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Author: Mike Celeste Editor: Tony Ponzo January Circulation: 13763

Stat Sheet Week Ending January 6th 2006

ChangesWeeklyDecember4th QuarterYear to Date
IndexesPointsPercentPointsPercentPointsPercentPointsPercent
Dow+241.0+2.2%-88.0-0.8%+149.0+1.4%-65.0-0.6%
S&P+37.0+3.0%-1.00.0%+19.0+1.5%+36.0+3.0%
NAS+101.0+4.6%-28.0-1.3%+53.0+2.5%+30.0+1.4%
Splitmaster Strategies
Basic......................+9.5%+22.4%+49.3%
Big Dipper......................0.0%+16.3%+38.6%
Option Calls......................+86.0%+237.0%+467.0%
Option Puts......................+91.0%+250.0%+644.0%
Highlight of this past week
PZZA sees the CALL price jump 288%, from buy date to the high on Friday. The stock is up over 6 points.

In this Issue---2005 Year in Review--
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Take a long look at the stats above, and in fact, you might want to print out this whole newsletter for future reference.---Numbers do tell a story. This is going to be a long newsletter, as there is lots to cover. We hope we don't bore you to death, but we figure that your money is, or should be important to you, and if you take the time to read this, there might be just one point that turns out to be valuable to you--and it is all worth it.

Boy, there was a whole lot of rocking and rolling going on this past year in the stock market, and what kind of results did we see? The Dow actually lost for the year, not much, but still a loss. That was the first yearly loss in the Dow since 2002. The S+P 500 was up a small 3%, while the Nas did even less, gaining a paltry 1.4%. SplitMaster, on the other hand, did pretty doggone good, we think. The Basic was up 49.25%, the Big Dipper gained 38.6%, and the option did the best---again--with the CALLS showing profits of 467% and the PUTS did even better on a percentage basis, gaining a huge 644%. Our numbers are so good, we sometimes hesitate to tell them to people, as the natural and normal reaction we get is, "Sounds too good to be true". However, our team members know otherwise. Integrity is a very large factor in SplitMaster and we show everything we do, win or lose---and we show the plays 2 days in advance, so there is no hindsight stuff that other services work with. A slight word of caution here---We like to think that the word "Greed" is not in our language. Therefore, we don't want everyone to get totally spoiled (just pretty good spoiled) and expect that we will get these results each and every year. The Basic has seen better and it has seen worse years. It took a hammer on our heads to get the options programs working--how could we not have brought them in so much earlier? While we have shown triple digit profits in options for just the 2 years they have been in the program, we feel that data will show that every year of our stock split database would show triple digit gains. The year 2005 completed the 31st straight year that stock splits have shown a profit, and I don't know of a year when we didn't beat the major indexes handily---that's H-A-N-D-I-L-Y. Oh, and let's not forget mutual funds. Yes, there have been funds that beat us over a 1 year period, but we believe that there isn't a fund around that has done it at the level we have for so many straight years. Friends, stock splits do make money. Forget what you hear from the "experts" on TV and in the other media, when they dismiss stock splits as a profitable strategy. I would love to ask them what data they have, because we have the data for anyone to see and we know their comments are not accurate.

If we take a look month-by-month, we get an interesting picture. SM had one losing month during the year--April, with a 2.22% loss--and one other month that was less than 2%; it being August, with a small gain of 0.72%. We always say, we know we will have losers, no one with a large sampling is perfect all the time. Some people have told us we don't show very high results, monthly, in the Basic System. Our response to that is to say that we averaged over 4% per month for the whole 12 months last year. Where else can you get higher results? We'd like to know. Grinding it out, as some people say, can get a person rich, if they stick to it. See our Quest results too, and decide for yourselves. Always refer to the "Rule of 72" where you divided your percent return for the year into the number 72. That tells you how long it takes to double your money. If you make 18% a year, you double every 4 years. Of course, the higher percent you make, the shorter the time to double---again, looking at The Quest, we see that this did certainly happen.

