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Hello Don, a useful rule of thumb with AIM BTB is that a cash reserve of X% allows for a price drop of X%. Of course, things are different when the drop happens all at once or in installments. When the stock jumps down in broad leaps, you will still be able to buy at even deeper levels, if that's what you want...
Regards,
Karel
Hi Jenny,
very much appreciated! However, I liked the first one better!
Warm regards,
Karel
Ahem, Jenny, does that (Far Eastern?) haiku equally lends itself to ambiguity in Far-Eastish?
Karel@a-dirty-mind-is-a-joy-forever.com
No problem, and my reaction was a bit sharp too. Sorry.
Regards,
Karel
Eh, Robo, I just meant I didn't like it. Reality checks are quite unnecessary, thank you.
Karel
Hi TooFuzzy, about options out of thin air:
wasn't that my last scenario?
Another option for the company is to issue extra shares for the employee options. This results in dilution for the other shareholders. In other words: it doesn't cost the company a thing: the shareholders pay.
I agree that this doesn't need to be expensed, but here I have another problem.
<RANT>As a shareholder, I don't want to be considered as thin air!!</RANT>
Of course, the rant is not against you, but against companies that dip their hands in my pockets when they want to "compensate" (or whatever they call it) their employees.
Regards,
Karel
No problem.
http://quotes.nasdaq.com/asp/ETFsHome.asp
You'll need the NASDAQ site anyway, so I might as well let them explain it.
Or you could try:
http://www.indexfunds.com/ETFzone.htm
Have fun,
Karel
Overruled!
One of the best last lines posted to this board. Never mind the syllable count.
<g>
Karel
TF, I hardly understand options myself, but I'll try. Perhaps a kind soul can step in and correct my errors. I hope they are few.
In your example, the company loses $1 per share. Why? Because the options don't come out of thin air. These options are call options, and they are "written" by someone who wants to sell for $1. The most obvious "writer" for these options is the company itself. Now, when the stocks are $2, employees want to cash in on their options. They pay $1 per share, and the company has to deliver. How? By buying shares for $2 on the market. Loss: $1 per share.
Of course, this is a rather stupid example. But it might be true nevertheless. A company with a bit more foresight might cover or hedge the options, but then the cost of the coverage or the hedge should be expensed. Another option for the company is to issue extra shares for the employee options. This results in dilution for the other shareholders. In other words: it doesn't cost the company a thing: the shareholders pay.
Regards,
Karel
Conrad,
The link I gave you was for SPY, an ETF that follows the SP500 index. The prices may not compare to Bernie's, as Yahoo, the data source, gives the historical prices adjusted for dividends. Stocks with dividends then show lower prices before the dividend. Bernie's value of 84.71 is the closing price of 7-19.
Regards,
Karel
The sea lies waiting
Lemmings hasten towards it
Stocks overtake them
AIM results for Vortex backtest
One remark to start: the Yahoo results are dividend adjusted, so the backtest has to use dividend re-investment.
I did something as close as possible to AIM By-The-Book as my current spreadsheets allow. I used daily updates (weekly and monthly perform a bit worse). The overal return was 5.3%, or 1.68% annualized. (This corresponds to Conrad's Yield numbers.)
Vortex gives a much superior result.
And one nit: I think Conrad's numbers are overfitted. I discovered that I could get better returns by raising the Buy Safe to a level were AIM never bought back in the downturn. But a 30% Buy safe for such a 'flatliner' is overfitting for the slow climb to the top and slow descent to the end date. Conrad has used a 70% Minimum Buy value. It is not hard to guess that this accomplishes exactly the same as a ridiculously high Buy Safe.
I took my own medicine, and discovered that to get more diverse action than a string of sells followed buy a string of buys (if any), I had to lower Safe to 4% or thereabouts. Returns dropped, but the results were still positive.
Regards,
Karel
Conrad, take SPY, as Bernie already showed what AIM can do:
http://table.finance.yahoo.com/d?a=1&b=1&c=98&d=7&e=10&f=02&g=d&s=SPY
You can download all data easily via the link Download Spreadsheet Format on that page, which points to
http://table.finance.yahoo.com/table.csv?a=1&b=1&c=1998&d=7&e=10&f=2002&s=sp...
Important! The data are in reversed order (most recent first)!
Regards,
Karel
Hi Conrad, perhaps we're just talking about different things!
You: Everybody is wrong in this FIFO vORTEX loss (Sounds like a dog's name!). If you use the right combination of parameters most of the stock stays in much longer than you imigine!
The last sentence in this paragraph seems to indicate that you are talking about LIFO (Last in, First Out) gains/losses. I agree: with sensible parameters Vortex AIM will not sell its most recently acquired shares for a loss (and this might include the shares bought first).
