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Hi Ray, Which ETFs were you thinking of? With over 1700 ETFs/ETNs out there it's hard to keep track of them all and what their primary focus is.
Best,
Allen
Hi Tom, Thanks!! I greatly appreciate being kept up to date about the economic news.
Best,
Allen
Papageno: "What should we say now?"
Pamina: "The truth, the truth, ...even if it is a crime."
"The Magic Flute" Mozart with libretto by Schikaneder
Hi Gang, Beware of TDAmeritrade's web display of your portfolio. I noticed a problem with the various figures not matching up with each other back in January and collected data for a bit over a month and submitted it to them and got back a bunch of b$%* s^ excuses and they said they'd fix it. Well time went by and no fixes yet on one account, the others are mostly correct. Except a new error started last week on one of the accounts, trivial, less than a dollar, but the error is on only one of the accounts. They told me it was a "known problem." However that error is not on the other accounts.
Well, I created a more comprehensive spreadsheet for the account with the big problems and the displayed numbers for day gain, the upper left and the lower right just don't match the listed portfolio or stock change. They keep giving me the runaround about it and no fix. But the other accounts are just fine, for the most part.
If the errors were just rounding errors that'd be fine but, typically it is from about $500 to a $1,000. Some days only a few dollars but almost always over $100. And there has been no trading on that account so it can't be an error there.
Anyway, keep an eye out for these issues.
Now, another observation. Over the last month the one I've been tracking has ranged from 99.96% of the previous day's value, up to 100.55%, back down to 98.91% and now 99.98%. This includes a couple of small dividends, .0009% in one case and .0006% in the other, not enough to really matter.
I'm going to keep up the daily listing, particularly the % change in the portfolio value. Looking back it seems like this might be indicative of market top. If I have time I'll go back, using the same positions and see what the results might have been in late 2007, just before the market crash and see if the results are similar. I'll use a bit broader base, weekly rather than daily and see what happens.
Best,
Allen
Hi Adam, Perhaps once could simply multiply the V wave by .6 to get a number closer to Buffet's. 42% x .6 = 25.2%, or one could .575 to get closer. 42% x .575 = 24.15%.
The more cash on hand and the longer it's on hand the lower one's overall return so following Buffet's metrics might be a good idea.
Best,
Allen
Hi Toofuzzy, Yeah, a bad cross-link in the brain.
Best,
Allen
Hi Toofuzzy & Gang, Well, duh, if one sets the percent cash to 0% and the minimum trade size to 100%, then checks down the column of prices to make sure no trade happens then you get the results for B&H including dividends, if you have entered them. If a trade should happen, then set the buy and sell safe percentage such that they do not happen and you easily can compare the results between AIM and B&H.
Toofuzzy, Where did I say I had reduced the buy safe to 0% and left the sell safe at 10%? I can't find it. Ever since Tom suggested reducing the sell safe to 0% I've been using it as my default.
BTW Gang, If you'd like a copy of the latest version of my AIM spreadsheet drop me a note at 60e20f21@opayq.com and I'll send you one. I've added a dividend column and a tab that calculates the dollar gain %/year directly from the AIM Backtest tab.
Best,
Allen
Hi Gang, I sc#$%@d up some of the last post in that I did not correctly account for dividends for Buy and Hope. In actuality B&H would have beaten AIM in every scenario because of the 20% idle cash in AIM that did not collect dividends but B&H would have. So the total for B&H would be about $56,144, 7.296%/year for the full 1993-2017 span.
It's too much to go back and do the B&H figures for the other scenarios but I'm guessing the same holds true for them because 100% minimum trade size amounts to, almost, B&H with very, very, very few, if any trades.
Clearly, beating an index in what is a mostly bull market is difficult if not impossible.
Now to PRNHX, lets see what happens there.
Best,
Allen
Hi Toofuzzy, I assume you were referring to PRNHX as that is the post you linked to, however, since I still had the data for SPY handy I did that instead. If I have the energy I'll do PRNHX later.
