Round Rock

Wealthbuilders
August 05, 2010

AGENDA
1. Introduction
2. Review from previous months themes
3. The Ostrich Investor
4. Bull/Bear Tug-O-War
5. Cloudbanks – A Technical Pattern
6. Market Scans with Stockcharts.com
7. John Murphy and Monty Guild
8. Energy Update with David Hill
9. Central Texas Real Estate Trends
10. Gold Sector Update
11. Wisdom of the Crowds Stock Picks
12. Questions and Answers
 WHY ARE YOU OFFERING THIS
INFORMATION FOR NO CHARGE?

What are you doing

with your dash?
“Occupy yourselves with that which profiteth yourself and others.”
Baha‟i Writings

“…guide me in my doings in that which benefits me for the Glory of

Thy Cause and loftiness of the state of Thy servants.”
Baha‟i Prayer

“Well done, good and faithful servant; you were faithful over a little, I
will set you over much, enter into the joy of your master.”
Holy Bible, Matthew 25:21

“For whoever has, to him more will be given, and he will have
abundance; but whoever does not have, even what he has will be taken
away from him.” Holy Bible, Matthew 13:11

“The essence of spiritual wealth is a love of God and the desire to serve humanity. The essence of material
wealth is the capacity to be of service. Material wealth, (the capacity to serve) combined with spiritual wealth
(the desire to serve), is a divine blessing and a means for the advancement of mankind. It is light upon light.”
Baha‟i Writings
 A New Name
Founded in the mid-nineteenth century, the Bahá‟í Faith
has spread to some 236 nations and territories and is now
accepted by more than five million people. The word
Some principles "Bahá‟í" means “follower of Bahá‟u‟lláh.” Bahá‟u‟lláh, the
of the Bahá'í Faith Founder of the Bahá‟í Faith, is the Messenger of God for
• Oneness of humanity this day. His name in Arabic means “The Glory of God.”
• Oneness of religion
• Religion must be the
cause of unity
His followers believe that, just as children progress
• Religion must be harmonious through grade levels at school with different
• with science and reason teachers, so does mankind progress through
• Independent investigation
of truth
the ages under the tutelage of the
• Equality between men and different manifestations of God.
women
• The abolition of all forms
of prejudice The sun shines equally
• Universal peace
• Universal education
upon all, regardless of
• A universal auxiliary race, creed, religion,
language sex, or social status.
• Spiritual solutions for
economic problems
• An international tribunal
 Tuesday October 2, 12:33 pm ET
By Jean Chatzky, Money Magazine editor at large

Getting Rich Is Contagious -- So Catch the Bug

You pick up the habits for growing wealth -- or frittering it away -- of your friends and family. Find out how
to make this rich-network effect work for you.

"Social networks determine social norms and social behavior," she says. "What's acceptable, what's not
acceptable. I expect we'll see a lot of parallels in other fields."

Money among them. Academics and other researchers who have dipped a toe into the networking pool are finding
that if you're surrounded by people who save and invest, you're likely to do the same. And if your pals spend like
crazy, well, you're in trouble.

"The people around you affect how you approach education, family, consumption, when you get married and
where you go to school. Those things affect wealth," she theorizes.

So how do you make the network effect work for you? Statistics show that you will rise to
the level of, but not higher than, your
Hang with the smart kids 5 closest friends or family members.

Pamela York Klainer, a senior adviser and wealth manager at Forte Capital in Rochester, N.Y., works with people
who have a variety of money problems. Some have money but aren't comfortable handling it. Others burn through
too much too quickly.

Before "social networking" became a buzz phrase, she told her clients to "find people who have the money
behaviors you want to learn and start hanging out with them." She suggests, for example, joining an investment
club.
 Become Your Own Portfolio Manager
•By Ron Delegge
Wednesday November 25, 2009
SAN DIEGO (ETFguide.com) - Everyday more and more people are making a choice they never thought they would make: To
become the manager of their own investments.
Among the top reasons for self-directing one's investments are greater control and flexibility. But there's one other very good reason
for becoming your own portfolio manager: The potential for better performance.
Many academic studies show that during both good and bad times the vast majority of Wall Street's portfolio managers consistently
underperform versus corresponding benchmark indexes. However, making the decision to supervise your own investments won't
necessarily guarantee better results. To avoid the same type of market underperformance that characterizes most of Wall Street,
you'll need to build your investments on the right foundation.

