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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________37% Up 1 - Average Risk Growth Stock Mutual Funds___________24% Up 1 - Average Risk IW Risk Oscillator____________________"+2" - Rising Risk |
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Value Line P/E ratio 14.7 + 30 Year Treasury Rate 5.49 =____ 20.19 Up 0.22 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 8.3 Down 0.5 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.6 Up 0.1 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.5 Unchanged Bullish (Zeal) |
The year proved interesting in many ways throughout. With the NASDAQ Composite starting the year above 4000 its current value shows a decline of about 39% - the first decline since 1990. All the major indexes are off for the year while not as severely. I heard some bozo on CNBC state that 2000 was one of the worst years ever for the NASDAQ. This is true, but he neglected to say that 1999 was one of the best years ever. The pendulum can swing both ways!
Well, did AIM work? Did the Idiot Wave keep us informed? Did we survive "..one of the worst years ever for the NASDAQ?" Let's take a look back................
January - IW = 50% Cash, High Risk; The Speculation component of the IW was showing reason for concern. Tom, Keith Felkins, Bill McKinley, Doug and Stephanie Newberry all meet at the Orlando Money Show and put plans in motion for the AIM 2000 Meeting
February - IW = 52% Cash, High Risk; BioTechs are hot along with almost everything else. My Cash Reserves were swelling to new all time record highs. My account was up 21% for the year to date.
"Because of the market's unusually high Speculation rating in recent times, I've increased my Buy SAFE (Resistance) on most of my stocks and mutual funds. My thoughts are that if a $30 shirt has recently had its price raised to $50, then it's not necessarily a bargain if it goes on "Sale" for $35. If I sum the P/E of all the stocks I own that have P/E values (some stocks aren't showing ANY earnings) and take the average, I find my "average", unweighted P/E is 51. This doesn't include my mutual funds, but I'll bet their average P/E isn't much better than my own."
One week I had 31 separate AIM transactions (buys, sells and 'vealies') to report!
March - IW = 60% Cash, HIGH RISK!!!; New record High Risk level for 18 years of data on the Idiot Wave. NASDAQ Composite breaks through the 5000 mark.
"I guess the way to handle this is that if you own some of the market's recent High Flyers, please follow AIM's and the IDIOT WAVE'S advice and have PLENTY of Cash Reserve on hand. You may also want to insulate your AIM accounts from making purchases too soon in a price correction by pumping up the Buy SAFE (Resistance) to a high level or just letting the clock run a long time before buying. I've chosen to raise the Buy SAFE levels very high to prevent premature buying. I've inflated the SAFE level to the point that I'm comfortable with the buying it will do at a price way below my last Sell. As an example, I last sold shares of NERX at $48-1/8, but by using 100% Buy SAFE, my first buy won't occur until the price falls to under $10/share. The Market seems to think Cash is Trash, but I don't. I want to conserve it until some of these stocks fall back to more civilized prices!"
April - IW = 50% Cash, High Risk; "What appears to have been a serious breakdown in investor confidence on Friday, April 14th occurred. ...........it would appear that the laws of Market Physics (or maybe Psychology) took over. In an astounding week, the NASDAQ Composite fell 25%, and the DOW fell 7%."
May - IW = 42% Cash, Average Risk; Negative press articles abound. Robert Shiller's book "Irrational Exuberance" is # 14 on the Non-Fiction Best Seller's list. Stories of serious margin calls appear.
"....note that I'm still maintaining a defensive posture with high Buy SAFE (Resistance) values on most every stock I own."
AIM 2000 Meeting takes place in Las Vegas. AIMers gather for the first time since Mr. Lichello's last efforts.
June - IW = 39% Cash, Average Risk; Markets back to treading water. Some AIM trading going on.
"For four weeks the NASDAQ Composite index has been within 100 points at its Friday close with last Friday bringing the market to 3845."
".......we've gone from a record high risk level in March to a benign average risk level by mid June. That was a painful lesson for many investors, but was an opportunity for AIM users and followers of the IDIOT WAVE."
July - IW = 38% Cash, Average Risk; Markets continue in a tight range while my Speculation component creeps back into its Bearish territory. AIM trips both a few buys and a few sells.
August - IW = 41% Cash, Average Risk; Steve Kaufman and Keith Felkins drop in to visit Wisconsin and sample some Bratwurst and Beverages. AIM's busy with both buys and sells, but buying is heavier.
"Speculation is Bearish in a controlled fury sort of way. Not as wild as March, but still not a healthy long term sign."
September - IW = 45% Cash, Average Risk; The NASDAQ pulls back from around 4200 to around 3700 by month's end. Rising Idiot Wave indicated rising risk and the market responded right on que.
"Maybe it's still fall-out from the nuclear melt-down of the market after speculation mushroomed back in March. In any case, we're attempting to test all incoming inventory for radioactive waste!! No use contaminating perfectly good inventory with new bad stuff."
October - IW = 50% Cash, High Risk; Market risk as measured by the Idiot Wave continued to rise while the market averages fell. NASDAQ Composite now down to about 3300. Pretty serious AIM buying throughout the month.
"As I've mentioned in the past, it's BEAR markets that seem to attract the most attention for AIM! When all is going well, who needs to manage the risk of investing? When all is flushing down the old sluiceway it appears that we get VERY POPULAR!"
November - IW = 39% Cash, Average Risk; Moderating risk and the NASDAQ down to about 3000 go hand in hand.
"With no resolution yet in the presidential election, the market is going to be quick to take profits in any sort of rally and will continue to punish all stocks that don't do anything less than Herculean feats. So, I'm sticking with my strategy of keeping most of AIM's SAFE (resistance) value on the Buy side while keeping the Sell SAFE very low. I've kept these same settings with only minor adjustments since very early in the year."
December - IW = 36% Cash, Average Risk; Here we are finishing out the year with the NASDAQ at lower levels than have been seen in all but the last couple of weeks of 2000. It would appear that the prolonged election pushed "Tax Selling Season" back to the very end of the month spoiling the Santa Claus Rally.
We are ending Y2K with a much lower risk profile than we started it. As mentioned in the beginning of this article, "The pendulum can swing both ways!" I'm disappointed that we have yet to see the Idiot Wave drop back to a Low Risk value. It may have more to do with the data lag than with actual market conditions. In any case, I think we've seen that AIM does a remarkable job in rising, falling and cyclic markets. I hope that no bugs, Y2K or otherwise, bit you too severely during this last year. I also hope that you now understand why I've spent the last 13 years preaching Mr. Lichello's ways to anyone who would listen. The last twelve months have tested all investors. I think that AIM users have done much better than most.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________36% Unchanged - Average Risk Growth Stock Mutual Funds___________24% Unchanged - Average Risk IW Risk Oscillator____________________"+2" - Rising Risk |
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Value Line P/E ratio 14.4 + 30 Year Treasury Rate 5.57 =____ 19.97 Up 0.01 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 8.8 Up 6.5 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.5 Up 0.3 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.4 Unchanged Bullish (Zeal) |
A few more shares were purchased by the warehouse and added to inventory this week:
I also decided to try out QQQ as an investment. The NASDAQ 100 Index looks well suited to AIM and my account. My starting price was $61-1/2. As soon as graphs are available I'll put them up here at the web site. The hold zone for QQQ is approx. $51 to $74.
As for me, I've had just about all the fun I can have buying stocks. Now it would be nice to have a chance to sell some shares. The warehouse shelves are sagging under the burden of all those certificates. As of last Friday's close, the account was still ahead by about 10% for the year. Unless something rather dramatic happens between now and this coming Friday, the results could go negative for the year.
I wish all of you very Happy Holidays! We've now had record snowfall here in Wisconsin for December. Your basic Winter Wonderland. Here's a few photos for your review:
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________36% Unchanged - Average Risk Growth Stock Mutual Funds___________24% Unchanged - Average Risk IW Risk Oscillator____________________"-1" - Falling Risk |
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Value Line P/E ratio 14.3 + 30 Year Treasury Rate 5.66 =____ 19.96 Down 0.25 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 2.3 Up 0.8 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.2 Up 0.9 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.4 Unchanged Bullish (Zeal) |
I'm most disappointed to see my Best/Worst index stall without dropping to the Low Risk area. It's hard to believe that there could be enough stocks with solid gains in the last Quarter to keep it in the Average range. Let's look more closely:
So, as bad as the "worst" stocks were, the "best" stocks still out shone them. I really find it disturbing that there's still some stocks that are showing triple digit gains in the last quarter. After a rout like we've had there's rarely been triple digit gains left. The NASDAQ was at about this same level 13 months ago when my Best/Worst index last signalled a Bullish time. Ten weeks later the NASDAQ Composite rolled over the 4000 mark - a gain of +44% in that short time. After another ten weeks the NASDAQ had soared past the 5000 mark for a total gain of 79% in just 20 weeks. We've seen the market give all those gains back and so, I'm disappointed that we've not yet seen enough FEAR to drive the Speculation Index to Bullish numbers.
Not seeing "total capitulation" happen allows the possibility that it may yet occur. So, if I can make a recommendation to all of you, please stay with AIM and make sure you execute your Sell Market Orders when recommended! Let's recover cash without hesitation as the market heals its recent wounds. This isn't the time for "greed" on our parts. We need to recover our purchasing power in case this turns out to be just a shelf on the way to the final cyclic bottom.
Down at the Warehouse we had only one shipment in the last week. We had an order for 5% of our ADCT shares ship out at $25-5/8 for a 55% LIFO gain in just 6 weeks. Many of my other inventory items also improved in value during the week, but didn't trip any "Good 'til Cancelled" orders. I get moody when there's little activity!
Our "Storm Of the Millennium" came the other day to Wisconsin. It's easy to qualify the storm that way since it's the first snow of this new Millennium! Here's some photos:
"Lake Michigan steams like a young man's dreams....." - Gordon Lightfoot
I recently downloaded AOL's latest Instant Messenger software (it's free). It allows you to "chat" live with other users. Since you don't need to be an AOL member, this is really fun. The software also allows for some audio transmission if you have a microphone and headphones. I've been testing it out a bit with a couple of other AIM users from Arkansas, California, Texas and Florida. So far it looks like it might have some great potential for us to use to have a "Town Meeting" on-line. One can set up private "chat rooms" and bring in others for the forum.
I've used AOL's Instant Messaging for a couple of years, but only to talk to my college attending daughter in the past. Keith Felkins suggested that we give this a try. Thanks Keith! So, if you are interested in attending an AIM Town Meeting, you should consider downloading this handy software. I'll post the dates of the meetings here in the Newsletter in the future.
Please remember that a great way to help your 2000 tax situation is a late year charitable gift. A gift of Cash or Stock works wonders for both the giver and the recipient! Check with your Tax Consultant.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________36% Down 1 - Average Risk Growth Stock Mutual Funds___________24% Down 1 - Average Risk IW Risk Oscillator____________________"-3" - Falling Risk |
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Value Line P/E ratio 14.5 + 30 Year Treasury Rate 5.71 =____ 20.21 Up 0.02 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 1.5 Down 1.8 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.3 Up 1.0 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.4 Up 0.1 Bullish (Zeal) |
Good news came this last week with the U.S. Treasury rate for 1 year bonds dropping for the first time since the beginning of September. The long constant would lead us to believe that the FED won't raise interest rates again any time soon. Further a decline has usually signalled that the FED may lower their rates in the coming months. The 30 year and 13 week rates also dropped slightly this last week. All positive signals.
All of my stocks seemed to be in trouble this last week. Buying was heavy enough to reduce my overall cash reserves from 18% to 14.5% in just one week. Year To Date Profits sank to about a 3% gain while my 12 month gains show only 16% now. This market action triggered quite a bit of buying as indicated by the drop in Cash Reserve.
The sizes of the AIM directed buys are much larger this last week because of the large price drops since previous activity. As the total cash reserve continues to decline, we come closer and closer to that point at which Mr. Lichello says is the happiest point for AIM users! If we do make it to 100% invested, it's usually very near the Market Bottom and therefore a happy time. Then we just have to sit back and wait for our recently planted Greenbacks to sprout and start producing a nice harvest. Since AIM is always generous on a LIFO basis, we know that any selling AIM has us do will be a highly profitable return of the cash to our reserves.
Making such large buys in some of those stocks really brought down the NEXT SELL price nicely. For instance, where I doubled my position in CGNX, the Next Sell price dropped from $40-3/8 to just $24! On a LIFO basis the $24 selling price will represent a 36% gain whenever it comes. Even if it should take a year, 36% is a very handsome return. I don't consider this "Counting Chickens before they Hatch" either. I've been through enough cycles with AIM to know that if I stick to the Business Plan and I've chosen the stocks well, these gains are in the not too distant future.
As many of you have figured out over the years, I post these trades for several reasons. One is to show what activity I've had in my own accounts. Another is to show you whether the predominant effort for the previous week was Buying or Selling. Yet a third can be illustrated in this week's report by showing you the relative size of those buys.
