A mixed bag of buying and selling. Mr. Greenspan's upward pressure on interest rates has caused my bond funds to fall in price/share. This is sort of a "good news, bad news" joke. Good news is that I get to buy more shares with AIM as my guide and the yield is ever nicer. The bad news is that the liquidation value of the shares has fallen. Well, since I didn't buy them for capital gain, but for income, this is just fine.

I've been involved with my college fraternity alumni group for a long time. Unfortunately, in late 1995 the chapter lost its charter after a series of transgressions which could be used for the plot of "Animal House II"! We were forced to sell the house and land. Some of the proceeds of that sale are now under my care and feeding using AIM. You can see what I've accomplished so far by viewing the UOPIX Fund History. We'll eventually be able to start a new organization at the campus or possibly start a scholarship fund in the chapter name.

Having no "house" on campus any more seemed to really bother many alumni, so I took it upon myself to create a "virtual" fraternity house. A place where we can at least gather to find out what's going on with the organization, find other alumni, share some old stories and generally keep in touch. If you are interested in seeing how these pages appear, hop over to the Hillsdale's "Virtual TKE House" and take a look. If you are curious as to whether the house was being unfairly punished, read the "History" page! It's not that these last members did anything that different than when I was there, it's just that they always seemed to get CAUGHT!!! That always seemed to be the difference between John Kennedy and his brother Teddy!

Could this be part of what Eric Fry of Grant's International is getting at? He says that in a quick survey of market traders he finds they can quote the numerical level of the DOW and other indexes and are willing to prognosticate about where they'll be next year. He also said that these same people weren't close on their guesses of the Yield or P/E of those same indexes. He says these folks "know the price of everything and the value of nothing." If most market players only know Price and nothing about underlying value, he says that stocks become nothing more than "collectables." Oblivious of risk, he says, these players trade in a marketplace that becomes dangerous for all participants. "Investing in such a market is like riding in a cab whose driver cannot differentiate between a green and red light. He doesn't intend to be reckless, he just happens to be."

I'll discount the last three components at this point and just look at the Relative Valuation. I don't believe interest rates are going to fall any time soon. So, to get Relative Valuation to a Bullish point, the Value Line Price/Earnings ratio would need to fall from its current 16.7 level to about 14.3. That may not sound like much, but it would equate to about DOW 9500. To some that could be painful.

Maybe it would be more pleasant to discuss where the DOW might be if we were in the MIDDLE of the Neutral area instead. That would require a V-L P/E of about 15.3 or a DOW of around 10,150. There! Don't we feel better now? All of the above speculates that earnings and interest rates remain constant. If interest rates go up, then the V-L P/E would have to go lower. If earnings rise, we might work out way out of this jam. I don't even want to think about earnings shortfalls!

Well, what is going on down at the Equity Warehouse? Not too busy, actually.

The FED's latest interest rate rise didn't seem to have an immediate effect, but rather it brought many investors' focus back to the fact that interest rates bottomed some time ago and may be bouncing around from now on. Since interest rates and sustainable P/E seem to be inseparable, I guess we should pay attention.

It occurs to me to repeat something. Just because the IDIOT WAVE is no longer at high risk doesn't mean there's low market risk. In the broad band of Average Risk, we're still nearer the high risk end than the other. Please manage your cash assets as seriously as you manage your equity inventory. As AIM users, we learn to enjoy buying almost as much as we do selling at a profit. But there's no hurry!

This new balance is quite real. It takes a 42% loss to get listed with the "Worst Performers" and 41% to list with the "Best Performers." Just a typical market correction was needed to gring this about. Unfortunately, as the Price/Earnings figure in Value Line has been shrinking, the 52 week Treasury rate has risen enough to keep the Relative Valuation component in the bearish camp. We'll know soon if the FED is going to raise interest rates again.

Even while on vacation, AIM kept on working for me. There are several of these trades that tripped their "Good 'Til Cancelled" limits while I was away. Some I've filled since coming back to the "real world."

So, even though the Walleye of Wisconsin remained safe from my efforts to catch them, I did manage to land a few profitable trades during the week+ I was away.

Like a race engine with a rev limiter, the market has been running at peak RPM's for so long that I guess we needed this summer's break. We've now consolidated some gains and returned some areas of the market back to more realistic (?) levels. Well, AIM kicked the tires and, as always, checked our "timing" and said that we're ready to continue racing towards profits! So start your engines and get back on the track. Don't forget to use your brakes and be careful not to over-rev the engine on down shifts!

Speaking of AIM trades, let's get that done right away:

A mixed bag to say the least. Like Shake-n-Bake for one's portfolio!

Look what a beating its taken to get the Speculation index back down to more normal levels. Never in the IDIOT WAVE's history has it been so high. Relative Valuation is slowly coming down as the market worries the Value Line P/E to a more reasonable level for current interest rates. My guess is that the FED isn't going to do anything this month. We'll see how good my guesses are! Whether interest rates stay steady or go up, the market will most likely suffer until the big announcement. Last week the Advance/Decline data was really awful with 3493 issues down and only 1223 issues up on the NASDAQ. The NYSE was a similar story. Just 179 new highs on the NASDAQ with 350 new lows helped to bring the Divergence value back into the Neutral range.

All in all, it looks like as we've been trimming fat, we've been throwing it into the fire. Some stocks are getting scorched. Some renewed strength in the bio-pharmaceutical stocks has shown up with my CHIR selling several times in the last few weeks. Others in the group are also doing better. This week's BARRONS makes mention of some needed consolidation in this sector. Maybe we'll see some further improvement.

I'm being very cautious about how quickly I "burn" my cash reserve. On the other hand, I'm not hesitating very long when AIM's asking me to sell! During the month of July my portfolio reached yet another record high value. With the NASDAQ off quite a bit during the month, this came as a pleasant surprise. Already August is turning out to be a bit troublesome! Well, some seasons are for planting and some for harvesting!

The last time this value was any near where it is right now was back in 1987. It had been building for a long time prior to the massive sell-off in Oct. of that year. This value is calculated by taking the current Idiot Wave value and subtracting 41, which is the average value of the IW since 1982. Then we sum the values to get the cumulative total. As you can see, it can be negative as well as positive. Please note that for most of the time since about 1993 it has been rising. Also note that it has been rising at a pretty steep rate for all but a short period since the beginning of 1997. Can another "instant bear market" like last fall relieve the building pressures here? Is another "crash" necessary to get things back to safe limits?

