A total of 11% of our readership recently has come in the form of non-U.S. internet users. Fully 5% of the readers come from 18 different countries as represented in the "Other" category in the graphic shown below. It takes readership of 1% or more from an individual country to have it identified by itself.

REPORT - WEEK OF 11/25/2002:

REPORT - WEEK OF 11/18/2002: Many reports are coming in from Equity Warehouses around the World. The reports are that there's finally some demand for inventory that's been building up for a long time. We were careful and added to our positions when we could and now, after a long wait, we're finally getting some positive cash flow from those purchases. In my own warehouse I had three sales in just one day. IBB, VTSS and CGNX all shipped some inventory out as sizable LIFO gains. I've updated all my open orders to make sure that my customers know there's inventory available at the right price.

These sales are coming along at just the right time as we see the Idiot Wave risk profile rising back into the Average range. The rapid rise in stock prices from their lows this Autumn has pushed the Speculation component back into the Bearish zone. With the Best Performer in all of Value Line, (Quest Comm.) currently showing a 13 week change in price of 240%, it's no wonder that the IW's Speculation index is starting to wave a red flag of caution. However, we still have two components Bullishly keeping us in the market. Divergence has risen to being in the Neutral zone, but this in and of itself isn't too worrisome. It's indicating that there's some surprise with the strength in the market and also reflecting the two weeks of consolidation we've had.

This isn't a time we should forget about the AIM strategy. We need to realize that the October lows that made us feel so badly can't be replace with the dreaded "irrational exuberance." Keep your finger near the Sell button and execute AIM trades as they are suggested. These long months of our having been fully invested with no cash reserves appear to be coming to an end. AIM's going to want us to refund the cash as quickly as the market prices allow. After being out of ammunition for so long, it's nice to be able to put some fresh powder and lead shot on the shelves of the Magazine. It looks like we may have survived to fight yet another battle.

The Idiot Wave has set a goal for my Warehouse business to raise the cash reserves to as high as 33% this week. It's not going to happen that fast, but with each sale we will rebuild the reserves as quickly as the market will allow. I look forward to the time I have to start to "worry" about having too much cash on hand!

I plan on freshening the IW Component graphs for everyone's review. Check back on Friday for those at the Idiot Wave page. There you can see where we've been for the previous 18 weeks and where we may be headed now that we've ended this long string of Low Risk weeks for investors. Speculation is starting into its chant of "Too Much, Too Fast!" so we have to pay attention. After two weeks of consolidating the October rise in prices, maybe we can get to the next plateau and again rest. If we cycle between rises and rest periods, we may keep the Idiot Wave from shooting all the way to High Risk for a while. Currently I am guessing we'll see a High Risk signal sometime in early to mid January. I'm hoping to have more profit opportunities along the way before that time comes.

REPORT - WEEK OF 11/11/2002: Last week and most of this one have been spent consolidating gains made in the previous month. The DOW Industrials gained modestly while the NASDAQ and Russell 2000 gave back tiny amounts. The consolidation showed up in the Idiot Wave as no change in general risk profile. Inside, however, the Divergence component is starting to believe in the rally that occurred in October. The last week saw the first number of new highs larger than the number of new lows for the first time since the week of May 27th! That may be some kind of record for my data base. The number of new lows was small enough to return this component to the Bullish range.

My second sale in my refurbished Retirement Account has occurred. This account had been in a single diversified mutual fund but has now been changed to include five Exchange Traded Funds and a Closed End Bond Fund. This most recent trade was a sale of 9% of IYW at a price of $34.70 and a profit of 14%. The shares have been in the account since mid - September. In a taxable account we liberated 10% of our APCC shares at $14.46 for a handsome 34.5% LIFO gain. (See American Power Converter History) Another sale occurred just today with BSX selling 6% of its inventory at $39. The long string of sales has occurred with no recent chance to recycle the cash reserves. (See Boston Scientific History)

For me, it is nice to have an occasional sell order trip. It seems like FOREVER since I've had a decent string of them. If the market can have upward moves with consolidations and no major set-backs, we may yet see a nice rise through the end of the year. To get back to where the year started, the DOW needs to rise nearly 19%, the NASDAQ Composite needs to gain back almost 42% and the Russell 2000 a healthy 30% must be tacked on. This gives us a feel for what kind of year it's been. I don't think we should count on the year being "break even." But even part of that would be nice to have back!

I'm watching the Idiot Wave components carefully for signs that the market might be coming to a boil. So far the temperature has been rising with no concern of it spilling over. Readership here and posting on the AIM Bulletin Board has been picking up and I've noticed a bit more posting on the individual Stock threads at Investors Hub and Silicon Investor. It appears to be a good sign.

REPORT - WEEK OF 11/04/2002:

Back in July (NASDAQ - 1373, DOW - 8684) when the Idiot Wave (IW) first descended into the Low Risk range for this cycle I took some time to explain what was happening. I feel it is important to you, the reader, to have a feel for what is happening with the internals of the IW as well as the overall view. So, now that I'm seeing signs that this Low Risk period is coming to an end, it seemed a good idea to repeat the process.

The component rules are that any one of the components can push the Idiot Wave into a risk zone other than it would be. This week we have two in the Bullish and two in the Neutral areas. This isn't alarming in its own right. When you review the graphs of the components below, you'll see what I mean. The trend is showing us on three of the graphs that we are heading back toward the Average Risk range, but we still have a way to go.

First is Relative Valuation. It is still quite bullish even though it has risen quickly from its recent low point. Prices would have to rise 23% with earnings and interest rates remaining flat to put this component in the BEARISH camp. I welcome that sort of rally.

Speculation is starting to exhibit its "knee jerk" reaction to the market lows of recent times. This measure is always looking back 13 weeks to see how far the best and worst stocks have moved. It's still neutral, but once some of the recent gains show up in this component it will most likely go back to being BEARISH. If the market rises too quickly this could be a tripping hazard so we'll keep our eyes on it.

As the market shifts from decidedly BEARISH to neutral, there can be much confusion. Many will guess that the rise is a "bear trap." Others will speculate that this is the "real thing" and we're heading higher yet. By measuring the new highs and lows each week we can gain some insight into the level of confusion, or what I call Divergence in the thinking of investors. Here again we can see a rise from the recent Bullish stance. Too early to be of concern, still this is a direction indicator at this point which we shouldn't ignore.

The available number of issues to be traded on the NASDAQ and NYSE continues to shrink. This is generally bullish as it tends to concentrate investment money in the remaining issues. The graph shows that this has been a very long trend. Not shown on this graph is that in 1983 and again in 1993 there were huge spikes in this component sending its raw and smoothed data high into the Bearish camp. We'll have to watch to see if this spector returns in 2003!

With 17 weeks now indicated as Low Risk and the DOW and the NASDAQ barely changed from the beginning, I think the time for true Low Risk buying may be drawing to an end in the next few weeks. Much depends upon how much profit taking there is in the early stages of a recovery. If we see healthy dips from selling throughout the rally, we could sustain the Low Risk enviroment for another month. If the money flows into stocks too quickly, we could see the Idiot Wave back at High Risk by the beginning of the New Year.

Keep to your Business Plan and make sure you take profits as AIM dictates.

REPORT - WEEK OF 10/28/2002: Sixteen weeks with the Idiot Wave showing Low Risk for adding to our portfolios, doing AIM buys or starting new AIM accounts. All this while the markets have been slowly building a base. The Dow 30, Russell 2000 and the NASDAQ Composite have all risen three weeks in a row. The NASDAQ alone is up over 16% from its lows of early October. With the broad averages up as nicely as they are I hope you are starting to get some AIM designated Sell trades in your accounts. My Equity Warehouse has increased in value about 10% so far this month.

At V.I.E.W. we have had a sale of 6% of our IBB fund at $51.58 and 4% of our CGNX shares at $19.91. The IBB account was just started in my IRA in mid September while I've owned CGNX since the early 1990s, through many market cycles of this capital equipment company. Both sales were nicely profitable.

As we see many times when the market is attempting to change direction, our "Divergence" component has moved from Bullish to Neutral. This indicates that there's some confusion about which way the market will turn next. The divergent opinions discussed in last week's newsletter are part of this same phenomenon. For me, this isn't a worry, it usually spells Opportunity. It makes for a choppy market where I may get several "round trips" of selling and buying as the market turns the corner and leaves the BEAR behind.

There's so much activity at our AIM Bulletion Board that some days it's been hard to keep up. This increased posting seems to have coincided with the market's recent turn upward. The low point in posting coincided nicely with the market lows of early October.

Lucky for us, we don't have to know "why" these changes take place. As AIM users, we only know that once the changes happen, we will know just what to do. No muss, no fuss! If we are using "good 'til cancelled" orders with our accounts, then it's really easy. The orders will fill when our short term goals are met. All we need do after that is set our next ST goals and place GTC orders to handle them.

Traditionally October has been a nasty month for investors. This year it did inflict its wounds early in the month only to rebound nicely to levels not seen since before September. There are still ghosts and goblins out there so watch your step! Be careful of Trolls and Headless Horsemen on Halloween! Then there's tax selling season and elections and all those other headline news items. Looks like it's business as usual!

REPORT - WEEK OF 10/21/2002: We have a new all time record for the Idiot Wave this week! Never before have we had the IW cast such a deep shade of GREEN to the risk level. Riding primarily on the drop on the Value Line P/E ratio, the IW dropped and the Oscillator again shows falling risk. This is week 15 of the current low risk period. Again Nextel's 13 week rise (up 139%) skews the Speculation component to be Neutral. Substituting the next best stock in that same period (being up just 60%), Speculation would be bullish and would bring the IW to an even lower risk value. Whether the BEAR MARKET continues or not, it would seem that investments made in this time frame will be rewarded nicely in the future.

There are days when I feel a bit like the Mr. Rogers of Wall Street! Every week I come here and tell everyone it's a "Wonderfull day in the neighborhood!" Sometimes it seems the neighborhood is going to the dickens and other times it seems property values are on the rise! Well, boys and girls, it's really a matter of whether we take Mr. Trolly to the land of make-believe or not! A friend who's been suffering the Blues recently told me that the news on CNBC hasn't been very optimistic. I challenged him to tell me of a single instance in all the years he's been watching CNBC where he actually made money from something he heard there. My second challenge was to tell me of a single instance where what he heard on CNBC prevented him from losing money. So far he's not given me a reply. Herb Vic on Silicon Investor said that CNBC stands for "Cheerful News, Bad Commentary" but Jimbobwea thinks their introduction should be "Live! From the corner of Wall Street and Sesame Street!". Jorj thinks CNBC is where "Crazy Nut Balls Convene" while all this time I thought it meant "Can Never Be Clear!" I suggested to my friend that he find something else to occupy his time in retirement, hang up his sweater and put his tennis shoes away.

In the press, it seems that there's a serious divergency forming. One side seems convinced that we have at least two full years of BEAR market to withstand while the other side is equally convinced that the market place is now ripe for a rally. The Idiot Wave is weighing in on the side of the rally supporters. Uncertainty about the future is really the reason why we invest using AIM. Whether the Idiot Wave is right or wrong hardly matters in the long run. It is already known that AIM will do its best to help us no matter what circumstances it sees in the future. In BARRONS this week, (Page 42, 10/21/2002) the article "A Long View" tells of every bear market and its duration throughout modern history. The author wanted to make the point that the last 20 years have conditioned people to think that Bear markets are short term events and only happen once in a great while. His facts indicate otherwise. To me, the important part of the article was that AIM could have helped people for nearly two centuries here in the United States. Too bad Mr. Lichello didn't publish sooner!

REPORT - WEEK OF 10/14/2002: If it weren't for the nearly 190% run up in Nextel's price/share in the last 13 weeks, all four components of the Idiot Wave would still be in their respective Bullish territories. However, to keep revisionism out of the IW's data, I've chosen to stick to the facts. As it is, we had 16 straight weeks of Speculation in the Bullish range and the IW's been Low Risk now for 14 weeks. Did the fact that we had four UP days on the major exchanges recently mean that there's no room for new investments? No. But please be careful not to ride any coat tails that aren't securely fastened to solid fundamentals!

Relative Valuation has been getting more and more favorable each week since May 13th when it peaked at 22.77, a decidedly BEARISH value. Now with it showing 16.72, it's just as decidedly BULLISH.