Everyone's own portfolio is going to be structured slightly differently than all others, but we have seen that overall, our accounts tend to move with the market. The old saying about tides and boats is true here as well. When the tide rolls in this time, it's going to find that the SS Veale is carrying only a small Cash Anchor, so should be first out to sea with its cargo. There's lots of deliveries to be made and the Storms of November have put us behind. The holds are very full of good merchandise with low spoilage rates. There's plenty of Rum for the Crew, so all should be clear sailing once we're past the Presidential Straits. If the Guns of Greespan are quiet, then we'll slip out into deep waters and onto our first port of call.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________37% Down 2 - Average Risk Growth Stock Mutual Funds___________25% Down 1 - Average Risk IW Risk Oscillator____________________"-5" - Falling Risk |
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Value Line P/E ratio 14.4 + 30 Year Treasury Rate 5.79 =____ 20.19 Down 0.19 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 3.3 Up 1.2 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 1.3 Down 1.3 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.5 Down 0.4 Bullish (Zeal) |
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________39% Down 2 - Average Risk Growth Stock Mutual Funds___________26% Down 1 - Average Risk IW Risk Oscillator____________________"-4" - Falling Risk |
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Value Line P/E ratio 14.5 + 30 Year Treasury Rate 5.88 =____ 20.38 Up 0.08 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 2.1 Down 3.4 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.6 Down 0.8 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.1 Down 0.2 Bullish (Zeal) |
Here's the reasons why: 1) the Relative Valuation figure leaves quite a bit of room for either the interest rates to rise or the P/E while remaining Neutral. 2) Speculation has really dried up in the last few weeks. There's now only one stock in Value Line that's up over 100% in the last quarter. This compares to over 15 at the height of the speculative bubble with several up over 200% at that time. 3) There is no Divergence of opinion about where the market is going. Everyone hates the market - that's good news. 4) Finally we see ZEAL! showing absolute shrinkage of the total number of issues being traded on the NYSE and NASDAQ. This means there are fewer and fewer equities from which to choose. The IPO market has dried up for now. No IPOs to syphon off speculative dollars means more traditional stocks will be chosen.
Here's what's been happening at the Warehouse the last week or so:
So, while Veale International Equity Warehouse builds inventory, Veale Savings & Loan has seen its reserves drawn down. My overall account is now down to 18% Cash reserve.
The overall account is now showing +13.5% Year To Date profit and 30.6% Year over Year. So, I still feel as though AIM has done a very good job for me in Year 2000 so far. The DOW is essentially flat YTD while the NASDAQ has fallen 29% YTD. I'm sure there are plenty of Short Term Traders out there that may have given up more than 1/3 of their asset value since the year started. Maybe NASDAQ is the REAL Y2K Bug!!!
With no resolution yet in the presidential election, the market is going to be quick to take profits in any sort of rally and will continue to punish all stocks that don't do anything less than Herculean feats. So, I'm sticking with my strategy of keeping most of AIM's SAFE (resistance) value on the Buy side while keeping the Sell SAFE very low. I've kept these same settings with only minor adjustments since very early in the year. It has helped me to conserve cash while making sure AIM's as good a "Purchasing Manager" as possible. While still experimental with me (that's why I've not changed anything here at the web site yet) it seems to be working okay. I'm using the Idiot Wave and my 'vealies' as the resistance to selling.
Some new discussion has started about when AIM Users might again have a meeting. I'll keep everyone posted as we get some response to this discussion.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________41% Down 1 - Average Risk Growth Stock Mutual Funds___________27% Down 1 - Average Risk IW Risk Oscillator____________________"-2" - Falling Risk |
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Value Line P/E ratio 14.5 + 52 week Treasury Rate 6.241 =____ 20.74 Up 0.90 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 5.5 Up 0.5 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.4 Down 0.9 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.9 Down 0.2 Bullish (Zeal) |
In the mean time, our IDIOT WAVE has settled yet another point and now is firmly in the center of the Average Risk range. Three neutral readings and one bullish one give the impression that risk has pretty much evaporated. Please don't let this allow you to become complacent. There's still plenty of risk in the markets and it's a long way to the IW's Low Risk values. I foresee a short term rally once the presidency is finalized.
Again during the last week, Cash Flow has primarily been negative. AIM buys have been triggered on many fronts.
So, since the last item is a happy SALE, I thought I'd highlight it at the AIM BB this week. With every trade accounted for and all costs subtracted, the account is now showing a significant improvement through the use of AIM. The gross profit shown at the web page shows what you would have if it were an IRA account. The net shown on the Bulletin Board is what you would have in a taxable account with moderate commission costs. With AIM doubling the profits in a little over three years, it shows what AIM's best performance can be in a cyclical priced stock or what some would call a "rolling stock."
From what I hear down at the diner, there's not as much overtime available now as six months ago. Maybe this is the slow-down that Mr. Greenspan has been expecting. How much further he's take it or allow it to go is not yet known. Everyone's trying to out-guess "Hard Landing" "Soft Landing" etc. I'm just hoping it's not a belly-flop!
The last time the Idiot Wave was at 41% Cash, it was mid-August with the NASDAQ at 3789 and the DOW at 11027. Risk was on the rise then. Now it's declining, the Nasdaq is 20% lower and the DOW is off 4%. There's been lots of churning around during the general decline we've seen. It's looking more and more like a range of 3000 to 4200 on the outside and 3300 to 4000 on the inside for market traders. Most of my AIM accounts will do some light trading at each extreme of that range. So, I guess we will have to satisfy ourselves with clipping some coupons while we wait for the market head up again.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________42% Down 1 - Average Risk Growth Stock Mutual Funds___________28% Down 1 - Average Risk IW Risk Oscillator____________________"-4" - Falling Risk |
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Value Line P/E ratio 13.4 + 52 week Treasury Rate 6.241 =____ 19.84 Up 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 5.0 Up 3.1 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.3 Up 1.3 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.7 Down 0.2 Bullish (Zeal) |
The rise in the Divergence component is typical of this sort of market. First there's very few new HIGHS as the market tumbles. Next, as the market starts to flatten out or recover a bit, the new HIGHS start to rise while there's still lots of new LOWS around. I'm not too concerned with this right now, but don't want to see it continue very long.
After Tuesday's U.S. elections, the markets should start to pick a direction. The uncertainty which comes with the changing of the President in the US is like any other uncertainty - something that markets don't like. Soon it will be over for another four years.
It was a quiet week at Veale International Equity Warehouse:
It would appear that we had a positive cash flow week but not by much. However, portfolio value is up and showing a 25.6% YTD gain while being currently about 80% invested and 20% overall cash in reserve. Current cost of Inventory at the Warehouse is 39.4% of current market value.
I still don't see a clear trend anywhere in my portfolio. Today, the market decided it didn't like Cisco Systems. Well, if you're not liking them, well Vitesse Semi sells to them, so why don't they hate them, too? Hmmmm, doesn't Jabil Circuits sell to Cisco? Well, then the market should hate them as well. So, the market trimmed about 7% to 10% off their respective prices at about mid-day. This all over a slight change in one company's fundamentals. Well, does this mean they were over-priced by that same amount or that expectations were that much too high? It probably means that someone got burned and someone else will make some money. For every Seller there's a Buyer.
I will be building an archive of all my weekly newsletters back to early 1997. So, for those of you with a bad case of insomnia, you'll now have something other than the phone book to read when you can't get to sleep! I'll post the link here and make it available from other AIM pages as well.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________43% Down 4 - Average Risk Growth Stock Mutual Funds___________29% Down 2 - Average Risk IW Risk Oscillator____________________"-9" - Falling Risk |
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Value Line P/E ratio 13.4 + 52 week Treasury Rate 6.241 =____ 19.64 Down 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 1.9 Down 12.2 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.0 Up 0.3 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.5 Down 0.2 Bullish (Zeal) |
The last time we were at 43% on the IW, the NASDAQ stood at 4234 back in early September. At that time risk was rapidly on the rise. Since then the NASDAQ Composite has fallen about 22%. This time the risk is falling as quickly. The market seems in a hurry to both raise and lower risk. There's lots of money on the side right now and when it starts to look for a new home, it will probably look like a Land Rush. Let's hope there's some sense to all of this!
At Veale International Equity Warehouse we were buying since the last report:
All of these buys were after the shares have suffered setbacks that have been going on for several weeks. I don't know whether I'll be buying more or if this is the end of this shopping spree. Some of my stocks have now exhausted their cash reserves while others are still holding plenty in case of yet cheaper prices.
You may have noted in the Speculation component this week that where it's been in the Bearish area for some time, it fell to near the bottom of the Neutral range now. Depending upon this week's data, it could actually turn bullish. I always like such a signal as this component has rarely been wrong about short term bull markets. This week Value Line's Best Performer was up 118.4% (American Eagle Outfitters was Soaring) in the last quarter while the Worst was down 89.7% (Copper Mountain looks to be in Death Valley!). This gives our Speculation Index some balance. There were 153 new Highs and 511 new Lows on the NASDAQ the previous week. Although no longer bullish, Divergence is still in a healthy range.
Those of you who have followed AIM and the Idiot Wave for some time know that when we get a big negative value on the IW Oscillator that it won't be long before the market reaches a bottom. It may take getting the presidential election out of the way to reduce traders' uncertainty. Well, we don't have to wait long for that.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________47% Down 2 - Average Risk Growth Stock Mutual Funds___________31% Down 2 - Average Risk IW Risk Oscillator____________________"-7" - Falling Risk |
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Value Line P/E ratio 13.6 + 52 week Treasury Rate 6.241 =____ 19.84 Down 0.40 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 14.1 Down 12.7 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.7 Up 1.2 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.3 Down 0.1 Bullish (Zeal) |
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It's not that there isn't useful information on CNBC, but that it's too much like a Soap Opera. As though each minute of each business day is really all that important to the price of the equities. I have a feeling that more harm than good has come from the five years that this show has been on the air. My own account is up 255% in that time period and I can't honestly say that I've made a single dime from anything I've seen on their show. For the next few weeks, I'd suggest you turn off the TV set and not watch their program unless you have a bottle of MAALOX handy!
Something delightful has been happening down at the Warehouse. We have actually had a couple of SELL Orders pass through Shipping and Receiving!
Cash flow for the warehouse was still negative for the week, but better than in recent weeks. It would appear that the biotech stocks are attempting to be the market leaders right now. I'm not taking any chances and am selling any chance that AIM gives me to move inventory. As this market seeks some direction out of its current abyss, we should attempt to make every round trip from a buy to a sell that comes along. The sooner we get our Cash Reserves back to civil amounts, the better all will sleep!
The IW is still relatively high by historical measures. We can't relax yet. AIM will continue to guide our hand while the IW provides our target. Bringing the target closer by reducing market risk certainly will help our AIM. We should soon start to see articles showing that Mutual Funds are heavy with CASH. This has historically signaled that we're near a market bottom. Cash flows into mutual funds hasn't dropped yet, so we know those managers are going to have to start to spend some of it one of these days. They're not in business to be running Money Market Funds!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________49% Down 1 - Average Risk Growth Stock Mutual Funds___________33% Unchanged - Average Risk IW Risk Oscillator____________________"-4" - Falling Risk |
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Value Line P/E ratio 14.0 + 52 week Treasury Rate 6.241 =____ 20.24 Up 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 26.8 Down 13.3 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 1.5 Down 2.0 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.2 Down 0.1 Bullish (Zeal) |
REPORT - WEEK OF 10/16/2000: As bad as last week "felt" it really wasn't too bad unless you were fully invested in the DOW 30 stocks. The rest of the averages had a bad week, but not like the DOW. Friday's enormous rally and all-day endurance caught many short sellers by surprise. It also probably set the stage for many investors to call their brokers and enter "Stop Loss Orders" on many of their securities. They probably thought they wouldn't get triggered after that strong one day performance. Well, I think today, Wednesday, they all might have been stopped out in the AM! The DOW was off about 400 points and the NASDAQ Composite was down about 200 points not long after the bell.
Then, as though a Wall Street Miracle had occurred, the prices reversed direction and the major indexes spent the rest of the day treading water around the neutral lines on the charts. The volume was heavy on the sell-off and as we all know, for every seller, there's a buyer. So, those of us who were in the buying mode picked up some nice shares at or near their daily lows. Wasn't that clever of someone to invent Stop Loss Orders so that we could take advantage of such situations as AIM users?
We've had to ask the employees to work some overtime down in the Warehouse. Here's what they've been doing:
With the large inventory increases shown in some of our holdings, we've had to re-arrange the warehouse a bit. Some serious alterations to our Open Limit Sell Orders had to be done also. It's nice to see the Lichello Bands shift to a lower octave with the purchases! :-)
A significant change in the Divergence component of the IDIOT WAVE was complemented by drops in two other components Speculation and Zeal! The combination was enough to pull the IW back out of the high risk range after just one week. I don't think we're ready for continuation of the Bull market yet, but it certainly looks like we may be very near the bottom of this particular cycle. Having all the buying going on at Veale International Equity Warehouse makes it look like there's some panic selling going on someplace. I'm glad to lend support to those who are wanting to unload their equities at reasonable prices. Where a few weeks ago there was considerable divergent thinking about the market's next direction, this last week's data showed no confusion at all. There were only 77 new highs on the NASDAQ exchange out of more than 5000 issues! There were 1031 new lows during the same period! Everyone hated equities last week. The Advance/Decline numbers for the NASDAQ exchange confirmed my Divergence component as well. 1366 advances with 3318 declines were registered during the week.
