We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon
Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Market participants' enthusiasm seems to have no bounds. New highs in the major market indexes are mundane because of frequency these days. I'm not complaining as this has allowed frequent inventory reductions in investment inventory as prices have been rising.
Not to be like the Grinch, but maybe more like Scrooge, there are measurable increases in stock/fund market risk that have come with the index's upward slope. The v-Wave 3-5 Year outlook is showing caution with a value of 34% suggested cash. For the 18 Month time horizon the v-Wave is far more cautious at 48% suggested cash held in reserve.
The SignalPoint Market Risk Indicator has similar posture with 37% cash reserve suggested. These values are unchanged from previous weeks. The MRI Oscillator is +3 showing only mild upward risk pressure.
Let's review the three main objectives of investors: A) Price Appreciation over Time B) Dividend Capture over Time C) Profitable Volatility Capture over Time........
Right now both the v-Wave and the MRI are showing lower potential for "A." Some are saying stocks are "priced to perfection" and won't stand much bad news at this point. With the higher share prices, we're also seeing lower current yields, so "B" isn't as good now as at other times. Value Line shows its dividend yield as being 1.9% currently. Its long term median is 2.2%, so the market isn't offering us very generous coupons to clip on new dividend investments. "C" looks to be where our efforts will be most rewarded in the near term should the markets consolidate or retreat from current levels.
We've had adequate opportunity to "sell to the greedy" during much of 2024 to build out our reserves of cash. Will 2025 be a year to "buy from the scared?" Our stock/fund inventory management method seems to be suggesting that could be in the future. But, remember that it takes more than a 15% discount from our most recent sale prices before we start to shift our cash back toward stock/fund inventory.
Best wishes, OAG Tom
Buy from the Scared; Sell to the Greedy.....
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
I went to ~60% cash two days ago since this will be the 5th time in my life I've seen a substantial and unsustainable market bubble happening.
I have the the IRS Wash-Rule to think about for investing in January if I do for the small loss I'd like to write off, but basically I sold to lock in my gains for this year, which were substantial on a percentage basis.
Tax loss selling are eating those stocks up slowly and I expect more of that to come, save whatever Santa Claus seasonality rally that might happen before Christmas.
I expect volatility will be huge next month as Mr. Market goes parabolic yet again. I don't day trade or short, I leave that to the experts like Trader J, whom I've learned a great deal from over the years on SI and who has mostly moved on to the greener pastures at Reddit.
I also fly by the seat of my pants a lot in the markets, metaphorically, of course. I just like to watch the patterns and the pretty lights. :-)
Thank you for confirming with nice charts and graphs what I've been seeing.
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
Long term v-Wave remained the same, 18 month v-Wave came down a bit. LT v-Wave is still 34% suggested cash where the ST v-Wave came down to 46% cash suggested.
The SignalPoint MRI rose this week as we see the indexes flattening out a bit. The MRI shows 38% cash suggested and a +6 MRI Oscillator indicating more steeply rising risk.
Both the MRI and the v-Wave cash levels are for diversified portfolios and not individual company stocks. Single stock risk would argue for multiplying the MRI and V-Wave values by 1.5x to be on the safe side.
Looking at these two indicators, it would appear the MRI has some shorter term aspects than the LT v-Wave, but not as short as the ST v-Wave. Studying the components of the MRI shows three of the four components rising in risk this week and one declining slightly. Three are currently in their own "Caution" ranges (a full standard deviation away from their medians) with one being neutral.
As we view just how far away each market risk measure is from its own "Proactive" range, we see this isn't a time to be speculating on new, higher risk investments. Both are suggesting it's a great time to keep some powder dry while we await better times for new money investing and AIM cash reserves shifting to the invested side. This week's 13 Week Treasury Coupon rate is 4.408% yield, which is more than two times the Value Line Dividend rate. So, maybe Cash isn't such a bad place to vacation while we wait for better investment weather.
I'm sorry I don't have anything more optimistic to report, but like on the old "Dragnet" TV show, I'm presenting "Just the Facts, Ma'am..."
