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

To: matvest who wrote (14775)	2/6/2001 9:08:44 AM
From: OldAIMGuy	Read Replies (2) \| Respond to of 18928

Hi Larry, I believe (and will check when I get to the office) that I'm using 5% SAFE for buying and 10% SAFE for selling on ACG. Yes, those settings are just fine for LT bond funds. You can even broaden them a bit probably - maybe run 10% on both sides. I've been thinking of doing just that. Years ago I kept the SAFE values at 5% or less thinking that I'd pick up more trading activity. However, after learning how slowly the long bond cycle is I've been stretching the Hold Zone out to a bigger size with larger LIFO distance to be travelled between buys and sells. I'd also recommend a trade frequency of once per month or maybe even bi-monthly. This helps to conserve cash and there's no use hurrying a long cycle equity like this. We were discussing ACG yesterday at the Warehouse with a fellow AIMer. His opinion was that he'd be hard pressed to sell any shares since at his cost (in the low $6's) his effective yield is around 12% to 14%. So, why should he sell any shares? Well, he also could be capturing something in the neighborhood of 25%+ LIFO gains on any trades he'd do now. There's no firm answer here. If the income from the bonds is very important for total living expenses, then selling is a low priority. If total return is the highest priority, then possibly capturing a bit of the LIFO gains available is a good idea. In any case, I've usually only let the Cash Reserve run to about 10% to 15% of the total value. That cash doesn't earn as nicely as the dividend while it rests, but if the LIFO gains are okay, then at least it keeps me in tune with where the long bond funds are in their cycle! AIMing these shares adds to my enjoyment of ownership. If I capture a 45% LIFO gain, for instance, that just about equates to three years worth of dividends. So, some of the account can then sit "idle" at 5+% until it's put back to work. The Russian bond default a few years ago rocked ACG's price/share. It soaked up a lot of my usual cash reserve too early in the long cycle. So, as the bond continued to drop on a per share basis, I added to the position with money borrowed from my other strong performers. Some time in the near future, I'll start to repay those "borrowed" dollars. I also added to the position in 1999 with cash derived from the buy-out of several of my stocks. Shocks like the Russian default brought on are why I like some extra cash reserve around. These shares are part of the foundation of my investment pyramid. The cash reserve is the mortar. Best regards, Tom