SPY with a 0% sell safe and a 10% buy safe I got got $40,891 and 5.981%/year return with 10% minimum trade size from February 1st, 1993 to May 1st 2017 based on monthly figures. With 10% buy and sell safe and 10% minimum trade size I got $33,596, 5.124%/year. With 5% minimum trade size and 10% buy and sell safe I got $38,854 and 5.756%/year.
Going back to 0% sell safe and 10% buy safe and 5% minimum trade size I got $39,767, 5.858%/year. With 0% sell safe, 10% buy safe and 100% minimum trade size (180) I got $54,389, and 7.234%/year. With 10% buy and sell safe and 100% minimum trade size I got exactly the same results. For goofs and grins I tried 0% buy and sell safe and 100% minimum trade size and got exactly the same results so then I tried a minimum trade size of 5% and got $47,303, 6.618%/year and with 10% minimum trade size got only $42,037, 6.1%/year.
Then I tried doing as you suggested of buying in 2002, selling in 2006, then re-buying in 2009 to present.
Starting September 2002 and running until January 2007, the results were best with 100% minimum trade size and it did not matter if the buy and sell safe were 0% or 10% each or 10% one and 0% the other, they all got $16,792, 12.707% 10% trade size got $15,372, 10.431%/year with 10% buy safe and 0% sell safe. at 5% minimum trade size it was %15,282, and 10.291%/year.
Then starting at the Orcroft point, April 2009 until present, best again was 100% minimum trade size (91) with a return of $25,713, and
12.393%/year. These figures assume starting with the same $10,000 as the previous run of SPY. If one started with the results from the previous run, $16,792, the results would be a total of $43,210 and a slightly better 12.404% for the 8.33 years of the second part.
Assuming you let the results of the first run sit on the self and got no return sticking with SPY the whole time would be best as you would have gotten $54,389 total, or $11179 more. To make this much sitting on your hands you would have to make ~31.786%/year during the 22 month you were out of SPY!
AIM beats the pants off Buy and Hope over the total period of September 2002 to present with a return for B&H of only $28,885 versus the $54,389 for AIM. Even giving B&H the chance to get in in 1993 it only gets $53,703 for 24.5 years, 7.102%/year.
So it is clear that playing with your settings and when you get in and out makes one hell of a difference.
Best,
Allen
Hi Gang, and Tom, Then I went back to SPY and tried the same routine starting in 1993, the oldest data on Yahoo. No luck at all. Buy and hope outdid AIM by more than 50%. Even trying a shorter period for AIM did not work as the "down point" was not for several years, and though the overall percentage for that later period per year was over 9%, AIM just could not keep up.
So, it proves volatility and a relatively short range - SPY had a range from $44.40 up to $236.77 and the lowest intermediate point was $70.53.), but that did not happen until April 2009 so sitting on your hands was not a viable option.
Best,
Allen
Hi Tom, Yes, it is true that the T. Rowe price table over ten years is considerably better than Buy and Hope as it has more volatility than is typical these days. I'm not sure why that is true but it seems that way to me.
I do wish that, like you, I had found Lichello's book back then rather than in 2002, and actually followed it, but, alas, other things got in the way. As a side note I still have the original purchase slip as a place marker in the book.
Anyway, back to the T. Rowe Price New Horizons Fund (PRNHX). During the ten year period under test the range was from a low of $15.51 up to $49.45 on a monthly listing basis from Yahoo, 318% overall. The table in the book goes from a low of $4.49 up to $15.36, 342%, almost the same total range.
All of the following tests were done with a 0% buy safe and a 10% sell safe.
I did the back test for the last ten years, starting on May 1st, 2007 through May 1st 2017, including dividends and commissions based on the current TDAmeritrade cost of $6.95, and AIM comes up short on a 50% cash basis as used in the 4th edition table on page 88. Buy and Hope gets $21,360 including dividends, 7.885%/year while AIM comes up with $20,258, 7.315%/year. This is with a minimum trade size of 10% and $1000. Reducing the minimum dollar trade size did not change anything. Interestingly enough as one increases the minimum trade size the return gets better. The initial stock purchase is 140 shares. At 100% minimum trade size the return is $20,922 including dividends, 7.662%/year.
