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Hi Grabber, one of the problems of LD AIM is that you just might pick a good stock
I think 2, a reset, is out. Then you would buy back for more than you sold, which is not in the Spirit of Aim. (Respectful silence, or something like that.) Seriously, if you want to capture just the volatility, or hitch just a short ride, there might be better strategies, including X_DEV or V*rtex. (Trying to fool Conrad.)
I like the Virtual Vealie option. When you have two or more positions fully in cash, you might perhaps start an extra LD AIM position. A combination of 1 and 3.
Regards,
Karel
Hi Ken! Well, your wife seems to do a thorough job! I hope you'll be up and running again soon!
Regards,
Karel
Hi Ken,
I am sorry to hear about your troubles! I hope you'll get everything straightened out soon. Cleaning can be dangerous to your health and sanity!
Oh, and just an idea: When you open My computer, open the Crive and then the folder Program Files, do you see a folder WS_FTP? Your wife may just have deleted the link to the program. Just hoping!
Regards,
Karel
QP (to Ken): Just stay focused with some minor tweaks that have to be worked out.
Let me propose a tweak. I'll need a bit of a runway, however. Here goes.
First a question. Let's say Ken's method works. That's the assumption everyone here has. Now why does it work? Does he discover seasonality, or just good stocks? You might say: "What's the point, both are fine," but there is a point. If Ken is just finding good stocks, picking a "season" (month, quarter) is not very logical. But doesn't Ken find stocks with good months/quarters? Doesn't that prove seasonality? No, it doesn't. Let's look for a string of 5 years with good same-month results. Let's look at a stock that is flat over the 5 year period. Let's assume that the monthly results have a normal distribution. (You know: a lot about the middle, and the more extreme plus and minus scores get progressively scarcer.) Now you have a 1 in 2 chance (flip a coin) that a month is positive, and a 1 in 32 chance (1 in 2 in 2 in 2 in 2 in 2) that the same month is positive in all five years. We're looking at 12 months, so the chance to find a "green column" is 12 in 32, or better than 1 in 3. Work your way through 200 of such stocks and you'll get on average 75 green columns in 75 stocks (or less when one stock has more green columns). And this is all by pure chance! Flip a coin! No predictive value whatever! (BTW, this is why looking at 2 week periods is such a bad idea. There are 52 (staggered) 2 week periods in a year, so you'll find 1.6 green column on average, just by chance.)
Now things get worse. A lot of stocks load the coin, for they have grown over that period. Which means that their (geometrical) average monthly result is greater than 0. Which means that they have a better chance than 1 in 2 for a positive month, and a much better chance than 1 in 32 for a 5 year green column. The fact that a stock is good (=makes you a profit) makes for a greater chance for a green column, by pure chance alone. Hey wait, that's not so very bad! You could turn that around and say: When you find a stock with a green column, there is a fair chance that it has that column because it loaded the coin, and thus is a good stock.
Is Ken just finding good stocks? No, but probably a good deal of them are just good stocks. A lot of his stocks are noise: some bad stocks that got lucky, average stocks have a chance of better than 1 in 3 to come aboard, and good stocks an even better chance. But all these stocks are just noise for the seasonality pattern. How do we find the real patterns? Enter the tweak: unload the coin! First of all, create a barrier: don't look at positive returns, but at returns over, say 3% (or 5%) monthly. Those are True Green, as opposed to Dappled Green with all the noise mixed in. That will weed out most of the noise. But you might also look at the (geometrical) average monthly return of a stock, and if it is higher than 3% (or 5%), require a higher score than the average for a True Green month.
And remember, this doesn't weed out all chance! You just can't do that. (Except by raising the bar so high that nothing will be able to jump over it.)
Just an idea.
Regards,
Karel
Hi Ken,
sorry if I made the impression I was mad. That was not my intention, because I'm not mad. I am concerned. As I see it, you are building a top heavy construction, branching out in several stock universes and ever shorter periods (dangerous in itself), without laying a foundation first. And just look at this:
SPY QQQ KENLet's say you have matched the market, OK? There are easier ways to do that. BTW, for a reality check for myself I calculated my real money MrMarket returns for those periods: FEB-APR: 17%; MAR-MAY: 27%. You know what? I like those numbers!