I mentioned the Nextel effect on the Speculation component. Here you can see what it is doing to this component.

Although a bit of unreliable data has come into the Divergence component in the last month or so from BARRONS, it, too , has remained quite bullish.

Finally there's not over-heating of the IPO market evident as of yet. I occasionally hear of IPOs being mentioned on CNBC, but this graph says there's not much pressure on the markets from that activity.

Only BSX was kind enough to move to a trade price for me in recent times. AIM managed to sell an additional 12% of the shares to an anxious buyer. This brought the account back to 26% Cash Reserve and keeps it near an all time high value.

I continue to keep the trade resistance of my AIM accounts against the Buy side to conserve cash. "Vealies" in conjunction with the Idiot Wave Cash recommendations will be used to conserve shares as prices recover.

September showed another good month with additional readers from across the globe. Thank you all for keeping the AIM site popular with rational investors!

REPORT - WEEK OF 10/07/2002: A horrible week just wizzed right past us. Broad averages dropped between 2% and 5% while an unending barrage of bad news seemed to sweep the market each day. By week's end the markets were screaming, "When will it ever end?" It appears that the quarter just ended took the largest single amount of money away from traditional domestic stock funds in all history. "Well," says the optimist, "there was lots of fat to be trimmed anyway." That fat, was many people's hopes of retirement. Were they false hopes? No, but their confidence in the markets was falsely built on quicksand. A fair question would be to ask if the active stock fund managers' fees can possibly be justified. Were there no alternative strategies these professionals could have used to stop the bleeding of their customers' accounts?

We're now more than half way to the old record of 21 weeks of low risk. We haven't seen anything but the Speculation component rising much. Since the Speculation component is based upon a rate of change from 13 weeks ago it's no surprise that we're seeing some rise there. Still, the bias is showing essentially no speculation in the broad traditional markets.

As if to add to my own concerns, this week BARRONS goofed up their DATA for the NASDAQ Composite in their "Market Laboratory" section. I'll be writing once again to their email addresses in the hope that someone will get the proof reader back on staff! If you would also like to write to them, please feel free to contact them at:
BARRONS EDITORS
Here's what I've sent them:
Dear Dow Jones/Barrons, Again this week (Oct. 07, 2002) I've found what appears to be a data error in the Market Lab trading statistics.The section title is "Market Advance/ Decline Totals" Subtitle "Week Ended Last Friday Compared To Previous Friday" The NASDAQ weekly totals for Advance, Decline, New Highs, New Lows and Total Issues Traded seems to be exactly the same as what is shown for the AMEX in the adjacent column. You will find this data on the first page of the Market Lab section on the right hand column. The error is apparent because the weekly totals are always larger than the daily summaries and in this case they're not.

This is the third error in the last two months. I've written twice before regarding the other errors noticed. Some confusion exists in the email address shown in BARRONS index section. It shows editors@barrons.com as the place to write, but that address is non-functional. "Odo Barron" was kind enough to forward my note but I've not heard a response.

This data is something that I've tracked since 1982. In all those years there's been no noticable errors before. Now I've seen three in a short time span. I would love to have the corrected data, but what is more important to me is to have you be aware of this problem in the hope that it won't continue.

I appreciate your time in looking into this matter. If possible for you to send the corrected data via email I would be most grateful.

Best regards,

You may want to compose your own note, but this is an idea of what I think is needed to get their attention. Thanks for your assistance.

I hate having the data compromised, so I've just listed this week's data as the same as last week's on both DIVERGENCE and ZEAL. I'm confident that we're not being misled by these errors. The measure's components are all still in their respective Bullish zones. This week's Value Line P/E dropped again and is now down to the LOW we saw briefly after the WTC/Pentagon attacks a year ago. It was from this P/E low that we saw an eventual rally which took the NASDAQ up about 33% and the DOW up 17%. Maybe we'll get lucky and again see a rally. What was interesting is that over the next six months the Value Line P/E rose from 15.4 to over 21! The DOW thirty continued to rise during that time, but by March the NASDAQ was again falling on hard times.

So, can we see a rally from these levels? Yes it is possible. Can we see further decline? Yes that's possible, too. The Idiot Wave indicates that we're more likely to see a rally than a further decline. Please understand that the Idiot Wave doesn't listen to presidential speeches nor does it read the London Times. The IW doesn't know who Saddam is or anyone named Bin Anybody? It did respond to the WTC/Pentagon attacks, giving us a clear Low Risk signal that allowed many an AIMer to make some short term progress by the end of 2001. I just don't know how long we'll see the IW stay at low risk this time. We're now past the half way point to a new record in Low Risk time. We've bounced off the former all time low risk level a couple of times now. Another gruesome week or so and we'll have another chance at a new record IW low.

REPORT - WEEK OF 09/23/2002 & 09/30/2002: Eight days away. I was in a near total news vaccuum for the entire trip. Hurricane Izador (sp?) came and went; Lili's now stealing the headlines. It doesn't appear that I missed any news at all regarding world politics. Maybe I should extend my News Vacation!

Looking over my ticker list it doesn't appear that any of the stocks were attempting to make me happy while I was away. There were a couple of trades, however.
- Sold 5% of BSX at $36.95 (at the open on a GTC order in at $32.50)
- Sold 5% of ACG at $8.25
- Bought 6% more IBB at $43
- Bought 6% more IYC at $36.84

So, it appears that the Warehouse ran smoothly even in my absence. I can't say as much for the rest of the market indexes. The NASDAQ Comp. gave back yet another 7% as well as the Dow Industrials. So, it's no surprise to see that the Idiot Wave has remained solidly in the Low Risk area where it's been lodged for 12 weeks now. If you look at the component values you'll see that some are inching their way back up toward their own "Neutral" territories. When this week's data is recorded we should still be in the Low Risk area but it remains to be seen if we'll still have all four components giving Bullish readings.

Since the IW first signalled Low Risk the Dow has dropped 11.4%, the NASDAQ Comp. is down 12.7%. Interesting that they are tracking this closely. It also shows that the first day of Low Risk doesn't mean the ultimate market lows. It was July 15th when we got our first official reading of below average risk. We're now more than half way through the longest time the IW's remained in such shape. In 1991 it signalled low risk for 21 weeks straight.

It is hard to imagine what will finally remove the gloom from the markets. Anticipation of improved earnings seems way off in the distance. The Price/Earnings of Value Line has declined, but only in step with the market averages. Short term interest rates remain steady while long term rates have declined slightly. The confusion over potential Middle East problems will continue to weigh heavily on the market. Once some resolution is reached (the markets don't care which way) we'll see some side-line money return to the market for longer than a day.

While aboard ship last week I read all about the Great Lakes in National Geographic Magazine. 20% of the Planet's surface fresh water is contained here. A rain drop falling in Chicago takes over 100 years to flow out through the Straights of Mackinac and into Lake Huron. Not to be out-done, Superior takes over 160 years for a complete water change. If one were to spread the water of the Great Lakes over the entire continental United States, it would be nine feet deep (three meters). So, next time you have a cool glass of water, think of these huge lakes.

One of the lectures aboard ship was "Perspectives From Space" by U.S. Astronaut, Jack Lousma. Mr. Lousma was the third person to fly the Shuttle into Space. He spent two months aboard the Skylab in 1973. His talk was excellent and accompanied some great footage he'd taken with his "Super 8" movie camera. In summary he mentioned four items as his perspectives:
- National borders aren't visible from Space. It's all one world. Borders are constructs of Man.
- Any time he was in Space there was some form of warfare taking place somewhere on Earth. It was not visible to him. Ideology is yet another human construction that turns invisible from a distance.
- Amazing technology was required to put him in Space. From where he flew, he could see the mountains, deserts, oceans and Great Lakes. He knew there were areas of starvation on Earth. He knew if the effort used to put him in Space could also be used on Earth that fewer people would have to starve.
- SkyLab and the Shuttle were essentially "closed systems" and care had to be used with the available resources to complete their missions. Looking out the porthole at Earth showed him that Earth is only a larger Closed System. It, too, requires care in use of resources to be able to complete its mission. His view truly showed "Spaceship Earth."

Sadly there are still too many people that just don't get it. Maybe Mr. Lausma's view will become more the prevailing one and help end the distractions here on Earth.

REPORT - WEEK OF 09/16/2002: Unfortunately again this week there's an error in BARRONS data for the number of new highs and lows for the NASDAQ and also the number of issues traded. I'm again attempting to get proper data from them with a letter to their editors. So, for my Divergence indicator, I'm having to use average data for the recent weeks instead of actual. As you can see, we're still well below the Average Risk range and near the record lows set at other times.

An odd thought occurred to me while writing to a fellow AIMer. I was lamenting the fact that the data on which I've based the Idiot Wave doesn't go back any further than 1982. One part of it only goes back to 1986. What a joy it would have been to have gathered the data for the 1965 to 1974 period in the markets. It would have been able to give us many clues as to how a bubble looks. It could also have shown us what happens after the bubble starts to deflate. Then I realized that I was in fact collecting such data at this very time! What we've been gathering here in the form of the Idiot Wave components will be valuable again some day when we look at the markets of the future.

If these bubbles only occur every 30 years or so (once a generation?) I may have to depend upon one of you to review all this history for future AIMers! Thirty years added onto this aging body isn't something I like to think about! I did see Jack LaLane on TV the other evening. The interview with this 88 year old lifetime health and fitness guy was inspiring. Heck, if I can get this carcass in shape, maybe I can make it another 35 years!

I'll be celebrating my birthday next week with an 89 year old aunt, an 87 year old uncle and a cousin or two. So, if I can behave as well as they have over the years, maybe I can report to you on the next Bubble in the stock market when I'm their age! Because of this birthday you'll have to wait an extra week for the next IW report. I'll be off line for the entire week most likely.

TRIM TABS reported that there was again net redemptions in U.S. Equity Funds in August. $8.8 Billion moved to some other area and away from equities. This is much improved from the estimated $47 Billion that was taken out of U.S. Stock Mutual Funds in July. Many Gloom And Doomers are now wondering if even a transfusion will help the poor anemic markets. It was interesting to note that Growth & Income funds gave up more in redemptions than did Technology funds in August! I guess there's not much left to redeem in Technology!

September so far hasn't been very glamorous. Both the DOW and the NASDAQ are off from the end of August. The Russell 2000 has been holding steady. September hasn't had a very good reputation in the past. I'm beginning to think that it's not trying to redeem its reputation this year either!

In the last week or so I've started to notice certain stocks making quick moves to the up side then a slow retreat. This morning I read an article indicating that insiders at several semiconductor manufacturers have started to buy up shares of their own stock. Maybe it's coincidence. Another coincidence I noticed in Value Line this week was that Westpoint Stevens is now down over 60% and firmly on the Worst Performers list. Back in June it was the Best of the Best showing a gain of over 136%! Now that's a dramatic bit of movement! Guess they were playing "Good Stock, Bad Stock" with this one.

I have now rolled my Individual Retirement Account over to a discount brokerage from the diversified mutual fund account I'd been using since 1990. I split the $$$ up between ACG, IBB, IYC, IYE, IYG, IYH and IYW. Each is set up as an AIM account with its own cash reserve allocation. ACG received just shy of half the total allotment while the remainder of Exchange Traded Funds received 1/6th of the remainder. ACG is set up with a 60/40 ratio of equity to cash. The others were set up 77/23 to start. It is my feeling that these sector funds offer greater chance to capture volatility than did the diversified fund I used in the past. I feel each has possibilities long term, so have made the move as of yesterday. I'll keep you posted as to the results.

REPORT - WEEK OF 09/09/2002: A year to remember that many would just as soon forget. As we think back on the uncivilized acts of a year ago and how it changed our feelings about our civilization please remember that we survived and to a greater degree have prospered. Should you care to see what was said last year at this time please look at the Achives.

The tough stock market over the last two weeks took some points off the averages and lowed the Idiot Wave's market risk down to near record levels. I find it interesting to note that in March of 2000, all 41 of the Value Line "Best Performers" were up over 100%. Now, under decidedly different circumstances, there's not even one that is up 60%! The bottom of the list is up just 10.5% in the last 13 weeks. Compare that to it requiring over a 62% loss to make the Worst list at all and the "baddest of the bad" is down over 84% in the last quarter. "Oversold" is what it says to me.

