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Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Hi Bob,
Yes, that was a Pragmatic Investor press release you read. I'm glad you liked it!
An upgrade is scheduled for release early next year. It will be a significant upgrade including:
1) The ability to enter your actual portfolio and have the software keep track of it (much like Automatic Investor does now).
2) Reports (lots of really useful reports). You'll also be able to export data to excel and text files.
3) A better Fundamental Analyzer using a Fuzzy Logic rules based expert system.
4) Support for Canadian Stocks (most of you in the U.S. won't use this feature, but for us Canadians it will be a boon).
5) Automatic rebalancing using Artificial Intelligence techniques.
6) The ability to schedule the Pragmatic Investor to run Fundamental Analysis at set times and notify you (via email if desired) when stocks score above (or below) a preselected limit (assuming you have an "always-on" Internet connection).
7) A Historical Analyzer so you can backtest your portfolios and compare them to the Buy and Hold strategy.
8) Different Fundamental Models that can be loaded/created as desired. So you could use a Ben Graham model in the Fundamental Analyzer or you might use a Peter Lynch model or create your own.
Plus a number of other less important, but still effective, improvements.
Regarding your question about emails, are you referring to the eGazette? One was sent out last month and the November issue will be sent soon. If you didn't receive the October issue, let me know and I'll send you one.
Hello Jack,
Thanks again for the information. I will be updating both the Pragmatic Investor and Automatic Investor early next year. One of the main items on the to-do list is to have a source for Canadian data. So it's coming...
Jack,
Thanks for the link. I just checked it out and it seems to have data for all the Canadian stocks I tried.
A couple of questions...
1) I didn't need a password to view the financial statements and key ratios. When you say a password is required, when does it ask you for one?
2) If I enter a ticker symbol, say BNS, I see the description says "The Bank of Nova Scotia (USA)." How do you retrieve the Canadian information (if I use JDU or NT it seems to bring up Canadian versions)?
Any insight into these questions would be appreciated.
Hi SAM,
The reason for what you're seeing is the filters.
Both the MACRO and VoluFilter filter recommendations when turned on. MACRO filters based on the price crossing a moving average while VoluFilter filters on volume.
These filters are in addition to price. So if the price is at a point where it will cause a recommendation and the filters are turned on, the filters could further filter that price-based recommendation so you don't actually receive any trade advice.
You can read more about filters in the user's guide (click the HELP button on the toolbar to view it).
I hope that helps. Please let me know if you have any other questions.
Hi RCB,
Yes, Canadian stocks can be hit and miss. I'm currently looking for a good site with Canadian financial statements (I actually have the same problem with my RSP -- but fortunately a number of my Canadian stocks also trade on the US markets).
The next upgrade will include the option to select a Canadian data source, which should alleviate some of the missing data problems.
Hi Charlie,
That's strange that everything is missing all of a sudden. Did you accidentally delete files from the installation folder?
In any case there is no problem if you have a backup of the aidb.mdb file. Just do the following:
1) Rename the aidb.mdb file located in the AI 3.0 installation folder (e.g. aidborig.mdb).
2) Copy the backed up aidb.mdb file into the installation folder.
3) Start the software. If it asks you if you'd like to register the software, click YES and send me the 14 digit registration code (displayed in red). Otherwise your software should be ready to use.
If you have further questions or run into any trouble send me an email (mhing@automaticinvestor.com)
Hi Jeff,
Thanks for the suggestions. The first two are already planned for the next release and I've added the last one the list (good idea!).
Let me know if you have further suggestions.
Wow, thanks Don. Looks like you've been giving your computer quite a workout.
I think you covered all of the stocks I was following with scores of 7.0 and above.
For any AIMers out there, I've been AIMing PLNR and it has been a good AIM stock so far (quite volatile).
If anyone decides to select one or two of these high-scoring stocks and perform further analysis (as described in the Pragmatic Investor book -- see the ORCL example), please post your results here.
I think it would be interesting and might give us some ideas for investments.
I think SHRP is a great AIM stock. It has the right volatility and historically has done very well.
On the fundamental side it looks good in a number of areas including the fact that it's currently trading for less then 2 times book value, has a P/S ratio of 0.49 and has no significant debt.
On the negative side its free cash flow margin is not that good (-2.18%) and much of its income seems to come from sources that don't put cash in the bank.