FEB-APR 7% 12% 3%
MAR-MAY 16% 21% 20%
Ken: I know that the charts that I placed up front are not the normal expectations for people, but a potential.
Even when you invoke the parallel with advertising, this is misleading. It is perfectly possible for a strategy to perform stellar with perfect hindsight, and to run absolutely into the ground in real time. I mean, you *do* expect a burger at Wendy's, don't you? even if it's not as glorious as on your TV screen, and not a grilled shoe sole. And do you view iHub as an advertisement platform, or as a means to develop your ideas? And who are you trying to attract with a 500+% annualized return over 5 years? Anyone with at least a smattering of sense immediately recognizes this for the snake oil it is. Wouldn't you?
To make an obvious argument against the effectiveness of your method: Why do you think the information on the Thomson site is free? Because they never tried it out for themselves? I bet they did, and discovered they could do better with other strategies. I could be wrong. You could show it. Right now, you just have no idea, no answer.
Still interested, but a bit disappointed that you prefer to live in your own hype,
Regards,
Karel
Hi QP, I see you didn't read Ernie's homepage too closely, for he does play golf. In his own words: "I shoot around 100, play only 3 times a year but I usually average one beer per hole." But that is besides.
I read your posts with interest, but they are sometimes a bit hard to follow, because of your, ahem, spelling variants. English is not my native language, so they are sometimes a bit hard on me.
I am not racing against the clock. I started too late anyway (I am 46). To race against the clock would put too much stress on my decisions. I like to grow my money on the Exchange, and the pile will get as big as it will get (if it will get big at all).
I am getting a bit worried when I see Ken exult in results he gets by perfect hindsight. Real results will be much more mundane. Backtests prepare you for this. The idea is interesting, but one needs a reality check. Otherwise, acceptable results might discredit the method altogether. Wasn't 100% a year possible?
Regards,
Karel
Hi QP, OK, you were kidding. But... I can't look in Ernie's pockets, but I estimate his result since Jan 24 to be around +24.5%. My own MrMarket like port is up 27% over the same period. That's real money. My paper port on http://www.marketocracy.com is up 15.5%. Now if that's losing money, I don't mind.
And I am still waiting for a real test of Ken's method. All this crystal ball stuff is nice, but shows nothing. Banging out stocks is nice, but you really don't know why you are doing it. Paper ports move up nicely, but so does the market as a whole at the moment. Why not do some work to show that this works? Like:
- pick a stock, say a DJ 30 stock.
- go back 20-30 year.
- move five years forward.
- select the best (1, 2, 3) 1-month/3-month periods. Leave those ugly two-week periods out. Don't use your intuition for a first test; just go by the numbers.
- compare the results in the next year for the period(s) you pick with the average results for that year for that stock. If according to your selection criteria no period qualified, compare a zero result with the actual results.
- move the five year window one year up.
- rinse and repeat.
- report.
- Do this for all stocks in the DOW 30. (Or whatever)
Then you are talking. As long as tests like these are not performed, this is just so much hot air. Really. But is a fun board!
Regards,
Karel
Hi Ken, the stocks in my Marketocracy portfolio are momentum stocks. So: no, I don't like financial stocks, except when they show better momentum than the rest. I try to let my stocks ride, but that is not what my guru says. You'll find him on http://hometown.aol.com/ebarsamian. There you'll also find a link to his Yahoogroups board.
I pick my own stocks, but have to do that without the benefit of IBD, which figures rather prominently in the original method.
Regards,
Karel
Ken, the prosecution would love your chart. From http://money.cnn.com/2002/06/14/news/companies/stewart/ Stewart sold about 3,900 of the shares Dec. 27, a day before the company said the FDA had refused to review the application for Erbitux.