Earlier in the year we mentioned that the 3 best months of the year in the stock market were in this order--November, December and January. SplitMaster had its 2 best months of the year in November and December. January, of course, has yet to prove itself, and we keep in mind that its historical record is the least of the 3 months. It's nice to see history repeat itself---but only when we are talking about positive things.

Later on, working our way down the subject list, we will make further comments about the year 2005.

Testimonial #1 (All unsolicited)---
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We wanted you to read this for a couple of reasons. One--It shows that there really is very little age limitation on what age someone can start with an investing education and actual investing program. Two--It shows what a useful education, applied earnestly, means in the real world application. Three--This person studied with me on a 1-1 basis, and he is still studying. Here is what he has to say---

Start Quote--"Mike,

I started investing using your split system in late April (2005). By the way, without your help I wouldn't have been able to do any of this. I focused mainly in the call options. So my starting investment was $16,800. Well, I ended the year with $38,400. That is a 129% profit on my original investment. It is simply amazing. After taking $14,400 out of my account for my dream car (a Range Rover), I ended the year with an account value $24,000 and a car. The news gets even better. After the first three trading days of the new year, I am up to $35,000 from my original $24,000. That is right, $11,000 in 3 days. A 46% return on my entire account in just 3 days. I thought about throwing in the towel for the year because anybody who can return 46% in a year is doing an incredible job. I've decided that I'm going to stick with it because with your system anything is possible.

To those of you who think that this is too good to be true, try Splitmaster out because it works. I'm being sincere here. Not only do I have a portfolio valued at $35,000 and a car, but I'm also 17 years old. It is that easy. If I, a 17 year old, can return 129% in a year, and 46% in three days, then I'm sure many of you out there can do the same, but with the help of Splitmaster. It is worth it...trust me.

Thanks Mike and everyone at Splitmaster,
JV."....End of Quote

Auto Trading Program--
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There was a very good question that came in this past week from a member of the team, Alan. He asked how it works if we send out an alert to consider closing a position early (usually because of a big gain, like PZZA). The answer is that the team member should contact the auto trading broker and let them know what the member's decision is--sell early or hold. Alan is also bringing up another interesting point. He was planning on selling about 1/2 of his CALL position and holding about 1/2. That's playing both sides of the fence, and it is just another example of how team members can vary their own personal strategy and make them feel comfortable. I think just about every one of the team members varies the SM systems a little bit. Cherry-picking is very tough, but some people seem to have the knack for it---not us. Sometimes I vary from the strategy and I win and sometimes I lose---probably more losses for me than winners. After all, that's what our computer studies are about---coming up with a profitable strategy--and I should stick solely with it, but it is sometimes fun to try to beat the system. Oh by the way, if you are interested in our auto trading program, send us an email.

SplitMaster Basic System---
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We think there is value in looking at numbers, as we have said before. This past year, the Basic System had 104 stock splits that met our criteria. That compares to 57 in 2004. Percentage-wise, that is an increase of 82% in the number of splits. Why could that be, you might ask?? If you have followed us for any length of time, you know that we feel very strongly that stock splits are announced by companies that are doing very well with earnings. Once in a blue moon there is a split announcement, the stock takes a jump, and the company announces a secondary offering, which probably brings the stock down to its original price. To us, that split announcement, without any other positive data, is a ploy to deceive the public. OK, back to the numbers. We feel that 2005 was a good year for companies and earnings. There is a lot of cash in their coffers. Now let's get down to the nitty gritty. Why did the major indexes do so poorly while the stock splitters did so well? We repeat---stock split companies do well. Take a look at the stocks in the Dow, etc. Many of them are old line companies, and if they do 4-6% over the year before, they are satisfied. On the other hand, companies that split are showing earnings growth far greater than that, on the whole. Carrying the thought forward, what is probably the biggest reason the stock price in a company goes up? Of course, because of earnings growth. So, combining earnings growth with stock splitting companies, doesn't it seem logical that those are the companies showing very nice stock price increases? We think so, and we keep saying it, over and over and over, again.