We've only had two of the four IW Components causing the most recent High Risk reading. Valuation seems to be getting a bit better with the latest earnings reports and the small dip in the 52 Week Treasury Coupon rate. Speculation, which has been outrageously high since the first of the year is finally settling down a bit. So, there's a chance we'll get the IW back into the Average Risk range without too much pain.

AIM has been careful to raise plenty of cash in most people's accounts so far this year. Even the Russel 2000 stocks have been able to rise enough to bring the index to a 52 week high about a week ago. So, if we were listening, AIM was giving good advice! Now, let's make sure we keep this powder dry for the next time we must take AIM!

During the last week, AIM and I

Anybody else notice how the activity is shifting from Selling to Buying? Yes, this is what happens sometimes and it's what we plan for and even hope for when we have plenty of cash reserves on hand. I assume that many of you may be shifting to the Buy mode now. Keep your AIM precise and don't burn up too much ammo too quickly. We never know how long the siege will last!

Last weekend's races at Elkhart Lake, WI proved to be fast, noisy and fun for all who participated. One nice thing about not racing myself is that I got to start drinking beer earlier in the day! It was hot as blazes all weekend long. My XK 120 Jag in David Hinton's capable hands did well against the competition. I'd made a few changes this year - a newer steering gear box and the addition of a Panhard Rod to the rear suspension - that really improved the cars handling. Thanks go to David Stevens for the design and fabrication of the Panhard. Nice to have just the front wheels doing the steering now! First day out David Hinton managed to get the car's lap times down under 3:00 and by the end of the weekend he'd managed a 2:53 - not bad for 4 miles and 14 turns!

Watching the races a thought kept popping into my head - We really have to understand the risk involved in what we do in any activity. If we understand the risk, then we can set about planning a way to manage it. Ignorant bliss can quickly turn into painful knowledge. So, let's keep our wits about us and stick with our risk management plans!

So, assuming the end of the world just happened, what are we going to do? Well, if the prices of our favorite equities fall enough, we will just have to repurchase some shares at a nice discount to our recent selling prices and rebuild our inventories. Being good Warehouse managers, this makes sense. When the IW is at High Risk, I'm never in a big hurry to spend my Cash Reserves, but will "reluctantly" take on more inventory at the right price. Many AIMers forget that AIM sometimes "pumps the brakes" in a declining price environment. Don't be surprised if as you buy, AIM tells you to buy a bit more at the same price. I like to let some dust settle between buys when the market's at high risk. No use having too high a "burn rate" for our cash. Chances are if we wait a bit we might just get more shares at a better price.

Since last week's report, AIM's guided my hand with the following trades:

There were also signals to sell more CSTGX, TWCVX, TWCUX and UOPIX, but those orders weren't entered in time. Also note that AIM's already active bringing back some shares previously sold.

This coming weekend is the big vintage race at ROAD AMERICA, Elkhart Lake, WI. The Brian Redman International Challenge or BRIC takes place Friday, Saturday and Sunday and draws about 500 cars for competition and almost another 100 to be put in the Concours. This year I'll be there as Cheer Leader, Photographer and Tour Guide for the Leaping Cats Racing crowd. My 1953 Jaguar XK 120 roadster will be much faster than usual.... I won't be driving it!! My good friend and fellow Leaper, David Hinton, will be piloting the old Jag for me. David's one of the best "solid axle" Jag drivers in North America and I'm sure it will be a good show. All this is to say that I'll be out of touch quite a bit during the next few days. Since the AIM BULLETIN BOARDS have become pretty much self sufficient, I don't forsee any problems!

It would appear that the market's focus has now shifted from the quarterly earnings reports to what Mr. Greenspan will do next. Well, it seems they always have to have something to worry about! Just think, if they all were AIMers, they wouldn't have to worry about the markets at all! Then what would they do with all their free time?

Part of this is due to the fact that the Relative Valuation continues to rise into a very risky area. Any value above 21.5 is a bearish signal. Historically we just don't do well when both the Price/Earnings Ratio of Value Line and one year Treasury rates combine to be anything above that level. Either interest rates have to come down, or the P/E has to. I don't see interest rates declining in the near term, so this quarter's earnings will have to be spectacular to maintain the market levels we have right now.

There was lots of hand wringing this morning (Tuesday) which took the Dow and Nasdaq Composite down quite a bit at the open. However, by day's end it looked much brighter. Thank goodness with AIM we don't have to worry much about such things. The one stock in my porfolio that really got bashed this AM was Vitesse Semiconductor. They reported earnings and revenues right where they were expected to be so the stock dropped about 10%!!!?!!! Well, that affects my net worth, but not my sleeping habits! With a healthy cushion of Cash Reserve under it, I think I might even dream of when AIM instructs me to repurchase shares!

In the last week AIM's given me good advice on the following:

So, it's not been an inactive time. Nice to have profitable sales along the way during a high risk period. Sunguard Data (SDS) has been stuck in a rut for about a year but has allowed me to sell three times, pull one "vealie" and buy six times. It's the ratio of sells to buys that's not good, but overall the account continues to do well. Cash Reserve for this stock will allow continued buying for a long time if the price continues to decline below the $30 mark.

I noted we crossed the 22,000 reader mark today with this new edition of the AIM/Idiot Wave Newsletter. Hard to believe! Hope Mr. Lichello knows how popular he's become!

Using long term stock and fund histories, it's interesting to note that they aren't too far apart, but that this idea isn't as good on very long term accounts. Although it conserves cash a bit at the beginning of each buy cycle, it still managed to exhaust cash overall when things got ugly. The only way I could get equal results was to start the simulations with slightly more invested and less cash reserves. Of course this was my goal in the first place.

I figured that by keeping the resistance to Buying higher than selling, I could use less total cash reserve and therefore achieve better results. This has not proved to be the case on the stocks and funds I tested with history starting in 1982. It is because AIM set up this way doesn't take as big of an advantage of the tiny dips along the way. It still does just fine when the chips are down for several months in a row, but just doesn't nibble on those juicy little morsels that appear from time to time. Those morsels, when combined over an 18 year period added up to a full course meal! Sort of like adding one pad of butter per day to your diet, eventually, if everything else stays the same, it adds up!!

