Lichellos Golden Little Secret

Lichello’s Golden Little Secret
By David Gressett
Copyright © 2002, Adept Prime Corporation, All Rights Reserved.

No part of this work may be reprinted, resold, or redistributed without express written
permission of Adept Prime Corporation.
www.adeptprime.com
comments@adeptprime.com
Table of Contents
Foreward _____________________________________________________________ 4
Acknowledgements _____________________________________________________ 6
Searching for Opportunity in a Dangerous World ___________________________ 7
Dr. Jekyll, Mr. Hyde live on Wall Street _________________________________ 7
Wall Street Robbers __________________________________________________ 9
Throw Darts at the Stock Analysts _____________________________________ 12
The Experts vs. the Markets __________________________________________ 13
Hunting for the Mysterious Crystal Ball __________________________________ 15
Mathematics is An Abusive Language __________________________________ 15
Monster Tamer: A Vision of Lichello _____________________________________ 17
A Gaudy Little Diamond _____________________________________________ 17
Visitations by the Master _____________________________________________ 19
Gold From the Machine ________________________________________________ 23
AIM vs. Buy and Hold _______________________________________________ 23
AIM Amplifies Profit ________________________________________________ 24
AIM Shields Against Loss ____________________________________________ 38
Schematics of Magic ___________________________________________________ 44
How AIM Works______________________________________________________ 44
A Brief Demonstration of AIM ________________________________________ 45
Setting Up For AIM _________________________________________________ 53
Getting Advice From AIM ____________________________________________ 55
Buying Stock Using AIM _____________________________________________ 57
Selling Stock Using AIM _____________________________________________ 58
Adding Funds to AIM________________________________________________ 59
Withdrawing Funds From AIM _______________________________________ 60
Upgrading and Tuning the Machine ______________________________________ 62
Swapping Stock For AIM_____________________________________________ 63
Cash Control _______________________________________________________ 64
Filtering Market Orders______________________________________________ 65
Optimizing Buy and Sell Resistance ____________________________________ 66
The Wizardry of Tom Veale __________________________________________ 67
Cash Conservation __________________________________________________ 69
Feeding the Machine___________________________________________________ 71
Stocks, Mutual Funds, and Index Trackers ______________________________ 71
Durability__________________________________________________________ 72
Volatility___________________________________________________________ 73
Performance _______________________________________________________ 74
Growth Oriented____________________________________________________ 75
Be a Fundamentalist _________________________________________________ 75
Win on a Technicality________________________________________________ 76
Choose Another_____________________________________________________ 77
AIM Resources and Community _________________________________________ 78
AIM Book _________________________________________________________ 78
AIM Resources on the Web ___________________________________________ 78
AIM Software ______________________________________________________ 79
Afterward____________________________________________________________ 80
Foreward
You have picked up the schematic to a secret weapon that the

smartest stock market investors use. It is powerful enough to tame
the stock market dragon and put its horde of gold into your pocket.
This system, known as Automatic Investment Management,

was invented in the late 1970’s, and over twenty years has
marveled thousands that have listened to its advice.
Imagine if your best friend was the world leader in stock

analysis expertise. If you listened to his advice everyday, would
the stock market be at your mercy? Of course it would! AIM
produces results that world-class experts usually have a hard time
matching over long periods of time, and dispenses that advice to
you every day, free of charge.
If you select a good stock, AIM can squeeze more money out
of it than the most cunning day-trader. AIM can be like a
magnifying glass for a good stock. For example, with the average
investment return of 20%, it will often provide 30%. That’s an
increase of 140% in profit! It will add significant percentage points
to your returns, often more than 10% per year.
Conversely, AIM can be your shield against the bloody
onslaught of a hostile or fickle market. For poorly performing
stocks or bad years on the markets, AIM protects your investments,
often subtracting more than 10% from your losses. Sometimes it
can even put a little money in your pocket while everyone else has
their heads on the chopping block.
You won’t have to keep your eyes super-glued to stock prices

all day. You won’t need anything more than a sheet of paper and a
pocket calculator. The whole process takes minutes a day, no
matter how many things are going on in the market and in the
world.
AIM can make you very rich. It is not a get-rich-quick

scheme. It is a get-rich-definitely scheme. If you can trust AIM for
five or ten years with your investments, it often provides an
average return of 25%-35% per year, for very little effort. If you
think a little harder about how you use AIM, the only limits are
your imagination.
AIM is among the most effective stock market powerhouse

secrets invented. Over the last twenty years thousands of people all
over the world have used AIM, from grandmothers to
stockbrokers. Welcome to the insiders. This book will put AIM
into your hands. Turn on this wonderful little machine and watch it
multiply treasure!
Acknowledgements
Robert Lichello, September 12, 1926 – February 1, 2001:
Your legacy is remembered.
The wizards of the AIM universe, Robert Lichello and Tom

Veale, are the geniuses behind this particular brand of AIM. Thank
you, gentlemen, for enriching us with your knowledge.
To my dear wife who was so patient while I spent nights and

weekends preparing this book.
And of course, I owe all of the prosperity and wisdom I have

to the loving-kindness of my best friend Jesus Christ.
Searching for Opportunity in a Dangerous
World
Dr. Jekyll, Mr. Hyde live on Wall Street
True story:
I put my money down on my lucky number. I had just seen a

number of other players walk away with their pockets full, and I
was hungry for the same. The numbers started rolling, coming
round and round in a whir. My eyes and heart were glued to the
turning numbers. I had put down $10,000 and I was holding my
breath that my lucky streak wouldn’t run out.
Hadn’t I missed breakfast? For that matter, didn’t I miss
lunch? It didn’t matter, only the numbers mattered, and everything
else could wait a week. Or a month. Or whatever. Finally came the
time of reckoning. I finally allowed myself to breathe – my lucky
streak held and I had $16,000.
I pulled away from the stock quotes and charts on my

computer for just a few seconds to celebrate. I had bought that
stock at $0.90, with only a few minutes of research. It was pure
speculation by most standards. But hey, I was the genius that just
made a 200% per year investment. I kissed the monitor and got up
for a bragging binge . . . but wait, I hadn’t sold the stock yet. Why
should I? This stock is hot and I’m going to let this winner run.
Now, flash forward six months later. The same company had
lost their rights to drill on the land they were exploring for oil –
because they weren’t drilling. The founder (and president, of
course) was selling shares by the millions, every day. Their press
statements would contradict their mandatory disclosures. And the
stock price? Please don’t mention it.
Did I hold on to this one? Oh yeah. Of course, this stock has

to turn around any time now. If I just hold a little longer, I can get
back to $10,000, okay? I had already lost $4,000, even though my
philosophy, written in gasoline mixed with blood and lit every
morning on my forehead, was to “cut losses quickly!”
Buy and hold you say? What’s the point? I might as well
invest in something illiquid like real estate or tax lien certificates.
If you’re going to play the stock market, you should be able to take
advantage of that liquidity to push the numbers, right?
The stock market junkie that got me involved in this Wall

Street Casino would just keep telling me, “stocks have the best
return out of any investment over the long haul.” He was making
6% return that year, and was on the way down. But we both knew
that there were people winning big in the market. It just wasn’t us.
They had to know something we didn’t.
During those years, I picked stocks based on what was hot,

what was moving, and what the analysts were talking about. I was
gambling, and losing just as often as I would have at a casino.
Unfortunately, this is how most small stock investors choose their
investments.
But choosing a good stock, or even a great stock, as hard as

that is, is not enough to win in the stock market. If you consider
market price the measure of a stock’s worth, then every great stock
that is making you money is doomed to suddenly turn against you
and viciously rob you, when the time comes. And you will not
know the day or hour that time will arrive.
Wall Street Robbers
Now if you’ve been in the same boat, then you’ve learned

that the entire stock market has a running practical joke on you. A
stock making a blitz for the end zone will fumble as soon as you
buy it. A lazy stock will take off like a rocket just as soon as you
get off the ride.
The laughter you hear is not coming from Wall Street.

