I would suspect that even AI programs for all of their calculating intelligence are left stumped if all of the irrational humans decide to all jump off the cliff of selling like lemmings all at once!


Indeed, there's an Android app called "Replika" that is an AI-driven chatbot. Purportedly it "learns" more about you and can give you insights that are pretty amazing, if you feed it enough info. I did run the query by the developers as to what would happen if one Replika bot started chatting with another one, with no outside input? Could they bootstrap each other into something at least interesting, if not profound? Nope. They started talking around each other and as Montgomery Scott told Captain Kirk, "we're goin' around in circles an' getting nowhere pretty fast!" So in short, AI may have some potential for some of the things some of the time, but clearly not all of the things all of the time. And some things are probably best for never of the time. The old sci-fi movie "Colossus: The Forbin Project" warns what happens if you give a big AI system control of all the nukes to remove human error in causing a potential WW-III. A cold war piece, it still plays pretty well, especially in light of our increasing interest in, if not increasing reliance on AI.

Mr. Puri,

A bit late in the time of this plane, but in the Cosmic sense, not even the blink of an eye. However you want to view it, please accept my condolences at your loss. Never easy. But part of the duality.

In a more on-topic related sense, your system (and AIM and similar) are working as volatility capture mechanisms. Which may well be fine for someone fairly young, with a long enough window to make such systems work. However for those of us now closer to retirement age, (how we got here so quickly is another thought), with the shift in emphasis to become more one of developing a passive income stream, in anticipation of leaving one's employment and wanting to still have money coming in, do you have any thoughts as to how this concern may be addressed?

Thank you kindly in advance.

But I can't even trust my self, so what's a guy to do?

There's an old maxim,

"In God we trust, all others pay cash!"

Ouch Conrad!!!

Paranoia isn't enough anymore it seems. I think I should order another external drive and use it just for backup...

But to inject hopefully some small glimmer of humor into the situation:

http://www.thejaywalker.com/pages/shit_happens.html


Different religious and philosophical takes...


Best,

AIMster

I've traded futures in the past and have years of experience with them - and I've learned to stick with stocks.

Thanks, Praveen, for the reply. I've looked at futures - and that's about as far as I've gotten. I'm sure there are those who make money with them, but even from your own experience, such money is harder to earn. AIM and your own system are more of the 'set it and forget it variety, with occasional stirring, as needed.' More conducive to a sound sleep.

AIMster

I assume I can just aim the components. Would that work. Or is a constant value system like Mr. Puri better. I'm looking for simplicity. In the Ivy portfolio book buy and hold did ok also about 9%.

1step,

I think you've hit on the basic issue. Simplicity. Whilst we can appreciate all of Clive's hard work and statistical crunching, at the end of the day, all any look-back at the past tells us is where we've been. Yes, one can analyze it to death to find the "coulda, woulda, shoulda's" of what one might have done at some key point in the past that would make us multi-millionaires now, but unfortunately the crystal ball is more rear-view mirror than reliable guide to the future. The fact that we didn't, indeed couldn't know at that particular time the particular action we should have taken has, inexorably, led us here. The fact that we want a better return for the future, rather than blindly handing our money over to mutual funds puts us ahead of most.

That being said, it is probably far better, in the long run, to settle upon one system and give it a good run, instead of trying to explore each and every idea that gets tossed up on here. Unless you've all kinds of money that you can use for such systemic experimentation, of course. AIM (and variants) are the main tools of choice here, and I think the envelope can be stretched enough to include Mr. Puri's system, as it might be considered a "slow AIM" of a sort. So find something and go with it, mind your step around all the ladders this, permanent portfolios that, careful not to fall into that stack of virtual shares over there, might be difficult to get an option to come back out. Someone might have to call you, or you'd might end up being put upon. In any case, don't sell yourself short, you're on the right track overall.

Best,

AIMster

Has anyone thought of a way to AIM options? I'm thinking income stream

I've thought of AIM in context of both options and also futures contracts. The problem I see with both of these is their built-in lifespan. Never mind the leverage aspect once you get into futures! Ideally if you hit it right you could probably make a fortune, though with more checking than once-a-month. On the other hand you could probably lose that fortune, too. Either that or end up with 40,000 pounds (or more) of pork bellies arriving to your doorstep, and a heck of a bill for bringing home all that bacon!

