275K cash.
9 - That means that 28-27,275=0.725K PC less in M2 and overall we have -1,5K (in M1) + 2.275K (in M2) = 0.775K PC created totally while if we only used 1 machine we would have created +1.5K PC.
10- So the net effect is one of adding less stock and more cash and a bit of PC destruction.
When selling from a machine(M1) you can increase PC. Then you decrease PC in another machine(M2), which could trigger a sale in M2.
We could also sell in M2, decrease PC in M2 while keeping PC/share constant, then moving the cash from M1 to M2 and adding the PC lost in M1 to M2.
Using LD-AIM flexibility is increased by having all the virtual shares would could be sold or bought.
I personally use the PC/share number as an anchor whenever i move PC around from one machine to another machine. I am not so much looking at cash because :
1- I sold a few machines at the top of the market, so the overall cash/stock ratio is nearly 50/50 for me.
2- This overall ratio makes it possible to restore any machine to a desired stock/cash ratio.
3- I use 2 buckets (see old posts on Selengut 2 bucket system)
4- Bucket 1, for income, makes it possible to restore cash balances.
I have to think/ponder more on the advantage of keeping the balance as you indicated, because in practice i have seen the skewing of stock/cash ratios. I like the idea of keeping the target machine aligned.
Kind Regards, K
Hi Winkerbean,
Its a way of rebalancing over several machines, but it is also a middle way between a multistock machine and a one stock machine.
You have the flexibility to move stock around and you dont have to buy what you already have(one of Lichello's recommendations). Lichello kept the stock in a multi stock machine, but that is not necessary, you can move it to another machine, if that is what you want.
I use it also for PC-rebalancing. Some machines i like to get a bit smaller(PC wise). That i do with the PC(new)= PC(old)-0.5 * Market order.
This is classic AIM BtB.
So a few Middle ways:
1- 'focused'ETF,
2- machine with 5 stocks(Lichello BtB).
3- PC rebalancing(Lichello used an example of starting with one stock and adding stocks to it, you could of course also delete stocks from a machine)
Kind Regards, K
Hi Ls7550,
Yes, also move cash to the target machine. I take the ratio of remaining stock and stock leaving the account and apply that ratio to the cash side as well, so the target machine gets an infusion of stock plus PC plus cash.
So 30K/20K
Buy 3K
Now we have 33K/17K
Decrease PC with 1.5K
Decrease 33K to 30K
Decrease 17K to (30/33)*17K = 15,45K
Increase new machine with:
3.0K in PC
3.0K in Stock value
17-15.45=1.55K cash
Kind Regards,K
More Ponderings,
Sometimes I use an interesting new formula these days when buying:
PC gets changed as follows:
PC(new) = PC(old) - 0.5 * Marketorder
(so Portfolio Control didnt get a 0.5 increase, but a 0.5 decrease)
You take the newly bought stock and put it into a new machine or into a grouped machine(where PC(new) = PC(old) + Marketorder)
The advantage is that whenever a machine flashes a buy signal, you can buy what you like the most and after you bought it, you can put it into the machine where it belongs.
In this way you can split up total PC over several machines and manage it in a flexible way, streamlining your machines whenever you need or want to.
With Kind Regards, K
Hi Toofuzzy,
Only know that the latest quarter was good, with 18% growth or so. No subprime thingies, only very limited.
I have ING in a machine for nearly ten years now. It pays a regular dividend and you get the occasional AIM trade.:)
I am no expert on banks, so i cant make any comparisons with other banking entities. It seems that the damage in Holland is limited. Be careful with Swiss banks and also in Germany some banks have damage.
Again, i dont know, especially with this 3 trillion global derivative overhang, which could come home :)
Kind Regards,K
Hi Tom,
http://en.wikipedia.org/wiki/Rip_Van_Winkle
I had to look it up :)
But no, my surname is not 'Van Winkle'.
Kind Regards, K
01 March
There was more buying activity now than in recent months :)
I didnt buy the Commodities after all. I saw on CNBC that the US is selling gold via the world bank. Interesting to see what will happen with the gold price and with the prices of other commodities. Commodities however will stay on watch!