Everyone there is the victim of the same joke. The real villains are
your own greed and fear. You know you’re supposed to buy low
and sell high. You know you’re supposed to cut losers quickly and
let winners run.
What really happens? You see a stock running up like a

raging bull, and you start to salivate. Just yesterday it was trading
at $12, and now it’s at $125! “If I had bought it at $12, I would
have made $521,124.34!” So you jump into this market at $125.
This isn’t exactly buying low. Suddenly, a whole crowd of
investors just like you realizes that they got in late and that this
puppy isn’t going anywhere but into the basket. In the panic on the
way out your brokerage account is trampled.
You hold onto the stock all the way down to $100. “If it just
goes back to $110, I’ll sell.” It drops to 80. “If it just goes back to
$95, I’ll sell.” It plummets to $20 as the last speculators panic and
will sell for anything. You cut the cord and get out, just in time for
the institutional investors to realize that the stock is at a bargain
price and drive it up to $140 for another cycle. If you still have
some money, you play again, after you’ve recovered from your
phobia of this wild horse. By the time your knees stop knocking
and you’re not chicken anymore, you enter at $100. The
institutional investors love you; you’re giving them all your
money! See you at the bottom, sucker.
You consider yourself a rational person. You don’t make

your stock decisions based on anything but sound judgment, so
why is this happening? Because Mr. Greed and Dr. Fear are
masters of disguise. They can look just like Prudence and Wisdom.
Throw Darts at the Stock Analysts
One thing that will make you feel much better about this is
that all of the professional stock analyst experts are also losers.
Too prove that point to the entire United States Senate, an

inventive Senator invented the dart board test. He put the names of
stocks up on a dartboard and then picked five stocks using a toss of
the dart. One year later, professional stock analysts squirmed and
wormed as the Senator demonstrated how his dartboard portfolio
outperformed almost all of the analysts for the year.
Since that time, the Wall Street Journal has performed the
dartboard test every year, versus five prominent analysts. Usually
they’re lucky if even one analyst actually beats the darts.
With this sort of track record, it is astonishing that a few

words published by these clowns can make or break a stock or
even the entire market.
The Experts vs. the Markets
In fact, these experts can’t even do better than just taking all
of the stocks in the market together, winners and losers. A few of
them will have a lucky year or two where they squeeze a
percentage point or two past the S&P 500, but it never lasts long.
If the professionals can’t cut it, who can?
We know about stock market experts that do actually beat the

market, year after year. They make their living on it, and what a
living it is! They’re not day-traders, but they don’t just buy and
forget, either. Year after year, compounding their returns, their
investment eventually blooms into hundreds of thousands or
millions of dollars.
You can find plenty of information on how to invest in

stocks, but not much that really works well enough to beat the
market. You can read about and know about the successful
professionals that know how to tame the market, but none of them
are good teachers. They can’t pass the magic along well enough for
us to do what they do.
The quest for this knowledge took me ten years of earnest
searching, and thousands of dollars in the school of hard knocks.
And now you will learn what I found in just a few minutes.
Hunting for the Mysterious Crystal Ball
Mathematics is An Abusive Language
What was the purpose of this insanity? I was living in a mad

scientist’s lab. I had $20,000 worth of computer hardware and
$8,000 worth of the best stock analysis software. I had books and
notebooks stacked up four and five feet high all around me. I had
three scientific calculators, two high-speed modems and I even
hired a hunchbacked assistant.
Months stretched into years. A year stretched into a decade.

So many times I was so close, within inches of it, but then, one last
trial would produce a disaster! But there was so much data to use,
and such sophisticated mathematics; it had to be there.
I learned how to swear using only trigonometry and calculus

expressions, because they were swearing at me. They would vex
me and abuse me, haunt my dreams with endless frustrations.
Volume, real strength indicator, fast and slow kurtosis, price to
earnings ratio, revenue and sales growth trend, Bollinger bands and
strike prices, stochastic, dollar-cost-averaging and exponential
moving averages, number theory, linear equations in n-dimensions,
complexity theory, gradients, partial differential equations, where
did it lead, where did it end, why could all of these things not
provide one simple behavior – buy low, sell high!
After all of those years, I still had not found the mysterious
math that would tame the stock market beast. The more I searched
the more I realized, that stock prices depended so much on the
context of the economy and the world, that I was trying to predict
nothing less than the future. But if a crystal ball could be found in
that ocean of figures and operators, I would find it.
Monster Tamer: A Vision of Lichello
A Gaudy Little Diamond
My investment library, full of contradictions and half-truths,

grew to hundreds of volumes. And every week I would add some
more, but finding something different, let alone effective, was
becoming more and more difficult. Desperation can drive you to
do some interesting things.
One day while strolling through the supermarket, grabbing

some household goods, a gaudy little book caught my eye. It was
horrible.
It was a supermarket book, for crying out loud.

It was just a little bitty paperback, printed on cheap gray
paper that made my hands itch.
Its title was printed in two ugly shades of puke green.
Worst of all, the title was “How to Make 1,000,000 in The
Stock Market AUTOMATICALLY!”
I murmured, “right next to the Enquirer and ‘Mystery of

Psychic Tarot Aura Reading,’ where it should be.”
Then something very strange happened. I picked up the
paperback and put it in my basket. I didn’t want it. I didn’t know
why I did it. I couldn’t believe I was, but I did. Then, no second-
guessing, no buyer’s remorse; I just forgot about it until after I
returned home.
Later that Friday night, with red, puffed up eyes, I began

thumbing through the book, just to preview it for a few minutes
before going to bed.
I finished the book for the second time Saturday morning at 4

am. I set it closed in front of me and stared at it for an hour.
This man, Robert Lichello, had apparently found what I was

looking for. He hadn’t used one differential equation. He didn’t
even touch on complexity theory, or even use a moving average.
My first grade son could do the math.
But instead of rejoicing, just sullen anger and growing doubt.

The theory made sense. The numbers added up. But I couldn’t
believe it was true. It was too simple and too easy. He had only
taken six years to build it, and what was that to my ten? I just
hadn’t found the flaw yet. And who does he think he is, publishing
this kind of shoddy research work? He If he could make a million
dollars in the stock market, what was he doing making pennies on
books?
Excitement was gnawing at me, keeping my eyes open. I

wanted for this thing to work, it was so elegant, so simple, and so
effective. But I hated it at the same time, for all the same reasons.
Revulsion and awe pinned my eyes to the cover until finally, some
unknown time later, my eyelids floated down as they drew the
curtains of sleep.
What happened next was truly bizarre.

Visitations by the Master
I suppose I shouldn’t have eaten a whole jar of salsa before

going to sleep, or I wouldn’t have had such strange dreams. The
flammable emanations of the salsa churning through my body
joined forces with the anxiety compressing my mind and somehow
produced insight.
I dreamt I was programming another trading program on a

rainy night, but the symbols scrawling across the screen looked
more like cave paintings than equations. The electricity was out, so
the lights were out and the AC off, and I was running the computer
on a very long-lived universal power supply.
“The dilemma is,” I murmured, “I can make a trade as soon

as a I see the market turn, but then my commissions eat up my tiny
gains. Or, I can try to wait to see if a move is more serious, but by
the time I know for certain it’s too late to make much of a profit. If
I just jump in, and try to let winners run and cut losers short, I’m
always bumped out before I make any money.”
“Aaaaah,” said a funny little voice, “But price matters not,

without considering if many shares or few there are. Many shares
may gain much on small moves.”
I whirled around, my keyboard raised above my head, ready

to strike the intruder. The tiny visitor shielded his head, pleading,
“I mean you no harm! Harm me not! Just trying to help you I was.”
I lowered the keyboard. “You should be more careful! You

almost had keyboard keys for teeth. Don’t sneak up on people like
that.”
“Did not wish to break your concentration, I did.”
“You were doing pretty good until you started babbling.”
“Another loser this program is, like all of them you have
made.”
“I suppose you could do better?”
“You should not consider price alone, but the value of your
holdings, hmmmmm?”
“Look, do you mind? This is hard work, and you’re

distracting me. Unless you know an algorithm that can predict
price tops and bottoms, go away.”
“To predict the future you seek?” he asked, poking me with

his little stick. “That is both unwise and unnecessary. You simply
must buy on the way down and sell on the way up. Tops and
bottoms matter not. Prices are determined by economic events,
hmm? All the things happening in the world can you predict with
your numbers and programs?”
“You start buying from the top of the market, that’s suicide.
So how do you know how long to wait before buying? When do
you stop?”
“More you must buy the lower the price.”
“Oh, you’re a doubler?”
“I know of him not.”
“The strategy of doubling your investment every time you

lose. Eventually the market turns your way and your larger stake
makes up for your lesser losses and then some. But, my little green
pain in the neck, eventually you’ll have a long enough string of
losses to wipe you out.”
“The amount of stock bought your resources must determine,

hmm? But if know you cannot the top or bottom, but buy or sell
going up or down you will not, then your program does nothing.”
“Look, I just want a program that will buy low and sell high.
Right out of the middle of a stock run, without being bumped out
by little corrections. If you know someone who can do that, great;
otherwise, put down my granola bar and get out of here.”
“Lichello!” he said. “…You seek Lichello. Knows of such a