The number of new 52 week lows still continues to overwhelm the number of new highs on the NASDAQ. The NYSE, however, is now posting more new highs than lows. We seem to have two separate directions for the two markets. Upon closer inspection it appears that both exchanges have fewer advances than declines, but the bad are getting worse while the good are getting all the attention. It almost looks like what we see during Year End tax selling. Very interesting!

Dreyers Grand Ice Cream continues to be the best stock in Value Line, up 57.3%, where it's been for four weeks. Guess all those company picnics did them some good! AmKor Tech. appears to be rotten to the Kor as its stock fell 84.8% in the same period.

Value Line's P/E has been quite jumpy lately. Small shifts in share prices seem to have a great effect on this statistic right now. My guess is that there's so few companies with earnings, that the price change of any one of them is influential. As companies start to move back to the profit side of the balance sheet, their initial P/Es will be quite large during recovery. This will undoubtedly bias this particular data toward the Bearish side later on this year or next. For now I'm content to see it reside on the Bullish end of its range along with the rest of the IW components.

We passed the 5000 post mark on Investors Hub this week. That landmark took just 7 months from when we moved there. Thanks Everyone for making it a worth while place to communicate.

REPORT - WEEK OF 08/26/2002: Seven weeks into this Low Risk period and it appears that the markets are still feeling uneasy. Maybe we've not yet seen the ultimate market lows of this cycle. But wait, the NASDAQ rose 1% last week along with the DOW and the Russell 2000. The NASDAQ and the Russell 2000 have risen three weeks in a row while the DOW just finished its 5th week of improvement. The DOW has risen from its Friday, July 19th closing low 10.6%. The NASDAQ and Russel 2000 have risen 9.4% and 4.6%, respectively. These statistics don't eliminate the terrible bashing the market has suffered since January first, but it helps.

Have wee seen the cyclical lows or is this just a plateau before the next big fall? A lot depends upon things that the Idiot Wave doesn't measure. We can, however, see some strength returning to the marketplace in the rise of all four components of the IW. The Value Line P/E has steadied out along with flat short term interest rates. Speculation remains very low. Divergent thinking has risen showing a bit of confusion about the next market move. Finally, last week we saw the smallest number of issues traded on the NASDAQ since January of 1984! The number of issues peaked at 6136 in December of 1996 and has been slowly declining since then to the current 3984 issues. Over 2000 company names have merged, failed, moved to the NYSE or otherwise disappeared in six years!

All the Idiot Wave Component Graphs are available for your review on the IW page. You'll have to scroll down to see them all.

Although several of my equities rose in value last week I had no Sales. The Sales Dept. isn't to blame. AIM and I set the prices according to our business plan and those prices will remain in effect until a buyer is found. Gee, maybe we should try direct mail marketing. Just stick some certificates in envelopes and mail them out to prospective buyers. If they want them, just return a bank check, if not, mail them back! Now I'm going to have to come up with a mailing list.

August is usually a slower month for readership of this newsletter. However, this year we're nearing an all time high and still have a week to go. Maybe it's the way the market it. Maybe it's the expansion of the Internet world wide. Maybe people just like to see me embarrass myself publically week after week!! In any case, thank you all for sticking with AIM during the last 2+ years. Our rewards are yet to be realized, but our inventories will be more valuable in the future.

REPORT - WEEK OF 08/19/2002: NOTE - I'm unsure of the Divergence and Zeal values this week. BARRONS weekly data for the number of issues traded as well as new highs and lows look suspect for both the NYSE and the NASDAQ. I've made an attempt to contact them but have not yet heard back on the possible error. To keep the IW conservatively estimating risk, I've just used last week's values for now. I assume by next week the error will be resolved. If the numbers were correct, we'd have a new record low for the IW.

The Value Line "Best Performers" list is really a sad looking group compared to more bullish times. #41 on the list is Cognizant up just 6% in 13 weeks with #1 being Dreyers Grand Ice Cream up a chilly 43.8%. By comparison, #41 on the Worst list is down 68.2% with #1, Petroleum Geo ADR, being greased with a loss of 92% in 13 weeks. It currently is a lot easier to get on the Best list than on the Worst. This over-sold condition is good news for us. A rally should come along which will bring us back to a more neutral stance (and put some profits in our pockets, too).

Last week's gains were impressive for the NASDAQ and the Russel 2000 with +4.2% and +7.5%, respectively. The Dow didn't do quite as well showing +0.37% . It may take some time for the averages to move back to even where they were at the first of the year. There have been sellers and buyers all along the way which could mean a multitude of upward resistance points. Many of the AIM users are now starting to report that their accounts are closing in on the Sell side of AIM's hold zone. Congratulations to those of you who stayed with the Program all the way through. In my wife's account last week, we got our first AIM Sell in a long time:

I hope your own accounts follow IBB's lead in turning in some capital gains soon!

REPORT - WEEK OF 08/12/2002: For the first time in many weeks we had the major indexes moving up week over week. It was the first week that the NASDAQ closed up since the Idiot Wave started signalling Low Risk. Although the Smoothed data for the IW continued to drop this week, the rate of decline was less. Also, the Raw data shows the IW actually climbing a bit from 20 to 23 this week. I think it's still too soon to say whether we saw a turning point or not.

One thing is for certain. V.I.E.W. is having to lay off people in the Purchasing Dept. as there's no money left to spend.

Since the end of July the account seems to have stopped falling apart. Or at least the decay has slowed. I only have one or two equities that are anywhere near a selling point. Even these few that are near selling, however, were much lower two weeks ago. Maybe we'll move into a news driven zone of trade for a while. It seemed that way on Tuesday when the FED decided to leave its rates alone for now. The news caused a quick drop in the indexes followed by a rebound. Then as the day waned the markets absorbed the rest of Mr. Greenspan's comments and sold off the indexes to the lows of the day. Apparently Mr. Greenspan doesn't think the patient is ready to be sent home yet.

REPORT - WEEK OF 08/05/2002: Nine weeks ago the NASDAQ Composite Index stood at 1615 and last Friday it closed at 1248, down 23%. Nine weeks ago the DOW stood at 9925 and last Friday it closed at 8313, down 16%. Nine weeks ago the Idiot Wave was still in the High Risk area at 50% and now it's indicating only a 20% Cash Reserve is needed. The evidence is quite clear. The High Risk readings we'd seen back then were real.

For 4 weeks we've been getting Idiot Wave readings showing Low Risk (less than 30% cash indicated). This week shows the second week where it's been tied with the former low set in late 1987. The DOW has dropped about 4% and the NASDAQ about 9% since the earliest IW Low Risk signal. So, most of the damage was already done when the IW first said it's time to load up on stocks.
(note that I discovered I'd made an error in last week's data. The IW actually hit 20% a week ago.)

Is the Idiot Wave going to be right again? Are we just finishing the basing that always seems to be necessary to have a rally? Have we already seen the ultimage market lows? So many Questions to be answered! Today a fellow AIMer, Marcia, asked me, "Now that I'm out of CASH, what do we do?" I smiled and said, "Pray!" and she laughed. She's only been serious about using AIM for about a year. She and her husband had always been 100% invested in their retirement plans and personal accounts until AIM came into their lives. They had taken a giant leap last year and raised cash by selling portions of their portfolios. They created reserves large enough that they should have been able to buy to the bottom of a really nasty BEAR market. So far, it's been a nasty bear market, so we have that part out of the way! The Idiot Wave is telling us that we should have a rally. The state of my portfolio is such that a rally would be a blessing. Will it be big enough to get some of my portfolio's AIM accounts to actually Sell some inventory? I hope so.

I reminded Marcia of Mr. Lichello's comment regarding running out of cash. He said it should be a very happy time of an AIM user, knowing that we've followed our plan and used the cash wisely. They were 100% invested before AIM and would have suffered each day the market fell. This way, they had sidelined some profits a year ago and have now accumulated more shares than they had before starting AIM. They also have a plan in place where they will refund the Cash Reserves profitably when and if the market rallies. I congratulated her on sticking to the Program and carrying it this far.

She agreed that the buying had been fun. Most of their acquaintances have been doing the opposite of what they've been doing. Most of their friends have been despondent and have been selling - rather than see their accounts go down more. Marcia and her husband have been accumulating shares at much better prices than they sold at a year ago. This smart shopper aspect of AIM goes a long way toward making the user feel good. She and I agree that it would also be some fun to get a chance to sell some of the accumulated inventory profitably! Buying is getting a little old!

Those of you who have AIMed through other market cycles over the years know much of what Marcia's going through. I have had to look at myself in the mirror recently and ask, "Are you sure you know what you're doing?" The Idiot Wave has spent such a small amount of time at Low Risk since 1982 and the rallies have been so impressive each time, that I have to assume it will be right again.

What should we own and what should we expect from our stocks and the market? David Nicholas (Nicholas Funds) says, "When people get burned....really badly, they tend to sell on the way back up. So, you'll get this constant selling as stocks move up - which I think puts a lid on big, huge upside (moves)." I think this refers to the foundation of the next Wall of Worry. Let's call it the Foundation of Despondency!

Mr. Nicholas goes on to say, "The P/E ratios of the 1970s were eight, nine, and 10 times earnings, but you had interest rates that were 16%, 17% and 18%. Now we have these interest rates that are the lowest in history. So if you just look at the inverse of the P/E ratio being the P/E Yield, so to speak and compare that with Treasuries, you're right there. So what that says is that....... the risk premium on stocks is very low right now." My own Relative Valuation graphs speaks clearly to this. Here's the Value Line P/E and the 13 Week Treasury combined to make the Relative Valuation..........

At this point people will start to think about what their new cash hoards are going to do for them. If they liquidated their mutual fund positions and went to money market rates, they're not being paid very much (they're not "losing" anything, either except for opportunity). If they took the proceeds and went to the Bond market, they should be quite concerned with what will happen to the principle when Mr. Greenspan does start to return interest rates to a more normal level. Usually rising interest rates mean declining bond portfolio values. Mr. Alan Purintun of Oarsman Capital, Inc. says, "If you don't agree with (a) rosy scenario for the long term for stocks, the question is, 'What are the alternatives?'. Cash is yielding 1% right now if you are lucky, and that may go up a little bit as the economy recovers and the Fed eventually starts raising interest rates, but 1% or 2% is probably not something to get excited about. I think bond returns could actually be pretty poor - and that's very different from some of the other bear markets that people keep comparing this one with."

As far as my other Idiot Wave components go, Speculation is essentially dormant. It will again appear like a pimple on the nose of the Day Trader, but for now we don't have to be too concerned.

As confusing as the market has been with massive one day pops followed by days of sinking averages, it is of surprise and delight to see my Divergence indicator still very bullish.

Finally, Zeal shows no signs of any significant IPO activity. The last big spike in the number of issues available to trade came in 1993 and before that in 1983.

With venture capital much more cautious now than in the 1990s, I don't think we'll see a bearish sign from this component in quite a while.

I'm sure all of you are just as anxious to get on with some Selling as I am. It will be a nice treat to put the Sales Dept. back to work.

REPORT - WEEK OF 07/29/2002: A third week with the Idiot Wave in Low Risk. At 20% cash being suggested for individual stocks and 13% for diversified mutual funds, this is equal to the historic low point set in late 1987 after the "crash." It makes me think that this is the time we should be letting AIM do its best to get us fully invested. Normally there's been a nice rally from these Low Risk periods in which we can recover some cash at a nice profit compared to our latest purchases.

Low risk events don't happen very often. This is only the sixth one since 1982. Each has been brought about by different reasons. This one was the result of massive speculation through March of 2000, some creative accounting in several industries, a mild recession, and possibly in part as a change in psychology brought on by the 9/11 tragedy. It would have happened anyway even without the senseless attacks.

We've been busy here at Veale's Intl. Equity Warehouse. Buys have been made in ADCT, DIGL, CGNX, CHIR, APCC, ANCFX, SDS, VTSS, GER, IYE, IYG, IYC, IYW, TWCUX, and REI in the last week. Many of these accounts are now fully invested. Some have negative cash balances showing even though I've yet to borrow any money except from myself.

I've already asked AIM at what price we'll start to sell some inventory. I've placed GTC sell Limit orders on essentially everything I can at those prices. Now, will the Idiot Wave be right again? Will the rally materialize? Can it be sustained even in the face of lots of negative feelings about investing? Again, as in the past, there's usually a snap-back after a deep low risk event. The rallys can be impressive, but the Idiot Wave usually signals High Risk again over the next 3 to 6 months. So, we should be prepared to reduce inventory as AIM requests.

