Q...........
Hi Tom,
Have you seen any research as to how AIM would have done from 1928 to 1933, say, using the DOW? We should be able to find the data in a library. Also, the Japanese market (Nikkei) from 1988 to now would be good, too (when it went from 39000 to 14000)!!
Thanks,
Gary in Florida
A.............
Hi Gary,
I seems that I'm always trying to get the AIM site finished, but get interrupted with having to keep other things going. This last week, I didn't even get the weekly report up as I was busy doing my taxes. I promise I'll get the report done soon!!
I'm glad you found the vealie definition at the site. I still have a couple of terms there to finish. Most of the work I've done on AIM has been to compensate for its very conservative nature in a bull market. AIM tends to fall behind the major market averages because of the cash reserve acting as an anchor on performance. It's been so long since we had a low risk market that people are starting to forget how painful they can be. Mr. Lichello concentrates on the period from 1969 to 1974 and statistically, it's one of the worst periods in history. I modeled the 20 years from 1969 to 1988 using the Value Line Composite Index as the basis. At its low point in late 1974 it had lost 2/3rds of its value. The Buy&Hold investor wasn't back to break even until 1982 where the AIM investor was in the black 4 years sooner. That means there were 10 pretty aweful years before AIMers were again happy.
AIM was tapped out of cash reserve from 1973 (a year before the bottom) until 1978. This is sad, because the late 1974 dip was a tremendous buying opportunity. By the time the full 20 years was up, AIM was ahead by nearly 100% over its starting position while the Buy&Hold investor was up about 33%. So, AIM's averaging down did, in fact, pay off, but both investors had a long period of sad looking returns. I believe the index that I used didn't include reinvested dividends. If it had, both investors would have recovered to the black sooner.
I have a friend in Japan that's been modeling the last decade of the Nikkei 225. He has also found that the only scenerio that was a winning one was either cash or bonds. He indicated that AIM would eventually be the winner as in my 20 year history because of its downward averaging, but it still had its work cut out for it. One thing he mentioned is that although the Nikkei has been down, not all stocks have done badly. With good stock selection, he could have beaten the average's record.
One thing he mentioned is that the Japanese government has its pension money invested in many types of securities. He says that there's a fair amount of political manipulation of the Nikkei by govt as they "support" it at various times to maintain office. He says that Japanese investor's biggest problem is trying to subtract this manipulation factor before evaluating the fundamentals of the stocks. It also messes up technical analysis to have such a large, unpredictable player in the market.
I've not modeled the late '20s and early '30s but can imagine that similar results would have occurred to the US late '60s and '70s and to the Nikkei 225. In each market crisis there's been events that most likely will not repeat. However, it doesn't mean that there won't be some "new" and unforseen event that will bring the Big Bear out of hybernation. The peak of oil production predicted for the end of the first decade of the new millenia could bring on a long term bear market as oil prices rise along the Supply/Demand curve. We'll just have to wait to see what technology has done to compensate by then.
If I can help in any way to answer other AIM related questions, please just send them along!
Best regards,
Tom |
