A.I.M. Users Bulletin Board

[ls7550]

To put some context on the 2016 or 2019 start date to recent period, that has been a good period for stocks. Looking at my AIM of S&P500 real price based indicator of year start %CASH, somewhat similar to vWave, iWave/MRI and starting a 30 year SWR drawdown period when started at a time when %CASH was high typically reflected a relatively high start date stock price, such that potential SWR withdrawals were lower; Similarly if started when %CASH was low typically reflected relatively low start date stock price, such that potential SWR withdrawals were higher.



30 year SWR in this context is to start with for example a 5% SWR, 5% of the initial portfolio value drawn for spending in the first year, where that $$$ amount is uplifted by CPI inflation as the amount drawn for spending in subsequent years.

Another point of note is that like vWave I divide the S&P500 real price AIM by 1.5 which historically placed that in a 12 lower, 50 higher range. Which if that is invested in cash and the remainder is split 50/50 between 3x stock and gold then at a value of 12 = 88% weighting split 50/50 between 3x stock and gold = 44% in 3x stock which is similar to holding 132% in 1x stock exposure. For 50% upper = 25% in 3x stock = 75% in 1x stock exposure. So historically we broadly ranged between 75% and 133% stock exposure, averaged 100%. But where that yielded a higher annualised gain than 100% stock, with lower downside volatility, higher SWR (generally many consider 4%+ SWR to be mostly be appropriate for all stock, with AIM as above that was mostly 5%+).

Much of the data in the above is synthetic, there weren't 3x leveraged stock funds available until the new millennium, however the estimated versus actual values/gains for since when actual 3x funds became available compare pretty closely. Similarly the S&P500 didn't exist pre 1950's and again is based on back-calculated values (not by me).

Each of MRI/iWave, vWave and my own S&P500 real price AIM tend to produce somewhat similar indicated %CASH values, so they might be used interchangeably (to similar overall effect).

Here in the UK we have Investment Trusts instead of ETF's (although we can buy into ETF's typically via Ireland). Many Investment Trusts include the option for the manager to scale up/down stock exposure levels, typically between 80% and 120% type levels. Which makes them somewhat 'Value' style. Buffett does similar, scales Berkshire Hathaway's cash levels up/down over time, but where for him that's more a case of where he deploys cash as and when value opportunities present. As a simpler choice IMO buying/holding a midcap value stock index can work reasonably well.

As of the start of 2025 indicated CASH% values were around the 35% to 37% levels, that might support a 30 year 7% SWR, But that's down from the 2009 to 2012 years when 25% CASH% levels were being indicated i.e. relatively low prices (good value) that are more inclined to support a higher SWR. But even at 37% start of 2025 CASH% levels that's not as high as at other times when the S&P500 was more inclined to just support a 4% SWR.

Basically what I'm saying is that the 2016 or 2019 start dates for the NAIL test period was across a low prices to high prices period transition, which is also reflected in how over recent years stocks in general have provided double digit annualized real (after inflation) gains. That could continue for a while yet however that's likely to slow, or potentially see a correction to give back some of those great gains. a.k.a the great gains from AIM'ing 3x stock is likely drawing to a close for the time being, may be more inclined to settle into more mediocre rewards, until the next dip that is, and any dip when you're holding 3x leverage hits harder unless you've dialled down the weighting in the 3x. Don't expect too much consistently, beating the S&P500 by 2% or so would be a good outcome, yielding perhaps a 30 year 7% SWR, whilst doing so with around averages of 33% in cash, 33% gold, 33% in 3x stock.

I changed the AIM so that since the mid 1980's when US taxation changes promoted more of earnings being retained rather than paid out as dividends, to increase/accelerate Portfolio Control (PC) at a 2%/year rate in reflection of that, somewhat like instead of 4% dividends being paid that reduced to 2% and the retained 2% accelerated price appreciation in compensation for the lower dividends and hence I opted to accelerate PC to account for that.

The other and final point of note is that for gold I use silver from the 1930's up to the mid 1970's in reflection of investment gold being banned in America. And prior to that I use T-Bills/cash-deposit as gold/silver were money back then and those with surplus money (gold/silver) likely would have put that on deposit for both safe keeping and some interest (more gold/silver).