Mr. Fosback, who created the Hi/Low Logic Index shows that when this Divergence value shrinks to very small levels, we're in for a good rally over the next quarter. Let's hope he's right yet again! Either way, VIEW is prepared. I still have cash available for buying and have plenty of inventory should the prices rise to my asking points. Many of my mutual funds have arrived late to this party and are now just starting to do their buying. These will turn out to be valuable inventory in the future as well.
As I've mentioned in the past, it's BEAR markets that seem to attract the most attention for AIM! When all is going well, who needs to manage the risk of investing? When all is flushing down the old sluiceway it appears that we get VERY POPULAR! This graphic shows this quite well:
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________50% Up 2 - High Risk Growth Stock Mutual Funds___________33% Up 1 - High Risk IW Risk Oscillator____________________"+4" - Rising Risk |
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Value Line P/E ratio 13.9 + 52 week Treasury Rate 6.241 =____ 20.14 Down 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 40.1 Up 6.9 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.5 Down 3.0 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.1 Unchanged Bullish (Zeal) |
The Speculation value is still way too high by historical comparison. This will be self-correcting if the markets stay in turmoil. Good news shows up with a Value Line P/E that's reasonable compared to interest rates and is dropping slightly. To me this means that prices are dropping faster than earnings! The other bright spot is that the Divergence component is showing that there is now conviction that the markets are going lower. Although a short term indicator, the High/Low Logic index applied to the NASDAQ gives some great signals. Maybe by next week's report this piece will be Bullish again.
In this graph I've plotted my own performance against the NASDAQ Composite on an relative basis. This means that I'm showing my overall performance as a percentage of what the Index has done.
From this graph we can see just what a market "Bubble" will do to our overall performance when trying to keep up with an index. When valuations were out of sight in 1999 and early 2000 I fell terribly far behind. Now AIM and I are catching up nicely.
There's plenty of AIMers that like data out there. I've promised for a long time to have some of the Idiot Wave's raw data available for analysis by others than myself. I think I've found a way. I'm not sure if these files are easily handled by spreadsheets, but please give them a try. The Idiot Wave Component Data can be accessed here. You'll need to take each one in turn. I don't have the ZEAL! indicator finished yet, but the others are all there. Data starts in 1982 and goes to present in most cases. Please let me know if you have any problems. In each case, I've put the date, data, and the NASDAQ Composite on the page. This should, when included in a spreadsheet, give you some good comparisons.
Down in Shipping and Receiving, we've been busy.
During all of this buying, my larger pharmaceutical stocks have stayed even or have risen slightly. Also the Energy related stocks have had a good week this week. Most are nearing new highs since I've owned them.
10/13/2000
I've not heard much in the way of details about what happened to the US ship which was bombed today. The explosion seems to have rattled windows all the way to Wall $treet, however. I remember only too well what happened temporarily to the markets in 1990. It was painful at first, but it set the stage for the massive 1991 ralley. In any case, I still have plenty of cash reserves should things get uglier.
If terrorists put as much energy into being productive citizens of the world, they'd be millionaires. Instead they waste time, material and lives in a futile attempt to gather what they feel is a limited number of marbles in their game. If they only could finally join the industrial revolution, they'd realize they could make all the marbles they could ever use. This is true in all corners of the planet. With productivity, what was finite becomes nearly infinite.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________48% Up 2 - Average Risk Growth Stock Mutual Funds___________32% Up 1 - Average Risk IW Risk Oscillator____________________"+8" - Rising Risk |
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Value Line P/E ratio 14.0 + 52 week Treasury Rate 6.241 =____ 20.24 Down 0.30 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 33.2 Up 6.5 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 6.5 Up 2.5 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.1 Up Bullish (Zeal) |
It would appear that the selling is a bit over-done by now. September took much of the bloat out of the markets and this first week of October hasn't let much fat gather either. Still, my Speculation index shows that things are still a bit out of control. There's still 13 stocks in Value Line that have risen over 100% in just the last thirteen weeks. It looks like the party's winding down, and the hang-overs are nasty. The market's confused state is showing well in Fosback's Hi/Low Logic Index as I apply it to the NASDAQ. With 328 New Highs and 620 New Lows last week, direction isn't indicated well yet. Confirmning the confusion is the 2067 Advances and 2611 Declines on the NASDAQ. There's still betting going on even as the Casino has been indicating "Last Call!"
I noted in the data this last week that the DOW, S&P500, NASDAQ and NASDAQ 100 all dropped while the Russell 2000 Small Cap Index rose slightly. So, is that where the money flow has been going? Will recent small cap investors be willing to stick it out even as the DOW and NASDAQ are falling? All good questions. I don't think I have the answers yet, but will be sure to report them AFTER we know for sure! :-)
I've not done much trading in the past week.
Although there's three buys of UOPIX, each was done as a Minimum size order. The three finally satisfied AIM's desire to own more shares of this very special index fund. As of the last purchase, there's still 10% Cash Reserve left in the account and the Total Return since starting is still over 80%. No sells again in the last week. My accounts are still, for the most part in Limbo between buying and selling. Although the Warehouse's Asset Value has declined a bit since September, it's actually risen in the last couple of weeks and is still about 28% ahead of my starting point in January. Cash Reserves are hanging right around the 24% mark overall.
I've noticed that the retirees at the local library aren't talking about their investments and "trading profits" as much these days. It's not that they're talking about how wonderfully the Green Bay Packers have been doing that's keeping them from market discussions. I think there's some reality that's seeping into Middle America about what's been going on with Wall $treet. It's when the faces are the longest that AIM users are usually the happiest. AIMers just don't recognize that buying shares in a depressed market is a "Happy" event until after it's over. Once the prices stabilize and start their long term upward trend all will be smiles. AIMers always smile first after a correction.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________46% Up 1 - Average Risk Growth Stock Mutual Funds___________31% Up 1 - Average Risk IW Risk Oscillator____________________"+4" - Rising Risk |
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Value Line P/E ratio 14.3 + 52 week Treasury Rate 6.241 =____ 20.54 Up 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 26.79 Up 6.8 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.0 Down 0.6 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.3 Unchanged Bullish (Zeal) |
The Idiot Wave value has been slowly rising for 13 weeks, so I guess we have had adequate notice that some change was occurring. What's interesting is that really only one of the four components has been influencing the rise in risk. If we want to look at this optimistically, we could say it's a situation that should be easily remedied. What seems to have been happening is that the concentration of investment dollars is still narrowly focused driving our Speculation component into almost permanent Bearish territory.
Looking in my journal it's easy to tell where the money isn't going! I've been buying shares, so that should mean that the market is selling those same issues.
Profunds' Ultra OTC fund frustrated me this last week. It was very close to my AIM buy point several times only to turn and dance away. Maybe I'll still get a chance to add a few more shares to that account. In reviewing that account for my fraternity's annual meeting next week I find that while the NASDAQ Composite Index rose 37.8% in the last twelve months, our AIM/UOPIX account has risen 46.7%! Both numbers are great, but I'm pleased to see that AIM has performed exceptionally in the last year. Even our bond fund managed to rise 16.7% partially through AIM's management and partially from accumulation of dividends and interest. Not bad for a year's work!
Fall colors are starting to show themselves here in SE Wisconsin. This is my favorite season for many reasons. I guess one of them would be that each year it seems I get to do lots of buying of my favorite stocks! In the last few weeks the Cash Flow has been negative from the Warehouse. Lots of shelves are filling up with inventory as the nervous investors plug holes in their portfolios by selling shares and stuffing greenbacks into the leaks. Where will they go next with their money? I don't know how to guess, but they seem to always chase the latest earnings glamour reports. I feel a solid portfolio is built on a foundation of strong companies in strong industries that will be good performers over the next 5 years or so. I've positioned a significant amount of my account in technology stocks, telecommunications related companies, biotech and energy as main concentrations. Lastly, I have had money in brokerage stocks as well. All should do well over the next five years or so, in my opinion.
If nothing else, the unusual market conditions for the Summer of 2000 have offered an excellent opportunity for AIM to demonstrate its strengths. Many AIMers have been pleasantly surprised by the number of "Round Trip" buys and sells they've had during this period. Of course this is just how AIM makes money for us. Long periods of flat markets with lots of churning going on is just what we hope for as AIMers. It's fun to participate in long rallies, but AIM does its best work when the market averages are stuck in a range like they've been this summer. Let's enjoy it to the fullest!
Those of you who have questions about how you can improve your AIM, please don't hesitate to email me. So far Year 2000 has provided me with a 27% gain Year To Date. Looking back 12 full months, my account is showing a gain of 56% as compared to NASDAQ's 37.8%. All this was done within the confines of AIM's conservative, rational activity. I certainly hope you account is looking as pretty!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________45% Up 1 - Average Risk Growth Stock Mutual Funds___________30% Up 1 - Average Risk IW Risk Oscillator____________________"+3" - Rising Risk |
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Value Line P/E ratio 14.2 + 52 week Treasury Rate 6.241 =____ 20.44 Up 0.30 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 19.9 Down 10.0 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.6 Up 1.8 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.3 Up 0.1 Bullish (Zeal) |
There's so much "news" around for folks to dwell on that is negative right now that such divergent opinion is not surprising. Oil prices are rising and scaring everyone. Is recession just around the corner? If we have recession world-wide, does this mean the Telecos will quit buying all the fancy new techie stuff? Will the world have enough energy to power all those cute little cell phones? What will happen if we go out to dinner without our phone or PDA? Well, none of these things are really of much worry. I don't know if energy prices will stay at the levels they currently are holding. It was only about 18 months ago that oil was priced incredibly low. My guess is this is just one more swing of the energy pendulum. I doubt there's much I can do to prevent a recession, personally, so I'm not going to worry about that either.
Down in Shipping and Receiving we managed to keep busy.
So, while not pushing us into any overtime work, we managed to keep busy at the Warehouse.
While nobody loves a BEAR market very much, AIMers seem to manage just fine in a Trading market. To me that's what we've had since around the end of March. This is more like a consolidation that's taking too long than anything else. Maybe it's still fall-out from the nuclear melt-down of the market after speculation mushroomed back in March. In any case, we're attempting to test all incoming inventory for radioactive waste!! No use contaminating perfectly good inventory with new bad stuff.
That about covers the AIM related news for this week. I've been watching the Olympics as often as I get the chance and enjoying the games very much. Hope you have, too. Maybe we should have an AIM Olympics!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________44% Up 1 - Average Risk Growth Stock Mutual Funds___________29% Unchanged - Average Risk IW Risk Oscillator____________________"+4" - Rising Risk |
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Value Line P/E ratio 13.9 + 52 week Treasury Rate 6.241 =____ 20.14 Down 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 29.9 Up 7.3 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.8 Down 0.7 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.4 Unchanged Bullish (Zeal) |
This week I updated all the IDIOT WAVE Component graphs for your review. I have an arrow on each component graph that shows the low point if the IW Oscillator during the week of 04/24/2000. This way you can see the way the Idiot Wave, Oscillator, NASDAQ and the components all were at the same moment 20 weeks ago. As you will note, only Speculation is in the Bearish area. This is in part because about 15 weeks ago the whole market was still in shock from the April-May correction. Since then many stock prices have risen. This tends to color my Speculation Index to look like there's been a bit rise in prices, where there's only been recovery. What is surprising is that 21 of the 41 stocks listed in Value Line as the Best Performers for the last 12 weeks are up over 100%. This is quite unusual even in a "recovery" period.
Please note that my Zeal!! component, although still Bullish, is on the rise. Part of this is the IPO's of recent weeks. As this component returns to the Neutral zone, we lose the effect of having the money concentrating in fewer and fewer stocks. We've had that luxury working for us for a long time.
We've been busy moving into our brand new Headquarters of
This is a significant upgrade from our last facility and should allow for faster shipping, receiving and inventory turnover through modernization. With all this distraction, we only managed to:
Not much for a week's work, but it wasn't a very good week in the marketplace, either.
Welcome to all our new readers! I invite you to spend time investigating this site as deeply as you wish. I've received some great correspondence via Email from both Holland and Australia this week. I could understand the Dutch, but not the Aussie!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________42% Unchanged - Average Risk Growth Stock Mutual Funds___________28% Unchanged - Average Risk IW Risk Oscillator____________________"+2" - Rising Risk |
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Value Line P/E ratio 14.1 + 52 week Treasury Rate 6.375 =____ 20.48 Up 0.1 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 13.1 Down 4.6 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.2 Up 0.5 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.5 Up 0.1 Bullish (Zeal) |
Cash flow for the Veale International Equity Warehouse was positive for the week. Profitable trades were made on many equities.