In stead i bought some more ING and a package of FORTIS.
ING has nearly 7% div and FORTIS nearly 9%. There doesnt seem to be subprime danger. We will see.
Further there were regular buys in:
- ishares MSCI Europe
- ishares MSCI Japan
- ishares US Reit
- ishares Asia Reit
The ishares S&P500 buy is in the system, but hasnt executed yet.
For the Reits I have entered new GTC orders roughly 7-9% below last buy. I want to increase my inflation-related assets!
Back to sleep mode and wake me up around 01 April :)
Kind Regards, K
Hello AZ-Sunshine,
I use ETF securities :
http://www.etfsecurities.com/nl/document/etfs_document.asp
I started this machine in Oct 2007.
It was flat till january and then it started to move. I am thinking of adding to the machine.
Reasons:
1-increase exposure to commodities, lets say get to 10%-15% allocation
2-inflation, seems to get out of control
3-more users of commodities(BRIC countries)
I also use a Basic Material Fund. I am not sure that a fund is the way to go, but i am not sure which vehicle to use in this area.
Because i have a rule that any machine is up to 5% of the whole portfolio I also need other vehicles.
Hope this helps
Kind Regards,K
Hi All,
Did my 01 March check:
Cash still 48%.
Buy signals in ishares:
Japan
S&P500
Reits(asia/us)
These signals i will execute hopefully next week.
Also buy signals in some shares.
Because i want to move to ETFs i will use the Buy signal to buy into an ETF and will decrease Portfolio Control for these 'one share' machines. Probably i will use this buy signal to buy more Commodities. I notice an explosion in Commodity prices since January 2008, and think it is not too late to increase the size of the Coomodity machine, a basket of precious metals, industrial metals, energy, lifestock and agriculture(because it doesnt feel good)
Up to now i have used weekly checking and monthly execution since August 2007. The urge to increase these frequencies is growing. Maybe i will insert GTC orders at, what i feel are, low prices.
The times are interesting and instructional. Will the lessons learnt in 2000-2002 apply again this time ?
Kind Regards, K
http://online.wsj.com/article/SB120424991252301815.html?mod=rss_markets_main
Hi Aimster,
My powder level is still at 46%.
I had buys on 1 Dec and 1 Jan.
Next evaluation will be at 1 Feb.
All buys strictly 'classic AIM'.(once a month)
I have Buy safe of 10% and minimum buy amount 6% or 10%.
Kind Regards,K
Opportunistic rebalancing
Getting closer to AIM:
A new research study advocates “opportunistic rebalancing” of portfolios to enhance returns. Specifically, Gobind Daryanani’s paper, “Opportunistic Rebalancing: A New Paradigm for Wealth Managers” published in the January 2008 Journal of Financial Planning, concludes that a 20-per-cent threshold monitored every second week is the optimal rebalancing strategy.
If the target allocation for equities is, say, 60%, no adjustments are made until equities fall outside the threshold band of 48% to 72%. This does not happen often but when it does the biweekly monitoring of the portfolio is sure to catch it and lead to action. The end result is rebalancing that is infrequent but best in terms of capturing buy-low-and-sell-high opportunities, and thus augmenting returns.
According to Daryanani’s testing of rebalancing strategies on U.S. financial assets over the 1992-to-2004 period, “opportunistic rebalancing” outperformed the widely used five-per-cent threshold band (monitored annually or quarterly) by 0.25 to 0.30 basis points a year. The margin is trimmed after factoring in costs, taxes, and adjusting for volatility, but still positive.
Note that Daryanani does not adjust asset allocations back to their exact target but to the closest boundary in the tolerance band, defined as equal to 50% of the threshold band. Thus, in the example above if equities climbed past the 72% level, they would be cut back not to 60% but to 66% (effectively, the midpoint between the target and threshold band).
http://seekingalpha.com/article/58561-in-favor-of-opportunistic-rebalancing?source=feed
The studies suggest these practical guidelines: (1) use wider rebalance bands, (2) evaluate client portfolios biweekly, (3) only rebalance asset classes that are out of balance—not classes that are in balance, and (4) increase the number of uncorrelated classes used in portfolios.
http://www.fpanet.org/journal/articles/2008_Issues/jfp0108-art7.cfm
Merry Christmas!
