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Hi Conrad, somewhere around page 37 Lichello talks about Portfolio control and the adjustments to it. He wanted portfolio control to reflect all cash invested in stocks. but the problem with that idea was even though the price had not changed you would keep investing more money non-stop. So he changed the rule to only adding half to portfolio control. With that rule the additional investments quickly stopped. He felt it was a acceptably compromise.
A lot of formula plans have trigger points, where the don't buy or sell until the trigger points are exceeded. With (SAFE), Lichello did things a bit different from the rest. First, Safe is based on Stock value not portfolio control. Second, instead of using (safe) as just a trigger, (safe) is subtracted from the differences. This also reduces the size of any Residual Buy.
While this could be a correction, I suspect the drop in the stock market is more likely due to people selling stock to get money to donate to Haiti.
Hi ls7550, about Ladder, I was wondering if you ever got to play with my HiLowdemo spreadsheet? I did have it on the web for download but Yahoo shutdown where I was storing it. I could send it to you in a email. I haven't done anything with it since 2004.
Your ideal of using the Permanent portfolio in place of cash is interesting.
Hi Infooverload,sorry to say my Basic programing is very rusty. Hopefully some of the others can look it over for you.
You stated one of the programs was a Twinvest/Synchrovest hybrid, could you explain the differences in english?
Hi lrp42, found the cash burn rate page by doing a google search.
site:www.aim-users.com "burn rate" http://www.aim-users.com/cashburn.htm . The normal way to get to the page is through the "AIM basic link on the home page. http://www.aim-users.com/aimbrief.htm
Hi Infooverload, it is my understanding from Praveen Puri blog that his system is based on the constant value plan, otherwise known as the constant dollar plan. I think the main reason he references Mr. Lichello's AIM plan is to draw people to his web site. I have not read his book. If you are a member of a public library, they can likely get a copy of the book for you to read through the inter-library loan program.
In this article he talks of alternatives to dollar cost averaging.
http://ezinearticles.com/?Two-Alternatives-to-Dollar-Cost-Averaging-For-Recurring-Investment-Contributions&id=2709714 The second method is actually Mr. Lichello's Twinvest method.
Google books has a limited preview http://books.google.com/books?id=L9B5XZAca60C&dq=%22Praveen+Puri%22+system&source=gbs_navlinks_s
Hi Conrad, I think the short MA is used to reduce the whiplash that you may get using the raw price data.
Hi firebird, that code could be related to Stock Traders Find Speed Pays, in Milliseconds http://www.nytimes.com/2009/07/24/business/24trading.html
Hi infooverload, I think that one of the averages is used as the mean/average and the other average is used as a substitute for the raw price.
About using the standard deviation, you may want to check out some of the early postings of Myst he came up with the idea of using a deviation from the mean in a AIM like manner.
Check out his forum, http://investorshub.advfn.com/boards/board.aspx?board_id=1074
Hi AIMster,
Putting on Devil's advocate hat here for a minute, if something has already fallen 80% since inception that means either there's only 20% until wipe-out or at some point it will start to revert to the mean and go back up to some degree.
Not necessarily, I can't remember which fund it was but during the 2000 bear I know at least one of these funds did a 10 to 1 reverse stock split. In order to get the price back up.
These funds remind me of going up to Oklahoma to play blackjack on the Indian casino. When you sit down at the table they have the normal bet area and what they call a ante area. The minimum bet is five dollars, and the ante is 50 cents. They say if you are a good blackjack player the odds are about 2% against you, if you are bad it could be as high as 20% against you. With that ante the odds become 12% and 30% against you. With those odds you start losing money in a hurry! In order to get those odds back down you have to have a minimum bet of $25 or $50 dollars a hand.
Hi infooverload, first let me say that all of my spreadsheets are for testing the formulas plans, not for real investing. Also let me say that I have not been able to do any investing myself. One way to make Synchrovest more conservative would be to allow Synchrovest less access to the cash. You could have two cash accounts and when you have a sell, split the cash between the two. Let Synchrovest be only able to draw on one of the cash accounts.
