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| Author: Mike Celeste | | Editor: Tony Ponzo | | August Circulation: |
Stat Sheet Week Ending August 5th 2006
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| Changes | Weekly | Year to Date |
| Indexes | Points | Percent | Points | Percent |
| Dow | +20.0 | +0.2% | +522.0 | +4.9% |
| S&P | 0.0 | 0.0% | +31.0 | +2.5% |
| NAS | -9.0 | -0.4% | -120.0 | -5.4% |
| Splitmaster Strategies |
| Basic | ............... | +12.1% |
| Big Dipper | .............. | +25.8% |
| Option Calls | .............. | +105.0% |
| Option Puts | .............. | +33.0% |
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Highlight of this past week:--- MON---Will be closing out Monday with a very nice profit. The CALLS are closing out too and should return close to a 100% profit.
In this Issue---
Web site additions---
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We have made 2 additions to the site--
1. Pictures of us--one can be seen by everyone, and one that shows for team members. Because we have received quite a few requests to see what we look like, we have inserted our pictures on "The Publishers" page. We realize that we are not going to look anything like what you have pictured, but there we are, matching our faces to our words. The Publishers page is available to everyone. Team members can see another picture of the 2 Tony's and Mike on the Home page, once you have logged in. You can see that we just discovered a new analytical point that is hoped to add to profits.
2. For team members--The Option Picks Page.
We send out a trading email every day, with our exact suggestions for the next day. Because we are having email problems for a few of the team members, we are working on a better solution. In the meantime, we have added a column to the Option Picks. After the column headed "Exit Date" we inserted a column headed "Suggested Exit Order Based on Split Price. (Important--remember that it is listed as the split price, not based on the original buy price.) In the column we show our suggested sell price of the option--or better. Also, in the Call Buy Price and Put Write Price columns we put the split price in parentheses. The same for the Month and Strike Price column. For example, if it is a 2-1 split and the CALL was bought at $4, originally, it would show $4 (#$2)--and if the strike price was $40, it will show $40 (#$20), adjusted for the split. The split price symbol will not be listed (just the original option symbol), so make sure you place an order based on the correct symbol. This should help in case you don't get a chance to see the daily email. If there is any question, please don't hesitate to email us.
SplitMaster Basic System---
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It's nice to see a good winner coming up for sale on Monday. MON has done very well and more than makes up for the small loss that appears to be in store for FUL. That is what we are used to seeing---until the recent emotions in the markets ran wild, with no reasoning behind the declines. Our posture has always been that we will have winners and losers, but the winners have always done better than the losers. We refuse to give in and say that companies with good earnings that announce splits are not expected to continue to do well--otherwise we will hang up our six-shooters and call it a day. First of all, this is the infamous 3rd quarter of the year, and we have planned all along that it would not do as well as the other quarters. We did not expect, however, that logic and reason would fly out the window and emotion would just about strangle the market. We are getting the feeling that we are edging our way back to more normal action in the market. Something very positive in general seemed to be happening this week with a great number of stocks moving up -not just splitters. And quite a few companies had good earnings announcements. It is a long way, yet, to the end of the quarter, but all we're asking for is logical moves, based on fundamental facts. We can live with that, as we strongly feel that splitters are fundamentally sound and earnings are doing well in them.
Big Dipper System---
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This is still a quiet section, so nothing newsworthy to report.
Options---
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MON should close out on Monday with about double the buy price on the CALL, or close to a 100% profit. On top of that, we were conservative on our bidding for the CALL on FUL, and we did not get the buy order off. That day the CALL sold for a higher price than the price we were willing to pay. We were looking at the Aug. 40 CALL at $1.90, but when we didn't get it, we didn't re-enter our order. The stock is currently 38.93, so the Aug. 40 CALL is only 60 cents. So, we save ourselves a big loss--and a loss saved is preservation of capital, which is a good thing. We weren't able to avoid all losses, but at least we did avoid some, and this was one of them.
Chart Indicator---
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The CI is dead even with the Positive/Negative line, but it is still negative, as it takes a few days to make its way and be confirmed. At any rate, it is a welcome sight to see the numbers becoming more positive. That gives us a lot of confidence.
Stock Split Comments---
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Tony has been working feverishly on the one-day Spread plays, so don't think we have forgotten them. On Thursday, there was a great paper profit of about $4,000 for a one-day play on four different positions. Wednesday had been slightly positive. Friday didn't show much, either, but the 3 day net was still very good. He is looking mostly at recent splitters that have earnings coming out on these days when the spread would be applied. We are still trying to find the magic formula--shooting for a 70% success rate--that is, winning on 7 out of 10 plays. Tony wants 80%, but I'm more than happy at 70%. Then, too, you can have 7 winners and 3 losers, and the 3 losers total more in $'s than the 7 winners, so we want to be careful that the net $'s are also in that range of profits. There is a whole lot more work involved in this system, but we are more than willing to try to find the sweet spot criteria.