Tactical rebalancing might be a better option than the commonly used calendar- or threshold-based approaches.
http://seekingalpha.com/article/58312-tactical-as-opposed-to-calendar-rebalancing?source=feed
So we have 4 types of rebalancing:
- calendar based
- threshold based
- tactical (v-wave based)
- additions or withdrawals(regularly or random) from asset classes
Kind Regards,K
Interesting
Wheat breaks through $10 a bushel
http://news.bbc.co.uk/2/hi/business/7148374.stm
I use for my Commodities component: ETFS All Commodities DJ-AIGCISM
http://www.etfsecurities.com/nl/document/etfs_document.asp
Kind Regards, K
Hi Ls7550,
Lets take the 80/20.
That is 4 machines or 4 asset classes.
One could take:
1-Income (could be shares)
2-Shares
3-Reits
4-Commodities
Each class could be AIMed as one machine. Then we have the real 80/20. Each asset class has the same size to start with. Very close to having 25% in each asset class with rebalancing.
Via the use of cash ratios, each class could also be AIMed for each individual component within each class.
Only in case of the "Perfect Storm" we need more cash, especially when we have negative correlation between the classes.
Dividends and interest could be deposited in the cash component.
Kind Regards,K
Cash is dangerous because the dollar can be devalued............
I think this also applies to the Euro to some extent:
http://www.freemoneyfinance.com/2007/12/cash-has-been-t.html
Hi Tom,
Yes, I like that chart as well.
Assume you have 2 machines:
1- Dow Jones
2- Gold
Both machines will sell, and you will get a lot of cash.
Lichello machines always have 2 asset classes.
Now look at a machine with 3 assets : DJ vs Gold vs Cash.
It is interesting to think about designing a Portfolio Control based on a 'triangular relationship'.
Rebalancing will use maybe fixed percentages.
Momentum thinking will have the majority of assets in Gold.
Lichello type thinking could result in 3 PCs.
These 3-types could be generalized to Ntypes.
I have ordered Asset allocation from Roger Gibson and Value averaging from Edleson to enhance the cristmass period :)
Maybe there are answers in these books that address these things
Kind Regards,K
Dow Jones index and inflation.
Have a look at this chart :
http://www.chartoftheday.com/20071214.htm?T
Chart of the Day
Is the stock market performing well? It all depends on how you measure. When measured in US dollars, the Dow is within 5% of its all-time record highs. However, when measured with that other world currency (gold), the picture is not nearly as rosy. To help illustrate the point, today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 16.7 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces back in the year 1999. When priced in gold, the 21st century US stock market has been in one big bear market.
Kind Regards, K
Hi AIm hier
Catch the next MSFT, and you will get few, if any buys, so your portfolio control falls further and further behind, the intrinsic value of the business
When you have a series of sells you Total PC is constant but the number of shares is decreasing. That means that PC/share is increasing.
PC/share is following price/share. On the buy side and on the sell side as well.
AIM will trade around the PC/share level.
Kind Regards, K
Annual Rebalancing Does Not Improve Investment Returns
http://seekingalpha.com/article/56117-annual-rebalancing-does-not-improve-investment-returns?source=feed
Rebalancing portfolios at year end does not improve investment returns. In fact, it may even lower them. So why bother?
That’s the message from several recent research studies. Of note, an empirical study by the Vanguard group of funds (as revealed by founder John Bogle earlier this year) found that mechanical, calendar-based rebalancing did not result in a noticeable improvement. And a research paper by David Smith and William Desormeau published in the Journal of Financial Planning (November, 2006) found that monthly, quarterly, and annual rebalancing actually underperformed when transaction costs were factored in.
Admittedly, rebalancing is conceptually appealing: returning a portfolio to its chosen asset allocation controls risk and compels an investor to buy low and sell high. But what the studies challenge is the assumption that a formulaic readjustment of asset weights is the way to do it.
