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Hi Tom, Am I correct that you are using a narrower than BTB 30% hold zone? It looks like 15% or is that a combination of the various moving parts and some are more and some are less?
Thanks,
Allen
Hi K, Thanks for the very clear explanation. Most helpful in developing my own portfolio. Although I don't have all of these, I had started to get some of them and a couple of alternatives for cash (SPFF for one which is doing quite well overall.)
I assume that when you say: So all ETFs are AIMed separately with parameters (10,0,6,5) (BSafe,SSafe,BMin,SMin) you are using percentages for the Buy & Sell Minimum, correct?
How are you handling the split Buy and Sell minimum, via LD-AIM?
Best,
Allen
Thanks Tom for connecting it to the amount needed to recoup a loss. I hadn't thought of it that way. It sort of makes sense in that that approach makes for smaller moves on the buy side so one can accumulate more shares. And it makes sense in that, historically, things go up more than they go down, if you have patience.
So it would also make sense that the sell side waits a bit more before executing to take advantage of the overall trend in pricing.
Best to you and yours,
Allen
Hi Karw, And a Happy New Year to you as well.
I'm curious about UBA. Am I correct in assuming that you got into it back when the chart starts? Then I noticed that except for the first few months you appear to have done no trades. Is this correct? I was playing with AIM settings and noticed that with the standard 30% hold zone there would be almost no trading. So is this primarily a steady dividend position for you? Seems to have done reasonably well overall. Do you intend to sell any of it?
Also, when you refer to PP for a third position in cash, what symbol is that? I can't find one that is just the two letters.
Best,
Allen
Hi Clive, I'm not sure I agree with one point, but I have been known to be wrong from time to time.
You say:
Hi OldAIMGuy, You point is important but ignores the common way of seeing how percentage changes are calculated. $117.65 is not 15% more than $100, and $86.96 is not 15% less than $100, no matter how you slice it.
I don't think it matters all that much on the sell side but I think it does on the buy side as it would get you to buy sooner in a down market. We've had discussions about the advantages of delaying buys to get in as low as reasonable and that it produces better results overall so something that goes against that approach is not to our best interests in the long run.
I looked back at the book and I think I understand how this strange way of calculating happened. In the book Lichello does the calculation as addition and subtraction of dollar amounts, not percentages of Stock Values or Portfolio Control, to calculate buys and sells. This works great for paper and pencil calculation but is a bit of a pain for using with a spreadsheet. Someone way back in the Pliocene era of AIM converted to using percentages and, for whatever reason, used a non-standard method of calculation for them. Then it got incorporated into some spreadsheets and Newport.
So now we have it across the board. Does it really matter? Probably not, but I think it is important to know the issue exists and that it might have consequences.
It is also worth noting that:
Hi Clive, I don't get it. Since the TEST position is valued at $10,000 for 100 shares then a percentage of stock value and the percentage of portfolio control should be the same for the initial trade, I would think. Additionally the label says it is Portfolio Control in the first box:
Also looking at the figures again, it does not make a lot of sense. There is only a 20% Hold Zone for the online calculator when I use the 1 share (1%) minimum trade like in Newport, but if I make it 5% the calcs are about the same as Newport, Sell = $117.65, Buy = $86.96.
I confess to being quite puzzled why division is used instead of multiplication. So I looked up the "proper" way to calculate this and came up with the same approach I've always used. Plus, using the calculator at http://www.calculatorcat.com/free_calculators/percent_gain.phtml it says that it is 13.04% down from 100 to 86.956 and from 100 to 117.647 it is 17.65% up.
However, when you turn the figures on their head and calculate what percentage you would need to increase $86.956 to 100 it is 115% - 15% of 86.956 is 13.043 and add them together to get 99.999. The same happens going the other direction. To decrease 117.647 to 100 you use 85% or subtract 15% - 15% of 117.647 is 17.647 and subtract from 117.647 you get 100.