Please remember just how valuable you felt the cash reserve was in the last few weeks. Remember the feeling of dread as you spent those last few dollars. Remember the desire to be able to buy even more shares knowing the prices were outrageously low. Now, this is why you must not become greedy when prices start back up. Sell and rebuild that cash reserve profitably and as quickly as AIM requests. Then, should this not be the final portion of this bear market, you'll again be prepared to buy into the next low market that appears. With AIM, you can run out of cash, but you can never run out of inventory.

REPORT - WEEK OF 07/22/2002:

Not very pretty. What do we see inside this list, however? Are the NYSE stocks really down more than the NASDAQ stocks? Yep. Is the Russell 2000 really down more than the NASDAQ stocks? Yep. Remember reading how money had been sent from Growth to Value a year or so ago. Value funds soared. Remember reading how the money flow was still in that direction early this year? All those mutual fund investors looking at the previous year's Value gains believed their rear view mirrors and bought in. Now, FEAR is gripping the growth and value investor. Nothing is sacred. The guy on CNBC this AM pulled a one dollar bill from his pocket and said greenbacks were the only real safe haven any more. "Cash is king." he said.

Well, is this the time to be out of stocks and holding cash? To me, courtesy of the Idiot Wave, it looks like a heavily over-sold market. It may not be through being sold off, but it's getting very close. The Value Line P/E ratio has dropped from 18.5 three weeks ago to 17.0 now. If you are suspect of P/E values, then also understand that Value Line's average yield has risen from 1.7% to 1.9% in that same period - an increase of 12%. The average Value Line yield is now higher than Money Market Rates. This is a good sign.

On the Speculation front, the V-L Best Performer for the last 13 weeks is up just 61% while the Worst is down 93%. It only takes a 17% gain to get a stock on the Best list while a drop of 62% is needed to make the Worst in Value Line. Speculation is on the critical list, and this is good news for us.

The minus 10 IW Oscillator value shows us that the rate of change is still very impressive. The IW risk is still dropping very fast. We could easily drop below the 1987 record low for risk recorded by the IW. All four components remain seated firmly in the Bullish camp. We should get a very nice snap-back rally some time soon.

I was vacationing last week and didn't spend any money buying any new equity inventory. Once I have a chance to update my prices for the week I'll be able to get the Purchasing Dept. busy. As "Nimbus" on the AIM Bulletin Board stated last Friday,
"The Nimbus Equity Warehouse will have to have it's trucks park on the streets over the next few months as the company parking lot has pallets of new inventory that the purchasing department has picked up at this weeks "garage sale run" down Wall Street."
I've waited a long time with this remaining reserve of cash to buy after the IW showed us a solid Low Risk event. As Mr. Robert Lichello was kind enough to teach us, Cash really is King in a bear market. Now is the time for our cash to be doing its best work - buying up over-sold quality stocks. Some rally in the future will return to us our cash with a kingly profit attached.

REPORT - WEEK OF 07/15/2002: The very rare occasion of having all for components in Harmony has occurred this week. All four components are shouting "Bullish!" This is because of the massive over-sold condition in the market place right now. Money has been exiting at such a rapid rate that we've dropped from High to Low Risk in just 6 weeks (50% Cash Reserve suggested to less than 30% respectively). Three of the four components show this rapid decline below:

RELATIVE VALUATION

SPECULATION

DIVERGENCE

ZEAL !

It is possible to see a 15% to 25% rally from the market's current levels over the next three to six months. It also usually signals that the market is about through falling in this phase. I won't mind a rally at all!

I'll let the graphs speak for themselves this week. Good Luck to Everyone. I will be letting AIM guide the remaining Cash into my investments now that we're finally at Low Risk.

REPORT - WEEK OF 07/08/2002: The Idiot Wave components are all flashing either Yellow or Green this week. No Red in sight. Of the two remaining Neutral components both are very close to their bullish levels. Relative Valuation and Divergence both could be showing Bullish signals by next week. I love it when the four components all sing in Bullish harmony. I'm preparing for that happy moment by reviewing all the possible purchases being recommended to me by AIM. Being this low on ammunition, I want to make sure I hit all the proper targets.

Only one AIM directed trade filled last week. I purchased 7.4% more JBL at $18.45 and added the shares to inventory. That helped lower the next Sell price for a similar quantity of shares to just under the $25 mark. That may take a while to achieve, but AIM and I have loads of patience when it comes to these things.

Again this week I'd like to display the four components for your viewing pleasure. It is important to note the rapid decline of each component in recent weeks and how the cumulative effect has dropped overall market risk as measured by the Idiot Wave. Please realize that on June 3rd the IW was telling us that 50% Cash Reserve was a great idea. The NASDAQ was at 1615. Now the NASDAQ has dropped to about 1400 (about 13%!). Market Risk has been shaved so that the IW now sees a requirement for just 31% cash on hand. That's a 19 point improvement in the last month.

RELATIVE VALUATION

Note how close it now is to the Bullish territory. It need only drop to below 19.5 to turn bullish.

SPECULATION

The raw data is now solidly in bullish territory and the smoothed data is falling rapidly toward it.

DIVERGENCE

If we have no change in sentiment this week, this component should have raw data showing bullish.
At 2.8 it needs only to fall below 2.75 to turn bullish.

ZEAL !

With the general market consolidation continuing we see no flares going up indicating a surge of IPO activity.

It is very rare when all four components are bullish simultaneously. Since 1982 those occurances have proven to be extraordinary opportunities for strong short term rallies and long term investing. We'll know very soon if this situation is going to happen again. It won't take long to discover if the outcome is once again favorable for AIM investors.

REPORT - WEEK OF 07/01/2002: Last week's WorldComm wreck inspired me to "cheat" a bit and move some of my buying up even though the Idiot Wave is still not yet at Low Risk. Some of the buys were continuation of existing AIM accounts. Some were the starting of new accounts.

So it turned out to be a busy week. Well, now this week we see the Idiot Wave trying to tick in an upward direction. I'm not too concerned at this point. Only the raw data went up a bit shrinking the Oscillator to a -4 reading. Still if all remained the same for several weeks the Idiot Wave would slowly drift down to 35. While not Low Risk, it's better than we've had for some time.

Speculation as measured by my Best/Worst index went deeper into the Bullish territory this last week. It's interesting to note that the Best Performer in Value Line is currently up only 83.5% while the Worst is down 91.6%. So, if you'd split your investments between the two 13 weeks ago, your portfolio would be showing a loss. At 58% loss will get your company listed on the Worst list while it takes only a 29% gain to make the Best roster.

This could well be the week we see the Divergence (market confusion) indicator fall to Bullish. Everyone appears to be interested in doing nothing but selling this week. It should shrink the number of New 52 Week Highs to a suitable level.

As we celebrate the United States' Independence Day on the 4th of July I'll be thinking of all the dreams of financial independence that have been shattered by the declining market of the last 2+ years. So many people would have had greater net worth today if they'd been using a guideline like AIM than whatever they had been doing. More and more I'm hearing sad tales of what's happened to people's retirement money, personal financial strength and also mental stress.

I reviewed the performance of the alumni account that I manage for my fraternity and see the DOW is down 8.7% for the first 6 months, the NASDAQ is down 27.5% and yet our account is up 16%. It was our good fortune that we switched to ACG, a long term bond fund, around the first of the year when the Idiot Wave hit its High Risk limit. Paying nearly 13% per year much of the gain is from its dividend. The rest has been from some capital value growth in the fund itself. Should we see the IW's Smoothed value drop below 40 we'll be changing the investment make-up to 50% ACG, 25% QQQ and 25% money market funds for AIMing QQQ. Then I'll let AIM take care of things. Should the Idiot Wave drop to below 30% (Low Risk), we'll trade in the QQQ shares for UOPIX and continue AIMing. Now, the switching isn't very AIM-like, but if we think of the entire account as a basket of equities, much like Mr. Lichello proposed, we're then entitled to make changes internally to the account assuming we don't interrupt AIM's overall ratios. When the Idiot Wave next returns to High Risk, then we'll be liquidating either QQQ or UOPIX and switching those dollars back to our ACG bond fund.

Please understand that this internal switching is something I'm still testing (with real money, however). So far it worked well after 9/11, but it's not yet completed a full cycle. In this case I'm using the Idiot Wave as a signal for when to be changing the general make-up of the assets inside the overall portfolio. At time goes on, I'll report here on how the idea is progressing.

REPORT - WEEK OF 06/24/2002: Ahhhh, 1997! It was a wonderful year. Remember? The NASDAQ Composite was just rising to the 1400 level. Well, we're there again!!! Could it really have been that long since we last saw this level on that index. In the mean time, the DOW looks remarkably strong even though it's had a bad few weeks. It's still above 9000 where it's been since some time in 1998.

As another rememberance, do you remember the last time my Speculation Index went Bullish?

I know it's not been pleasant to watch our portfolios sag in the middle like some old mare put out to pasture. She's born us many a filly in the past , however, and is tired. We should have a clear signal of when we should open up our remaining feed bags for all the remaining race horses in our stables.

Just one trade this week to report. AIM let another 7% of our BSX holding go at $31.15 the other day. The AIM cash reserve is now starting to look almost respectable for that stock.

Obviously there's plenty of things we could be worrying about with the markets, economies and politics of the world. One thing we need to remember is that there have been problems before and will continue to be in the future. Somehow, we've managed to overcome these and prosper all through history. I don't believe anything has changed this time around. Between AIM and the Idiot Wave giving us good council, we should do better than many a trader and investor.

REPORT - WEEK OF 06/10/2002 AND 06/17/2002: Vacation was good for my brain and my body. It wasn't very nice to my portfolio, however!! This week's double report will help to bring me back to the real world and also help you to understand how much distance was covered over the last couple of weeks. The 06/03 report had the Idiot Wave still hanging on the edge of the High Risk area with the DOW at 9925 and the NASDAQ at 1615. This week the IW is solidly back in the Average Risk area but the DOW had to drop to 9474 and the NASDAQ to 1504 to accomplish this. Nothing comes easily! Value Line's P/E ratio has dropped from 21 to 18.8 in the last month.

With both the Raw and Smoothed IW data both confirming this drop in market risk, it makes the last few dollars spent by AIM look a little more wise.

In the last report I noted that there were still 8 stocks on Value Line's BEST Performers list that were showing at least 100% gain in the previous 13 weeks. That dropped to 6 stocks the week of 06/10 and then to just 2 for the latest week. So, finally we're seeing some of the speculative or rotating money stop moving. Market Musical Chairs seems to have finally caught everyone with no seats left. Although this may seem to be a bad thing at first when we look at our portfolios, it is my opinion that it is a necessary part of establishing a base for any future rallies. For me, I always welcome the Speculation Index dropping to negative numbers. We're not there yet, but it's getting closer. Speculation may not be dead, but much of it has been purged in the last month.

I know as I walk around Veale Intl. Equity Warehouse that some of the inventory seems to be getting dusty. Some doesn't look as fresh as it did when last I took inventory. The small amount of GNSS I had left dropped in value by 50% while I was on vacation. I now have to decide whether we'll add back to that position for the future. My last sale was at $66 not that long ago and now the price is nearing $8/share. Take your time and decide where your money will be best spent for the short and long term. Right now it seems that the only thing certain about the market is UNCERTAINTY! In the past the Idiot Wave has given us good council during these uncertain times. I'm again pleased to see that it has warned us early of high risk and now is easing back with an average risk indication.

REPORT - WEEK OF 06/03/2002: Could it be? The NASDAQ broke through support at 1600 today, Monday the 3rd of June and ended the day at 1562. Biotechs were bad, Telecoms not much better and the whole of the tech sector a wreck again. Well, look very carefully at the Idiot Wave's "raw" data line. Do you see that? Yep, it's crossed to just under the 50 mark. Not enough to get us to round down to 49, but it's the first time in a month that the IW's come down this much. All four components celebrated with a showing of improvement this week.

Still the market participants aren't completely convinced the Bull is dead. They're still confused. My Divergence index is still Bearish with almost the same number of new highs and new lows on the NASDAQ. However, for the first time since the end of February, we're seeing more new 52 week LOWs than HIGHs. So, maybe the confusion is coming to an end for NASDAQ stocks.

