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Thanks for digging up the links Clive.
If one day you managed to find that sheet please share it. thanks
Love this board
I still AIM and visit this great board now and then. Good to see members back and posting. Thanks everyone.
Does anyone have that Husky spreadsheet the came up recently? I have a simple backtesting program with several flavours of AIM that one day I plan to publish a web version of. It would be nice to add this flavour.
thanks
Hi AIMAGIC,
I did start a CARA program which is a continuation from Jan 2014 as follows:
PC: $44,537
Shares: 3,182
Cash: $19,340
Next Buy: 318 shares at $11.66
Next Sell: 318 shares at $17.50
I started an LDAIM program where I only bought 1,250 shares. I am thus using 3,182 - 1,250 = 1,932 virtual shares. It is thus ~2.5X leveraged.
I was lucky to get in close to the recent lows at $12.75. Stock moved up recently so I already had a sell (@18.37). Being a leveraged program, I might only get 2-3 additional consecutive sells in total before it sells out of stock completely, which I am OK with. I plan to keep the virtual program going ...
I think the gains in the crypto market, like the recent gains in the stock market, are mostly due to loose monetary policy. There is tons of liquidity in the system. Of course the crypto gains are bigger, but so are many stocks'. Forget the coins; the real action is in crypto stocks like MARA, RIOT etc... actually forget the crypto world altogether. Have you seen CAR or CROX lately? There are many stocks that have gone up 5X or 10X over the last 3 years.
In March 2020 all cryptos crashed along with the stock market, and they recovered around the same time, which was when central banks started injecting liquidity. Being decentralized currencies, why didn't they provide a hedge when it was most needed?
The last 10 years have been exceptional and I honestly would like to see BTC put to the real test of tight money supply.
So far, BTC or other cryptos have not delivered on the promise of being currencies. And they haven't provided a hedge either. So far they have been pure speculative plays, nothing more.
Thanks again Clive for the great insights provided and for the very elaborate reply.
Hi Clive, Very Informative SORR Post
Thank you Clive for posting such interesting and informative studies. I find this post very informative. So if one were to retire and worried about stock prices being high (always a worry), they would look to start with a relatively high cash level (as indicated by an AIM program of S&P real prices) but look into using AIM to generate future buy signals to transition to 100% stock.
Today this starting cash level would be 72.68% and in 1969 it would've been
65.48%, I think.
How long would it take to transition to 100% stock based on the studies you did? In your 1969 example it looks like AIM would've done so in 8 yrs (by 1977).
But looking at the AIM cash% chart, why does the cash level ever rise after going to 100% stock?
Hi Clive, re Cash% based on stochastics
In this example
Thanks @Myst.
For AIM optimization, do you do anything to preserve your cash reserves? These are very aggressive parameters for MSTR that I am seeing you use, i.e. doing daily reviews using 4.3% SAFE with no MTA.
Thanks Tom.
Good choices for sure. FSLR was on my watchlist early this year and I remember looking at it when it was almost $70 and thinking there is room for it to drop more. Oh well it took off without me :)
Hi Tom, congrats on the Sells.
These are some really good stocks to own. How old are these AIM programs and how did you pick the stocks?
Thanks
Thanks @Myst.
Great work.
So you are using a ~20% starting cash, 4.3% SAFE and a low MTA (enough to buy/sell two shares) because your AIM optimization method indicated so as of 05/14, right?
That is very aggressive but a great optimization. Is that method documented somewhere?
thanks
J
Please do send it. Not sure you can send it to my mailbox here. If not plz email it to me at jhreich at gmail dot com.
It takes a lot of conviction.
What % of your investable assets are in cryptos? Have you endured a 90% drawdown?
Oh and what is the AIM magic method? I am currently doing extensive backtesting and I keep discovering different AIM flavors
Thanks @Myst. I will watch the video later on.
When I said adoption I was referring to what is being priced in it. How come I don't see anything priced in crypto that I spend money on for a living? mortgage/rent payments, groceries, gas, bills, etc...
I am pretty sure if one started an ETH AIM program in Jan 2018 they would've run out of cash in a few months... are we talking about the same AIM method here? You chose May 2021 as a starting point so I arbitrarily chose Jan 2018 as it denotes the previous major top.
