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Author: Mike Celeste Editor: Tony Ponzo April Circulation: 7283

Stat Sheet Week Ending April 14th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+52.0+0.4%+149.0+1.2%
S&P+9.0+0.6%+35.0+2.5%
NAS+21.0+0.8%+77.0+3.2%
In this Issue--- SplitMaster Basic System---
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We seem to be in another time zone where companies don't want to pull the trigger and announce some stock splits. It has been over a month since a qualifying 2-1 split has been announced. We are fully expecting announcements to pick up substantially during this earnings season, assuming earnings come in as expected. The early results are promising, altho the reports that came in this week were relatively small in number.

 Big Dipper System---
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We still have one active Big Dipper, but it is not much to rave about, being cents above our entry level. This is another indicator that the markets are doing fairly well. We remain positive and happy to see that we are running 100% winners so far in the Big Dipper for 2007.

 Options-Momentum Play for Day Traders---
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With nothing in our Basic System, we have no options currently working regarding splits. Our option attention currently is focused on the Momentum Play, which has been quiet also, since earnings don't get fully underway until this coming week. We did have one play and that was yesterday. Unfortunately, it was one of those plays that fooled us into thinking it was a down play but not much after we got in, it turned positive along with the market. It was an inexpensive option we went into so we held the option over the weekend. We are looking for a little pull back at least by Wednesday to recover some of our investement and if things go well, maybe we'll even pull out a profit. We shall see. This doesn't bother us though as the plays are going to start rolling in and we'll have plenty of opportunity to post gains.

The really interesting and good thing is, quite a few of our testing day trader members are becoming really proficient and fast with this play. We received several reports from members that said, when they saw the stock turning around, they bailed on the PUT play and went into a CALL and wound up with profits. And good ol' Bernie, bought a CALL from the start and made a nice profit. Further, later in the day, he went into a PUT and made profit again. It wasn't much as the stock was mostly to the up side in the afternoon, but it was still a profit. Bernie, once again - GREAT GOING!!

 Chart Indicator---
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Positive is where we stand on the CI, and that's where we like to see it. It is comfortably above our break-even line at this time, so all we need are some split announcements---but don't forget you can apply the CI to other stocks in your portfolio.

 Stock Split Comments---
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We are starting to wonder if decision makers in the corporate head offices are playing Easter Bunny games with us--hiding the stock splits. Again, tho, we expect to see improvement in numbers coming from split announcements for companies that do well this quarter. We especially like to see a split announcement that comes shortly before earnings are released. It is our opinion that a split wouldn't be announced if the earnings weren't going to be decent.

New RSI System---
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We have progressed in this study, but not far enough to have even a beta test done. We are watching recent splitters to see if the RSI chart can give us some direction. All we can say at this point is that it looks promising. On the other front, we still have not been able to tie in RSI to the Momentum Play, but we will take periodic looks at it, too.

 The Economy & Commentary---
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I have to admit that the reports on the economy and the results of the stock market have me confused--but what is new about that? Realizing that the markets are supposed to look down the road about 6 months might explain it. The Dow was up for 8 straight days and 10 of the last 11 days. That is a pretty strong statement. Nas has been up 9 of the last 11 trading days, also strong. We looked in our Traders Almanac and saw that April has been the Dow's best month since 1950. We are half way thru the month, so we will see how it turns out this year. Economic reports have not been as strong as the market is indicating, but we like to see the up moves, don't we? Gas and food prices have driven up costs beyond what the "experts" expected for the last report. The retailers are cutting back expectations for the next quarter due especially to the gas prices--ala Wal Mart's repeating that it will probably come in at the low end of its forecast. Here in California gas prices hit an average of $3.25/gallon, and that was nearly 26 cents higher than the next most expensive state in the survey. Here's a stat that might be challenged---A survey said that gas would have to reach $6.27 a gallon before people would stop driving to a vacation destination. Another article predicted that $3/gallon prices would result in consumers cutting back on their discretionary spending. Well, I just said that California is already averaging $3.25/gallon, so what has happened here in CA? Friday's Los Angeles Times had a front page story stating that the state's drivers are guzzling less gas in 2007 than the year before. That is with more drivers and more cars. The price of gas, it seems, does make a difference, contrary to what the other "experts" are predicting. That's why we like facts over predictions.

