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Hi gang, Froggy's wild ride, eh? So, is this the dead cat bounce or did we hit a bottom? Really hard to tell. Either way, sticking to the plan is obviously the best no matter which way it goes.
Best,
Allen
Hi Clive, Maybe I'll get the names right and keep them straight, but don't count on it as I have always been a bit weak on names, even calling my girlfriend by the wrong name once, years ago.
In any case, a big THANK YOU for the dense discussion of a variety of issues. It takes me a bit to digest them and it always proves valuable to have put in the effort.
Best,
Allen
Hi Ken, It seems I misunderstood your post as well. My apologies. I was not as clear as I could have been. My intention was the bottom where we start a steady path up, minor setbacks aside.
Given what today's end of day is, $15,666.44, ~(-14.5%), I'll stand by my two guesses. The first just above yours at ~(-16%) and the second at about ~(-19%).
So, tomorrow a rally of a bit more down? Your guess is as good as mine, probably better actually.
Best,
Allen
Hi Firebird400, Sorry to disagree, but TDAmeritrade says the close for the DOW ($DJI on TDA and ^DJI on Yahoo) is $15,871 with a low of $15,370 at 9:36 (One minute candles). Yahoo Finance agrees except for a few pennies.
Where did you see the figures you posted?
Best,
Allen
Hi Gang, Anybody up for a nickel bet? Where do you think the DOW will bottom out before headed back up or would you take a wild ass guess that it has gone about as low as it will go?
If we look at the high point $18,312 and the close of the day, $15,989, that is only ~11%. (These are Yahoo's figures.)
My wild ass guess is we still have a ways to go. If it does not stop at around $15,350, ~16%, it will go down to around 14775, ~19%.
So are we in for a "full" typical correction or just a mini?
Best,
Allen
Hi Alton, It looked like it had hit, or was near, bottom a few days ago when it started up but then the oil price dropped and EGY fell as well, but it is up 18% above bottom even with the current "correction." Who knows, I sure don't.
Best,
Allen
Hi Jaiml,
Hi OAGuy & Jim, OldAIMGuy is right that it is a math approach issue - I don't really see it as a problem as long as you are aware of what is happening.
When you use the online calculator, http://web.archive.org/web/20120609073103id_/http://www.aim-users.com/calculator.htm , and use these figures, $5k stock @ $10/share - 500 shares, 10% buy and sell safe, and 10% minimum stock sale (i.e. 50 shares to start with) you get the following when it does the calculations:
@ Stock Value Above $6250
Min Sell Order Size $625
Min Sell Price $12.5
Min # Shares Sell 50
@ Stock Value Below $4167
Min Buy Order Size $417
Max Buy Price $8.33
Min # Shares Buy 50
So it is a 25% change going up to a sale and only 16.67% change going down to a buy, at least the way I learned math, starting at the $10 point and looking down rather than the $8.33 point and looking up. As you can see it is a matter of perspective. I look at it as a "loss" when I start at $10 and get to $8.33, but the math is set up to look at it from the bottom and going up. ~$8.33 * 1.2 = $10.
The issue is that the order of the calculation is the same up or down which creates the difference. I haven't looked at this in a while so I don't recall exactly where in the calculations this occurs and I'm feeling a bit brain dead today so I won't commit myself to an error. As I recall it is the use of 1.1 versus .9 for one or the other of the way it is calculated.
You can "fix" this for the way it is calculated by the "standard" spreadsheet by adjusting your buy to 15% and sell to 6.65% which gives you the following:
@ Stock Value Above $5999
Min Sell Order Size $600
Min Sell Price $12
Min # Shares Sell 50
@ Stock Value Below $4000
Min Buy Order Size $400
Max Buy Price $8
Min # Shares Buy 50
I.e., $10 + 20% for and actual sell price of $12 and $10 - 20% for and actual buy price of $8. You still wind up with two different values for the $ amount for the buy and sell as you can see. If your goal is to have the same $ value in a buy or sell, then you have to use both a split buy/sell % and a different % of stock for buy and sell. I find that too hard to bother with.
Or you can do what OAG suggests and use the minimum sale to be 10% of Portfolio Control (PC) which does not really work starting out.
So, you are right, there is a basis toward buying, long term. Good, bad? Given that the stock market tends to be biased up I think this is probably good.
The other issue is that AIM, as traditionally done, requires a wide trading range - more than 2-1 - or you never get either a buy or sell depending on where in the 52/104 week range you buy in at - at or near the high or at or near the low. This is not a real problem if you buy in at the middle and the range is great enough. However a lot of the ETFs have a relatively narrow range. For example XLP has a 52 week range from $43.69 to $50.95 or about 17% from bottom to top. XLF's range is from $21.55 to $25.62 or about 19%. With the standard settings and buying in off the high or low you'd never get either a buy or a sell.