My "Best/Worst Index" for measuring Speculation also was showing some signs of relief at the end of last week. After a long spell (almost continuous since the first of the year) in the Bearish end of its range, it would appear to be slowly settling back toward the Neutral range.

It's pleasant to see the Relative Valuation figure start to finally taper off. Interest rates remain steady and Value Line's P/E is finally starting to decline slightly from its peak levels. It's taken quite a market beating to start the median V-L P/E back downward.

I note this month that the AIM-USERS site is now being reached by 8% non-U.S.A. readers (see below usage map). Activity on our AIM bulletin board continues to flourish. Recently a new subject of rebalancing a diversified AIM portfolio periodically has been addressed. An interesting approach to the idea of scaling in and out of the market has also been discussed in a new AIM-like idea called X_Dev. If you feel like participating in these bulletin boards or just following along, there's plenty of good information being presented to the reader for free. We literally have participants from around the globe contributing. It's heartening to me to see the readership figures holding up well when the markets have been so unattractive of late. Thank you all for participating.

REPORT - WEEK OF 05/27/2002: With the Idiot Wave basically stuck in the High Risk area, there's not been much to talk about. We've seen what may have been the peak of the Value Line P/E ratio pass for the market's current trading range. Short term interest rates are steady for now, but economic news is good enough that chances are the FED will raise rates next time they make an announcement. After all the FED is nothing more than a bank. They charge "All the market can bear." Since around the first of 2002 the market could bear less than 2% interest. In the coming months, if the market can stand a rate hike, there will surely be one.

Even with the stock market indexes stuck in tight ranges there's been room enough for speculation in some stocks. Unfortunately, I don't own any of the seven stocks that are up over 100% in just the last 13 weeks. Even the bottom of the Best and Worst Performers lists in Value Line show there's still speculative bias in the market place. #41 on each list are up 53.8% and down 45.6% respectively. So, there's nothing wrong with my Speculation Index. With all the confusion in the NASDAQ market, there's lots of new highs and lows simultaneously. What is surprising is that this isn't true on the NYSE. On that exchange there were 254 new highs and just 74 new lows last week. This is much stronger than the NASDAQ. On both exchanges the market "breadth" was bearish last week with decliners way ahead of advancers. No wonder investors are confused. As mentioned last week there appears to be continuing shift from four letter stocks to the three letter variety. This confirms the long held belief that "value" is on the NYSE and "growth" is on the NASDAQ. Money has been flowing so heavily to "value" in the last 6 to 12 months that many value funds are closing themselves to new investors.

The Idiot Wave's call of High Risk in recent times now feels right. When it headed back into High Risk at the end of April, the NASDAQ was essentially at the same level as it is a month later. In this case, "High Risk" has meant "Flat Market" for a month so far. Year To Date it's hard to find a market measure that looks good other than Gold.

Let's try not to be among the "rear view mirror" investors out there. They should have been buying "value" in the late '90s when nobody would touch them. They should have been selling "growth and tech" at the same time. In a diversified portfolio, this is EXACTLY what AIM would have been doing for you! Thank you Mr. Lichello! Of the AIM users I know who were involved in the previous decade, their biggest mistakes were to not diversify toward value when they had the chance and to spend their profits too quickly when the bubble started to deflate. I, too, made the mistake of thinking that the burst would be swift and self correcting.

What people did right in the early '90s was to buy into the rapidly expanding "growth" areas of the economy. However, what was right in 1990 wasn't right any more in 1999. I am willing to speculate we've seen as low a short term interest rate as we'll see in the next 20 years. Stock prices in certain sectors are starting to look quite low (and therefore, attractive). World wide concern over current events is keeping some form of a lid on some forms of speculation. However we still have this enormous rotation of money from growth to value. This shows up in the odd mix of companies in Value Line's Best Performers list. It's loaded with specialty retailers, foreign funds, gold stocks and automotive parts companies. None of these really fit into what we thought of for a decade as "tech" or "growth" stocks. Over on the Worst Performers list we see telecomm, pharmaceutical, "tech" capital equipment companies, some energy and some engineering companies. This group much more closely represents the stocks that were purchased throughout the '90s.

So, what was good in the early '90s turned bad by the beginning of the the new millennium. What was boring in the '90s is now a "hot stock tip" in the new century. Have investors just shined up their rear view mirrors again? My guess is that they have. It's too hard to judge whether stocks are fairly valued. Accounting has become such a mysterious science with annual reports and Form 10K reports not being much more understandable than a U.S. Tax form.

Through lack of purchasing power, I'm maintaining my high resistance to AIM Buys and keeping most of my Sell SAFE levels at zero. Even so, my usual update shows many more buy signals than sell. Some of my stocks have adjusted to the new trade ranges. Some are very far from the mark. As we close in on the end of the second quarter of the year we should see some interesting and peculiar "Window Dressing" by institutional investors. Mutual Funds have had several quarters of attempting to remove egg from their faces. I don't think they are through yet. Just maybe after June 30th we'll start to see the business reports start to look better and the markets stabilize.

REPORT - WEEK OF 05/20/2002: It's very hard to make any sense of what has been happening in the market place. I could speculate that the only people making money right now are the brokers. One week the NASDAQ rises nearly 9% and the following week it gives back a significant portion of it. There had to have been some significant commissions generated in the last two weeks. Even my Long Term Bond Fund (ACG) has had the willies recently. After heading up above $8.10 briefly it fell back to around $7.75 only to recover to about $8 again. All the while it's been paying out at a rate of over 12%.

I was pleased to hear a mutual fund manager mention on CNBC this morning say that he felt people were making a mistake similar to what they'd done at the end of 1999. At that time everyone seemed to want to buy the "best" of the mutual funds from the previous year. Those ended up being some of the worst in 2000 and beyond. He says that now people are making the same mistake with Small Cap. Value funds. They did well last year so money's flowing (too late) into those. In a recent post on Investors Hub I said,

I started my wife's Energy Index fund (IYE) last week buying shares at $48.35. It will be AIMed along with the rest of her portfolio. I'm still waiting to start her Consumer Cyclicals (IYC) and Financial Services (IYG) segments. Her overall portfolio will then have a heavy weighting in Income (ACG) with near equal weight being divided among six sector funds. Each will use AIM as their guide for inventory control. My hope is that I've chosen good sectors for long term growth and that there will be enough volatility for AIM to profit along the way.
(Link to lots of information on Exchange Traded Sector Funds)

I plan on doing the same sort of repositioning of my IRA. It will be divided up into the same sectors and weighted about the same as well. For me to "win" at this, the results have to be as good as the diversified mutual fund that I've used for a long time in this account. I should probably track the mutual fund as well and set up some form of "foot race" for my collection of sector funds and their diversified fund.

I've not had an AIM related trade in a week. Boy I hate dry spells like this! With the market behaving unusually and the IW still at high risk, I suggest that your new investments be very well planned. If they make sense, then go ahead and get them rolling. In the mean time, Good 'Til Cancelled orders are our friends on the Sell side. They'll pick off some profits for us even if we don't happen to be watching when some sudden move occurs.

REPORT - WEEK OF 05/13/2002: The Idiot Wave reflects statistics which were gathered at last Friday's close. As of then we can see that we'd not exactly reached the Low Risk end of things. Three of the four components rose slightly for the week just past. Only Speculation moderated a bit. So far this week we've had strong rallies in the DOW and NASDAQ. So, is the IW wrong this time. I don't believe so. It is showing that the gains experienced in the big indexes could easily be washed away again. As of yet, the market breadth and the Divergence are still not pretty. There's no earnings to lend support, although we can assume the reason prices are rising is in anticipation of better times ahead.

I was pleased when Sales called to say they'd secured an order to ship 5% of our JBL inventory at $24.50 today. That is a handsome 34.2% LIFO gain in less than a full week. Mr. Lichello would be proud! Just to make sure I didn't get too excited, I added 27% to my DIGL holding to make sure we didn't leave any shelves empty in the Warehouse.

Most of last week's inventory increases look like they are on the way to increasing the overall value of the Warehouse's assets. Essentially every one is above last week's purchase price. It's too early to tell, but just maybe the pendulum will start to swing back toward better prices.

My guess is that next week's Speculation value will further improve. I noted that of Value Line's Best Performers the number above 100% in the last 13 weeks dropped from 11 to 6 this week. Should the rally not break down before the end of this week, we could see Divergence drop considerably as well. Relative Valuation won't improve any time soon as it will take several quarters for better Earnings to start to show up there.

Through the end of April, my personal account managed to stay ahead of the NASDAQ on a relative basis.

Being nearly fully invested, my plan is to attempt to stay ahead of the NASDAQ during future dips and bumps for as long as I can. Warehouse inventory management is critical to that goal. Assuming the range-bound market continues for a while, each cycle should allow VIEW to move further ahead.

REPORT - WEEK OF 05/06/2002: It has been a busy week at Veale Intl. Our Warehouse Manager was working overtime on Monday and Tuesday. Here's what he did:

Have you ever wondered if there was any logic in how one should vote on a Proxy? I guess most people vote with the board of directors for lack of any better or more informed choice. My good friend and childhood neighbor, Robert Hamilton, brought a few thoughts to my attention in his last quarterly report for his Investment Limited Partnership. Here's what Bob says:

"Annual Report/Proxy Season - We're now at the height of the Annual Report season which presents a modest opportunity for shareholders to be heard. For the Partnership and as an individual, here are some of my rules:

1) Election of Directors You would think that anyone nominated to sit as a director of a public company would immediately purchase a respectable number of shares (edit - if they weren't already substantial holders). Alas, that's not the case. It's truly amazing to see the number of nominees listed in the proxy statements holding no shares. Zero (they wait until they can exercise options). They get an automatic "NO" vote from me as do nominees with inordinately small holdings.

2) Stock Incentive Plans automatically get my "ABSTAIN" vote. First, they're usually hopelessly convoluted in wording and secondly the whole matter of stock options needs to be reformed.

3) Corporate Governance - Though a direct vote may not avail itself, you might examine the biographies of the directors sitting on the company's Audit Committee. Steve Forbes suggests the following reforms (Forbes, May 13, 2002)
- Outside accountants should be hired by the audit committee, not by top management.
- Auditors should report to the audit committee, not to the CEO or the CFO.
- Former executives of the company should not sit on the audit committee.

4) Pension Fund Growth Estimates and Corporate Earnings - Many large corporations sponsor Defined Benefit Pension Plans. Company contributions to these plans obviously must be paid out of income. Therefore, estimates of the rate of growth of the fund assets affect the size of these contributions and, perforce, earnings. The expected returns on plan assets are shown in the "Notes" to the financial statements. Warren Buffett suggests that just the difference between using a 6% and a 7% estimate, respectively, can be very large."

Bob's background has involved working inside an investment company as a Stock Analyst but he gave that up and has for over 15 years managed an investment limited partnership as the General Partner. With a primary emphasis on Capital Preservation as the goal of the partnership, Bob has consistently shown profitability - even in 2001! For me, his influence has been very profitable. In conversations over the years Bob has led me to some of my most successful investments which I've chosen to manage with AIM (VLSI, Inc., Cognex Corp., and most recently Pharmaceutical Resources). So far I'm three for three with winners using Bob's ideas. Thanks Bob!

Wednesday's strong rally surprised everyone, I believe. I don't know what to make of it at this point. It was nice to see the net worth of my investments actually RISE for a change, but other than that, it seems to fly in the face of the Idiot Wave's recent cautious position. This week shows both the "raw" and the "smoothed" data of the Idiot Wave being above 50% Cash for starting new AIM accounts (High Risk). I don't see this rally as making many of the components look better, either. The Relative Valuation figure will need price decline or earnings growth to fall back out if its Bearish position. Speculation has been rising for a few weeks and this week the data show 9 stocks in Value Line up more than 100% in just the last 13 weeks. This isn't typical of "capitulation." The confusion in the market place isn't getting any better either as represented in my Divergence component. Only the shrinking number of issues available on the NASDAQ and NYSE is bullish this week. To see what the component's histories look like for the last few years, click on this link to INVESTORS HUB. This is where we hold our daily "forum" on AIM. If you've not visited there, you are in for a treat.