thing he does.”
“Lichello? You know this Lichello?”
“Oh yes, not far from here he is. Come, come with me, I will
show you. But first, we will have snack.”
The next thing I knew I was sitting in front of a giant boiling

pot of fresh salsa. The little critter was chattering away about how
tasty it was as he cut up horseradish root chips into concentrated
pepper oil. He went to get out the chips as I fidgeted in front of the
fireplace.
“No thanks,” I said, “I had plenty earlier. I just want to get

out of here and meet this Lichello guy.”
“Two days worked without eating you have. Try it you

must,” he said, “for Lichello it is time to eat as well.”
With an exasperated sigh, I shoved a tortilla heaped with

salsa into my mouth. I don’t know what the mean little jerk had put
in it, but if it were any hotter my hair would’ve caught on fire. He
hadn’t even given my anything to drink, and he didn’t get a clue
from my gasping and choking.
“Hot!” I rasped, tears washing my face. After choking for a

few more minutes and eating about half the bag of chips trying to
quench the nuclear reaction going on in my mouth, I screamed,
“Look, I don’t want any more of this napalm or whatever it is! Just
take me to Lichello, will you?”
“I cannot teach him,” he said in a far away voice. “Too

sophisticated is his ideas. Always his thoughts adding variables
that make only tiny contributions. Always seeking to predict the
future with numbers. Never his mind on where the market was,
what the market was doing.”
“Lichello?” I asked excitedly.
“This one a long time I have watched. Put real money into
unproven systems. More concerned about prices, he is, than value.
In his accounts keep you not one penny of cash. You are reckless.”
Suddenly the ghost of Obi-tom Vealobi appeared. “So was I,

if you’ll remember,” he offered.
“Master Lichello, I can learn, I promise! Please, just teach me

the ways of AIM. I’m not rich enough to retire early!”
“You will be,” he said, “you will be.”

Gold From the Machine
AIM vs. Buy and Hold
To understand AIM’s performance, we must have another

machine to race it against. If a dartboard can make more money
than full-time stock analysts, then any rational stock system will
make something. But which is better?
This will be no race of amateurs. The current reigning

champion is the strategy of Buy and Hold. Simply get into a
portfolio of strong companies and mutual funds, and hold onto
them as the market drives them wherever it goes. On a year-to-year
basis, the best and so-called brightest stock analysts eat the dust of
this simple, but invincible machine.
A new contender, another stock trading strategy, has come to
challenge this haughty champion. Buy and Hold sneers at AIM;
what can another trading strategy do? Buy and Hold is now
conventional wisdom, and proven over time.
But AIM has secret new technologies under the hood, which
Buy and Hold has never competed with before. AIM actually
keeps a portion of cash in the portfolio. This is a resource, that by
definition, buy and hold has nothing it can do with. AIM has safety
controls for risk, whereas Buy and Hold will run right off a cliff if
that’s what its course is set for.
True, AIM has a certain kind of stock it performs well for,

but it is the exact same kind that Buy and Hold performs the best
in, so the race is fair. But even if you should want to race AIM on
other roads, its engine can be tuned and configured to perform
under many different conditions.
AIM Amplifies Profit
The battle of the machines begins with a string of wins for

both. But which one pulls ahead? Let’s begin with a look at how
AIM and Buy and Hold perform for Adeptec, Inc.’s stock for the
year 2001.
AIM PERFORMANCE ANALYSIS FOR ADPT
Portfolio Value $89,368.59

Profit or (Loss) $39,368.59
Simple Return 79%
Annualized Return 79%
Buy/Hold Portfolio Value $85,063.33

Buy/Hold Profit or (Loss) $35,063.33
Buy/Hold Simple Return 70%
Buy/Hold Annualized Return 71%
Start of Period 14-Jan-01

End of Period 14-Jan-02
Original Investment $50,000.00
AIM CONFIGURATION
Buy Resistance 10%

Sell Resistance 10%
Initial Cash Reserve 33%
Average Commission $10.00
Out of the gate, the race seems close, but little gains by AIM
add up in the end. For the first leg of the track, AIM pulls a gain of
10% above Buy and Hold. The configuration shown here, the
tuning of AIM’s engine, will be explained later, but what you see
here is what you would call the default configuration. With a bit
more tuning, AIM’s gains on Buy and Hold could no doubt go
beyond this.
Looking at the graphs below, you can see that the portfolio
value closely follows the stock price, just like Buy and Hold
would. Aim always dips with the market because it pours your
cash into bargain prices all the way down. Nevertheless, the results
are different than Buy and Hold.
Watch how AIM dumps stock on the way up, building up a
cash reserve to buy with on the way down. On the way down, cash
is used up and both cash and portfolio fall, but stocks are built up
gradually in anticipation of a recovery. If you feed AIM stocks of
strong companies with good fundamentals, that recovery will come
in a matter of time. When the recovery comes, we make good on
the low prices we got from the sell-off. And the cycle continues.
01
1/ /1
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
18 8/
/2 02 01
00 /0
$0.00
$20,000.00
$40,000.00
$60,000.00
$80,000.00
$100,000.00
$120,000.00
1 8/
2/ 02 01
18 /2
/2 2/
00
1 03 01
3/ /1
18 2/
/2 03 01
00
1 /1
4/ 6/
18 03 01
/2 /2
00 3/
1 01
5/ 04
18 /3
/2 0/
00 06 01
1 /0
6/ 8/
18 01
/2 07
00 /0
1 3/
7/ 08 01
18 /0
/2 1/
00
1 01
Portfolio Value
09
8/ /0
18 7/
/2 09 01
00 /1
1
Stock
9/
9/ 10 01
18
AIM Performance: ADPT

/2 /1
Stock Price: ADPT
00 5/
10 1 10 01
Cash
/1 /2
8/ 3/
20 11 01
01 /0
11 2/
/1 11 01
8/
20 /1
01 2/
12 12 01
/1 /0
8/ 7/
20 01
01 01
/0
8/
02
I know that reading long reports of figures and numbers just
thrill you, so I have included just one listing that explains how
AIM built the graph you just looked at. Watch the stock price and
value versus the cash value. AIM manages to beat Buy and Hold
without even using all of the $50,000 investment at once. The
gains don’t even account for the money market interest you earn
on this cash whenever AIM sets it aside.
Date Advice Stock Cash Portfolio Value

18-Jan-01 SELL 81 shares at $11.0367 own 3,381 valued at $37,315.08 $17,378.08 $54,693.17
8-Feb-01 BUY 20 shares at $9.5781 own 3,181 valued at $30,467.94 $19,690.69 $50,158.63
1-Mar-01 BUY 121 shares at $8.4598 own 3,909 valued at $33,069.36 $13,231.40 $46,300.76
27-Mar-01 BUY 113 shares at $6.9769 own 5,561 valued at $38,798.54 $708.60 $39,507.14
10-Apr-01 BUY 17 shares at $7.0090 own 5,578 valued at $39,096.20 $579.45 $39,675.65
30-Apr-01 SELL 96 shares at $8.7438 own 5,482 valued at $47,933.51 $1,408.85 $49,342.36
1-May-01 SELL 126 shares at $8.9538 own 5,356 valued at $47,956.55 $2,527.03 $50,483.58
8-Jun-01 SELL 40 shares at $9.3600 own 5,115 valued at $47,876.40 $4,742.94 $52,619.34
2-Jul-01 SELL 175 shares at $10.3100 own 4,659 valued at $48,034.29 $9,273.93 $57,308.22
1-Aug-01 SELL 40 shares at $11.9100 own 4,021 valued at $47,890.11 $16,540.59 $64,430.70
6-Sep-01 BUY 25 shares at $9.7900 own 4,000 valued at $39,160.00 $16,818.44 $55,978.44
24-Sep-01 BUY 212 shares at $7.7700 own 5,922 valued at $46,013.94 $550.16 $46,564.10
26-Sep-01 BUY 34 shares at $7.8300 own 5,956 valued at $46,635.48 $273.94 $46,909.42
15-Oct-01 SELL 240 shares at $10.0400 own 5,716 valued at $57,388.64 $2,673.54 $60,062.18
2-Nov-01 SELL 41 shares at $12.8600 own 4,446 valued at $57,175.56 $17,394.44 $74,570.00
6-Dec-01 SELL 176 shares at $15.9600 own 3,598 valued at $57,424.08 $29,759.74 $87,183.82
In this next example, AIM improves on Buy and Hold’s

result by a solid 29%, up 11 percentage points from 37% to 48%,
again using the generic configuration.
This stock is exactly the kind AIM loves: it has an upward

bias, but swerves like a drunk all the way up. Each time it does,
AIM takes advantage of it to gain a little performance that Buy and
Hold can’t.
If you’ve noticed the unusually long month of August on the

next graph, the explanation is that I’ve stretched parts of this graph
out a bit so you can see the action more clearly.
AIM PERFORMANCE ANALYSIS FOR MCRS

