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Hi Ray, Another thought, it looks like both high and low beta stocks work the best. I'm guessing this is because both are out of step with the market as a whole. This seems to create the volatility that AIM needs to work best.
Look at BTB 10, 8, 5, 4, 5, 8 10 results versus what I got doing 10, 9, 8, 7, 6, 5, 4, 5, 6, 7, 8, 9, 10 sequence.
Best,
Allen
Hi Toofuzzy, Yes, but..., well in a sized weighted ETF and someone like AIG or Fannie Mae and Freddie Mac (~185 billion each) goes bankrupt, don't you think that it might have more than a minor impact on the value of the ETF? What if the US had decided to let Goldman Sachs just go bankrupt like Iceland did with its banks? Also look at how many ETFs no longer exist. If there was a combination of the two it just might rip your pocket and make a significant hole that leaks your money big time.
Another thing to think about is that if you look back at economic cycles they seem to start with relatively small top to bottom ranges and that each subsequent one gets worse until you have a 80+% crash and then cycle starts over again. Think about 1894-6, 1929-32 and, well, are we in for another one like those anytime soon?
Another thing to think about is that a few people are saying that you might want to be more into cash for a while. Locally, Fisher Investments, a $63 billion company, is asking that question in its ads.
Best,
Allen
Hi Ray, Great idea, especially as we may well be headed to a correction/bear market. I was not aware of this before, so thanks.
Wikipedia has a good description of what goes into it at https://en.wikipedia.org/wiki/Altman_Z-score#Z-score_estimated_for_non-manufacturers_.26_emerging_markets
When I get a moment I'll do a spreadsheet for this.
Best,
Allen
Hi RT, and you too, Tom;
Hi Toofuzzy, True, July 15th, 2012. Daily price dropped for one day to ~%0.63 and then went back to where it was, roughly, the very next day and has been a relatively narrow range since then. So what is the problem?
Besides, I was just testing a variety different stocks and ETF/Ns and playing with PC%to see if I could get a sense of how to use it.
Best,
Allen
Hi Gang, I forgot one part of the commission/interest/dividend calculation. In the cash on hand column, now AC, you need to add +ABx to the formula - =IF(C21<>"",IF(X21<>0,F21-Z21+AB21,F21+AB21),"") and drag it down the column.
Sorry 'bout that.
Best,
Allen
Hi Gang, Sometimes the obvious hits us between the eyes but we don't realize it until much, much later.
As you may recall I modified the BareAIM.xls spreadsheet to allow the addition of the interest that Lichello used in that first table in his book. Worked great.
Then, last night, as I was headed home from a somewhat raucous BoD of the credit union I am president of, it hit me that there might be an easy way to add the cost of commissions to that column. Took me about 15 minutes to do it. All I did was add =IF(V21<>"",-$A$13,0) where V21 is the column where the Recommended Action - ## Shares is shown and $A$13 is where the commission cost is listed. This displays a zero (0) when there is no action. It has to be numeric to avoid fouling up the rest of the calculations.
This will not be perfectly accurate as the assessment added to sells. just a few pennies, is not included, but it does make it a bit more accurate.
Then, when you get a dividend you just enter the figure in that column, overwriting the formula. Now you get an assessment of total portfolio return, including dividends.
Best,
Allen
Hi RT, In playing with the variable PC% I have found some oddities. Using the figures from Lichello's book, the first set of tables - 10, 8, 5, 4, 5, 8, 10 stuff - I found that you could get even more dramatic results at 60-65% but with others there might actually be two "sweet" spots, one above 50% and one below 50%. So far I can not tell why. The only thing that stand out is that volatility - high/low range, combined with the length of time between the two - and a shorter time frame seems to create the best results.
Looking forward, this means to me, we might want to look for positions that, back in 2008-9 had the greatest drop and then a fairly rapid recovery to put a small amount of money into to take advantage of the coming - who knows when? - market correction/bull market that appears to be headed our way. This might be something we might want to use LD-AIM for. Haven't really tested the idea enough.