REPORT - WEEK OF 04/29/2002: A 7.5% drop in the NASDAQ Composite Friday to Friday last week was shown with a rise in the Idiot Wave's risk reading to Bearish again. Although the "smoothed" IW line still hovers just below the 50% cash level, the raw IW data shows it ascending to 53% this week. The rise was brought on by a new surge in Crown Cork's stock price to over $11/share while the whole "Best Performers" list showed improved gains over the last thirteen weeks. Add to this the high level of confusion about the market place shown in the Divergence index and we have three of the four components suddenly all bearish. These may all be short lived data peaks as there is eroding market breadth which should make this self-correcting and quickly.

AIM asked for the following trades during the previous week:

In addition to the AIM trades, I decided to get started on my "sector Exchange Traded Funds" this week. I sold out of QQQ and have replaced those shares with an equal value of IYW. The Nasdaq 100 Index has become a mix of high tech, telecommunications equipment and biotech, where the shares of IYW are technology without the biotech segment. Here's the mix - 1. Software 28.63%, 2. Semiconductors 28.14%, 3. Technology Hardware & Equipment 23.20%, 4. Communications Technology 17.03% , 5. Technology Services 3.01%; Total 100.01% . The weight of the various components is different than in the QQQ ETF also. I plan on adding a separate biotech ETF later on. These will be traded using AIM as the guide right along with everything else in my account.

I also did some serious spring cleaning in my wife's account. It was cluttered with a bunch of stocks that had performed remarkably well during the last two years (by not going down much!) but have been dormant for years. Since she's not a "stock picker" I decided that we would consolidate the cash derived from selling out of many of these long term holdings and reinvest it in a group of Exchange Traded Funds. I've chosen only sector fund for her use. These include Healthcare/pharmaceuticals, Biotechnology, Technology, Consumer Cyclicals, Energy, and Financial Services. She will have better diversity and still will be able to AIM the sectors as "rotation" continues into the future. Eliminated from her account were shares of QQQ and another technology heavy mutual fund, several utility stocks, a couple of banks and some old line manufacturers. I should note that a significant portion of her entire portfolio is invested in the ACG income fund as it is in mine. Overall, this provides her with an account she could potentially manage herself without ever picking a stock by herself. With the use of "Good 'til Cancelled" orders it should be a very low maintenance way to manage assets. Given time, these sectors should provide good growth individually with some being "hot" and some "cold" at various times.

It has been my intent to get these reports written earlier in the week, but somehow the time slips by. I'll be attempting to get them added in here by Wednesday of each week.

REPORT - WEEK OF 04/22/2002: On April Fools day the NASDAQ broke under the 1800 level and today sank below 1700 in the morning. I'd suggested that 1720 was a "support" level to be watched. It broke that a day or so a go and I'm not sure there's any active support above about 1475. I'll be watching today's close on the NASDAQ to see if we make it back to 1720 or not.

I usually don't spend much time on "tea leaf reading" but looking back at previous interrum bottoms seems to be a pretty good guide to where we might expect the market to go in the near future. Now, the Idiot Wave is showing that risk is finally starting to come back toward the middle of the Average range. With three of the four components now Neutral or Bullish, we only have the P/E of the Value Line 1700 being worrysome. The Relative Valuation Index shows this well. It will fall back a bit with the decline in stock prices, but it's really going to take until earnings improve to get it to move very much. So, we might not see this one retrace much until later in the year.

It is nice to see my Speculation Index fall back to more normal levels. Obviously it's hard to show "capitulation" when there's still "speculation."

With the poor market conditions of late, this component may soon turn Bullish. That has usually been good for a short term rally.

At the Warehouse, we managed to ship out some goods and also add some:

So last week remained about even on a cash flow basis while inventory changed ratio a bit. The "vealie" for STKL was approved by the Board of Directors because of the recent sales bringing the Equity/Cash ratio to 50% on that inventory item. This boosted the next Sell price up along with the next Buy price.

I noted in BARRONS a huge amount of insider buying in USON was listed in the Market Lab section. I don't know much about this company. A quick glance showed they weren't very consistent in earning money. I want to do some more study on that one as a $111 Million commitment by 13 insiders shouldn't be ignored.

REPORT - WEEKS OF 04/08 and 04/15/2002: Although I had the Sales department check to make sure that we had a full set of Sell Orders in place and in Purchasing to verify my Purchase Orders, no activity occurred at the Warehouse while I was on vacation. I think the Warehouse was also on vacation! Well, as soon as I got back I made sure we'd not missed any opportunities. Sure enough, Tuesday brought about a sale of 7% of my inventory in STKL at the handsome price of $3.13. That account is now showing 51% Cash Reserve and over 200% profit since 1997, so it's time for me to decide where we're going from here.

Today Andy N., a fellow AIMer and Wisconsin resident stopped in for lunch. We reviewed the changes he's made since we last talked. He's added some new mutual funds for his wife's Retirement Account while a couple of other stocks have come and gone from his account. Andy's known of AIM since the '80s, but only started AIMing in earnest less than two years ago. So far, his portfolio is growing very nicely.

Andy doesn't come to our bulletin boards so hadn't heard about our discussions on Zig Zag analysis to help qualify a stock as a potential AIM investment. We reviewed his stock and fund selections using 30% Zig Zag and he saw where some were much more active than others. This was also confirmed by his actual trade history. The more active the Zig Zag pattern, the more trading he'd done.

We talked about the past two AIM meetings, both of which Andy attended. He said that each time we've gotten together he's come away with some new good ideas. I think that's the main benefit of our AIM meetings, whether they be in a specific location or via the Bulletin Boards on Investors Hub and Silicon Investor. What is interesting is that he's experienced much the same thing that I have over the years. I've been enthusiastic about AIM since I first read the book back in the mid '80s. However, it was nearly impossible to get anyone I knew interested in trying it. I'm sure it was a combination of "Not Invented Here" and "Too Good To Be True." Andy has been facing this same thing. He's been able to lead a few horses to water but all, so far, have walked away thirsty!

Well, the perch and the whitefish were both very good at the Port Hotel and it was a great visit in all. Andy had been away on a trip with a good friend in February. I asked him if he had any AIM trades happen while he was away. He said that there were quite a few and that when he got back he had some work to do to get all the trades entered. Andy uses "Good Until Cancelled" orders as I do on the stocks he holds. So, Andy's Warehouse was on auto-pilot and running smoothly while he was away.

For my week away, I really can't blame my staff for not getting more done. The DOW and the NASDAQ have been pretty much stuck in a rut since before I left. I hope your warehouses had more activity than mine!

REPORT - WEEK OF 04/01/2002: Value Line's P/E ratio is still giving the Idiot Wave and the markets fits. There seems to be strong opinion that the 1st quarter of 2002 will not show up as a great one relative to corporate earnings. Since interest rates won't go any lower, it means the market prices must come down or earnings must rise to cure this Bearish reading we're getting from my Relative Valuation component. Even so, the rest of the components are moderating enough to now have the IW back toward the middle of the Average Risk range.

Another 8% of my STKL left the warehouse this week at $2.87/share. That makes this warehouse operator very happy. Overall profit on that account is now approaching 200% while a buy and hold investor would have only realized about 115% gain over the same period. Here's the complete history since 1997 of my AIM activity with Stake Technology for your review.

The NASDAQ is back under 1800 as of mid-week. It will be interesting to see if it finds support at a higher level than the last test. For me, support above about 1720 looks to be critical this time around. My accounts recovered in March making back the drop in value from February. Although my Retirement account struggles along with no cash in reserve, it is at least staying just ahead of the NASDAQ Composite. My taxable account improved as did the cash reserve.

Since 1990, my personal account has done just about exactly the same as my retirement account. My personal account, however, has living expenses and taxes being drawn from it where my retirement account has remained untouched. The big difference is that one is entirely invested in a mutual fund (my IRA) and the other is a mix of stocks, bond funds and mutual funds.

Next week's report will be delayed. I'll write a "double report" the following week.

REPORT - WEEK OF 03/25/2002: Two sells and a buy at Veale's Intl. Equity Warehouse this last week.

Each sale was completed at a very nice gain. I'm sure the new owners will be pleased with their purchases. These shares were sold without a warranty!

The NYSE and the NASDAQ are performing an interesting statistical dance. Both exchanges are showing many more new 52 week Highs and not very many new Lows. It is managing this while the Advance/Decline ratios are not very bullish. We need to see some companies start reporting earnings improvements. The Value Line P/E plus short term interest rates remains stubbornly Bearish. We already know interest rates aren't going to fall, so we have to look for improved earnings or a drop in share prices to get my Relative Valuation index back below the Bearish reading. My Speculation index is "self-correcting" after the huge run-up that Crown Cork had over the last 13 weeks.

REPORT - WEEK OF 03/18/2002: The Idiot Wave's continued nervous action is colored again this week by Crown Cork's fantastic performance over the last 13 weeks and by the extreme P/E ratio of the Value Line Composite. Should earnings start to improve, we could see that P/E ratio start to improve also. Mr. Greenspan shifted to a "neutral" bias as far as the FED's short term rates go. This should give us some breathing room once the economy starts to report better conditions. If we eliminate Crown Cork's data from my Speculation measure, it would be back to Neutral immediately. I keep the data base small for the Speculation Index to keep it responsive, however, these peculiar circumstances do throw it off a bit.

If market entropy were to prevail, all stocks would eventually drop to zero value. However, with the effort put forth by individuals to create goods and services we beat the second law of market thermodynamics. A quote from James Lovelock* sizes this up, "Whoever set up the rules of this universe clearly had no time for those who cry unfair. The prizes, though, are only to be won by the cunning, bold and resolute, with the wit to seize on any chance that offers. If it offends the moral sense to be born into some cosmic Las Vegas with unbreakable house rules and with no chance of escape, think instead of how wonderful it is that we have survived.... in a world of one-arm bandits and still have a chance to take stock and plan our future tactics." The last two years have been tough, but here we are still in the game and ready for the next steps along our path as investors.

The yeast-like growth of share prices leading up to 2000 was treated to a Malthusian correction. This week in March of 2000 I wrote on this page, "It's difficult to explain why the IDIOT WAVE is at an all time high value with only two components being Bearish while two are Bullish. I don't think this has occured before. It shows how amazingly high the market Speculation actually is. Further with the Value Line P/E as low as it is, it shows how narrow the market performance is. Most of the speculation seems to be among stocks that have no earnings, or the P/E would also be soaring." A year later the tune had changed as the Idiot Wave had predicted, "A division between what market analysts and economists think is developing. The economists are worried, but not ready to say we're in serious trouble yet. The manufacturing sector is in the worst shape of the bunch. Market analysts, on the other hand have only to point to the bloodletting so far on the NASDAQ to show that the world will surely come to an end. Even the Dow 30 index is shedding excess fat in an attempt to catch up with the NASDAQ's anorexia. All the while as stocks are being sold at lower and lower prices, somebody is buying." The NASDAQ Composite was over 5000 in March, 2000 with the DOW at about 10,600. In March, 2001 the NASDAQ was at 1890 with the DOW at about 9800. Today the NASDAQ is still in the 1800s and the DOW around 10,500. Range bound as they've been for a year, by next March we should see results of an improving economy reflected in the market averages.

AIM, with its nearly cybernetic control, managed to increase my cash reserves at a much faster rate than the value at risk rose for my equities. From nearly zero cash in 1998 to a massive reserve peaking in early 2000, AIM kept a fairly tight lid on my risk amount. Year 2001 will see me submitting the shortest Capital Gain schedule with my taxes in a very long time. I've had some activity in 2002 as the market continues to trade with no real direction. Improved earnings and dropping P/E ratios should give us the signals needed to lead the markets upward.

* "GAIA - A New Look At Life On Earth" - James Lovelock, 1979

REPORT - WEEK OF 03/11/2002: A choppy week of profit taking after a couple of good gaining weeks. This isn't unexpected as profits have been slim for a long time. I should think there will be quite a bit of resistance along the way to any rise in the market place. I, too, provided some of that resistance during the last week with a sale of 10% of my new DIGL shares at $7.33 and 11% of my PRX shares at $20.93. Both sales put some cash in the register along with about a 25% gain.