Sure not the way I was taught, nor the way the calculators on the net work. Even ads in the newspaper touting great sales do it the way I've always done it, I just checked.
It probably doesn't really matter. I wonder if Lichello did it the same way as Newport. I'll have to look it up, but not now. I'm off to the land of nod.
Best,
Allen
Hi Gang and BowlerBob, In addition to DBC, take a look at BNO, it is down ~50% from its high point and is $2 below its initial introduction price.
Best,
Allen
Hi BowlerBob, Yep, I'd bet DBC is worth looking at as the current price is lower than at any time in its history, including the low point of the 2007/9 crash. So far DBC doesn't seem have hit bottom yet, as I have not gotten a buy signal. I wonder how much further it will fall. Impossible to even guess given the turmoil around oil/fracking/sanctions on Russia. But it will come back at some point, I would think.
It has accumulated 145 virtual shares, using weekly figures, but only since the middle of October last year. I started the watch data as of 1/7/2013. Even using daily figures with the same Buy/Sell it is not ready, but it accumulates fewer virtual Buys, only 113 and starting on 11/13/2014 using data from the last six months.
You may recall that I did a brief review of the "Ivy Portfolio" a while back. I keep looking at what is mentioned in the book as possibilities. DBC is the best so far.
Getting into a good position is a bit tough when the market is mostly up.
Happy New Year,
Allen
Hi Tom, Thanks for the link. Great laughs. I particularly liked this one:
Hi Clive, Very interesting that Newport does the math that way. I checked and saw that you are quite correct about how Newport calculates the hold zone. I had not noticed. However the buy price is slightly different than what your spreadsheet gives, $86.207 versus $86.956.
In any case I went and checked the online calculator using $10,000 for Portfolio Control, 100 shares, 10% Buy and Sell Safe, $500 minimum trade, and a 1% minimum share Buy/Sell quantity to attempt to match the Newport figures. I did not see where PC.
And, as you can see, the online calculator gives different numbers than either Newport or the percentages that I used!
So what gives, or did I use the wrong figures for the online calculator? No matter how I fiddled around with the figures near the values shown could I get the same results as either Newport or my AIM spreadsheet
In any case, I wonder if it really matters which of the three we use. What does everyone think?
There is another online sample calculator but I can't recall the URL and don't see it in my list or resources. Perhaps someone can tell me where it is and I'll check it as well to see what happens.
Best to you and yours you hold most dear throughout the New Year,
Allen
Hi Clive, Like Winston Churchill said about America and Great Britain, "Two peoples divided by a common language." In this case the "language" is math and how we learned it.
You had, as one example,
and I worked on a spreadsheet and could not come up with the figures you had for the Buy and Sell price. Scratched my head did the math on a four banger, and again pencil and paper. Then it suddenly dawned on me last night, when I woke up to take a bathroom break. It's great how one's mind continues to work on a problem even when we are asleep.https://uk.finance.yahoo.com/q/cp?s=^DJI Price PC #S N = Buy Sell
American Express Company 94.29 5000 53.03 94.29 81.99 110.93
Hi Toofuzzy, You said that, "I like ETFs. They can't go to zero." Well I ran into evidence that this isn't necessary so.
Hi Toofuzzy, Actually I have looked as far back as I can go with some of the narrow range ETFs and they are more or less within the same narrow range over several years. This would mean no trades at all for years to come, baring a market crash that hit ETFs hard. They seem somewhat resistant to a big drop given what I've seen of the 2011 data. Not many are older than that so it is hard to tell how they would react to a 2007-9 type retrenchment. So it might be that a BTB AIM setting might not work very well.
Best to you and yours, now and in the New Year,
Allen
Most Excellent Advice, BowlerBob! I'm going to do just that for forward testing of potential positions. The only additional things I will do is to do the checking on a weekly basis rather than monthly and doing a couple per day because I need to be ready to get into some positions around the end of the 2nd quarter because a position with $100k in it that will be closed around then and I don't want it to sit it around gathering dust. It has been getting 7+% dividend and I don't want to miss out on that kind of return, either dividends or a combination of dividends and appreciation, as I need it for the trust funds.
