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Author: Mike Celeste Editor: Tony Ponzo February Circulation: 13836

Stat Sheet Week Ending February 4th 2006

ChangesWeeklyJanuaryYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow-113.0-1.0%+241.0+2.2%+76.0+0.7%
S&P-20.0-1.5%+37.0+3.0%+16.0+1.3%
NAS-41.0-1.8%+101.0+4.6%+58.0+2.6%
Splitmaster Strategies
Basic......................+4.7%+4.7%
Big Dipper......................+10.8%+10.8%
Option Calls......................+74.0%+74.0%
Option Puts......................+81.0%+81.0%

Highlight of this past week
AET CALLS jumped $3.00 and not finished yet, up 46% so far, in 4 days.

In this Issue---Testimonial---
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This is definitely one of those that seems too good to be true--but is--
"R" says it is OK to publish what he did in 2005, investing $5,000 for each play--Obviously he did better than SM, but he used the SM Systems as his basis. What an incredible year he had---and I don't think he is done setting records yet.

Total profit CALLS--2,990.00% PUTS--4,218% Net CALLS $149,500 Net PUTS $210,900.00

Thinkorswim---Auto Trading
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Many of you have been asking if our auto trading program will extend to more than one broker. In fact, some of you have specifically been asking about ThinkorSwim. Well, we are happy to announce that ThinkorSwim is now able to perform auto trading on the SplitMaster strategies. For more information please email us at contact us and ask about ThinkorSwim.

New website benefit---
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We listen. When our readers and team members make suggestions or comments, we do listen. Naturally, we can't do all of them, for sometimes the suggestions are conflicting---but if we can, and we can see benefits for everyone, we try to make changes and additions. We have already made a number of changes to the site in the last month or two, but we are always trying to make it better to understand, view, etc. This week we have added a new feature. This particular one is for team members only, and refers to the email ALERTS that we periodically send out, notifying our members of special points that could affect them. Once you have logged in, you will see at the top that you can edit your member login or email. Right under that line is the addition of "ALERTS ARCHIVE" Now you can go back and check all the alerts that we have sent, in case yours got deleted, etc. Earlier we added an archive for the Newsletters on the Home page, and this is for members and non-members. This has been especially welcome to many, for a variety of reasons. On a minor note, we have changed the appearance of the Pattern Play Past Results. It was reported as being difficult to read and understand and when we went back to look at it, we had to agree. We're still not finished tidying up the appearance of this page, but that will be done this coming week.

SplitMaster Basic System---
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Ah, what a difference a couple of weeks make. Earlier we didn't have many new splitters going on our list, but now we are sure getting what we asked for. We told you that they would be coming in, and here they are. For those of you that like to plan ahead, we see that we have 5 more coming in February--that is, up to this point. Since we are early in the month, we could have more additions, but 5 it is, for now.

Big Dipper System---
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You might be asking how come there aren't any new Big Dippers hitting, what with the major indexes dropping 2 of the last 3 weeks??? We wonder the same thing, especially since we have tightened up (or loosened up, depending on how you look at it) our criteria. We want more plays, but refuse to sacrifice prudence to do it. We have one that is fairly near the BD price, but seems reluctant to drop that little bit further. Maybe this coming week--since we are so close, it might be nice to see it hit and then bounce right back up. That's our goal, anyway.

Options---
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We have 7 option combinations running at present--combo of CALLS and PUTS on the same stocks, that is. So far, on balance, we have 4 of the stock prices up and 3 are down. Can we bring the options in line and have another good month? We remain optimistic.

Testimonial #2---
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Folks, these testimonials come from all over, and from a wide range of investor types--but they all use SplitMaster and have found that they can match or beat what our systems do--We feel it is within everyone's realm of possibility to do it, too. Having faith is a big part of success.--no matter what area of your life that you deal with----Here is our next testimonial---

"This is the start of my third full year with Splitmaster. I analyzed the last 8
quarters of my trading experience and I was profitable for every quarter. I have
just had the most profitable January since I started this program. This record and
these returns are just unbelievable. In my wildest dreams I was hoping to beat the
market. I never dreamed that I could make enough profit to actually get ready to
change careers.