One stock is troubling the Idiot Wave still this week. Crown Cork and Seal is again popping a bottle of champagne to celebrate its rise of nearly 500% in the last 13 weeks. This has skewed my Speculation index way to the Bearish side. If we were to eliminate just that one stock's results (out of a potential 1700 stocks) the index would be back to near the Neutral zone. So, I'm not overly concerned. If you look at the Idiot Wave Graph, you'll see that the "smoothed" data (in green) has steadied out in the high 40's while the "raw" data has been dancing around.

Both the NYSE and the NASDAQ are showing many new 52 week Highs and not very many new Lows right now. This is a good sign for the short term and indicates that maybe the market is healing from wounds inflicted last September 11th. Advances on both exchanges were ahead of decliners by over a 2:1 margin. I don't think that this week's data will be as strong after the profit taking, but not worrysome, either. The DOW looks like it will end the week not far from last week's close and the NASDAQ will only drop about three percent. We can live with that.

The discussions at the AIM Bulletin Board continue to enrich all that read there. Great discussions being brought forth by well written posts. Our diversity of experience, age and nationality are adding to the wealth of the discussions. I learned, for instance that in the Netherlands, one doesn't pay a "capital gain tax" annualy on profitable trades. They, instead, pay an intangible tax as a percent of the value of the portfolio (currently 1% per annum). If such a tax policy was in place here in the U.S. it would shift people's thinking about their porfolios, I'm sure. Please feel free to join in the discussions or just read along at the Investors Hub site.

I've always liked the "Absolute Breadth" graphs that BARRONS includes in their Market Laboratory Section each week. It give one a feel for the direction of the market and the turning points. Well, I'd like to introduce you to my own version, lovingly referred to as

The data for this graph is the sum of the difference between the Idiot Wave's long term average value and its weekly values. So, this week the IW is at 52 and the average IW reading is 41 leaving us a plus 11 for this week. So, 11 gets added onto the previous total, and so on. So, if there's an uptrend (like you see during the early part of this graph) it means the risk has been steadily above average. If it starts down, the trend is showing the market at less than average risk. I've compared this to the NASDAQ Composite Index as a point of reference. So, if in the future you hear someone mention a comment about an Absolute Idiot, you can say, "Well, actually, I think I've met him!"

REPORT - WEEK OF 03/04/2002: Since last week's report the US markets have been doing quite well. Both the DOW and the NASDAQ Comp. have had a good week so far. This has helped the net worth of my account while bringing the Sales department much closer to closing some deals. My most recent inventory addition, PRX, should be shipping out the first 10% tomorrow. I added to inventory late last week 15% more shares of JBL at $18.80. So far that looks like a successful purchase.

Another "opportunity" presented itself to me. I have been watching a stock for just over a year at the suggestion of a friend. Its business is supplying capital equipment to the telecom companies that use fiber optics. Well, I don't have to tell you what their last year has been like. None of the telecom equip companies have done well in the last twelve months. News on this company brought me to make a decision to buy shares and start a new AIM account. I purchased shares of DIGL at $5.85 today and set up the account. They recently signed an agreement with Jabil Circuits to have JBL produce some of their components for them. Since I already own shares of JBL, this seemed like just the reason to get started. JBL is good at producing electronic components under contract and this should mean a cost savings for Digital Lightwave. I'll be sure to post when we see some AIM activity on this new account.

The Idiot Wave did a quick reversal after last week's rise. It's back to 44% cash indicated for new accounts. (that, btw, is what I used as the starting cash on my new DIGL holding) Two big drops helped to ease the IW's reading downward. Speculation dropped back but not quite to the Neutral range. Divergence fell all the way back to the Bullish range. I'm a bit suspect of the data from BARRONS on the Divergence component this week. It just didn't look like the numbers of new highs and lows could be right. However, I plugged the numbers in until I can get them verified by a second source.

A humorous footnote to the use of Value Line occurs this week. The Best Performing Stock in the Value Line Universe of 1700 stocks happens to be Crown Cork and Seal (CCK) up 235% to $5.59/share in just 13 weeks! However, back when the price was $3.10/share here's what Value Line said in their review of the stock on January 11th, 2002:

Well, this is why I depend upon Value Line's statistics and not their commentary! Their recommendation to stay on the side lines kept a potential investor from harvesting profits of 80% from the time of their report. It's probably now risen too far and too fast to hold up here. It will be interesting to watch. AIM and I are more likely to be buying stocks listed with V/L's Worst Performer's than their Best!

I note this week in Value Line's Best Performing Stocks list (page 33 of their Index section) that there are more than ten Retail and Specialty Retail companies listed. The list is only 41 companies long, so 10 represents a very large portion. When nearly 25% of the Best Performers list is comprised of companies from just one sector of the economy, you better hope that AIM has been taking profits! Chances are this sector is seriously over-bought. The pendulum always swings both ways. Next stop will be "over-sold."

REPORT - WEEK OF 02/25/2002: The DOW and Nasdaq seem to be heading in different directions these days. That's good news for Dow investors. Too bad I don't own much of that stuff! It's the same all through the data fields. Advances lead declines on the NYSE and visa versa on the NASDAQ. New Highs lead new Lows on the NYSE and trail on the NASDAQ. All this confusion has brought my Divergence measure back into the Bearish camp. The other ugly news this week is the showing of an all time high P/E ratio for the Value Line Composite - 20.1! Even with short term interest rates very low, this pushes the Relative Valuation over into the Bearish camp as well. So, we have three Bearish and one Bullish signal for a combined High Risk reading from the Idiot Wave. I've freshened the IW Component graphs for your review.

I'm sad to say I've gone yet another week "Tradeless." This is very frustrating. Actually, there's several AIM accounts begging for me to make significant buys, but I'm keeping to my Once A Month diet. I hate dieting!

We passed the 1000th Post on our new home at the Investors Hub AIM Bulletin Board this week. It took less than a month to gain that many! From the Netherlands to Singapore to Wisconsin, we're seeing lots of activity. Non U.S. readers at this site now represent about 11% of the total. I see that Australia is showing up on the radar now. Any of you from Down Under who wish to join in the discussions on the AIM BB, please feel free.

Some early discussion about where to have AIM 2002 has started on the BB. I'll post information here when the plans firm up. Here's some information from last year's AIM Event.

I'm not sure if Mr. Greenspan was trying to sooth Wall Street's nerves today when he indicated that the U.S. Recession is waning or if he was trying to sooth his own! For a brief period in the AM the markets liked what he said. Then they went back under their rain clouds and grew moss instead of celebrating.

Mr. Greenspan would love to be able to raise his interest rates if he could. It appears that the stock market is convinced his rates are already "all the market can bear."

REPORT - WEEK OF 02/18/2002: It was hard getting the Bull's attention. He was sound asleep and had been for a long time. The Bear was out frolicing around eating caviar and salmon and getting fat. With luck the Bear will now grow tired and go back into hibernation.

After our wrestling match the Bull asked how I knew how to throw him. I told him we're used to tipping sleeping cows here in Wisconsin and besides my web site was loaded with BULL!

I completed the liquidation of my various Energy stocks and funds and will now consolidate them into a new AIM account which will use an Exchange Traded Energy Index Fund, IYE, for its basis. Most of these independent issues were not very exciting as AIM investments. I'm hoping that the ETF will be more interesting.

I started the first new AIM investment for VIEW in a very long time. Through a friend I'd been looking at PRX as a potential AIM candidate (Value Line Expanded Edition). Well, on Wednesday the stock was hit hard because of news of a competitor arriving on the scene. The news took 33% off the stock price in one day. I took this as a signal from Mr. Lichello's ghost to start a new AIM holding! If I hadn't already reviewed this stock, I probably wouldn't have been interested in the price drop. Without the price drop, it would have just sat on my "Watch List" unpurchased. Wish me luck!

I heard a horror story out of the Cleveland, OH area about a big time broker who's been arrested for fleecing several well healed clients for literally millions of dollars. Apparently this fellow had been sly enough to have all his customers' monthly statements delivered to himself. He then "created" statements that showed much better results. This brought in more money which he then used in a sort of "pyramid scam" to bolster the false results of other accounts. Amazing!

My guess is that the Idiot Wave components will continue to fall and give us some relief in the form of a lower market risk profile. Certainly this week's action so far shows weakness and that data will start to be reflected in the components of the Idiot Wave as lower risk. Tech stocks seem to have been most heavily hit and Telecom stock within the techs seem to be the "bad boys" this week. I'm getting close to loading up my remaining ammo and taking AIM at more shares of the holdings I have in these areas.

The question we should all be asking is, "Where is all the 401 K and Retirement money going these days?" It's obviously still being set aside by individuals, but what vehicles are they using as their investments? Is there now a growing pool of "sideline" money that might be put back into the market under the right circumstances? What will it take to shift some of all of that money to the stock market? If it's like the past, the money will remain on the sidelines longer than it should and miss quite a bit of the next move by the Bull. It could well become the driving force of the next run when it comes in off the sidelines.

REPORT - WEEK OF 02/11/2002: With the revised Idiot Wave being presented with the "raw" data instead of the "smoothed", you can see how much more jumpy it is. The market confusion as measured by Divergence and the unhappy rising P/E in Relative Valuation are the main culprets this week for the IW rising. The market seems to have a hard time putting two good days back to back. Maybe after Options expire on Friday things will look happier.

I'll be "off line" for a couple of days, so won't be able to do much posting at the Bulletin Boards. Investors Hub is developing very nicely. Hope you all have had a chance to stop in.

AIM and I added heavily to JBL, ADCT, CGNX, CHIR and BMY this week. No sales. I also added to a speculative issue of mine, BPUR. I'm in the process of reorganizing my Energy holdings. I liquidated XOM and D and will combine the proceeds with my mutual fund in the Energy sector. More on that when it's complete.

This is a shorty of a newsletter. I've been very busy with home remodeling projects and not paying very close attention to anything but copper tubing, mixing valves, in-floor heat, paint, stain, varnish, sinks, tubs, shower valves and heads, tile and grout. Busybusybusy!!! We're in Phase III and this is the last of the projects for this house! Maybe I should have purchased Home Depot's stock before starting this!

REPORT - WEEK OF 02/04/2002: I can't say that last week did VIEW much good. The Dow was up for the week, but the NASDAQ was down. Not big moves but nothing that made me very happy. The Idiot Wave data shows three components rising from last week's activity. Relative Valuation, Divergence and Zeal all rose a bit. Still this week's Oscillator shows the IW will decline more if all the data stays the same.

I managed to acquire some more Inventory in my CHIR account last week. We added about 7% to the shelves at the price of $42.61. So, Shipping and Receiving wasn't exactly working over time last week.

Investors Hub has given us a very warm welcome. They have provided us with a location where anyone can post a few messages each day without any charge. There are different levels of "membership" that allow more posting activity and other features if one wants to pay for the service. Also available is a one time $50 membership fee which gives you full site access and will keep you a member as long as the site is alive. That fee goes to $100 at the end of February. So, for those of you with busy finger tips you may want to consider this.

I'll be monitoring the Motley Fool site and the Silicon Investor site for a while to make sure we don't lose any of the less frequent posters.

Several "new acquaintances have been made while moving around the internet to various Bulletin Board sites. Welcome to all of you! I hope we'll be seeing more of the new posters on Ihub in the near future. As the AIM community continues to grow we are gaining more and more members from the international community. In January, for instance, 9% of this site's hits came from outside the United States. Readers from 22 countries logged on to the aim-users.com site to see what was going on. Now, with the addition of Ihub as a bulletin board accessable by everyone, we should see even more interesting posting than in the past.

REPORT - WEEK OF 01/28/2002: According to the news wires today, the market is nervous about the poor accounting practices that may be in play at many companies other than Enron. Well, I just don't know what to think about that. The entire market is being seen as "guilty by association." I think it might also have something to do with the FED meeting due and also the State Of The Union message to be delivered tonight.

Mexico's ICA rose enough to have my AIM Equity Warehouse Manager suggest my selling another 6% of our inventory this week at $3.05. That sale brought with it a LIFO gain of 68%. Feels good to have a sale or two now and again.

Last week's best performer in Value Line showed a gain of over 450% in just the last quarter. This week that number shrank to just 193% up in 13 weeks. Well, that's not exactly bad news, but it shows that we've passed the peak of the statistical blip I'd been predicting since early December. More normal numbers should be coming in over the next few weeks.

