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

To: Bernie Goldberg who wrote (15154)	3/7/2001 12:40:01 PM
From: OldAIMGuy	Read Replies (6) \| Respond to of 18929

Hi Bernie and Steve (and anyone else that fell into this discussion), Going back to my original "rule of thumb" idea for discussion....... I didn't even mention the SELL side of AIM. I am of the personal opinion that selling profitably is a good thing no matter how often it happens. My rule of thumb only dealt with the Buy side of AIM. It was an attempt to vary one's activity based upon what the market and AIM was telling us. If AIM's telling us we have a 50% Cash reserve, then we've been doing lots of selling for an extended period of time. One might look back at that point and say "That was a bull market." We don't yet know if it was the first or last leg up in that bull phase. However, we have plenty of cash on hand. So, let's assume some different scenarios: 1) market goes flat before next leg up--- We could safely assume that weekly purchases might just capture more of a tight trading range during the market's "flat spot." 2) market goes flat before starting on slow decline--- We could possibly make weekly purchases and capture a few sales before the start of the long decline. 3) market starts on long slow decline--- We wouldn't know the long slow decline was coming until it had already been in progress for quite a while. We could make weekly sequential purchases at the start until 1/3rd of the cash had been consumed. Then we would slow our frequency of sequential purchases to something like once a month. Maybe after we'd consumed half of the remaining cash, we'd switch to bi-monthly or quarterly sequential purchases to slow the burn rate further. I think you guys got pretty far afield from my original suggestion. Or maybe I just wasn't clear enough with the idea. Message 15450749 It is my thought that AIM's Cash Reserve size is as good a market indicator as any. If you don't believe me, take a look back at your own cash reserve totals during bull and bear markets. AIM was very clearly telling us what was going on in the general market. If you don't have a good feel for this or haven't been AIMing long enough, take a long look at my mid- and long term histories: aim-users.com aim-users.com These graphs show my total account and would more closely mirror what one would do for a diversified mutual fund account. The same rule would apply, but starting from a smaller total percentage. Here we would assume a max cash reserve build-up of maybe 33%. The first 1/3rd of it would be used for frequent sequential buys as AIM directed. The next 2/3rds would be used on a much more judicious basis of once a month or less. I appreciate very much all of the discussion, but was meaning to focus on the Purchasing Agent role of AIM in this particular dialogism. As we know from real life, when businesses see a slow-down in their Sales dept, they will usually attempt to stop or slow build-up of inventory by inforcing strict protocol in how Purchasing will handle their end of business. This will extend to very tight inventory control, differed purchases and spending and in some cases, if the penalty isn't too great, order cancellations. I don't see why we can't take this basic lesson from the world of Business and apply it to our AIM business plan. My suggestion is to treat the first third of PEAK cash reserve as something more like "petty cash" which doesn't need to be watched as closely. The remaining cash can be seen then as reserves that must last out nasty BEAR markets. Slowing the pace would then make sense. The basic idea is Individual Stocks and Sector Funds - from 50% to 33% Cash Reserve allow sequential purchases to be weekly - from 33% to zero Cash Reserve allow only sequential purchases spaced a month or longer apart Diversified Mutual Funds - from 33% to 22% Cash reserve allow sequential purchases to be weekly - from 22% to zero Cash Reserve allow only sequential purchases spaced a month or longer apart If Sales are made in between the buys, then we would reset the clock. Comments please. Best regards, Tom

To: Bernie Goldberg who wrote (15154)	3/8/2001 8:37:27 AM
From: rgammon	Read Replies (2) \| Respond to of 18929

Bernie said: "I get the feeling from you, that you might do it monthly at the outset. Change to weekly if it looks like the stock is going to rocket up. And perhaps change to daily or hourly depending upon some magical criteria that you haven't even decided on yourself yet. I don't believe that this is what Mr. Lichello had in mind!" It is useful to recall the information environment in which he wrote the original text, and most of the subsequent revisions. When he wrote the original text, the only way for most of us to get intra-day quotes on stocks was to call our broker, or sit in the bullpen at the brokerage watching the ticker. By the time the latest revision was made, many of us had access to delayed quotes on Internet (by the early 90s). The environment of the 60s and 70s for stock trading and computing HEAVILY colored his thinking and writing about AIM. GTC limit orders that get examined in the evening after work, or in the morning before work, resetting them as needed, appears to be a perfectly acceptable adaptation of Lichello's ideas. I refuse to believe that Lichello shied away from more frequent monitoring because of mathematics. To make the idea palatable for his audience at the time, it had to be a ultra low maintenance system. Once a month for about an hour seems to have been a compromise that would appeal to the broadest possible audience. Remember, in the 1970s, direct stock investments were regarded as EXTREMELY risky by most of Americans. There is still a sizeable fraction of the population that still believes this.