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

To: budweeder who wrote (13850)	12/7/2000 9:13:49 PM
From: Bernie Goldberg	Read Replies (1) \| Respond to of 18928

Hi, As in most questions I see here, the answer is in Mr. L's book. the answer may not help someone who has already committed all of his funds to one stock, but here goes. Let's say some invested $25,000 in Microsoft with a $25,000 Cash Reserve. For some strange reason you are incorrect in your assessment of Microsoft and instead of shooting to the moon the stock starts dropping. One of Mr. L's recommendation is that when you get a buy signal, instead of buying more Microsoft you purchase some other stock. You then have a mini-mutual fund. More importantly you have diversified. Hope this helps. Bernie

To: budweeder who wrote (13850)	12/7/2000 10:42:51 PM
From: Jack Jagernauth	Respond to of 18928

Hi Bud, Suppose a person finally "gives up" on gold and wants to move to another stock. I feel that now is probably the worst time to give up on gold. Regardless of what we are hearing from the experts right now, my sense is that rising inflation will become more evident within the next 12 to 18 months. If anything, now is not a bad time to bail out of tech. stocks. Since 1991, the Nasdaq 100 gained something like 2000%, before the recent decline. It could probably continue it's rocket climb, however, that 2000% is much more than a 'typical' doubling of one's money every 3 years or so. Have a look at this chart showing the performance of NAZ 100 and that of a Precious Metals Fund. globefunddb.theglobeandmail.com I agree with you that gold and precious metals was not a good place to be. However, chances are that if you bail out of gold now, you just might end up maximizing your loss and exiting at the bottom. That would be even worse for your emotional well being, going forward. Regards, Jack

To: budweeder who wrote (13850)	12/8/2000 12:59:57 AM
From: aptus	Read Replies (1) \| Respond to of 18928

Hello Bud, I like Bernie's answer on this topic. Another way to handle this situation (right out of RL's book) is to simply sell all the shares of the stock you've "given up on" and replace them with shares of another stock that you like. As long as the equity value in your portfolio doesn't change you can do this without violating any cosmic AIM principles. In effect you dump the "loser" and add the "winner," but you don't actually start from scratch. Your current Portfolio Control and Cash Reserve remain the same. Regarding gold, I remember when it went over $400 a few years ago and an analyst (I think his name was Rolley Bradley or something like that) stated that since gold broke the magic $400 mark, "$500 was in the bag." Needless to say, gold went straight down and has never even approached $500. Just goes to show how much an analyst's comments are worth. Regarding Analysts, I can think of two things. 1. If you take most of the popular analysts and look at their track record, you'll probably find that not one of them has a consistent record over the long term. I can still remember Henry Blodget saying that ICGE was a great deal at over $100. Today it closed at 5 21/32. I suppose it was a great deal if you were short, unfortunately Henry was recommending you go long. My feeling is that you can simply flip a coin for any particular stock (heads means the stock's going up, tails means it's going down) and most likely beat most analysts. However I do think analysts may be useful... which brings me to point number two. 2. Many people listen to influential analysts, so if one of them says stock XYZ will hit the $100 mark within a month and they upgrade it to a strong buy, sometimes it hits that number just because people jump in and start buying -- based solely on the analyst's remarks, a self-fulfilling prophecy if you will. I suppose you can profit on this sort of information. However if you stick with AIM you really don't have to worry about where the price is heading or the current psychological mindset of the investment community. Finally as long as you think the fundamentals of your stock hasn't changed you should be prepared to ride it out with AIM for the long term (even if your stock is down for a number of years). If you think the fundamentals have changed, then move your funds into another stock that is fundamentally sound. I can remember, not so long ago, when the overwhelming sentiment was that Internet stocks could not fall very far before bouncing back. Well we have to look no further than today's closing prices to see how wrong that was. And so it might be with gold. The overwhelming sentiment is that gold is finished for a number of reasons (central bank selling, currency is no longer gold backed, etc.). But who knows... stranger things have happened. regards, mark.

To: budweeder who wrote (13850)	12/8/2000 7:39:58 AM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18928

Hi Bud, I didn't want to let your questions go without adding my two cents. :-) From Mark regarding analysts: One feature we can add to our arsenal of things to consider when contemplating a new investment is how well followed a stock is by analysts. If well followed, then chances are it will be the most influenced by the analysts. Rather than assuming that the analysts are our enemy, we are now using them as allies. Don't trust what they say, just make sure there's plenty of them following your favorite stock. Then when your favorite stock doubles from $50 to $100 with no fundamental improvement in their business you can be sure all the analysts will come out with a prognostication that the stock is going to double again. Sure enough if history repeats, they're going to be wrong and the stock will sell off tremendously. Then, we get to use them again when they all chime in and drop it from Strong Buy to Hold right at the bottom. In other words, rather than hold them in contempt, use them for your own benefit. None of what they do is bad for AIM! On Gold: Years ago I had started a strategy of building a 5% holding in gold and another 5% in "black gold" as a shock absorber for my portfolio. However, after being beaten about by yellow gold, I finally "capitulated" and sold the gold part and added to the energy part. So far this has been very satisfactory. I used the "tax loss" on the gold account and bit the bullet for the loss. The energy fund I used to replace the gold fund has done okay. No shining star, but far better than the corroded gold fund had done before. As I mentioned in my earlier note, gold has rallied from its nasty lows by a substantial amount already. I don't know how to guess where it will go next. I do feel that "black gold" will continue to do well for the next decade, however. My decision was then based upon comparing uncertainty about gold with near certainty about energy. That made it easier. Bernie and Mark's "How": I rolled that account directly from Vanguard's gold fund into their special energy fund. I re-started the account after balancing equity and cash again. I felt it was unfair to burden the new account with the old one's sins! At the time Energy was out of favor and had been for about a year. So, the timing wasn't bad at all. aim-users.com I hope this helps a bit. In my case I wanted to keep the "insurance" value of something held dear like gold or energy as a portion of my overall portfolio. So, I substituted black for yellow. Many times we're trying to substitute one stock for another within the same general industry to keep overall portfolio balance. We have to make sure we're making the change for fundamental reasons and not "timing" reasons. If we do it for timing reasons, chances are we'll fail. Best regards, Tom