I assume you have already downloaded my spreadsheets. In the Synchrovest spreadsheet, on row three are all the adjustments feel free to play with them. You will likely find B3,C3,D3,F3, and G3, all worth playing with.
Mr Lichello, started working on Synchrovest sometime after the 1968 crash/bear market. His investment in a mutual fund was in shambles. He learned the hard way that DCA alone was not the answer. One of the first things he saw was that he needed money for rainy day events, if he had been able to invest extra money in the crash he would have recovered much quicker. So he came up with his rule of investing 75%, and putting 25% away for a rainy day. He also decided to use a multiple based on average cost divided by current price. By using that when current price was below average cost, he would invest a larger amount. He was also concerned with investing as much cash as possible when the market was low. Which leads to his second investment rule, if the multiple is greater than one then subtract one from it and use the decimal part as a percentage of the cash to be added to the first formula. He also thought that by the time you had a 100% profit the bull market was likely over and it would be a good idea to sell out.
When you build your spreadsheet or (on paper) formula plan. Here are some things to think about. You could use a multiple based on several things added or multiplied together.
You could use a multiple based on your average price as you buy stock. http://books.google.com/books?id=XeaorGgYAXsC&pg=PA311&lpg=PA311&dq=accelerated+dollar+cost+averaging&source=bl&ots=HUaa_srgaO&sig=mx596IIuVuM_voR41y16WlFV0kM&hl=en&ei=7VzKSqnNGImwtgfLwoWaBQ&sa=X&oi=book_result&ct=result&resnum=1#v=onepage&q=accelerated%20dollar%20cost%20averaging&f=false
you could also use a moving average of the current price. This used to be on dripadvisor before it was sold to a new owner. http://web.archive.org/web/19991004130251/www.dripadvisor.com/calc/about.shtml
about the second formula ,the percent of cash, you don't have to use it if you don't want to. You could also change it to a real percentage, that would also change how fast you use up the cash.
Example: average cost is $10, and current price is $5. Using the old rules you get 10/5= 2 times monthly installment , plus 2-1= 1, for 100% of remaining cash.
You could change it like so. Keep the first rule, you get 10/5= 2 times monthly installment. But change the second rule to a true percent. If the multiple is greater than 1 , take (average cost- current price)/average cost, for a true percentage. you would want to get rid of the negative sign.
((5-10)/10)*-1= 50%, times cash. As you can see there are all sorts of formulas that one can use.
Last but not least here is a copy of post number 10.
Here is some more interesting stuff on DCA. In her book Practical Formulas for Successful Investing by Lucile Tomlinson, Mrs. Tomlinson has a chart that shows how long it would take for a DCA plan to reach 40% profit, the time period varied from 2 1/2 years to 10 1/2 years long, most were about 5 years long. She seemed to be recommending stopping the plan at that point, as she goes on to say that after reaching 40% the plan tended to just follow with the market. Another thing she said was that If one were to combined a DCA plan with a Constant ratio plan one could get greater profits.
I have not made a spreadsheet to test this, but I have full confidence in Mrs. Tomlinson that this would work. I feel that you will end up with greater profits than DCA, but less profits than ether (Value Averaging) or Synchrovest.
PS: I think that most of the people on http://www.bogleheads.org/ use this.
Take care,
Clifford
Hi Karw, I am still unsure as to how this will work over several cycles. It looks to me like the average cost gets smaller and smaller as the current cash gets larger than the initial cash.It may even become negative if current cash is larger than initial equity + cash. Or am I just missing something?
Interesting reading on leveraged mutual funds. http://www.usatoday.com/money/perfi/funds/2009-08-20-leveraged-mutual-funds-investor-traps_N.htm
I remember somebody saying something about PayTrading. As I was searching on Google I came across this web page with a spreadsheet for it. I have not tried it. http://www.illiteratewithdrawal.com/stock-market/paytrading/
If I run out of cash while AIM signals buy, is it prudent to add cash and keep 'buying low'? I know Lichello advises against doing this often, but it seems like the right thing to do.
Hi mike, AIM does not keep track of how much cash you have. That is why it is asking for more cash than you have on hand. Can you add the total amount that AIM is asking for with out upsetting AIM? YES you can.