On the whole it has been a rough year trying to get out from under prior positions that were bought too near the 52 week high, they all took an immediate hit in price back before I had full control. With no cash on hand to buy more on the way down it has been a wait and see game to close out without having too much of a loss. So far the losses have been less than 2%.
Combining what you suggest with Netstock as I am setting it up for sectors and watching for reasonable positions will ease my mind about proper feedstock for my AIM warehouse.
Best to you and yours, now and in the New Year,
Allen
Hi Toofuzzy, Yes, I understand that the BTB AIM 30% hold band is too wide for ETFs. What I was trying to find out is what metrics others thought should be used for an ETF that one holds, not the starting point.
However, in looking at the 13/30 day crossover I noticed that where the crossover happens depends on the time frame in use. What time frame are you using? What internal interval are you are using, daily, weekly or monthly? That seems to make a difference as well.
The other thing I noticed is that one had to also look at the 52 week range and make sure the position is not near the high point. If it is, it seems it is unlikely that you will do as well as the index in use or the S&P 500.
Best to you and yours in the New Year,
Allen
Hi Gang, In looking over ETFs, the majority have less than a 2:1 high to low 52 week range, so how would you approach setting your buy/sell/% of stock settings?
In looking at some I noticed that even if you got in very near the 52 week bottom a buy on the first sell, using 5% sell safe and 5% of stock, i.e. 1.1 x (last buy price), can put you fairly close to the 52 week high. For example PGF, which pays ~6%, it's 52 week low is $16.81 so if you were to buy at the first sell above the last buy (assuming $16.81 is that last buy signal) that would be at $18.49, if I've done the math correctly.
But the problem with that is the 52 week high is only $18.32 so you would never get a buy unless it was a raging bull market.
There are lots of ETFs with a better 52 week range but as far as I can tell not many pay a significant dividend. Of the 91 a high to low of 2 or better, only 8 pay above the ~2% of the ValueLine average for stocks. Of the 166 with a high to low ratio greater than 1.75 only 15 pay above ~2%. Of those greater than 1.5 to 1, 303, only 41 pay more than ~2%.
Given this it seems to me that the buy/sell/%stock figures need to be different than for non-ETF positions.
So it seems to break down as a choice between [ETF+dividend] appreciation versus solely (for practical purposes) [ETF] appreciation. If it is just ETF appreciation it seems like there would be at least somewhat more risk involved, and a likelihood of less return for the risk. Does this make sense?
Best to you and yours, now and in the New Year,
Allen
Hi Toofuzzy,
Hi Orcroft, Am I correct that when you say:
Hi Tom, Got a laugh out of that! Yep, if someone had told me a few bit of wisdom around the time my mother started needing help with her affairs, life would be a lot richer today. I would have moved her away from using a broker and learned to manage it myself rather than based on a broker's (self serving) advice. Oh, well. Live and maybe we'll learn, or at least be open to learning.
Best to you and yours, now and in the New Year,
Allen
Hi OldAimGuy, Is that biotech ETF PBE? Knowing what to avoid starting an AIM position for the moment is quite useful.
Thanks,
Allen
Hi Toofuzzy, Yes, I am AIMing about one third of my positions now. Using BTB so far but investigating what improvements might be made for new positions that I will be moving into as I close out the old.
As to maximizing returns increasing risk, absolutely true, but even being conservative about returns does not avoid risk as I have found out. Risk is multifactoral and not subject to being completely pinned down. All we can do is attempt to avoid as much risk as possible.
I find your comment
Hi Art, Thanks for your kind words.
I had already seen Robinhood and wrote them asking about their security. They pointed me to an almost meaningless FAQ. Very annoying, especially since my background for the last 20 or so years has been information security.