Best,

AIMster

Thanks, Mark.

Since I pragmatically took advantage of the AI offer last time, would you consider extending it to other software offerings?

I know, I push, [grin]

AIMster

Mark,

A few years back for the Indonesian Tsunami you offered a nice deal on the software - a license for a corresponding donation to the Red Cross equal (or greater) to the software cost to the Red Cross. Are you inclined to do a repeat for the Japanese and their nuclear situation?

Thanks for your consideration.

AIMster

<OT>

It is an ENGLISH FLAW !!!!

I am not going to pay € 55.

I agree that might be a bit pricey. On the other hand, perhaps a tin of smoked fish would be more to his liking! :)

AIMster

Should I wait for a downtrend? Should I just buy one $2000 security per month until finally fully invested? Should I just jump in?

Hi!

As Praveen notes in his book, the $2k figure is one that he's comfortable with, but it doesn't mean that that's an absolute value that has to be used. If you want to put $3k or $4k per, if you're comfortable with maintaining that amount - that is perfectly acceptable too. You'll note that his intent is for us to start with his basic premise as a "core" system, but tune it to our own levels, schedules, etc.

Best,

AIMster

If I download an English Excel program then the conversion to Dutch is automatic. . if I type in English words in the Dutch Spread it is rejected.


You might consider Open Office - a freeware open source product that their "Calc" spreadsheet program is pretty well equipped feature-wise with Excel, but without the hefty tribute to Microsoft.

Best,

AIMster

RandyH
=IF(LEN(B29)>0,J29*D29/100,"")
Is not accepted in Excel for Office 2000!

Does it give you a particular error message? I did a quick google of looking for a blank cell in Excel 2000 and the test you cite is supposed to be good for versions from 97 through 07 at least.

The one page I looked at mentioned a function called ISBLANK. So if you set that one up:

=IF(ISBLANK(B29),"",(J29*D29)/100))

see if that will work for you.

Best,

AIMster

I suspect that arbitrarily assigning a scale factor equally to all holdings isn't perhaps the best choice.

Nor would I think that a scale factor chosen at one particular time would be necessarily valid at another, as the relationships between the various holdings change as the larger market moves around to value things differently. Still, one has to start somewhere, and your suggestions, as always, are quite informative!

Best,

AIMster

I'd love to have a more reliable inflation measure than the ones we see on the business news channels.

I doubt we will. Since inflation is the erosion of purchasing power, I'd expect the financial elites to want to keep such knowledge of the real rate outside the scope of the regular investors. There'd probably be a panic on if the reality was fully exposed. Since much attitude is governed by perception, if "they" say we're in a period of low inflation, people will act that way. Similarly if "they" want to say we're in high inflation or stagflation.

As you've seen with healthcare costs, I've noticed at the grocery store, finding anything much under $1 or so per item or per pound's a rarity anymore. A few of this or that, bam - $5 for the purchase! Of course we AIM for sales and the like, but overall I think the real rate of inflation's higher than they'd like to have us believe.

Best,

AIMster

Its something I've been meaning to have a closer look into for a while now, but never seem to get around to it.

Ok, no more excuses: :)




Put it to good use!!!


Best,

AIMster

Congrats!

I was working my way through the list - spent too much time reading instead of foraging for grubs!!! (getting in touch with my inner Meerkat!)

Grabber, it time for me to bow out with dignity . . I have never understood any of this "virtual" share business even though I have tried to follow some of the discussions when this idea was invented.

Just to let you know, Conrad, you're not alone. The way some of these discussions get, I think it makes us BOTH Toofuzzy!!! And people thought that there was only one!! :)

Best,

AIMster

Trying to derive a negative adjustment to PC in order to keep the internals of an AIM program in line with the action taken (Stop Loss execution) is a reasonable concept IMHO.

Of course one may also reasonably ask why you need to make the adjustment to PC in the first place? After all, Lichello does allow for a swapping of one security with another at any time, provided the relative ratio between stock value to PC isn't altered too significantly. In other words, if the one you want to take a loss on one that has declined to say $10,000 worth, and to preserve what's left, you cash out the $10K, then all you should have to do is either add a new holding for $10K or add the $10K to the existing holdings. (If AIMing in a portfolio mode). That way the stock value remains where it was (more or less) and PC shouldn't be affected at all.