You all have my total respect and gratitude. There is no question that my lifestyle
and my standard of living have improved as a result of using your program. And my
golf handicap continues to go down!! Keep up the great work, I'm looking forward to a fantastic 2006!!
Your eternally grateful friend, "B"

S+P 500 Options---
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We are getting closer to SPX expiration, with a little less than 2 weeks to go. Both of our plays are profitable at this point. We always want to point out that there is margin required to work this play with the brokers, and the requirement varies from broker to broker. On top of that--and this is very important---many trading departments give an incorrect amount of margin that is required for their own company. If you have the margin required and want to be involved in this play (and are approved by the broker), we suggest you ask for the most experienced person in their margin department. Then, ask for the formula they use to set the amount of margin required, and get an example by quoting the current S+P 500 figure, going down about 100 points (As when the SP is 1275 and we ask about writing PUTS on the 1175). This isn't for everyone, but for those that can and want to do it, we continue to point out that this is the one system of SplitMaster's that has never had a losing trade. We attribute that to what we think is very conservative planning.

The Quest---
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I have to admit that my personal investing in this non-system has been a bit lax. Let me explain why. Our workload for each of us at SplitMaster.com has increased because we want to give the best service we can, under the circumstances. Each of us has a job within the organization and each of us is busy. My job is to analyze and keep track of opening positions, CALLs, PUTs, and updating all the pages. At the open, the options get to be tricky. They are usually traded on more than one exchange, plus (and this could be a BIG plus) the brokerage house might match a buy and sell order within house. Bottom line is--the active strategies take priority and when things get very busy as they are now, the quest takes a back seat.

Chart Indicator---
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The Indicator is below the Positive Negative line at present, but needs confirmation, which hasn't happened yet. We have been flirting with positive and negative for a few weeks, and the Chart does seem to show what is happening to the major indexes.

Stock Split Comments---
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The list of stock split announcements keeps increasing--as we expected. We know that a number of you like to know how many are upcoming, so you can try to plan ahead for how much you need to invest in each one. As you know, we keep saying that the system is based on getting some of every play. When the list of splitters grows, you can divide up your investment dollars so that you get fewer shares or options, or you invest fewer dollars into each--or both. Also, we know that most of you can not get into every single system. We introduced different systems so that our team members can pick and choose which one they feel most comfortable with.

For instance, we have also pointed out that our PP System (next one below) has a short historical study base, in that we have only 5 years of history on those stocks.
The Basic System, on the other hand, has 31 years of historical data. Which has more credibility? It's not hard to figure. We know that there are requests for a system that buys PUTS long, too--and we are studying that, but it is on the back-burner at present. We like to think positive--yet recognize that there is opportunity when the markets turn negative--for the market drops a lot faster than it goes up, as the old-timers can testify to. However, we constantly remind ourselves in meetings that we have an excellent winning system--so what's wrong with concentrating more on that? As we expand, we know we draw more diverse investing members and readers, but we have to keep our emphasis on keeping our long-tested systems strong.


Pattern Play System---
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You know that we say that the good luck and bad luck evens out over the course of time, but we have to say that we have been running into some tough luck in this system lately. We have seen stocks advance nicely, and then get hit with downgrades---and downgrades show more negative results than upgrades show positive results. Then we have seen some close out, only to rise rapidly by the end of the day, or the next couple of days. This is where historical studies should be of help, but when we have only 5 years of studies, and using a system that is for certain time periods in each of those years, we don't really have a lot of research to go on. But we are still optimistic about this one, don't get me wrong. Hey, even here at SplitMaster we have a limit on our investment funds, so we're no different, really, than any of you. ANF was particularly galling to me, by the way. The stock was considerably up--and WHAMO--it got downgraded, and there went most of the profits. On Sell Date, which is at the open, we then saw the stock get upgraded. Too late for us. In 3 days the stock jumped 6 points. You can just imagine what that meant to the CALL options--Boo-Hiss !!! News releases talked about the great sales the company has been having--and that went along with the upgrade, (as I say, upgrades by themselves are usually not as strong as downgrades) to result in this great change in price. However, the sales news was just a rehash of what had been known before the downgrade. Having said all that, and doing my crying, I have to be fair and point out that THOR was sold at a 100% profit for the CALLS and shortly after, negative news came out and the stock dropped from the 25 range to 19+, all in one day, and within 2 days after that, it is down to 18.56. We have to be thankful for those, as well as be sad about the other.