Now, on to the question I posed in the first section. How is 49% better than 61%? I want you to know that the people I teach don't get answers from me, just questions. And here we go with numbers, again. This time I'm going to give the answer---but I know that many of you already know the answer. The Basic System made 49.25% in 2005, but made an even higher number in 2004, coming in at 61.02%. The point to be made is that the 49% was on a much higher investment amount thru the year, because there were 82% more splitters to be invested in. As an example---Let's say that you rolled over an investment amount on those 57 splitters, and it totaled $50,000 for the year 2004. A 61% gain would show a profit of $30,500 net. Hey, that's a very fine return, don't get me wrong. Now, let's turn to what happens in 2005, with 104 splitters and just for simple calculations, there was that 82% increase in the amount invested, or 82% more than $50,000--and that would be a figure of $92,500 (divided by 12, of course, or about $7,700 per month, rolled over each month). By making a lower percentage return of 49%, we see the profits at $45,325. That's about $15,000 more dollars of profit than made at the higher percentage of return (61%). And it also means that an extra $15,000 more than the $30,500 is about an extra 50%---all with a lower percentage of profit. I love numbers. You can play all sorts of games with them.

Testimonial #2---
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Here is another testimonial, this time from one of the team that plays only stocks and not options---well, he did do it that way. He told us he is going to be playing the options, too---but here is what he had to say about playing just the stocks---This was dated in Nov. 2005 and I think he ended even higher at the year's close--something over 60%. Here's his email to us---(And Bernie is famous for varying the system-- successfully.

"I'M CHEATING LIKE CRAZY OUT HERE!! After
today's, trades I'm at 54.9% for the year!!! ....Bernie"

Big Dipper System---
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As the Basic System increased in numbers of plays, so did the Big Dipper. In 2004 there were 19 plays in the Big Dipper, while 2005 saw the numbers rise to 25. The percentage return in 2004 was 17%, and we more than doubled it, coming in at 39% for the year. Thus, we had an increase in the number of BD's and also an increase in the percent of return. That's double the pleasure. This is an excellent system for those team members that don't want to be involved in as many plays as the Basic System. If a person plays both systems, he/she gets a solid return.

The theory of the Big Dipper System can be reviewed now, also. Stock splitters are supposed to make profits. And they do, but that is on a net basis. Some of the splitters go down in price after the buy date, and our studies show that if they go down to a certain point, it is profitable to buy them at that lower price, as the net return for all of that type has been profitable. If you play both the BD and Basic, many times the bounce back will make a profit not only on the Big Dipper, but could well come back and make a profit on the Basic play, too. If it doesn't come back to be a double profit, the profit on the BD helps offset the loss on the Basic. There are many variables for our team members to choose from. What we continue to say is that you don't have to invest in every single system, but whatever system you do pick, our studies are based on seeing profits if each play in that particular strategy is done.

Testimonial #3---
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This one is from a new team member---we like you to hear from all levels of the team; new, longtime, large investors, small investors, young investors and senior type investors. We have them all. OK--here is what Robert has to say-----and PS--we finally got the PP Play page on the website at the end of this week.---

" I am a new subscriber. I can't find any information about Pattern / Probability's
Thanks to you I am up over $ 5,000.00 since I started last month. I don't want to miss anything....Robert"

Options---
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People want action, we give them action, and plenty of it. No, we aren't day traders, but my health is not good enough to stand that stress, and I don't think many people can. Don't get me wrong. I'm pretty healthy, just not healthy enough for that kind of stress. Over the course of 2005 we saw 107 CALL option plays come thru our option system. (Not including the options in the Pattern/Probability System, new around November). There were 109 PUTS, in addition. If you did the CALLS, that averaged out to 9 plays per month. Selling PUTs naked don't cost anything out of pocket (unless they are put to you), as they work on margin requirements. The logic for PUTs is that splits make profits by going up, so PUTS should be going down in value. As it turns out, the PUTs had a higher percentage of profit than the CALLs. Ah, but more was invested in the CALLs, so the dollar profit was higher in the CALLs. And look at those $ figures, by percentage. 467% profits in the CALLs and --WHOA !! - 644% profits in PUTs. Few of our team members work with the PUT side, but we know that will increase as more and more team members get to understand how they work. Because of the margin, some people won't qualify, but certainly more can qualify than are playing them now. See the next Testimonial --that comes from Randy, playing the PUT side.