So, the way I've suggested the Split Safe and "vealies" be used at the AIM pages stands as the overall winner. My attempt to conserve cash and therefore reduce risk resulted in exactly what I should have guessed - reduced risk, reduced reward. Hope I've not misled anyone here to the point that they have to undue lots of work, but that seems to be the way it works out. Thanks for your patience on this project.

The A.I.M. Discussion Bulletin Board continues to prosper with nearly 8000 messages now archived. These pages have also been well attended with over 30,000 visits to the index page and over 20,000 readers of this report. It would appear that we're starting to build some momentum! I thank all of you for making this a popular place!

AIM trades for the last week consist of:

The rest of the portfolio is looking healthy other than my biotech stocks. After several months of AIM's insisting that I buy more NERX (tiny biotech) I finally gave in this week. However, instead of buying the common stock, I purchased the convertable preferred stock, which is currently yielding about 15%-16%. That will help to pay some "rent" until somebody starts paying attention to this little company's science.

Please keep following AIM's selling advise as the market rises in value and risk. If you are "fully funded" with cash reserve, then use "vealies" to expand your risk envelop ever so slightly. With market P/E's and interest rates up simultaneously, something is going to have to give. So like the Boyscouts say "Be Prepared!!"

There's lots of AIM trades to report for the last week or so:

Several of my AIM holdings are now at the point that the Cash Reserves are fully funded and "vealies" will start (See the AIM glossary of terms).

Activity on the Silicon Investor AIM thread and by email remains high. I had expected the summer to have slowed activity a bit, but that's not been the case. Certainly the IW's Speculation hasn't slowed much. Winners are still outshining losers by quite a wide margin.

I don't mind the market moving higher when I can sell shares into the rally. The sigh of relief when the FED finally did raise interest rates brought on a late week surge that has carried many stocks back to new highs. I hope all of you are also getting trades done and funding your Cash Reserves. Certainly on Independence Day we should remember to keep plenty of Powder dry!!

Just how much excess is measured easily in Value Line's Best and Worst Performers list on page 33 of their index section. This week there are 14(!!!) stocks showing gains in excess of 100% in just the last 13 weeks! The "worst" performer on the Best list is up a full 72.9% all by itself. The "best" performer is up over 300%! I think the Speculation index has been in the Bearish mode continuously since January of this year. It can remain so for very long periods of time looking back on its history since 1982. However, there comes a time to pay the piper.

With the other components looking okay, chances are we'll have nothing more than a quick breakdown in market prices - another in a string of instant bear markets. It pleases me to have plenty of Cash Reserve on hand just in case my favorite stocks tumble a bit. As a historical reminder, my Speculation index was also Bearish for most of the first half of 1987!

In the last week I've had a few AIM trades take place and some other "adjustments":

This last item was a continuation of the build-up of my JBL account. It now represents a big chunk of my portfolio. Hope I'm right about their future. I still have some nice Cash Reserve for AIMing it.

It would appear the market's fixation on interest rates is back in full force. Being good bankers, it is in the FED's best interest to make as much as they feel the market can bear. Wall Street seems to think it can bear another quarter of a percent. I guess we'll have to see if and how far rates move. As AIMers, we know that rate hikes are good for our Cash Reserves and bad for our equity value. At the same time, we know that a depressed stock market is just what AIM likes. AIM gets anxious if it can't periodically re-deploy some if its cash hoard by adding to our inventory. So, it would seem to me that AIMers should view anything that the FED does as benign.

PS: For anyone interested in learning a bit more about Port Washington, WI please click on this link to a recent Milwaukee Journal/Sentinal article:

At times like this it's nice to have a plan!

Summit Technology continues to lead the Value Line Best Performers list as it says "BEAM me up, Scotty!" Summit's new peak is up 220.8% in the last 13 weeks. Network Associates must be hanging around with a bad crowd! Their stock is off 66.1% in the same period. Again this week there's imbalance between the Best and Worst performers in Value Line. It takes over 79% gains to make the Best list while a setback of about 25% will land you on the Worst list. Speculation hasn't been eliminated from this market yet.

Earnings reports managed to trim back the Relative Valuation to the Neutral level. Just barely. However, this is always better for the general health of the market. Since it was such a dramatic one week move for the Value Line P/E, it might be better for us to wait a week or two to see if this is real or just a "blip" on the curve.

Looking back a few weeks, here's the AIM orders that have been filled:

There also have been several "vealies" in recent weeks, but I didn't do a great job of documenting those.

I've been playing around with my old Lotus 123 spreadsheet again. This is always a "scary" event! What I remember from my early AIM analysis is that splitting up the SAFE was usually a good thing if we wanted to bias AIM for accumulation or selling. Also, for the low volatility stocks, having a reduced overall SAFE allowed for more frequent trading.

I also remember that using a 0.0% Buy SAFE (resistance) got AIM a bit hyperactive on the Buy side in a declining price environment. Since the advent of the "vealie" for inhibiting AIM's overzealous selling, I'd not gone back to analyse the whole "package." After some preliminary tries, it now looks like it would be better to stage the Split SAFE values with a bias for Selling when used in conjunction with "vealies." For instance, if we're using a total SAFE value of 20% (10% Sell SAFE plus 10% Buy SAFE) then it looks as though putting the entire amount on the Buy side and using "vealies" and 0.0% SAFE on the sell side has a bit of an advantage. Part of the reason is that AIM becomes a bit better purchasing agent.

The same seems to hold true for mutual funds. Historically I've used 8% Sell SAFE and 0.0% Buy Resistance so that AIM tends to accumulate shares rapidly in a down trending market. However, cash is conserved nicely if we reverse those values and use "vealies" to cap the total allotment of cash. It may (I've not finished this study) allow me to actually lower the total cash reserve for an individual holding by keeping the "draw-down" slightly smaller. More later on this.

In attempting to switch some of these around, I found that if I was using 10% on both the sell and buy sides, when I made the change to 0.0% Sell SAFE and 20% Buy SAFE, it usually put me in the position of an immediate AIM Sell. I just handled these with "vealies" for now as there was already plenty of cash in most of the accounts. If as I continue to study the long term effects of this modification I find that it's a generally good idea, I'll be changing some of the permanent information contained at the AIM site to benefit all who read here.

Should any of you care to join me in this study, please email me or post your results at the AIM Bulletin boards if you are members. I always look forward to your comments. Last week's inquiry brought out some good points. First was that there was no need to consider "tax efficiency" inside an IRA or other qualified account. Next was that no matter what, it wasn't fair to AIM to jeopardize its efforts to save a couple of bucks in taxes! Thanks for your thoughts.