If this type of app becomes common then we are likely to see a rise in cell phone hacking because, except for the Blackberry which has a hardware module for this function - much, much harder to crack, they are all quite vulnerable. For example the iPhone recently implemented a 6 character encryption code. All well and good but..., well, ever since the Pentium Pro cracking an 8 character code can be done in under 3 minutes. The FBI demonstrated this at Moscone Center at least 15 years ago. Look up Rainbow Tables if this interests you. Brief abstract of an improvement is at http://lasec.epfl.ch/php_code/publications/search.php?ref=Oech03 that is worth reading. I could bore you with a bunch of additional information about hacking but I won't. Aren't you lucky?
Back to the basic theme, grist for the AIM mill. Backtesting is great but how many stocks, ETFs, and other possibilities are there? Too many to be realistic for each of us to do them all, so what we need are some metrics to screen out the least likely to work with AIM. That way we can realistically do backtests and create virtual AIM positions that we can manage. 100? I doubt any of us have the patience to do that many virtual AIM positions, I sure don't. So the goal is to create a screening mechanism and metrics to get the number we need to look at under control.
Tom talks about doing an analysis of a potential position just to see if it is worthy of looking at. I did that on one position but missed a key fact and so was lucky to get out with my skin intact. Had I had a rubric to consult as I evaluate a position I would have been told to look at the lifespan of a trust. But I lost less than $100 even though I could have done much worse. Bound to happen as selection is never perfect, especially given the strange things happening around the world and how interlocked all of our economies are. Oil is down causing the Russian ruble to go down, but wait, that is great for the EU which gets the bulk of its oil and gas from Russia. So what will be the outcome of this in the middle of winter? Are the EU countries already locked into contracts at a higher price than current market or not? What effect will this have on American exports what with the strengthening dollar, especially given the current sanctions by both the US and EU over the Ukraine and Russia's Crimea grab?
I have no clue and I doubt anybody has much more than guesses. So what do we do, avoid anything that might go down, and might not go back up, because it is somehow related to trade with Russia? If you have any ideas as to what all that includes you have a much better crystal ball than I have, or maybe it is a Ouija board and planchet that speaks to you. Can I look over your shoulder?
Back to selecting things that are interest to us. Yeah, I'd rather do positions that interest me but on the other hand my tastes are not necessarily the same as the market's so I want to be a bit adventuresome and try those strange items on the menu. What is that they are eating over at that table? Looks interesting, maybe I should try it.
In any case Best to you and those you hold most dear, now and in the New Year,
Allen
Hi Clive, It's as I have said, AIM, in its various iterations, does a wonderful job of managing your investment warehouse, but it is still our job to find the right feed stock. Much like I hate okra because it seems slimy to me and avoid it like the plague but love broccoli and almost can't have it too often, AIM digests some positions better than others.
All the discussion we've had about the Orcroft Method, Vealies and other variations on a theme are wonderful. Now we need a good discussion on the right metrics for the current market. Things change over time and we see this in other stock market algorithms and fund managers when they do great for a while and then fall on their face. In fact I once read somewhere that a hot fund manager that is at the top of his game and is hired away by another fund almost never does as well again.
As I was reading recently, current management practices are very linear but this tends to create constipation of ideas and keeping up with changing tastes in the clientele. Take GM as one example. The process for creating a new model of a car takes years so they fell behind what the market wanted and almost went out of business. They could produce a car very efficiently but could not innovate.
AIM is that linear process and it is damn good at it, but the market is different today than when Lichello created it and even he kept tinkering with it. So, while we need to keep AIM tuned up regularly if we put gas into the tank of a car that uses diesel, trust me, it will run very shittily for for quite a while. I know, I did it once when I was tired and I only put a couple of gallons before I caught it and filled it the rest of the way with diesel. That is why I ask about ideas for metrics for selecting the right fuel.
BTW, you used the Orcroft Method on both the buy and sell side in the spreadsheets you posted, right?