It is however an at least equally accepted practice to assume that the shares you bought first also go out first (First In, First Out, or FIFO). After the first two buys, the next AIM sell will seldom be above the original buy level, and I would suppose that this is also true for Vortex AIM, again using sensible parameters. If you use less sensible parameters (overtuned?), you might even sell for a FIFO loss after the first buy. That was all what the discussion was about, as far as I can see. A bit theoretical.
Regarding your other post: I indeed think that the most important difference between normal AIM and Vortex AIM is the flexibility offered by the "Agression" factors in Vortex AIM. If my imagery confuses, just skip it. It should be redundant.
Regards,
Karel
Hi Bernie,
of course you are right. SPY has been showing some exceptional action the last few years. A more than 50% rise in about two years and then a breakdown is very exciting, and hardly representative for a fund that is often seen as a proxy for "the market". And of course, almost always when Mr B&H ends up in the red, AIM will have done better. Good points, I always like to make them myself.
But I am still interested in what Vortex AIM could do over for example that period (98/01/01-02/07/01).
Regards,
Karel
Hi Conrad,
What about SPY or DIA as a test for Vortex AIM? They are really difficult to AIM, especially if you want to beat B&H
Regards,
Karel
Frankly, it came as a bit of relief to me to find at least one American who thought these jokes just a bit lame...
<wink>
Karel
George Carlin?
http://www.georgecarlin.com/georgecarlin/home/dontblame.html
Of course, there certainly are more George Carlins, but then a little note might have been appropriate.
Regards,
Karel
Rien's proposal at least addresses the case where someone does grub, even if it doesn't get him/her a decoder. As far as I am concerened: I really don't mind the silly grub posts.
Regards,
Karel
Hello Jibes, you're right, it isn't explained. But there is not much to explain: the b/s factors (ahem) are arbitrary values. You fit them to get the right buy/sell action.
Regards,
Karel
Hi nitelord,
You make perfect sense. You are right, in that case Vortex might sell for a FIFO loss (depending on sell factor and minimum trade). But AIM also could trade for a FIFO loss: start standard AIM, get two buys, and the next sell is for a FIFO loss. Both systems primarily AIM at LIFO gains. Obviously this bothered Matt, and he puts PC at average cost. I don't see it as a problem myself. So AIM's value is 'ideal' and Matt's value is 'real', while the PC value of Vortex is just for trading.
Regards,
Karel
Hi MM,
Yes, I was wondering what you would make of Conrad's answer. The stuff is there, but you have to dig it up yourself. Let me give it a try and let's start at Lichello AIM.
Lichello AIM is a holding strategy where you invest part of the money you allocate to a stock in shares. The AIM algorithm then has you selling and buying as the price rises or falls.
The standard AIM buy is based on the difference between Portfolio Control (Portfolio Control starts at the value of your initial investment) and Share Value. From this difference you subtract the Safe Amount (=Safe Percentage * Share Value). If there is enough left for a meaningful trade, execute the trade. Extra: after a buy, update PC with 50% of the value of the trade. An AIM sell goes the same, but without updating PC.
In formulas:
Buy = (Portfolio Control - Share Value) - (Safe % * Share Value)
Hiram who? This one?
http://www.walkervilletimes.com/hiramwho.htm
Karel
Hi Conrad,
Same as karw here. It must be the name...
Regards,
Karel
Conrad: ... but the yield of -1,4% for the 191 day run could almost not be right.
Why not? It is about what I get. I can't completely duplicate the results (unless I change my min $$$ to min shares), but I get a small loss too, just under 2%. B&H lost more, so AIM did a fine job. This is one of those cases where the AIM action cushions a negative stock trend, but not enough for a profit.
BTW, B&H with 33% cash would have done a bit worse, about -5%, so AIM did a bit more than cushion (in that case it would have stood between B&H with 33% cash and plain B&H).
I don't think AIM is designed to beat all other methods in the market. It is designed to reduce your risk and to turn you a decent profit, even in markets that go nowhere. In case you want profits in declining markets, don't turn to AIM. You might get lucky, but that is about it.
Regards,
Karel
OT: http://www.4daagse.nl/
For those that find this market a bit too exciting, it is perhaps nice to know that the world's largest walking event (and one of the world's largest sports events) is starting tomorrow: The Four Days Marches in my home town Nijmegen! Close to, or perhaps over 40.000 people are expected to participate in a 4 day walking event where the participants daily cover distances of 30, 40 or 50 km, depending on their age bracket. All this in the setting of a big party that has Nijmegen in its grip for about a week. It is debatable what is more strenuous: the walking or the partying, but some even manage to do both! Medals however are are only given to the walkers who succeeded! (Some 90% each year.)