I would like to introduce an idea to the readers this week in regard to "tax efficiency." Since we now have a two tier capital gain tax, it might be wise for an adjustment in our thinking. Here's my idea:

What I'm proposing is that in the first year of ownership of a new stock that we postpone any selling by use of a "vealie." We would start the new holding with a fully funded Cash Reserve and if AIM told us to buy, we would be quick to respond to that command. After all, we're very interested in getting to that point where we're on equal footing with Mr. Buynhold (100% invested).

However, if AIM were to ask us to be selling any shares during that first 12 month period, we would refuse and instead do a "vealie." The "vealie" would raise the next buy and sell prices slightly as if we'd made a tolken sale, but with no tax consequences. So, slowly if the rise in the price/share continued for the entire year, the Cash Reserve would remain the same value, but a diminishing percentage of the total portfolio value. It would, however, retain its full Buying Power.

At the end of the initial year's time, we would then switch back to regular full blown AIM. Then, if we are asked to do some selling, it would be both tax efficient and probably prudent as we bring up the Cash Reserve total value and percent of portf. value.

I've been receiving some great email recently. If the idea presented above intrigues you enough to comment on it, please feel free to email me or place a comment on the S.I. Bulletin Board if you are a member.

Two areas are bad right now. Relative Valuation is rising and showing the sum of the P/E ratio and interest rates well above happy levels seen last fall. As before, we have three choices at this point; 1) Earn our way to a lower P/E, 2) Have Mr. Greenspan lower interest rates, 3) or have market prices for securities fall off. Hmmmm, I don't think Mr. G is going to cooperate, so it's either 1 or 3. Right now the market seems to be attempting #3. So far AIM's cash reserves haven't been tapped by my own accounts, but they are giving me great comfort.

My Speculation Index has never really settled down since the first of the year. In recent weeks, we've seen the Best Performers rotate away from the Internet Stocks and to other areas of the market. This really hasn't helped to bring market speculation under control, however. It takes an 80+% gain to get listed on the Best Performers list while only a 27% setback to get you onto the Worst Performers list. Clearly this shows an imbalance.

I've seen the Speculation Index stay in the Bearish area for long periods of time, but there always seems to be some reconcilliation eventually. This time it's been a full 6 months in the Bearish area with no relief. This is beginning to remind me quite a bit of 1987 before the market got whacked. I hope I'm not sounding too gloomy here, but please remember that we've seen this stuff before and it usually doesn't end happily for the short term.

I've not caught up on weekly AIM trades yet, but will report on those next week. I'm feeling so darned good since surgery that I'm beginning to wonder why I waited so long to have my neck fixed. Shown below is a Secret Spy Photograph taken of me while I was still hospitalized. As you can see, I was bored just sitting in bed and felt the urge to get up and walk around. You can also tell that I got a little behind in my work. I just want to thank all of you for being behind me all the way!

Hope everyone had a good Memorial Day Weekend. We cooked out and had our first "summertime" meal of burgers, bratwurst, potato salad, fresh tomatoes, etc. At this rate I should be back up to fighting weight in no time!!

Bob Norman will be calculating the Idiot Wave while I'm recouperating from spinal surgery. Rob Hansen and Bernie Goldberg - regulars at our AIM Bulletin Board are collecting the raw data and working with Bob. So, the information won't be posted here, but on the Bulletin Board. Please check there for the IW information.

Once back on my feet I'll get all the data and summarize it here for everyone. Thanks to Rob, Bob and Bernie for helping out. I'm not sure if I'll be taller or shorter when the surgery's over, but at least you will all know I have my head screwed on straight!!

One up and three down is the count on the IDIOT WAVE components. The result is a balancing act with the IW remaining steady. Qualcomm, Inc. topped the Best Performers list giving a magnificent performance after settling its differences with Ericsson over digital phone standards. With a 214.6% gain it's the first time in a long time that an Internet stock hasn't topped the list. Here's what it looks like from AIM's point of view:

The number of new highs and lows on NASDAQ reversed last week with just 170 new lows showing. This helped to bring the Divergence reading back into the middle of its neutral range. I don't like it when the Relative Valuation reading goes into the bearish area. Unfortunately, with interest rates steady and a rising P/E, that is the case.

The last week brought several attractive AIM trades for my portfolios. Here's what AIM and I did to keep a cap on portfolio risk:

All in all is was a positive cash flow week for Veale's Intl. Equity Warehouse. Current accounting shows a 24% overall cash reserve level, 72% average profit for the portfolio. VLSI certainly helped the Cash Reserve! Now I have to dust off my stock guides and see what to do with all this money.

The counter on this page is very close to the 20,000 reader mark! Nearly 29,000 visite to the AIM home page as well. It's good to have so much company!

A week ago on Monday, the market got a bit upset, taking the NASDAQ down about 5% in one day. Then, by Friday, we were seeing a 100 point gain for the week overall. Advances led declines on the NASDAQ once again with 2579 ascending and 2141 declining for the week. New highs and lows narrowed during the week with 217 new highs and 235 new lows showing. This helped to bring the Divergence reading back to neutral. The internet stocks continue to hold the Speculation index in the bearish area with the best performer in Value Line showing a 13 week gain of 245%.

The week wasn't without some AIM activity. Here's what AIM did for me:

With more Sells than buys, I guess my cash flow for the week was okay. It was nice to see my Hong Kong fund WEHKX back into the Sell mode. It did well back in November and then fell back asleep for several months. With the Hang Seng back near old highs, WEHKX should continue to perform well near term. I also noted that Japan OTC Fund and I believe it was Brazil Fund were on the Best Performers list in Value Line this week. Lots of activity abroad and here at home.

There's been talk of a cyclical pattern related to IRA contributions that happen just before the April 15th Tax deadline. There's been a tendency for the market to climb with the new money and then fall back in May. We'll have to see if this pattern holds up again this year. This has sometimes allowed me to do a bit of buying, but these events rarely mean much to my AIM accounts. If anything it puts my AIM trades on hold for a month. I find the lack of trading probably one of the hardest parts of running an AIM account. I don't mind buying or selling, but just waiting drives me nuts!