However, if one switches to 30% cash (lower runs out of cash) and 100% (196 shares initial purchase) minimum stock trade size, the results are significantly better, $25,312 and 9.732%/year return. However, if the minimum trade size is 10%, the return is only $24,795 or 9.505%/year. The difference seems to be that the lower minimum trade size causes sells that cause lower dividend income.
Anyway, it seems like Lichello's later versions work better overall but it seems like there is still room for improvement.
Using Orcroft's approach of sitting on your hands waiting to hit bottom and back up a bit is, overall, better. If one assumes that the Buy and Hope investor got in May 1st, 2007, their result is, including dividends the same as before, $$21,360 and 7.315%/year. If the AIM investor sits on their hands until April 1st, 2009 and starts out at 20% cash and a minimum trade size of 10% the return is $22,482, 10.542%/year but if the minimum trade size is 100% (417 shares) the return is $31,923, 15.442%/year! So sitting on your hands is worth a bit over ten grand! And there are no buys or sales in that period, so one could use the dividend income for other purposes, like when another position runs out of cash.
Who says sitting on your hands doesn't pay? In this case it pays over ten grand in the long run, much better than the banks or bonds do.
If you reduce the minimum trades size to 50%, (210 shares)you get one sale and a return of $26,782, 12.961%/year.
Finally, it seems that if one is near the end of a bull cycle is is best to sit on your hands a while, so the question is, are we nearing the end of a bull cycle? I'm guessing yes, but I've been known to be wrong more than once.
Best,
Allen
Hi Tom, My understanding is the AAII is, for the most part, a semi-buy and hope portfolio. It has a few criteria that govern what is in the portfolio and when it gets dumped. To get into the portfolio it has to be a small cap, less than $300 million and gets bumped out, if there is something to replace it, when it gets to $900 million. There are other factors also in use. As far as I know there is no cash reserve. They get the money to buy the next position from selling the bumpee.
The SPY had no cash hoard, just the dividends that came in. And the AIM version had 30% cash. Less than that cash went negative.
As to the results Lichello shows in his book, remember that when he starts at $10 and goes down to $4 that is a 60% drop, something that vary rarely happens in the real world. And then when it goes back up to $10 that is a 250% move in just three months. That, too, is rarer than hens teeth. So, while the concept is great the figures he uses to prove it are wacky at best.
Best,
Allen
Hi Gang, I was reading the May 2017 AAII magazine today and looked at their model portfolio versus SPY returns since 2003. Interesting as the SPY return is 8.769%/year versus the AAII of 8.898%/year. $10,000 invested June 2003 becomes $31,763 for SPY and $32,288 for the AAII portfolio, only $525 difference.
Running AIM, the best I could come up with is 6.473%/year.
Oh, well.
Best,
Allen
Hi Toofuzzy, the only problem with: "Sell(ing) PUTS at a price you are willing to buy." is that you may wait a long time before it gets there. Not that it is a bad idea, just how long will you have to wait for it to arrive at your door?
I'd guess that a combo of Puts and an ETF with very low volatility and a reasonable dividend is the best way overall.
Best,
Allen
Hi Gang, Thanks for asking about NAVI, kraw, it caused me to look at things in a slightly different way.
One of the things I've questioned for a long time about Lichello's book is the table where the price goes from $10 down to $4 and back up twice a year for seven and a half years. I've never seen a position do that. Maybe, somewhere, there is one that does that but I've not found it.
While backtesting is limited as it is no predictor of the future, what it is useful for is showing what has not worked in the past. Remember the discussion about SPY and AIM versus Buy and Hope? Combining what happened there with the NAVI stuff and all the variations I tried with minimum trade size, PC percentage added when buying, percentage cash and looking at various time periods it is fairly clear to me that the most important key for relatively short term thinking, a couple three years - being 74, looooong term is not really an option - is entry point and then selecting an exit that makes sense and automating it with Good 'til Cancelled sale orders.