By week's end the rather sad story of BPUR's recent price history had somewhat turned happier. It closed the week at $19+, so that last AIM directed buy was right as usual! It's good to see my mutual funds finally moving out of their HOLD ZONEs. They've been somewhat dormant since the buying done in April and May. The increase in their Cash Reserves adds comfort and future purchasing power.
Many new AIM users have been starting to post on the Silicon Investor AIM Bulletin Board. This is not only good for those of us who post, but also for you "Lurkers" out there! The questions, comments and comradship all are attracting more talented investors to AIM. If you've not taken time, please read along with the running dialog - it's FREE! (to read, anyway!)
I've updated the History page to show the results through the end of August for your review. Right now my personal account is ahead of my retirement account for the first time in many moons. I've been gaining slowly on the NASDAQ Composite as well. I like it when I can beat the averages!
With the market reheating a bit heading into Fall, please make sure you are sticking to AIM and letting your Cash Reserves recover to proper levels. We are about in the middle of the Average Risk range right now and the markets seem to want our inventory. No reason to hold out on them if we're still not flush with cash. If Risk continues to rise, we'll all be very happy to have as much cash available as AIM will generate and the IDIOT WAVE will allow.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________42% Up 1 - Average Risk Growth Stock Mutual Funds___________28% Up 1 - Average Risk IW Risk Oscillator____________________"+3" - Rising Risk |
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Value Line P/E ratio 14.0 + 52 week Treasury Rate 6.375 =____ 20.38 Up 0.3 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 17.7 Up 7.4 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.7 Down 0.3 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.6 Up 0.1 Bullish (Zeal) |
Overall Cash Flow for the week was good for the warehouse and the savings & loan! Everything is going well overall.
I'm not so sure of the IW's rise again this week. I don't like to see it do anything but decline! Speculation is Bearish in a controlled fury sort of way. Not as wild as March, but still not a healthy long term sign. I guess as long as Speculation is rising and we're AIM Selling along the way, it's not all bad news, however. The other components are showing just moderate risk.
Read along for free with other AIM Users at the Silicon Investor AIM Bulletin Board. REPORT - WEEK OF 08/14/2000: It's amazing what happens when we think we're getting bored. Just as I was getting restless last week who should show up here in Wisconsin but Steve Kaufman (SoCal) and Keith Felkins (Lemonhead) from our Silicon Investor Bulletin Boards and AIM 2000 Meetings. To have two "electronic friends" show up to tease and harass me for a couple of days was a treat. At one point we had five AIM users together for a beverage or two. That solved the boredom problem!
  Keith Felkins, Tom Veale, Bob Norman and Steve Kaufman in Port Washington. Steve checks out Tom's race car.
To keep myself busy for the last week here's what AIM's had me do: So it turned out not to be so boring after all. Those CALL options I sold are for the shares AIM would have me sell at those same prices. So I'm doing just what AIM wants, but just doing it early! If the price exceeds those call prices, those shares will be called away at the contract price, and I get to keep both the proceeds of the sale as well as the premium from the option. I do this when I have plenty of cash on hand for my stocks. I've updated all the component graphs for the IDIOT WAVE today, so you can see what's happening inside the indicator. In general the IDIOT WAVE is neutral and the market is in a trading range. AIM's been able to nibble a few trades on both the buy and sell sides in the last couple of months while the market decides where it will go next.
I was looking back at how generous Mr. Lichello's AIM has been to me. I usually try to remind the readers here of the fat LIFO gains that AIM provides. However, I pay my taxes on a FIFO basis. Here's what my FIFO gains have been in recent times: Just wanted to say thanks again to Mr. Lichello for creating a system of consistent wealth accumulation. It's nice to see that in my "worst" year I was still earning almost 22 cents profit on every dollar of inventory sold. I hope you are having similar results with your warehouses!
Best regards, Tom Veale in Wisconsin Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________41% Up 1 - Average Risk Growth Stock Mutual Funds___________27% Unchanged - Average Risk IW Risk Oscillator____________________"+1" - Rising Risk |
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Value Line P/E ratio 13.5 + 52 week Treasury Rate 6.375 =____ 19.88 Unchanged Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 17.0 Up 1.0 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.0 Unchanged Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.8 Up 0.1 Bullish (Zeal) |
Last week showed a 2.4% gain in the DOW, 3.4% gain in the NASDAQ, 2.7% gain in the Russell 2000 and a 4% gain in the NASDAQ 100 Index. It almost looked as though we were going to be starting a new rally of some sort. The NASDAQ Advance/Decline ratio was essentially 1 to 1, however. Not exactly convincing. Add to that 151 New Highs and 490 New Lows for the week and we see why the Warehouse is still adding more inventory.
On my way to my office each day I get to see Port Washington's harbor and marina. On a clear morning I can see the taller buildings in Milwaukee - 25 miles away.
Can you tell it's been a bit slow here at the Warehouse? Here I am providing a Travel Guide to Port Washington! Well, I'm sure we won't have to wait long for something exciting to stir up the markets again. Last night we had 26 thirteen year old kids at the house for a birthday party. Good thing it ended early! Even my 20 year old was a bit overwhelmed by it all!
As we sail through the Summer Doldrums we'll have to keep the jibsheets trimmed and watch over our shoulders for any gathering clouds. Right now the IW is saying we have clear sailing for a while. Nothing visible on the near horizon. I'd be a lot happier if the breeze would freshen a little. My "sales" aren't doing much good with no wind!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________40% Unchanged - Average Risk Growth Stock Mutual Funds___________27% Unchanged - Average Risk IW Risk Oscillator____________________"+1" - Rising Risk |
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Value Line P/E ratio 13.5 + 52 week Treasury Rate 6.375 =____ 19.88 Down 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 16.0 Down 1.7 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.0 Down 1.1 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.9 Up 0.1 Bullish (Zeal) |
Almost all the activity was in the form of Adding to Inventory!
That's the bad news!
Here's the action from the Warehouse:
That explains the Cash Flow situation for the warehouse. Almost all out-flow. There's not been much constant about the markets for weeks other than confusion! It may be that there's still portfolios suffering from the traumas inflicted earlier in the year. April and May were serious reality checks for many investors. For AIM users, it was the first chance in a while to become fully invested. As of last Friday's close, my account was still up 19% YTD even though it was down for the month of July by 7%. My cash reserve is still healthy at 22.5% overall.
So, if the worriers want to worry the prices down a bit, I'm prepared. If the exuberant speculators need to buy shares in desperation, I have inventory. In the mean time it's a matter of making sure we buy and sell efficiently as the market churns about in its current range.
My guess is that this recent correction will help to lower the Speculation reading back towards its Neutral zone. It doesn't take much to trim the top off the Best Performers list when it's sporting over 200% gain in just 13 weeks. The rest of the IDIOT WAVE components are behaving quite well. There could be a nice rally once Vacation Season is over. The Value Line P/E is still low relative to interest rates and could provide some safe growth before turning bearish.
I want to welcome all the new readers from the last few weeks. One is a Cayman Islands resident. Maybe I should relocate closer to his computer! Another long term AIMer found our Bulletin Board and has started to post. All this bodes well for our future.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________40% Up 1 - Average Risk Growth Stock Mutual Funds___________27% Up 1 - Average Risk IW Risk Oscillator____________________"+4" - Rising Risk |
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Value Line P/E ratio 13.6 + 52 week Treasury Rate 6.375 =____ 19.98 Up 0.30 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 17.7 Up 5.9 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.1 Down 0.4 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.0 Unchanged Bullish (Zeal) |
Leaping Cats Pride - David Hinton's '52 red XK 120, Tom Veale's '53 green XK 120 Roadster, and Edgar Boles' '59 XK 150 Coupe
Edgar's Shagadelic CatBlu!
I can't say that I know much about what's been going on in the markets. The IDIOT WAVE tells me that Speculation continues to rise at an unhealthy clip. The other four components of the IW are okay, however. I've been hearing that there's a bunch of IPO's coming to market in the near future. This will show up in the ZEAL component sometime soon as well. While the IW's still showing average risk, this represents the second week of it rising slightly. The +4 value for the IW Oscillator indicates the risk is rising overall. The above graph shows this quite well.
Boston Scientific's stock (BSX) was crushed last week and AIM had me buy a bit more at $19-1/2. American Power Converter (APCC) managed to rise to my selling price of 47-1/2. APCC was recently in the high $20s to low $30s and offered some AIMers a nice buying opportunity and now a fat LIFO gain. Bristol Meyers (BMY) dipped down and tripped my GTC order to buy additional shares at $48-5/8. All this happened while I was away from my desk and was guided by AIM's sensible market orders. It's nice to know someone will take care of things while we play!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________38% Unchanged - Average Risk Growth Stock Mutual Funds___________25% Unchanged - Average Risk IW Risk Oscillator____________________"0.0" - Steady Risk |
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Value Line P/E ratio 13.3 + 52 week Treasury Rate 6.375 =____ 19.78 Up 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 9.2 Up 6.6 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.5 Down 1.1 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.1 Down 0.2 Bullish (Zeal) |
In looking over my account briefly, it would appear that Jabil (JBL), Chiron (CHIR) and a few others are ripe for me to do some AIM related selling. I'll see if that gets done while I'm goofing off this week. My BMY position has been creeping up for about a month now as well. It's not ready for an AIM Sell yet, but is closer than a month ago. Most of my mutual funds are doing well right now also.
With three Neutral ratings and one Bullish, the IW components are all looking rather content right now. If there's any concern at all it would be that the Speculation component is showing signs of rising to an undesirable level again. With Lilly Industries 'A' rising 157% in just thirteen week as compared to a drop of about 75% in Superior Consultants in the same period shows that speculation is getting stronger while caution is still high. We'll keep an eye on this over the next few weeks.
Keep your AIM sharp. I'll have more to report next week.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________38% Down 1 - Average Risk Growth Stock Mutual Funds___________25% Down 1 - Average Risk IW Risk Oscillator____________________"-1" - Falling Risk |
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Value Line P/E ratio 13.3 + 52 week Treasury Rate 6.375 =____ 19.68 Down 0.30 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 2.6 Down 2.4 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.6 Up 1.1 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.9 Unchanged Bullish (Zeal) |
Right now the Best Performer in Value Line's universe of stocks is up about 100% in thirteen weeks while the worst performer is down almost 76%. This gives "balance" to the Speculation portion of the IW. It appears to me that we've created a great launch platform for the next move of the market. We have low speculation, low relative valuation numbers, a shrinking universe of equities and just enough confusion to keep the markets on edge. I'd love to see a 12 to 18 month slow rise from here and that's the way it "feels" to me.
This week we pulled into four ports and off-loaded some merchandise. Here's the results of those trades:
So the ship's holds are lighter on inventory and heavier on doubloons for the next leg of the journey. The trade winds are fair and the natives are peaceful. The Good Ship AIM is on course with the decks swabbed and the bottom cleaned. Our cannons are ready and we have plenty of dry powder should we see any pirates on the horizon.
There's still a slight bulge in the "Yield Curve" with the 52 week Treasury still paying better than the 13 week and the 30 year. This sort of thing would have been reason enough for serious hand wringing a few years ago. This time around nobody seems to care. At this point, I don't really care either. My reason is that I believe the FED is just about through with its upward rate adjustments. We should see the market resolve the bulging yield curve as the market price of those bonds shifts around over the next couple of months.
There have now been over 50,000 visits to the AIM home page. Mor than 35,000 visits have occurred here on the Newsletter. A long time ago Bruce Bowman told me that to get some momentum going with AIM, it was going to take organizing a MEETING someplace! Well Bruce, we finally got the first one done. I certainly hope you can be part of the next one as well.
Looking back about a year, it would appear that I've shipped out between 150 and 200 copies of Mr. Lichello's book! I wonder if he appreciates the royalties?! I certainly hope that people are grasping just how timely AIM is today. It's as though it took the realm of "On-Line Trading" to occur to create the volatility needed to make AIM as useful as it is. The same on-line trading capability with its vastly reduced commission costs is also what has made AIM such a proper tool for TODAY. No "systems" have lasted as long as AIM, as most have become out-dated. Mr. Lichello's model, on the other hand, seems to be more and more useful as it ages gracefully and productively.
I updated all the graphs of the Idiot Wave Components this week. Please take a look at them and see how much better they look now than at the end of March. Again with this latest bought of High Risk, the Idiot Wave continued to be a good guide and companion of AIM's.
It looks as though there's a new software choice for use with AIM. Please take a look at Automatic Investor.com to see what they have to offer. I've down-loaded their trial version and will be fiddling with it during the next few weeks. I'll report on my findings.