Best wishes, OAG Tom
Buy from the Scared; Sell to the Greedy.....
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
2024 Markets now seem similar to the Olympic "Clean and Jerk" weightlifting of 500 Lbs. Investors Have that barbell over their heads, but can they hold it there long enough? Do we see knees wobbling? Elbows quivering? Forehead veins bulging?
The SignalPoint Market Risk Indicator has been noticing all of these things.
Up one point this week to 39% suggested reserves of cash for diversified portfolios, it is under considerable strain. The MRI Oscillator comes in at +2 indicating slight upward risk pressure.
Our v-Wave market risk indicator could be considered 'optimistic' by comparison. It stayed unchanged at 34% suggested reserve cash for diversified portfolios.
Please note just how far each risk measure is above its own "Proactive" range. Have investors become conditioned to this high level of market stress and are ignoring the risks? With just a week until we close out 2024, it's still been a good year for investors. Many of the risk factors that were there at the start of 2024 are still in place here near the end. The Market Weightlifters are obviously well conditioned.
Merry Christmas to all,
OAG Tom
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
Maybe a lot of folks lurk this thread and don't post. They just take the value of what you do here and invest in private. I wish I'd had that restraint decades ago when I first got on the internet, but oh well...
Since Robert Lichello's AIM program was the first thing I saw on a late night infomercial in the mid 1980's that truly looked like a great system, I bought his book back then but I didn't buy the program he created for the infomercial at the time, I wanted to research his system first to see how it worked. As you know Tom, It works very well over the long term. A proven way to capture market gains through its inherent volatility while managing the risk, and continuously.
> Have investors become conditioned to this high level of market stress and are ignoring the risks?
I don't know how people ignore indicators like AIM and the ones you've developed to keep pushing the market higher. I guess the hedge funds don't care because, well, the answer is it their collective name, they "hedge" against the market with derivatives of all kinds, and they have very deep pockets.
Mr. Market and his wrist rubber-band snap is going to be a painful one soon, no doubt about that. Aversion therapy at its finest for a new bevy of newer and inexperienced investors. The stock market always reverts back to historical PE Ratios, or PERs.
Like you, I thought the dot-com bubble might be a new paradigm too back around, eh, 1994 through 1999 when I worked in IT and as a consultant for a couple of failed dot-coms, but NOPE. What did I know on March 1 of 2000, right before the crash? Not enough, obviously. Looking back at the chart, the tech heavy Nasdaq was near a parabolic blow-off top, and that's exactly what happened starting on March 13, 2000. The low didn't come until over 2-1/2 years later in late October of 2002. The Nasdaq lost 78% of its value in that time and all of the gains it had made in the bubble.
Do I think we're in a speculative bubble of dot-com size right now? No, not even close. The dot-com bubble was propelled by hundreds of companies with no profits whatsoever and no hope of ever having any.
That isn't the case today. The very largest companies in all three major indices are highly profitable, so as many of the technical analysts have been saying, keep your money in those and use Dollar-Cost Averaging (DCA) to average down on large pullbacks unless you're a day trader.
Sell the speculative ones that have run up on too much hype alone, far beyond real value as measure by their PERs. TSLA anyone?
Check how much TSLA has run up just since October this year vs. the chances their profits will justify a PER of... 113+ as I write this. That's just one glaring example.
If historical patterns play out again, we're in the 3rd year of a speculative 5-year bull market where the first two years of the S&P 500 had over 25% returns in each. That's only happened 4 times in history. Only one time did the 3rd year have over a 25% gain. Yep, it was in 1998 during the dot-com bubble.
In the others, the 3rd year of the speculative bull was the toughest of them. For those Mr. Market's history shows overall performance for 2025 will be single digit gains at best to a boring 0% return for the S&P500.
Could the S&P 500 run up another 20% or more in 2025? Sure, but it isn't likely.
I do expect January to be a wild ride, with high volatility and sharp market index spikes. For Bitcoin and Nasdaq's unprofitable tech stocks most of all, but also with the Dow (DJI) and its near worthless short-term measure of stock market performance will be wild too because of its goofball price-weighting.
