final issue of airelon's market tactics

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November 8, 2010

Redistribution of Model “Three Sisters” Accounts

This marks the final 'full' issue of “ Airelon's Market Tactics”. After November 9th, 2010, the entire newsletter will be brought to an end. Iwould like to take this opportunity to thank everyone that had a part in thisnewsletter. This project has most definitely made me a better investor, anda better trader.

As I conclude the Model “Three Sister” Accounts that benchmark theresults of this newsletter? I thought it best that I initiate one final 'three-sisters' distribution. Irealize that the newsletter will be brought to an end,and that save myself …. no

one will probably givethese “Model accounts” asecond thought. But in thespirit of “leaving thenewsletter” on a healthynote, I initiate thisredistribution transfer among the 'three sister'accounts to better establishthose accounts for future growth.

Yes, growth that may never be tracked again. But I was taught that if youare running a race, you don't slow down as you approach the finish line.You look beyond the finish line, and you lengthen your stride, and quickenyour pace. You complete the race … completely and totally. I will go beyond simply explaining my thoughts for the next week in the capitalmarkets. I will describe my overall thoughts in the time frame of the nextquarter. Therefore, to adjust to these circumstances, I am obviously settingaside the $20,600 goal before the next redistribution.

Since October 5th, 2010 we have had almost $1,220 in trading profits, in

1

Dan ShyDan Shy

[email protected]@davianletter.com

IINN FFOCUS:OCUS:

Redistribution of ModelRedistribution of Model “Three Sisters” Accounts “Three Sisters” Accounts

Model Portfolio DividendModel Portfolio Dividend Investing Outlook for theInvesting Outlook for the Week of 11-08-2010Week of 11-08-2010

Trading Thoughts for theTrading Thoughts for the Week of 11-08-2010Week of 11-08-2010

Summary of HypotheticalSummary of Hypothetical Model PortfolioModel Portfolio

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November 8, 2010

the newsletter in the model trading account.Therefore, I will take half of that, $610.00 and send itto the Model Dividend Investing account. I will take$305.00 from the trading account and send it towardsthe Model Side-pocket / Slush fund.

Dividend Investing Outlook:

Note: It should be noted, that as I pointed out in the blog entry of October 5th, 20101 , I am bringing “Airelon's Market Tactics” to aclose on November 9th , 2010. As noted on the blog entry of August 10th, 20102 , I am beginning anew with my investing and trading

efforts, as I liquidate my other personal accounts. Therefore, inthe interests of transparency and disclosure, it should be noted

that due to the reasons I have outlined in those two entries, I no

longer hold the dividend bearing stocks that I am discussing in Airelon's Market Tactics Dividend Investing section. I will discussthe management of such a hypothetical portfolio until the close of

this newsletter in November.

Last week, I explained parameters for an index hedgevia the SDS and a three-sisters distribution to coincidewith that hedge. Obviously, with the new

redistribution in the Model Account, and with the S&P500 Index rocketing higher, I would now completelyset aside such a plan.

Let's talk for a moment about the 'big' picture when itcomes to the equities market. Let's look at the big picture while examining not only the positiveinfluences on current stock prices, but also thenegative factors.

Since March of 2009, we have experienced anincredible rally in stocks. I don't try to 'blow smoke' atanyone. I missed some of the lowest prices back inMarch, but finally became publicly bullish on stockssince August of 2009.

The economic picture, slowly … very … very slowly,is improving. As I discussed in my newsletter thatoutlined my thoughts for the year of 2010, there are

1 Exact Link -http://investorandtrader.blogspot.com/2010/10/annoucement-end-of-airelons-market.html

2 Exact Link -http://investorandtrader.blogspot.com/2010/08/surprise-no-one-and-challenge-project.html

serious headwinds to the economy overall; and I believe that those headwinds remain.

As I discussed in the “Week in Review” podcast3, I'mwatching productivity numbers for the economy

overall. I'm waiting to see if we enter a time periodwhere those productivity numbers begin to flat-line.At the present time, productivity is climbing, whichtells me that although the payroll picture seems to beimproving; companies are focusing on increasing productivity of your average employee, rather thansimply hiring more workers. This despite the positive NFP numbers last week.

That is not to say that I am discounting the positive NFP numbers. I try to keep my eyes open to as manyscenarios as possible.

That being said, we could 'leapfrog' productivity,diminishing returns and payrolls. Increasing payrolls( such as last week ), increasing productivity,subsequent decreasing payroll numbers with flat-lining productivity, which would be a positiveinfluence for the next payroll numbers.

