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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 (15486)	4/2/2001 7:46:58 PM
From: Bernie Goldberg	Respond to of 18928

Hi, Just to stick my two cents in here. Most of the world today works on a YTD basis. I am sure that when both investors reach $10,000 they will both be happy. Just today there was a great todo about DELL being up 25% YTD. They said that not all PC stocks were hit equally. I'm sure that people who bought DELL last year at $55 are not pleased with DELL's performance over that period of time. But if they still are holding it they are probably very happy about the 25% increase YTD. Perhaps it all does dpend on your point view, which IMO is psychological perspective. Bernie

To: Jack Jagernauth who wrote (15486)	4/3/2001 12:37:12 AM
From: aptus	Read Replies (2) \| Respond to of 18928

Hello Jack, The reality of the situation is that both A and B made $8,000 after they started using AIM. The fact that A lost $8,000 before starting his AIM program doesn't come into play. A started with $2,000. He now has $10,000. B started with $2,000. He now has $10,000. End of story. The fact that A lost $8,000 means that A is now inclined to think about making back that $8,000 as a goal to reach (so he can break even). This means he's apt to take greater risks in order to try to make back his losses. Meanwhile B hasn't lost anything. When B gets to $4,000 he'll probably be happy. But when A reaches $4,000 he'll still be looking to get back to his original $10,000 (and therefore will still be inclined to take greater risks). This is why the situation I described is purely psychological and not based on logic or facts. I'll illustrate further... Let's pretend that you and Bernie are in Las Vegas sometime in May (hey... wait a minute!?!??!). You arrive 2 days before Bernie, purchase $100 worth of chips and sit at the black jack table. You lose $80. Bernie arrives and buys $20 worth of chips. "Hello Jack," says Bernie, "how's your luck?" "Not too good I'm afraid. I was at a cold table... hey, there's Tom. Hi Tom!" "Hello Jack, Bernie, say, I've come across this great system for cleaning up in black jack. It takes the emotion out of the game. I'll show you..." (10 minutes later and you're both itching to try Tom's black jack strategy.) Now assuming Tom's system really works, would you use it with your remaining $20? Would Bernie use it with his $20? Of course you would. So would Bernie. The fact that you had lost $80 before Tom showed you his system has nothing to do with whether you use the system to "manage" your $20. After all you're looking for the best system you can find that will increase your $20 as quickly as possible. Similarly, Bernie would use the same system because he's also looking to increase his $20 as quickly as possible. Now the fact that you've lost $80 may lead you to try to make it all back by betting the whole kaboodle on one hand. However if Tom's system is the best, then betting everything on one hand (i.e. not following Tom's black jack system) is not the logical thing to do. It simply increases your risk (sure you might get lucky, but the odds are against it). Meanwhile Bernie is following Tom's system. Why? Because he has no psychological reason to try to get to $100. So he takes the proven route. Let's then say that Tom found out that you lost $80. He has a brain jolt and, on the spot, modifies his system so that it takes your $80 loss into account. "Hey Bernie and Jack, Wow! I just had a brain jolt and if you average down by..." (and then he starts into some really complex mathematical formulas) "...and therefore this method is superior to the one I first showed you!" Now which method would you use? Tom's first one, or his new improved one? I'm guessing you'll go for the new improved version because you'll get back to your original $100 that much sooner. But wait a minute! If Tom's new improved version will work for you, it'll also work for Bernie (because you both have $20 and a hankering to play black jack). So Bernie can also use Tom's improved system. Notice that Bernie didn't actually lose $80. But he's using a system that takes into account that he "lost" $80. Of course if Tom's new improved system didn't work as well as his original system, you'd both want to use his original system. However it is COMPLETELY ILLOGICAL for you to use Tom's new system and for Bernie to use Tom's original system considering the fact you both have $20 and you're looking to make that grow by playing black jack (this of course assumes you both agree that one system or the other is better). The fact you lost $80 before using the system has NOTHING TO DO WITH WHICH SYSTEM YOU USE. Unless it's psychological. And, after all of that, therein lies my point. If two investors start with the same amount of money and both start using AIM at the same time then they should both use the system that's the best. One should not use a different system based solely on the fact that he'd lost money before starting to use AIM while the other investor hadn't. It just doesn't make sense. You'll notice I didn't say that one system was better than the other. In general I lean towards Bernie's suggestion for a variety of reasons, but I'd use Tom's system if certain starting conditions were present. However that's an entirely separate subject and one I'll be glad to discuss with anyone who's interested, in Vegas. regards, mark.