It scores a 6.0 on the Automatic Investor fundamental analyzer (which is close to the 7.0 cutoff that generally means a stock is worth considering further).
I just added a Pragmatic Investor board here --> http://www.investorshub.com/boards/board.asp?board_id=2872
If you get the urge please feel free to visit.
I had a suggestion to start a Pragmatic Investor board from one of my users, so here it is...
Hi RCB,
I see you've already received a couple of responses. As with most things, the folks in the U.S. have more choice so it makes sense that they would have a greater choice in ETFs too.
I read somewhere that the first ETF was created in Canada (I can't recall the source) but I don't know if that's true or not.
Regarding foreign ETFs, I actually meant either Asian or European (not the U.S., although technically the U.S. is a foreign market for us Canadians). That's because the Canadian and U.S. markets are highly correlated whereas that's not the case with some others. Latin America might be a good bet if you don't mind the increased risk.
As you mentioned, my thought was also to go with a broader index-type ETF for the foreign content (rather than sectors), so I think that's a good strategy.
The increase to 30% foreign content in RSPs is a good thing -- although I wish they would just do away with the limits altogether and let the capital flow where it will get the best returns (but the increase to 30% is a step in the right direction).
I do like ETFs for their instant diversification and low cost, but I personally invest only in individual stocks at the moment. I expect that as I move closer to retirement age I'll move a portion of my holdings into ETFs (basically following the strategy I outlined in my recent post and, from the sounds of it, what you're planning to do) -- but that's still quite a few years off.
Right now I'm holding 10 individual stocks (chosen by fundamentals and diversified by correlation) and I rebalance whenever the allocations get out of whack. The nice thing about ETFs is that you can rebalance them just like stocks (so you're buying low and selling high).
If you're also using AIM with some of the more volatile ETFs or stocks, the combination of AIM, allocation and rebalancing is really quite powerful.
It sounds like you're positioning your portfolio for above average returns, minimum risk and you won't have to spend much time on it. That's not a bad way to go.
Hi TF,
A rising tide lifts all boats (and vice versa) is one popular saying. Perhaps that's what happened in your case. Over the long-term, however, you should expect industries that are not highly correlated to move differently with respect to one another.
One of the keys to a successful diversification strategy is to select equities that have low correlations between them. Some industries are highly correlated so for best results you should select only those with the lowest correlations. With ETFs you're sufficiently diversified anyways so you don't necessarily need to hold multiple highly correlated assets in order to eliminate non-market risk.
Another idea is to select 1 or 2 foreign ETFs. Foreign markets usually exhibit low correlation with the US/Canadian markets and also give you exposure to economies that you normally would ignore.
There's a very distinct psychological bias that causes people to limit their investments to things they know best -- and that usually translates into investing close to home.
For Canadians and Americans that usually means the major North American markets. Most will say that these markets will outperform others (such as those in Europe or Asia). However if you ask the Europeans or Asians they will probably say their respective markets will outperform North America's.
The truth is that any one country (or group of countries) is a relatively small part of the global economy. Therefore it makes sense to diversify outside of your geographical boundaries. This is a problem when using individual stocks because foreign company information is not as readily available as domestic information.
However with the advent of traditional index funds and ETFs much of this disadvantage has disappeared.
I suspect that over the long-term your 10 ETFs will behave differently assuming they aren't all highly correlated.
Hi Everyone,
Canadian trading fees through the big banks (Royal, CIBC, Bank of Montreal, TD and Bank of Nova Scotia) run about $30 (TD where I have an account is $29 up to 1000 shares and CIBC is $27).
Compared to what you can get in the U.S. it's quite high. However Ameritrade Canada charges $10.99 (unlimited shares).
I looked into IB Canada, but if memory serves there were some other fees (in addition to the commissions) -- so it's a good idea to read the fine print before opening an account.
Hi Steve,
I felt my house swaying a bit but it was a gentle swaying. Nothing too bad. Every few years we get one of this magnitude.
However from what I read the experts believe a big one can hit at anytime, either tomorrow or a hundred years from now -- sounds like stock analysts, "this stock might go up tomorrow or it might go up at some time in the future."
I didn't realize the quake news travelled all the way to Texas.
Thanks! That's the One.
I still smile when I see it.