Example 1: AIM wants you to buy $3,000 worth of shares, but you only have $2000, so you get a loan for $1,000. You would buy the $3,000, and add $1,500 to Portfolio Control. No Problem!
Example 2: AIM wants you to buy $3,000 worth of shares, but you only have $2000, But you think this is such a bargain that you want to add extra money to the stock, so you get a loan for $2,000. You would buy the $3,000, and add $1,500 to Portfolio Control. No Problem! But you want to add a additional $1000 of unasked for money? What to do? Mr Lichello was a ultra-conservative man, that is why he recommends only putting half of the unasked for money into AIM now. That way if the stock should drop again AIM has some cash to work with. Any unasked for money that is put into stock must be added to Portfolio Control at 100%. In he's early editions he wanted you to add 110% to Portfolio Control, But if I remember right in the Twinvest edition he dropped it to 100%.
The same goes for selling stock, if aim asks you to sell stock to add to cash then you don't change Portfolio Control. If you are removing cash or stock, say to buy a boat, then you want to reduce Portfolio Control by 110% of the cash in the old editions and 100% of the cash in the new editions.
Hi guys, I remember some of you commenting on some of your sells and buys being completed at the top price for the day or low price for the day. Came across this at Bogleheads that may explain this.
http://www.bogleheads.org/forum/viewtopic.php?t=40738
http://www.nytimes.com/2009/07/24/business/24trading.html?_r=2&partner=rss&emc=rss&pagewanted=all
http://market-ticker.org/archives/1259-High-Frequency-Trading-Is-A-Scam.html
It seems these high speed traders may be tripping your GTC orders. Don't you hate it when you sell at the top price because someone is fishing for trades.
Re: Split Portfolio Control
Hi glennpj, Once you have your rules defined. I would test them on paper, and compare them to original aim. If that works then make a spreadsheet, and do more extensive testing over many cycles to make sure the rules are stable. Sometimes when you mess with the rules of AIM it can become unstable, leading to where it will not buy and sell correctly.
I did come up with a idea of splitting Portfolio Control into a Buy Portfolio Control, and a Sell Portfolio Control. But I could not get it to work properly. But my idea was no where near yours.
Mr. Lichello tried to have portfolio Control equal to the amount of money put into stock, that way you would not start selling below the average cost of the stock. He also wanted to keep all computations simple so that anyone could do it. He also wanted it to be automatic. He was unable to do all these things, so he came up with AIM as it is in his book.
Tom came up with the idea of Vealies on the sell side. If Mr Lichello believed that 50% cash was good enough to start a AIM program and carry it through a bear market, then why let AIM have more than 50% cash in a bull market. However if you do not do the sell, it is only a paper profit that could evaporate later.
Later Mr. Lichello came out with newer editions where he changed the starting ratio of cash to stock. He did this to try and adjust for the super bull market we had in the 80's and 90's.
Meanwhile Tom came up with his Idiot wave, for determining the proper starting ratio of cash to stocks. There has been talk of using the Idiot wave to adjust the cash to stock ratio from time to time but I don't think that anyone tested it.Now we have the use of the V-wave, which is still a new concept.
About your buy side Vealies, not sure that they are a good idea. I think it could end up having you buy less stock than with regular AIM. Regular AIM delays buying of stock in the holding range so that it has more money available to buy stock at the bottom of the market. Because AIM increases Portfolio Control with each buy, at or near the bottom of most bear markets AIM will buy most of its stock. The increase of Portfolio Control, also causes a delay in selling of stock. This causes AIM to have a greater profit than its father, the Constant Dollar Plan.
The Constant Dollar plan, has cash for up to a 70% bear market, AIM normally has cash for a 50% bear market, that is with using a 10% drop between buys.
It may be more profitable to use the V-wave as a trigger to delay buys and sells, but not do any Vealies. Just a thought.