Recoveries are a process. They are not a single event.And a recovery out of the single greatest creditrecession since the Great Depression will be noexception to that well known market mantra.

However, in looking at the 'big picture' I alwaysmaintain that any investor and traders primary concern

… is … what? Risk control … right? So it is vital toexamine risks, in addition to positive economic

The single greatest risk that I see to the stock marketoverall … is something I have discussed for sometime. It hasn't gone away, by any stretch of theimagination.

Uncovered Interest Parity.

A true unwind of the Carry trade through uncoveredinterest parity (which I've discussed at my daily blog )is exactly why I have weighted the dividend investing

'sister' account as I have; towards a majority cash position.

There's “free money” out there. There's your technicalanalysis of the situation. The second I believe we are

3 Exact Link -http://investorandtrader.blogspot.com/2010/11/week-in-review-podcast-dog-stick-and.html

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http://investorandtrader.blogspot.com/2010/08/surprise-no-one-and-challenge-project.html









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November 8, 2010

beginning the unwind in uncovered interest parity, Iwill be interested in hedging all long stock positions,and hedging them heavily.

Of course the Federal Reserve is comprised of some

pretty smart people. One of the things that the FederalReserve tries to do, is not dictate market behavior, butthey do try to guide the capital markets and marketsentiment.

It may be, that the Fed will manage to change thefocus of market participants from a 'fearfulcontraction' outlook, towards a expansive GDP productive outlook. Once QE 2.0 begins to shrink from the public consciousness, market guidancetowards expansive GDP production could (note I said,could, not 'will') lead to underlying U.S. Dollar strength; as well as an underlying strength to equities.

To overcome the unwind in the carry trade throughoutright uncovered interest parity will take somedoing. But stranger things have happened in thecapital markets. Regardless, I say all of the proceeding to say this …

If such an eventuality were to occur, my strategy of remaining 'majority cash' would mean that I would probably be severely under invested in equities. I saythat, to reiterate my thesis that you must keep your eyenot only on strategies to mitigate risk, but also the risk that even your risk control strategies present.

I will no doubt continue to keep my eye on all of the'probability clouds' and comment further on them inthe future.

Now, although I may not buy more shares of thefollowing stock for some time, but I did want to giveyou a 'heads up' to something you may see me purchase in the future.

General Mills (GIS): As I will discuss in the tradingsection of this newsletter, nearly all foods in thecommodity markets are undergoing a great deal of futures inflation. Corn is going through the roof.

December Corn – Daily Chart

Wheat futures prices remain at their high plateau.

December Wheat – Daily Chart

Soybean futures prices have gone through the roof.

January Soybeans – Daily Chart

This all has an impact on a company like GeneralMills (GIS) who is in the business of buying suchcommodities to make cereals for public consumption.As I have discussed in the past, to some extent,

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November 8, 2010

General Mills (GIS) can hedge such higher operatingcosts. And over the lifetime of the company … theyhave proven they are very good at doing this.

But in the short term, this has put pressure on General

Mills (GIS) stock price, despite the euphoria we haveseen displayed over Q.E. 2.0 in the rest of the equitiesmarket.

General Mills (GIS) – Daily Chart

Therefore, I will wait for a bit of price congestion, andas I will soon discuss, I will be keeping an eye on thecommodity markets, specifically the grain sector as itrelates to General Mills (GIS). Eventually, we'll belooking at the March rollovers in the grain markets,and I'll be paying attention to fundamental news as to plantings acreages, commercial positioning (CoT Index), and other seasonal factors.

When the time is right, if the conditions are right, andonly after I believe that such commodity futures foodinflation is coming to an end … you may see me buyGeneral Mills (GIS) for my small little ChallengeProject; which is now my main dividend investingvehicle.

I thought I would give you an advance 'heads up' inthis last issue; that my 'eye' is turned in that direction.

Trading Outlook:

Note: By way of reminder, since the Model Portfolio has only$18,417.63 there would only be 'day trades' at this stage of thegame in order to escape the risk of over-leveraged gap opens in thecommodity futures markets. This is an attempt to demonstrate

how account size relates to trading style. As the 'trading sister'would have grown to the $30,000 I would have graduated theaccount into 'swing trading'. In addition, it is understood that Itrade according to the methodology outlined in my YouTubeseries4.

Last week I had no trades at all. I have now liquidatedall of my trading accounts, and therefore … I spentlast week going through the hassle of running all of the errands of picking up a new vehicle for my family.

So as I have liquidated all of my other tradingaccounts, I am now down to the trading account for the Challenge Project, and the Challenge Project

alone. Thus, I cannot in good conscience state that Iwill be trading in any markets, when I most definitelywill not be trading.