AIMing cryptos
AIMing cryptos would've been very lucrative indeed. But it is not so much about AIMing; it is whether one would want to own them to begin with.
Many (including me) don't believe in their very premise as currencies; they are just too volatile for anything to be priced in them. It has been 10 years and there still isn't any real adoption. They remain speculative plays bordering on being a Ponzi. I really have no idea where BTC or ETH will be in a few years. They could be trading at 10X their current price or just ZERO.
And if one bought in Jan 2018 they would have had to stomach a 90% drop and be underwater for almost 3 years. It takes a lot of conviction about the underlying instrument to keep executing those AIM buys and most AIM programs would've run out of cash unless they start with 90% cash.
Stocks are a different story.
no worries. I am just starting with healthcare stocks and still experimenting with backtests. These returns are from the last 5-6 years.
I already bought CARA and RCKT and thinking of adding 2-3 more. EDIT, MTEM and AXDS are candidates.
@Myst, the CAGR returns I posted are per year! During the 5 year period, the portfolio would've gone up from $60K to $271K while on average holding 43.63% in zero yielding cash. That is a 452% return over 5 years!
Why do I AIM? Because AIM is a good investment strategy that I can stick to in good and bad times. It is actually better (in terms of risk/reward) than "buy and hold" or "constant weight" options. Helps me stay the course which IMO is the most important factor in determining one's success path in investing.
My testing was limited to Russell 3000 stocks. I am not sure I want to own microcaps or cryptos. I think that a +30% return on a stock/cash portfolio while holding 50% in cash on average is pretty darn good. I would be thrilled to achieve such results on my overall portfolio in the coming years.
Do you have any data that shows inflation was higher than +30% per year in the last five years?
AIMing Healthcare Stocks
Is anyone AIMing individual Healthcare/pharma stocks? they keep popping up on my screener (a custom AIM screener I am developing) from the universe of Russel 3000:
Examples: CARA, EDIT, RCKT.
I AIM'ed each individually using standard AIM settings (50% cash, 10% SAFE, 10% MTA). bhCAGR denotes the buy and hold value. AIM CAGR is a remarkable beat:
I then backtested a portfolio of $60K with $30K total stock ($10K in each stock) and $30K in pooled cash. The results are among the best I have seen in my backtesting so far, not just from the perspective of beating the underlying buy and hold, but also in terms of mixing healthcare stocks together; they each zig/zag at different times:
These are the results using monthly reviews. The black line is the total portfolio value (stock plus cash) and the blueline is the stock buy and hold:
and with weekly reviews the results get better:
Notice how in the above the b/h is back to its late 2019 levels, yet AIM is still further above those levels.
I am actually in the middle of starting a few new AIM programs. One idea I am toying with is starting the program (virtually) a few years ago - 10 yrs seems like a sweet spot but it is not set in stone - and continuing it from here.
For example, I am thinking of starting a new program for CARA (a healthcare stock) that seems to be a decent AIM candidate. IF one had started a $20K 50/10/10 (Cash/SAFE/MTA) program back in 2014, they would initially own 775 shares at $12.91/share and 10K in cash reserves. Today, they would have a total of $59,813 (3,182 shares at 12.72/share and $19,340 in cash). The last two actions were buys: $9,419 in Apr and $6,603 in July for a total of $16,022.
Amazingly the stock is where it initially started (i.e. 0% CAGR for buy and hold) but the portfolio has gone up from $20K to $60K, i.e. 15.26%/yr CAGR. And that is with the stock at 57% below ATHs. At some point, the portfolio was $76K in March this year.
I am hoping CARA will continue this beautiful AIM friendly behavior going forward. So I am thus thinking of starting a new program.
I want to utilize both Ocroft's delayed and Grabber's LD-AIM methods, so I am thinking of starting with $16,022 in stock (1,250 shares at today's prices) which represent the sum total of the 2 recent adds of the original program and keeping the rest of the shares as virtual, as follows:
PC: $44,537
Real Shares: 1,250 shares
Virtual Shares: 3,182 - 1,250 = 1,932 shares
Cash: $19,340
Next Buy: 318 shares at $11.66
Next Sell: 318 shares at $17.50
I would be effectively starting with an initial cash level of 55%. This should be enough to trigger 6 buys. I would sell out all stock after 4 sell signals which I am OK with.