Tom Veale posted a humourous "stock picking system" some time ago based on alphabetical order of ticker symbols (or something like that).
Does anybody know which post it was in? Was it here or perhaps over at the old SI board.
Any help finding it would be appreciated.
Hi Bruce,
If you don't have a floppy drive then just follow these steps:
1) install the latest version of AI 3.0 on your new computer.
2) copy your aidb.mdb file from your original computer to the new computer (put it in the folder where you installed AI 3.0).
3) Send me the registration cdoe (14 digits displayed in red). You can send it to me at mhing@automaticinvestor.com
4) I'll send you a new unlock code that you can enter on your new computer.
If you have any questions please don't hesitate to let me know.
Hi Firebird,
If you're using Automatic Investor 3.0, the glitch was caused because Yahoo! changed its historical quote format a few days ago.
This caused a problem with the Historical Analyzer, Parameter Optimizer and Asset Allocator (basically any AI 3.0 function that required historical quotes).
There's a Service Pack update available from here --> http://www.automaticinvestor.com/upgradecenter.html at no charge.
If you downloaded your copy of AI 3.0 before July 5th, 2004 then you need this update.
If you have any questions please let me know.
Automatic Investor 3.0 Update is now available...
Yahoo! Finance's website recently changed their quote format and this caused a problem with the Historical Analyzer, Parameter Optimizer and Asset Allocator (basically any AI 3.0 function that required historical quotes).
To fix this problem, Service Pack 1 has been released. If you're an AI 3.0 user, you can get it from here --> http://www.automaticinvestor.com/upgradecenter.html at no charge.
If you downloaded your copy of AI 3.0 before July 5th, 2004 then YOU NEED this update.
If you have any questions please let me know.
Hi Conrad,
Glad to see you're moving forward with your Vortex program. There are lots of good testers on these boards, so I think you should be able to get 3 good ones.
Hi LH,
Using AIM to rebalance is one way to go and I don't see any major theoretical problems with that method.
Back at the 2001 AIM conference I spoke a bit about the MACRO and MICRO views of portfolios.
At the MICRO level I let AIM direct when to buy and sell. At the MACRO level, rebalancing to initial allocations tells me when to buy and sell.
I suggested using MPT to create those initial allocations back then, but oh how the years have made me wise I no longer think MPT is a good method for allocating individual stocks (however I still think it's a good method for allocating Index funds and Sector ETFs).
I'm now a fan of using the Sharpe ratio to allocate individual stocks. However it doesn't matter how you choose to arrive at the initial allocation, the important concept is to rebalance whenever your portfolio gets some set percentage away from the initial allocation (I use 7% in general).
This forces you to buy low and sell high at the micro level (using AIM) as well as at the macro level (rebalancing). And it's all automatic. No Emotion. No Greed. No Fear.
Sure beats watching the ticker every day.
Hi Bruce,
Yes, the Asset Allocation part can be used with the Asset Allocator in AI 3.0. Also check out the Fundamental Analysis part in Chapter Eight. That adds useful information to AI 3.0's Fundamental Analyzer.
Hi Tom,
Thanks for the chart. Don C. sent me a longer term one too.
Both NOK and QCOM have relatively low debt, decent FCF (especially QCOM) and Ben Graham's formula puts their fair value at 21.16 and 67.39 respectively.
They both have a decent current ratio (again, especially QCOM) and their accruals ratio is good (especially NOK's).
I like that QCOM gets revenue from its CDMA protocol and if it ever gets going over in Europe and Asia, there will be more dough around than a Krispy Kreme at 7pm.
I've got both NOK and QCOM on my watch list.
I'm off to see the new Troy movie tonight (just doing my share to contribute to Warner Bros.'s coffers).
Hi Tom, yes QCOM was just a nudge below NOK. I read recently that QCOM is expanding its CDMA protocol rapidly into Europe. That can only mean good news for the company.
LemonHead used ValueLine to come up with a list of stocks a while back and I've been tracking them ever since with AI 3.0's Fundamental Analyzer.
Four stocks from that list (SILI, PLNR -- which I own, TUES and JILL) have scored well recently (with scores of 8.0, 8.0, 7.0 and 7.0 respectively).
Another fundamentally attractive stock, that wasn't on LH's list, is NOK. Looks like this market might be giving up some decent values.