A better way may be “threshold rebalancing,” where changes are made not by the calendar but when portfolio weights diverge more than 5% or some other percentage from the prescribed setting. Or, if the calendar is used, once every two to four years, will suffice, say Smith and Desormeau. For investors who regularly add savings to their portfolios (e.g. RRSP contributions), transaction costs can be kept lower by adding new money to the lower-weight asset classes to bring a portfolio back closer to original allocations.
Interesting
All investors have to do is wait.
http://money.cnn.com/2007/11/27/news/economy/tully_meltdown.fortune/index.htm
Hi Clive,
Yes, quite often the index makers cap the Large Caps.
I am only dreaming about my classic Lichello machine.
It is a kind of mythical target.
When looking at this machine, i think in terms of discrete packages. Every package would be a stock that i like, or admire, or believe in.
But in fact i dont have such a machine, while i have many 'one ETF' machines :)
I am busy over the last few years to restructure the portfolio and hope to implement a Lichello basket.
Kind Regards,K
Hi AImster
20 stocks is a nice minimum number
if you have a minimum of 20 stocks and they are all sized equally then you buy and sell a stock if the min amount is 5%.
So you can nicely get rid of 'losing stocks' and buy new ones.
If each stock position <= 5% you can do this.
I am not looking at tax(different rules here), but when the market goes down its nice to diversify.
Kind Regards,K
Hi Ls7550,
A similar arrangement but on a smaller scale (10 to 15 stocks is a reasonable amount) can be applied when using a AIM managed basket.
I was thinking that 20 stocks is a nice minimum number. When you have a sell, you could sell one stock, and when a buy, you can buy 1 new stock(one of Lichello's recommendations).
(Assumption that minimum amount is 5%.)
Kind Regards,K
Hi MM,
At the bottom in 2002 i was at -20% cash.
Didnt have the guts to go to -30% etc. It felt like everything was collapsing and you couldnt tell where the bottom was.
Kind Regards,K
Hi all,
I will use any buying event to continue rebuilding my portfolio.
I made a target asset allocation:
income: dividend ETFS, reits(USA,europe,asia),
equity: value ETF, growth ETF, broad indexes etfs, ETCs, Basic materials, 1 classic multiple stock AIM machine,.
I dont see the case for bonds as an income asset.
Income target: 25%
Equity targets: i looked at global GDP numbers and i want to spread over Europe(20%), US(20%), Japan(10%), EMM(5%),.
The materials i have in a Basic Material fund and in an ETC(all commodities)(10%)
I have 10% left.
All these numbers are very approximate, because this asset allocation is work in progress
All dividend income will be put in an income bucket and redistributed to income or equity.
Kind Regards, K
Hi Toofuzzy,
It doesnt seem to be a bottom.
Here in Europe the bank and insurance sector is aaccelerating downwards.
I will be evaluating at Dec, 1. Several ETFS are already in buy territory, but i postpone any decision till month end.
In the machines with one stock i will buy an ETF and then split the machine, balancing PC.
Kind Regards, K
At the bottom of the valley.
The thought occurred to me:
When we are at the bottom of the valley, our machines are 100% invested and we get more buy signals.
We cannot act because we have no money, this is not a satisfactionary feeling.
When we have a portfolio that contains : stock, property, commodities, then we can have defined allocation parameters like 50%,25%,25%. No bonds because the cash in the machines returns income and we probably have some dividend ETFs.
So at the bottom we still can act, by adjusting the portfolio to the allocation parameters. We can buy things that are low and sell high stuff.
This could be an additional strategy and also could serve as a reset point for Aim machines.
Kind Regards,k
iShares Property
During the weekend I reviewed my research machines and saw that iShares Property Global has penetrated the 6MA from below. This ETF has a TER of 0.75%.
This is always a moment to make a decision: will we start a new machine?
I reviewed Property Asia, Property Europe and Property US. Asia has a TER of 0.75%, but Europe and US have a TER of 0.50%.
Additionally the Euro is highish, so that is a plus.
So, in an analogue way to Tom's slicing up of the S&P, I decided to start 3 new machines, of equal size.
This also helps with the diversification of all machines, because i want more 'inflation hedge'.
So, 3 new machines.
Kind Regards,K