Please note that the email link at the bottom of the page is now working. When I moved these pages to aim-users.com some of the former links didn't function and I was unaware that the email didn't work until just recently. Thanks for your patience on this!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________39% Unchanged - Average Risk Growth Stock Mutual Funds___________26% Unchanged - Average Risk IW Risk Oscillator____________________"-2" - Falling Risk |
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Value Line P/E ratio 13.6 + 52 week Treasury Rate 6.375 =____ 19.98 Down 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 5.0 Down 2.4 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.5 Up 0.2 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.9 Down 0.1 Bullish (Zeal) |
For four weeks the NASDAQ Composite index has been within 100 points at its Friday close with last Friday bringing the market to 3845. A 2.6% trading range for four weeks is something we haven't seen in some time. Still, AIM seems willing to work in this environment even if its not overly active. Here's my trades since the last report:
So, it looks like the tide was primarily moving out on my Trade Ship. We have plenty of inventory in store and will be able to trade with the natives when we arrive at our next port of call.
I might have been willing to guess that the FED would not raise rates this time around. My favorite bond fund, GSF, has been rising in price recently from near its lows. It has covered the distance from $6-3/8 to $7+ in the last four or five weeks. This may not seem like much, but remember this is a "bond fund" and not a tech stock! In the mean time it pays $0.78/share in dividends on an annual basis.
Our efforts in bringing AIM towards a more "mainstream" recognition have been working well. It is gratifying to me to have many new people joining our ranks and prospering right along with the "core group." Thank you to all who have been working with me to show off AIM's best features. Market activity in 1998 and now again in 2000 have made believers of those new to AIM and made nice profits for all of us.
I was digging around for my Organic Chemistry books the other night (my oldest child is taking it right now) and noticed how much thicker the new texts are than my old ones. After looking inside, I decided there's just more "pictures" in the new one. I also pulled out my "Investments" textbook. Written in 1967, it quotes from a list of 70 institutions and endowment funds for colleges and universities. At that time there was $6.6 Billion represented then. While nothing to sneeze at even today, it would represent only a small portion of what those same schools would have under management today. At the time I took this class, my college didn't have a computer. However, the very last chapter of the book is titled The Computer in Portfolio Selection. "Many sophisticated statistical techniques are opened tothe analyst, since he is relieved of burdensome calculating work and his horizons are broadened. Many suggested timing devices can be tested on the computer, at least in terms of their usefulness historically." They mention that once information is gathered and stored in a computer it could then be possible to perform screening processes. Boy, wouldn't they love to see our current databases and ease of access?
They don't discount the individual as the final decision maker. "The financial analyst must still evaluate and interpret on the basis of his knowledge, experience and skill the vast accumulation of data and statistics produced at unbelievable speeds by mechanical means. The less skillful and mediocre analyst will find that he may simply make bigger mistakes at a faster rate, with more disastrous consequences than ever before." I think I know that person!!
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Value Line P/E ratio 13.7 + 52 week Treasury Rate 6.375 =____ 20.08 Up 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 7.4 Up 1.5 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.3 Unchanged Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.8 Unchanged Bullish (Zeal) |
I'm pleased with both the Purchasing Dept. and the Sales Dept. for making such handsome profits on a LIFO basis! Nothing like the "team" working together for the best possible results!
With the IDIOT WAVE OSCILLATOR back to near the neutral mark, I don't believe we'll see much more reduction in market risk in the near term. However. we've gone from a record high risk level in March to a benign average risk level by mid June. That was a painful lesson for many investors, but was an opportunity for AIM users and followers of the IDIOT WAVE. I remember just a few months ago that Summit Technology had been knocked way down in price and was a resident on Value Line's Worst Performers list. Guess who's now at the summit of the Best Performers list? That's right, Summit Tech. (BEAM). AIM investors are saying "Beam my net worth UP, Scotty!" These two lists in Value Line are really lots of fun to watch. They are the heart of my "Speculation" component and are always full of interesting ideas for AIM investors.
I added the basic outline of my opening remarks from the AIM 2000 meeting to the photo page. I'll add more later from the other speakers. Only those who have a copy of Bob Gammon's video or Keith Felkin's audio know what I actually said! I certainly don't remember!
Also this week I added the graphics and text of Santos Torres' speech which was intended for the AIM 2000 meeting, but Santos couldn't attend. Santos created a block diagram and some simple line diagrams that help explain what goes on inside your AIM accounts. Please take a look at the Torres Report.
As a final addition to the AIM pages this week I have added some graphics to the AIM Improvements page to show how the "Vealie" and Split SAFE ideas work with my current favorite stock, Vitesse Semiconductor (VTSS). I hope you find the graphs interesting.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________40% uNCHANGED - Average Risk Growth Stock Mutual Funds___________27% Unchanged - Average Risk IW Risk Oscillator____________________"-3" - Falling Risk |
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Value Line P/E ratio 13.5 + 52 week Treasury Rate 6.375 =____ 19.88 Down 0.80 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 5.9 Down 1.1 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 3.3 Up 0.5 Neutral (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.8 Unchanged Bullish (Zeal) |
Of note this week in Value Line is that six of the 41 Best Performing Stocks come from the Energy sector. Also of note is that ten of the Worst are from the "dotcom" sector. For Energy stocks, this may mean that it's getting a bit "over-bought." I don't know how to interpret the "dotcoms" as I couldn't tell why they got so high in the first place. They might be right where they belong or maybe they are relative deals. I recommend you study then for yourself.
There's a bit of a bulge in the Treasury Coupon Rate right now. Not quite inverted, but lumpy. The 13 week Tbill is showing 5.968% yield, the 52 week is at 6.375% and the 30 year is at 6.00. It's unusual that we get a fatter yield on the one year bond than the 30 year. In the mean time, my long bond fund (GSF) is slowly rising after being bashed again with FED rate hikes. It traded at about $7/share today for a while.
My own portfolio is still quiet. Here are the week's trades:
I like the idea of being able to sell shares of Vanguard's Energy Fund (VGENX) just when I note that there are several Energy Sector stocks listed in Value Line's Best Performers screen! Demand for energy stocks is high and I'm lucky enough to have some inventory to sell. My Vitesse (VTSS) shares have been rising quite rapidly in recent weeks triggering sequential SELL orders. I'm very pleased with AIM's work this year so far. It managed to take serious profits in the early year's rally and pump those profits back into inventory just when nobody wanted stocks any more. Now we're again taking profits and refunding our cash reserves. I hope your own portfolios are doing the same.
I made some changes to my "History" page to show what the approximate turn-over rate for my portfolio has been. I felt it was important to show AIM's relatively low turn-over rate compared with other "trading" tactics. Since starting to keep track in 1990, my average turn-over rate has been 26.2% of portfolio value. In other words, in any given year, I sell about 1/4th of my inventory. When compared to "day traders" this is very small. With the current differential between long term and short term capital gain taxes, it is an important feature of AIM's. It helps us to keep our overall tax burden low.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________42% Down 2 - Average Risk Growth Stock Mutual Funds___________28% Down 1 - Average Risk IW Risk Oscillator____________________"-7" - Falling Risk |
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Value Line P/E ratio 14.0 + 52 week Treasury Rate 6.197 =____ 20.20 Up 0.30 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 4.4 Down 3.5 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.1 Down 0.4 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.6 Unchanged Bullish (Zeal) |
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________44% Down 2 - Average Risk Growth Stock Mutual Funds___________29% Down 2 - Average Risk IW Risk Oscillator____________________"-7" - Falling Risk |
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Value Line P/E ratio 13.7 + 52 week Treasury Rate 6.197 =____ 19.90 Down 0.40 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 7.9 Down 0.9 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.5 Unchanged Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.6 Down 0.1 Bullish (Zeal) |
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________46% Down 2 - Average Risk Growth Stock Mutual Funds___________31% Down 1 - Average Risk IW Risk Oscillator____________________"-7" - Falling Risk |
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Value Line P/E ratio 14.1 + 52 week Treasury Rate 6.197 =____ 20.30 Up 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 8.8 Up 1.0 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.5 Unchanged Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.5 Down 0.1 Bullish (Zeal) |
Also note the trend is for still lower risk to come. The IW Oscillator is still showing "Falling Risk" and has been for several weeks. Looking back at the NASDAQ graph I can just make out a "dead cat" bouncing once after the peak. The market seems to be in just as big a hurry to get the excesses out of the market as it was to inflate the "bubble" a few months ago.
Negative reviews and editorials are showing up in many of the financial journals now that the market is way off its peaks. Not that they hadn't been showing some features on the possible bubble earlier, but such articles like the one on Robert Shiller in BARRONS (05/22/2000, PP37) show how far the negative sentiment is going. Mr. Shiller says we may not see the DOW or S&P 500 above their previous highs again for 10 to 20 years!! The title of his book, IRRATIONAL EXUBERANCE, is now about 14 on the Best Seller's list for non-fiction. I'd say we AIMers better be prepared to "Buy from the Scared" if Mr. Shiller's ideas take hold!
I've updated my HISTORY page, the Idiot Wave Components page, and all the stocks shown in my PORTFOLIO for your review. There's quite a bit of information there and I'll be happy to answer any questions which might arrise. Please direct the questions via either my email or directly on Silicon Investor, if you are a member. Note how the IW Components are all falling nicely towards average and low risk readings. Note how my own portfolio total has not fallen nearly as much as the Indexes. Finally note that I'm still maintaining a defensive posture with high Buy SAFE (Resistance) values on most every stock I own.
I've been assembling photos at the page formerly devoted to our AIM 2000 meeting. Contributors so far are RF Hansen, Keith Felkins and Yours Truly. More will be available over the next few days. With six presentations it was a full day. We occupied the room from about 7:30 AM to around 6:00 PM. About 32 people were there for at least part of the day. The enthusiasm shown indicates that we should have a similar event again sometime. If you couldn't attend this one, we will have summaries of the papers available for your review. More on that later. Also, we may be able to provide either video or audio tapes to go along with the materials. I'll have an information page available soon on this subject.
Thank you to all who attended the show. Thank you to all who gave their time to organize the event, prepare the presentations and do such a great job on delivering them to the AIM users. We provided more information in that one day on AIM than has been presented in years!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________48% Down 2 - Average Risk Growth Stock Mutual Funds___________32% Down 1 - Average Risk IW Risk Oscillator____________________"-10" - Falling Risk |
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Value Line P/E ratio 14.0 + 52 week Treasury Rate 6.197 =____ 20.20 Down 0.30 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 7.8 Down 2.1 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.5 Up 1.4 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.4 Unchanged Bullish (Zeal) |
At this point the IW is still suggesting a 48% Cash Reserve. Hardly the time to go get a second mortgage on the house so you can invest more! It is nice to see all four components back in either the Neutral or Bullish range. Thanks to the Idiot Wave we were again cautioned in plenty of time about mounting risk in the market place.
Ten of the 41 worst performing stocks in Value Line for the last 13 weeks are from the Internet Sector. That constitutes a pretty big Sector Rotation! Even the best of the bad stocks was down over 50% this week while the worst was off 76%! With 126 new highs on the NASDAQ and 376 new lows it's easy to see that there's still pressure on the market in general. AIM has been guiding me through these troubled waters with the sure stroke of its paddle. We shipped a bit of water when the Idiot Wave hit its high mark in March, but lucky for all aboard we were able to keep plenty of provisions dry. In the last week AIM guided me to the following decisions:
Not as busy as the previous week but a much better one for Cash Flow! Again, it would appear that between sector shifts and the general bottoming trend we may be working our way out of that peculiar market bubble that dominated the first quarter of the year.
I've been getting some "last minute" registrations for the AIM 2000 Convention. Please don't hesitate to come, even last minute, if you feel you would benefit from our meeting and the Money Show. All will be welcomed! I've started to prepare some of my graphs and histories for everyone's review at the meeting. I'm finding that reviewing things while making up this presentation is helping me refocus on AIM's effectiveness and simplicity.
Bob Norman from Newport told me he received a demo order for his software in March and the fellow recently wrote, ordering the full version, saying that AIM has already saved him many times the price of the software. I like hearing that people are doing well with AIM and that they are prospering through its use. You could almost say that our entire 11,000 posts on Silicon Investor's AIM Bulletin Board are actually testimonials. Thanks for keeping me busy with your emails and BB posts! I enjoy it very much.
Heck, this is easier than AIM Investing!!! If you're short of Cash, just copy this picture and print as many as you need, compliments of Veale International Equity Warehouse
(and Savings & Loan)!!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________50% Down 3 - High Risk Growth Stock Mutual Funds___________33% Down 2 - High Risk IW Risk Oscillator____________________"-13" - Falling Risk |
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Value Line P/E ratio 14.3 + 52 week Treasury Rate 6.197 =____ 20.50 Up 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 9.9 Down 13.8 Neutral (Speculation) NASDAQ Hi/Low Logic Index__________________________ 1.1 Down 0.6 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.4 Down 0.1 Bullish (Zeal) |
End of what, you say? Well, it looks like the end of the correction is near! That should be good news to all AIMers as well as those troubled day traders and margin users.