Best,
Allen
Hi Gang, Beware of older data from Yahoo. I was looking at 5 years of DHT and the figures got screwy, off by x10 back in 2011/12.
I went to Google but I did not see how to do monthly for comparison but I did look at the day stuff in that range and Yahoo definitely has a math/programming problem.Date Close Adj Close
10/1/2012 4.22 3.349867
9/4/2012 6.26 4.969234
8/1/2012 5.53 4.389755
7/2/2012 6.61 5.060504
6/1/2012 0.619975 5.69571
5/1/2012 0.679973 6.246908
4/2/2012 0.799968 7.139324
3/1/2012 0.959962 8.567189
2/1/2012 1.109956 9.905811
1/3/2012 1.059958 9.184081
12/1/2011 0.73997 6.411529
11/1/2011 0.819967 7.104667
10/3/2011 1.599936 13.585509
9/1/2011 2.039918 17.321524
8/31/2011 2.979881 25.303009
Hi Gang, More PC %. In lots of playing around I have found that the correct PC percentage to use is highly dependent on the nature of the volatility of the position. It appears that lower volatility positions tend to do better with a lower PC %. I have do do more with different price histories and see if I can tie it to beta or some other factor that we can use predictively.
Best,
Allen
Hi Clive, You said:
Hi Adam, Taking your advice I went to TDAmeritrade's commission free list and was a bit shocked at what I saw. Of the 101 ETFs 5 were up today, one did not change and ALL the rest were down. All the Vanguard, etc., so it may well be that your comment about the market being waiting to crash is accurate.
Looking at the various charts at http://www.seasonalcharts.com it would seem that we might get a bit more up until October and then ~20+% down slope. Here is a 37 year history of the DOW: http://www.seasonalcharts.com/volatilitaet_aktienindices_dj.html
Poking around at his other historical charts on the US election cycle there appears to be a low point in February next year. This is based on 100+ years of election cycle history.
And then there is the data at NBER where the bull markets have lasted an average of 65 months since 1960 and we are at ~90 months now. Even looking at the last three bull markets the average is 95 months so I'd guess upcoming times might be a lot like a roller coaster - a slow grind up and then a fast, wild and woolly ride down, screaming all the way until we hit bottom.
It looks like starting a TLT position might well be a starting point, perhaps 80% cash, 20% ETF to allow for buys on the downside. Others might be HYG, HYND or JNK.
JNK may be the best bet as it is paying ~6% with HYG right behingd it at ~5.5%.
Well, I have a few days to mull thus over.
Thanks,
Allen
Hi Gang, Remember I asked about the 30 day rule and its effect on basis? I went over this with my accountant and then sold the position and the broker and the accountant agreed with each other. The mistaken sell and buy back of the proper number raised the basis ~$13k so when I sold out the position I got a higher basis which translates into a loss for tax purposes. I still made money over my investment $, granted not much. I wonder if this gimmick is being used by others?
In case you don't recall I was told by AIM to sell but I typed in the wrong number and didn't notice for a few hours. I then bought back the number that would correct the mistake. The difference was a wash sale and was added to the basis, making it above my purchase price. I wound up making a couple of hundred dollars on the close out of the position but, for tax purposes, I lost money. Whoopee!
Almost done closing that trust and will have a significant block of money in a few days to try to figure out where to put it given that the market seems to be keep hitting its head against the ceiling over the last couple of weeks. I wonder if it is going to get tired of this and just lay down for a while?
Any suggestions where to put ~$185k? All ideas welcome. The rest of the money is in not tradeable assets, alas, so I have to figure out how to handle that.
Best,
Allen
Hi Gang, Followup on PC %. If you go into a negative cash on hand you do better at 50%, in fact there are times when less than 50% is better still. It pays to play with various possible % settings to see what you get when backtesting various positions. The results are easily seen in the Gain/Loss cell.
Best,
Allen
BTW, Is7550, in one of your posts you reference "ETF/ETP/ETN". What is ETP?