If you restrict yourself to those with enough range over a couple of year period then you wind up being excluded from a lot of possible positions unless you are looking at things from a buy and hold perspective.
If you use 0% buy and sell safe with a minimum of 10% of stock then the buy is at $9.09 and $11.11 sell price, a 22% difference.
If you use (-3%) for buy/sell safe you get a range of about 15%;
@ Stock Value Above $5376
Min Sell Order Size $538
Min Sell Price $10.75
Min # Shares Sell 50
@ Stock Value Below $4673
Min Buy Order Size $467
Max Buy Price $9.35
Min # Shares Buy 50
The dollar amount of each trade is still in the right range. I know this is screwy but it works when working with a narrow trading range position.
Best,
Allen
This e-mail may, and probably does, contain factual errors as well as errors of logic, organization, grammar, and spelling. They are included at no charge. However, you're invited to make a donation.
Hi Clive, I like the source of your user name.
About dips, however, they tend to be more often than once every 20 years. Here is what National Bureau of Economic Research (NBER) says:
(Only the number of cycles are shown. I clipped the rest.)
The amount down varies and the dates of index or stocks high or low points don't really match up to the dates the NBER uses for the trough. Also it it not as clear prior to about 2000.
The last two of the S&P 500, the peak in January 2000 was $1498.58 and the low in July 2002 was $815.28, a 45.6% drop. During July 2007 it hit 1526.75 and dropped to $797.87, a 47.7% drop.
Of course the figures differ depending on which stock or index you use. SPY hit a high in October 2007 of $154.65 and a low of $73.93 in February of 2009, a drop of 52.2%. SHY went from $82.97 in March of 2004 down to $79.69, a tiny drop of 3.9%.
Of course there are the drops of the Great Depression and even further back in the late 1800s. From ~1945 until ~2000 seems to be a special time with lower than common drops when they happen.
If the market takes a dive similar to the last two it will be a great buying time so keep your powder dry.
Best,
Allen
But then, since you both commonly use nomé de AIMs, it can be hard to sort out, and remember, who is behind the masks.
Best,
Allen
My apologies to both of you! My prior e-mail contains factual errors as well as errors of logic, organization, grammar, and spelling. They are included at no charge, unless, of course, you'd care to make a donation.
Best,
Allen
Hi Gang, It shows that in a generally up market you can make money, but with a leveraged ETF and AIM you can take advantage of the dips to make even more. Notice the 22% and then 29% drop right off the bat letting him buy more right at the beginning.
The unrulydog's return over the 6.5833 years is 17.18%/year while the S&P (^GSPC on Yahoo) was only 15.47%/year. That is worth about an extra $2,350.
Of course, don't forget to add in the dividends. Leaving them out makes his return a bit lower than it really is, but it is too much trouble to figure out exactly how much.
His column "Int 0.6%" does not seem to match the dividends. I can't find any place that gives the figures he shows.
His return would not have been as good had he started to ease into SSO in 2008 as the dive started. This is where Clive's method of looking for the first buy after the last sell makes sense.
Had he done what Clive suggests he would have bought in just above $20.49, about 26% below where he did, using the prices he shows.
BTW, be careful when looking at historical data. If you select "monthly" on Yahoo and select the first day of the month what you actually get is the closing price on the last day of the month.
Best,
Allen
Hi Ken, What is your A.T.T.I.C aiming system?
Thanks,
Allen
Hi Toofuzzy, Yes I know, that is why I was asking what approach he took and why.
Best,
Allen
Hi Jamil, I'm curious about one point. At TDAmeritrade one has the option of selling out portions of a position with the highest price stock, thereby generating the greatest % loss, although a lesser $ amount, leaving the remainder in place. Selling out a portion like this seems like a great way to harvest a tax loss (in the US at least) to reduce the tax burden.
Had you factored that into your strategy?
That is what I am planning on doing toward the end of the year with EGY. Whatever is left over in a position can then be left alone for potential gains, should they ever happen, or used later for more tax loss harvesting.
Best,
Allen
Hi Clive, What is BRK? I only get BRKK on the pink sheets when I try to look it up.
Thanks,
Allen
Hi Jamil, Well, I almost bought more EGY but then I got cold feet as I did not see any good news about the energy sector. Bloomberg said the S&P 500 energy sector went down 1.5% last week so I held off. Glad I did as it is down to $1.44 at the close of the market today. At that price it sure is tempting but I just am not sure.
As to them using their cash it would be nice if they put out even a small dividend, but I'd bet they won't.
Will you buy more if it gets down below $1.25? That's what I am planning on doing. It would bring my average price down to $2.053/share.
I can't see why EGY keeps going down.
Best,
Allen
Hi Gang, Amazing parallel I noticed today. PGR, XLU, and SO all have charts today that are roughly parallel.
