OOPS...for Tom,
The Submit Post button was pressed too prematurely! I repeat the text here.
Hi Tom,
How much more efficient would our discussions be is we were sitting on the same table once a week!
So, Rico is a Dutchman too! All of us form the Dutch Connection.
I am beginning to see some light on Portfolio Control Addition discussion, but I think there might still be a case of talking about different things. Tom, on your Board you used for the Buy Order calculation the flowing example
Sell Order={Y- (PC+0,1Y)} and called (or you implied it, or Rico did that?) that as an Addition in the discussions. This is causing the tempering of the buying. That is the same effect as using 0,9 on the Y and then Sell Order={0,9Y-PC}.
Now, when I read Rico's comments about Additions he appears to refer to adding 50% of the Buy to the PC in order to get a new PC (the Positive Feedback concept). These two types of Additions are not related to each other. It made the essence of some discussions on Additions difficult to follow.
Now, after many, many discussions, I have come to the conclusion that the only significant core of the AIM principle is Lichello's idea of raising the Portfolio Control after a Buy and to keep it untouched after a Sell. This brilliantly simple Lichello idea results in the effect that the source from which investment growth emanates (The Base Investment=PC) is continually increased during the market cycles. The rest of the paraphernalia such as SAFE (as a Hold Zone), the freedom to temper the Buys and the Sell (with the SAFE or methods), to delay cash disbursements or to take profit early or to let it ride are essentially adjustments to make the operation of the system suit our particular needs or desires. None of these things are essentialities. I feel that, having read Lichello's book with great intensity(if not with 100% attention to detail) I sensed that Lichello was quite tolerant of all sorts of modifications that the user judged necessary.
Now with the issue of the Positive Feedback Concept my claim is that Lichello had no fundamental reason to use the 50 % of the Buy to add to the PC, to get a new PC-value. As I recall(it is about 18 years ago), he tried a 100% Addition and realised that cash would be gone in a Jiffy and that is what bothered him...How to prevent rapid cash depletion was the question that was tormenting him.
Then after some miraculous revelation from reading a old licence plate he hit upon the 50% concept a Golden Rule for averaging....100% was to much and 0% packed no punch. With 0 % addition to the PC the Equity Base remains the same over time and has only a causes a mild portfolio growth.
I state categorically that Lichello implied no magical meaning to the 50 % and that he used this only as a logical solution to his search for a less aggressive Buy Order Generator. My contention is that Lichello could just as well have chosen a 1/3 factor instead of 1/2.
Suppose that in his book 30 years ago or so he would have chosen 1/3. Then with
PC2=PC1 + 1/3Buy----- a lower new PC---- and this would have made the Next Buy much less aggressive than with the factor 1/2 instead of 1/3.
From this I conclude that the choice for the PC-Correction Factor 1/2 can legitimately be changed to free programmable
Constant...as was done in the software of Automatic Investor.
I would venture to say that the effect of playing with that constant is a much more interesting issue than playing with the paraphernalia of the AIM.
My challenge to AIM users today is to consider finding out the effect of using a pc-corrector of say 1/3 instead of 1/2. This would lead automatically to the question on "Do I still need to temper the Buy Advice in order to get the desirable Buy Order?
I predict that the answer is NO. As the factor 1/2 is reduces the Next Buy Advice gets smaller and the need to temper the buy Advice disappears.
That appears to me an intriguing issue.
Conrad