Starting dates are random but going back in time helps provide some perspective, I think/hope.
I keep a weekly screen of AIM candidates that have delivered good returns but recently dropped at least 30% from the last time AIM indicated a sell here: https://docs.google.com/spreadsheets/d/1pInLgrkhFIwMJYrOMFal9XK0K5Wv54poaPWftXCgbH8/edit#gid=1814860374
Starting a New AIM Program Based on Ocroft's Delayed AIM Method:
In the past I have been intrigued by Ocroft's delayed AIM method where instead of executing each recommended Buy order, one would keep track of the total value of Buys and then executes a single Buy order after the stock reverses. This can be beneficial especially if the stock trends down for a long time; one can potentially accumulate more shares.
I have been looking to start new AIM programs and I am having a hard time finding candidates given where the market is today.
So I thought there might be value in utilizing Ocroft's to help find some candidates. I am hoping to find stocks who have been dropping for a while but are showing signs of reversal; but I don't want to use technical trend lines and would rather have AIM manage it completely.
So I crafted a screener based on the following criteria:
1. Choose from the biggest 2000 US stocks (large/mid caps and some small caps)
2. Run a virtual AIM program starting 5 years ago with loads of cash so as to not miss Buys and hence keep the PC correct. This ensures the signal remains clean
3. Look for stocks with programs that have issued at least 2 consecutive Buys but no longer recommending a Buy.
I just ran it and it resulted in a list of 31 stocks:
Looking at ARNA for instance: if one started an AIM program 5 years ago with $10,000 PC, then this program would have recently initiated 2 Buys for a total amount of 3,493.
The list can also be found here: https://docs.google.com/spreadsheets/d/1pInLgrkhFIwMJYrOMFal9XK0K5Wv54poaPWftXCgbH8/edit?usp=sharing.
I think it can be beneficial to start LD-AIM programs using the accumulated Buy amounts given are small for the most part.
If you think there is value in doing this, please share some thoughts. I would love to incorporate them into the screener.
Flavors of AIM in a Single Thread
Thank you all for keeping this board alive. In the past I have written a simple program to backtest AIM; I mainly wanted to convince myself of AIM's benefits. I haven't maintained that program for a while but I might have some free time coming up in the next few weeks/months and I am thinking of reviving and enhancing it. I might also make it available if you are interested.
For now, I am gathering some use cases on all different flavors of AIM that I know of. I haven't kept track of who came up with each flavor so I did my best putting names next to some. Please correct me if I made mistakes. I would also appreciate it if you could add other flavors or just any comments in general. Also, if there is another thread that captures all these flavors, please point me to it.
Here is what I can recall on top of my mind:
- Standard Method: by the book method with only the basic parameters: Cash%, SAFE, minimum trading amount (MTA) as %SV
- Separate SAFEs for buys and sells. For example, one may choose a 10% buy-SAFE buy a 5% sell-SAFE
- SAFE Increment
- increment buy-SAFE on buys, reset to original on next sell signal
- increment sell-SAFE on sells, reset to original on next buy signal
- Vealies (Tom's)
- Sell Vealies (Sell just enough to stay below a max cash threshold. May miss a sell)
- Buy Vealies (Buy just enough to stay above a min threshold. May miss a buy)
- Portfolio AIM
- have target weights for each stock
- use multiple AIM programs with optional cash pooling
- use a single portfolio AIM program but with some flexibility on how to deploy cash and sell stocks. This can be tricky. For example, run separate virtual AIM programs for each stock and only invoke buys on those stocks whose program indicates a buy, but limit how much cash to deploy as per the target weight for that stock. Similarly with sells.