Best to all in this Holiday Season,
Allen
Hi Clive, Your post about the results for STKL and your previous post explaining the delayed buy (best and clearest explanation yet!) really display the benefit of this approach as a good refinement for AIM. In your backtest for STKL, did you also delay sells as well as buys?
As well know, not every position is suitable for AIMing, so what do you think are the metrics to use that suit the Orcroft Method best?
I am amazed at how much knowledge there is to gain here. Phe f$%^ing nomenal, as we used to say waaaay back when.
Best to all of you in this Holiday Season,
Allen
Godfrey Daniel!, as W.C. Fields used to say, there are over 60,000, yep, sixty thousand, indices for just the US and Canadian exchanges.
https://finance.yahoo.com/lookup/indices?s=^&t=I&m=US&r=1
And ETFs? Holy guacamole! 15851 world wide.
https://finance.yahoo.com/lookup/etfs?s=^&t=E&m=ALL&r=
Some that are not actually being traded anymore but more than enough to satisfy all but the craziest of us.
Best,
Allen
Hi Clive, Very funny response! Kept me laughing for quite a bit.
Besides, if we can't have a bit of fun on the net, why bother with it? Like I say,
Hi Clive, A couple of weird things about the new spreadsheet. The first was that when I downloaded it, for some unknown reason the dates for SSO were screwed up and out of order. Took me a while to figure that one out and go get a fresh set of data and confirm that the pricing was correct. All the prices were correct except for the very last one, December 2014 which was off ~$4.
BTW, I like that you used ISO standard for displaying the dates.
Also the data for the B/H column was for SPY, not SSO, but that did not make all that much difference in the results. Go figure.
Next, when I reduced the total portfolio to $10k from $100k to match what I normally use, Vealies started showing up and the draw down increased. This happened across all three tabs. Again, no clue.
It looks like you did both a delayed buy and a delayed sell for both Orcroft tabs, correct? I can't quite figure out how you did it. Can you reveal your secret, please? Somehow the formulas are as clear as mud to me. Probably my bad eyes.
Thanks,
Allen
Hi Clive, Maybe I'm not reading what you wrote about two ways of doing Orcroft correctly but you seem to be saying two slightly different things about AIM as-is on paper (By The Book {BTB} I assume):
Hi Clive, Link to the new version, please? The http://tinyurl.com/kx35oku link shows the old version when I checked now, ~4 pm PST (-8 hours GMT).
Best,
Allen
Hi Clive, Oh dear, I remember the ZX Spectrum. Never had one, just a Trash80 Model 1 as the first owned computer. Used a friend's Altair and later CPM machine. Boot tapes, ugh.
Anyway, the download worked without signing in.
You are right, a strange worksheet. Columns N, P, and AA all give different results with the B/H (P) the winner it looks like so this might not be a good approach. I'll have to look at it some more with other stocks to see what happens then. Not every position is a good fit for AIM and backtesting does not always tell us this.
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, unless, of course, you'd care to make a donation.
Hi Alton, I don't think we are near a short term bottom yet. 1288 of the ETF/ETNs were down today and another 165 did not change. That is about 87% of them, but then Mondays can be bad after a down Friday. Also 246 fell through their 52 week low.
I'm going to use Netstock to divide the world of ETF/ETNs into the 10 sectors so I can better see what is happening.
Happy Holidays,
Allen
Hi Clive, Google being what it is it must not have taken as I had to sign in to my "account" (itrulyhate@gmail.com) order to download a copy. I keep that account so I can sign into Youtube on occasion and so I can test privacy settings for clients.
FWIW: I use https://startpage.com/en/ or https://ixquick.com/eng/? because they are the only search engines in the world with the European Privacy Seal. It is amazing how much better are the results one gets compared to Google.
Best,
Allen
Hi Clive, I must say for a person who does not use computers all that much you sure have a great grasp of spreadsheets. I have to respect that!
Seasons Greetings,
Allen
Hi Clive, In looking at your chart, am I correct that it is not adjusted for inflation?