The IDIOT WAVE and the IW Oscillator if added together give the week's "instantaneous" reading. The IW is built from moving averages while the IW Oscillator is the difference between the raw data and the smoothed data. So, if all the data were to remain the same for the next quarter of a year, the IDIOT WAVE would drop slowly to 37% Cash for stocks and 25% Cash for mutual funds. Those would be the best values we've seen in a long time!
So, what does this mean? It means the market has recognized its excesses of the 2000 Bubble and has rid itself of the same. Certainly there's still some stocks that are highly priced, but most have been humbled by excessive selling with very little buying support. Is it over? I think we're getting close.
Take a look at my Speculation index, for instance. It was the most bearish of the four components in recent times. The excess seen just a few weeks ago has been brought under control in a rather brutal fashion. Finally it is back in the Neutral range after five months of bearish signals. In that time it drove the IW to a new record high of 60% Cash recommended. From a peak value of 85 on March 20th, it has fallen to under 10 this week. As the data catches up in the near future I expect it to fall further.
Here's how AIM has been reacting to the changed scene in the markets:
This was some SERIOUS CASH FLOW into building inventory for the warehouse! Some of the purchase prices are at less than half the previous highs registered only a few weeks ago. Just think what I might have done if I'd been in the office the whole week! I was off Wednesday through Friday! I certainly hope the rest of you AIM users are also looking at this buying opportunity in the correct light.
If you care to see how well AIM has managed a Sector fund, you should look at Invesco Technology Fund. AIM's cool head through the last few weeks has kept this nicely profitable account moving in the right direction. Another Wild Ride can be witnessed with Profunds Ultra OTC Fund. UOPIX hasn't had a really good buying opportunity since we started that account over a year ago. This one will test my fraternity alumni's stomachs!
Around the water cooler here at V.I.E.W. there was conversation yesterday about the extreme views being presented in the media about the market. Very high and low DOW and NASDAQ figures were being quoted. While not beyond the realm of possibilities, either extreme seems unlikely. I don't know why the Television Talking Heads feel this is a good thing to do, but it always happens. It appears that they'd do better if they just signed on to this web site once in a while to find out what the IDIOT WAVE is indicating! Again in this high risk period I am very pleased with how well the IW has guided us. I hope you are as well!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________53% Down 1 - High Risk Growth Stock Mutual Funds___________35% Down 1 - High Risk IW Risk Oscillator____________________"-9" - Falling Risk |
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Value Line P/E ratio 14.1 + 52 week Treasury Rate 6.197 =____ 20.30 Up 0.50 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 23.7 Down 2.6 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 1.7 Down 1.0 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.3 Up 0.7 Bullish (Zeal) |
I've been hoping for a broadening out in the market and have commented here in past weeks that the Valuation component of the IW has actually been quite attractive for some time. It means there's lots of stocks with quality that are being ignored while all the dollars have been chasing the few latest and greatest investment "stories." There's good value in more traditional areas of the economy. There's traditional cyclical stocks that will ALWAYS be good AIM investments.
As Friday progressed, I found myself humming Mr. Rogers' "It's a Wonderful Day in the Neighborhood" as my AIM Buy orders came rolling in. Here's the results:
So, the shelves of the Warehouse are again well stocked!
Please take the time to look at The AIM 2000 page to see what to expect for the week of May 15th. We've planned a "Lounge Night" for Monday and "Dinner Night" for Tuesday. On Wednesday night, the group will gather for "Show Night" at Treasure Island for Mystere! I certainly hope as many of you as can attend the AIM 2000 meeting will also socialize with us in the evenings! Sounds like a fun time!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________54% Down 3 - High Risk Growth Stock Mutual Funds___________36% Down 2 - High Risk IW Risk Oscillator____________________"-10" - Falling Risk |
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Value Line P/E ratio 13.6 + 52 week Treasury Rate 6.197 =____ 19.80 Unchanged Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 26.3 Down 8.2 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 2.7 Down 1.9 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.0 Up 0.1 Bullish (Zeal) |
Hmm, looks like there's a bit more Receiving than Shipping! Well, prices are starting to get attractive, so maybe it's a good time to re-stock the shelves of the Warehouse. Who wants all that boring cash sitting around cluttering up the place anyway?
It's been a while since we had a reason to get the GUT WRENCH out and use it. Seems there's some lemmings leaping here and there after receiving calls from their brokers regarding servicing their margin debt. The GUT WRENCH is always good for making those sorts of adjustments!
Why is it that so many investment strategies only really look good during a Bull phase of the market? AIM's like a brand new set of all season tyres for our investment limousine. We get to cruise in comfort - rain, sleet, snow or sun. If we care to look out the windows, we'll see high performance vehicles spinning into the ditch. All the while we have AIM set on Cruise Control! Back during the week of March 13th, so many people were convinced of the market's continued rise there were 971 New Highs on the NASDAQ that week. However, there were also enough folks convinced the market would decline that there were 412 New Lows simultaneously. These are numbers I use for my Divergence indicator. How about this week? Well, after the blood letting early last week, there were only 139 New Highs while New Lows rose to 541 issues! Looks like everyone's convinced the market's going down! The creator of the Hi/Low Logic Index, Norman Fosback, says it's a bullish indicator when there are very few new highs or lows - it doesn't matter. It's nice to see this component of the IDIOT WAVE back in the Bullish camp. Now all we have to do is get my Speculation indicator down to more normal levels.
Several AIMers on the SI Bulletin Board have indicated their Cash Reserves are dropping fast. If this is a problem, you have a choice of either reducing the frequency of your buys to slow the activity or increasing the resistance to buying by raising the SAFE level. Another way described by Robert G. from Texas is to buy no more value than half of your remaining Cash Reserve. He refers to this as "Half Way To The Wall." This will also help you to conserve your cash in a down-draft and let you buy all the way to the bottom. While none of these things are strictly AIM "by the book", all are pragmatic solutions to having too high a cash burn rate.
My friend was kind enough to turn one of my pencil sketches into a nice "Bookplate" for me. I'll be sticking these in all the Lichello books I send out from now on. That way if you pass on your AIM book, people will know where to find out web site. I'm planning to bring several of these along to the AIM 2000 Meeting, so if you'd like to bring your Lichello book along, I'd be happy to give you a bookplate for it.
I have secured a domain name for us - www.aim-users.com - and will be slowly shifting all the AIM pages to that site. This should save wear and tear on my fingertips for typing out this page's address! Ideas for the new web site include a file of the Idiot Wave data that can be down-loaded for study; complete library of the Newsletter; more and better detail AIM example graphs. Please let me know what else you might like to see.
I'd like to extend a special welcome to John the Iceman from Iceland. John's there checking up on the weather and has recently joined in the fun at the UOPIX thread on Silicon Investor. To my knowledge, he's our first reader from that far north in the Atlantic.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________57%* Down 1 - High Risk Growth Stock Mutual Funds___________38%* Down 1 - High Risk IW Risk Oscillator____________________"-5" - Falling Risk |
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Value Line P/E ratio 13.6 + 52 week Treasury Rate 6.197 =____ 19.80 Up 0.50 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 34.5 Up 4.0 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.6 Down 1.1 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.1 Unchanged Bullish (Zeal) |
Note that the IDIOT WAVE is actually starting to retreat a small amount. Speculation and Divergence both have come off their respective highs. It's important to note that there were 233 new highs last week with 434 new lows on the NASDAQ. This shows that the sentiment is now seeing the market pull back and more folks are convinced of it going down than up. I like to see it below 4.2 before I call it "Neutral" in rating. At 4.6 it's better than its been in recent times.
I noted that there's not many BioTech stocks left on the Best Performers list in Value Line any more. They had their run and we AIMers made our money. Now they are falling back towards more normal levels. I'll start to do some buying soon. IDENTIX is identified as the Best Performer, up 370% in thirteen weeks. Someone laid down the law with LAIDLAW forcing it into incarceration at the bottom of the Worst Perforers list, down 75% in the same period. I can't wait until this recent drubbing shows up in Value Line's lists. Maybe we'll finally get some of the fat liposuctioned out of the market.
If you haven't already ordered your hat and/or shirt for AIM 2000 please contact Keith Felkins with your order. This is about the last chance you'll have. There's a photo of our "Poster Boy" for your review fully decked out in AIM-ware! Also please note that we've now assigned times to the meeting presentations. It's going to be a good meeting. If the market gets really ugly, we may want to change some of the topics to things like "Survival Tactics!" {:-)
For you that are relatively new to AIM style investing first let me congratulate you on choosing a sane course of action for managing your account. Next let me tell you that when your stocks are falling, you have to remember that this is a "good" thing! It might not feel like it right at the moment, but after you've accumulated lots of better priced shares and the recovery's under way, you'll realize that it was "good!" Please remember our now World Famous motto:
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________58%* Down 2 - High Risk Growth Stock Mutual Funds___________39%* Down 1 - High Risk IW Risk Oscillator____________________"-8" - Falling Risk |
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Value Line P/E ratio 13.1 + 52 week Treasury Rate 6.197 =____ 19.30 Up 0.40 Bullish (Relative Valuation) Veale's Best/Worst Index ______________________________ 30.5 Down 54.8 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 5.7 Down 1.5 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-1.1 Down 0.2 Bullish (Zeal) |
As has been typical of corrections in recent years, this one seems to be sector oriented. Yesterday they were particularly hard on the BioTech sector. Other areas of the general technology sector were also hit hard. It's too soon to tell if this was "window dressing" with the institutional investors or a trend that is going to last for a while. If the market just hunts for a new base for a while, the needs of the correction may be fulfilled by the passage of time. AIM users should be able to "trade the range" once a new range has been established.
Speculation as measured in my IDIOT WAVE fell back quite a bit this last week. It needs to was out quite a bit more before we're back to the Neutral range for that component. Divergence also came down a bit, but again not enough to get back to its Neutral reading. It shows there are lots of investors on both the negative and positive sides thinking the market will move their way. Usually for a correction to be finished it takes a majority of investors thinking the market is doomed. We're not there yet.
Looking back to the last report in which I listed trades I find there haven't been as many in recent weeks:
Only one buy in all this time. The extra Cash Reserve in each stock that sold will be comforting as the market seeks new solid footing.
Should the IW Oscillator remain a negative value for the next few weeks, we could haul the whole IW back down into the Average Risk range again. In the mean time, my energy stocks and mutual fund are doing well. It looks like the market is thinking that some dividend income might be something they would like to have right now. With the average dividend of the Value Line stocks being 2.4% it's not overly generous. However, those dividend paying stocks are mostly depressed of recent times, so maybe the investors are thinking that they'll have a capital gain along with the dividend.
The AIM 2000 Meeting in Las Vegas is shaping up nicely. We're planning on having awards for several categories of investment. I hope to get a chance to meet many of you with whom I've been corresponding for so many years. Please let me know if you plan on attending as soon as possible.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________60%* Up 4 - High Risk Growth Stock Mutual Funds___________40%* Up 3 - High Risk IW Risk Oscillator____________________"+15" - Rising Risk |
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Value Line P/E ratio 12.7 + 52 week Treasury Rate 6.197 =____ 18.90 Down 0.20 Bullish (Relative Valuation) Veale's Best/Worst Index ______________________________ 85.3 Up 28.5 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 7.2 Down 0.9 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.9 Unchanged Bullish (Zeal) |
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________56%* Up 3 - High Risk Growth Stock Mutual Funds___________37%* Up 2 - High Risk IW Risk Oscillator____________________"+9" - Rising Risk |
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Value Line P/E ratio 12.9 + 52 week Treasury Rate 6.197 =____ 19.10 Down 0.50 Bullish (Relative Valuation) Veale's Best/Worst Index ______________________________ 56.8 Up 21.3 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 8.1 Up 1.1 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.9 Unchanged Bullish (Zeal) |
I guess the way to handle this is that if you own some of the market's recent High Flyers, please follow AIM's and the IDIOT WAVE'S advice and have PLENTY of Cash Reserve on hand. You may also want to insulate your AIM accounts from making purchases too soon in a price correction by pumping up the Buy SAFE (Resistance) to a high level or just letting the clock run a long time before buying. I've chosen to raise the Buy SAFE levels very high to prevent premature buying. I've inflated the SAFE level to the point that I'm comfortable with the buying it will do at a price way below my last Sell. As an example, I last sold shares of NERX at $48-1/8, but by using 100% Buy SAFE, my first buy won't occur until the price falls to under $10/share. The Market seems to think Cash is Trash, but I don't. I want to conserve it until some of these stocks fall back to more civilized prices!
I hope you have noted that the IW's current value eclipses its 1987 former PEAK. At that time all four components were in harmony showing Bearish values. That isn't true this time, but never the less, I feel we need to be cautious of those Zero Earnings companies that have been flying away with the NASDAQ Index. It appears to me that there's some very attractive "Value Play" stocks in the Value Line Survey. It may be time to search for quality companies with dividends for some of our most recently won gains.