Constructing Your Portfolio

How can you build a rock solid investment portfolio that matches your risk tolerance and unique financial goals?
First, you must begin with an unobstructed view of the entire asset class universe. This is where you begin. No discussion of
securities or investments should happen until you first determine which asset classes you want exposure to and what precise
percentage amounts they should be.
The key asset classes include stocks, bonds, commodities, real estate, collectibles and cash. Within each one of these areas
there are sub-divisions too. For example, within stocks there's foreign equities and U.S. equities.

Select the Appropriate Vehicles

To get accurate exposure to each of the important asset classes you'll need to select investments that best represent each of these
respective areas.

The Periodic Tune-up

Once you've chosen your asset allocation mix and which specific index funds or ETFs you'll use, the next part of your job as portfolio
manager involves the maintenance of your investments. Be sure to avoid the two extremes of rebalancing.
• The first extreme is a negligent approach, where a rebalancing policy is either lacking or nonexistent.
• The second extreme is hyperactive rebalancing, which often adds unwanted trading costs and tax liabilities.

Conclusion
Managing your own money is an important responsibility that requires financial maturity and education. I suggest reading books
by individuals that know about the truth of successful investing. Also, becoming your own portfolio manager, if done right, should
not become a daily chore that requires you to be in front of a computer 24/7. Once your portfolio's allocation has been determined
(with your risk tolerance and goals in mind), stick with it and periodically tweak it. Much like a growing a garden, you'll need
patience and discipline. Trust me, pulling up the plants every single day to check the roots won't do you much good!
WHAT DO YOU SEE WHEN YOU LOOK N THE MIRROR?

I have not failed

700 times.
I have not failed
once.
I have succeeded
in proving that
those 700 ways
will not work.
When I have
eliminated the
ways that will not
work, I will find
the way that will
work...
Thomas Edison
 Round Rock
Wealthbuilders Investing with Confidence

Disclaimer
The investment opinions expressed on the following slides
are personal opinions developed through personal research
and experience, are for educational purposes only, and in no
way represent opinions or suggestions on how to manage
your own investments. Moderator and presenters are in
many cases NOT investment professionals, and have NOT
passed applicable exams or otherwise credentialized
themselves as advisors. Remember that you can lose money
on your investments and nothing presented or discussed in
the meetings should be taken as a recommendation to buy or
sell a particular security or investment.

02 Sept 2010
D. Caldwell
"Money is always there, but the pockets change." -Gertrude Stein
 Know Thy Enemy (the Fed is NOT a US Government Department)

“…the Fed's job is to protect the banking system.

A lot of people say they are there to protect the economy, they are there to protect
the consumer, the average American.
No, that's not it.
The Fed‟s job is to protect the
banking system so that when you
have banks or financial institutions
in distress such as we have today,
the Fed is going to do whatever it
takes to reflate the asset prices.”
Jim Pulpava, Financialsense.com, Sept. 22, 2007

"The money power preys on the nation in times of peace, and

conspires against it in times of adversity. It is more despotic
than monarchy, more insolent than autocracy, more selfish
than bureaucracy. It denounces, as public enemies, all who
question its methods or throw light upon its crimes."
- –Abraham Lincoln
 The Bernanke Doctrine refers to measures that the Federal Reserve
can use in conducting monetary policy to combat deflation. In 2002,
when the word "deflation" began appearing in the business news,
Bernanke gave a speech about deflation entitled
"Deflation: Making Sure "It" Doesn't Happen Here”