The two things to consider are how to select an entry point and how to select an exit point.
Selecting an exit point is easier once you know where you will enter the trade, what percentage profit are you aiming for. I'm guessing that a stepped approach is best, i.e., 1/3 at X, 1/3 at Y and 1/3 at Z or something similar to the way others protect their profits. This does not necessarily mean totally out of a position, just a decided upon portion. If I understand LD-AIM correctly, it helps with this. But it seems that looking at the range of past moves might be a good indicator as well. Not the dollar amount but this position typically goes up x percentage over y time, then apply it to the current market price of the position when selecting sale prices.
As to buying into a position, MACD crossover, Orcroft's method or some combination thereof, and, perhaps, some other metrics yet to be found, seems like the best approach.
The difficulty with this approach to getting into a trade is, what to do with your cash while you wait, twiddling your thumbs?
It seems that finding positions with almost no range in both bull and bear markets but that pays dividends is the best approach.
So, what does everyone think about all this?
Best,
Allen
Hi karw, NAVI does not seem to be a good AIM position based on getting in two years ago. Much better than Buy & Hope but much less than the S&P. However, if one does Orcroft's, or a similar method, to get into the position and wait until the second up after the bottom, then you can do quite well. Based on the last two years of weekly prices, if you got in at the $19.33 price you only get ~3%/year depending on where you set the minimum share sale, best around 35% minimum stock sale. Set at 10% you get 2.19%/year. Much better than Buy and Hope which would get you -21.84%/year, a big loser. If you get in at the $9.56, two up from the $9.00 price and you set the minimum share sale to about 35% you'll get 35.18%/year. Following the same wait until just past bottom, Buy and Hope would get you 33.87%, not all that much difference.
However, if you set the minimum stock sale to 10% you'd only get 13.54%/year with AIM.
Neither calculation includes dividends.
Based on this example and others I've tried, the entry point is key to best results.
Now back to QCOM, Where did you get the figures from that gave you the "...return on total capital of 12.4% and a cash yield of 6.8%. The estimated price is 59% of value."? I can't seem to come up with the same figures but then I might not be using the right starting points or method of calculation/formula.
Thanks,
Allen
Hi Tom, I think that is a very interesting idea. My only question is similar to Toofuzzy's, will long bonds will take a hit during a market downturn? This seems likely to me and if so what amount should we have in cash to take advantage of the downturn for our stock/ETF positions?
Best,
Allen
Hi Toofuzzy, I meant net. Last sale is currently at $0.23/share, $23/contract and I took off the $6.95 commission plus ~$0.89 including the SEC fee per contract and then rounded down because, who knows if you would get even that. Sorry about the confusion.
Yeah, at $10/share or $1,000 per contract I'd jump at that too. It'd mean my cost would only be about $40/share, a great starting point, about 30% below the current price.
Best,
Allen
Hi Toofuzzy, I agree, charging interest when there is no outstanding "loan" is totally crooked, but they are not in business to help us, only themselves.
I wonder if any of the brokers have a better policy and have reasonable fees?
Best,
Allen
Hi Toofuzzy, Yep, I agree, getting ~$10 for a June 16th put versus the cost of having to buy at a $50 strike price is probably too close to the current price of $54.68 to make any sense.
Best,
Allen
Hi Toofuzzy, What broker are you using?
Thanks,
Allen
Hi Tom,, Weren't you listening? :-p I told you a while back somewhere between 6 and 18 months from then. Given what is going on in the swamp it might be closer to 6 months than 18 months. :-> But, who knows, I sure don't. Just guessing based on various things I read and try (really, really try) to understand.)
You say, "That means that its P/E is only 63% of the average in that group. That's pretty good." So a P/E of 100% is not good for AIM? I'm not sure I follow.
In any case thanks for the analysis followup. I'm thinking I might get QCOM and leave 65% cash to leave a larger reserve for a possible down market. Does this make sense?
Best,
Allen
Hi Toofuzzy, Actually one should sell Puts way out of the money at a price you want to own the position. Puts and Calls expire worthless 65-80% of the time, both bought and sold.