I've not had a chance to compile the trades that occured while I was on "Spring Break." I'll report them in next week's Newsletter. I think the next few weeks will be very interesting for investors in general and AIMers in particular. Mr. Greenspan raised interest rates another 1/4 point today and the market celebrated. BARRONS wrote a scary article on the impending death of many DotCom companies as their yearly burn rates have now exceeded their remaining reserves. The market seems to want to ignore all bad news. I guess that is reason enough for caution.
Please note that I've updated all the IDIOT WAVE component graphs for your review. They are shown at the following addresses:
Relative Valuation
Speculation
Divergence
Zeal!
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________53% Up 1 - High Risk Growth Stock Mutual Funds___________35% Unchanged - High Risk IW Risk Oscillator____________________"+4" - Rising Risk |
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Value Line P/E ratio 13.7 + 52 week Treasury Rate 6.287 =____ 19.99 Down 0.30 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 35.9 Up 8.2 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 7.0 Up 0.1 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.8 Down 0.1 Bullish (Zeal) |
As you can see, we've had to turn down a couple of Sell orders and replace them with "vealies" along the way. This helps to conserve inventory as those stock and fund prices rise. Note that two of the Buys were in the Energy field, Texaco and Santa Fe Snyder. The other buy was at what I believe was a "distress sale" for shares of Bristol Meyers Squib. All in all the last few weeks have been a marvelous time to raise cash and keep risk dollars under control.
This week in Value Line's Best Performers list three of the top five stocks were BioTechs. This tells quite a bit about what's been going on in the marketplace. Just a few weeks ago they would all have been internet stocks, but the blush has gone from their cheeks. The "Worst" stock listed is Visx, Inc., down 66.6% in recent times. This laser surgery outfit had soared last year, but competition has forced them to reduce their royalty payments per event. The jury is still out on whether this will actually bring in more revenue later as the more competitive price brings in more total business.
I added a new page to the AIM series this week. It shows a stacked bar graph of each of my current holdings. Since these pictures would load slowly at full size, I have reduced them to about 1/2 normal size. The resolution sufferes a bit, but with over 25 images to load it seemed the wise thing to do. If you look at the whole group, I think you'll find that AIM's been a pretty good friend of mine. Also note that many of the stocks are now fully funded with Cash Reserve.
Please check out Tom's Equity Holdings to see what AIM can do for an entire portfolio.
This week has ended on a good note. I entered a Sell order for a portion of the UOPIX fund shares I'm managing for my fraternity alumni group. About 8% of the shares will be sold at today's close. We should get about $125+ for them. That account was started just 14 months ago with 50% allocated to Growth and 50% to Income. Because the Growth side has done so well, the allocation is now only 30% Income and 70% Growth. I'll update the graphs for this investment next week after I have the new values.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________52% Unchanged - High Risk Growth Stock Mutual Funds___________35% Unchanged - High Risk IW Risk Oscillator____________________"+2" - Rising Risk |
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Value Line P/E ratio 14.0 + 52 week Treasury Rate 6.287 =____ 20.29 Down 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 27.7 Up 3.0 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 6.9 Up 1.7 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.7 Unchanged Bullish (Zeal) |
A year ago 14% of my account was in the Cash Reserve. This year it is showing 30% of total value. A year ago the Profit/Loss for the account showed a 47% gross profit. This year it shows 151% profit. In other words, the liquidation value of my portfolio is 2.5 times its cost. Again, this is at an all time high.
So, as this market has been screaming ahead AIM and I have been taking profits and funding our overall cash reserve. There's still considerable value at risk in the market, but also considerable purchasing power built into the Cash Reserve. Should the markets go flat for the remainder of the year, the Cash will return Money Market rates of about 5%. This is more than twice Value Line's average yield of 2.3% for dividend paying stocks. Since most of my stocks don't pay ANY dividend, that yield from Money Market Funds is nice padding for my family's income stream.
Looking at the overall mix of equities in my account, the only place I feel that maybe there's room for further adjustment beyond what AIM has accomplished for me is to maybe increase the portion devoted to my "base line" income. This is derived from ownership of a long term bond fund (GSF). A year ago it represented about 12% of my account. Even though I've nearly doubled my position in it from a year ago, it now represents about 8% of the account. Maybe it's time for me to adjust this artificially back towards 12%. Over the last year this bond fund fell in share price to the point that the yield was about 14%. Although not as good a "bargain" as a few months ago, its current yield is still over 12.5%.
So, where do we go from here? Because of the market's unusually high Speculation rating in recent times, I've increased my Buy SAFE (Resistance) on most of my stocks and mutual funds. My thoughts are that if a $30 shirt has recently had its price raised to $50, then it's not necessarily a bargain if it goes on "Sale" for $35. If I sum the P/E of all the stocks I own that have P/E values (some stocks aren't showing any earnings) and take the average, I find my "average", unweighted P/E is 51. This doesn't include my mutual funds, but I'll bet their average P/E isn't much better than my own.
Should the market continue its P/E contraction because of continuing interest rate hikes, I don't want to be using my generous cash reserve too quickly. Value Line's average P/E has already contracted from 16.2 a year ago to 14.0 this week. This contraction has actually been healthy for the broad market. However, as we all have seen, the contraction didn't occur in the Tech Sector, Internet Stocks or most recently the BioTech Sector. Of those three, there's not much in the way of earnings in either the internet stocks or biotechs. The technology stocks do have earnings, but they are very richly valued. Lessened expectations could shave their P/E ratios very rapidly.
For the first time in a while we're hearing some swords rattling in the Far East. It would seem that China is looking for some beach front property. This is the sort of thing which, if it were to get out of control, can make a mess of investor's expectations. If the earthquake that occurred in Taiwan a while ago managed to create some chaos in the market's Technology Sector, imagine what a few troop carriers heading for their shores would do! There's always something like this in the news or just over the horizon. That's why we use AIM in the first place.
Am I Bullish? Am I Bearish? I don't think I'm either. Instead, AIM helps me to just be a sober manager of my Equity Warehouse. I really don't care what happens to the market prices as my AIM Business Plan will handle the situation well. Raising my Buy SAFE won't stop my buying, only postpone it for a while. That should be good enough.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________52% Unchanged - High Risk Growth Stock Mutual Funds___________35% Unchanged - High Risk IW Risk Oscillator____________________"-1" - Falling Risk |
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Value Line P/E ratio 14.2 + 52 week Treasury Rate 6.287 =____ 20.49 Down 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 24.7 Down 12.3 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 5.2 Down 0.1 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.7 down 0.1 Bullish (Zeal) |
The "BioTech" sector is leading the way with 8 of Value Line's best performers for the last quarter coming from that sector. Enzo Biochem leads the list with a sterling 254.8% 13 week gain! Not that ENZ doesn't deserve it. After all, the P/E is only a modest 319, the Price/Book is only 29, and Price/Cash Flow is only a little over 600! With a Market Capitalization of a mere $1.9 Billion and 1999 Revenues of a whopping $44 Million, the stock is selling for just 43 times its REVENUES. What will happen to this stock's price after money managers and investors switch their interest to yet another sector?
If you find youself wanting to actually buy into a new stock or sector, you might look at either of two areas. Value Line's Worst Performing Stocks list is currently showing Specialty Retail as the sector being abused the heaviest by Asset Managers with 11 of the 41 stocks being from there. Food Processing also seems to be on everyone's Don't Buy list. 4 of the 41 stocks are from that area. I have found that when there are many stocks from one sector concentrated on V/L's Worst list, the sector is usually "Over-Sold." I suggest that you go to that sector and look among the best companies listed. There are much worse ways to invest than buying the strongest player in an "out of favor" sector.
Well, AIM has been busy down in the Shipping Department attempting to keep up with orders. We've been FedEx-ing shipments all over the place.
Needless to say this is what I call a "favorable" ratio of buys to sells! Positive Cash Flow is always a nice thing to have here at the warehouse! As you may have noted, the same stocks appear multiple times. I know that my general rule is to not trade the same stock more than once per week, but with the Idiot Wave calling for High Risk, I'm letting the Cash Reserves rise as quickly as AIM and the market will allow. My current overall Equity/Cash ratio is 70/30 including stocks, mutual funds and bond funds. Many of the stocks are now maxed out on Cash Reserve, so I can now start to substitute 'vealies' for Sales. This will help to conserve the remaining inventory and also to allow the overall portfolio to grow, should the market continue to rise for a while yet.
If we owned a warehouse full of the DOW stocks in recent times we'd be looking at a churning price range that might be large enough to trip some AIM trades. The DOW recently passed that statistical point of being off a former high by 10%. Assuming that some individual stocks were probably off more than that it's safe to guess that AIM would be accumulating shares. If one was trading the DOW 30 Index with AIM, it would most likely have also done some buying. Isn't it nice how AIM takes care of you no matter where in the market you invest?
I've had several people comment that they were able to book into the NewYork - NewYork Hotel for our AIM meeting at prices LESS THAN the Group Rate that they offered us. I'm attempting to see if I can get an improvement on our rate based upon this information. In the mean time, please book at the best rate you can. I have found that my own best rate comes when I book flights and the hotel with the same "package."
The Meeting is shaping up nicely. Steve Kaufman has volunteered to get Tee Times for any golfers who attend. Please contact Steve directly via the link from the AIM MEETING Info Page. The various speakers are busy preparing their presentations. We're going to have available Summary Information from each speaker for those of you who will not be able to attend.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________52% Up 1 - High Risk Growth Stock Mutual Funds___________35% Up 1 - High Risk IW Risk Oscillator____________________"+5" - Rising Risk |
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Value Line P/E ratio 14.3 + 52 week Treasury Rate 6.287 =____ 20.59 Down 0.31 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 37.0 Up 7.5 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 5.3 Down 0.6 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.6 Up 0.1 Bullish (Zeal) |
But look at the indexes. Since the IW went to High Risk, the DOW has dropped 2.7%, The NASDAQ has risen 13.0% and please note that the Russell 2000 has also risen 12.7% (as of last Friday). This is the first time in a very long time that the R-2000 has kept pace with the NASDAQ! Maybe this is just one huge Sector Shift sending dollars to the Small Cap Stocks. V/L's 41 Best stocks has 8 biotech or pharmaceutical stocks on it with tech stocks making up the next big group. It's been a very long time since biotech stocks were on this list in those kind of numbers.
After a quiet week last week, I've had an almost frenzied AIM trading period this week:
As you see, there were several times I broke the "once per week" rule. With STKL, it was "Make hay while the sun's shining!" as this stock was short on Cash Reserve until this week. WIth NERX it was "A bird in the hand is worth two in the bush!" as I have waited a long time to have adequate Cash Reserves for this stock. With GENE, it was "Never look a Gift Horse in the mouth!" as it soared into deep space with rocket boosters at full throttle!
I receive quite a bit of mail about whether AIM can work with "penny stocks." I'm not sure it will always work as we must always look at the quality of the holding no matter what the share price is. However, with Stake Technology there's been a reasonable amount of quality along with a fun price range for attempting to make money with a penny stock. I've placed it as this week's example on the AIM Stock Example page this week. Of note is that as of the trade at $1-3/8, the stock price was only 4.5% above where it was in 1997. However, thanks to Mr. Lichello's AIM, the account is 59% of where it started! Not bad, expanding a 4.5% rise 13X!
So, yes, AIM can work with low priced stocks, but we need to be aware of some of their peculiarities. Low priced stocks also carry a very large Bid/Ask range compared to their high priced companions. It's nice to be able to use this to our advantage. I use strictly limit orders with such stocks. The Bid/Ask spread could eat all your profits if you are not careful. Also note that very low priced stocks have many times the percent price movement than high price stocks. If a stock moves from $0.75 to $1.00 it looks like only a quarter of a dollar, but it's a 33% move. In reverse, it's a 25% reduction. This is enough to make AIM happy and for you to trade profitably. Just remember QUALITY FIRST!! We don't need junk.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________51% Up 2 - High Risk Growth Stock Mutual Funds___________34% Up 1 - High Risk IW Risk Oscillator____________________"-5" - Rising Risk |
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Value Line P/E ratio 14.9 + 52 week Treasury Rate 5.997 =____ 20.90 Up 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 29.5 Up 9.5 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 5.9 Up 4.4 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.7 Unchanged Bullish (Zeal) |
This time it's different. All 41 stocks on VL's list are again up 110% or better with 11 being up over 200%. However, if we count back 13 weeks, the market wasn't all that bad! So, these huge gains are on top of already great performances. I'm worried! If I look at the NASDAQ Composite Index my eye tells me that it should be at 3000, not 4000. It gives me a feeling that this fluff is going to rapidly disappear.
That said, I am pleased to say that January appears to have given Veale International Equity Warehouse yet another record high value. I like it when my account goes up in value (even if it's just a tiny amount) when the S&P500, DOW and NASDAQ all suffered losses. Not only that, but my overall cash reserve shifted from about 20% to about 27% during the same time. So, like the Boy Scouts, I'll try to "Be Prepared!" Certainly having that mattress stuffed with Cash is going to be a comfort if the market does fall away.
