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Investing Results...up 25%

Demonstration Results Summary: The practice account is up $187,000, increasing 25%. We made a profit on all 17 stocks. In early March of 2003 there was $754,000 in the website practice account. In mid March we purchased high-quality investment grade common stock. We used the covered call hedge technique two different times. All call contracts expired by late September. The website cash position is now $942,000.

More Useful Information....Our Market Cycle Critique and Review.

Around March 14 we bought investment quality common shares spending $737,000. Our first cut in choosing stocks were the 53 companies that had the higher financial strength ratings from the S & P 100 list. We then picked 17 of the 53 companies. We bought 1600 shares of each company in mid March. By May we had written covered call contracts on half of the shares. In late June we wrote covered call contracts on the remaining half of the shares. In the demonstration all contracts were allowed to expire and we are now in a cash position again. It is possible that the market may have reached its cycle peak in September. We noted this on our website on September 9 with another MWTS and then the 24th with a Sell signal. If this proves to be true, then the following comments and critique would be reasonable for this March/September market cycle.

Early in the Cycle: Normally we would prefer to use our guideline of making two purchases and two sales (or cover call executions) in each market cycle. But, here is how the market cycle actually played out. In mid February there was a potential market low developing. We were watching it closely, but passed on buying because our model indicators were unclear. I remember us calling the February market movement "a head fake." But in reality it was a good buying opportunity for some stocks. We could see this more clearly, in hindsight, as the March low and the cycle was starting. Our model indicators were strong and consistent in March. Therefore, we decided to purchased 100% of our stocks on March 14. Several of our 17 stocks could have been purchased at a better price in February (HD and GE).

Market Cycle Facts in Hindsight: When we began selling (in our case writing the covered call contracts) we started too early. The contracts written in April/May negatively impacted our overall cycle performance. It turns out that our indicator reads on June 16 were more useful. Then in mid September we once again received strong indications to sell, or write covered calls. We would note that the S & P 100 index market cycle low was at 400 in March. In May the index moved to 480. The June 17 high was 513 (by the way you received our email notification that morning). Finally, if the September highs hold as the peak for the total market cycle, then the cycle high will be 523. In hindsight, we should not have used the May sell indicator. June and September's reads would have certainly made us more money. March 2003 Market Cycle Chart

But in Our Opinion: This would have been the better cycle execution. We should have written all our covered call contracts in June. Our reasoning: First, we could have captured major gains in just 3 months, in the 30% range. Secondly, to get those last few S & P points required too much risk exposure. For example; the risk/reward ratio changed on the 17 stocks. Also, we are exposed to a high risk international environment. Moreover, the markets are historically weaker in the late summer and early fall months. Covered call hedges against these risks.

Our Effectiveness Rating was Delightful Again: We made a profit on all 17 stocks. The effectiveness rating is the measurement of our profit win/loss record. All companies moved up nicely through June 17, most were up over 20%. The portfolio reached its peak for the market cycle on June 17, at a 36% portfolio gain.

Our Efficiency Rating was 52%. This efficiency rating measures how we perform against the theoretical possible gain on each stocks within each market cycle. For example in theory, you could have bought 1600 shares of all 17 picks for $700,000 and then sold them at their peak at $1,056,000. In the perfect world of theory, the gain would have been $356,000, achieving an efficiency rating of 100%. Our gain was $187,000, earning a 52% efficiency rating.

Where Do We Focus To Improve Our Results? Getting the most out of each stock cycle, as measured by efficiency, is still our focus. For those who remember, in our Oct/Jan evaluation, our efficiency rating was 38%. Our research from February through September was focused here. Our models were adjusted based on our learning, but it will take several market cycles to prove that we are really better. We know that theory is impossible, so we will try to establish an appropriate "standard of achievement" for efficiency over the next several years.