I did a simulation of what 5 years of AIMing would have done for an investor that bought AOL's stock in April of 1994. That investor would have done very well. Not nearly as well as the Buy and Hold investor, however. That said, how many of us would have held onto one stock for a 160 X ride? At least AIM would have kept many of us involved instead of selling out of the position all together. Here's what the graph looks like:

Magnificent performance is shown with wonderful safety. What would one do now? Cash in the account? Let AIM carry it another 5 years into the future? I'll let you all contemplate this!!

I'll be making some arrangements to keep the Idiot Wave data collected while I'm recouperating from the cervical fusion I'll be having done at the end of May. With that said, I'll attempt to keep the reports up to date. As you who have read this report for a while know, the Idiot Wave data itself doesn't move that fast. We usually see some signs of market stress before the IW signals a confirmation of the problems. So, if you notice that the reports are a bit late at the end of May, you'll know why.

What's funny is that last week was the first since early this year that we had more advances than declines on the NASDAQ! Market breadth seems to have signalled the end of some other era! With nearly equal new highs and lows my Divergence measure jumped up further into the Bearish area. Relative Valuation remains in the Neutral area. This has best mirrored the overall market of any of the four components. Many of the internet stocks doen't even get measured by the Relative Valuation because they have no earnings and therefore no P/E!

AIM and I kept busy since last week as follows:

There may end up being more buying this week if we see more lemmings leaping tomorrow.

I've been searching for some good junk bonds (good?) that I can play with along with the common stocks, but I'm not finding anything that interesting yet. I'll keep all of you posted if I come up with anything juicy. I like to buy a convertible bond and common stock in equal value in the same company. The conv. bond pays enough yield to make the overall return quite good while I use AIM to manage the common stock side. I've done this a number of times in the past but have had problems finding the right combination recently.

With nearly 20,000 readers of this page, it's almost becoming respectible! Thanks to all of you for making my efforts feel worth while. Hope all your AIM accounts are doing as nicely as mine so far in 1999.

Last week I sold 11% of my ADCT at $44 with a "good 'til cancelled" order. That and the sale of some July $20 VLSI CALL contracts for $0.75 each was all the trading I got done. I have my latest round of "gtc" orders placed and waiting while I head on vacation for a bit. So, if any of you see a balding fat old man with transparent Wisconsin white skin sitting near the beach drinking way too much rum, it's probably me! It's been MONTHS since my skin has seen the sun. Sure hope the sun screen works!

Please don't hesitate to write to me while I'm away. I'll get caught up with the email as soon as I get back. Hope all of you won't miss me too much. I don't plan on watching any TV or listening to the radio and Jane won't let me bring my portable computer, so the market is in your hands until I get back!! Take good care of it and make sure all my stocks go up and trigger their next AIM SELLS!!!

C-Net is showing 323.8% GAIN in just 13 weeks to head the list of Best Performers in Value Line. This has driven my Speculation Index back up to an even more bearish level. Overall, the IDIOT WAVE didn't move, but for the first time since Feb. 15th, the Idiot Wave Oscillator has turned to rising risk. I've seen this sort of thing before when Speculation is a high value while the others are neutral or low risk. This is typical of the period of time after a major sell-off like last Fall. With 322 New Lows posted on the NASDAQ last week and just 199 New Highs, it's a long way from being out of control yet. The Advance/Decline ratio deteriorated on the NASDAQ last week as well. 1949 advances and 2805 declines. The relative values of the best performers and the rest of the market continues to widen. I've been waiting for my "value" plays to perform, but nobody is interested in "value" growth stocks these days.

AIM continues to manage my inventories for me in excellent fashion. If it sees interest in our holdings, it jumps on the chance to make a trade.

I'm learning quite a bit about buy-outs and take-overs with my VLSI holding. I halted selling shares (much to AIM's dismay) around $17 while waiting to see how the $17 price offered by Philips Electronics (PHG) was received. Well, VLSI's board turned down the offer as inadequate, but said they would be willing to talk further about the possibilities. They went on to say they have hired two investment bankers to help them explore their alternatives. One of the investment banking concerns they've enlisted happens to be Hambrecht & Quist (HQ). If you note above, I've just has the luxury of selling off a few shares of their stock in the last week. I don't know if their stock is up because of the VLSI deal or not, but I love a profitable coincidence! VLSI's other options seem to be a possible "go private" leveraged buy out or another suitor(s) such as ST Microelectronics (STM) or possibly some domestic firm. It doesn't seem as though they will remain independent, however.

Also related to VLSI is the agreement by Ericsson (ERICY) and Qualcomm (QCOM) to settle their disputes over what's termed CDMA technology. This is the digital science for the latest generation of portable phones. QCOM had one standard and ERICY another. Together, they may end up with something near a "world standard" which will help both companies. ERICY is a major customer of VLSI's so anything that's good for ERICY will also be good for VLSI. In many ways I wish VLSI would remain independent long enough to see how far this next business cycle will run for chip makers involved in communications. My gut feel is that VLSI had a good year ahead of it before the Philips offer.

Via Email, I'm hearing from many old and new AIM users. One fellow had worked very hard at improving Mr. Lichello's model and had also divided SAFE into separate components for buying and selling. Great minds think alike!! Keep those cards and letters coming!

Next week will be a short one for me. I'm taking some vacation time with the family. I PROMISE to get the report done before I leave, but the following week's might be a bit late. I've selected May 21st as the date for my "elective" neck surgery. Three disks removed and four vertebrae fused. Don't know if it will make me any taller, but it will relieve compression on my spinal cord. I've spent a great deal of time during the last week reading all about such things. Our Jack Park was kind enough to have provided me with a great web site and bulletin board on things medical. Thanks Jack.

AIM and I had some good trades recently. Here they are:

One of the best parts of the IDIOT WAVE components for a long time has been my Zeal measure. It's been showing a steady decline in the number of issues available to investors for some time. In its own way, this has been quite a good broad market indicator. When there's shrinking availability of issues, that tends to concentrate the dollars in the remaining issues. Less supply, better demand. The total issues of the NYSE and NASDAQ peaked at about 9600 issues available some time in the last two years. Now we're down to "only" 9033 as of last week. If we compare the times of contractions in the past to the NASDAQ Composite Index, we see that these times have been good for the market in general. With Zeal remaining a negative value, this overall measure remains quite bullish.