I was checking into where my family and I could use up some "banked" time with our time-share. I thought, "Well, the economy stinks, Enron employees aren't taking much in the way of vacations, Wealth Effect has evaporated. I should be able to pick and choose from the finest resorts anywhere in the world!" Well, I'm having trouble finding anything but a Motel Six in Steubenville, Ohio! Maybe the world isn't grinding to a halt after all! From South America to the Artic Circle and from Hawaii to the Canary Islands, all I find are booked resorts! Who's doing all this travelling?

We'll be watching the markets tomorrow to see what effect the SOTU has on everyone.

REPORT - WEEK OF 01/21/2002: I guess you could say the good news is that the Idiot Wave stopped rising this week! That and the IW Oscillator backed down to +8 from +10 meaning there's not as much upward pressure on market risk. In fact, as of this AM, the NASDAQ is about even for the week while the Dow is ahead a few points. Maybe we've seen the worst of the clouds move past Wall Street.

Watching the reaction to earnings announcements from various companies this week it appears that there's still no room for error. Even making estimates doesn't seem to be good enough. Companies beating estimates are being generously rewarded.

This week my two lowest price equities traded. As a coincidence, I sold 7% of my STKL shares at $2.25 for a LIFO gain of 50% and sold 5% of my ICA shares at $2.88 for a LIFO gain of 59%. Nice to win a skirmish once in a while! It's rare that I've had both low priced stocks trade in the same week. STKL has been doing very well for me since 1997. ICA has been a bit of a struggle for a long time. It's "break-even" as of this sale, but needs to pay Veale Savings and Loan back on over-due borrowings!

Not much else to tell you this week. I expect to see the Speculation rate trimmed back over the next few week which should drop the Idiot Wave back into the Average Risk range once again. We're watching this very closely. In the mean time it appears from conversations on the two AIM Bulletin Boards, Silicon Investor and The Motley Fool, that AIM trade activity has been picking up recently. This is a good sign that the market is either stabilizing or maybe even starting to make its next move upward.

REPORT - WEEK OF 01/14/2002: Previous Harvests were good. The Mill ran overtime. We've attempted to keep plenty of Yeast in the mix. We've Kneaded to see the Bull market return. We hope to make plenty of Dough. If the market will just start Rising, we'll make plenty of Bread.

That's the way it is around Veale's Bakery these days. WPC was Rising this last week. It managed to Cook another sell order along the way. About 4% of the inventory left the Bakery and was sold for a LIFO profit of about 40% at $24.40. Not much else has been happening, however.

I guess all those folks on CNBC that are talking about the market being a bit "Over-cooked" must be looking at my Speculation component. Again this week it's the only one that is in Bearish territory. Well, if the market is over-cooked now, then it was under-done back 13 weeks ago. In looking back at that data from mid-October through mid-November it would appear that our Speculation component should start to fall back towards its neutral zone over the next month. Since it's the only component holding the Idiot Wave in the High Risk area, we'll be happy to see it retreat.

The end of 2001 wasn't particularly glorious for V.I.E.W. It was a struggle all year long balancing living expenses, 2000 taxes, 2001 estimated taxes and Cash Reserves for AIM use. The April low point of my Cash Reserve coincided with tax time. Estimated taxes ate into usable purchasing power the rest of the year. A major remodeling project at our house also didn't do much to create positive cash flow! All things considered, AIM managed to generate enough cash flow and gains throughout the year that Uncle Sam will still get his dues.

In reviewing the long term history of my AIM activity, I compared it to the NASDAQ Composite Index. In this next graph I decided to show how VIEW did on an "absolute" basis when compared to the index. To do this I divided the VIEW account value by a factor to get it to be the same as the NASDAQ Composite in 1990 (455 on the NASDAQ, if anyone is curious!). Next, I divided the NASDAQ Comp. into the VIEW for each period and multiplied by 100. This gives us a starting point of 100, or VIEW equals 100% of the NASDAQ. Each period then reflects how VIEW did relative to the NASDAQ.

Note that VIEW kept pretty close to the NASDAQ during the period from 1990 thru some time in 1996. Those are what I am designating the "normal" years. From 1996 thru early 2000 we'll call the "bubble" years as those were the years that VIEW lost ground against the NASDAQ. Finally, we see the "bear" years of 2000 and 2001. I don't know if the bear market is now over or not, but at least the "Absolute VIEW" looks like we may be heading back to more normal times.

We need to keep our wits about us with the Idiot Wave still in high risk. As the apparent speculation recedes to show just a return to pre-WTC Attack levels, we should then have market gurus everywhere looking at the stocks in the portfolios they manage and making decisions on where to go next. WTC/Pentagon first scattered the Herd and then stampeded them towards the BEARS. After the slaughter, the remaining lemmings have been trying to find new direction. I can't imagine an end to Sector Rotation, so we'll probably see Sector Shifts as the herd mentality returns to Wall Street.

REPORT - WEEK OF 01/07/2002: Many of the AIM users on the Silicon Investor and Motley Fool bulletin boards are starting to report they are getting Sell signals. This is very encouraging. Unfortunately, here at Veale International Equity Warehouse sales have been rather slow. The Sales Dept. tells me that there's nothing about which to worry. Customers have been calling, but prices aren't what they currently want to spend.

I thought it would be important for everyone to see that there's just one component currently that has dragged the entire Idiot Wave back into the High Risk area. These graphs show how this can happen.

The reflex reaction of the Speculation component to the World Trade Center and Pentagon attacks back one quarter ago shows up now as a bearish signal. We will have to wait another month for this value to stabilize again. I don't consider it too significant at this time. On three of the four graphs I've included a "Smoothed" version of the data. This should help you to see just how quickly the data are changing.

Although not many trading days have occurred yet in 2002, most have been good for the markets. At this point the NASDAQ Composite Index has risen over 44% since the IDIOT WAVE signaled LOW RISK after the al-Qaida attacks. It has risen 22% when compared to the week just prior to the attacks. The DOW has risen nearly 25% from its post attack lows and about 7% from the week before the attacks. It could be argued that the NASDAQ has gotten a bit ahead of itself being up as much as it is from the pre-attack lows. However, the DOW and the NASDAQ are really only at about the same values as they were in mid summer of last year.

The FED probably won't lower interest rates much further. The Relative Valuation figure can't stand much more of a rise in the P/E ratio of Value Line before heading into the Bearish territory. This may cap the upside potential of the market for a while. It would appear that companies are going to have to "earn" their way to higher prices. In mid-June the Value Line P/E was 17.7 and the 13 week interest rate was 3.59%. This gave us a Relative Valuation figure of 21.29. Now we have the P/E at 19.4 and interest at 1.71% for a RV figure of 21.11. So, it would appear we're right back where we were in mid summer.

Remembering back, there weren't a lot of optimists around then. Is there reason to be more optimistic now? The FED's rate cuts have had an extra six months and several more cuts working to help the economy since last summer. This is bound to start to show up at the bottom line of company financial statements sooner or later. Companies that lead the economic cycle should show some improvement later this year. Until then, the markets may remain "range bound." AIM doesn't mind a range bound market as long as the range is big enough to make some buys and sells along the way. So, keep your eyes on your price targets and take careful AIM.

REPORT - WEEK OF 12/31/2001: What a Year! It's hard to look back on 2001 and think of it as just twelve months. It seems like it should be described as separate epocs. As I have in the past, I'll try to review the previous twelve months' highlights:

January - IW = 37% Cash; After a tough nine months of 2000 we started 2001 with a risk profile just slightly below the middle point of the Average Risk Range. The Speculation component of the IW signalled Bullish conditions. This has usually signalled a short term rally. The NASDAQ and DOW were at 2470 and 10786 respectively.

February - IW = 40% Cash; Mr. Lichello, creator of AIM, passed away. Although January gave me some AIM Sell trades, Feb reversed course and had me buying shares back. I started assembling my P.I.C. list of stocks.

March - IW = 42% Cash; Risk was rising, prices were falling. AIM was buying. Market was terribly confused.

"For AIM investors, there's quite a difference between riding out a storm at anchor and ending up on the rocks. As AIM hauls in its sales and puts out a sea anchor, it appears many other investors are abandoning their ships. These others were either ill prepared or ill advised. AIM seems to be carrying way too big an anchor when seas are fair but it's what saves it during the worst of storms."

April - IW = 41% Cash; New market lows on the NASDAQ were hit early in the month. Veale's Equity Warehouse runs out of Cash Reserves. The IW starts to ease off with dropping risk. However, by now I'd begun to wonder if we'd ever see Low Risk again. The IW was being very stubborn about its "Average Risk" reading. By month's end I was starting to get a mix of buys and sells again.

May - IW = 36% Cash; A 30% NASDAQ rally from the lows hightlights the month of May. Lots more AIM selling than buying. Our second AIM meeting took place in Las Vegas with talks given on several subjects and Live Entertainment provided by Barry Savage!

June - IW = 38% Cash; Mixed trading with some AIM directed buys and sells. My cash reserves were showing 6% of total value, up from the April low point.

July - IW = 42% Cash; Rising risk and a slow down in trading come together at the beginning of the month. By month's end mostly buying is occurring. This time even conservative stocks are being hit. FED cuts for the year haven't seemed to have had any noticable effect on the markets.

August - IW = 48% Cash; Back briefly to near High Risk levels, the IW cautioned us that the worst was not yet upon us. With the DOW back below 10,000 and the NASDAQ in similar condition, it was difficult to find a safe haven for one's money. With the little Cash Reserve I had left, it was being allocated on a monthly basis to stretch its use as long as possible.

September - IW = Moving Target; The Idiot Wave started the month near the High Risk end of its range and ended the month in the Low Risk area. Such was one of the effects of the attacks on the World Trade Center and the Pentagon. The sell-off after the markets reopened was strong enough to get the Idiot Wave to finally move to Low Risk after 18 months of poor market conditions after the 2000 Bubble had burst. One of the longest Bear markets in recent history is finally brought to conclusion because of some egomaniac and his gang of thugs. New lows are seen in the DOW Industrials and the NASDAQ Composite. I did what buying I could with the nominal reserves that I had left.

" I know there's "ENERGY" that's given us all. It's up to us individually and collectively to put that energy to positive use. "Energy" isn't either positive or negative - it's the individual expending it that determines whether it's used productively or distructively. Anyone who uses it for destructive purposes, anyone who associates with such people, cannot be regarded as fully sane or maybe even human. All the "Energy" expended for destructive purposes by groups of sub-humans is completely wasted as it makes for no change at all in the long run. If the same energy was expended in a productive manner, literally millions of people world wide would benefit."

October - IW = Low Risk - Below 30% Cash; For a while in October all four components were in their respective Bullish areas while the sum gave the IW its most solid Low Risk signal in a very long time. It seemed hard to feel good about this because it was brought on by such a tragic event. However, the best prices of many equities were seen in late September and early October. By month's end both the DOW and the NASDAQ had risen significantly. AIM again started to give me Sell Market Orders in sync with the rise in prices.

November - IW = 30% Cash; As the shock started to wear off the NASDAQ continued to climb back to better levels. However, in general November was a slow month for me relative to trading.

December - IW = 45% Cash and rising; December is never an easy month to qualify. The Idiot Wave showed typical knee jerk reaction to the September attack by rising, showing how much things had improved over the previous quarter. However, for the year overall, the NASDAQ Composite fell 21% and the DOW Industrials fell 7.4%. I don't have all my final numbers in yet, but it would appear that my own account dropped in value about 12% to 15% during the year. The market just wasn't going to let me get back to break even for the close.

I don't remember many years that I was so glad to have seen come to an end.

We start 2002 with the Idiot Wave telling us to be cautious investors. A lot has changed in the last twelve months, but one thing is still steadily giving us good advice, the Idiot Wave. This week's High Risk reading should be viewed with somewhat less concern than normal times. This is because the Speculation Component had been blown way out of shape by the September attacks. This week all 41 stocks on the Best Performers list in Value Line are showing over 100% gains in the last 13 weeks. Well, this is because they were at very low prices in the weeks following the NYC and Washington, D.C. attacks.

Still, the Value Line P/E has popped up to 19.3 this week and that's nothing to be ignored. This is up from around 15 back just after the attacks. Part of this has to do with the rise in prices and part because of a poor earnings reporting season over the last quarter. As always, keep sharp AIM on all your investments and make sure to execute those Sell Market Orders as AIM requests.