Well, do I actually expect the market to collapse and disappear? No, but Speculation appears to be out of control. Some of these stocks are flying a bit too close to the Sun and are going to start to melt down. Those 41 stocks that are up over 110% aren't that much better companies than 13 weeks ago. Those 41 stocks aren't better analysed than 13 weeks ago. Without looking, I'm not sure if those 41 stocks even have better earnings than 13 weeks ago.
So, I'd suggest that we stick to AIM's Market Orders, especially on the Sell side. On the Buy side, remember that there might be better bargains later on, so watch your Cash Reserve burn rate. Stretch the time between buys out to two weeks or longer. We want that cash to last to the bottom of the next market cycle. So, what's happening down in the Warehouse?
So, not a lot of activity, but a sure sign that the Purchasing Dept. has been busier than the Sale Dept.!
Here are some tidbits garnered from The Money Show which I attended with fellow AIMers, Keith, Doug, his wife Stephanie, and Bill last week:
The 1990s in review
Telecommunications Voice, Data and Information all merged
U.S. leads World in Technology and Finance
Iron Curtain shreds
1999 has the highest volatility EVER on the Nasdaq Exchange. 58% of stocks go up or down 1% EACH TRADING DAY! Average daily swing was 1.4%
1999 Big brokerages Merrill Lynch and Paine Webber join the On-Line Trading free-for-all
In 1999 over 200 mutual funds gained more than 100%, 24 funds gained over 200% for the year
1999 Federal Reserve raised rates three times and yet the markets charged ahead.
Our AIM Meeting in Las Vegas is now a GO! We have a room reserved at the resort New York New York and a block of rooms is being reserved under the name AIM Group. We'll be getting a room rate of $89/night for single or double occupancy with rooms having two queen size bets. I'll have the hotel phone number, our Group Code Number and other information available at the AIM Meeting page by this weekend. We will be starting the meeting at 8:00 AM on Monday May 15th. The Money Show dates are May 16, 17, and 18, so we'll all be able to compare our own group to those presenters who follow us. I plan on arriving on Sunday the 14th.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________49% Down 2 -Average Risk Growth Stock Mutual Funds___________33% Down 1 -Average Risk IW Risk Oscillator____________________"-7" - Falling Risk |
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Value Line P/E ratio 14.4 + 52 week Treasury Rate 5.997 =____ 20.6 Up 0.20 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 20.0 Down 1.9 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 1.5 Down 3.3 Bullish (Divergence) % change, # of issues on NYSE & NASDAQ_______________-0.7 Down 0.8 Bullish (Zeal) |
Still with three of the four components falling for the week just past, the IDIOT WAVE has relaxed a bit from its recent High Risk warning. I'm sure we all know that RISK hasn't disappeared, but only moderated a bit. When we have a full trading week behind us this week we'll see where we stand.
Speculation continues to be way above normal as measured by my Best/Worst Index. This week 30 of the 41 Best Performers on Value Line's list are up over 100% in just 13 weeks. That's a powerful rally. It also smacks of rabid speculation. It takes over 84% gain in the last quarter to make their Best list while a decline of just 33% puts your stock on the Worst list. This sort of speculative rally begs us to follow AIM's Sell Market Orders as they come along. Keeping true to this, here's my list of trades since last week:
Okay, so I cheated on my one Mutual Fund! I already have plenty of cash reserved for that particular account anyway!
With all this selling that AIM's been doing my overall Equity/Cash ratio has risen from about 20% at the end of 1999 to 25% as of today. The Cash Reserve is also at a numeric all time high. This is quite heartening considering the peculiar action of the markets recently. What's also nice to see is that the number of dollars at risk in the market has remained almost constant during the rally. This is AIM telling us, "If you were only willing to risk $X0,000.00 before the rally, why would you now be willing to risk more?" My overall account is currently showing a 13% gain for the Year To Date! Hard to believe. My "AVERAGE PROFIT" if I were to liquidate all holdings right now is 134%. In other words the cost of my portfolio is only 43% of its current value! This is the lowest cost/profit ratio I've ever had.
I'm heading for Orlando, FL tomorrow to meet up with the StockSystem guys and the Honorary Redneck - Keith Felkins. We'll be discussing the May AIM meeting in Las Vegas. I'll report next week some time.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________51% Down 1 -High Risk Growth Stock Mutual Funds___________34% Down 1 -High Risk IW Risk Oscillator____________________"-2" - Falling Risk |
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Value Line P/E ratio 14.4 + 52 week Treasury Rate 5.997 =____ 20.40 Down 0.10 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 21.9 Down 4.3 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 4.8 Down 0.8 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________+0.1 Unchanged Neutral (Zeal) |
With three of the four IDIOT WAVE Components down this week and one unchanged, it was nice to see the IW drop. Although still in the high risk area for the fifth week straight, it would appear that the risk is moderating a bit. The market might work its way back to more moderate risk without upsetting the whole system. I'm all for that.
With last week's 1999 recap, I didn't post that week's AIM trades. So this week the list looks a bit longer than usual:
Busy, Busy, Busy! Who said this is a boring job? Managing a warehouse is fun and profitable with AIM as your assistant.
My Cash Reserve is building overall, my warehouse inventory value is growing, I haven't caught this year's nasty flu, so life is good! If anything is a bad sign it might be that the markets seem to have taken a break from worrying about things. As a contrary investor, that fact might scare me. At least there's plenty of buyers out there for my inventory.
My energy stocks and fund have stirred a bit in the last week. They've been pretty sleepy for several months. I assume that as Europe and Asia continue to strengthen in their own economies we'll see continued strength in the energy sector.
I'll be sampling what The Money Show has to offer next week in Orlando, Florida. With luck I just might run into a few AIM users there. Show dates are January 26, 27, and 28. Main lectures are free while special focus lectures are "Pay as you go." I'll try to remember to wear something with AIM on it so you can recognize me!
When we gather in May in Las Vegas my time will be committed to discussing AIM with all of you and sharing as much as I can of my own experience. That will not leave much time for visiting the lectures going on concurrently at the Money Show presentations. So, I thought I'd get a head start on all of you! I've collected a long list of email addresses and will be putting together an update soon and sending it out. Please keep your eye on the Email Box sometime in the next two weeks for the update.
Best regards, Tom Veale in Wisconsin
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________52% Up 1 -High Risk Growth Stock Mutual Funds___________35% Up 1 -High Risk IW Risk Oscillator____________________"+2" - Rising Risk |
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Value Line P/E ratio 14.5 + 52 week Treasury Rate 5.997 =____ 20.50 Up 0.53 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 26.9 Up 4.4 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 5.6 down 2.0 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________+0.1 down 0.1 Neutral (Zeal) |
January: "With the new year just starting already we're hitting new highs on the indexes."
IW = 41; DOW = 9181.43; NASDAQ = 2192.69; R-2000 = 421.96
February: "Even if you don't think this is a high risk market, you'd have to admit it's a bit nervous!"
IW = 51; DOW = 9306.58; NASDAQ = 2288.03; R-2000 = 392.26
March: "The Idiot Wave after four week showing high risk is finally coming back down "
IW = 48; DOW = 9822.24; NASDAQ = 2419.17; R-2000 = 393.92
April: "Qualcomm, Inc. topped the Best Performers list giving a magnificent performance after settling its differences with Ericsson over digital phone standards. With a 214.6% gain it's the first time in a long time that an Internet stock hasn't topped the list."
IW = 47; DOW = 10,789.04; NASDAQ = 2542.85; R-2000 = 432.81
May: "The Summertime Blues seemed to have arrived a bit early this year with the major indexes falling and the Idiot Wave rising."
IW = 49; DOW = 10,913.32; NASDAQ = 2527.86; R-2000 = 443.13
June: "Summit Technology continues to lead the Value Line Best Performers list as it says "BEAM me up, Scotty!" Summit's new peak is up 220.8% in the last 13 weeks."
IW = 51; DOW = 10,552.56; NASDAQ = 2552.65; R-2000 = 443.50
July: "I noted we crossed the 22,000 reader mark today with this new edition of the AIM/Idiot Wave Newsletter. Hard to believe! Hope Mr. Lichello knows how popular he's become!"
IW = 50; DOW = 11,209.84; NASDAQ = 2864.48; R-2000 = 465.26
August: "Every once in a while, like a boiler who's thermostat is stuck, the market must blow off some steam. Last fall did a quick job of getting the pressure under some control, but nobody seemed to do anything about the thermostat. It just went straight back to High Fire and pressure started to build again."
IW = 49; DOW = 10,714.03; NASDAQ = 2547.97; R-2000 = 428.04
September: "I noted that Japan OTC fund (JOF) had made its mark on the Best Performers list in Value Line this week with a gain of over 48% in 13 weeks. The volatile Yen has been making for some big moves in Japan's markets in recent times. Just last night on the back of the Taiwan earthquake and a strengthening Yen, the NIKKEI had its largest point loss so far this year."
IW = 45; DOW = 10,279.33; NASDAQ = 2740.41; R-2000 = 417.09
October: "for the 7th consecutive month it's achieved new record highs. For the 12 months ending in September, my account has essentially doubled in value. For the year to date, it's up about 42%. But being a good AIMer, that's only part of the story. My Cash Reserve is up 510% from a year ago and 240% for the year to date. What this means is that there wasn't much cash left a year ago!"
IW = 43; DOW = 10,019.71; NASDAQ = 2731.83; R-2000 = 414.70
November: "After much pain and suffering on the part of Buy & Hold Investors, the Idiot Wave has settled back to its 18 year average value."
IW = 41; DOW = 10,704.48; NASDAQ = 3102.29; R-2000 = 442.41
December: "The most encouraging component of the four IW puzzle pieces is the Relative Valuation figure."
IW = 52; DOW = 11,522.56; NASDAQ = 3882.62; R-2000 = 488.31
1999 RESULTS
R-2000 UP 15.7%
DOW UP 25.5%
TOM'S ACCOUNT UP 54.3%
NASDAQ UP 85.4%
It would appear that 1999 turned out to be more of an AIM trading year than many we've had in the past. However it didn't have one really big price dip like 1998. All in all I'm pleased with the results. It would certainly look like there's still plenty of room for the Russell 2000 to improve in the future. I guess we could also say that there appears room for the NASDAQ Composite to go through a correction! As the Idiot Wave is showing, risk is high with plenty of speculation built into the prices of the highest flyers.
There are still plenty of low P/E companies around and many trading at or below their book value. These may not be the next DOTCOM leaders, but they might provide good AIM trading with decent yields as well. AIM is very contrary by nature and picking stocks in contrary fashion at this time might be justified. A friend of mine brought up "Wealth Effect" as a potential theme for analysing stocks. Why not try to find investments where new found market wealth might be helping sales and earnings? I'm off to the library to get going on this idea.
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Suggested Cash Reserve For New AIM Accounts Using: Individual Stocks____________________51% Up 1 -High Risk Growth Stock Mutual Funds___________34% Up 1 -High Risk IW Risk Oscillator____________________"+3" - Rising Risk |
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Value Line P/E ratio 14.3 + 52 week Treasury Rate 5.67 =____ 19.97 down 0.1 Neutral (Relative Valuation) Veale's Best/Worst Index ______________________________ 22.5 down 1.7 Bearish (Speculation) NASDAQ Hi/Low Logic Index__________________________ 7.6 down 0.4 Bearish (Divergence) % change, # of issues on NYSE & NASDAQ_______________+0.2 up 0.1 Neutral (Zeal) |
So, what should we expect for this new year? It would be hard to imagine that the markets could be better than last year. I bet every one of you would like 2000 to be as generous! If it were it would mean that I'd be blessed with two 54% gains back to back! Well I sort of doubt it! My own efforts in 1999 are recorded for your viewing at 'Tom's Account' and show this to be the second best percentage year I've ever had and the best in terms of total dollar value.
The IDIOT WAVE is signalling for the third week a high risk market condition. Although all four components aren't in sync giving bearish signals, we shouldn't ignore the very high Cash Reserve request by the IW. I think it's obvious to everyone that there's been a bit too much speculation in certain stocks. This is confirmed by my Best/Worst Index. For instance, this week it takes a gain of over 80% to get a stock listed as one of Value Line's Best Performers for the last 13 weeks. It only takes a drop of 39% to get on the Worst Performers list. The best performer for the last quarter, Cognizant Tech., managed to only go up 265%.! Will the bubble pop or just leak down to a more manageable pressure? I think a mild correction will occur, but it will be limited to those high fliers from 1999.
Since the last report AIM and I have been busy down at the Warehouse. Last minute shipments for the end of the year were sent and received. Here's the list:
So, here we are in the middle of a high risk event and we have almost an even mix of buys and sells over the last week. All's well in Shipping & Receiving.
One of the reasons I think that a correction will be short lived is that the Relative Valuation index is showing the lowest level since the Fall of 1998. With all the fat P/E figures around it's hard to believe that Value Line's average P/E is just 14.3 right now. Of all the IW components, Relative Valuation has tracked the market's moves the best. When in the low end of its Neutral zone, the market's downside isn't too bad. I guess we'll see soon enough!
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