Or do you have something more clever afoot that we're all still missing?

Best,

AIMster

Its better IMO to follow AIM's advice and let the stock exposure decline, and then periodically remove some of that cash from the AIM and use those funds to start a new AIM (or maybe add more to the existing AIM at a time when the AIM was indicating a buy).

The latter option going to reduce your average cost even further. Good idea!

AIMster

Anyone else care to dip their toes in this muck?

Well, to put a toe in, Automatic Investor has a testing function, of which one of the controllable variables is to adjust the setting from 0% increment PC per purchase to 100% increment PC per purchase, in 1% increments.

Not that I'd want to do 100 tests of each and every percentage (!)
But a 0,25,50,75,100 series might give enough separation between to show what a cumulative effect might be.

Got a particular security and time range you'd like me to run through?

AIMster

What I am essentially doing is to try to "capture" the result of human behaviour from the stock prices because from part of that the prices develop. That is something different than stating before an experiment what the outcome

"Ah," he said in response to the sudden glow above his head from the sudden illumination of the the proverbial "light bulb." (though it should be duly noted that the original incandescent has been replaced with a CEF, especially for this particular quest for optimum CER)!! CEF, BTW is a closed end fund holding silver in Canada, should anyone be interested.

All that aside, I think I get that what you're trying to get to is to anticipate the current and near future movement of the herd in finding the optimum CER. Which I think was the basis for Lichello's revisions of the AIM parameters from a very bear period with the original 50/50 to the 80/20 during the '90's bull. The problem, is of course in the timing. Had one wanted to AIM the NASDAQ "cubes" originally QQQ, now QQQQ, starting in 1995, Lichello's new AIM-HI might have been a good place. Start in Feb of 2000, and one would almost need the inverse of 20/80. But would you have known that then? That's the bugger of the question, isn't it?

Best,

AIMster

So, how can any one keep saying that a Starting CER 50-50 is the best for all cases while that is obviously not true, for in all cases some people know more than others?

I think it is a matter of distinction. Obviously if you have access to inside information and can use it, that puts you at a distinct advantage over someone who doesn't have it. Which is why they attempt, at least, to restrict on how inside information can be used. I don't think that anyone's claimed that 50/50 is the best in all cases. Rather it's a ratio that's reasonable for most people to start with.

We could break it down thus into 4 outcomes of 50% of the 50%

25% best ratio - AIM works to maximum effectiveness
25% so-so ratio - AIM works moderately well, producing some gains overall.
25% so-so ratio - AIM at best matches B&H or incurs a slight loss over the period.
25% - horrid - stock turns into a deep diver and you either sit on a huge loss or take it.

Now, those fairly equal probabilities ( at 50/50) will be skewed somewhat by the ratio of cash and equities. A stock that is going down with either of the last two options obviously may fare better with a larger starting cash amount. In the inverse, one would do better to start with less cash.

Again the problem is that we can't know in advance which of the four outcomes is the most likely. So a 50/50 may be considered something of a hedged bet.

Best,

AIMster

Obviously I realise that one OPTIMIZATION RUN for all stocks in the world would not give exactly, an average CER= 50/50 but if you are right and we do the optimisation experiment 1000 times the average of the optimised CERS must be 50.50. . if you are right, and if the result is not 50/50 on the average that would mean that a starting CER of 50/50 is not generally an optimum value.

Not sure if this isn't getting into the "how many angels can fit on the head of a pin" type of debate from the Middle Ages, in the sense that one can determine the optimal ratio using past data as if you've invested back in the past. The problem is, as I see it, that that doesn't really count for all that much for what ratio to use if you're starting a new AIM program today. Whilst the v-Wave may be an adequate measure for the relative few of us who've managed to find our way here, I think Clive's point, for the ordinary "John Q. Public" investor is that 50/50 might be a reasonable starting point. This was, after all, Lichello's earliest opinion when he found the "2X" marking on the license plate: the odds are 50/50 that the stock will go up or down from any starting point in time, especially if you don't bother to look at a current trend of recent price activity.

In the world where we all would have perfect crystal balls we could know the optimum in advance. But one test, or even 1,000 will only show you optimum numbers for the range of time and the range of stocks selected. I suppose to get a realistic number would be to number-crunch the 1,000 or so tests together, repeating all 1,000 for each trading day and see what the average numbers come out to be over a protracted period of time. Though again, it seems to me to be more an item of curiosity rather than truly practical information I could use today.

