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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Jack Jagernauth who wrote (9309)	11/20/1999 3:59:00 PM
From: OldAIMGuy	Read Replies (4) \| Respond to of 18928

Hi to both Jacks, It's not so much that 'vealies' are subjective, but a means of keeping a practical lid on our purchasing power. At present, none of the software packages have an "automated vealie" and maybe that's a good thing!! I have felt that any time that we fiddle with Portfolio Control, we should be in the THINKING MODE, not the automated one! We've all seen that AIM BTB can express a fatal flaw in a pure bull market. It will maintain the same size Risk Envelope while piling up more cash and purchasing power than it might ever use, even under the worst market conditions. By using a "fixed" cash cap or a "floating" one such as the Idiot Wave we limit the size of the Cash Reserve as a percent of the total value. However, it's still necessary to tell AIM that we're willing to expand that Risk Envelope a small degree (If the sell was to have been 5% of the current equity value, then the "vealie" represents just 2.5%). My preference at this time is to use the "floating" cash cap. I let the IW guide me as to what's appropriate for total cash and then limit my Selling with 'vealies' to keep the cash within a tight range of what the IW is suggesting. However, it still takes the stocks increasing in Value to trigger the whole thing. The nice part is that it not only moves the Next Sell price up slightly (just like selling does) but it also moves up the next Buy Price (just like selling does). This means that the "Lichello Bands" move together, following the stock's price movement. All we do with a 'vealie' is shift the bands a bit higher - but we only do it when we have plenty of purchasing power in reserve. It takes a few times to start to feel comfortable with the idea. I've been using it consistently since 1995 and now don't consider it anything but an extra tool to keep AIM performing well in a bull market. There is an added benefit for those working with a taxable account. Each SALE avoided by using a 'vealie' is actually a postponed taxable event. One place I've also noticed how well 'vealies' help is with my Am. Century mutual funds. They currently limit transfers 'out' of their stock funds (to their money market funds) to six per calendar year. If we have plenty of Cash with one of their active funds, then the 'vealies' help to space out our SELL orders. It becomes harder to "max out" at their 6 events when the Cash Reserve is already fully funded. I should post my IRA history at the site for you to see what I mean. I think there's more 'vealies' there now than Sells!! Hope this helps, Tom