We get many inquiries from people wanting to know about how much it takes to be able to invest in each CALL option. So, we took a harder look at the figures. If a person bought 2 CALLS for each play in the 107 total for the year, the average cost was about $430 per contract. That means that an investor would need capital of about $7,700 to cover the plays per month. If a person wanted to take a bit more risk, they could buy the higher strike price above the one we list, and get more contracts, or spend less capital. The profit probably wouldn't be as much because of that higher strike price, but it is a possibility.

S+P 500 Options---
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Our record remained intact in this system. We have never had a loss on a play. Granted, there haven't been that many plays, but we feel we are very conservative in our selection for this program. The theory is that we select PUTs to write that are very far away from the current S+P 500 price at the time we write the PUTs. It is another grind-it-out program, with the price on the PUTs we write not being too high, but a profit is a profit. There are currently 2 plays in this system, and both are showing good percent profits.

The Quest---
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Before we get into details on this one---Hurray !!!---We have posted a separate page for The Quest on the website. Go to the Home page and in the left column, you will see the yellow colored link--The Quest--click on it and it will bring you right to the page. Follow us forward to our goal. Last year, 2005, was the first year we listed this. It is definitely not a system, but just an attempt to see if we can put our money where our mouth is and turn $1,000 into $1 million, in 10 years---or less. We don't do all the plays but should have. We did some cherry-picking.

I can tell you this---we saw great results, but they would have been even higher if we had made a play in each pick in the Systems. We are using the options, so we didn't have enough $ capital to get each pick, starting with only $1,000. That's one of the main reasons that we didn't get 1 of each play. We don't complain about anything, tho, when we look at the results of the first year. Our goal, or course, was to double the $1,000 for the first year. We ended up with over $4,000. That is the goal for the end of the 2nd year. If we don't hit a major losing streak, we should easily stay at least at the $4,000 goal level. We won't be satisfied at that, tho, so we are going to give it our best shot.

Chart Indicator---
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Lots of people ask how the CI (Chart Indicator) works with the stock split systems. Well, it doesn't, very much. However, it is a great indicator for the rest of an investor's portfolio. And, it really does affect the splitters, too. If you look at the profits of the splitters during the times that the CI is positive, you will usually see that the splitters' profits are higher, on a percent basis, also. Here are the times of the CI changing during 2005. Look at the times and apply them to our splitters (by month) and also compare the CI to your other stocks outside of SM.


Jan. 5, 2005, went Negative.
Middle May, to Positive
Middle Aug. to Negative
Sept. 7 to Positive
Sept. 20 to Negative
Nov. 2 to Positive
Dec. 29 to Negative
Jan. 4, 2006 to Positive

Stock Split Comments---
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This is sort of a repeat of what we have said earlier. How does the economy affect stock splits? When the economy is rolling along there are more companies making good profits. The more companies that make good profits, the more companies announce stock splits. It's as simple as that. If you don't believe us, you just don't believe us---we can't convince you if you don't check it out with data. Maybe it's too simplified an explanation as to why a certain sector of stocks repeatedly results in higher stock prices (Stock splitters). The close of 2005 marks the 31st straight year of profits for stock splitters. What more can we say? What more does it take? That's what the figures say, and they are backed up with all the historical data. We have convinced many of you, but there are still a lot of investors out there that don't seem to want to believe it. Show me a better system, with the data to back it up, over this long period, and I will personally switch systems. So far, we haven't found anything that is this consistent and this profitable over this amount of time.