Or am I missing something here?

Best,

AIMster

The question is what if the stock does not fall below the 200 day SMA and comes within the AIM buy zone?

Good question. If it doesn't break the 200 day SMA, at least it has, for now, a basis of support so you may consider the stock to still be in a long-term uptrend, even if the shorter term is scaring the heck out of you. If it's otherwise in a buy area, you might want to make 1/2 of the buy now, then wait it out to see where it goes relative to the 200 day SMA. Worst case it will dip, then go back above, in which case you can execute the other 1/2 of the buy at some point down the road. If it instead resumes the upward movement, never crossing the 200 day SMA at all, you'll still profit from the smaller buy, and still have more cash left over.

Sound reasonable?

Best,

AIMster

So the entire question amounts to how well one can set the parameters of the investment machine so it will be optimum for the prices that are to develop. . .the skill of the investor is the key in all this . . .it is all about fine tuning the Investor as well as his Machine.

I think this is starting to segue into an idea I've touched upon before, i.e., applying some form of AI or neural networking to AIM such that as it gets fed the daily price movement, it then "learns" or sees patterns, making AIM calls based on what it's learned. In other words a self-optimizing system. Which I realize is all well and good to talk about in theory, how such a system would be developed is another matter.

Best,

AIMster

I was just thinking in the vein that some people think gold is really more stable than cash and that it is cash that is varying in value. The only thing that makes cash money is that we believe it is. Everything could just as easilly be priced in gold and for a long while the dollar was valued in gold.

I get your point. Of course the value of gold, as indeed with most any commodity item is valued primarily on a supply vs demand basis. With something like gold, influences may be far more outside of a strict supply and demand but come under additional factors such as a hedge against inflation, times of social unrest, and so on. Lichello's post WW-II cautionary tale of how gold would actually fare in a crippled but recovering society does make one feel partial to be stocking soap.

As for the market being over or undervalued, I suppose if there's a way to get the historical overall P/E and compare it to the current value, that should give some rough measure.

Best,

AIMster

Is there a chart of gold vs S+P 500 and would it be worth AIMing one against the other (use gold as cash?)

They are both aproxamately the same price so I thought that would be interesting.


Hi Toofuzzy,

In theory I suppose one could. However Lichello was looking for the cash component to be of fairly constant value, with the stock part being the variable side. AIMing two variable value components might work if they're close to 100% non-correlated. Anything that's reasonably correlated would be more likely not to work - think of the 2008 "black swan." I believe in the book someone had suggested diamonds for the cash part and Lichello nixed that idea.

<OT>

(which reminds me I haven't defrag'd my hard disk for a few weeks now :)

You may want to look at Perfect Disk by Raxco http://www.raxco.com I've been using it for several years now and it has features beyond the standard defragger that comes with Windows. It can do a boot-time defrag so that it will defrag files that are normally locked because the system is using them, also has a stealth mode so it will defrag in the background if your machine is idle. Set it and forget it.

The bottom line is: when a stock drops from 35 to around 22 and stays there, AIM just does not work. Even if there is a bottom at 18. I suppose you can say, in retrospect, that I should have started with 70% in cash and allowed all the buys, but if you do that with all your stocks your performance with suffer.

This is the downside of AIMing each individually rather than in a portfolio as Lichello recommended. In a portfolio move you allow for more human input into which to keep adding to and which to shed. A further strike against us is that we can't know, in advance what the optimum level of initial cash reserve should be.

In the case where one's preference is to AIM each individually, however, in a case like this (which, BTW is an equally valid method, a choice we each must make. Indeed, I would be surprised if some don't have a hybrid portfolio with some holdings being AIMed as a group and others individually), the larger question becomes is AIM still a valid system to use on this particular holding? Or, knowing that Intel isn't likely to be going bankrupt anytime soon (at least we hope not), is it worth adding additional money to, wanting to "jumpstart" the AIM program at the current lower level? A question you must answer given the overall situation of your portfolio. One good thing is that at least you're bringing in a decent dividend meanwhile, so your money isn't totally tied up doing nothing, with no return at all.