Oh, and here is another little item that confirms what we have mentioned before---this in regards to the government needing "x" amount of money to run the country. There is talk about increasing the gas tax because so many people bought fuel efficient cars that the gas tax is not bringing in enough to sustain the government's expenses. Yep, you can multiply that in one area after another---like water rates, for instance. Drought areas lead to conservation requests on water use. Uh, oh--what does that mean if it happens? Less water used means less income to water agencies---they need "x" amount, so they increase the cost of water--but they never mention that possibility at first. In the beginning they appeal to our sense of doing what is right---conserving. Then the cost factor finally comes out and prices go up. It's all really very simple. It has happened before and it will continue to happen.

Take a look at the oil situation in another light. We are talking about more ethanol, mostly from corn. It is all for the good, weaning us away from importing foreign oil, so we are not dependent on them. Again, cost is not mentioned, just the fact that it is an alternative source of energy. Ethanol gets less mileage and the cost per mile is higher--and corn prices are going sky high because we are combining energy with food.

Here is a stat that surprised me---do you know what year had the most acres in corn production? It was 1944. That really shows that our production per acre has gone up so much that we are just now approaching the surpassing of that record. When dire warnings came out 40 or 50 years ago about food, there was not enough accounting for increased production per acre. We actually went into subsidy programs that are still costing us, when we took land out of production by subsidizing. Our scientists have done a fantastic job in increasing production of food per acre--even tho it costs us quite a bit more than in other areas when including inflation. Grocery stores here in CA are also facing another strike that was so damaging a few short years ago. At that time the stores took the position that they needed labor concessions because the stores needed something to combat Wal Marts increasing take in the food area. Well, the results show that grocers are doing much better than anyone expected and they have not been terribly influenced by Wal Mart, as it turns out. Kroger saw earnings go up 16% in 2006, Safeway posted its biggest numbers since 2001, and Supervalu collected $332 million in profits in the nine months ended Dec. 2, 2006. They are the big 3 in the nation. Have you compared prices lately? I know that the basic, bread, is steadily rising, so that a good loaf costs close to $3 here--emphasis on "good" loaf.

Not to belabor the point, but another area of concern continues to be the housing sector---and now the retailers are saying that those problems are affecting them, too---as we pointed out months ago as an expectation. More and more "experts" are saying that we should probably expect a longer time frame before housing recovers. CA is seeing a 2 sided market at the moment---the San Diego area was the first to see the price increases and is the first to see price declines, it appears. The Los Angeles area is holding on prices, but sales are way down. I want to call the company that furnishes the price information to question the Los Angeles figures--which actually went up in March. Their report said that first time buyers are being priced out of the entry market due to the lack of sub-prime loans. Entry homes are usually the smallest in size, so my question is--What is the median size of the homes sold now, which resulted in a price increase over last year at the same time? The report gives the median cost per square foot, which is good, but it doesn't give the median size of the homes sold. My guess is that the median size is higher because fewer smaller, entry-level homes are being sold. Thus the median selling price would be higher for a larger sized house.

And--not to sound too repetitive--but what are the rumbles from our government about the mortgage market--and which we warned you about a while back? The rumbles are that there is desire for a government bail-out of the people that took these sub-prime mortgages and now can't afford the payment, especially on the adjustable mortgages. Many of these were given without proof of income, remember? We said that we could expect something, just like what happened when the Savings and Loan disaster hit in the 1980's and we had to use taxpayer money to bail out that situation. Here we go again--but it is just in the talking stage at present. If the matter gets worse, you can bet the bail-out calls will get stronger.

We will close by showing the power of Warren Buffett. It was disclosed that he raised his stake in Burlington Northern railroad and bought stock in 2 railroads he didn't mention. After that news came out, Burlington Northern jumped $4.18 a share. Now that's power.

 Today's Thought---
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Business conventions are important because they demonstrate how many people a company can operate without.


Mike

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