Thanks,
Allen
Hi Gang, Double Holy Guacamole!!! I just did a modification of the BTB AIM spreadsheet, the one with the same results as in the book, approximately, and the results are stunning: 164.11% better results with a 56% of the buy addition to PC instead of 50% of the buy as is in the book.
The setup is a minimum sale of 1 share, $100 minimum trade size, 10% buy and sell safe. All the data, prices and interest, is the same as in the book.
At 57% it ran out of cash and at 45% the result is much worse, only $678,293.40 versus $1,652,026.40 at 56% and $1,006,631.40 at 50% addition to PC on a buy.
F#$%ing amazing.
As usual, if you'd like a copy, drop me a note at 60e20f21@opayq.com
Best,
Allen
Hi RT, Thanks for the info. I guess it must have gone away with the latest Firefox or NoScript update. My alternate browser, Maxthon, doesn't have NoScript and they show up with it so I'd guess it is one or the other.
Using NoScript, WOT (Web of Trust) and Firefox has warned me about potentially danger web sites but, on occasion, something like this gets blocked - sort of out of sight, out of mind. Oh, well.
Since I still do information security stuff on occasion I have to make sure that my machine does not get hacked because I sometimes have sensitive data on it - medical primarily - so I have be very cautious.
I'll have to drop a note to both of them.
Best,
Allen
Hi RT,
Hi Gang, There used to be a few locked in posts at the head of the list. What happened to them?
Thanks,
Allen
Hi Gang, I'm in the process of closing down one of the trusts as I'm the only one left who benefits from it. I was talking with my accountant yesterday and got her advice on the best way to do this.
So I started to implement it the actions and placed a sale for the small amount of IVR stock at the ask price. It was taken before I even had a chance to click though to the transactions page!
Best,
Allen
Hi Toofuzzy, You are quite correct about having a minimum position of at least $20k. Even with the best possible buy/sell/minimum stock sale settings, much less doesn't make enough per trade to even keep up with the typical index given commissions and lost income on cash reserves. The real problem is getting up to that size so that it makes sense.
Firebird400 seems to be doing quite well with his Pocket Change Portfolio so that is one approach. The other is LD-AIM, not that I have used it all that much, but I'm beginning to see the virtue of it when starting a position but I've not have a lot of luck in trying to apply it to already existent small positions. The old learning curve, etc.
So, to encourage more people to the list it might help if we had more discussion on both getting to a proper size. I think this is especially important given to the large number of recent college graduates who have less than great job in their choice of career - Starbuck's baristas, etc. - and their massive debt from attending college. I just read that about 34% of the 18-34 year old group are still living with their parents and have half the home ownership of the country as a whole. If we want the economy to succeed and boost our own income from our investments we need to be sure that those who will take care of us in our dotage are successful. If they can't buy stuff our economy will suffer as roughly 70% of our economy is consumer based nowadays.
Best,
Allen
Best,
Allen
Hi Gang, HOORAY! Finally got a spreadsheet version of the online calculator to mimic it perfectly, well, except I rounded the number of shares to avoid the odd fractional share the online calculator creates.
The other difference is that the % of shares can be set separately on the buy side from the sell side. This may help with a delayed buy. We'll see.
Now I'm going to see if I can do what LD-AIM does making the number of shares be larger on the buy side to meet a minimum dollar trade size. But one can get almost the same result by setting the buy % of shares or the buy safe differently from the sell.
Anyone want a copy, drop me a note at 60e20f21@opayq.com.
On another subject, I recall reading at some point that rather than adding 50% to Portfolio Control one can get somewhat better results using 56-58% as the added amount. I've been playing with it and it might be true. I need to do more back testing to confirm.
Best,
Allen
Allen
Hi Toofuzzy, Yeah, spending time with Oriana would be good but, well, she is pissed at me because I'm attempting to get her out of the spendthrift habits she learned from the ex. She was yelling and crying at me last week about me always saying no and controlling her, but she is only 23 and has not yet had to support herself.
One can never do everything right in raising one's kids
My plan is to put it all into a trust and have someone else be the trustee until she is older - 35? - or when she shows better judgement.
