AI
Tuesday, August 27, 2024 11:17:11 AM
Thank you Clive, Re: Year End Cash Suggestions with the Risk Indicators................
I really didn't think 2022 was that harsh a period, but the returns indicate it was far worse than it felt at the time when compared to other periods. It appears to be the 3rd worst drawdown in this 40+ year history. As you mentioned, it was the follow-up to the rather rapid gains seen just prior to this downturn. That run-up was in reaction to the Covid collapse and kneejerk reaction. It also coincided with the zealous period of New Issues that occurred at that time.
When I started working as an investment advisor in 2008 and founded SignalPoint Asset Management with my partners, I had to give up the i-Wave and my weekly reports here and on my web site for AIMers. I didn't like having to do that, so created the v-Wave for such gauging of market risk. A variety of people have been tending to that effort ever since. A big Thank You to them all, past and present. At the time I wasn't sure whether it would be as solid a gauge as the i-Wave, but has been better than I had guessed.
The original intent of these scaled market risk indicators was to assist AIM and Mr. Lichello's "One Size Fits All" cash reserve percentages. I think they've served that purpose. Using AIM's actual cash reserve levels based upon a market index would also, as you've shown, work to gauge a more appropriate cash reserve starting point than just an arbitrary, fixed percentage. Psychology has such a staggeringly heavy influence on investors when there are no consistent demarcations of risk. Getting caught up in either a bull run or a bearish nightmare usually has investors making very bad decisions. The "Cool Hand" of these two market risk indicators and/or AIM's ongoing cash level do a good job of benchmarking where the markets are compared to the average bipolar stock trader.
This has been a revealing exercise that you've done and I very much appreciate the time and energy spent.
Best wishes,
OAG Tom
I really didn't think 2022 was that harsh a period, but the returns indicate it was far worse than it felt at the time when compared to other periods. It appears to be the 3rd worst drawdown in this 40+ year history. As you mentioned, it was the follow-up to the rather rapid gains seen just prior to this downturn. That run-up was in reaction to the Covid collapse and kneejerk reaction. It also coincided with the zealous period of New Issues that occurred at that time.
When I started working as an investment advisor in 2008 and founded SignalPoint Asset Management with my partners, I had to give up the i-Wave and my weekly reports here and on my web site for AIMers. I didn't like having to do that, so created the v-Wave for such gauging of market risk. A variety of people have been tending to that effort ever since. A big Thank You to them all, past and present. At the time I wasn't sure whether it would be as solid a gauge as the i-Wave, but has been better than I had guessed.
The original intent of these scaled market risk indicators was to assist AIM and Mr. Lichello's "One Size Fits All" cash reserve percentages. I think they've served that purpose. Using AIM's actual cash reserve levels based upon a market index would also, as you've shown, work to gauge a more appropriate cash reserve starting point than just an arbitrary, fixed percentage. Psychology has such a staggeringly heavy influence on investors when there are no consistent demarcations of risk. Getting caught up in either a bull run or a bearish nightmare usually has investors making very bad decisions. The "Cool Hand" of these two market risk indicators and/or AIM's ongoing cash level do a good job of benchmarking where the markets are compared to the average bipolar stock trader.
This has been a revealing exercise that you've done and I very much appreciate the time and energy spent.
Best wishes,
OAG Tom
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