Bernanke Doctrine
The seven steps that the Federal Reserve needs to take (to combat deflation) are:
1) Increase the money supply (M1 and M2).
"The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost."
"Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."
2) Ensure liquidity makes its way into the financial system through a variety of measures.
"The U.S. government is not going to print money and distribute it willy-nilly ..."although there are policies that approximate this behaviour."
3) Lower interest rates - all the way down to 0 per cent.
Bernanke observed that people have traditionally thought that, when the funds rate hits zero, the Federal Reserve will have run out of
ammunition. However, by imposing yields paid by long-term Treasury Bonds, "a central bank should always be able to generate inflation,
even when the short-term nominal interest rate is zero ...[this] more direct method, which I personally prefer, would be for the Fed to
announce ceilings for yields on all longer-maturity Treasury debt."
He noted that Fed had successfully engaged in "bond-price pegging" following the Second World War.
4) Control the yield on corporate bonds and other privately issued securities.
Although the Federal Reserve can't legally buy these securities (thereby determining the yields); it can, however, simulate the necessary
authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral. (Carry trade)
5) Depreciate the U.S. dollar. Referring to U.S Monetary Policy in the 1930's under Franklin Roosevelt, he states that:
"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."
6) Execute a de facto depreciation by buying foreign currencies on a massive scale. (Think recent Euro/Dollar swap support)
"The Fed has the authority to buy foreign government debt ... [t]his class of assets offers huge scope for Fed operations because the quantity
of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."
7) Buy industries throughout the U.S. economy with "newly created money" (i.e. 2208 Bank Bailout)
In essence, the Federal Reserve acquires equity stakes in banks and financial institutions. In this "private-asset option," the Treasury could
issue trillions in debt and the Fed would acquire it - still using newly created money.
 STAGFLATION

Election Years
 If you were in a Bear Market ETF in 2008
you probably doubled your money.

Today there are

more investment
tools available to
the individual
investor than at
Hidden Credit Risks of ETFs
any other time in
history. Many ETF‟s use swaps and these derivatives open those ETFs to
counterparty risk, the risk that the institution on the other side of
their trade will default, which could leave a fund with no return on its
assets or even a loss. The ETFs vulnerable to counterparty risk fall
into two major categories: leveraged funds and commodities funds.
(The Bear Market)… ETFs cannot invest directly in a basket of
equities twice the size of their index or short-sell their entire portfolio
due to restrictions on the investments allowed in a U.S. mutual fund
structure, so they instead use swap derivatives to capture the
desired daily leveraged returns.
if a major counterparty defaults…the investment bank may not have
ETF‟s that are enough capital to make the other parties whole and may be forced
short the market into default.
via different
sectors or
indexes are a
great option to
sitting on the
sidelines in cash. Stick with
what‟s normal
and avoid
exotics.
 1. Home prices peak as speculation in R/E tops out.
Jan. „06 2. Housing construction stalls, home builder stocks drop.
3. Undocumented temps laid off first, government data still positive.
4. Mortgage lending impacts/layoffs; ARMS start resetting; foreclosures rise.
Jan. 2007 5. R/E home prices fall, inventory builds and bank raise reserves to compensate.

Jun. 2007 6. Credit tightens and financial paper assets fall as liquidity in the system contracts.
Jun. 2008 7. Tight credit impacts small businesses and consumers putting more loans at risk; more layoffs
8. Consumer‟s tapped out; consumer discretionary spending impacts; sector BK‟s and layoffs.
Jan. 2009
9. Business spending contracts
10. Commercial R/E vacancy rates rise; increase in commercial loan defaults
11. More layoffs, more home foreclosures, more bank failures; credit tightens even further.
12. Income, property and sales tax revenues decline; local government layoffs
13. Muni-bond defaults
14. More layoffs, foreclosures, business closings, contracting businesses & govt.

RECESSION SEVERE RESSION DEPRESSION

Until bank writedowns bottom and their reserve requirements stabilize and banks
have excess money available for lending to small businesses, for home purchases,
and for business expansion things will get worse before they get better.