I'm introducing the MANANAM, a relevant index and acronym for the AI, tech and media (several are all three) stocks in it. It is also a palindrome as well because what goes forward reverses quickly and goes backward even faster on occasion. Why? Because Mr. Market is bipolar –– as you'll see if you're still currently unacquainted and haven't had time to read his Wikipedia entry yet. The names should be obvious here, so in no particular order they're Microsoft, Apple, Netflix, Alphabet, Nvidia, Amazon, and Meta.
MSFT, AAPL, NFLX, GOOG/GOOGL (D'OH!), NVDA, AMZN, and META., respectively.
Only three letters are used in its seven characters and they're essentially interchangeable. All of them together are driving our current market and responsible for most of the stock market gain for 2024, fueled by AI and Bitcoin mania along with the significant geopolitical risks of the very different planned economic policies of the incoming U.S. President.
-------------
So....in conclusion, just replace the word night with January in the following video clip and it'll be a funny reminder and way to think about what probably isn't going to be funny at all for many U.S. investors soon.
We always need to hang on to our humor and sarcasm when dealing with Mr. Market, otherwise it's too painful to watch him do this again. :-) Bette Davis did have some amazing eyes, didn't she?
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
Her voice, too, speaks as though she's a two pack a day girl, smoking only unfiltered Camels!!
The small setback we've seen in the indexes in the last week or so were enough to soften the high levels of market risk a bit, but not enough to create any broad buying opportunities as of yet.
Both risk indicators are still suggesting 33% to 36% cash liquidity right now as we head into the New Year. While my own portfolios aren't quite as liquid, they've done a remarkable job of building cash during 2024.
We're still a very long way from bargain basement deals. Our Market Weight Lifter is gonna have to rest a while.
I was talking with a friend recently and we were discussing whether CASH is an Anglo-Saxon Four Letter Word! During 2024 it seems that sidelining cash was missing an opportunity. However, that's only if we consider Cash's value vs turning it into risk.
I suggested that for any portfolio, cash can be an inexpensive insurance policy. While not a magic bullet, it does offer some cushioning during short term downturns. If nasty bear markets come along it offers its true value as portfolio insurance. It can be used to build out a portfolio during the times that markets offer better value.
We buy cars and houses and don't think twice about having insurance on those items. It's just a cost added to the ownership. Does Car Insurance prevent us from getting into accidents? Does home insurance prevent flooding, fire or other damage to the structure? As I said, insurance isn't a magic bullet. It's only there to help recover from unexpected damages.
During much of the first two decades of the New Millennium truly cash had very little value when sitting on the side. However, with the joys of Inflation came better yield on cash. Now the cash segment of our portfolios is at least pulling some of its own weight. It's earning at better than 2x the average yield on stocks right now. So, holding a portfolio of high priced stocks is yielding less than cash if that portfolio has stalled or has actually started to decline. I guess we can ask at those times, "How much would our total portfolio go down without the cash buffer?" I noted that since the end of November, my U.S. Business Sector ETFs portfolio has dropped 4.64% including its cash reserve. Without the cash, it dropped 5.59% on the "invested" side. So, the cash has provided its first benefit - acting as a buffer. It even went up in value ever so slightly.
Should the ETFs continue to lose value, eventually my AIM program will shift into Purchasing Mode. It takes between 15% and 20% decline from a previous share inventory reduction (incremental sales) before the program gets interested in spending any cash. Once that has happened, the second benefit of holding cash becomes apparent. Now I can rebuild share inventories in a proportional fashion as prices decline. That can continue as long as the cash holds out.
Where mutual funds and individual investors tend to hold the least amount of cash at or near market tops (see Norman Fosback's writings along with AAII) they also hold the greatest amount of cash at or near market lows. My M.O. has that inverted. I tend to hold the greatest percentage in cash nearer market tops and, on occasion, run cash to zero near market lows. In the recent 2022-2023 decline my Sector ETF portfolio drew down the cash by roughly half while buying up lots of shares. My smile would have been greater had the decline been larger and the drawdown complete to zero cash. Still, those new shares provided extra profit for the portfolio during 2024. Here's how that portfolio looks as of the end of November:
So, I'm again ready should the markets get funky. BTW, I use the Invesco "Equal Weight" sector ETFs for this portfolio.