If she had followed your discipline, she should have sold at the end of NOV. That's a good month; DEC is nothing special. And just eyeballing: almost the only profitable 3-month period seems to be SEP-NOV.
Of course, it's the "a day before" that's damning.
Regards,
Karel
Hi QP, I thought about "annualized" and I don't agree. The word is used like this: "A 5% return this month means 80% annualized!" Or: "when you want to double your money in 5 years, you need to realize about 14% annualized" We are looking about shorter periods here: quarters, months, bi-weeks, and at their (geometrical) average return. So really geometrical average (or some contraction) is juch better.
A rose by any other name would smell as sweet; but calling it a tulip will raise confusion.
Regards,
Karel
Hi Ken, looks good! Perhaps I shouldn't have used 'annualized'. That value is computed as the geometrical average for a month (quarter; two week period). I propose to call it just that: GEO. AVG. or something like that.
And yes, those 3600% look good, but you really should look only at the Geometrical Average. Unless you expect such a streak in the coming 8 years. ;)
Have fun!
Karel
Hi UT, with your stops I think the main question is: how does it work out? talking about the principle is nice, but useless when you don't bring it further. Why don't you look at a stock, go back a year or five, start an AIM account and see what happens? Do this with 10 stocks that look attractive to you. Then you have at least some facts to chew on. Start with an ETF like SPY or DIA, they are nice and slow. If it doesn't even work with those, fuggeddaboutit.
Regards,
Karel
Hi All,
It has been a nice week at NEW (Nijmegen Equity Warehouse). Our long languishing LRT was in full demand and I was able to ship (no shipping department yet) off 19% for a 54% LIFO gain! Thanks to Mr Lichello for the basis of a sound business plan!
Regards,
Qarel
Hello Ken,
you're right, it's 29% see (1st column price, 2nd = number of stocks that make $1000, 3rd close, 4th $$$ at close, 5th return in multiplier form; last row: 2nd column $20,000 to start with; 4th column total result; 5th total return):
price number close total returnAnd yes, always use equal dollar amounts (and partial shares for more exactness when possible).
27.49 36.38 35.32 1285 1.285
31.25 32.00 32.91 1053 1.053
64.20 15.58 72.11 1123 1.123
62.17 16.08 65.92 1060 1.060
52.00 19.23 60.94 1172 1.172
8.25 121.21 9.88 1198 1.198
29.07 34.40 38.70 1331 1.331
33.66 29.71 40.71 1209 1.209
4.42 226.24 7.19 1627 1.627
2.79 358.42 5.20 1864 1.864
12.00 83.33 21.79 1816 1.816
31.90 31.35 33.12 1038 1.038
36.13 27.68 46.64 1291 1.291
16.61 60.20 20.99 1264 1.264
19.85 50.38 17.32 873 0.873
39.65 25.22 45.08 1137 1.137
51.99 19.23 72.00 1385 1.385
6.10 163.93 9.04 1482 1.482
4.92 203.25 6.93 1409 1.409
19.63 50.94 23.94 1220 1.220
20000 25835 1.292
Hi Ken,
I am not sure what would be the easiest way to go about it. You use your checkered board to look for the green columns (or rows), but you also look at the Total row/column to see which period came out best.
I don't quite know how you get the percentages in the table,
but when you use for instance Yahoo closing prices, just put [February close]/[January close) in the box for Februari. The colour should be green when this number comes out above 1, below 1 gets the pink. For the total you don't use SUM(), but PRODUCT(). I think that should do the trick.
If you like, you could do all this somewhere in the background and still use the old percentage gains in the boxes. You just don't calculate the Total from the boxes, but pull it from the 'background'. (And you may even change it to percent gain then.)
And Gummy Stuff that QP mentioned is a very nice site! Highly recommended!