Dan‟s Opinion: Fed must continue to pump liquidity into the system
to prevent a wholesale meltdown. This = inflation, but will reach a
point where the selling price of real estate is well below cost to
build, effectively putting a floor under the value of asset backed
paper, and the need for banks to raise reserves.
 End of Review

Please Hold All Questions

To the End of the Presentation
WINDOW DRESSING
The deceptive practice of some mutual funds, in which recently weak
stocks are sold and recently strong stocks are bought just before the fund's
holdings are made public, (end of Quarter) in order to give the appearance
that they've been holding good stocks all along.
Thursday, September 30th, 2010
 Why investors are leaving the market
When higher oil prices spark a rally in every sector except
oil stocks, the market is broken. It's no wonder investors
are going elsewhere.
Posted by Jim Cramer on Thursday, August 26, 2010

Technology makes a run off of oil's rally but not the oil stocks. Health care
rallies on oil but not oil stocks. Retail rallies on oil. But not the oil stocks.
Food stocks leap on a turn in oil. But not the oil stocks. That's how things
played out all Wednesday afternoon. Will it play out that way today?
Excuse me for sounding like Dr. Seuss, but what a joke this market has
become. Food and retail, both incredibly sensitive to rising oil prices, rally
on oil getting better because oil's upturn is a sign that the consumer is
feeling better? What hogwash. Rising oil prices hurt the food companies
because it is their biggest expense, more than the food commodities they
package.
Retail? Rising oil prices are demonstrably bad for them. Tech? There is no
correlation in real life whatsoever. However, we are not in real life. We are
in some sort of bizarre world where the only correlations we can find are the
wrong ones.
Again and again I come back to a market that's broken, just a huge
commodity asset class that is careening out of control on a daily basis, with
the only true north compass being companies that rally because they pay a
good dividend.
It is true that you don't have to love the market to make money on it.
Nevertheless, there is a tolerance level that is totally unnerving, and we
reached that a long time ago. So what happens? People leave. They go

The Ostrich Investor elsewhere.

The last creators of the exchange-traded funds that are driving this
nonsense win, though. If I had it to do over again, I guess I would just start
a lot of ETFs to take advantage of the brainwashing about how that's the
way to make money. Why not? For them, the chaos is becoming.
And people wonder why investors are leaving this market. To me it is a
wonder that anyone stays.
 Key Investor Survey Reaches
Extreme Levels
BY ROB HANNA | AUGUST 30, 2010

One indicator I thought it was worth taking a closer look at this weekend was the AAII Investor Sentiment survey. In general the survey is
viewed by technicians as a contrary indicator when it reaches extremes.
This past week the number of bears rose to 49.5% and the bulls dropped to 20.7% so it is now at fairly extreme levels. The last time the Bull-Bear
Spread was this low was in early July as the July rally was just beginning. Prior to that is was the first week of November of '09 just as that rally
was kicking off, and the time before that was early March of '09 just before that rally began.

Buy Stocks "In the Face of Fear" BY DAVID GRANDEY | AUGUST 31, 2010

1040 going once, 1040 going twice, SOLD at 1040. The market has now defended the 1040 level twice and in both instances we've bounced off
of it. If you were watching the indexes this morning at the 1040 level you'll have seen before we pulled away from it to the upside, the leaders
(AAPL, BIDU, NFLX) all took off before the index did. It showed you that the market always moves with the leaders first.
Believe it or not, this is the secret to successful
investing - to keep your most important asset in
the game, that being YOUR STATE OF MIND.
We'll continue to drill this in your head so that it
becomes second nature to you. Consider yourself
warned. The funny thing about all this is that none
of it has to do with stocks or indexes or chart
patterns, its that of managing your emotional state
of being. They say YOUR perception creates your
reality and to a big degree that is true. But Ahhh
when looking at the market through the reality of
what is vs. what we want to see? That is the
secret - The standpoint of the un-opinionated
observer. It's a mindset you really want to
cultivate.
So far, every other day, the S&P 500 has tested
the key 1,040 level exactly, and each time -
including this morning - buyers have rushed in to
support the market, causing a sudden up-burst in
price immediately following the test.
 What stocks are Buffett, Soros & Druckenmiller buying?
August 19, 2010 – Investor sentiment for stocks is at a very low level, but some well-known investors are taking positions in stocks. According to
the video below, Warren Buffett and Berkshire Hathaway (BRKA/BRKB) just added significantly to Berkshire‟s already large stake in Johnson &
Johnson (JNJ). In addition, Buffett is buying other healthcare related stocks such as Becton Dickinson (BDX).
Stanley Druckenmiller, who just closed his very successful hedge fund, bought Wells Fargo (WFC). And, Druckenmiller and George Soros both
bought Internet technology firm Akamai (AKAM).
This billionaire buying binge should not necessarily be taken as a vote of confidence on the stock market overall, but rather that these brilliant
investors believe there is real value in these stocks. Incidentally, Wells Fargo was just purchased by Druckenmiller, but it is also one of Buffett‟s
top holdings.