I understand how to apply inflation point to point, i.e., 1990 to 2014 but I'm not sure how to apply it to a chart like yours. Would you spread each year's inflation over the data points proportionally, i.e., if inflation is 2.52% for the year, would one deflate each day's data point by 0.01%, assuming inflation was a smooth curve for the year, and then chart from there? (I chose 2.52% because there are approximately 252 trading days in a year.)
I assume, if this is a good way to account for inflation, that a data point that is positive would have inflation subtracted from it, right? For a down day would one subtract from it as well, making it even lower? I.e., a -1.00% for the day become -1.01%.
Thanks for your help.
Allen
Hi Clive, Great stuff. How are you handling the Vealies, Newport, paper and pencil or do you have a spreadsheet for this? I haven't figured out how to do it on a spreadsheet and am not yet comfortable enough with Newport to attempt it.
Thanks for all your efforts.
Allen
Hi Jaiml, I'm not sure why the difference myself. I used the original AIMBARES.XLS spreadsheet, not my modified version. My version also got 32 shares for the first trade and 51 for the second, a total of 83 for the delayed buy.
I'm not completely clear on how to apply Orcrofts method myself. What I have been looking for is a weekly price that is at or above the last suggested buy signal. This does not account for market volatility, as happened to me a few days ago where the price gaped down after my buy and has not yet recovered. This is why I started looking at the 52 week low as one possible metric. In looking back over several years it seems that if you buy near the 52 week low or when it breaks down below it, you will be as close to the best you can do going forward. This works for an up market, but when we hit a slide like 2007/9 then it looks like you have to be sure of following it down before buying in otherwise you will still have a ways to go to hit bottom.
I'm checking a combination of AIM reversal, 52 week low and leading indicators. For example, BECN, a roofing company, hit its low in December 2007, 15 months ahead of the market as a whole. BIG, Big Lots, hit its low in December 2007, although in February 2009 it went 50 cents lower, but since then, even it one had bought in at the end of January 2008 at $17.36, you would still have done well:
The big problem is finding the leading indicators. Also I think one needs to follow them on a weekly basis for several weeks to confirm their trend and compare them to the 52 week low and the AIM trend reversal.# Intervals Percentage Beginning Ending
CGR Value Value
Year 7.00 12.47% $10,000.00 $22,758.40
Month 84.00 0.98%
Week 363.72 0.23%
Hi Clive, Have a sunny weekend yourself. Rain is predicted here in San Francisco, but who knows. Weather forecasts are a lot like prognostications by stock analysts - take them with a very large grain of salt as they tend to be more inaccurate than not.
Thank you for the excellent discussion of the issues of accounting for actual gains involved with backtesting. I intend to read and reread it a bunch of times to extract the most out of your contribution to this forum.
BTW, I should have posted the actual link I use to get prices from Yahoo. https://finance.yahoo.com/q/hp?s=VFISX&a=09&b=28&c=1991&d=11&e=13&f=2014&g=d Change the symbol (VFISX here) to what you wish to see. Then change the last character to what you want:
Now to adjusted versus daily close. I've looked at a number of different stocks and noticed an interesting aspect to adjusted prices. For the most part the further into the past you go the wider the divergence between the adjusted and the closing price. Yes, it seems to change based on dividends by lowering the adjusted price prior to the date of the dividend so that makes the historical price lower, and increasing the AIM trading signals. This seems to make the gains higher in backtesting a stock. Is this realistic? For VFISX, I'm not sure but it might be, for others I think it actually seems to ignore inflation's impact as we will see when we look at ADS.d = daily
w = weekly
m = monthly
v = dividends only
So, I'm not sure what is the best way to backtest given this. Yet another puzzle to solve to develop a good methodology that is closer to reality. What I have done is limit my backtesting to about 2 years to reduce the effect of inflation and dividends.4.69 Gain Factor 18.29 Gain Factor
13.67 years 13.67 years
11.98 %CAGR 23.70 %CAGR
AIM B/H
Avg Cash
66.98%