Regards,
Karel
Hi Ken, I looked at your HCRT table and noticed you still use simple addition. For example: the row for the two weeks ending April 1 and April 8 reads
127% - 22% - -33% - -21% - Total 95%
Now let's see what happens when you invest $1000 in just those weeks over those years:
2000: 1000 - (21% of 1000 =) 210 = 790
2001: 790 - (33% of 790 =) 261 = 529
2002: 529 + (22% of 529 =) 117 = 646
2003: 646 + (127% of 646 =) 820 = 1466
from 1000 to 1466 is ~47%, about half of your total. Your way of calculation underestimates the power of negative returns in a mixed run. I don't think you want to do that...
And in an all positive run, your total comes out too low, in an all negative run, it comes out worse. It is perfectly possible to lose 50% in each of 3 consecutive periods: it brings you down to 12.5%, not to owing 50% to the bank. And when you gain 50% in each of 3 consecutive periods, you stand at 3375 (starting with 1000): a 237.5% gain, not 150%.
In short: you are messing up. Repeat to yourself every morning when you rise: I will never add up percentage gains and losses.
If you want an explanation of how you should go about it, don't hesitate to ask.
Regards,
Karel
Hi Ken,
I don't think it is possible to access a fund of someone else by ticker. You could publish the 'public' link to your port, but positions are invisible. (This is a competition; you're not supposed to copy other funds.) You'll find the link when you click 'public' in the left hand menu when you have opened your fund.
Regards,
Qarel
Hi Ken,
I don't know what your trouble was. The trouble I have sometimes with my momentum picks is not enough volume (and orders for a fund only get filled when there is enough real market action). But that doesn't seem to be the case with you!
Good luck with your fund!
Qarel
Hi Ken,
I tried to be critical, but not too much. It seems you have taken it way, thank you! Sometimes I have a bit of trouble in this direction. I am rather busy these days, but I have two points for your consideration.
When you consider a history of up months, you don't consider whether a stock would have hit a stop loss in its 'green' months/quarters. Why then do you apply a stop loss strategy? Two remedies: also consider the stop loss when you look at a stock (which greatly reduces the usefulness of the Thompson site and is a lot more work), or just forgetaboutit. Hint: over at mechanical investing on www.fool.com, stop loss strategies never seemd to pan out right. (Perhaps because of the same reason: stop loss is on a daily basis, the return info is on a monthly basis.)
And do you know http://www.marketocracy.com? It is a competition where you become a virtual fund manager and you could pit your 'revolving funds' against other players, myself included! They also have a public page for your fund, without the holdings (this is a competition!), but with the return. If you make the top 100, they even pay you (and they use your picks for a real fund too!). So you might get some compensation when your research is OK! Sorry, no stop losses. (Fund managers only use mental stop. Entering a (huge!) stop loss order would make them vulnerable.
Regards,
Qarel
Hi Ken, two things:
looking for "revolving quarterly" is just one way to search. Seasonality, in combination with stocks and other investing terms brings up rather a host of sites, f.i.:
http://www.winninginvesting.com/stock_seasonality.htm
And your criticism of the fund manager is unfair, in the sense that all you have to show right now is hype. Interesting hype, and I am following it, but hype nonetheless. Your backtests use a crystal ball, and that is about the worst thing you could do. If the only thing that stops us from becoming multi-billionaires is that we don't have a time machine, we can always hope.
What I do like is your paper port (but there, equal dollar amounts would be preferable over 1000 each).
What I would like is a backtest where you move forward slowly: Get five years of data; Pick the best stocks for each quarter; Invest; Do this for a year; Move the five year frame one year up; Rinse and repeat.
Why do something tortuously complicated like this? To avoid that the data you use to make a decision also show up in your results, where in the Real World that is impossible. As are billion dollar returns, much as I would like otherwise.
Regards, and keep up the good work,
Qarel
Going from, say 34%, to 1.34 is called 'converting to multiplier format'. A quick illustration why you need multiplier format:
The average of +50% and -50% is 0%.
Now with real money! start with $1000, +50% makes $1500, then -50% makes $750. Oops!
Multiplier format gives 1.5 * .5 = .75, or 75%. Looks about right!