• Smart money – Buffett, Soros,

Druckenmiller – are buying.
30 August 2010 7:30 p.m. EST
• Companies with cash see an
opportunity to buy other companies.
“$1/4 Trillion in M&A activity in the last 30 days” WHY AREN‟T YOU BUYING?

Bull or Bear? by Chris Puplava | Sep 1, 2010

Is it a bull or is it a bear? I would hold off making that call for now.
Simply looking at the major trend following indicators I track suggests that we are in a bear market as four of the five signals are flashing sells.
However, two of them are barely negative and could easily switch to buy signals if the market heads just a little higher, leading to whipsaws and
more frustration. Rather than attempting to get out in the first inning of a bear market, I would suggest taking a more moderate approach and
wait for confirmation. You can be an incredibly successful investor without ever timing market tops and bottoms perfectly. In terms of a baseball
game, just playing the second to eight innings or the third to seventh innings will keep you in the bulk of bull markets and out of the bulk of bear
markets, and at the same time help you keep your sanity as you wouldn‟t be whipsawed as much trying to be a perfect market timer.
In addition to tracking the five trend following indicators mentioned above I would suggest watching the 50 RSI level on the monthly 14 period for
the S&P 500 in addition to the lower 200d BB. If the lower 200d BB fails to hold and the monthly 14-period RSI for the S&P 500 dips lower then
we can be sure with further certainty that we are indeed in a bear market rather than something temporary like the 1998 Asian Currency Crisis or
2004 consolidation. The fact that 4 of my 5 trend following indicators are on sell signals does suggest having a below market exposure, but at the
same time the character of the market (montly/weekly RSI, lower 200d BB support) resembles a bull market, and so with conflicting trends and
character it is perhaps best to wait before becoming overly defensive. Thus, I‟d hold off on making any major market calls at this juncture.
Stark Disconnect Between Interest
Rates and Stock Prices BY STEVE SAVILLE | AUGUST 24, 2010
US economic data have been deteriorating over the past three months and
are likely to deteriorate further over the next three months, but that's not
necessarily a problem for the stock market. The stock market always
attempts to discount the future, which means that economic weakness is
only ever a threat when it hasn't been discounted. This is why the stock
market often makes a sustainable up-turn months before the economic
data begin to show any signs of improvement. In such cases it isn't so
much that the stock market is able to presciently look beyond the current
weakness to the brighter days that lie well into the future, it's that a lot of
additional economic weakness has already been factored into current
stock prices. So, more evidence that the US economy is deteriorating will 5 YR Bond Yields
only be a problem for the stock market if the market is expecting a rosier
scenario. Assuming that the economic numbers are going to get worse, the
relevant question with regard to the stock market's likely reaction is
therefore: how much additional economic weakness is the market
expecting?
We mentioned above that the stock market could be approaching a point of
recognition -- in this instance, the point where the market stops discounting
additional recovery and starts discounting recession. The bond market,
however, seems to have reached this point a few months ago, which
means that there is presently something of an expectation mismatch
between the stock and bond markets.
When inflation expectations are low, interest rates tend to decline in
anticipation of economic weakness. So, either the bond market is
completely wrong or the stock market will soon make a catch-up move to
the downside.