But you do raise an interesting issue of what to do if AIM, through no fault of its own, just isn't working. Which will give us further points of discussion. Thank you.

Best,

AIMster

Tom,

I've got a Win-XP virtual machine running under VMware player (free for personal use) Also a Linux machine. These both can run in a Win 64 environment as the "host" no problem. I can actually have all three running at the same time. So if anyone has issues with it (Newport) running in Win7-64 this might be a low-cost way to go. Of course, you'll need a valid Microsoft Win-XP license for the virtual machine.

Best,

AIMster

Potential gains are obviously correlated to the risk entered into. But if one systematically can reduce risk without as much of an impact on the corresponding reward potential, then I say go for it.

The quest for the "efficient frontier." I'd think an AIM-based stop loss function would have to take into consideration a few items:

1) is the stock a real "dog" with no likely prospect for a price rebound anytime soon?

2) do I think I can get a better return on something else, despite whatever loss I incur if I cash this one out?

3) how much impact does this have on my overall portfolio, versus holding for some future price activity?

4) are there sufficient price swings such that converting this from AIM to constant value would still let me make profit on it by trading the LIFO shares until the overall uptrend resumes?

5) what combination of loss percentage and/or time held at that loss percentage is enough for me to consider cashing out?

Probably even more than these - but these are the ones that jump off the top of the head first.

Best,

AIMster

From my humble point of view,and showing all my respect to Mr Lichello; his method is kinda dangerous even if you AIM a portfolio of stocks. You could be throwing money into the wrong stocks that keep falling on a strong downtrend or even going bankrupt....
Many of the stocks wont be on the market in a future not so far away. I would say that only a small percentage (25%)will still be on the market in the next two decades.If you get caught in the middle, you might lose your money.


On the other hand you might make the proverbial $1,000,000 automatically. At the end of the day, it all comes down to risk vs reward. The problem is that we can't know, in advance what will work and what won't. Had you done a simple B&H on a small Arkansas retailer with the funny name of Wal-Mart, a $10,000 investment in 1972 would be worth $60 million! But who, in 1972, was there to tell you that? And unless you were fairly well off to start with $10,000 in 1972 was probably fairly dear money. My father, for example, having purchased a four-bedroom house in a rather upscale Long Island, New York community for $31,500 in 1965! Looking it up today the assessed market value is $727,700, with a projected decline to $711,600 two years out. The housing value change since the bubble burst. A couple years back it was approaching $1,000,000!

So, the point is unless you want to trade all your stock market risk for inflation risk, i.e., not investing in the market at all but keeping one's investments in relatively low-yield cash investments, that's a choice that only you can make. AIM and similar methodologies strive to minimize the all-or-nothing approach by balancing cash against invested, more in when the market goes down, more to cash when the market goes up.

The truly risk averse method with some better return might be to keep investing in a fund like the Permanent Portfolio Fund (PRPFX), if you don't want to create a permanent portfolio fund of your own from various ETF components. No guarantees for any of it, but we have to try something, even if it means cash under the mattress!

Best,

AIMster

Probably managing a mutual fund would prove far more frustrating than my "dream" of it!

Tom,

And anyone else, for that matter - if you'd like to have a go at doing just that with running a virtual mutual fund, check out marketocracy at http://marketocracy.com With a free registration you can set up and manage your own mutual funds. They also have you work within constraints as real-world fund managers have to contend with. Further the best ideas are incorporated into a fund that they actually run.

Have fun.

Best,

AIMster

<OT - humor>

The percentage is understood to be variable and dependent on the portfolio.
Now I have to determine my weighting of Timber!

Knock on wood! Sorry, just couldn't let that one fall far from the tree with all these chances to see the forest from the trees...

I was included in a new Wall Street Journal Market Watch article on Bloggers:

Nice write-up, Praveen. Good job. I noticed it mentioned you're in Aurora, IL - my grandparents lived for many years in St. Charles so I'm somewhat familiar with the area. Do you perchance attend the Sri Venkateswara Swami [Balaji] Temple there? My wife and I went there once on occasion of visiting my grandfather who turned 90 in 1998. Quite a nice facility and I'm sure it's grown a lot since then.

Namaste'

AIMster

It is not all my intention to discuss the details and pro's and con's of the Tesla Disc Turbine Technology. . .I am very well aware how it works. I just have a small hope that some of you have more faith in it's future commercial viability than I do. I would personally not invest in it yet.