Entry, early rise and then a gradual drop to end down for the day. PGR -0,79%, XLU -0.53% and SO -0.14%.
I wonder what other parallel movement positions that might be an indication of where things are headed in the short term that we could use to enter a new trade. Thoughts?
Best,
Allen
Thanks for the perspective. I'll pass on that idea!
Best,
Allen
Hi Gang, I've been following a map printed in the San Francisco Chronicle that is supplied by Bloomberg. It is a map with color coding for % up or down. It is not clear what metrics they derive the data from but it is interesting because you can see where markets are up or down in relationship to other countries.
What is really interesting is that about 80% of the time the US and Venezuela are opposite. When the US is up Venezuela is down and vise versa. What is really interesting is that Venezuela is more volatile. Yesterday the US was down between -0% to -.75% while Venezuela was up between 3% and 6%. This is typical.
I have not found any ETF that weights Venezuela significantly or any stocks that can be traded here in the US so I don't know how to take advantage of that quirk. Any suggestions?
Best,
Allen
Hi Gang, Hunting around to see whether it might be worth reading one of the advisers that abound, mostly with junk, I stumbled upon a stock in the energy sector that may be worth looking at, GDPAN. It has been floating around $6 and past history shows good volatility. It has been relatively flat with a downward tilt over the last month or so.
I'm going to put it on a watch list and see what happens.
Happy Fourth everyone, especially for the Brits. I'll bet they are glad to be rid of us. :)
Best,
Allen
Thanks Steve, Makes sense. Helps avoid gaps down after buying as you can see where it is at prior to executing a buy.
Best,
Allen
Hi Grabber, Why do you not use GTCs?
Best,
Allen
Hi Grabber, According to TdAmeritrade the low was at 9:54 and was only there for a minute so alerts would not be all that useful. Good until canceled (GTC) is the way to avoid this problem, if your broker allows them. The big problem with GTC is that it does not protect you if the position gaps down like EGY did shortly after I got into it and I have not figured out how to account for this. Suggestions anyone?
Best,
Allen
Hi gang, In looking for places to put the cash that is likely to come in in the next month or so I went to http://etfdb.com/cheapest-etf-for-every-investment-objectives/?utm_source=ETF+Database&utm_campaign=8d55640b04-Free_Engage_Content_Roundup_6_24_2015 and extracted their list of low cost ETFs, because, as we know, any expenses reduces the potential gain. A caution is in order in that the list is 16 months out of date. However, I don't think that many will have changed all that much because costs don't change all that rapidly, so here they are:
Africa EZA
All Cap Equity SCHB
Asia VPL
Australia AUNZ
BRIC BIK
Brazil BRF
Canada CAD
China CHNA
Consumer Discretionary FDIS
Dividend SCHD
EAFE ETFs VEA
Energy FENY
Emerging Markets SCHE
Europe VGK
Health Care FHLC
Financials XLF
Frontier Markets FRN
Global Equity VEU
Growth SCHG
India INDA
Industrials FIDU
Japan DXJ
Materials FMAT
Russia RBL
S&P 500 VOO
Small Cap Blend SCHA
Consumer Staples FSTA
Technology FTEC
Utilities FUTY
Value SCHV
Build America Bonds BAB
Bank Loans SNLN
Emerging Market Debt VWOB
Floating Rate FLRN
German Bond GGOV
International Corporate IHY
International Treasury IGOV
Junk Bonds XOVR
Long-Term Treasuries BLV
Money Market BIL
Municipal Bond SMB
Preferred & Convertable PFXF
Short-Term Treasuries SCHO
TIPs SCHP
Total Bond Market SCHZ
Active IELG
Agriculture TAGS
Alternative Energy ICLN
Broad Commodity DJCI
Emerging Market Dividends DVYE
Gold Miners RING
Physical Gold IAU
Hedge Fund CSLS
Industrial Metals UBM
Mortgage-Backed Securities VMBS
MLP MLPA
Multi-Asset TZV
Nuclear NUCL
Leveraged Equity SDYL
Low Volatility USMV
Oil & Gas USO
Real Estate SCHH
Retirement TZV
Silver SIVR
Volatility TRSK
Hi Toofuzzy, Yep, I'm accumulating the dividends but they mostly go to necessary distributions - school for my daughter and living for my brother. I'm leaving mine in to accumulate for, hopefully, positions but it is slow, about 2 years.
However it looks like a REIT I got into as a short term solution to a sudden dump of cash that I was not really prepared to handle well will settle in the next month or so. This will allow me to open 5 new positions in each account so I'm on the lookout for what the best potential ones might be. Energy is the most out of favor but I hesitate given the sideways motion there. It might go down even more.