Looks like no one read the link! I still say no one can do math the way Ma and Paw Kettle can! This has widened up my horizons. With my new math skills I should be out of debt in no time! Come and learn the new math!
http://www.dvo.com/financial-crisis-explained.html?CID=beprepared2_msg
Hi guy's, I don't know why I keep trying to explain things to you mathematically. But, I'll try one more time! Go to this web site and watch the video, math can't get much simpler! Also the cookbook software is pretty good.
http://www.dvo.com/financial-crisis-explained.html?CID=beprepared2_msg
Hi Tofuzzy, one day I'll have to get that fourth edition.
When the original book was written the settings were 10% buy and hold SAFE and 5% MIN order size.
Reducing BUY and SELL SAFE to 5% but increased the MIN order size to 10%.
Off hand, to me anyway, he kept the +-15% hold range, but allows AIM to take a 10% bit instead of a 5% bit. This would give you more action near the holding range, but would burn cash faster when the market fell.
Wonder what would happen if you made the (BUY and SELL SAFE) and the MINIMUM order size, adjustable dependent on how much the market had moved from your starting point?
Came across this presentation on the mortgage crisis.
http://www.scribd.com/doc/14166113/T2-Partners-Presentation-on-the-Mortgage-Crisis4309-3?ref=patrick.net
Try to keep some powder dry for the coming years.
Hi Guy's I just got the word that Geocities will be closing later this year. That means if you want any of my spreadsheets you need to get them now.
Hi Guy's I just got the word that Geocities will be closing later this year. That means if you want any of my spreadsheets you need to get them now.
Hi Ryan, sorry for the late response but how can you come up with $951,184 after 4 cycles, unless you are using margin and selling the stock short?
Even though Mr Lichello came up with attention grabbing titles for his books, the formula's try to reduce risk. one of the ways was to not use margin or sell stock short. In AIM you start with a 50%:50% ratio, and with Synchrovest and Twinvest you started with a 75%:25% ratio for the monthly investments.
About gummy's web site, it is still there. http://www.gummy-stuff.org/ but as he says it will be going soon. You can read more about it here. http://www.bogleheads.org/forum/viewtopic.php?t=34502&start=0&postdays=0&postorder=asc&highlight=gummy
In the middle of the page someone has made a zip file of gummy's web site if you want it.
Also http://www.financialwebring.org/ has gummy's permmision, and has put up the web site there.
I'd be interested in learning how the Myway programed works.
OT:CO2
How hot would the lime, water, CO2, get? Would it get hot enough to turn water into steam to run a generator? Also would it release heat fast enough? I am remembering making plaster of Paris castings in my school days. You would mix the plaster of Paris with water and pour it into the casting and then wait a while for it to get hard, it did get hot to the touch, but I am not sure that would be hot enough.
Note the amount of heat released, and the temperature range produced may be more in line with house heating. I have seen these home improvement programs where they have a water hose embedded in the floor with hot water running through it. You would likely want to use a heat converter of some sort, so the lime does not run through the floor hose. Then you have the problem of what the home owner would do with all that lime.
Worth a look!
Hi guys I was over at aim-users.com, and saw the link to Jeff Weber's site. I said to myself, I haven't been there in at least two years, what's he up to? So I went and looked. http://www.jjjinvesting.com/ Looks like he is into LEAP's right now and ETF's. I know a lot of you have been looking at the inverse and 2X ETF's. It just may be that LEAP's are safer than going that route. LEAP's work like options but last much longer. I'll let Jeff tell you what he has been up to. As he has just made a video telling about how he uses leap's with AIM. http://www.the-market-toolbox.com/tv/pca/ . You should also get this web page up in another window. http://dshort.com/ Jeff talks about the picture of the four bad bears on that site. You also want to check out the bear bottoming process on that site. Jeff has some free spreadsheets that you can get by emailing him, you can also get a copy of his book also.
Wish I had some extra money, Jeff makes this pretty interesting.
Take care,
Clifford
Hi Ken, I think the spreadsheet was made in excel 2000. Hi LC,
I can't open the 3rd and final sheet. Says its protected and needs a password.Yes the spreadsheet should be protected, I still haven't made up my mind about maybe trying to sell it.
That being said you should be able to change all the cells that are in yellow, I only protected the cells that have the formula in them. Should I decide to make it public domain, I will have to upload a new spreadsheet as I no longer remember the password.
