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Author: Mike Celeste Editor: Tony Ponzo February Circulation: 6820

Stat Sheet Week Ending February 23rd 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+33.0+0.3%-884.0-6.7%
S&P+3.0+0.2%-115.0-7.8%
NAS-19.0-0.8%-349.0-13.2%

Highlight of the Week - FWLT in the Big Dipper: After being way down for a couple of weeks, it has come roaring back. If its up trend continues this week, it will finally turn into a nice win.

In this Issue---
SplitMaster Basic System---
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With market conditions being what they have been, the Basic System is doing pretty well. That is, outside of CMI, which we are holding, as it is a good stock, and we feel good stocks are going to come back. The others are showing a net profit.

 Big Dipper System---
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We have 1 Big Dipper currently on the list, FWLT. It is another stock that took a beating, but we had faith in the stock and it has come a long way back and got within cents of break-even--a major consideration considering where it was not too long ago. We probably need to take a closer look at this system, and try to coax a few more plays into being. While we don't have some splitters on the BD potential list, we are watching them, and see that they have not dropped to levels that are considered buys. If they do get near some buy levels, we will be sure to show them on the list. An interesting note---While the Basic is not running away with high profits, the Dipper is not showing stocks approaching buy levels---a pretty stable group, it seems. Even CMI, which is below our Basic buy price, has been a profitable Dipper play, having closed out quite a while ago.

Options---
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Writing PUTS continues to be a good play in the option field. We closed out our call on PCU, a previous splitter, and rewrote the March 110's for 5.10, when the stock was 102.90, just this past Tues. The stock has run up to over 115 since and is near it presently. We are in it at 100 and have written puts and calls on the stock, so far always at a nice gain. At 115, the stock is returning a 15 point gain at this level. Not bad for such a short time. DRYS was also a good put and call write profit maker--but--it got away from us and in 5 days it ran from 64+ to 90 and we were called out. We were looking to write more puts on it, but the stock has remained very strong and didn't drop during the losing market days, but went up--not as high as 90, but still above our comfort level for writing the put. (We should have when the stock was at 80, but we missed it--can't get them all at the right time.) We mention these, among other opportunities, as written puts and calls can bring in some very nice income, if they are written at attractive strike prices. This method for returns on investments is made possible by the high time values being placed on options, due to the increased volatility in stocks at present levels. We try to take advantage of what is given us--when low time values, we purchase more options instead of writing calls--but writing puts is always considered, if the timing and strike prices seem right.

 Momentum Plays---
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This week looked a lot better. Momentum Past Plays We are still not getting as many plays as we would like as the options are still very tight on the SPX but we did manage four trades with three winners and one loss of only .10. So all in all, it was a good week. We had three earnings plays and one SPX play. Because things are so volatile and the SPX options are so tight lately, we are playing with a smaller number of contracts as we have pointed out a number of times in the nightly recap. If this coming week continues to be good, we'll most likely increase the number of contracts back to our usual amount. We'll keep the members posted on that.

The test we conducted on the more expensive SPX options did not produce any easier trading in the way of getting in and out quickly. So we went back to the strikes we normally play and took a little more aggressive move getting in. But we find that it still takes quite a move in the S&P to reach our target out prices so for now, we are lowering our targets to secure a quick profit. This coming week on the SPX options, we will go for the smaller profit and try to get into more plays. Of course,once in an SPX option, if we immediately see the S&P moving strongly in our direction we will go for a bigger profit. Hopefully the volatility in the market will come down somewhat and loosen up those options and give us more predictable ranges. But, this may not happen for awhile so in the meantime, we have to work hard and maneuver the best we can.

And speaking of maneuvering around the play, the one thing we want to work on, is cutting a play when it goes against us and before it gets away in the wrong direction. We have to not be afraid to use the "Cancel" button when placing orders or sell fast if we see a play start to fade. So members, be ready for fast changes when times call for it. This change can also be used to increase a price too. For example, if we are in a play and we put a .30 profit sell price, and we see the market going in our direction strongly, if we have the time we will try to increase our price to make more profit. On an SPX play, this is very possible to do when the time is right. However, this is a harder thing to do on earnings plays as the bid/ask ranges are usually much thinner.