Hi Bruce,
AI 3.0 covers most of the functionality in the Pragmatic Investor software (i.e. Fundamental Analyzer and News Reader).
The only difference is the Asset Allocator. The AI 3.0 version works on the AIM results while the PI version works on the stock prices directly. If you have AI 3.0, you probably don't need the PI software.
However the Pragmatic Investor digital book explains how to properly use fundamental analysis, diversification, asset allocation and other important things when investing. These things apply whether you're using AI 3.0 or PI. So you might be interested in reading the book as it can help you with your AI 3.0 investments.
The Pragmatic Investor software has been released!
For those who purchased the digital book before May 13th, 2004 you should have received an email with details on how to claim your software discount.
If you haven't received the email (sometimes overzealous spam filters remove emails), please let me know and I'll send you the details.
For everyone else, feel free to drop by http://www.pragmaticinvestor.com if you get the urge.
Hi Conrad,
If you click on Don's ID you will see an option to "hide this poster." Could you have accidentally done this?
I'm not sure how you can go about reversing this as I've never used this option before. Perhaps a note to one of the investorshub support people would help.
Hi Conrad,
I just clicked on message #690 and was shuttled to...
Message #690!
I not sure why it didn't work for you, but all seems well when I do it.
That's Great! Thanks, that reminds me... I have to go walk the dog.
Arrggghhhh!
Hi Don, I just wrote an entire reply with the most eloquent prose and interesting facts and lost it when I clicked the "Submit Post" button. That's the first time that happened to me.
However I'm not at all motivated to rewrite it, so suffice it to say that I agree with you and hope someone will do more work in this area.
Hi Conrad,
In my previous reply to you I wrote, "I have my own theory on why Lichello did this, however that's another discussion in itself," which matches exactly what you state when you said, "I suspect that Lichello did not intentionally set out to achieve the Residual Buys."
I believe that Lichello noticed this effect after he designed AIM and then created an explanation for it. However that's just a guess on my part.
The original point was that Lichello did notice it and said it was something that was part of the AIM algorithm. Therefore it is not WRONG to buy at a similar (or the same) price multiple times when following AIM. In fact it is the CORRECT thing to do in certain circumstances.
Whatever route Lichello took to add this to his algorithm, the fact remains that it has been added. That's my only point in response to your initial post.
"I find it rather strange that if Lichello was so very proud of this intentional design feature..."
Well that's what he wrote. If you have the 3rd edition, check it out on page 57.
"I would also mention that a systematic optimisation of a variable update factor, with a large number of arbitrary historical data sets, would reveal that 0,5 is not an average optimum value"
Yes, I would tend to agree with this, although I haven't done the historical tests. I've said many times in the past that Lichello, using only a pencil and paper, did not have the resources to properly find the best parameters for AIM. However he did find ones that were "good enough" for a wide variety of stocks (which is an amazing feat in itself).
That fact is the main reason that AI includes an optimizer and models.
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Hi Conrad,
"I implied that it would be the wrong thing to do in the context of Lichello's AIM as Lichello did not intend to generate repeated buys without a price change."
Actually Lichello intended just that. I don't have the 1977 edition but in the 3rd edition on page 57 he writes, "Sometimes when a declining market suddenly shrieks to a stop, AIM will pump its brakes to avoid going into a spin. Instead of curtailing your investments entirely, it will call for sharply decreasing investments for a month or two -- and then nothing -- just to pick up a few cheap shares in case the market turns around and heads upward again."
The key pieces are:
1) Declining Market stops (therefore the price does not change much. If it did, then Lichello would not say the declining market suddenly shrieked to a stop. Similarly if the declining market did stop and the price then went up significantly, then he would not say that AIM will have you pick up a few cheap shares in case the market turns around and heads upward again).
2) Calls for sharply decreasing investments for a month or two (this is exactly what I mentioned in my first post. The price has not moved, or not moved much, so the investment decreases, however Lichello still says you invest at a similar, or the SAME, price -- you just do it in a sharply reduced amount).
"I state (my interpretation) that it was never Lichello's intention to have his followers make repeated buys at the same price"
As per Lichello's instructions above, it's clear he did intend his followers to make repeated buys at the same price -- however each subsequent purchase is greatly reduced in value.
"In my view with "pumping the brakes" Lichello referred to applying the SAFE values."