Bear Acceleration Confirms New Trade Signal (SPY) BY ANDREW HART | AUGUST 26, 2010
Seasonality suggests that we could see strong selling pressure in September while the mid-term election cycle suggests a one year rally starting
after the elections... It would seem likely that a sharp seasonal sell-off could take place in September following by a strong fourth quarter rally.
 Cash In The Air
Cloudbanks
by Thomas N. Bulkowski

During the 30 years I have spent investing in or trading the markets, I have
discovered many chart patterns, including pipes, horns, and barrs. Here‟s
another, which I call the cloudbank pattern. Investing in cloudbanks gives you
the opportunity to make a lot of money if you are patient and price rises back
into the clouds.
Identification guidelines
Figure 1 shows an idealized example of a cloudbank chart pattern. It begins with price moving horizontally for several years, but the duration can
vary from pattern to pattern. The shortest length in my study was five months and the longest was almost 17 years, with the average duration
being 2.75 years. The cloudbank is nothing more than a ceiling of overhead resistance.
The theory behind the cloudbank is that the stock‟s normal price, established over years, represents where the stock should be selling. If a bear
market takes it down, when the market recovers, so too should the stock. It should regress back to the mean – rise back into the clouds.

How often does that happen? To answer that, I found 184

cloudbanks in 574 stocks from January 1990 to February 2010.
Unfortunately, many of the cloudbanks are too recent to have
returned to the clouds, but 59% did so. Using a cutoff in 2005 for the
end of the cloudbank (which is the date before the stock makes a CLOUD
large drop), 90% of those cloudbanks had price return to the base of BANK
the cloud. If you have patience, you have a 90% chance of having a
successful investment.

Now that we know cloudbanks make for a good investment, how do

you buy one?
1. Look for 52 week lows; use a weekly chart, not a daily chart.
2. The stock must drop a minimum of 56% (Fibonacci)
3. Wait and buy when the stock price rises through the 30 week
simple moving avg. (SMA) The SMA works better than the
EMA and waiting for the rise will confirm the rebound to the
cloud bank.
4. Confirm with other signals, such as RSI or CCI positive Positive
divergence signs, double bottoms, etc. Divergence
5. When the price reaches the base of the clouds – SELL!
More Bullish Than Bearish…
More Bullish Than Bearish…
 Current Ratio by Investopedia
A liquidity ratio that measures a company's ability to pay short-term obligations.

The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-
term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A
ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this
shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to
access financing - but it is definitely not a good sign.

Things I look for (simplified):

1) Cash left over after bills are paid (Liquidity), measured as free cash flow. If that info isn‟t available use the Current Ratio
(explained above), greater than 2.0 preferred..
2) Low Debt to Equity ratios for their industry. This varies widely by industry or sector, i.e. Apple‟s D/E ratio isn‟t the same
as Bank of America.
3) Paying > 6% dividend yield, for at least 2 years
4) Equal to or < 2x Book Value (Most companies get bought out for 2-3x book value, so I want undervalued companies
5) Low Price to Sales ratio for their industry. A price-to-sales ratio under 1.0, coupled with rising revenue growth in the
previous 12 mo., is one of the most potent combinations on Wall Street.

Speculative
Story Stocks – stocks at death‟s door, but they manage to recover. Think Ford at $1.50 in 2008 to $+14 one yr later, or American
Airlines at $1.34 in 2003 to +$30 in 2006. Have to really pay attention to these company‟s liquidity issues – are their costs under
control and can they meet their day-to-day obligations? These stocks won‟t be paying dividends, but have the potential for a 200% or
more gain.

What I don‟t pay attention to, or I discount, is the price to earnings ratio, since earnings can be influenced by holding onto bills an
extra two weeks to roll them into the next quarter, etc., by „one time‟ charge-offs, etc. Sales and revenue growth and cash flow are
better indicators of a companies health than so called earnings. JMHO.