For example, QCOM Jul 21 2017 $50 strike price put currently sells for $68/contract. QCOM hasn't sold that low in a while so is likely to expire worthless. Assume you have $20,000 and you put 50% aside just in case you get assigned, you'd be getting it at almost 10% below current market. You'd collect roughly $120 after commission for two contracts. And then you could do it again for the October contact which is selling for $155/contract at the moment.
If you expect a bear market, you might want to sell calls. Currently the price for the Jul 21 2017 $60 call is only $53/contract, most certainly not worth it unless you already have a position in QCOM and can sell it significantly above what you paid for it.
Great fun.
Allen
Hi Gang, I looked a bit closer at QCOM and ran a backtest. Had you bought it a year ago you'd of made ~10% including dividends.
So, the question is, when and how far will it fall in the coming bear market? I'm going to sit on the idea and see what happens over the next while.
Best,
Allen
Hi Gang, Forbes sent me an offer for a cheap subscription so I said to myself, sure, why not look and see what it's all about. Mostly it is useless from my perspective, but then.... The issue I got the other day and just sat down with today has two interesting tidbits.
The first one is a one pager that says Trump lied about his apartment. Hello, Forbes saying Trump lied to them? Amazing.
The next item is about Qualcomm (QCOM) where Matt Schrifin suggests that it is time to buy the stock because its shares are down 20% since January and that it is trading at less than 12 times its cash adjusted earnings. Its forward looking dividend is 4.1% and it has been raising dividends every year since 2003.
So, what does everyone think?
Best,
Allen
Hi Toofuzzy, Your option strategy is quite smart.
Best,
Allen
Hi Toofuzzy, You should have bought it on April 11 when Yahoo lists it as $0.00. At that price you could have bought a whole universe of it and sold it today at $0.02 for enough profit to live on forever.
Best,
Allen
Hi Toofuzzy, I was thinking some more about your question and reflecting on my history with gambling. Yeah, I've spent a bit in Las Vegas, probably under $100 over the last 50 or so years. $200 on that pump and dump stock trade I mentioned - If I recall correctly I lost about $175 or so with it. Occasionally I play bingo, never made much but never spent much.
The last time I was in Vegas I actually won $15.40!! Whoopee!!! But I had to give it to my girlfriend as she fronted the money and asked me to play. Oh, well.
But, back to gambling in the market. I ran EMMD again over the last three months based on $1,000 total, 50% cash, 10% buy safe, 0% sell safe, 10% minimum stock trade and $350 minimum trade size. A mere 398% gain after commissions.
I love having commissions calculated right along with the trades!
Volatility is King with AIM and something like EMMD has got it up the wazoo. A thousand dollars in, 500 cash and the cash, as of today, would be $3775 along with 4216 shares.
Of course I would not expect the actual return would be this good as the spreadsheet assumes that you get the sales at the price it sees.
BTW, I'm calculating actual buys and sells a bit differently these days. What I do is go from today's closing price and run down the spreadsheet in pennies, nickels, or dimes and see where the spreadsheet says the next action should be.
The online calculator says:
but that does not match what I get from the spreadsheet because the minimum sell order size is only about a third of what I use for looking at this. Even though TDAmeritrade commission is only $6.95, that's ~5% but at $350 trade size it is a tiny bit less than 2%. Any trade size less than $300 and you run out of cash. True, a $300 minimum trade size can be more profitable, 549%, but, again, this assumes you actually get the trade you post. Another point is that a $300 trade size gets a sale at $0.60 instead of $0.65 for $350 minimum.@ Stock Value Above $1359
Min Sell Order Size $136
Min Sell Price $0.32
Min # Shares Sell 421.6
Hey, Toofuzzy, isn't all life a gamble? Like, when is the next pothole going to trash your car?
Notice I did not say I was putting any money into EMMD, just commenting on some of the potholes I do see.
Best,
Allen
Hi Gang, Couldn't think of what the tactic was called and then it just flashed into my brain: Pump and Dump.