This morning the DOW cracked through the 10,000 barrier for the first time. It didn't manage to hold that lofty value for very long, but still it's interesting to think about that value and where we were when it crossed other thresholds. Although the DJIA broke through 1000 a very long time ago, it wasn't until 1982 that it made it stick. In 1987 it soared through the 2000 mark making it all the way to about 2700 before it had a "bad day" later that year. We saw it cross 3000 for good in 1991, 4000 in '95 and 6000 in '96. So, although 10,000 only lasted a few minutes today, it's interesting to think back to 1982 and to realize that the stodgy old DJIA has been a Ten Bagger in the last 17 years! Let's see, that means the DOW will be at 100,000 by the year 2016 and 1,000,000 by 2035!

The NASDAQ Advance/Decline ratio is still showing more falling than rising, but again this week it's better than most of February's values. Number of new highs is still quite small giving us a good reading on the DIVERGENCE index. Really, the only sore spot in the IDIOT WAVE is SPECULATION. It continues to have very high percentage moves upward on the Best Performers, outweighing the Worst Performers by quite a bit. Remember that a good stock can be up more than 100% but a bad stock can never fall further than that amount.

Although AIM and I did a reasonable amount of trading during the month of February, my account held steady with essentially no gain or loss. This was while the NASDAQ Composite fell about 8.2%. It seems like usually my portfolio suffers more than the NASDAQ, so this was an unusual experience - one that I enjoyed. My Cash Reserve rose slightly during the month. Here's what AIM and I accomplished most recently:

This week was chopped up with some doctor's visits and a quick trip to the Mississippi to visit LaCrosse, WI. Unfortunately this cut into my composition time for the Weekly Report. So, here it is at last. I'm always amazed to see every week that lots of people are coming here to see what the IW has to say. Thanks! It's probably time to update the IW graphs as well. Maybe next week!

This coming Wednesday I have an appointment to see the back and neck guy. He didn't like my MRI scans from 2.5 years ago, so we'll look at the "fresh" ones along with the old ones then and make a plan of attack. It would appear to my untrained eyes that most all the damage that was there before is still there - but at least not much worse. Of the three offending disks in my neck, one is putting rather hearty pressure on my spinal cord. That could explain why my right arm has been doing a Bob Dole imitation recently. I'll keep everyone informed as I learn more.

Much has happened since my last report. A long time position in VLSI looks like it will be closed out. They received a buy-out bid from Philips Electronics (PHG) at about $17/share. Since the price just before the offer was about $11, this looks to be a very nice bonus. However, VLSI is taking its time evaluating the offer and in the mean time the price continues to climb - over $18 this AM. My CGEN shares have buy-out offer at $14-1/2 and another cash deal. Looks like CGEN will drag their feet a bit as well. The share price today went up to $15-3/4, so somebody thinks the offer will get sweetened. Another long term holding UWW also has agreed to merge with another company. I don't like the idea much and have sold out of my UWW position. More "spring cleaning" occurred when I sold out of FGLDX and took the proceeds and bought VGENX. This was a swap of "yellow gold" for "black gold" for my account.

Other AIM TRADES:

So, all in all it's been one of the more interesting weeks I've had in a long time. Getting rid of three stocks in one week to buy-outs and mergers is a new record for me! All will close out at nice profits.

I said I wanted to do some housecleaning, and the market has come along and done it for me! I'll miss these "old friends" but it will make some room on the shelves down at the Equity Warehouse for something new and interesting!

Maybe I'm just restless. I only had one trade since the last report, 4% of my Mexico Fund (MXF) headed off for new ownership yesterday at $12-1/2. It turned a handsome 35% LIFO gain on my last purchase in early January at $9-1/4. However, I'm still feeling like doing SOMETHING!!! As you've come to notice, it's not too often that I have a whole week go by with no trades or just one or two.

Phil from New Jersey and I have been corresponding for a long time. He's been AIMing about the same length of time as I. Indeed, he's suffered like problems of feeling somewhat isolated as an AIM user. It's been the internet that's brought him in contact with other AIMers and with me. Recently Phil was commenting on trying to compare AIM and Buy & Hold. Here's his thoughts:

"I think one of the neglected points about comparing the value of using AIM to a buy-and-hold strategy is that with AIM we are "forced" to use investments that are "lively".

Such investments most investors would shy away from because of their volatility and risk. So when comparing AIM results to buy-and-hold results, we really need to compare apples with oranges. The two types of investors will more than likely use different investments vehicles, or Mr. B&H will be scared out of the volatile stuff when the price moves against him.

In the limited testing I have done, the AIM program with high volatility - and sometimes high Cash Reserve - beats out B&H of "tame" investments during the same time frame.

Phil"

And my reply:

"Hi Phil, One of my other "favorite" books is by Thomas Phelps. It's called 100:1 In The Stock Market. He is a proponent of Mr. Buynhold. However, he does a beautiful job of identifying what characteristics long term high growth stocks have in common. He says we only need to find these 100:1 potentials and buy them.

However, as you point out, how many of us would have the guts to stick around for a 10,000% gain? With AIM, I'm much more likely to be there at the end - even if I'm not up as much as Mr. Buynhold. Vitesse Semiconductor is a perfect example. It's really not been a great AIM stock, because it rarely goes DOWN in price! At least not enough to trigger much in way of AIM buys. BUT, would I have stuck around either in Buy&Hold form or as a "Trader" while the stock climbed from a split adjusted $1.30+/share to its current $48/share? Not likely! If someone were paying me $ix figures a year for my good looks, maybe I'd have let it run longer with my original purchase, but nobody is! Tuff being unemployed! Mr. Buynhold would be up 36X, I'm up 10X by using AIM with "vealies." Unless Mr. Buynhold is Mr. Phelps' clone, I doubt if he'd have stuck around for the whole ride, either.

Your point is well taken. If as Buy&Hold investors we're only willing to buy utility stocks with a high yield and low volatility, aren't we missing out on a great bull market? If we divide up our portfolio into an INCOME section and a GROWTH section, within a very few years the Income section will look trivial compared to the Growth section.

I actually did this while acting as fiduciary for a charitable trust. The trust had a $65,000/year pay-out that was manditory. I set up the investments to earn the required $65,000 per year by owning 80% high yielding bonds. The remaining 20% of the portfolio was divided up AIM style and sunk into an aggressive growth fund. The bonds did their thing and kicked out plenty of interest income each year to pay the base payout. The growth end used any surplus income to continue to grow with new investments as well as its own internal and AIM-generated growth. In the seven years I managed that account, I never had a year over year "loss" on paper and by the end of the 7 years, the GROWTH side had increased to 50% of the portfolio from just 20%. The earnings on the Cash Reserve of the Growth side was now a comfortable source of income by itself.

