TooFuzzy,
Speaking as one who participated in >>pretty much beat to death the discussion of using inverse funds as the cash reserve or the inverse (pun intended) of AIMing an inverse fund and using the regular fund as the cash reserve<< but not as one who has >>decided it just wasn't worth it<<, I am somewhat underwhelmed by the subtlety of your suggestion.
Aren't you saying in effect that at a certain point in the next upwave, you would take the accumulated cash to buy the inverse fund, which would then act as your cash portion until it began accumulating cash on its own, when you would have a new AIM program with the inverse fund but only a B&H fund on the original (since AIM does not sell out the core holding and there would be no cash portion)? I could see that as a method of transferring from one AIM fund to another, but don't see any real value otherwise. Wouldn't you be better off to just use the inverse for your cash (even if you waited until the VWave reached that 60% (approx) level before you bought into the inverse fund)? That way you are essentially using AIM as a Trend Timing System, but not as an AIM system.
Even though I had success this year using double inverse funds from Dec '07 to Oct '08, I was just lucky and I would advise against using the 2x funds in general. We do not know where the market will go from here -- if it goes into a trading range for the next few years, you may find the 2x much too sensitive. The same would be true of the 200sma in a trading range -- you could see a lot of whipsaws (especially with the 2x). As Tom Veale has posted elsewhere, AIM is at its strongest in a sideways market. If the whipsaws are are strong enough, AIM is at its best, while Trend Timing is at its worst. If we continue the pattern established in the 90's (Strong UP), 2000-2003 (Strong DOWN), 2003-2007 (Strong UP), and 2008 (STRONG DOWN), using AIM Trend Timig or the 200 sma to time the market will reap great rewards, but how can we know?
Small Cap Stocks usually lead the market both up and down. IWM peaked in July '07 and SPY/QQQQ peaked in Oct '07.
Regards,
Bob
