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Author: Mike Celeste Editor: Tony Ponzo September Circulation:

Stat Sheet Week Ending September 26th 2009

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-155.0-1.6%+889.0+10.1%
S&P-24.0-2.2%+141.0+15.6%
NAS-42.0-2.0%+514.0+32.6%

Highlight of this past week: The Momentum Strategy has a great week and now sits on over a 390% profit year to date.

In this Issue---
Options---
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Leverage can be a wonderful thing, one with risks, but also one with great reward potential. As an example, we played RIMM options this week and the stock was over 70. The option we picked cost 2.57. The cost of the option was about 1/28 the price of the stock, and we controlled 100 shares for each contract we purchased. There was a 10% profit in the option, and to get a 10% profit in the stock, the stock price would have to go up over 7 points during that one day. The option needed 25.7 cents to make 10% for the day. That means to get that 10% profit with this particular option the stock only had to move $1 as the option had about a 33 Delta. That is leverage. Of course, you can lose 10% on the option, too, but here at SplitMaster.com we have a nice record, as you can see by our stats. If you are interested in day trading, you might want to give us a try--we have a great introductory program--nothing to lose, and possibly much to gain.

Momentum Plays---
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We may be coming out of the summer lull finally as far as the Momentum Strategy is concerned. This week we had 6 plays and all but one were wins. A couple were good size wins too so it looks like we are getting back to our normal pattern with this strategy. And as of the end of Friday, the Momentum strategy is sitting on top of a 390.35% profit for 2009.

Where else can you find that kind of a return with such a conservative strategy? I say conservative because we don't allow losses to get away from us. We have specific stop loss points and while sometimes the stops take us out of a play too soon, by-in- large the stops have done their job and saved us huge losses many times had we not had those stops. Yes, this is not a strategy that makes huge dollars per play but as we have said before, we like to make a lot of base hits (using a baseball analogy). And at the end of each month those base hits add up to home runs. Also, more aggressive members who play a large number of contracts have done very well following this strategy. And we have a number of members who play 50, 75 even 100 contracts per play.

Let's take a look at what that gets those larger contract members. We always show 8 contracts per play. A good dollar profit for a win on one of our plays would be about $300. If that was made on 8 contracts, 50 contracts which is over six times the number of contracts is going to earn a trader $1,800. 100 contracts is going to earn a trader over $3,700. Now, for one trade, that becomes a serious day's pay especially when you add in the fact that most plays usually take less than 30 minutes. True, that means when playing those kind of numbers and a loss occurs, it equals serious dollars too but, if a trader stuck with the stop losses and followed the strategy by making each play, that trader would still be 390% ahead. For this year, following the strategy using 100 contracts on each play would roughly have earned a trader $149,000 so far. Or about $74,500 on 50 contracts. That's a very good year's work!!

Now let me make this completely clear. We are in no way prompting anyone to play more contracts than they can either afford or are comfortable with. We are a conservative and cautious group here at SpltiMaster and rarely go out of our comfort zone. So we always tell our members to stay within their comfort zone. We just wanted to point out that so far, the Momentum Strategy has been a great trading vehicle and for some, it has been a great source of income.

Check it out at Momentum Strategy. Also, check out the Past Results

Indicators---
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We have had an interesting month in the Indicator plays. There have been 7 official plays this month, winning 5 and losing 2. For the year we are going at an 80% win rate, winning 48 out of 60 plays. The interesting part is that the markets are so far out of the norm that we have had to cancel potential plays over and above those 7. By doing that we have avoided some losses, and thus we believe that being cautious in this market run up from the bottom has proven beneficial to our members. check out The Indicators

Feedback---
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Once again we are getting feedback that some of our members are doing better than we are. Do we care? You bet we care. We are thrilled that members have confidence in our teachings--and--have made good profits while we remained a bit more cautious. Keep up the good work, team.

The Economy, The Markets & Commentary---
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We have all heard that old saying "If you can't beat them, join them." That applies to investing in the stock market, too. Maybe we should start taking a look at some stocks that are considered boring at times. There are a couple of areas--finance and energy. The government is loaning out money to financial institutions and charging them around 1% interest. Are those companies using it to make loans? Not enough, it appears, as the news stated this week that commercial and that type of loan were down compared to last year at this time. Why should they make these loans, when they can buy US Treasury bills that pay 3.5%. Yep, it costs them 1% and they return 3.5% from the same institution that lends it to them at 1%. We all could run a financial business and make great profits--no risk, either. Someday that money will have to be paid back, but that is down the road. For now, the stocks in those finance areas have shown tremendous increases in price---no surprise. The surprise is that many haven't joined in.

