|
| Author: Mike Celeste | | Editor: Tony Ponzo | | September Circulation: 8204 |
Stat Sheet Week Ending September 2nd 2006
|
| Changes | Weekly | August | Year to Date |
| Indexes | Points | Percent | Points | Percent | Points | Percent |
| Dow | +181.0 | +1.6% | +279.0 | +2.5% | +747.0 | +7.0% |
| S&P | +16.0 | +1.2% | +34.0 | +2.7% | +63.0 | +5.0% |
| NAS | +53.0 | +2.5% | +102.0 | +4.9% | -12.0 | -0.5% |
| Splitmaster Strategies |
| Basic | ...................... | +2.3% | | +13.2% |
| Big Dipper | ...................... | -6.0% | | +19.8% |
| Option Calls | ...................... | +18.0% | | +123.0% |
| Option Puts | ...................... | +32.0% | | +65.0% |
|
Highlight of this past week:----CHAP---is off to a good start; up 3 points.
In this Issue---
SplitMaster Basic System---
*****************************
While we have only 1 stock splitter active, it is off to a good start. And that certainly is better than seeing it at a loss. We closed out the month of August with a gain for the month of 2.33%, or about 28% annualized. This compares favorably with the major indexes. For year-to-date we continue to far outshine the major indexes, and the Nas still hasn't made it back up to even for the year. Also, the nice part is that the 3rd quarter is winding down and we are eager to see that 4th quarter begin.
Big Dipper System---
************************
The Big Sleep is famous as a 1946 movies, starring Humphrey Bogart and Lauren Bacall. It probably is more interesting to watch the movie again rather than spend too much time watching the Big Dipper. Of course, we had overactive months earlier, so we know that the quiet times might not last too long. We had only 1 dipper last month and it was a loser, but year-to-date, the BD is still up almost 20%. There is a really good side to not having any dippers. This means that stocks are not dropping in price enough to even hit the BD target buy price. Just a month or so ago, stocks were tumbling like rocks. Now they are either going up or staying in a safe range and for the overall market, that's good sign.
Options---
************
August saw the options programs swing back to positive results, gaining 18% on the CALLs and 32% on the PUTs. That raised the year-to-date figures to show profits of 123% on the CALLs and 65% on the PUTs. The very unusual stock market action of the middle of the year hurt almost everyone, and we trust that the worst is behind us. Also, we want to remind our team members that since we started suggesting option prices the day before the buy date that those listings are just that--suggestions. We wanted to be conservative during this 3rd quarter, and we did save quite a bit of money by not chasing option bid/ask prices. However, since we just suggest doesn't mean that you can't try to get the options at slightly different prices. Auto traders do use the fixed price listings, but they can be changed thru personal contact with brokers. Now, we are not suggesting that you do change price orders, but we did want to point out that if you feel we are a bit too conservative at this point in the year, you can still make profits with slightly different price orders.
Spreads - a look at their versatility--
*************************
Many of you emailed us last week saying you are interested in the spread strategy. This week we started our beta testing with about 10 of our members. Let us extend our invitation to the beta test. If there are other members who would like to join in on the beta test, send us an email and we will put you into the beta test email group. Now, on to how the test performed this week.
We mentioned in previous newsletters that we are basing these spreads on stocks that have been on our stock split list in the past and but are now announcing their earnings. Not all are previous splitters if we find opportunity in other stocks, but most are. We are looking for stocks with a lot of volatility so that there is a good chance there will be a nice price move immediately following the announcement. We do not care which way the stock price moves (up or down) as long as it moves. Unfortunately, earnings announcements are slowing down as the season winds up. There are always going to be stocks announcing but the ones that fit our criteria, are becoming harder to find. However, earnings season will start all over again, starting about the middle of next month (October).
In a way, this is good for our beta test. Members have a lot to learn and we have a lot of feed back to get from our testers and a lot of tuning up to do. We want things to go at a slower pace for now so we can really concentrate on the things we have to adjust. Unfortunately, this late season has made for some lackluster price movements in the stocks we tested this week. But as the beta testers saw, when the picks do not have big price moves, the losses were limited in each case to under $200. Plus, if they have followed our advice, they are only paper trading at this point. While losses can vary, they will almost always be low. Profits on the other hand can be tremendous for a one day play and that is why we like this play.
NOTE TO BETA TESTERS: Please give us your feed back. Are the signals clear enough? Do you understand the plays and the timing of the plays etc. ? We have had a number of good suggestions for the week but we would like to see more.
SPREAD STRATEGY LESSON FOR THIS WEEK ---- We thought we would show you one new thing about the spread strategy each week for the next couple of weeks so you can see the versatility of this play. First, we want to reiterate that these are debit spreads in which you buy long a CALL and buy long a PUT. Then when the time comes, you sell both positions. We had a few members who thought these were credit spreads. Those plays are good too but are harder to work with.
There are two ways to enter and exit the play. A trader can enter the play as one trade or a straddle, if your broker provides that trading tool. With this tool you enter both CALL and PUT and give the instruction to buy the spread for say $3.20. This means that if the CALL is selling for -bid 1.60 and ask 1.80 and the PUT is selling for -bid 1.40 and ask 1.60 you might try to buy the CALL for 1.70 and the PUT for 1.50. That is a combined total of 3.20. So you put the straddle order in at that price. The good thing about this type of order is, the play will not go off unless both sides can be executed for any combination equaling 3.20. The bad thing is, because of this, you may not get the play off at all. Also, as mentioned above, not all brokers offer this trading tool. You'll have to ask your broker if this interests you.
The other way to enter the play is one side or leg at a time. Many members prefer this as they can work with the bid and the ask side until they get their orders off. The good side of one leg at a time is you can often get a better combined price. The bad side is you could get one side off and not the other, or have to pay more than you wanted for the second side.