I'm glad you've enjoyed my musings on market risk.
Best wishes for the New Year, OAG Tom
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
Another year has passed by with nice improvement to our overall net worth. Of my various portfolios, the Simple IRA is the smallest of the accounts. The U.S. Business Sector ETF portfolio is the largest. They rank, Tom's Simple IRA - 1.4%, Tom's 10 Stocks - 9.7%, International ETFs - 22.9%, US Business Sector ETFs - 66.0%. Overall for 2024 the combination of these portfolios rose 9.8% after all expenses from a year ago.
I have boxes and boxes of these Day Timer weekly data from which the MRI and the v-Wave have been derived. What the heck should I do with them???
We're two days in to the New Year and so far, so good.
Best wishes, OAG Tom
Buy from the Scared; Sell to the Greedy.....
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
U.S. Business Sector ETF Composite Portfolio (Invesco Equal Weight Sector ETFs)
(Cash grew 73% during 2024)
IRA (converted from Twinvest to AIM 12 months ago)
(Cash increased 41% during 2024 even with the RMD withdrawal)
Overall, considering the situation of each portfolio's goals, things went pretty well. International did okay considering the economics of the ex-US markets along with the ongoing Putin/Ukraine situation. Since "growth" was in vogue during most of the year, my position in Vanguard's VUG in my IRA did quite well and helped boost the cash reserves there along the way. There was some sector rotation in the U.S. Business Sector portfolio with mostly selling but some buying during the year. In most of these portfolios the total cash rose and the percentage cash also rose during the year. That will help my sleep during 2025!
Best wishes for the New Year, OAG Tom
Buy from the Scared; Sell to the Greedy.....
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare
At a glance, we aren't seeing much change in either market risk indicator, but both have relaxed a bit recently. Even so, neither are suggesting we 2nd mortgage the house and go heavily into speculative stocks. Just look back to the 2022 market lows and market risk lows to see when there were better values.
"Attention Shoppers! Wait for Better Deals!" The v-Wave was unchanged for the week with both components hovering around the cautionary level. 3-5 Year shows 33% cash suggested while the 18 month shows 41% cash, both for diversified portfolios.
SignalPoint's MRI dropped a point to 35% cash suggested for the intermediate term for diversified portfolios. Here's the full 3 year look-back.
2024's year end activity with tax planning and future betting is now done, We'll have to watch to see what happens next. I note that 8 of the top 41 "Best Performers" in Value Line for the last 13 weeks are up over 100%. It speaks of some speculative excess. For instance, Astera Labs (ALAB) has shot up from under $40/share to over $145/share since the end of July, 2024. schrts.co This relatively new public company is currently a darling. Value Line suggests its 3-5 year price range should be $80 to around $130. It appears to be moving upward on some A.I. speculation. However, with a Price/Book Value of nearly 80, even with earnings this stock seems like it's a bit overcooked. Here's the top 8 performing stocks in Value Line for the latest 13 weeks: Astera Labs (ALAB) +160.0% App Lovin Corp (APP) +156.9% Reddit (RDDT) +151.1% Lemonade (LMND) +132.1% Credo Technology (CRDO) +126.0% Bloom Energy (BE) +113.2% Rubrik Inc (RBRK) +112.3% Palantir Technology (PLTR) +107.5% If you owned any of these stocks for the latest 13 weeks, congratulations on winning the Stock Market Lotto! Check your gains against your risk tolerance and adjust accordingly.
In the meantime, my stodgy U.S. Sector ETF portfolio posted a nice year in 2024. Both equity and cash values grew nicely during the year. The Cash side of this account grew by 73% in dollars and improved its ratio from just 12% of portfolio value to its current 18%. Dollars at risk in the market only increased 5% during the previous 12 months.
Best wishes, OAG Tom
Buy from the Scared; Sell to the Greedy.....
A.I.M Users Group Bulletin Board | Stock Discussion ForumsShare