Any of you would?. . .And if so, why are you convinced that it is a smart thing to do?


Given that it seems to be one of those solutions in search of a problem, rather than a mainstream piece of technology after almost 100 years since being patented, I too would be rather cautious in investing in such. That being said, materials fabrication has improved considerably and a general larger body of knowledge is available then when Tesla designed the thing, so it does seem to offer a greater promise for some development in some areas of application. You'll note the "sum" of the "some" qualifiers. Until such a breakout niche becomes commercially viable, I think it more of a scientific curiosity - for now.

But keep an eye on it - who knows?

Best,

AIMster

Learning the V wave as a novice. I am embarking on use of my new Automatic investor software which I find extremely helpful. Can I get some advice on where I can interpret the v wave and i waves. I really don't have the funds to subscribe to the value line website. Are they any other resources I can draw from to evaluate my stock selections as well as managing my cash reserves and equities?

Slow down, Tiger! :)

That's quite a mouthful for one paragraph with a lot of things to consider!

1) The V-wave or former I-wave is a benchmark indicator to give a reasonable suggestion for how much cash reserve percentage to start with, were you to begin a new AIM program today. Basically it looks at the risk level in the market and increases the percentage of cash to start with as the Bull runs for a longer and longer time, knowing that when the Bear puts in an appearance, having all that cash will be quite useful. So there's no "long term" interpretation of this signal, per se, since it's only used when an account is being started, unless you just want an overall "risk meter" to see where the market is.

2) Automatic Investor is a great piece of software and Mark's put a lot into it, but in order to fully maximize the value, having a good understanding of AIM by-the-book will help a lot. Knowing how calculations are made will let you understand the process better, rather than treating AI as some "mystical black box," from which the computerized "genie" will pop forth from to control your destiny.

3) As for evaluation, Yahoo finance under statistics offers quite a bit of info. Particular information to look for (other than the long-term profitability of the Company) is the Beta - the measure of volatility of that particular stock compared to the market overall. The higher the beta, the more volatility, the more AIM can work with the stock. In theory, then, penny stocks should be awesome with AIM. However, few will use them for AIM other than with truly "mad" money due to the amount of risk involved. The greater propensity for these to "crash-and-burn," especially with AIM's wanting to buy more on the way down, would recommend avoidance or extreme caution with money you can truly afford to lose. On the other hand, it could be like a lottery ticket over a long enough time period. If there were only some way to have a mutual fund of penny stocks to minimize the risk... I suppose a micro-cap fund like RMT might be about the closest one can get.

Another good source of info is http://www.stockcharts.com. A picture being worth 1,000 words, seeing a volatility pattern with their zig-zag function can be helpful. Cost for basic charting is free. For example:



The zig-zag red-line, set at 30, shows the retracement from each buy-to-sell, based on the by-the-book settings of 10% SAFE and 5% Minimum trade for each side, buying or selling. From late '08 going into '09, AIM would have taken great advantage.

More questions, let us know!

Best,

AIMster

.I'm kinda thinking about this brwc as a lotto ticket too lol

And the mega-millions jackpot for tonight is currently at $355 million, should anyone want a real lotto ticket on a more guaranteed payout - provided you win, of course. Small detail there.

As for BRWC, the question to ask is why is such a big-business enterprise so far underwater as far as their stock price is concerned? Was someone siphoning off the profits illegally to drive them into the drink? I mean, if their product is from the Catskills, that's the same source as NYC tap water. Nothing unique there. But I suppose they want to make a big splash instead of being a drop in the bucket. Put it in a fancy bottle and charge a premium price. What a concept. Might be a good investment, but then again you might end up all wet.

Best,

AIMster

Interest rates will rise, the question is when, not if.

Given the relatively historic lows, what else can they do if not just sit there but go up? Not much further down to go to 0%. The thing of it is that rising rates are usually used to help cool down an overheating economy. This economy is anything but. With joblessness being where it is and new uncertainties out of Washington, given the change in power structure between the Democrats and Republicans it will be interesting to see.

Of course, with Bernanke cranking out $ at the Fed, an inflation ignition becomes more real all the time also. In that case, we could be in for some volatility and turbulence - which in a contrarian sense is not necessarily a bad thing.