I can however, speak to my overall thoughts on thestate of the commodity markets, especially as it relatesto the foods. What I find when I look over thecommodity markets is that I couldn't have found a better time to liquidate my personal accounts, and begin anew with the Challenge Project. Becausemany of these markets are behaving in a manner, suchthat I cannot find a good trade among most of them;and I may not be able to do so for some time.

Sector No. 1

The Grains (Wheat, Corn, Soybeans): As I havealready described in this newsletter, the Grain marketsare undergoing tremendous futures inflation. Corn,Soybeans, Wheat … they are all up.

As I have previously mentioned in my podcasts, priceshave inflated in the grain markets is not due tocurrency inflation, but actual fundamental problemsfacing these crops. With drought in Russia, they have

pulled their portion of Wheat from the world markets.Weather patterns continue to hurt other crops such asSoybeans and Corn.

And I have absolutely zero edge in these sorts of

4 Exact Link -http://www.youtube.com/user/AirelonTrading#g/c/61DCBF4BF4E93A0F

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November 8, 2010

scenarios. I have made public my own tradingmethodology; and anyone can see that it is not built totake advantage of these sorts of situations. Turtlemomentum traders must be having a field day in thegrains right now.

As for myself? I stand aside from the entire sector,and wait for things to calm down. It goes back to anold rule that I try to adhere to: If it's in the news? Idon't want anywhere near it.

So this happenstance coincides well with theliquidation of other personal accounts. I will wait for the grains markets to cool down a bit, beforeattempting to trade them again.

Sector No. 2

The Softs (Sugar, Cocoa, Coffee, Orange Juice):Speaking of 'in the news', the Sugar market has noteven begun to pause in the midst of it's incrediblerally.

March 2011 Sugar – Daily Chart

As with the grains, Sugar is undergoing incredible problems in terms of the actual crop. Brazil's droughthas all but decimated any excess Sugar that Brazilcould float onto the world market.

As with the grains … I have no edge in these sorts of

scenarios, so again, I find a scenario that wellcoincides with the fact that I have liquidated my personal accounts. Because I will simply have to waitfor the Sugar market to 'calm down' as it were.

Cocoa, may have an opportunity for a long trade, perhaps around November 25th, 2010. That is the nextseasonal 'buy point'; although I will not be trading that

market for the aforementioned reasons of accountliquidation.

Coffee is not really a market that I trade this time of year at all. The seasonal signals are too mixed.

I do find Orange Juice to be one of the few marketsthat is behaving in a manner that I find 'tradeable', as itis behaving according to seasonal norms. Usually,around December 5th of each year, we find a goodopportunity to short the OJ market based on suchseasonality. This is not a market for the feint of hearthowever, as it can be a bit 'thin' at times in terms of volume.

Summary of the Hypothetical Model

Portfolio

Note: In the beginning of this hypothetical portfolio, the share purchases of the “Investing Sister” account will be extremely

small. As I explained in the first issue of this newsletter, it is myintent to demonstrate how to grow the size of these positions from

2 shares, to 300 shares that pay dividends using the “three sisters” portfolio management style. I hope to demonstrate with such an extreme disadvantage the power of the principles that I often discuss. It is also understood that readers of this newsletter

have a firm understanding of my 'three sisters' portfoliomanagement system5

We began this newsletter with a Model Portfolio of $15,000.00 in 2009. We have grown that $15,000.00to $27,433.81. Therefore, since inception, we havegrown the Model Portfolio by 82.89%

As follows, is the Model Account as it exists here at

the end of “ Airelon's Market Tactics”

Investing Account Balance: $6,247.63

• Received $610.00 from Trading “Sister” Account

• 5.130799 shares of JNJ (DRIP is on)

2 shares at $60.750.01522 shares at $64.3889620.0235 shares at $64.2553192 shares at $64.941 share at $60.610.046582 @ $58.391653

5 Exact Link -http://investorandtrader.blogspot.com/2010/07/three-sisters.html

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November 8, 2010

0.045497 @ $60.443679

• 7.169285 shares of KO (DRIP is on)2 shares at $56.580.013891 shares @ $59.0310273 more shares at $56.160.040033 shares @ $54.954662

1 share at $53.661 share at $51.250.061832 shares @ $50.1358520.053529 shares @ $58.472977

• 5.08562 Shares of PG (DRIP is on)2 shares at $61.160.014121 shares @ $62.3185332 shares at $62.080.030738 shares @ $62.7883631 share at $61.850.040761 shares @ $59.615809

• 10.10951 Shares of GIS (DRIP is on)2 shares at $70.302 shares at $70.610.013743 shares at $71.311 share at $71.07