Simple Return 48%
Buy/Hold Value $68,625.00


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: MCRS
$80,000.00
$70,000.00
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
1- -18
1- -21
1- -07
1- -13
1- -19
2- -19
1- -01
1- -18
1- -29
1- 11
1- -15
1- -20
08
1- -02
1- -07
1- -31
1- -07
1- -13
1- -17
1- -30
n-
n-
ov
ov
ov
ec
p
p
ay
ay
n
n
n
ar
ar
ct
g
g
Se
Se
Ju
Ja
Ja
Ju
Ju
Au
Au
Au
Au
O
M
D
M
M
1-
Portfolio Value Stock Cash

Now the race really gets rolling. Buy and Hold makes an
amazing three year gain of 117% on a real winner of a mutual
fund, Ultra ProFunds. But AIM likes good mutual funds even more
than stocks, because they tend to recover faster than the general
market does. A mutual fund with enough volatility will drive AIM
into a profit frenzy, and in this particular example it gains 167% in
three years, leaving Buy and Hold in a cloud of dust.
Why such a dramatic difference? It’s not so much more

dramatic, with an average per annum amplification of 77% of Buy
and Hold’s result. I wanted to show you how these 10% ROI
differences quickly add up. Notice the configuration parameters
are much different than the defaults you saw before … perfect for a
bull run like this one. A little while later I will show you how to
make these kinds of adjustments.
Near the right edge of the chart, the market starts to change.
When you see stock value and portfolio value about to cross, it is a
good time to consider swapping to another stock or adjusting
AIM’s engine again.
AIM PERFORMANCE ANALYSIS FOR UOPIX

Simple Return 167%

Start of Period 01-Mar-98

End of Period 01-Feb-01
AIM CONFIGURATION
Buy Resistance 0%
Sell Resistance 40%
Minimum Percent per Trade 5%
AIM Performance: UOPIX
$120,000.00
$100,000.00
$80,000.00
$60,000.00
$40,000.00
$20,000.00
$0.00
10/31/1998
12/31/1998
10/31/1999
12/31/1999
10/31/2000
12/31/2000
8/31/1998
2/28/1999
4/30/1999
6/30/1999
8/31/1999
2/29/2000
4/30/2000
6/30/2000
8/31/2000
Value Stock Cash

So what? Even a drunk chimpanzee can do well in an up-
trending market. Can AIM deliver the goods in a volatile market?
The more volatility the better, baby. While Buy and Hold
portfolios whipsaw back and forth, giving their owner’s motion
sickness, all that swinging around a sideways market gives AIM
plenty of opportunity to do what it does best: buy low and sell
high.
Back to default configuration and individual stocks, to keep it

simple. We could always choose some time period that puts the
whipsaw on the downside of the market, to make it look bad in
comparison, right? But remember AIM buys on the way down, so
it dips with the market also. Over the long run, AIM squeezes more
and more juice out of a sideways market until the glass is full.
The longer a volatile whiplash like this continues, the more

ground AIM gains against Buy and Hold.
In the next example, AIM performs 130% better than Buy

and Hold. On the next, it beats Buy and Hold 15% to 2%, a 750%
amplification. The next few examples demonstrate the same
principle. AIM thrives in this kind of market, where Buy and Hold
fails completely.
AIM PERFORMANCE ANALYSIS FOR APCC

Simple Return 23%


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: APCC
$70,000.00
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
10/18/2001
11/18/2001
12/18/2001
1/18/2001
2/18/2001
3/18/2001
4/18/2001
5/18/2001
6/18/2001
7/18/2001
8/18/2001
9/18/2001

AIM PERFORMANCE ANALYSIS FOR CGNX
Current Portfolio Value $57,463.97

Simple Return 15%


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
CGNX Stock Price
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
10/23/2001
11/20/2001
12/18/2001
2/27/2001
3/13/2001
3/27/2001
4/10/2001
4/24/2001
5/22/2001
6/19/2001
7/17/2001
7/31/2001
8/14/2001
8/28/2001
9/11/2001
9/25/2001
10/9/2001
11/6/2001
12/4/2001
5/8/2001
6/5/2001
7/3/2001
1/1/2002
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$50,000.00
$60,000.00
$70,000.00
$0.00
2/27/2001
3/13/2001
3/27/2001
4/10/2001
4/24/2001
5/8/2001
AIM Performance:CGNX
5/22/2001
6/5/2001
Portfolio Value
6/19/2001
7/3/2001
7/17/2001
7/31/2001
8/14/2001
Stock
8/28/2001
9/11/2001
Cash
9/25/2001
10/9/2001
10/23/2001
11/6/2001
11/20/2001
12/4/2001
12/18/2001
1/1/2002
AIM PERFORMANCE ANALYSIS FOR INTC

Simple Return 24%


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: INTC
$70,000.00
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
1- -06
1- 17
1- 14
1- -27
1- 30
2- 05
1- 23
1- 29
04
1- 01
1- 22
1- 26
1- 28
1- 16
1- 20
1- 10
1- 03
1- 09
1- 19
-
p-
-
n-
n-
n-
b-
b-
b-
b-
-
r-
r-
r-
ov
ov
ov
ec
ar
ar
ct
Ap
Ap
Ap
Se
Se
Ja
Ja
Ja
Fe
Fe
Fe
Fe
O
M
N
N
D
1-

AIM Shields Against Loss
If you feed Buy and Hold a sour stock, it literally makes you
pay for it as long as you can stomach it. Of course, no system
except abstinence from the market can protect you from a stock
plunging down a bottomless pit, but AIM can slow your free fall.
AIM can cover a bad stock so well that you should always keep
track of how Buy and Hold would’ve performed in comparison.
Buy and Hold is honest about bad stocks.
Eventually though, garbage in, garbage out, so as soon as you

see that a stock is under-performing you should exchange it for a
winner, and put AIM back on track to profits.
In the examples following, you can see how AIM often cuts
losses in half or does even better. In the some examples, AIM
actually converts a loss into a gain. Keep in mind that the “stock”
line is the value of the stock AIM owns in the portfolio, not the
price of the stock.
AIM PERFORMANCE ANALYSIS FOR TROW

Profit or (Loss) ($319.86)
Simple Return -1%
Annualized Return -1%

Buy/Hold Profit or (Loss) ($5,615.93)
Buy/Hold Simple Return -11%
Buy/Hold Annualized Return -11%

AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: TROW
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
10/26/2001
11/26/2001
12/26/2001
1/26/2001
2/26/2001
3/26/2001
4/26/2001
5/26/2001
6/26/2001
7/26/2001
8/26/2001
9/26/2001
Portfolio Value Shares Cash

AIM PERFORMANCE ANALYSIS FOR CCU

Profit or (Loss) ($5,310.79)
Simple Return -11%


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: CCU
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
23 1
20 1
18 1
15 1
21 1
1
29 1
13 1
27 1
10 1
24 1
1
0
0
00
00
00
00
00
00
00
00
00
00
00
00
20
20
20
20
20
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
9/
6/
4/
1/
7/
23
/5
3/
4/
5/
6/
9/
10
2/
3/
4/
5/
6/
6/
7/
7/
8/
8/
9/

AIM PERFORMANCE ANALYSIS FOR MOLX

Profit or (Loss) ($7,664.99)
Simple Return -15%


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: MOLX
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
2/ 001
3/ 001
6/ 001
7/ 001
8/ 001
2/ 01
3/ 01
3/ 001
4/ 001
4/ 001
5/ 001
5/ 001
6/ 01
7/ 01
8/ 01
8/ 001
9/ 001
1
00
0
0
2
2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
1/
1/
7/
5/
2/
18
15
15
29
12
26
10
24
21
19
16
30
13
1/
Portfolio Value Shares Cash

AIM PERFORMANCE ANALYSIS FOR CSC

Simple Return 9%


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: CSC
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
10/23/2001
11/20/2001
12/18/2001
1/30/2001
2/13/2001
2/27/2001
3/13/2001
3/27/2001
4/10/2001
4/24/2001
5/22/2001
6/19/2001
7/17/2001
7/31/2001
8/14/2001
8/28/2001
9/11/2001
9/25/2001
10/9/2001
11/6/2001
12/4/2001
5/8/2001
6/5/2001
7/3/2001
1/1/2002