Pattern/Probability System---
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Another big "Hurray !!!"---We have made a separate page for this system on the website. Since it involves options, it carries a Level II membership requirement. There is a present and past result page for it. The Past Result page is free to anyone to see. Just click on Past Results, then click on Past Pattern. We have also changed the format and think it is much easier to read. Let us know what you think. Taking a look at the figures for 2005, for the short time the system was in play, we see a 28% profit on the stocks and 204% gains for the CALLs. We do want to point out one very important thing about this new system. Unlike the Basic, which has 31 years of data history, the PP System is based only on a select group of stocks that have shown profits at a particular repeating time of year---for only 4-5 years. This might be a factor in your deciding whether you want to participate in it or not. Take a good look at it. We are giving it a great deal of our attention. Also, we want to point out that there could well be a type of Big Dipper play in this system, whereby more is invested if the stock drops--especially if it drops to a support level. In addition, there is also the possibility of writing PUTs on these stocks, with the same logic as writing PUTs on splitters. Again, the warning, tho---use caution when deciding how you want to play this system.

Testimonial #4---
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Randy has been with us for a long time, and we especially appreciate Randy, because he shares his thoughts with us (and more and more of the team does, too). Here is what Randy reports for some of his latest results in dealing in PUTS---This is short term, too.

"Mike –
Use whatever of this, or none, that you want for the newsletter: Currently in 5 put positions, 4 of which are profitable. I sold $5000.00 of each…here is the current standings:
ABC – Jan 40’s - + $3386 or +68%
PZZA- Feb 60’s - - $1474 or -29%
PSYS – Jan 55’s - +2735 or +55%
SIE – Jan 75’s +1636 or +33%
WFMI – Jan 67.5’s now - +4348 or +87%
Totals - + $10,331 or +214%

Cheers!!
Randy

Credit Spread System---
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I have to admit that this is a tougher system for me to get a grasp on. However---it is still a great system. Tony drives me crazy with this one, as it comes so simple to him. I easily understand the concept, but have a tougher time understanding how there can be a nice credit spread one day and it isn't there the next day. Tony has made a profit on all the credit spreads he has entered, the last I knew, and he has it down pretty much. For myself, I made money on them, too, but feel more comfortable in straight CALLs. See, that comfort zone applies to us, too. You will note that there is a button on the website for the Credit Spread Play, but it is under construction. We will have both the present and past pages up sometime soon. The difficulty is deciding on a format for it--for those that already understand credit spreads, we will continue to tell you which ones Tony comes up with.

Tip of the Week---
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#1. It's that month again--January--and each year we like to tell you about my Dad's old theory about January. He felt you should sell by the 10th day of January, and over the years, I have seen that to be a pretty good decision. This year, 2006, we started out with a huge week and every day has been a very good day for the major indexes. That means they are up 4 straight days. Usually there is a reversal after 3 straight days in any one direction. I would like to see strength continued for just a bit longer, as we have some sells coming up.

#2. This is a repeat of an earlier suggestion from team member, Alan. It's been around a long time, of course, but we thank Alan for bringing it up again--and we have not talked about it. That is, when deciding on a Sell Strategy, some people who want to vary their system from our SM Sell Date could decide to sell part of their stock or options and hold on to some. If you are one of those people that have a natural feel for some of these stocks, it might work out for you.

The Economy---
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The economy continues to show there is strength. Many companies are flush with cash and even tho the Fed has raised rates many times this past year, the most important part of the money supply is how much money is available to borrow----and there is no tightening when it comes to supply. It might cost more, but you can get it. A real negative affect on the markets comes when it costs more, plus it is hard to get. We have some negative figures on the housing and gas markets, but that is fodder for another time. I think I have pushed this about as long as anyone likes. I hope you took a break--that way your eyes won't glaze over--you know what I mean. We'll get into what we and others are looking for in 2006, also at a later time.

Today's Thought---
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Your future is created by what you do today, not tomorrow........Robert Kiyosaki


Mike



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