A.I.M. Users Bulletin Board

[Conrad]

Interesting points Ocroft,

Your remarks testify that you have a lot more Market know-how than I ever had, especially lately I have not been paying attention to it.

In one of my post I made the comment that the stock market is man made and repetitive.
You replied, " In that case when Enron re-bounces we know when to get out before it collapses!

I would agree that the SM is "man made" but you use of the word "repetitive" must obviously have a different interpretation than that the seasons on Earth are Repetitive. . .(which in this case also means the occurrence of seasons are reasonably "predictable"). . .if we discount time periods running far into the future. The details of the seasons are far less predictable, but we would not expect any one winter to go to absolute zero and stat there.

In any case "The Stock Market" is not Enron. In that perspective my remark on Enron recovering and going down again was clearly tongue-in-cheek humor. . .Any one equity hardly ever does feature repeatability other than a sort of chaotic volatility that in some cases shows repetitive periods.

I merely mean to say with this that in conversations on forums or otherwise in informal discussion we often use words that are not well defined so that what is actually said by different people carries a unique message, which is usually discovered later. . .or any conclusions that are stated are disagreed on, while in fact there might not have been any disagreement if the use of words were more carefully structured, as is normally done in scientific/engineering papers(at least that is the intend of such papers).

On the rest of yout remarks on AIM BTB, up-trend, down-trend, out of the market, and how it relates to Enron I must admit that "I am out of my tree on that", especially when it comes to the details of the matter that you seem to be very familiar with. . you obviously live in a different tree J

I like to remark that over the years I have discussed AIM BTB and Vortex AIM. . .which are very similar in their general operational mechanisms. . .I have always proclaimed that an AIMer should not let AIM be The Investment Manager and to use the system only as a guideline for trading within the limits of the understanding that the AIMer has of the Market Kinetics . . I dare not use the word "Dynamics" here .

In my booklet The Vortex Method I continually stress the point that an AIMer should study the market and not buy equity he knows nothing about, and not be afraid to bail out if things drop too fast or too deep for his liking, or in a very strange way that appears abnormal

So, in regards your question:

". . .I am curious to know how your present method of Vortex aim would have fared on auto-pilot using Enron's actual stock prices starting on 01/01/1997?. . ."

Interesting as that is, I would say that I never supported the idea of an Auto-Pilot Manager for investing. . . not with AIM BTB nor with Vorex AIM. The more interesting question would have been: "How would Conrad have fared with his "hands-on" Investment Management using his Vortex AIM?". . . . but that is not what you asked , so it is not relevant as we can not go back and redo it. . .I have no answer for you. I had never heard of Enron until its demise came onto the AIM Forum.

I did however experience a very similar case, and that was my investment in the Dutch Aircraft Company Fokker, that had been taken over from Dutch Government Ownership by Daimler Benz. . . .Jurgen ???? called Fokker "His Baby" . . I forget what year it was.

I "AIMed" Fokker by the seat on my pants. . .I was then not yet using the exact Vortex AIM algorithms as they are now but the idea was the same: Buy into the dips and sell towards the tops. . .in steps. . .No filters of any kind other that my own head.

I started buying at about Fl. 6 and sold and bought on the ups and in the downs, all the time keeping my eyes and my ears tuned to the Fokker Market information and the statements made by Jurgen Kemph about his Baby. The stock began to cycle downwards at some point. . .it had reach a high of Fl. 11 . . .great volatility . . .and landed back on Fl. 6 or so and kept cycling there for a bit, but then it started creeping down again. At the point it reached close to Fl. 4. . . 33 % drop from the start price. . . I decided to Bail Out at about at Fl. 4, using the "Market" information I had. . . The Baby appeared to be sick and might be dying in the near future. . .
The Baby died about a year later or less.

I would have to dig into the records for exact numbers but I recall that Buying at 6 and bailing out at 4 gave me an Annual Profit of 5%, including figuring-in the accounting of the trading costs

Looking at the prices of Enron till 10/18/2001 at the extremes:
43
88
43
90
43 From this point the shit hit the fan. . . apparently
29 At this point the "writing was on the wall" and I think I would have baled out at that point. This is incidentally a 33 % drop from the 43 starting point just as it was for the Fokker Bail-out. Of course, IF Vortex AIM would have been on auto-pilot it would have run out of money eventually and all the investment would have been lost. . . BUT THAT is not the way to run an AIM System. . The Investor must use his head and on the basis of his market know-how bail out when it is wise to do so!

I can not make any calculations on the profit I would have made on Enron IF I had invested in it. In hind-sight I can run the Enron Price History in the Vortex Optimizer I have now, but the question is:

"How would I decide in 2014 what I would really used for Vortex Parameters between 01/01/1999 and 10/18/2001 when the price reached $ 29 ? "

To do this without any bias in regards to what did happen I could use the Enron prices from before 01/01/1999 and optimism a Vortex Parameter Set and then Run an Unfiltered Vortex Aim the same way I have been running the S&P 500 SPY Demo since 03/01/2011.

If I would do the Bail out on the Enron price of 29 I could well have made a handsome profit over the ~~3 year run. Still in case where needed I would have intervened here and there to adjust the Vortex Parameters IF the actual price trend would differ significantly from the price history that would have been used for the optimization. That is what I did with the Spy Demo as I never use an auto-pilot on any real investment:

Originally SPY was quite volatile and a good AIM-equity, but I started out with Holding zones of 7% but SPY’s volatility had dropped, so I adjusted the holding zones roughly 50% to get some trading done but that increased to trading costs and that had to be stopped. So later on I again increased the Holding zones. They are now something like:

Buying: 7%
Selling: 10%

with very little trading occurring.

As you might know I also use a Time Average Investment Base to calculate the Annual Yield . . .ROTAI. . .At the moment ROTAI =~ 20 % . . .based on effectively invested capital over the 3.5 year period. Looking at the SPY Price development I would have been better off to use the Buy & Hold strategy. . . [much les work involved]. . .SPY shows little volatility and went steadily from about 126 to about 190 now-a days. . .That is a ~51% total yield or ~15 % per year. In this respect the 20%/year Vortex Yield is 33% higher than the B&H. . .in spite of all the trading costs incurred. . . .I also figure in the Interest gained on the cash. . . The many hours spend in this are not figured into it.

How it would have worked out for Enron is too much work to get into, and in any case the results would be hardly be identifiably unbiased.

The current Spy Demo IS unbiased as I do not know the SPY future price trend.