AIM PERFORMANCE ANALYSIS FOR CLE

Profit or (Loss) $406.53
Simple Return 1%


AIM CONFIGURATION
Buy Resistance 10%
Sell Resistance 10%
AIM Performance: CLE
$60,000.00
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
10/10/2001
10/24/2001
11/21/2001
12/19/2001
3/14/2001
3/28/2001
4/11/2001
4/25/2001
5/23/2001
6/20/2001
7/18/2001
8/15/2001
8/29/2001
9/12/2001
9/26/2001
11/7/2001
12/5/2001
5/9/2001
6/6/2001
7/4/2001
8/1/2001
1/2/2002

Schematics of Magic
How AIM Works
The time has come to let the wind into your sails, lift anchor,
and take your merchant ship full of securities to the city of
financial freedom. Your fellow merchants, who subscribe to Buy
and Hold, will take much longer to get their portfolios there than
you will.
The Buy and Hold strategy follows exactly with the contour
of the market, just like ancient merchant ships that would navigate
their vessels by following the contour of the coast.
They didn’t know a better way to safely navigate, but

imagine sailing from Stockholm to St Petersburg that way, all the
way around the Baltic Sea, navigating through twisting through the
loops and cutbacks of complex fjords for more than 1500 miles.
The trip from Stockholm to St Petersburg across the Baltic would
be suicide if you couldn’t track your position and course, but if you
can navigate it safely, the distance is 500 miles instead.
AIM provides the navigational instruments you need to cut

through the deep, choppy waves of the market safely, and a shorter
route to financial security.
A Brief Demonstration of AIM
A compass is easy to understand, even though with only

passing knowledge of it you may not be able to stay the course
between one merchant port and another. The basic theory of AIM
is also easy to understand at a glance. Let’s see a demonstration of
its magic.
Suppose on your maiden voyage you had $10,000 to

capitalize your venture. You begin by allocating half of it to
buying stock and half of it is reserved as cash.
The main gauge on your navigational panel is called Portfolio

Control, which you will use to control the steering of your ship.
Before you unfurl the main sail, you calibrate it to be equal to how
much your starting stock portfolio is worth, in this case $5,000.
AIM NAVIGATION
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
Portfolio Control Stock Value Cash
Now you’re ready to sail the seven seas. Look at the next
chart. Right away you run into a squall, and the market dips. You
check the Stock Value gauge; with the prices lower, your stock is
now only worth $4,000. A glance at Portfolio Control will tell you
which course to set. When Portfolio Control towers over stock
value, AIM advises you to buy.
We can’t be bothered with tiny course corrections, so we

check the Buy Resistance indicator, shown as a red line that always
hovers over the Stock Value. It adds 10% to the Stock Value’s
height, and if Portfolio Control isn’t higher than this bar, we can
ignore its advice. If Portfolio Control is higher than Buy
Resistance, then we proceed to buy some stock, otherwise we wait.
In this case, Stock Value is $4,000, making Buy Resistance hover
$400 above Stock Value. Since Portfolio Control is $600 higher
than $4,400, we take the advice seriously.
Portfolio Control exceeds Buy Resistance over Stock Value,
which is shown by the blue box. This amount is how much stock
we must buy. You take some of the cash reserve and buy stock
with it. So in this case, Portfolio Control exceeds the Buy
Resistance mark by $600, so you buy $600 worth of stock.
AIM NAVIGATION
10000
9000
8000
7000 Buy this much.
6000
5000
4000
3000
2000
1000
0
Now look at the result in the next chart below.
As a final step, we must recalibrate Portfolio Control. You

turn the knob slightly up by half of the amount you just bought, by
$300, as shown by the white box, and now Portfolio Control now
reads $5,300. AIM requires you to do this to keep your ship headed
for the Promised Land.
You’ve transferred $600 from Cash (shown by the orange

box) to Stock Value (shown by the green box), leaving Cash at
$4,400 and Stock Value at $4,600. Now you don’t have to bother
with it again until next week or next month.
AIM NAVIGATION
10000
9000
Add half the amount of We used this
8000
the transaction to cash to do
Portfolio Control. it.
7000 Buy this much
stock.
6000
5000
4000
3000
2000
1000
0
Congratulations, you just bought stock at a bargain price. If

the there’s still a storm brewing over Wall Street, AIM will
continue buying. If you bought the right combination of stocks, the
tide will rise again and your Stock Value will turn the other way.
This is when AIM begins to sell, when prices are high.
Look below at the charts side by side and you can see how
the value of cash was transferred to stock in the amount of the
advice AIM gave.
AIM NAVIGATION AIM NAVIGATION
10000 10000
9000 9000
8000 8000
7000 7000
6000 6000
5000 5000
4000 4000
3000 3000
2000 2000
1000 1000
0 0
Portfolio Control Stock Value Cash Portfolio Control Stock Value Cash
When sailing is smooth AIM starts gathering cash to use for

the next buying binge, raising money by selling your high priced
stock. Let’s look at the next chart below.
So when you check again, rising stock prices have pushed the
Stock Value gauge up to $6,500, well above Portfolio Control.
Portfolio Control also has a gauge that hovers over it, called Sell
Resistance. Sell Resistance adds 10% of Stock Value on top of
Portfolio Control. Since Stock Value is $6,500, Sell Resistance
hovers $650 above Portfolio Control at $5,950, shown by the red
line.
If the Stock Value bar is higher than Sell Resistance over

Portfolio Control, then we need to correct our course by selling
some stock, otherwise we simply hold course.
AIM NAVIGATION
10000
9000
8000
Sell this much.
7000
6000
5000
4000
3000
2000
1000
0
We want to increase cash by the same amount of difference

between the Sell Resistance over Portfolio Control and Stock
Value. This amount is shown by the blue box. In this case, $6500 -
$5,950 determines that we should sell $550 worth of stock.
Now let’s look at the next chart to see our status.
When you sell, you don’t need to recalibrate Portfolio

Control, so we leave it at $5,300. Cash increases from $4,400 to
$4,950 (shown by the green box) and Stock Value now reads
$5,950. The orange box shows where the cash came from. Next
week or next month you’ll return to your navigation panel to read
AIM’s advice again.
AIM NAVIGATION
10000
9000
We sold this
8000 stock.
7000 Here is the

cash from the
6000 sale.
5000
4000
3000
2000
1000
0
Now if your course is set for a $1,000,000, you can see how
Portfolio Control keeps the ship on course. Every time we buy
some stock, it increases a little, pointing us toward higher and
higher total portfolio value. Portfolio Control is our compass
through the treacherous seas of the Stock Market. If prices change
only a little, Portfolio Control advises only small course
corrections, but if they whip around drastically, AIM turns the
wheel hard.
Look at the action with the graphs beside each other.

A IM N A V IG A T IO N A IM N A V IG A T IO N
10000 10000
9000 9000
8000 8000
7000 7000
6000 6000
5000 5000
4000 4000
3000 3000
2000 2000
1000 1000
0 0
P o r tf o lio C o n tr o l S to c k V a lu e C ash P o r tf o lio C o n tr o l S to c k V a lu e C ash
Notice that AIM does assume that at some point, the value of
your stocks will come back up after taking a hit. That’s why it’s
vital to choose the right combination of stocks and mutual funds to
feed AIM, a subject we’ll cover in a later chapter.
Now let’s look at the process of putting AIM to work from

the time we chart a course to the time we pull into port.
Setting Up For AIM
Before we unfurl the sails we must test the wind. The

condition of the market will dictate how much cash we initially
reserve for cash and how much stock we must buy to optimize
AIM’s performance.
Risky Market Healthy Market
Cash
33%
Stock Cash
50% 50%
Stock
67%
Robust Market Booming Market
Cash
Cash
10%
20%
Stock
Stock
80%
90%
As you can see, the stormier the ocean, the bigger the anchor
we’ll need to keep the ship afloat. Your judgment of the stock
market must reflect its present condition, and what you expect for
it to be for at least a year. How do you determine the weather
forecast before you set out?
Well that question involves massive number crunching to get

the answer right, which we won’t delve into in this book.
Fortunately Tom Veale has already done all the number crunching
for you. He updates his analysis every month and publishes it on
the web. See the chapter “AIM Resources and Community” for
how to look this information up.
Multiply the money you have to invest by the stock

percentage and that will tell you how much stock to start with.
For illustration purposes, we’re going to assume you’ve

entered the waters during the stormiest season of the year and go
50/50. So in that case, if you started with $10,000, you’d open a
brokerage account, transfer all the money in, pick your stocks and
mutual funds, and buy $5,000 worth. Your remaining $5,000 in
cash should be picking up money market interest when you’re not
using it, and most brokerages offer this.
Next we have to set up the ship’s log. We’ll keep track of