Hi Ken not sure what is up with geocities any more, you should have seen a diretory with several spreadsheets in it. Here is a direct link to the spreadsheet, you may have to right click on it and use save link as. http://www.geocities.com/lostcowboy5/Spreadsheets/hilowinvestordemo.xls
Hi Clive, your ladder setup reminds me of my hilowinvestor spreadsheet. I have a demo of it at http://www.geocities.com/lostcowboy5/Spreadsheets/ Because your ladder spreadsheet uses macro's I can't compare the spreadsheets myself. I am using the openoffice/Calc and it doesn't like Excels macro's. Feel free to try my spreadsheet and compare the two. Your idea of the high being set at (5YHH) and the low being set at 0.4(5YHH) is interesting. You could also set the bottom of the ladder at the bottom of the bear and the top of the ladder at about 150% to 200% of that. you should get most of the next bull market. Once the bull market has topped out and you think that you are in for a bear market again, set your new low setting -50% of the high setting.
Hi guys, looking at the bull and bear data. Most bears are no greater than -50% from the last high point. Most bulls go no higher than 150% to 200% from the last low point. So one could use that for setting up the hilowinvestordemo.xls spreadsheet. For those who have forgotten you can get the spreadsheet at http://www.geocities.com/lostcowboy5/Spreadsheets/ .
Again, I am interested in what you think of the spreadsheet.
Here is some info on the average gain of bull markets.
http://www.usatoday.com/money/markets/us/2005-08-09-toothless-bull-usat_x.htm
Found this also, the largest bull and bears.
http://www.frbsf.org/education/activities/drecon/answerxml.cfm?selectedurl=/2001/0102.html
Come see me at Systematic Investing group #board-966 lets talk formula plans.
How This Bear Market Compares!
I found this today, thought people should look at it.
http://www.nytimes.com/interactive/2008/10/11/business/20081011_BEAR_MARKETS.html
Hi Toofuzzy, no I have no skin in the game. I did get out of credit card hell last year. But then my old used car started being very unreliable. So I went and got a loan on a new car. I decided to get a new car rather than another used car, due to the arthritis. I can't really do my own repairs anymore. Right now I am trying to pay it off as fast as possible.
Hello,not sure if anyone still comes here, or if anyone is still using Synchrovest in these hectic times? Tell me how things are going!
Hi Conky, I think you should sell, and take your losses. I came across this web page.
http://www.stocktradingtechniques.com/2008/02/08/its-time-to-buy-hguto/
That says HGU.TO (Horizons BetaPro S&P/TSX Global Gold Bull Plus ETF - whew, what a mouthful) is an ETF that leverages gold stocks by over 2:1. That is, for every dollar the gold index go up, HGU.TO goes up over two dollars (of course, if the price of the index goes down HGU.TO goes down twice as fast).
People have tried to do leverage funds before with AIM. I don't think anyone was successful at it. I think the problem is two fold, aim was not designed for the range of stock prices you can see in a 2:1 leverage fund. Also the cost of the funds are high, and taken out daily.
You want to play this fund differently, think of it like playing craps in LV. The next time you think gold is going to go up, place a bet, with money that you can afford to lose. If you win pick up your winnings, don't leave them in the fund.
Take care,
Clifford
Hi Toofuzzy, here is some more info on it.
http://news.cnet.com/8301-11128_3-10002704-54.html
Been so long, I've forgotten how to post a link on here.
The short version is that they have come up with a catalyst that can be used to split water into hydrogen and oxygen, which at a later time would be used in a fuel cell. They are currently working on the idea of using solar power to produce the electricity to split the water. But any electrical source would work.
Hi Adam, in this example I did not use a SAFE. But I do like the idea of using a SAFE. Using SAFE the way AIM does, it delays the initial buying, in the hope of a larger buy nearer the bottom. That is also part of the reason AIM adds the 1/2 the buy to PC. So we could find that while this formula stretches the cash, it may not concentrate the buying at or close to the bottom, the way standard AIM does. Something to think about, but that's what testing is for.