Replies to post #37876 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

Thanks Steve, Re: Cash and Fetal Positions...............

Maybe that's why AIM takes 'baby steps' toward the fetal position!

:-)

[Toofuzzy]

Hi Grabber

Like Yellen ( Hollering ? ) Greenspan also warned that the market was toppy. It is certainly higher than in April of 2009. Apparently the market can remain irrational longer than meer mortals can remain correct.

Is Yennen correct, probably. Is biotech crashing tomorrow, probably not. Is it a good idea to take some profits off the table or othwise rebalance to your allocation, definately!

You can never go wrong taking profits, I just let my AIM employees in the warehouse take care of it.

Not always
Toofuzzy

[SFSecurity]

RE: Back to the market feeling 'Toppy'...

I agree, in general, with the referenced article and Grabber's commentary, with the caveat that in the past the market did strange and volatile things before a "correction" (crash). I have a copy of a book (can't put my hands on it at the moment) that was focused on business cycle investing and he commented on the "chaos at both the top and bottom of the cycle. Given this viewpoint, it seems that the events mentioned in the article fit right in.

However, because of the various bailouts and Fed prop up of business by keeping interest rates low, I suspect that it will be a while before the correction hits. In the mean time AIM should be able to take advantage of the volatility.

Best,

Allen

[ls7550]

Hi Steve

GIEW is at 40% cash as of today, and I'm thinking of liquidating or reducing some of my programs.

That's quite close to the 43% average cash that a non dividend equal weighted set of stocks would typically need to average to compare to 100% all dividend paying stocks (total gains).

Kenneth French's data since 1928 indicates non dividend paying stocks had a 21.2% yearly (simple average) but with a massive 45.6% standard deviation

Whilst all-dividend paying stocks averaged 16% with a 25.8% standard deviation.

Leveling to the same standard deviation (volatility/risk) = 57% stocks, 43% cash. After discounting reinvestment of dividends costs, taxes etc provided cash earned the 1 year interest rate, and allowing for some 'rebalance benefits' from holding 57% very volatile stocks, 43% cash, that broadly compares to the annualised gains from 100% dividend paying stocks total gains (accumulation/dividends reinvested).

My understanding is that your GIEW is (broadly) reasonably close to being a non dividend paying, equal weighted type collection of stocks. Typically such growth stocks tend to do very well during rising markets, worst than average during volatile/down markets. With AIM/vWave helping you to navigate through such cycles !!!!

There seems to be considerable bias towards dividend stocks in more recent years - often being proclaimed to provide better risk adjusted rewards. Many however seem to overlook the overheads from such stocks. If for instance a ETF holds individual stocks from around the world each of the countries might levy a withholding tax on dividends, which is absorbed by the fund. Dividends when paid/reinvested incurs a taxable event sooner rather than later, together with other associated costs (broker, market maker fees etc). Whilst the gross pre costs/taxes gains might appear to be mathematically better than non dividend paying stocks, on a actual risk leveled after costs and taxes basis the overall differences are minimal. My guess is that in time when interest rates (and dividend yields) are higher the opaque costs of dividend paying funds/stocks will become more noticeable and some might be swayed to dump ETF's in favour of holding a smaller weighting to low/zero dividend stocks directly combined with cash (and periodic rebalancing).

Regards. Clive.

[ls7550]

Hi Steve

Right now I would realize a double+ on my remaining cost of SNDK, my largest program. It's off it's high by about 10% over the last 2 weeks.
I should also probably dump a few of my losers (deep divers). If the market does see a correction, they typically are the first fatalities.
Haven't decided quite yet but I probably should do something.

With GIEW relatively ahead by 36% perhaps keep 36% in reserves (cash)?



I've noticed that equal weighted non-dividend stocks historically have vastly outperformed value weighted non-dividend stocks (Kenneth French's data since 1927), so leveling up the exposure/weighting to each stock might help de-risk being overweight in what might turn out to be a relative loser.

Regards. Clive.