AIM’s state using a table of values, which you can record on a
ledger sheet, regular columned paper, in a computer spreadsheet,
or on your forehead if you want to.
If we had $10,000, we’d put our first entry in the log this
way:
Date Portfolio Stock Cash Advice Buy Resist Sell Market
Control Value Resist Order
01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
Record the current date. Plug in the values you’ve already

decided for Stock Value and Cash. Set Portfolio Control Equal to
Stock Value to begin. AIM doesn’t have any Advice yet, so you
don’t have any Market Orders either. Buy Resist and Sell Resist
should be initialized to 10% of the Stock Value. We could set each
one of these to some other percentage, to swab the deck and patch
the sails, but we’ll study how to do that later.
Getting Advice From AIM
If you consult AIM too often it could run out of cash to use. I
recommend starting with once a month, but no more than once a
week. Some really impatient investors consult AIM once a day, but
if you do this, be careful about your cash. You don’t want to run
out of money before the market hits bottom, where the bargain
basement prices are.
When you look at AIM again, record the date, and the first
thing you will need to do is update your stock value. To do this,
multiply each security’s price times the number of shares you own
and add them all together. If you have access to the Internet and
your brokerage account has a web site, it will often do this for you,
or you can set up portfolio tracking in one of the major Internet
portals such as Lycos or Yahoo. Let’s suppose for illustration that
prices have come down and our Stock Value is now $4,900.
Next fill in your current Cash Value, which should have

gained a little interest. Buy Resist and Sell Resist stay the same are
still 10% of Stock Value.
So far the log looks like this:
01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
02/01/2002 $4,900 $5,020 $490 $490
If we end up buying some stock, we’ll need to recalibrate

Portfolio Control, so don’t pencil it in just yet. Compare the
previous Portfolio Control to Stock Value this way:
Portfolio Control – Stock Value = Advice
Whatever number appears on your calculator after this

subtraction belongs in the Advice Column, whether positive or
negative, so write it in. If the number is positive, AIM wants for us
to buy. If it is negative, we must steer towards selling stock.
The first thing to do is to check if AIM wants for us to just

wait. To do this, we check against Buy Resist for buy advice and
Sell resist for sell advice.
If Buy Resist is greater than buy advice, we do nothing. If

we’re considering sell advice, convert it to a positive number and
compare it to Sell Resist. If Sell Resist is greater, we do nothing.
When AIM tells us to keep a steady course, we complete our chart
by bringing down the value of Portfolio Control untouched. Now
the ship’s log reads this way:
01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
02/01/2002 5,000 $4,900 $5,020 $100 $490 $490 --
Buying Stock Using AIM
In our illustration, if Stock Value falls further to $3,500, AIM

will dispense a buy market order. Here is how we read the dials:
01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
02/01/2002 5,000 $4,900 $5,020 $100 $490 $490 --
03/01/2002 $3,500 $5,050 $1,500 $350 $350
We don’t write in Portfolio Control yet, because it will need

calibration. Stock Value is down, but Cash Value, due to interest,
is slightly up. Advice (calculated as Portfolio Control – Stock
Value) is to buy $1,500 worth of stock, easily overriding Buy
Resist. Buy Resist still factors in, however, as
Market Order = Advice – Buy Resist.

01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
02/01/2002 5,000 $4,900 $5,020 $100 $490 $490 --
03/01/2002 $3,500 $5,050 $1,500 $350 $350 $1150
So we will need to immediately acquire $1,150 worth of

stock. The final step is to adjust Portfolio Control to see this
change in Stock Value. Take half of the Market Order and add it to
Portfolio Control.
$1,150 / 2 = $575
$5000 + $575 = $5,575
01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
02/01/2002 5,000 $4,900 $5,020 $100 $490 $490 --
03/01/2002 5,575 $3,500 $5,050 $1,500 $350 $350 $1,150
Selling Stock Using AIM
When the skies clear AIM can change course for increasing
cash. The steps for selling stock are even simpler than buying.
01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
02/01/2002 5,000 $4,900 $5,020 $100 $490 $490 --
03/01/2002 5,575 $3,500 $5,050 $1,500 $350 $350 $1,150
04/01/2002 5,575 $6,700 $3,920 $670 $670
When we check Stock Value again, all the stock we bought at

the bottom of the market is now worth quite a bit more. Cash has
also been adjusted to reflect the previous example’s market order,
and gained a little interest on the money markets. Since sells do not
adjust Portfolio Control, we can go ahead and write it in.
Advice computes as:

Portfolio Control – Stock Value = Advice
$5,575 - $6,700 = -$1,125
The negative number indicates a sell. Since $1,125 exceeds

Sell Resist of $670, we take Advice as a positive number and a
market order will result of:
Advice – Sell Resist = Market Order

$1,125 - $670 = $455
01/01/2002 5,000 $5,000 $5,000 -- $500 $500 --
02/01/2002 5,000 $4,900 $5,020 $100 $490 $490 --
03/01/2002 5,500 $3,500 $5,050 $1,500 $350 $350 $1,150
04/01/2002 5,500 $6,700 $3,920 -$1125 $670 $670 $455
You sell $455 worth of stock based on this computation.

When you come back to consult AIM in May, you would have that
$455 in cash, plus interest.
One question you may ask is which security in your portfolio
should you sell? As long as you sell enough to equal the amount of
the Market Order column, you can sell any security or combination
of securities that you hold.
If you want to be picky, try to decide which security is the

least palatable to AIM, and sell it off first. This usually means the
sleepiest (no action), or the most likely to go into to the doldrums
and stay there. The same guidance applies to buying securities, and
whether you buy new ones or increase your holdings in the
securities you’ve already picked.
AIM stocks must be high performers with high volatility,

something we discuss further in “How to Choose Securities for
AIM” later on.
Adding Funds to AIM
So you’ve got a bigger ship? If you want to put additional

investments into an already existing AIM account, some of it will
have to go into securities and some into cash.
Again, after consulting God, your spouse, the Fed, your

mother and Tom Veale you should know how to divide the new
funds going into AIM. According to how risky the market is at the
moment, decide how much cash is needed as a percentage. Consult
the pie charts above again. Divide your ingoing money only (not
considering what is already in AIM) according to those
percentages. Then add to cash and buy some stock accordingly.
Now here’s something odd so pay attention, or you will break

your fine little money machine. This is new money, from the
outside of the account, so you must add 100% of the amount you
increase Stock Value to your Portfolio Control.
Withdrawing Funds From AIM
If you’re determined to break into the cargo hold and set your
venture back a few leagues, you must learn to take money out
without breaking your navigation control. Pirates and brigands
could do no worse, but if you’ve considered your opportunity cost
versus your burning desire for a new set of Ginsu knives, it’s your
ship.
When starting your voyage or putting more cargo in the ship,
you must consult the stars to decide the correct proportions of cash
versus securities. The same applies to raiding your merchant
supply. Make a judgment of the market. The truth is it’s probably
just as risky / healthy as you decided a few months ago and you
can stick to the same ratio.
Now, you’ll need to take out both stock and cash from your
AIM machine for it to continue functioning. Sell enough stock to
meet the quota dictated by your withdrawal amount and the stock
percentage. Take the rest out you want in cash. As in adding funds
to AIM, make sure to adjust Portfolio Control or you have broken
the equipment. Do this by subtracting 100% of the amount you
took from Stock Value from Portfolio Control. And when you lock
those cargo hold doors again, throw away the key.
Upgrading and Tuning the Machine
There are many ideas about how to push AIM’s performance,

and of course you can always try ideas of your own.
The beautiful thing about it is that you can test the validity of
your ideas before committing money to it, and finding out the hard
way it wasn’t such a good idea after all. With a list of historical
price data, you can simulate years of AIM or AIM improvements
until you’re satisfied it performs better this way under all possible
conditions. Of course, past performance is no guarantee of future
results, but it’s better than going in knowing nothing at all.
Swapping Stock For AIM
At any time, whether consulting AIM or not, you can

exchange your ship’s cargo for other goods. If you’re not pleased
with any security you hold, simply exchange it for another buy
selling it and then buying another security. Make sure that the
securities you buy are worth exactly the amount of those you sold.
Careful exchanging of one security for another can improve