See - there is a lot of versatility with this play and it can be fun to work with. Which way you approach it really depends on what you are most comfortable with.
Next week we will talk about different ways to close the play and how you can potentially really increase your profits.
Chart Indicator---
*******************
The CI is again proving itself to be a very useful too. The Nas gained 4.9% for the month of August, and our CI went positive on 8/16. The close on 8/15 for the Nas was 2115 and the close on 9/1 was 2193, a gain of 3.7%. Yes, we didn't catch it right at the bottom, but as we have explained before, we need some time for confirmation of our signals--better safe than sorry, so to speak. We are a good, solid 55 points above our break even line between Positive and Negative. This is the best results we have seen since mid-May, when it went negative for such a long time. Keep your eye on it.
Stock Split Comments---
****************************
This has been a real quiet time for split announcements. There have been a few 3-2 split announcements, but the last 2-1 announcement that qualified for our program was OXY, back on July 20. We have a lot of catching up to do, and I think we will start seeing that pretty soon. Volume in the markets has been low during the summer, as expected, and after Labor Day most people will have taken their vacations, especially those involved in the stock market. That should mean higher volume ahead, and also it should mean that board members will be back on the job and getting down to serious business, which would include stock split announcements. The markets are far less volatile than they were in May and June and that bodes well. There are quite a few stocks that have been creeping up to new highs, with good earnings, and we think that those results will culminate in more stock split announcements.
The Economy---
*****************
The economy is still showing some mixed results, doing better than expected in some areas, and less in others. There is "talk" about a soft landing for the economy, but that is such baloney. Sure, at the beginning we do not see a sudden drastic collapse. The move is slow--one way or the other. Don't misunderstand me, I'm not predicting a recession, but just saying that a soft landing is really saying nothing because we would have to get to that point before it would get worse. Let's hope it doesn't pick up steam to the downside---but we are ready in case it does. The reason for saying that is because of what we have said for years---a decline in one area brings opportunity in another area, and the area getting the opportunity is more likely to bring about a split in the stock---and investors usually reward good earnings--it's really pretty basic and simple. The past summer didn't show that to be the case, as a great deal of companies with terrific earnings got hit hard with the fear and emotion that swept the market during that May-June time frame. Over the long haul, we remain firmly convinced that good earnings will be rewarded.
A mention about one of my favorite subjects--the real estate market. For a long time we have said that we felt there would not be a soft landing, and finally, after we have seen the sales and inventory figures setting records--negatively--we hardly hear any of the "experts" use the term "soft landing" any more. It is becoming a question of how low will prices go and for what period of time. It is our feeling that if you are in the market to buy, you can still wait for better prices. If you are a seller--well.............enough said.
There is another reason to worry quite a bit more about the real estate market. Some of you know that our programming partner, Tony C, also has a database investigation service that he has developed--specializing in linking databases. He currently has a real estate case going that is an example of a cancer in the industry that is really out of control. The specific area is in the field of appraising. Regulatory agencies have way too little personnel and funds to properly go after the crooked people that are siphoning millions and millions (probably billions, if we put them all together) out of the real estate market--and making it harder for honest people to get their real estate transactions processed. Tony has a case showing an appraiser that has been over-appraising properties. The appraiser also has a mortgage brokerage business, an escrow business, and various corporations, so that he can come up with almost any value for a property and get loans without having to qualify--just stating that the borrower (himself or his accomplices) has stated income to qualify to get the loan. He arranges to buy run down properties and then borrows more than he pays for them---and has graduated into loans of a million dollars or more. In this case, it is even worse, as he put properties in his wife's name, let them go to foreclosure, as he has already gotten the excess loan money, and she was stuck showing the foreclosure---and she didn't even know it was happening. There was a divorce and it was plain to see that he was setting her up for this. Many of you do not know that your troubles are not over when there is a foreclosure. The IRS can step in and say someone got a loan and didn't pay it back, so that now becomes income, and income has a tax due. This ex-wife was slapped with IRS liens, but fortunately the IRS has some pretty sharp people. Tony's efforts at exposing this resulted in the IRS removing the liens against the ex-wife. However, at this point, the ex-husband appraiser has not been hit with any action---so the story is still ongoing---and the ex-husband has continued to over-appraise (using his new wife's name--but it might be that she is well aware of the scam procedure as she is a working business partner), get large loans and live an extremely good life. Unfortunately the wife has run out of money to pay attorneys and the attorney she used didn't understand the technicalities well enough to expose this--and the child support for their child might well be cut, instead of being raised to the amount it should be, based on the income the father produces. Usually you hear about the wife taking a guy to the cleaners---this time it is going the other way. But Tony has his documentation and even tho he hasn't been paid for his work (yet--the ex-might be held responsible if it works out properly), he is still trying to help her.
The usual appraiser scam isn't this detailed, but is a real epidemic and the potential problem for all of us is that by appraising for too high a value, we will most likely see the balloon finally break as the properties can't be sold for enough to cover the loan, and the guaranteed loans will be paid from government agencies--and our tax dollars. Income-qualifying statements are another section that is very fraudulent. If this interests you, search the net for "appraiser scams" or "mortgage fraud". There are over 27,000,000 hits on those two terms, using Google. This is a fantastic problem and we predict foreclosures will dramatically increase, and for just this reason--along with the foreclosures that will result from adjusting mortgage payments.
Today's Thought---
*****************
A goal properly set is halfway reached..........Zig Ziglar
Mike
The Splitmaster.com information system delivers email to addresses provided by subscribers. To Subscribe or Un-Subscribe go to our Newsletter page.
