Hi Dave, Your words have good meaning for everyone. Japan doesn't seem to be able to get out of its own way. Clinton is handcuffed for two years. You're right - no leadership - no statesmanship.
There are some of us here who's livelihood depends (in part) upon our activity in the market. Don't think that we take this stuff lightly. Some of us who are retired have invested in the more conservative stocks (bluer chips) and managed those holdings with AIM. Some have chosen to sink money into growth stocks as the way to AIM for riches. None invested to lose money. If I wasn't optimistic about the long term potential of being involved in the market, I'd just cash out. If it takes 6 minutes, 6 weeks, or 6 years to recover isn't important. It's the recovery that counts and the lower price shares that I get to add to inventory while they remain out of favor. I'd love to maintain a 20% to 25% inventory turn every year (which has been about my average for the last few years), but fully realize that a stinky market may slow that effort.
Here's a thought - volatility ratings for popular stocks usually don't change much during bear markets. What happens commonly is that stocks with poor sponsorship fall asleep in bad markets. So, higher BETA stocks should remain relatively high BETA and should offer some AIM trading albeit in a new and lower range than our previous experience. The only way to participate in that new lower range once it's established is to have followed AIM's advise and bought as far down as possible.
I can't emphasize enough that once a business plan has been established, tested and proved sound, it's important to implement the plan - not abandon the plan just when it's starting to work. Yes it's painful and yes it may take some time to work out. However, we're all capable of making decisions as to where to plant our remaining seeds for the fastest "cash crop" when the weather turns.
You have me beaten on Equity/Cash ratio! I had about 6% cash at the beginning of the week. I guess that number will not hold up much longer!! It will take something rather dramatic to make me go into margin, and although we have some good actors in Washington, that's not the sort of drama that I'll follow. Even after the beating that we've taken, the Idiot Wave still isn't as low as during the Gulf War in 1990.
Between 1969 and 1974 (my entry into investing) the market stunk for various reasons. However, by Dec. 1974 the average P/E of Value Line was 4.8! It was truly painful adding to my positions during that massive decline to the end of '74, but as I stated, it was as close to a "chance of a lifetime" as I've yet had. Modeling AIM and the Value Line Composite Index between 1969 to 1989 shows that the Buy and Hold investor made some money, but the AIM investor made quite a bit more. It literally took YEARS off the recovery time to Break-Even. I don't know when the worst will be over. I do know that the business plan that I'm using has sound underpinnings and that given enough time, I'll do fine.
None of this disputes anything that you've related to us. There's a world of uncertainty out there, just as there's always been. The Idiot Wave still has to shed another 5 points before we officially reach the "Low Risk" area of its measure (30% cash reserve for stocks is where it starts). Even that figure is very conservative by most investment advice. The lowest it's ever been is to suggest 19% Cash Reserve. Right now my Cash Reserve is at the lowest overall level it's been since 1987. Even 1990 didn't tax my reserves as much as this market. I wish I could see more clearly into the future, but I just don't have the ability. I can only depend upon AIM's and my ability to react positively to the situation as I find it each week.
Way's to stretch out the buying to conserve cash are:
- Only trade once per month
- Use the "Half way to the wall" method described by a fellow AIMer
- Increase the SAFE (Buy Resistance) value
- Use some form of T.A. as a guide as to when the next AIM buy should be made
If I were to give up my AIM business plan and sell out of everything and go to 100% cash reserves, I'd pay a big tax bill. Fully 36% of my current portfolio is still capital gains. So to sell would mean a realized loss (due to taxation) of about 7% of my portfolio value.
Thanks for your continued coaching on macro-economic events. I watch such things, but not with the frequency and devotion that you have shared with us. That helps us all here.
Best regards, Tom |