AIM, but you must not do this based on hype, fear, or greed, so
you must establish a system for doing this rationally and keep to it.
The best thing to do is to keep a running list of securities, ranked
for AIM compatibility according to “How to Choose Securities for
AIM.” Once a year, or maybe once a quarter at most, exchange
your worst performers for the top two on the list.
If you try to exchange too often, AIM may not get a chance
to buy enough bargain stocks. You do not want to make the
mistake of exchanging a security just because a security has wild
swings; wild swings are required by AIM. In fact, the best reason
to exchange is not because a stock’s price has fallen on its face.
The best reason to exchange is if the stock is asleep, without
enough swinging around.
Cash Control
Once a year, you’ll need to pull your portfolio into dry dock,
chisel off the barnacles, reseal the hull, and paint the deck. So at
the end of a year of following AIM’s advice, take a look at the
market weather again. Is this a roaring bull market? Is it a whipsaw
market? Is it falling off a cliff? And more importantly, what kind
of market will it be this next year? It’s time to consult Tom Veale’s
web page again.
The point of all this is to try to determine if you have too

much cash. If you have more cash than the market risk warrants,
then you’ll need to make some adjustments.
If you have less cash than the market risk mandates, do not
sell stock to get more cash, just make sure you have a portfolio of
robust stocks. In fact, in this case, you might consider adding more
cash to AIM’s reserves, to give it more purchasing power near the
bottom of the market.
You may have more cash than the market deserves. For
example, suppose that on the day of your annual check that you
have 60% stock and 40% cash making up your total portfolio
value, but Tom Veale, the Federal Reserve Bank, your father-in-
law and common sense all agree that the market is at the bottom
now and will be as healthy as a raging bull this year, you need to
adjust your cash reserves down. If your research determines that
you should have 20% cash reserves, you will need to buy enough
stock to have 80% stock and 20% cash.
You treat this buy just like you would a market order from
AIM. For example, let’s suppose that you have $6,000 in stock and
$4,000 in cash, but your research indicates that $8,000 stock /
$2,000 cash is the right mix. You then buy $2,000 in stock and add
1,000 to Portfolio Control.
Filtering Market Orders
Sometimes AIM can become a little hyperactive, generating

tiny market orders to buy and sell. Besides the fact that your
commission eats up orders for $100 of stock, it would really be
better to improve AIM’s timing so that it gets more of the move
that stock prices make.
If you see your portfolio starting to stagger like a drunk with

pinprick trades, apply this additional filter to it. The filter
suggested by Lichello is to require that buy market orders (not buy
Advice) be at least equal to your buy resistance value before you’ll
consider it good, and that sell market orders be at least equal to
your sell resistance value before you’ll execute it.
Since the actual value of your Buy Resistance and Sell

Resistance are proportional to your Stock Value, this filter adjusts
itself as the value of your portfolio changes.
Optimizing Buy and Sell Resistance
The default values of 10% for Buy Resistance and Sell

Resistance work pretty well in most cases. Being workable for all
conditions, though, doesn’t mean that 10% is optimal for all
conditions. It is just about perfect for a volatile whipsaw market,
where investors can’t make up their minds and prices bounce back
and forth like a basketball.
You generally want to choose a couple of values when

starting out a portfolio and stick with them. They only really need
to change if the behavior of the stock as a whole changes. Market
changes from bull to bear or vice versa don’t count. If you change
this more than once a year you’re letting your fear and greed creep
into a perfectly good money machine. It can’t be corrupted from
the outside, but when tweaking the inside of AIM’s gears like this
keep your hands clean.
If we want AIM to trade more, we can reduce both Buy

Resistance and Sell Resistance together. If we want it to trade less,
increase them both.
The more a stock has a rising up trend, the lower you want to
set Buy Resistance and the higher you want to set Sell Resistance.
In some cases it even makes sense to set Buy Resistance to 0%.
I’ve set Sell Resistance as high as 50% before with positive results.
The closer the market resembles a whipsaw, moving sideways, the
more you want Buy Resistance and Sell Resistance to be close, or
even equal.
If a stock has a falling trend over the long term, you

shouldn’t be feeding it to AIM, but theoretically making Buy
Resistance high and Sell Resistance low would improve
performance. In other words, you would be cutting your throat
much more slowly. Enjoy.
Setting Buy and Sell Resistance optimally requires a little

experience and a good amount of thinking. The easiest way to
check your thinking is to plug your settings into some AIM
software (as discussed later in AIM Resources and Community)
and run an historical analysis with various values selected. It won’t
tell you what will happen, but it will give you some idea as to how
a stock responds to various settings.
The Wizardry of Tom Veale

Tom Veale, an 11 year veteran AIM user at the time of this
writing, and one of the foremost members of the AIM community,
invented several improvements to AIM, including the original
version of having both Buy Resistance and Sell Resistance
separately, instead of just Resistance. This has been widely
adopted by AIM users world-wide.
His most inventive idea, however, deals with the ever pesky
problem of AIM keeping way too much cash in a long bull run.
After a few years of an over-heated market, AIM might be keeping
80% of your portfolio in cash! Tom invented a sophisticated way
of keeping cash reserves under control.
As the market climbs and AIM begins issuing sell orders,

keep tabs on how much cash you have as a percentage of your
portfolio. You are watching it make sure that it does not exceed a
certain level. Tom has his own technical indicators, and you may
adopt his or develop your own. For illustration purposes, suppose
we do not want cash to exceed 33% of the value of our stock
portfolio.
Now with each sell market order that AIM recommends, I do

a quick check to see if that would exceed this cash barrier. So, for
example, if AIM recommended that you sold $1,000 worth of
stock in a market order, but that would kick cash up to $3,400 in a
$10,000 portfolio, do not take it’s advice. Instead, you keep your
stock and cash where they are, and adjust Portfolio Control as if it
were a buy order. Take half of the market order value and add it
directly to Portfolio Control. That will adjust AIM’s hunger to sell
until Stock Value has increased a bit more, keeping the ratios
between stock and cash how you want them.
Since cash is our anchor against rapid market declines, using

this technique does increase risk. That is why you should always
use it along with indicators and research that indicates just how
risky the market is at the present. In other words, how likely is it
that the market could tank in the near future? That is not a question
for this book to answer, but there are plenty of resources and
technical studies, including Tom’s, for this purpose that will serve
well.
Cash Conservation
Sometimes AIM can experience just the opposite problem of

cash control. As shares plummet and AIM jumps in to buy all of
the bargains, it runs out of cash too fast. If it buys too early, you
miss some of the better bargains near the bottom of the market.
In order to hold on to the cash a little longer, again decide a

percentage value for cash in your portfolio, beyond which you
must make adjustments. Call this percentage value the “cash
conservation” value. To make these adjustments you must decide
beforehand on a “brake” percentage value. A high percentage
would slow down cash outlays a bit at a time, but a low percentage
would slam on the brakes.
If cash percentage comes down to the cash conservation

level, and AIM issues you another buy order, then you will put the
brakes on. Calculate your cash times “brake” percent. Then, if this
value is less than the market order, substitute the value of the
market value for this new “brake” value and proceed with the buy.
Using this technique you will never actually use all of your
cash reserves, but they can still drop down low enough to prevent
any more practical buying. So this technique is a delay tactic,
seeking the bottom of a market. Really if the stock is coming down
so hard you might consider just exchanging for another. Adjusting
Buy Resistance up a notch also can prevent this problem a little
earlier.
They time to use this tool is when the entire stock market is
tanking fast and there are no winners in sight. A market crash
would be an excellent example of this.
Feeding the Machine
How to Choose Securities for AIM
Stocks, Mutual Funds, and Index Trackers
One important thing to understand is that AIM cannot be

used with just one stock in a portfolio. One stock, no matter how
promising the company, no matter how stellar the previous
performance, can suddenly go to sleep (go sideways for years) or
lay on the floor and not get up for years. AIM cannot work in this
kind of situation. But if you choose a strong portfolio of the right
stocks, even if one drops off the bottom of the board, the rest will
compensate.
One way to get this in a package is to invest in mutual funds.