International SpliMaster---
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Maybe you weren't aware of how international SplitMaster is. We talk about the US, the economics, etc., and yet we want to tell all of you that we have clients from all around the world---and we would like to hear more from them, even just to get another perspective on what is happening out there--for we are truly in a global economy and what happens in one place affects us all in one way or the other. We are proud to call our international group an integral part of being team members. Please don't hesitate to drop us a line to let us know what is happening in your part of the world.

The Economy---
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So why have we had 2 negative weeks out of the last 3? We are given several reasons, but who knows which is truly valid. All I know is that it appears that the book I talked about last week, "Mass Psychology", given to me by Leece (thanks again, L) is right on the money. Three weeks ago, it was doom and gloom on a real bad Friday when it was reported that there were worries about earnings that had come from a few and early reporting companies. The following week, it was reversed and a reason reported was that earnings had righted themselves and were on the right track. This past week, it was back to negative thinking, and a couple of reasons were given--the fear of inflation causing more interest rate hikes, and the report on jobs. We all knew there has been inflation and interest rates have been climbing, even in the mortgage area. In that area there was wonderment why rates hadn't gone higher earlier. As far as job reports go, there was great news about unemployment dropping--but the emphasis was on how many new jobs were created (fewer than expected) and--productivity had leveled off, while job pay had risen. It was repeated that company coffers had lots of cash, and I wondered if we had turned into a nation of early Ebenezer Scrooge mentality. (Scrooge is one of my heroes, by the way, and most people are shocked, as they remember him miserly and not the way he was so good the latter part of his life). Come on, we are bombarded by the executive pay hikes that have risen out of site, especially when compared to all historical ratios of top pay to bottom pay. Isn't the worker entitled to some share of the profits? Believe me, when I go into a store, for instance, that worker is the company as far as I'm concerned. Even over the phone, all people that talk to me are the company. When they do well at their job, the company benefits. I thought we rewarded people--all people--when they did a good job. It is a well known historical fact (as you can tell, I'm big on historical facts) that employee pay and job expansion is the last part of an economic expansion to kick in. Companies need more workers in good times, but they stretch out the hiring as long as they can. It has to come, tho, if they are to give good products and good service. The company cash is distributed in a wide number of places within the company, and employee pay is one of those places. Let's not deny what is so richly deserved--and let us not seem surprised when it happens, for it has happened time after time after time. And--don't forget--the less people unemployed and the more people are paid in salaries, the more they can spend and keep the economy going. No, this negative reaction is not logical---but the Mass Psychology of the market makers shows that the herd affect is definite alive and well--even if it could well be wrong in the longer run. I learned not to be fooled by this a long time ago--and I paid the price for it, too. How could I believe that one week I should sell everything, buy it all back the next week when thinking reverses, and then sell again the following week? Nope, it is not for me. I will continue to have faith in stock splits because I am firmly convinced over many decades of experience, that stock splits do well because they come from companies that are doing well.

One final note---Jim Cramer, who I admire greatly, and enjoy as entertainment too, because of his enthusiasm, has made a point that strikes deep in my heart. It was reported to me that Jim knocked stock splits as being similar to taking a pencil, breaking it in half, and ending up with 2 pieces of the same pencil, with nothing different. You can believe that I was on the phone to leave a message (you never get to talk to someone, they call you back if interested) that I think he is wrong, for one of the few times in his investment comments, and I would love to challenge his statement or debate the issue. So far, no return call from his people, but let me tell you something---they are going to get more phone calls from me until they at least call back to say he won't take me up on the issue. We feel that we have more historical data analysis on stock splits than anyone else in this area of investing. We have rung this data thru the wringer so many ways our own heads spin dry.

Yes, we do have certain criteria, but it just points up the fact that nothing can be totally generalized--nothing. I say that even tho I generalize a lot myself, but a generality is just that--a generality--not a totality. In case I forget to keep you updated, and you are interested in the follow-up, remind me.

Today's Thought---
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It's true that we don't know what we've got until we lose it, but it's also true that we don't know what we've been missing until it arrives.


Mike

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