Let's see how things turn out this coming week!

Feedback---
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Awhile back, we reported that our good team member, Fidel, had made great profits in the housing sector. He also commented on the possibility of auto loans showing an increase in the default rate. Well, this past week, we saw an article that reported a huge increase in the auto loan default rate. Good work, Fidel--keep those comments coming.

 The Economy, The Markets & Commentary---
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Mostly commentary this week---
CNBC continues to entertain me, as well as provide some basic facts. The entertaining part comes in the "expert analysts" that they have on. In particular, Larry Kudlow, the eternal optimist was on saying that reports he sees shows that there is not going to be a recession--in fact, we are not even close to a recession as he cites charts to back up his position. I don't know what world he lives in, but everything around me and my economic influences are showing danger signs. We shop at Sam's Club quite a bit because they have pretty low prices when matched against regular stores--not including the sale prices that regular stores have. Anyway, we were out of town for a few days and when returning to gas up here, we saw the gas price increase of 20 cents/gallon from our prior fill. Bread went from $3.58 for 2 loaves to $4.08, an increase of 14%. White albacore tuna increased 25% over its previous price. Then we stopped in our local Red Robin for a bite and saw new menus--and you know what that means. Yep, higher prices. Our 2 granddaughters work there and they told us that they were told that Red Robin sales have been lower than last year, so the company increased prices. My own personal feeling is that this may work for the short term, with increased prices making up for lower sales, but in the longer run, sales could well drop as consumers decided they don't want $9 burgers, etc.

We also saw some big names in bankruptcy filings, led by Sharper Image. Layoffs at Starbucks due to lower sales is just one report in this area--a number of other leading companies doing the same. We don't see the same things that Larry and his friends do--but that makes for the markets---a difference of opinion.

Economics and stock splits---We have continued to say that companies that are doing well are the ones that split their stocks, and companies that are doing well usually show increased stock prices. Therefore, stock splits show gains as they come from good companies. We also say that if one sector is doing poorly, another sector benefits. This past week we saw a great example of this. A new split announcement came from RBA. The company announced record results. OK--company is doing well, stock split announced, stock price near 52 week high. And what business are they in? They are an auction company. What is the booming area of their business? Real estate. What sector is in the dumps? Real estate. That's bad for builders, etc. That's very good for auction companies. Case made, we think. There are many more, too, so we feel that there will always be opportunities as stock investors.

WOW !!! Wasn't that some last 1/2 hour of trading on Friday? Over a 200 point Dow move in the last 1/2 hour. Apparently it was due to a report that Ambac might be getting some aid in the mortgage insurance business---might be, that is. We'll see how that comes out next week.

A fairness question coming up. Subject--sales tax on private planes and yachts. A number of states, including California (led by the Republicans vote) allow no sales tax to be paid if the item is kept out of the state for "x" days or more per year. It is around 20 days, it seems. The rationale for California was that if sales tax were added on, jobs would be lost for the builders of these. Gee, could we also assume that if we kept our purchased car out of state for "x" days (like when on vacation, business trips, etc.) we would be saving lots of jobs for builders of cars? Well, some states, like Maine, are on the receiving end of the parking of these vehicles--where they are parked for the 20 days or so.

They seemed to say, "Hmmmm, there is no sales tax being paid in the home state, and the items are in our state." So, they decided to assess a sales tax if there was no sales tax paid in the home state. The owners screamed that it wasn't fair---neglecting to point out that they didn't pay any sales tax at all--there was no double sales tax. So, I ask our readers--Is it fair?

And--I have 2 questions about the presidential campaign, that continues to be exciting. The first question involves job duties. All 3 leading candidates are US Senators. They were elected to do a senate job. This presidential campaign has been going on for a long period of time and I get exhausted just reading about their schedule for each day. Question--How can they do their senate job if they are spending all their time running for another office?

My other question is this---All three have platforms that will solve all our problems--jobs, education, health, immigration, security, and so on. They are already Senators---why haven't they solved all our problems thru their Senate powers? All they have to do is convince the relatively few Congressional members that they have the answers. Does this mean that Congress has no authority or no power, relatively speaking? Just wondering-----

 Today's Thought---
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Never spend your money before you have it............Thomas Jefferson



Mike

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