Not all mutual funds are well suited for AIM, nor is it necessarily
true that a mutual fund will outperform your own hand - picked
selection of stocks.
One more recent contender is the index tracking stock. You
can find most of them on the American Stock Exchange, for
example DIA tracks the Dow Jones and QQQ tracks the NASDAQ
100. Since these securities don’t have some of the tax
complications of mutual funds (like paying capital gains tax even if
you lose money), I personally prefer them. But plenty of people
make plenty of money applying AIM to mutual funds.
Really the type of instrument is not important, whether it be a

mutual fund, portfolio of stocks, gold coins, currencies, or
whatever. AIM will guard and improve any portfolio of liquid
assets.
Durability
Securities selected for AIM should be able to take a hit

between the eyes and get back up in short order. AIM cannot
convert securities into cash again until the values of the assets
recover and prices start to climb. A quickly recovering security
makes AIM run more efficiently.
Companies with low debt to asset ratios have better cash flow
and better survival in a rocky market. Of course, mutual funds and
especially index tracking securities have this virtue built into them.
Volatility
As an AIM investor, you actually want the market to take a

plunge now and then. Of course, you also want for it to come
shooting back up, and the more it does of both the wealthier AIM
will make you in short order.
There are several measures of stock volatility, published in

newspapers and magazines you can find at any public library. Beta,
for example is a well-known and well-published measure of
volatility.
Aptus Communications, Inc. has a free windows application

you can download called “Screen-O-Matic” that will instantly
judge the volatility of any listed security using a sophisticated
algorithm. Go find it on their website at
www.automaticinvestor.com.
Performance
You do not want a security that performs too well for AIM.
You need something with some spice in it. You need a stock that
not only can take a hit, but also will. So performance in AIM
specific terms means that the stock staggers quickly up the
mountain.
Thriving small companies, between the $100 million and

$300 million range, have stocks that behave this way. Stocks that
have a high media profile, and that are in a “hot” market sector
attract speculators. Speculators are our friends because AIM knows
how to take advantage of them.
We also must require that daily stock volume average higher

than 200,000 shares. Less than that and a poor quarter for this
stock could scare so many speculators away that there is nobody
left to make a market for it.
Growth Oriented
First of all, you want securities in rapid growth sectors and in

rapid growth companies. Companies larger than $18 billion in
value usually have to slow down, and cannot appreciate quickly
enough to outpace inflation, taxes, and the Joneses.
Be a Fundamentalist
Always have a look at the income statement and balance

sheet of a company before you buy its stock. Get their prospectus
if you can. Find out how quickly their market is growing. Found
out how many competitors they have and how large they are in
comparison.
Revenue growth is the key indicator of company growth and
stock price growth going forward. Market share growth is the key
indicator of stock durability going forward. Study a security before
you buy it. Ask yourself how this company fits in to the world of
its competitors.
You want to prefer securities, that although the prices may

swing around a good bit, the company performance consistently
excels. The fewer surprising quarterly reports, the better. This
predictability won’t prevent price swoons, but it will affect a quick
recovery.
Win on a Technicality
Finally, the technical indicators can improve your judgment

on whether a security is a good buy or not. You obviously don’t
want to buy a security that is at its highest price over the last year.
A strong company behind a stock down on its knees makes and
excellent bargain. If the price for a company with strong
fundamentals is the lowest you’ve seen in years, or even the last
year for a company, buy it.
Choose Another
You must expect to choose several losers, no matter how well

you pick securities. Pick enough of the best securities you can to
offset the losers, of course. Another thing you can always do is just
exchange the loser for more of a proven winner in your portfolio,
or another security altogether.
How do you know when a security is a loser? First of all,

watch its news. Did they go bankrupt? Having legal troubles?
Watch their volume. Has it declined as speculators ran away
scared? Generally, unless the economy is in trouble, if a company
has more than three bad quarters you could find a better
replacement.
Not only are securities with depressed prices losers, but

securities that have fallen asleep and do nothing are losers, too.
AIM needs action. If the value of a security you hold remains
stable for more than six months, you can find a better replacement.
AIM Resources and Community
AIM Book
Of course, you will have to make a visit to the swampy world

of “How to Make $1,000,000 in the Stock Market Automatically”
to visit the Master. Penguin Putnam publishes it. Follow this link if
you want it:
http://www.amazon.com/exec/obidos/ASIN/0451204417/qid=1012104001/sr=8-
1/ref=sr_8_3_1/104-6524324-9727912
AIM Resources on the Web
The hub of the AIM universe is of course Tom Veale’s page:

www.aim-users.com
Here you’ll find all of the great technical resources this book
refers to, and some fascinating alternative presentations on AIM.
Tom also has many other links that will expose you to most of the
AIM web.
Here is a friendly discussion concerning using AIM:
http://orange.lv/
If you want to chat with the best thinkers on AIM, you’ll

want to visit the Silicon Investor’s AIM bulletin board:
http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=12596
AIM Software
My favorite AIM software is Automatic Investor. I used it to

create all of the historical analysis for this book. It has great
historic testing (what if) capabilities, and has some very interesting
features in the upcoming upgrade that may improve AIM’s
performance significantly.
http://www.automaticinvestor.com/
You can try the program for free. If you decide to buy it, let
them know I referred you.
Another very popular program for AIM is NewPort. I haven’t

used it, so I cannot offer you any opinion on it, but I can say that
many other long-time AIM investors have trusted it for a long
time.
http://www.execpc.com/~newport/index.htm
If you’re a Mac user, there’s some AIM software out there

for you to. Direct your browser to:
http://www.marinusvanderlugt.nl/aim/
Afterward
Thank you for buying this book. Keep improving your

financial education, which is the only real source of increasing
wealth.
I know that if you follow its advice that AIM will perform for
you better than any alternative system I could find after ten years
of looking. Please send any comments by email found on the cover
page.
At Adept Prime, we have the best research department bar none,

finding and practicing the ideas that we publish to you. We’re also
among the best teachers you’ll ever discover. We don’t do
textbooks! Visuals, allegories, examples and stories are how you
love to learn, and how we love to teach.
Adept Prime has a tremendous lineup of wealth building books

coming up soon, including a fantastic work about real estate that
will truly be the best in its class. This book will cover in one
volume more information than you could find in a library of books
on the subject, including:
• Using published technical data to find amazing bargains

• Tax deed and bank foreclosures
• A breakthrough method on making a profit on abstract ad
judgment foreclosures.
• How to do title searches and court house research
• How tax-deferred real estate exchanges are the best tax
shelter in the world
Also you can visit us on the web at www.adeptprime.com. Please

come by and pay us a visit!

Lichellos Golden Little Secret

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Lichellos Golden Little Secret

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Lichello’s Golden Little Secret

Copyright © 2002, Adept Prime Corporation, All Rights Reserved.

You have picked up the schematic to a secret weapon that the

This system, known as Automatic Investment Management,

Imagine if your best friend was the world leader in stock

You won’t have to keep your eyes super-glued to stock prices

AIM can make you very rich. It is not a get-rich-quick

AIM is among the most effective stock market powerhouse

The wizards of the AIM universe, Robert Lichello and Tom

To my dear wife who was so patient while I spent nights and

And of course, I owe all of the prosperity and wisdom I have

Dr. Jekyll, Mr. Hyde live on Wall Street

I put my money down on my lucky number. I had just seen a

I pulled away from the stock quotes and charts on my

Did I hold on to this one? Oh yeah. Of course, this stock has

The stock market junkie that got me involved in this Wall

During those years, I picked stocks based on what was hot,

But choosing a good stock, or even a great stock, as hard as

Wall Street Robbers

Now if you’ve been in the same boat, then you’ve learned

The laughter you hear is not coming from Wall Street.

What really happens? You see a stock running up like a

You consider yourself a rational person. You don’t make

Too prove that point to the entire United States Senate, an

With this sort of track record, it is astonishing that a few

If the professionals can’t cut it, who can?

We know about stock market experts that do actually beat the

You can find plenty of information on how to invest in

Mathematics is An Abusive Language

What was the purpose of this insanity? I was living in a mad

Months stretched into years. A year stretched into a decade.

I learned how to swear using only trigonometry and calculus

A Gaudy Little Diamond

My investment library, full of contradictions and half-truths,

One day while strolling through the supermarket, grabbing

It was a supermarket book, for crying out loud.

I murmured, “right next to the Enquirer and ‘Mystery of

Later that Friday night, with red, puffed up eyes, I began

I finished the book for the second time Saturday morning at 4

This man, Robert Lichello, had apparently found what I was

But instead of rejoicing, just sullen anger and growing doubt.

Excitement was gnawing at me, keeping my eyes open. I

What happened next was truly bizarre.

I suppose I shouldn’t have eaten a whole jar of salsa before

I dreamt I was programming another trading program on a

“The dilemma is,” I murmured, “I can make a trade as soon

“Aaaaah,” said a funny little voice, “But price matters not,

I whirled around, my keyboard raised above my head, ready

I lowered the keyboard. “You should be more careful! You

“You were doing pretty good until you started babbling.”

“I suppose you could do better?”

“Look, do you mind? This is hard work, and you’re

“To predict the future you seek?” he asked, poking me with

“More you must buy the lower the price.”

“Oh, you’re a doubler?”

“I know of him not.”

“The strategy of doubling your investment every time you

“The amount of stock bought your resources must determine,

“Lichello!” he said. “…You seek Lichello. Knows of such a

“Lichello? You know this Lichello?”

The next thing I knew I was sitting in front of a giant boiling

“No thanks,” I said, “I had plenty earlier. I just want to get

“Two days worked without eating you have. Try it you

With an exasperated sigh, I shoved a tortilla heaped with