Experienced a 2:1 stock split0.082024 shares at $34.258266

• Cash: $4,767.40-$75.00 of this cash I reserve to Dollar Cost Average JNJ further in the future-$75.00 of this cash I reserve to Dollar Cost Average KO in thefuture-$75.00 of this cash I reserve to Dollar Cost Average PG in thefuture-$75.00 of this cash I reserve to Dollar Cost Average GIS-This leaves $3,877.40 available for new purchases

• 76.31 % Cash

• $692.00 available from Side-pocket Fund

I am increasing the amount of cash reserved for dollar cost averaging each position. Again … since thisnewsletter is coming to an end, I'm doing this toillustrate a point.

This account received a distribution from the tradingaccount in the amount of $610.00. But I onlyincreased the amount reserved to dollar cost averageeach dividend bearing stock by $5.00, or $25.00cumulatively.

Thus, the majority of the cash from this distributionwas to increase the background capital for thedividend bearing account; in accordance with the risksthat I discussed earlier in this newsletter.

The following graph displays this account visually …

Hypothetical Investing “Sister” Account Year to Date

Stock / Futures Trading Balance: $18,417.63

• Donated $610.00 to the Model Dividend Investing “Sister” Account

• Donated $305.00 to the Model Side-pocket “Slush” “Sister” Account

• 3% risk tolerance gives us approximately$552.52 for my drawdown tolerance.

• $692.00 available from Side-pocket Fund

Hypothetical Trading “Sister” Account Year to Date

Now as follows is my current money management performance metrics which have not changed fromlast week …

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November 8, 2010

Savings / Side-pocket Balance: $2,768.55 (Earning

0.15 Monthly)

• $692.00 for a Slush fund / Drawdown Kill Switch fund

•$1,384.55 for a Base Savings

• $692.00 for Emergency Savings

Hypothetical Side-pocket “Sister” Account

Year to Date

Once again, I would like to take this opportunity to thank everyone that has in any way been connected with thisnewsletter; and feel free to contact me at any time in the future.

I will conclude as I always conclude my thoughts … stay safe … trade well, and remember that loving other

people doesn't cost a dime. Note: The above statements should not be construed as an investment or trading recommendation. Airelon's Market Tactics is a newsletter that allows subscribers to look 'over my shoulder' as it were, for my own personal specific trading and investing ideas and thoughts for the

next week. But they are only thoughts as of the moment of publication, and are subject to change.. Any trades or investments that I discusswithin this newsletter are simply my own thoughts regarding my own investing and trading outlook. Remember that entering any market is

an individual decision. There is no guarantee that I will enter, or have entered any of the trading or investing ideas that I discuss in this

newsletter; as larger accounts may require a different strategy as the ones presented here. This newsletter simply contains my trading and

investing thoughts for the next week. I, the author do not grant this work for wide distribution beyond any single individual subscriber as this publication is protected by U.S. And International Copyright laws. All rights reserved. No license is granted to the user except for the user's

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Trading PerformanceAirelon's Market Tactics Since Launch

Per Contract Basis (American DecimalNotation)

Total Trades: 94Largest Drawdown: -1.785 % of currenttotal or $345.00 per contract. -2.805 % of total account at the time drawdownoccurred.Maximum Consecutive Losing Trades: 3Average Intra-Trade Drawdown:

0.2588% currently or $50.04 per contractAverage Loss: 0.5875 % currently or $111.55 per contract

Accuracy Rate: 75.53 %Average Reward: 1.035 % currently or $200.17 per contractAverage Risk: Reward Ratio: 1 Risk to1.8 Reward



November 8, 2010

personal use. No part of this publication or its contents may be copied, downloaded, stored in a retrieval system, further transmitted or

otherwise reproduced, stored, disseminated, transferred, or used, in any form or by any means except as permitted under the original subscription agreement or with prior written permission. I personally only enter any market after watching and reading the tape and I trade

using money management principles6 . The losses in trading can be very real, and depending on the investment vehicle and market, canexceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 14 years of experience

in trading and investing in these markets. The Model Portfolio accounts are hypothetical accounts,with all of the inherent problems therein,

which are used within this newsletter in an attempt to track the results of this newsletter, and is run for the education of other traders who should make their own decisions based off their own research, due diligence, and tolerance for risk. Any pictures used within this newsletter are believed to be public domain. Any charts that are displayed using the ThinkorSwim platform, and other pictures were obtained through

Wikipedia's public domain policy.

6 Exact Link - http://www.youtube.com/user/AirelonTrading#grid/user/D41865A5A41F4283

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