On your other note about REITs, you are probably right about commercial mortgage and/or commercial space like malls, however, historically this is not as true for lease backs of governmental facilities. But I think they will be hit some because "birds of a feather" thinking. This might be an area to monitor going forward.
As to when interest rate increase hits, that is impossible to predict. There are many different views but the one seems to make sense is that it won't be for a while because the economy is not picking up all that fast, and the pressure of the presidential race where both sides don't want to be hated. Given this I think the rate will increase in mouse steps, but steadily, as is the FED's record historically. Ain't going to lay a lot of weight on that though.
Best
Allen
Hi Toofuzzy, Look at MORL. At TDAmeritrade they say "$4.59/25.33%" for past year. I discount that figure given that I suspect they will cut dividends going forward.
The other one is LNCO and its return currently is $1.25/12.08%
BTW. Yahoo is messed up as it shows the dividends for MORL but not the rate of return.
Best,
Allen
Thanks Steve. Very clear explanation of how to proceed.
As to your question about cost basis, because they are in trusts, as I understand it, the cost basis is still what it was when my mother acquired them. This will continue for the trust for my mother and, as a result is a bit tricky as my brother tends to see that people are out to get him. Losses for him may mean a court case so I am hesitant to mess too much with his portfolio. I know that this is not the best way to run things. Additionally, the current income on his portfolio is a bit over 15% on current stock value and a bit over 11% when you include the amount of cash on hand. (Cash reserves are required for disbursements to him for living expenses.) Given that, I'd have to show changes will likely result in better returns. In all honesty I don't think this would happen by enough to make locking the losses worthwhile. Perhaps my past experience with lawsuits has made me more sensitive to cold feet than is appropriate. I don't really want to go through a 5+ year process at my age.
For the trust for my daughter and myself it is not as big a deal as the money for my daughter is for her education and will be almost totally spent by the end of the year so that trust will be closed and the cost basis for my share will be adjusted then.
My goal is to make things a bit more stable, long term, for both myself and for the trust for my brother.
Best,
Allen
Hi Steve, Okay, LD-AIM makes a lot of sense, but what I don't see is how to load a position I'm already into it.
I have a bunch that I inherited and are significantly down. I have GTC orders in place to dump or diminish in size for all of them so I can have cash for new positions down the road. When that happens I'll start fresh LD-AIM positions. Until then I need to get a handle on the current positions without a lot of cash for buying in the falling positions.
The other thing is that a couple of them are just too large a percentage for good distribution of risk.
Thanks,
Allen
Hi Tom, Yep, the bears ate their fill and are taking a nap. How long, who knows?
Here is a question for you and the gang. AMBA is almost at the top of a long run up. They provide the chips for GoPro and are beginning to sell some to drone makers. However the polls say desire for the type of cameras GoPro makes is down almost 30% compared to last year.
Since Jamil has shown that the best place to buy in at is near the top of the market would it make sense to take a small position with a large cash reserve and wait for a slide in prices to build a full AIM position?
Best,
Allen
Hi Gang, Although the market did not change all that much, of the 93 index ETFs I have in my watch list only one lost and one had no change!
Oddly the inverse VIX (VelocityShares Daily Inverse VIX ST ETN) also went up and it lead the charge. I sure don't understand this.
Best,
Allen
Hi Toofuzzy, But if no sale then less. Also it depends on what you set buy/sell safe and % minimum stock sale to. I'm finding that setting the buy/sell safe a bit lower works for low range, less than 2:1, positions.
Best,
Allen
Hi Toofuzzy, I don't think it is going to drop enough for a buy, for the most part. There will likely be a few that drop the 10-15% needed for a buy, but do we have them in our portfolios?
Last Sunday's Bloomberg S&P 500 sector list was interesting because all were down except Healthcare. Energy was down 2.1%.
Best,
Allen
Love Mark Twain!
Hi Gang, Another observation. Of the positions in my mother's trust most of them have either cut or eliminated dividends since ~September. From what I can tell this also happened back in 2001/2 and 2007/8 though it does not seem to have been as drastic back then.
Best,
Allen
Hi Gang, A different, and more sanguine, view of the direction of the market: http://chrisciovacco.tumblr.com/post/120266128471/what-are-the-odds-a-bear-market-has-already
Lots of noise about the market, truly a "fog of war" situation with limited understanding of the effects of a myriad factors on the economy and the market. TG for AIM and yo'all here for taking emotional response to Chicken Littles and the super optimistic types, charging into the future without looking at where their feet are, out of the equation.
Best,
Allen
Hi Steve,
Hi Clive, Thanks for the charts. Given that starting at the market high gets better results people might want to look at Palo Alto Networks, Inc. (PANW) the chart for it is somewhat amazing. But, given the rapid cycle of in and out of favor in tech, it might not hold up long term.
Best,
Allen