Regards,
Karel
Hello,
I shied back from interactive brokers for two reasons:
- they don't have moneymarkets
- they don't (or didn't?) like odd lots on NYSE stocks (currently about half of stock picks are NYSE...)
I might have picked FolioFn, had they accepted Non Resident Aliens, even if their choice of stocks is rather limited. At last I found http://www.lowtrades.com. Bare bones (little more than trading), cheap, reasonably fast response on (email) questions. I had no experience trading, but had almost no problems with them.
Regards,
Qarel
Hi Matt, good for you!
Qarel
No problem 2mc. The board will be getting used (or resigned) to this kind of madness when the number of posts approaches the next K. You are of course greedy and unpricipled, creating fake personalities just to get past the max number of posts, but you'll have to learn to live with that.
Congratulations! You'll find the SDR an invaluable resource!
Karel
Hi Tom,
no, I am investing in the US exclusively. It's a long story (well, the Motley Fool played an important part). I find I am beating the AEX easily, just not yesterday
Regards,
Qarel
Hi karw,
no you weren't clear enough, at least not for me. :) I see AIM not so much as Buy and Hold than as Buy and cream off profits and hunt for bargains. But probably you called it that because the AIMer would ask the same question as the B&Her: is this stock a stock I (still) want to hold? That means a look at the fundamentals and the prospects. When those are still OK, you continue AIMing. When the stock has lost its charm, you try to take better AIM the next time.
Stick to the plan, and don't make the plan too complicated.
Regards,
Qarel
karw: What other strategies/plans do you see?
AIM?
Regards,
Qarel
Hi Conrad, I have a really nice Vespa 50 if you would prefer it over a Harley!
Hah, Conrad missed his chance; could I claim it? The Big Bikers would leave me far behind, but that would be OK. Touring the States on a Vespa! Oh, my!
Qarel@WishIhadthetime.com
Hello Conrad,
you take the historical view, and I have no problems with that at all. It's just that systematically it's not a very good idea to call Vortex AIM-like, but I am repeating myself. I have two nits to pick in your reply:
... recalling what the simple DCA instrument actually amounted to I conclude that the Vortex Method has far less similarity to DCA than to Lichello's AIM. Yup, and less similarity is a systematic argument. The similarity with the CDP is much greater, though.
AIM BTB refers to the AIM variant(s) described by Lichello in his books, more specifically the 33% or 50% cash variety, with a 10% Safe and monthly updates. No Vealies, no Safe tweaking, no GTC orders, no half-way-to-the-wall etc. etc., that are used all over this board. AIM BTB can't be used for those tweaks, because they are not in the book... At least, that is how the term AIM BTB is used on this board by most people...
Regards,
Qarel@nothingbettertodo.com
Hi Jibes and Conrad,
when you both insist that AIM is Automatic Investment Management plain and simple (Jibes; Conrad is a bit more restrictive), that's OK by me. I don't care too much how you position your inventions. But AIM defined in this way also includes the Constant Dollar Plan, the Constant Ratio Plan and most other Formula Plans for investing, also Dollar Cost Averaging, TwinVest and SynchroVest, and X_Dev too. Under Jibes' broader definition, even plans like Mechanical Investing (see the Motley Fool messageboards) could be called AIM. Personally, I prefer to reserve the term AIM for Lichello's invention. The other plans already have names, and categories they fall under. Calling them AIM makes no sense to me. Just my opinion.
Conrad, when you describe how you developed Vortex from AIM (#msg-821362), you are only muddying the waters from a systematic viewpoint. And that is the viewpoint I picked. Vortex is much more easily described starting from the CDP than from AIM. While a historian might agree that Vortex is derived from AIM, the systematicist snorts: "by removing every feature that distinguishes AIM from the CDP and then adding another feature," and constructs a family tree like mine, with Vortex/New AIM directly derived from the CDP.
But again, call it AIM if you like! How important is this anyway?
