A.I.M. Users Bulletin Board

[SFSecurity]

Hi OldAIMGuy,

Thanks for the very clear explanation. Helps a whole bunch.

In theory one could use a well established BETA on the investment in question applied to the diversified portfolio v-Wave. An example would be AAPL with a 1.2 BETA. If the v-Wave diversified cash reserve was showing 41% cash reserve, then AAPL should get along with 49% cash roughly at this time. Another example would be BZH with a 2.3 BETA. It should be started with a 94% cash reserve!

What is the math that generates the correlation between BETA and cash reserve requirements? I understand the basic concept but it seems a bit steep to have 94% cash for BZH. Then again from a peak of ~$35 in 2007 to a bottom of ~$0.50 in 2009 and no significant recovery until a reverse stock split of 1:5 it makes sense empirically. I just don't get the math at this point.

BTW, I love the "Dead Cat" bounce image. Can't remember where I first heard/saw it but it was loooong ago.

Warmest Regards,

Allen