Investing

Automatic Investment Management – AIM

AIM is an investment method devised by the late Robert Lichello. This method is a proven way to take advantage of the inevitable market swings to enable us to ‘Buy Low / Sell High’.

Groundrules of how the AIM Strategy works:

  1. When starting with a lump sum, only invest 50% from the start.  If establishing a monthly investment plan, also split this allocation to 50% invested (after all, there’s a 50/50 chance the market will go up OR down tomorrow!)
  2. Utilize a cash account to maintain your investment reserves / gains, awaiting further investment (starting with the second 50% of your lump sum, and then including the proceeds from sales as well as 50% of any subsequent monthly investment.)
  3. Be prepared to sell a portion of the gains you have realized and deposit them into your cash account, per the AIM algorithm.
  4. Be prepared to buy some back with your reserved cash account when the stock declines.
  5. Set a routine period of time in which to analyze the markets direction, and take action.
  6. The algorithm is relatively simple.  It involves several key points:
    1. Portfolio Control:  Running total of your stock purchases (total initial purchase plus 1/2 of follow on purchases; however it is never deducted from in a sale) in order to keep a basis of where the portfolio should ‘aim’ to be.  This is the ‘governor’ of the system – it drives the initial assessments about buy and sell decisions. 
    2. Buy/Sell Advice:  Based upon the current Stock Amount (currently owned shares times current price) compared to the Portfolio Control figure.  When the Portfolio Control amount is larger than your current Stock Value, you will look to buying (the Market is down.)  When your current Stock Value is higher than your Portfolio Control, you will look to selling (the Market is up.)
    3. SAFE (Stock Adjustment Factor Equalizer):  10% of the Stock Amount – After you do the analysis in [b] above, you compare the results to your SAFE amount – you only pull the trigger on a sale or purchase for the amount of Buy/Sell Advice less SAFE; this controls you from selling or buying too prematurely.

TIP ME and I will email you the spreadsheet and a help file!


VOLATILITY S&P 500

This index measures the cost of option protection (insurance). It trades in the futures market (CBOE). That means it has a spot price (today) and a futures price (next month, and the next month, and so on)

To make it accessible to stock traders, several products (such as VXX) have been created. VXX is normally in contango. That means the price today is less than the future price. You lose money because when it rolls to the next month, you sell low and buy higher.

During market downturns, VXX goes into backwardation. You make money since you sell high and buy lower as it rolls to the next month.

BUT BACKWARDATION ONLY PERSISTS TEMPORARILY!

To make $$$, you must own XIV. This product is the inverse of volatility. 

Xiv


Natural Gas is a coiled spring

I'm seeing natural gas at $4.00 by December. Play it with UGAZ. Here are my reasons:

La Nina will increase the number of tropical storms in the Atlantic, which has been on the quiet side for the past three seasons.

During one week last month, the country used up a little of its gas reserves for the first time during a summer in 10 years, according to a report released Monday by the U.S. Department of Energy.

It became cheaper for power plants to burn gas than coal. In April last year, natural gas generated more electricity than coal in the U.S. for the first time in decades.

U.S. Natural Gas Drilling Rig Statistics
Current natural gas drilling rigs:     86
Active rig count one year ago:         223
Rig Peak (hit on 9/12/08):               1,606

 Peak natural gas is coming plus depletion rates show a steep drop off
Blog150728d


The stock market bias is higher in the long run and here is WHY

Of course FED money printing, stock buybacks, and mergers play a huge role in sending stocks higher, but the number one factor is the way market averages are manipulated!

The components of the S&P 500 update periodically. Between 1/1/2005 and 1/1/2015, 188 index components were replaced by other components. In other words, drop the companies going bankrupt and replace them with companies in their growth phase.