Looking back, we would like to point out again the stock that we had said was very volatile--HANS. When we saw the large profit in the Basic System, we grabbed it and ran--because of that volatility. We closed it out at 209 on July 6. Luckily that was the day it hit its yearly high of 210.88, so we did very well from our buy price of 191.49--3 days earlier. The point of this is the volatility---less than 1 month later the stock closed (Friday) at 40.25, or 161, based on pre-split. (4 for 1 split) That's a 48 point decrease from the sell point we had. We learned that some stocks are called volatile for a very good reason. Hans is a drink maker and the hot weather around the country is supposed to be very good to these stocks. Let's see what happens when HANS reports its latest quarter--will it have been a good buy? They are supposed to report on Monday, so take a look and see what happens.
Email problems for members---
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Going back the problems some of our members have in receiving all our important daily emails, it is generally caused by your ISP such as Hotmail or AOL etc. In an honest attempt to mitigate email Spam, these ISPs employ various filters that are designed to spot and block unwanted emails. The problem is, many of these ISPs have not thought hard enough about the overall consequences and unfortunatelly, legitimate emails such as those from SplitMaster sometimes get blocked in the process. This is frustrating for members who are dealing with trading their hard earned money but I don't think the problem is going away anytime soon. However, there are ways to combat the situation and it is up to you, to take action. We are trying to do are part by adding backup links and information on our site as mentioned above. But also, click on this link that will give some suggestions on what to do. Email Problem Solutions
The Economy---
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You know, this gas situation is giving me fits in trying to understand what is really going on. Everyone I know, and I mean everyone--from coast to coast--has been conserving on their driving habits. This also covers all socio-economic levels, not just for the average person. The upper economic levels of income are cutting back just as well as everyone else. Yet---the government report on gasoline shows demand is up slightly over the prior year at the same time. I just don't believe it. The only way I see it being possible is if there is an increase in population and therefore in the number of vehicles on the road. I didn't research it to that point to see if the demand increase is smaller than the population increase, but that would be the only way I would accept figures showing demand going up this year over last. What I do believe more in that report was the inventory report. Both oil and gas showed inventory increases of millions of barrels over the prior year at the same time. Therefore, it can't be that there isn't supply--at least based on those figures.
Pat found a couple of articles that might be of interest to you--one on gas and one on real estate:
http://www.energyandcapital.com/newsletter.php?id=248
http://wealthdaily.net/newsletter.php?pub=wd&id=233.
We are in California and can see what is happening out here, but the article is about what is happening back east. Here is a sample--
"Yes Virginia, there is a Santa Claus!
In fact, it is nothing less than holly and fruitcakes in the Mid-Atlantic, as one of the nation's largest builders, K.Hovnanian Homes, has actually proclaimed it to be "Christmas in July". Lucky buyers in Maryland, Virginia, Pennsylvania, Delaware and West Virginia are being urged to "Hurry In!" for savings of up to an eye-popping $100,000 on the purchase of their new homes.
You're reading that correctly... $100,000!
Is it just me or does Santa seem a little desperate?" End quote---
You know, a $100,000 cut in price seems to us to be a tad bit (a big tad, actually) more than a "soft landing" that the "experts have been predicting for the real estate residential sector. At first they were defining a soft landing as prices stabilizing at current levels, but not dropping. Now they have adjusted the definition to say a soft landing is a slight drop in prices---not defining the word "slight" of course. We have been hammering that there will be substantial drops in prices.
Another article said that in California the foreclosure notices are up 67% over last year. They were quick to point out that the new rate is still below the average number of foreclosure notices. You have to be careful when playing the numbers game. If you made 1 cent in profit and you go to 2 cents in profit, you have increased your profit by 100%. If you hear just the 100% part, you might be impressed, but if you know that it was just an increase of 1 cent, you are not very impressed. In this foreclosure area, tho, we think that a 67% increase is substantial for a couple of reasons. First, you are starting out with some numbers that are not in the 1 cent to 2 cent category--you are talking about thousands of notices. Also, the percent is moving quickly, over a short period of time. Then, we see that there are trillions of dollars in mortgages that are coming due for adjustment this year. Can they be refinanced? If not, the indication would lead us to believe that there will be even more foreclosure notices sent. If a person has an interest-only mortgage and has to start paying principal, the change in monthly payments can easily be in the hundreds of dollars. Many people bought homes stretching their ability to pay right to the limit, and that is based on interest only. My dad always used to say--"Every dollar you go down in price, you reach another buyer, and every dollar you go up in price, you lose another buyer." He proved his point many times over, and we think his words are proving to be true again. We are just beginning to see these negative numbers, but take a look at the stock prices of the builders. They have already taken huge hits. The one in the article, Hovnanian (HOV) closed Friday at 29.10, yet the 52 week high was 70.36, a 59% drop. So much for the statements that they are only building based on orders. They wouldn't be reducing prices $100,000 if they already had the home sold at the higher price. Watch out if you are considering buying or selling--and do your homework for it can be homework that pays off in a whole lot of $'s saved, one way or the other.
Today's Thought---
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Keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great.
Mike
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