Regards,
Karel (who only translates ENG/GER >> DUT)
No, Jibes' New AIM doesn't look like X_Dev, it looks more like Vortex. In fact, it might be exactly the same as Vortex. And just as Vortex, it isn't AIM. Like AIM, Vortex/New AIM are developments of the Constant Dollar Plan. (In a CDP, you sell and buy to keep equity at the same value.) But they have a different twist, compared to AIM. AIM uses Portfolio Control for the 'constant' amount, but raises this 'constant amount' after every buy. This repairs a perceived shortcoming of the CDP, that after several cycles the plan has spun off a lot of cash, but with equity still at the same level. Vortex/New Aim use as a twist that you buy (or sell) more (or less) than the CDP would: the Factor in New Aim, or the Agression in Vortex. The new equity value then becomes the new reference point. This allows the equity value to drift in any direction (apart from price development). So we get the following family tree:
CDPSo AIM and Vortex/New AIM are only siblings, in my view, and saying that they are AIM, AIM-like, or descendants of AIM strictly speaking isn't true. X_Dev is only inspired by AIM; its use of moving averages places it outside this classification completely.
(equity remains constant)
<- ->
AIM Vortex/New AIM
(adds a ratchet device: PC + (adds a factor to buys and
increments; equity may grow) sells; equity may drift)
Sorry, double post. See next message.
Karel
Conrad: It works every time for every two-digit number. I bet $ 9 on it! I am a gambler!
No takers here.
Your two digit number is in fact:
10 x First Digit + Second Digit
Subtract FD + SD and you are left with 9 x First Digit.
All multiples of 9 show the same symbol in the mind reading table ...
Very nice!
Karel
(Seriously OT) Dear Conrad,
when I read your post, my first conclusion is that you had a bad day. I hope you are better now. On TV News I hoped I was agreeing with Tom, and reading what you saw on TV doesn't make me change my mind.
The Bible can be a bone of contention. I presented my own recent experience. Your mileage may vary. I honestly don't believe it is a depressing book, and when it depresses you, perhaps you better don't read it all. But did you really read the Bible? The point of the Samaritan is not so much that he is good (he is, formidably so), but that Jesus uses this story to upset someone's thinking about 'who is my neighbor'. The father who took back his playboy son had not forgotten his other son at all, even if the other son (and you) seem to think so. And it is very peculiar to see you take the Biblical language about plucking out your eye so literally; as if you don't love to use plastic and drastic language at times yourself. The Bible is meant to convey the saving grace of God. If it doesn't do that for you or if you are not interested, put it away. And please move this discussion from the board. You have my email address.
Regards,
Karel
Tom, you are a blessing. Both because of your newsletter, substitute or not, and your aversion to TV News. I am glad to say I spent most of my time recently studying St. Augustine (some parts of his Confessions) and the Bible (Num. 20:1-13 and, unrelated, Mark 9:38-40). I can say safely that it beats the TV News any day.
Keep up the good work,
Karel
(OT, IMO) Hi Don,
did they find and publish information (not rumors) more recent than the 70s and 80s on the France-Iraq connection? AFAIK, everybody was calling Saddam Hussein a friend back then and supporting him with weapons, including the USA.
And I just love Camembert!
Regards,
Karel
<OT, kindof...> Hi Robo,
the problem is in the hazy definition of the backtest. How often did Ellis pick a new sector, for example. For me, it's just thin air. Backtesting with perfect hindsight is worse than useless. Strategies that outperform everything with a crystal ball might drop dead without one. Ellis might be on to something (he probably is), but he isn't going to let us poor suckers in on the details. And all those sector rotation sites want our money too! Now isn't that a suprise!
Regards,
Karel
Hello Rien! Congratulations! Did RMBS blast out of the hold zone? Then why not just sell whatever it is that AIM wants you to sell. Otherwise a GTC would seem OK to me for the first sell. After the first one, space your sells out a bit. However, on the sell side AIM allows you to be more greedy than on the buy side.
And rulings may be nice, but how sure can you be that there is no fly in the ointment?
Regards,
Karel
Hello Conrad,
just to lt you know that I am following your reports with interest. The results look good!
Regards,
Karel