She was here today and she was angry, but it was not completely clear at what as she had lost all her keys, including the spare $200+ electronic car entry key for the Prius I got her after her Honda was totaled by an 18 wheeler. I bought the second key so that she could be sure to have a spare. Yikes! The best laid plans of mice and men....
In addition to the car wreck, her uncle died 2 months ago, her cousin's wife, whom she really liked, about two weeks later and her grandmother on my ex's side about 3 weeks after that. She spent the summer helping her aunt and that was quite stressful as well as her aunt has never had to fend for herself - went straight from family to marriage to a very nice man but who took care of everything.
So Oriana has had a very stressful couple of months and now it is back to school, which she does not like because it is in Arcata, the so called Emerald Triangle where marijuana is grown, and she has the good sense to not like the drug culture.
As to investing in what she will be comfortable with, I haven't a clue at this point. We'll see what happens when she finishes her last classes in December.
I don't mean to burden everyone with all this, just trying to give you the background so you can better understand the constraints I'm working with.
And, thanks Toofuzzy for explaining your path in the investment world. It helps me see what I have to think about and help Oriana avoid when it comes her time to take over.
Best,
Allen
Hi Clive, Very interesting charts and argues strongly for delayed AIM buys as the market heads down.
Best,
Allen
Hi Toofuzzy, Most excellent description of the process for starting out, except for one point, I have no great emotional attachment to any particular segment or ETF provider so my only criteria is which position is going to have the most transactions over the next 7 to 10 years. I'm 73 and the expected lifespan tables say I likely have about 14 years left, on average. I'm guessing that I might be too gaga by the time I'm 80 or so to do all that much with AIM or the stock market in general. Given this I'm looking for relatively short term stuff, both for my own income and for leaving to my daughter once I can no longer handle this stuff.
My hope is that I can find positions that will continue once it's my daughter responsibility and will give her some income to pay off college debt and/or whatever, a house, who knows. So looking back at the 2000-2013 results does me almost no good. The only part of that is that the ETF/ETNs listed by AAII have two columns, NAV Total Return % - Bull Market and Bear Market so that potentially it can help in finding ones that have the most volatility but have an overall history on the positive side unlike DBC or UNG that are losers in both bull and bear markets. Something like ICF which has a gain of 410% in a bull market and a loss of 68% in a bear market but, since 2011, has had only one losing year, 2013, for a loss of 1.8%. But even that may not be a good choice, hard to tell.
It's true, had I put AIM to work in 2002 when I bought the book I'd be way ahead today, but no use crying over that mistake.
Best,
Allen
Hi Toofuzzy, In my paper trading and backtesting I'm only finding about 1 or 2% more than the S&P 500 and often a B&H actually does better than AIM over a two or three year period in some cases when you look at total % gain by the time you factor in the % cash you are holding.
I got my AAII issue today and they have listings of ETFs/ETNs and it is amazing how many make nothing or lose significant amounts over 3-5 year period and yet there are some like SPLV have been doing quite well though it has not been around long enough to see how it would do in a bear market.
Looking at the list is sort of like walking into a restaurant with 20 pages of menu items all of which sound like they might be worth trying but you've never had any of them before so you have no real clue what to order.
Best,
Allen
Hi AIM1979, If an ETF contains 30 positions do you look at all of the components if the ETF uses weighted values or just the higher percentage components? For an equally weighted do you look at all of the components?
Given there are now over 1900 ETF/ETNs how do you winnow it down to a manageable number?
Alas, it is not OUNZ I was reading about. It was one that had taken a deep dive over the last bit and was down around $5 if I recall correctly.
For ONUZ, given its narrow range, what would you use for buy/sell safe?
I've been playing with using 5% for buy/sell safe and 5% of shares to get the prices for the orders, but what I've been toying with is making the actual number of shares to sell at twice the 5%. Using the smaller % helps create a narrower range and doubling the number of shares overcomes the minimum total sell so one does not sell trivial amounts.