I modeled my own personal finances much the same way. First I established my "tight belt" living income. We earn, from high yield bond funds, enough to pay real estate taxes, buy food and other stuff that's needed. The rest goes towards growth. In good times, there's quite a bit more income because of earnings from the Growth side's Cash Reserve. When the market stinks, the Cash Reserve shrinks and we have to tighten our belts a bit. So far, so good!

There's much talk about investors "re-balancing" their portfolios periodically to keep all the various parts in proportion to each other. My experience with the charitable trust defies this sort of thinking. In my own life, when I've had extra funds on hand while bonds were not "happy", I've added to the bond funds to keep up with our increasing base cash flow needs. However, my portfolio is no where near as heavy in Bonds today as it was when I first started on my own in 1986. I've let the growth side of the equation GROW.

The only "re-balancing" I've done was a couple of years ago when I bought some "recreational" property. At that time I justified it as a way to redistribute my assets towards more real property and less paper assets. It made no real sense from a financial point of view, but rationalizations don't care about that!

Sorry for the rather long rambling note, but "I was born a ramblin', gamblin' man!" Both Mr. Lichello and Mr. Phelps have been great guides along the way - each with their own perspective.

Tom"

So, now all you have to do is select stocks by Mr. Phelps' methods and then manage them with Mr. Lichello's! Gosh, and you guys though this was going to be hard work!

A week ago the Advance/Decline ratio turned sour and it continues this week. We all know the market breadth has been slim, but these statistics show it getting worse recently. I don't get much predictive value our of the A/D ratio, but it helps to confirm what's going on. Last week there were 1669 advances with 3129 declines for the week. New Highs and Lows are showing that the market has made up its mind to consolidate. The DIVERGENCE index dropped nicely this week. The reason is that there are only 129 new Highs this week while there's 226 new lows. The DIVERGENCE index takes the smallest of the two values and divides it by the total number of shares traded on that exchange during the same week. Usually when the value is below about 2.75, it is a short term bullish signal. It probably is this time, too, but it was low three weeks ago, too. At that time it was a low value because of very few new lows - my how things change! As long as the number remains low, it means there's very little divergence in opinion about the market's direction. I predict this means a quick correction and then on with the bull market business.

What I've termed the "Hold Zone" between the AIM buy and sell points, Phil from NJ calls the "Boredom Zone!" Well, that's where many of my stocks are right now. So, I've compensated by selling a few Option contracts. Here's what I've been doing:

The sale of some PUTs and CALLs put roughly $1200 in my pocket after taxes and doesn't compromise my AIM accounts at all. In the case of VLSI, I'm supposed to buy 400 shares more at about $10, so if the contract is fulfilled in April, it will be just what AIM intended. The same is true of the March $75 CALL and the June $80 CALL for JBL. AIM would sell shares there anyway. (Note: the JBL contracts are priced "pre-split") In the case of VLSI, I decided not to spend the money now and buy the shares. For JBL, I've plenty of cash reserved for that holding, so I can "afford" to wait and see if they are exercised or not. It won't be a big deal either way, but I get some "walking around money" from the investments.

After a nice return to former highs in January, several of my investments have given back some ground. I'm certainly glad AIM was there taking some money off the table and reducing my risk exposure as prices were rising. I'm beginning to think the market is becomming a better AIM market all the time. For years I'd go along with almost nothing but Sells and VEALIES to occupy my time (what a shame!) and now it appears that we're in more of a trading market. If it continues to be volatile enough to trip both buys and sells while it consolidates, we AIMers will be very pleased. This is where we get to play "catch up" with Mr. Buynhold. We may not turn over large pieces of our portfolios in turbulent times, but if we do them frequently, we compound the LIFO gains.

The week brought a quieter bit of AIM trades and more mix than previous weeks.

Not all that busy of a week so far, but it's not over!

We've seen the uncertainty about the market's next move starting to build in the DIVERGENCE values of the IW in the last couple of weeks. It bottomed the week of January 11th at 0.3 and has now climbed to 3.6. Even though this value is still in the "Neutral" territory, it's the rise that's significant. Last week there were 195 new lows on the NASDAQ while back in Jan. there were only 16 new lows. It won't take much more of a push to bring it into the "Bearish" territory. When the market is confused, there's lots of new highs and lows simultaneously. This does describe how the market has been acting recently.

Again this week the SPECULATION component is very high. At 36.9, it's way above the 10 value that declares it in the High Risk area. If we get enough of the internet fat trimmed this value should fall back to more normal levels. When it hit 64.2 two weeks ago, it was a new record. The previous "high water mark" had been reached at 33 in 1991 after the Gulf War. This time we had a typical market rebound from lows posted 13 weeks earlier PLUS the internet bubble. The combination produced higher readings than at any time since 1982.

With the mild weather we've been having this year in Wisconsin, I've been thinking of doing a bit of Spring Cleaning of my portfolio. I'm not sure where I'll start, but maybe the basement of the Investment Pyramid would be good! Maybe a Garage Sale on some of the dusty old certificates that haven't had any recent inventory turns!

I've updated most of the IDIOT WAVE graphs, so take a look at the Components to see the spike that SPECULATION takes this week. The other components are more subdued than it. The Best Performer in all of Value Line this week is ETRADE. Why didn't one of you tell me to buy it 13 weeks ago at just 1/6th its current price??? All I can say is WOW. As stated it takes a gain of 106% to even make the "list" of best performers, while a rather small drop of 18.1% will get you on the "bad boys" list. If we discount Etrade and the other 5 200+% gainers, and assume the others have just returned to where they belong, then the Best/Worst index doesn't look quite so bad. Still, I don't think we can ignore this early warning for the market.

The sum of the IW and the IW Components would give us the awful reading of 65% Cash Reserve suggested for our AIM accounts or new accounts! I think we have to temper this with the knowledge that a good part of the recent rise can be attributed to the boomerang effect. The rest of the components don't look all that bad.

Trades have been a bit quieter recently.

All shares were sold very profitably in a very short period of time. Thanks, Mr. Lichello!