Best,
Allen
Holy Guacamole, EMMD is up another 20 cents today. Oh, well. Anyone have a guess where it will be tomorrow?
It looks to me like it is being manipulated because it sat idle for a while, perhaps long enough for those who do not look at all of history to miss the past actions. It reminds me of a past experience of mine where I invested $200 and lost almost all of it because of the crash in the stock when the promoters pulled out. That experience kept me out of the market for over ten years.
Best,
Allen
Hi Gang, Two things. EMMD is back from its recent bottom of $0.051 and closed today at $0.29, a mere 568.63% in 3 market days. It would make a perfect Pocket Change position if it didn't scare the s#$% out of me. Let's see 10,000 share would cost $510 plus commission and would have brought in ~$1900 net if you sold it all. Not bad.
If one had done a strict AIM approach starting back in November last year, only a bit over 6 months, starting with only $1,000, 50% cash, you'd only make 299% with $500 minimum trade, 10% buy safe, 0% sell safe and 10% stock minimum sale using Good To Cancelled orders.
Had you started a week ago you'd have made 137%. Not bad at all.
But, in a way it points out a potential limitation of actually placing a good till canceled order, huge volatility can cause you to buy or sell before the low/high points, which is my second point. I was playing with options, just to see how it might go, and I had set a paper trade of AMD for buying 4 more options at $3.00 but it actually dropped to $2.53. On paper I got in at $2.65. Had I been trading real money with a GTC order I would have paid $1200. But by only having the figure in my head I would have paid $1060, more than 10% better.
Best,
Allen
May it always rain hard in your world only when you are sleeping.
Hi Toofuzzy, I did.
Intelligence, degrees, money, and social status are not you. You are your heart and your kindness to the world around you. It is this that brings joy to you from the hearts of others,
Allen
Hi Tom, I would love to get one of those lapel pins. Any ideas?
Perhaps I could borrow one as a sample and see about getting more made. Or, perhaps a very good, straight on photo would do for getting more. I'll have to check around and see what I might need.
Best,
Allen
If acts of selflessness brought rewards of love the world would be on its way to being populated with Saints.
Hi Gang, I get a lot of c#$% e-mails but every once in a while one comes in with information that is worth thinking about. Here is one of those.
Hi Toofuzzy, Don't just be tempted, do it! It is interesting to compare the various editions and how few changes there are from 1977. Mostly they are additions at the end of the book. I think I've got all of them, including one that has the AIM website label created by Tom (? Can't put my finger on it at the moment so the description might not be accurate).
Best,
Allen
Hi Toofuzzy, Forget Amazon. Smart people do and they go to Alibris or Powell's Books. I bought my collection of all of his books on Alibris for $0.99 to $3.95, plus shipping, including another copy of the 2002 edition that is currently being sold for over $50. Sometimes you have to wait a bit for more to come on the market. However, had you bought a bunch of the 4th edition and held onto them until now and sold them for $54.95 you would have made 14.75%/year had you paid retail. Had you paid the normal bookstore wholesale price of $4.20, you'd have made 18.69%/year. This is without whatever you'd have to pay Alibris or Amazon for using their web site.
The only problem is knowing when the current value is going to be up or down from the price back then. Sounds a lot like trading stocks.
Best,
Allen
Hi ls7550, Nope, "through" and "thru" are both used here in the US of A. The shorter is mostly used in informal things, like road signs and chat. The longer is what is considered "proper" for more formal communications. Though I don't know for sure, I think it got shortened because of road sign space, or lack there of, rather.
Best,
Allen
Hi Gang, I was reading an article in the paper talking about investing and getting started young, that was promoting Buy and Hold thinking, and it occurred to me that it should actually be known as Buy and Hope.
Best,
Allen
Hey Toofuzzy, Great advice for Neco. I checked with a friend who is a tax preparer and and she said much the same.
Best,
Allen
Hi Neko, I don't believe there is a 503b, but there is a 403b. See: https://www.irs.gov/publications/p571/ch01.html
Best,
Allen