- LD-AIM (Grabber's Low Down AIM)
- apply leverage using virtual shares. Can potentially sell all (real shares) but keep virtual AIM program running. Deploy cash on next buy signal
- ND-AIM: special case of LD-AIM with ZERO down
- Delayed AIM (Ocroft's): Run a virtual AIM program such that:
- Delayed Buys: add up all the buys on the way down and invoke them (in one shot) after AIM stops signaling buys
- Delayed Sells: Similarly, accumulate sells on the way up. Invoke them after AIM stops signaling sells
- All in AIM: go all-in on first buy signal, all-out on first sell signal.
- Enhanced Cash. Example: use a risk parity portfolio (like permanent portfolio) as Cash reserves
- Combine AIM with constant-weight (CW) rebalancing (Clive)
- Examples: one's target asset allocation can be 50/50 stock/cash but may choose to AIM the equity portion. etc... This ensures AIM never runs out of cash.
- Flexible Review Periods
- Allow for wait periods. Example: wait 30 days before next daily review. If doing weekly reviews then wait 2 weeks in between
- Add some randomness into review periods. Example: if doing monthly reviews then choose a review period that falls randomly between two and six weeks.
Thank you
Jaiml
love this stock. I own it in my Canadian long term account but thinking of starting to AIM it.
Thanks Clive.
I too was expecting a deeper dive and possibly a retest - but that can take months and months. With time I learnt to be patient. Let's see what Q2 brings.
Regards
Clive, interesting analysis.
Are you still following this plan to deploy funds, i.e. for the 80/20 UST10/SCV line to touch the the benchmark? Is recent market action saying something?
Hi Ocroft,
With the last move up, I have to believe the MACD must have triggered a buy signal for many stocks by end of March. Are you buying?
Hi @Toofuzzy, ya. I did end up buying at SVXY at the open at 28.75 but only a 1/3 position. Oh well.
IMO it is going to take huge moves (in either direction) to keep the VIX this high. Yesterday was a really bad day and the VIX still dropped. We can easily see it at 30-40 by end of month, with SVXY potentially doubling
But who knows? this is all an experiment based on observations.
Good luck to you and all
Good call @Toofuzzy
Hi Ocroft,
Hi Clive, good analysis!
What do you think about SVXY at this point? My thinking is that market volatility cannot continue to rise. Markets might continue to drop (very likely), but perhaps at a slower pace. Hence SVXY should outperform going forward.
My back of the envelope calculation shows that SVXY now provides a ~2X leverage (as of Feb 2018 since the XIV event). See this SVXY vs. SSO vs. SPY backtest.
One thing that worries me is that while something might be good in theory, anything with derivatives and leverage at this point might be an issue.
What do you think?
@Toof, that is a v good problem to have ;)
Hi Clive,
Hi Clive, re SVXY:
In your (mathematical) opinion, was the single day 85% drop justified? In other words, is it currently mispriced at $11.XX and have some catch up to do?
I thought it was interesting that both UVXY and SVXY were up yesterday. Hence one is definitely mispriced. Likely SVXY?
OK, makes sense. Just wanted to make sure you are aware XIV is shutting down and recent trading activity was questionable IMO.
I will be keenly watching the volatility action in the next few days.
J.
@Toof, you are brave.
I will be allocating funds to it as well, but I would rather wait. The VIX is still above 30 which is relatively high.
I thought it was weird that when XIV was open for trading today, there were several trading halts in less than 30 minutes. Yet, unlimited selling was allowed overnight. How ironic? Makes me wonder if the attack on XIV was orchestrated.
It also appears it was Credit Suisse itself that triggered its own margin call and was doing all the selling last night.... weird, again.
In any case, I am interested in SVXY but would rather wait a few days. I don't see how such an event (billions lost) cannot have more ramifications. I guess volatility (VIX) will be the tell.
btw. would SVXY ever have to unwind like XIV did? is there something in its prospectus that one should pay special attention to?
Hi Clive, re XIV and SVXY
it looks like XIV did not survive (the NAV of $4 or something will be paid out to existing holders on Feb 21), but SVXY did.
Risk parity funds will now have to do some selling (based on the volatility spike) and this will take several days, possibly weeks?
I am bracing for more volatility which will put a lot of pressure on SVXY, if it continues to survive that is.
Are you still considering it in your portfolio?
Happy new year all.
I suppose the blue line is SPY/GLD/XIV 40/40/20 split, re-balanced once or twice a year?