T. Boone Pickens hasn't thought these areas are boring and he has done pretty well for himself---if considering that making yourself a billionaire is doing pretty well. We wrote some time ago that he was buying up water companies. It was a joke to again read a written "expert" statement that water rates have been cheap and cheap rates are about to end. Our water rates have been going up consistently and the public company that supplies our water has done very well, as has its stock. Cheap has long gone out of our vocabulary when discussing water rates. We, in California, are again in a rationing period because of false statements that we are in a severe drought (simply not true when you listen to the people on the scene up in the mountains where the snowpack is). What that also means is that when you use less water the company raises the rates to cover their costs plus allowed profit. T. Boone is also very big in natural gas, as we can see by his TV commercials. We have over a hundred years of natural gas, right here in the US, but we are spending billions on alternate green fuels instead. These are facts that show how political activity affects the stock market. Subsidies to companies in the green areas have allowed the stock prices of those companies to rise. We miss out if we aren't in on them, and that would at least help us when we are charged more for that type of energy. We could be using natural gas for almost all of our vehicles, but we decide to subsidize ethanol, made from corn, which drives up the price of corn, which raises the consumer cost, and since we are the consumers, we pay the price. If we have stock in these companies, at least we can get something for our money. It seems T. Boone is on the right path to making some more billions.

Staying with water, we just had a report that a Southern California water agency is going to auction off a huge supply of water. The current rates are about $200+ range, per acre foot. It is estimated that this auction will raise the cost to $800-1,000 per acre foot. This is an unprecedented method of handling water in California. Two years ago, in Arizona, a small block of water was sold for about $67 million. The buyer was a New York investment firm that is now marketing the water to developers, who will need the supplies to get approval for any new residential projects in the area. The approval, of course, comes from a government agency. Let's say the builder is a public company and that the investment firm is most likely a public company. Those almost guaranteed profits could well drive up the price of the stock---and we should be trying to get in on it, since we have to pay for the higher water, and we can't beat them, so we try to join them.

Going along the energy trail, let us again show how politics is affecting investing. This month it was reported that the Los Angeles Dept. of Water and Power wanted to buy a 68,000 acre ranch for a wind farm. The geography was good for a project there. Instead, a friend of Mayor Villaraigosa rushed in and bought it out from under the DWP. The mayor has pledged that he is going to make LA "the greenest big city in America." OK, the friend's group buys the ranch for $48 million. Before that transaction was completed, a portion of the ranch, less than 1/2, was sold to a city that is a neighbor of LA, the city of Vernon. The price of that was $42 million. Now, the city of LA is trying to buy out Vernon. No doubt there would be a substantial profit to the city of Vernon. In turn, the increased price will give a tremendous added value to the portion of the ranch left, over 1/2 of the original, to the friends of the mayor. Can you see the possibility that the DWP, or another government agency, will buy the remaining portion. Hey, that's how you make millions--and fast. If there is stock in that deal, get it.

Here in California, we are paying 57 cents a gallon of gas more than the national average. They, those "experts" again, say that it is because we have a different formula to make our gas, which costs more. How come it was far, far less of a difference in normal times.? How come NY State has about the same formula now, and their gas costs over 50 cents a gallon less than ours? So, what do we do--maybe we invest in those companies that are making obscene profits off us, the consumer.

This also baffles me. Not long ago, the rise in oil prices meant that the stock market went down. Oil affects almost all of our economy, and the huge raise in the cost of oil meant that companies had to pay way more to get their product out. However, these days, the stock market goes up with the rise in oil prices. The reason "they" give is that the US dollar plays an important part, since oil prices are based on US dollars. What a bunch of baloney. Airlines are again considering fuel surcharges, to go along with the many, many fees that have been added on to an airline ticket. It was mentioned on Friday that the airlines are taking in BILLIONS MORE in these fees that are added on and weren't even in existence just a short time ago. Thus, 5 airline stocks were upgraded to buys on their stocks.

One last story on this topic. New York State Electric and Gas, which supplies a good part of NY State in electricity and natural gas has applied for a rate increase in each energy. The raise for the electric portion is 18.6% and 17.4% for gas. And the "experts", both public and private keep telling us that there is no inflation. (My blood pressure probably went up 20 points just now). Yes, find the companies in this boring area, and if you can't beat them, consider joining them by investing in their stock. The government allows this, we are permitted to do it, strange as it might seem.

Stay tuned.......

Today's Thought---
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Why does a slight tax increase cost you $200.00
and a substantial tax cut saves you $30.00?

Mike

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