From the passage quoted above it is clear that Lichello does not use "pump its brakes" to mean applying the SAFE values. Rather he specifically states that when the market downturn stops, AIM has you buy decreasing amounts of stock for a few extra periods in case the market turns around. Of course the SAFE values come into play however that's not what "pump its brakes" refers to.
"making several separate buys without having any price change occurring is not a very sensible action and I am sure Lichello never intended that to happen."
Actually Lichello did intend that to happen and it shows in the very next paragraph on page 57 (3rd edition). He writes, "Of all the features we incorporated into AIM, this automatic check was the hardest to design and is the one of which we are most proud."
The Automatic Check to which he refers is the "pump its brakes" technique he mentioned in the preceeding paragraph.
I have my own theory on why Lichello did this, however that's another discussion in itself. BUT, it should be very clear from the two paragraphs on page 57 that not only was Lichello aware of the "flaw" but he was quite proud of it.
Hi Conrad,
"I have never regarded the Lichello Flaw as a means of pumping the brakes. This "explanation" makes no sense."
Actually it does make sense because the next trading advice at a similar price will call for a lower value traded. So it's basically slowing down the buying, but not stopping it immediately (which is similar to pumping the brakes).
Therefore Lichello's explanation is valid.
"If one considers that the initial Buy = 1200 was the RIGHT thing to do then executing a second buy at the same price is certainly the wrong thing to do"
Why is it the wrong thing to do? If you're following an algorithm other than AIM, it might be wrong thing to do, but with AIM it is the right thing to do.
In this particular case there is no absolute law that says it's not right to buy again at a similar (or even the same) price. Simply stating it's the wrong thing to do is not valid. You must frame your statement in a relevant context, such as, "it's the wrong thing to do when following the Vortex algorithm."
For new AIMers, the "Lichello Flaw" was recognized by Lichello and explained by him. Therefore if you want to follow AIM, it's NOT the wrong thing to do.
If someone wants to run a series of proper historical tests and compare what would happen if you took out the "flaw" with results from leaving it in, then you might be able to say that one method is better than the other. However just stating it with no supporting evidence only serves to mislead newcomers who might take what is said as gospel.
Hi Squash,
Without seeing your database I can't know for sure, however the AIM algorithm does allow for consecutive buys being close to one another. It's a variation of what some people call the "Lichello Flaw," however it really isn't a flaw in Lichello's eyes as he explained it as "pumping the brakes."
This might be the reason. However if you send me your database file (it's called aidb.mdb and located in the folder where you installed AI 3.0) I can tell you exactly why the next buy is so close.
My email address is mhing@automaticinvestor.com
Hi Jack,
Yes, that works well for Canadian stocks, but it wouldn't work for other non-US (e.g. UK or Australian) stocks. I'm looking for one source that allows all historical data to be retrieved and right now Yahoo! is the best.
By adding suffixes, you're able to retrieve quotes from all types of exchanges. I remember an AI user sending me an email telling me how excited he was that AI worked with his exchange (an exchange that I'd never even heard of).
The workaround right now is to use the CA: prefix, however I'll be working to move the Fundamental Analyzer over to Yahoo! for SP1. Then the syntax for all quotes will be the same.
I'll look for your email about the data source you mentioned. Anything that will reduce the need for patches is a good thing in my book. Thanks!
BTW, my email address is mhing@automaticinvestor.com
Hi Steve,
Thanks! I'm not only very happy with how the book turned out but I was able to nab the http://www.pragmaticinvestor.com domain (which just happens to be similar to http://www.automaticinvestor.com and to Ben Graham's "Intelligent Investor").
Chapter nine on risk was inspired by that MPT talk I gave at the 2001 AIM user's meeting in Las Vegas. So you could say the book has been years in the making
Hello Squash,
There are two main ways to use AIM depending on the stock of interest.
1) Tune AIM's parameters for use with a relatively non-volatile stock.
2) Use standard AIM parameters for a volatile stock.
Over the years I've found that option 2 works better and is easier to implement (although option 1 still works in many cases).
While both options can beat B&H, my suggestion is to pick high quality, fairly volatile stocks for use with AIM. You might also decide to use some other investment strategy for the your non-volatile holdings (i.e. diversifying your investment strategies as well as your assets).
As Conrad already mentioned, most people don't use the B&H strategy, rather they use Buy, hold for a bit and then sell.