I've had to re-do my entire list of open "good 'til cancelled" orders recently. There were so many trades (mostly sells) going on that my buy order prices were sadly out of date. If you use this technique, please make sure your own order lists are up to date.

The market seems to be churning about with big winners and losers each day. I can't tell if this is the beginning of a sector rotation or just consolidation and some profit taking. I'll vote for the second choice for now. NASDAQ "breadth" hasn't been too bad recently. Last week there were 2239 advances and 2550 declines and it wasn't much different from the week before. Considering the DOW sank about 200 points and the NASDAQ flattened out, this isn't too bad. I just don't want to see it continue.

Many of my stocks are very near their next AIM sell prices. Those orders will trip if we just edge up a small amount. No more "vealies" on the horizon since the IDIOT WAVE had gone up again. Veale's Equity Warehouse still needs to do more rebuilding of its Cash Reserves, so I'm hoping for a few more trades soon. At last glance, my overall cash position had risen to about 12% of total value. This is still way below my historical levels.

I'm not saying that we should ignore this, but the run-up in SPECULATION was to be expected. When you have things like Amazon.com showing a 343% gain in just 13 weeks, we certainly have to know that some speculative activity is going on!! It takes a gain of more than 117% just to make the Best Performer's list!! Last October, it only took 16.5% to get your favorite company on the list! Now it has to be 100% better. Are you beginning to understand why I track such things and have for more than a decade?

With the relatively good earnings reports coming in, I'm not sure the P/E for Value Line will stay up in the 17's. We'll just have to wait a week or two to see. Interest rates are "steady", so it's the P/E that will control whether our RELATIVE VALUATION levels will stay in or out or the High Risk area. I'm sorry to see it back as high as it is.

I had a few trades this last week, but things were a bit quieter around Veale's Intl. Equity Warehouse. I'll catch up on those next week!

I hope you all get a chance to take a look at the new graphs I've prepared for long term AIM usage with a good mutual fund. The EXAMPLES show "AIM by the book", "AIM w/Split SAFE", "Buy and Hold", "AIM w/vealies" and "AIM w/Split SAFE and vealies" to show just what each change to Mr. Lichello's program can do. I haven't finished all the text yet and one graph still needs to be finished, but I hope these Pictures are worth at least 1000 words to you.

They reverse split my new holding in UOPIX this last Friday! It was a 1:5 reverse. I've had to do some adjusting to the Newport files to keep the graphs from looking rather peculiar!! Since there was only 6 weeks of data, I just went into the History files and changed the # of shares and the price/share by the same factor for each of the previous periods. Now everything looks more straight forward. This account was started for my college fraternity's alumni funds. They have since given me an additional $10,000 to throw into the pot, so the initial investment I raised to $30,000 total with a current ratio of 54% invested and 46% Cash Reserve. I'm using 10% for both Buy and Sell Resistance (SAFE) for this volatile fund. I'm treating it basically like an individual stock.

Did you see how far the DIVERGENCE value fell this week? There were 399 New Highs last week on the NASDAQ and only 16 new lows! That's what happens when we relieve the markets of Tax Loss Selling. I noted also this week that Value Line's Best Performers list has 4 Internet stocks out of the top 5. E-Trade topped the list with 221.7% gain in the last quarter. Service Merchandise is barely showing up at $0.25/share down 81.3% in the same period. It now takes an 80+% gain to make the Best Performers list while just 31% loss makes your stock join the Worst Performers. This SPECULATION measure is not of real worry for me at this time since it's just one quarter after the market lows were seen in October.

Other than driving my daughter back to college on Sunday and Monday, here's what AIM and I have been doing recently:
Year End Buying:

I think it's been since the October lows that I've had this many trades in such a short time. AIM and Veale's Intl. Equity Warehouse are doing our best to keep up with supply and demand!

I had a scare earlier in the week when I called Penguin Publishing to order more of Mr. L's book and was told that it was no longer in print! Well, it turned out to be a mistake. They are still selling the book and don't have plans to eliminate it. The nice lady at Penguin did ask about my interest in the book and why I only ordered that one title. I told her about our web site, that there's lots of AIMers around and that we're a happy lot! She indicated she'd check out our web site! It was around Thanksgiving when I attempted to get in touch with Mr. Lichello by mail. All I can say is that my letter didn't come back. I guess that's some form of encouragement! I'll try again soon.

Lucent Tech. has made an offer to buy Ascend Communications so I now have the task of determining if I want to let my shares of ASND roll over to LU or pick a new investment. The conversion rate is tenatively 0.825 shares of LU for each share of ASND. Guess this means another trip to the library!

I was just getting to like this January Rally stuff. Hope the Brazillian currency problem and the Senate trial don't do anything to upset a good start to 1999.

Here's what's been keeping me busy in between taking the pulse on my accounts:

So all of that activity helped to replenish the Cash Reserves for my various AIM accounts. It is attempting to keep up with the rather rapid risk expansion that the Idiot Wave has been seeing. Just 8 weeks ago the IDIOT WAVE was suggesting 28% Cash Reserve for Stocks and 19% for Mutual Funds. Now the values are 41% for Stocks and 27% for Mutual funds. These values are dead center in the middle of the Average Risk Range. I hope AIM is helping you reach towards those same Cash Reserve levels.

The IDIOT WAVE presents a moving target at which we must AIM. It's moved up just enough to trigger this latest round of selling. Now many of those accounts are back to "vealie" territory if the IW doesn't rise any more for a while. Also, many of the stocks that had been under rather heavy selling pressure up until the end of the calendar year (tax loss selling) have now been relieved of that burden and are starting to rise a bit. This is probably what's helping the Russel 2000 index of smaller cap. stocks.

We have to remain on top of these trades and keep our "good until cancelled" order lists up to date. As prices rise, we have the luxury of taking LIFO profits and salting the proceeds away for the next time the air gets let out of the market. Just think back to September and October and how even our well protected AIM stomachs felt and then place your Sell orders (and hope they fill!).

Who would have ever guessed that AMZN at its lows posted in October would do what it's done since then! CNBC spends quite a bit of time every morning talking about AMZN looking more and more like a Hydrogen filled Zepplin heading for an electrical storm. I guess I would agree. However, if any of you have AIMed at AMZN, congratulations! I didn't have the stomach for it!

Please enjoy the January Rally as long as it lasts! So far so good for V.I.E.W.