On the buy side I'm playing with only buying 150% of the minimum number so that a significant drop will still leave me some cash for additional buys should that become available.
The narrow range positions seems to really limit any significant action using traditional numbers.
Other ideas?
Best,
Allen
Hi Gang, A question: ETFs in general have lower range and volatility than stocks, sometimes less than half of what Lichello posited in the sample on pages 64-71 in the 4th edition, going up 250% low to high or dropping 60% high to low. Given the general tendency over the last 40 or so years the 250% low to high is not totally out of line, but most often things like inflation add to the plus side. Only in the most severe bear market does one get close to that big a drop, ~56% in the last bear market and a bit less in the previous one, so it seems to me that, in effect, he did what a lot of "stock trading trainers" on the Internet do, present the best possible version as though it was real - all those charts based at some point of the up/down market, depending on what they are selling, without showing off the worst case that might happen.
Anyway, back to AIM and the changes that have happened to the market since 2002, primarily ETFs, what can we do to achieve better results? Firebird400 seems to be doing quite well, but he's not in the ETF zone as far as I can tell. I wish I understood the selection criteria better, if I did I'd put about 10% of the total portfolio(s) in paper trading to see if I understand the process.
However I ran into a reference to a low price gold ETF with a lot of volatility but I forgot to write down its symbol so I can't back test it. Can't think of where I saw the reference. Anyone seen this?
Thanks,
Allen
Hi Tom, Looking at older AIM things for inspiration and/or solutions I came across your AIM Backtest with Vealies and had two questions. One, is it possible to get the formulas you used in the spreadsheet?
I noticed, in reviewing it, you also had B&H as well as a Draw down columns. I did it slightly differently in that I did a Portfolio Return and a Stock Return (as a proxy for B&H) as percentages, not dollars. I like your Draw Down column as well.
The other question, and one you told me a looong time ago but it slipped my mind to follow up, why do you use Adjusted Price rather than Close of Day/Week/Month price? That does not make a lot of sense to me as it almost always means that past prices are lower because of dividends and stock splits. This, it would seem to me, that it would create a bias toward selling or am I wrong about that?
Best,
Allen
PS, Have you gotten around to making that CD/DVD of the old AIM web site so I can resurrect it? Not a hurry by any means.
Hi Tom, I haven't run Newport on my W7SP1 machine because of the problems I had with it, especially getting the back history in place so the current positions would be accurate.
The other thing is I have added a number of extras to the AimBareS.xls that are helpful for me. One is comparing Portfolio Percent Gain or Loss to Stock Percent Gain or Loss, which is a stand-in for Buy and Hold results.
Another thing I have added is a CAGR calculator on a daily/weekly/monthly basis.
I am working on making a cost of commissions and dividends part of the spreadsheet and adopting the LD-AIM Buy/Sell advice example work as well as the built in version. And then there is the online version which works differently but I have not yet been able recreate the formula and haven't been able capture the formula from the online one.
So I'm not all that sure the Newport version would be all that better, except in the major area of chart generation.
Currently I'm keeping track of some of the positions on a daily, weekly and monthly basis. What I have found is that both the daily and weekly figures have more volatility than the monthly and are slight more profitable, probably not worth the effort overall so far.
Best,
Allen
Hi Marv, All of the positions I posted are ETFs so are not likely to have all that much risk, especially the ones with the least 52 week range, and they tend to have a lower cost of operation than bond funds. The other thing is that the return on money market funds are very low and you lose one or more months of earnings when you withdraw money which can put you into a negative earnings positions in some cases. This is why I selected the funds I did.
Best,
Allen
Hi Gang, I've been looking around for a way to put idle cash to work and a friend said: "put the cash in a high yield Closed-End Fund or REIT that pays a monthly dividend - off the top of head HYF (this one has been dissolved) is a good example - it's paying 6-7% a year & pays monthly. So any month most of your cash earns 6-7% annual rate which more than offsets any commissions."