Regards,
Karel
Tom,
Please report on that other Black Monday too! It's a Black Monday I could learn to like!
Cheers,
Karel
Hi Tim,
no, I meant that already with 'some kind of random walk'. I am afraid I am rather ingnorant of these kinds of things (thanks for explaining autocorrelation!). The variations are your 'random values mapped to a gaussian distribution', or what was it again. I had the idea of a random walk because these things can "trend" and "trade" spontaneously, or so I understand. And perhaps the fixed step is not much of a problem either, underneath your variations.
Regards,
Karel
Black Monday:
http://www.gamesacademy.com/files/file.asp?code=9026
It seems to be a limited demo, but hey!
Regards,
Karel
Tim wrote: I'd start off with a simpler experiment; just some constant value plus fluctuations.
Perhaps a next step could be some kind of a random walk with variations? Just an idea.
Regards,
Karel
Hello Tim,
I am with you on the AIM-reduces-risk theme. When you say: To continue to put money into a constant down trend seems contrary to AIM's aim to reduce risk, you are right of course, but reducing risk is not the only aim of AIM (nor of investing in general . The basic supposition is that you buy quality stocks. That is why Lichello gives blue chip stocks pride of place in his book. In the majority of cases, a blue chip stock going down will go up again. That means that your quality stock that has gone down, now is at a level were buying involves less (downside) risk. Because you still have cash on hand, you buy. When the price rises, your quality investment becomes riskier: you have more money in the market, and downside risk is growing. You sell part of your holdings.
Of course there is a hook to 'in the majority of cases'. In this respect, holding a falling stock, the AIMer faces the same question as a Buy-and-Holder: is this stock worth keeping? If it isn't, liquidation is indicated.
I find your question for a general test intriguing and beyond my powers. Because nobody seems to have done it yet, I would like to make a general and obvious remark. You could classify stochastic inputs according to the way they are "trading" and/or "trending". AIM is custom built for trading inputs: stocks that are going nowhere, but cycle deep enough to generate trades. In this case, AIM makes money were B&H doesn't. With almost purely trending inputs, AIM loses from B&H in an uptrend (but still gets a postive result) and wins from B&H in a downtrend (but still gets a negative result). Inputs that show both trading and trending will give better results than purely trending stocks. Downtrending and cycling stocks show less loss or even a profit (see the jjjinvesting example). Uptrending and cycling inputs show greater gains and may even outstrip B&H. A far cry from a strict proof, and most probably you had this already figured out yourself.
Regards,
Karel
Thanks, Aditya. This more than enough!
Regards,
Karel
Thanks for the offer! And I want it to evaluate the idea, not to see a neat spreadsheet!
You can send it to qarel@notsohotmail.com. Just delete te 'notso' from the address. I get spam enough there already.
Many thanks,
Karel
Of course, he was talking about a dynamic SMA: that's what you need the dynamic references for in Excel, as far as I can see. You don't need them for an EMA.
Regards,
Karel
That was me, and I said it was "soo easy" (#msg-373176). I know it is possible in Excel to use dynamic references, but I would guess that it doesn't beat the EMA formula for simplicity:
(Factor*LastPrice) + ((1 - Factor) * PreviousEMA)
But I am always ready to learn more about Excel!
Regards,
Karel
Hello Karw,
I think you are reinventing AIM! It is a bit difficult to find the right board for this machine you are building! I would be interested in the spreadsheet you have made. I am also interested in your answer to message 43 from 2mc on the AIM ReBal board. In your formula for the buy side, you use Value/Actual Cost, in that for the sell side you add to this Weighted Average Price and Actual Price. Aren't these equivalent (WAP/AP = AC/Value)?
Regards,
Karel
No, I currently have very little money to invest with. I don't have enough to AIM, or to X_DEV. I am doing a bit of AIM-influenced scale trading like stuff. And some momentum investing to get more funds real quick. But today, nothing seems to work
Regards,
Karel
Mark,
stupid question, because you said you made a change in AI, but is the 5% resistance for Matt's AIM version over Share Value + Cash Value (and the 10% for standard Lichello over Share Value alone)? That isn't visible in the summaries.
Regards,
Karel
Thanks for the encouragement. I'm still here, as you see, and I won't go away in a hurry!
Regards,
Karel
Hi Jibes,
No problem here, when AIM Re-Bal doesn't prove to be the silver bullet of investing! As long as we have a fair idea what kind of stock and portfolio composition is necessary, things are OK.
Regards,
Karel