So I went looking and found a couple that might work, SPFF, 5.85% and pays out 11 months of the year, with the second one in December paying in January but it a low volume ETF, roughly 100k a day so it might not be a good choice. Then there is JNK, 6.2%, 12 payments a year, two in December, one paying in January.
This would argue for a single cash fund for all your AIM programs, and since mostly trades are rarely more than one a month the double commission (selling the cash ETF and buying whichever position needed) and since the dividend on the cash is not in the individual AIM account, keeping track of where you are is easier.
Then I decided to take a look at ETFs/ETNs and got these results:
JNK, HYD, HYG (2 in December), PCY, EMLC (2 in December), PFF (2 in December), all have 12 dividends a year.Symbol Low to High % % Dividend Volume
HYD 108.91% 5.1 215,773
PHB 113.79% 4.6 206,050
HYG 115.35% 5.6 9,396,390
PCY 115.62% 5.8 2,351,109
EMLC 118.78% 5.9 922,742
JNK 118.87% 6.1 5,257,130
PFF 124.81% 5.8 2,704,493
VEU 125.48% 5.2 1,281,773
VGK 128.04% 7 1,432,639
VWO 138.21% 4.8 9,350,448
Hi Toofuzzy, If I understand you correctly the loss that is denied when there is a wash sale it is added to your basis, right?
Thanks,
Allen
Hi Gang, Holy Guacamole! Do to some stupidity on my part around the first of the year I bought the wrong number of shares in MORL - brain fog - so when I found the error I sold that amount and bought the correct amount within thirty days so it was a wash sale. This error raised my cost basis over $12,000. I just checked with TDAmeritrade and they said that if I were to sell all of it like I planned per my previous comment about the strange nature of the dividend structure they have, I would have a much bigger tax loss. In addition I would be able to reduce the position size in the trust portfolio that was inherited. Yippee!
I confess I do not understand the wash sale rule and how it works. Anyone have pointers about this that goes into details?
If this turns out to be correct it might be a trick we could use with AIM.
Thanks,
Allen
Hi fellow Geezer, What does LTCM stand for?
Thanks
Allen
Hi Gang, One person, not on this list though using AIM, has a book with very old data with a lot from the late 80's and the newest from 2002, argues that there are no differences in the market between then and now, markets go up and markets go down. True, but to me it seems some fundamental differences exist, ETFs as one example and the interest earned on money in your reserves.
Are there other differences that anyone sees?
Thanks,
Allen
Hi Toofuzzy, As you say:
Hi Toofuzzy,
Hi Is7550, Toofuzzy, I just couldn't resist looking at this and trying another split: 10% XIV, 45% SHY and 45% SPY. Beats the two handsomely. $12,709, $14,402, $16,671
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2016&lastMonth=12&endDate=08%2F10%2F2016&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&showYield=false&reinvestDividends=true&symbol1=XIV&allocation1_1=10&allocation1_3=10&symbol2=SPY&allocation2_2=50&allocation2_3=45&symbol3=SHY&allocation3_1=90&allocation3_2=50&allocation3_3=45
I don't know how one could run the three together as though they were a single AIM so one could see the volatility and the buy/sell points. It looks like the third portfolio has more volatility and so might do even better. Look at the peak at May 31st, 2011 and the dip at September 30th 2011 as well as at July 31st 2015 and September 30th 2015.
True, you'd have to not panic as the maximum drawdown is 16.72% but the CAGR is a nice 9.59%,
If you could stand it 20% XIV, 40% SHY, and 40% SPY does even better with a CAGR of 12.03%
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2016&lastMonth=12&endDate=08%2F10%2F2016&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&showYield=false&reinvestDividends=true&symbol1=XIV&allocation1_1=10&allocation1_3=20&symbol2=SPY&allocation2_2=50&allocation2_3=40&symbol3=SHY&allocation3_1=90&allocation3_2=50&allocation3_3=40
As usual a log scale view is best.
Best,
Allen
Hi Toofuzzy, I could not commingle the two because one was a trust account and one was not. As trustee my fiduciary responsibility is to keep them separate regardless.
Best,
Allen