Dan
 Open High Low Close Volume
LFC China Life Insurance Co. Ltd. NYSE Financial Insurance (Life) 58.4 59.2 57.97 58.97 979,297
CSC Computer Sciences Corp. NYSE Technology Computer Services 40.39 40.8 39.76 40.77 1,980,204
HPQ Hewlett-Packard Co. NYSE Technology Computer Hardware 38.3 38.55 37.32 38 37,171,708
URS URS Corp. NYSE Capital Goods Construction Services
Oil Well Services & 35.57 36.29 35.09 36.23 710,892
UNT Unit Corp. NYSE Energy Equipment 34.14 34.94 33.36 34.84 356,472
SWN Southwestern Energy Co. NYSE Energy Oil & Gas Operations 32.64 33.5 31.89 33.35 3,906,542
BBY Best Buy Co, Inc. NYSE Services Retail (Technology) 32.24 32.27 30.9 31.86 7,578,670
LPS Lender Processing Services Inc NYSE Technology Software & Programming 29.58 29.92 29.23 29.78 809,489
CVS CVS/Caremark Corp. NYSE Services Retail (Drugs) 27.85 27.92 27.13 27.51 13,479,742
CYH Community Health Systems NYSE Healthcare Healthcare Facilities 26.99 27.02 26.32 26.93 1,851,202
WDC Western Digital Corp. NYSE Technology Computer Storage Devices 23.82 25.32 23.06 25.23 9,160,532
AVT Avnet, Inc. NYSE Technology Electronic Instr. & Controls 23.12 23.84 22.39 23.76 1,632,054
BGC General Cable Corp. NYSE Technology Electronic Instr. & Controls 22.08 23.27 21.68 23.19 1,168,724
GVA Granite Construction Inc. NYSE Capital Goods Construction Services 21.69 22.57 21.22 22.52 383,791
KOP Koppers Holdings Inc. NYSE Basic Materials Chemical Manufacturing 20.79 21.14 20.4 20.99 190,586
IRM Iron Mountain, Inc. NYSE Services Business Services 20.58 20.91 20.35 20.76 2,213,650
NRG NRG Energy Inc. NYSE Utilities Electric Utilities
Communications 20.45 20.71 20.02 20.63 2,527,073
CTV Commscope, Inc. NYSE Technology Equipment 18.97 19.32 18.39 19.27 1,347,120
GPS Gap, Inc. NYSE Services Retail (Apparel) 16.99 17.05 16.62 17.03 10,874,960
VLO Valero Energy Corp NYSE Energy Oil & Gas Operations 15.72 16.15 15.49 16.1 7,806,640
VVI Viad Corp. NYSE Services Business Services 15.29 15.5 14.97 15.47 139,833
BHE Benchmark Electronics Inc. NYSE Technology Electronic Instr. & Controls 14.36 14.57 14.03 14.54 329,047
ITG Investment Technology Group NYSE Financial Investment Services 13.85 14 13.73 14 330,235
HRB H & R Block, Inc. NYSE Services Personal Services 13.53 13.63 13.19 13.59 3,924,369
SCHW Charles Schwab Corp. NYSE Financial Investment Services 13.28 13.31 13.08 13.22 16,403,613
CMC Commercial Metals Co. NYSE Basic Materials Iron & Steel 12.58 13.03 12.12 13.02 2,162,712
BAC Bank Of America Corp. NYSE Financial Money Center Banks 12.57 12.72 12.41 12.64 158,555,677
SVU Supervalu, Inc. NYSE Services Retail (Grocery) 10.07 10.24 9.87 10.19 3,540,521
ONB Old National Bancorp NYSE Financial Regional Banks 9.48 9.65 9.33 9.64 408,871
DM Dolan Co. NYSE Services Printing & Publishing 9.46 9.52 9.25 9.51 124,134
HTZ Hertz Global Holdings, Inc. NYSE Services Rental & Leasing 8.86 8.9 8.41 8.84 4,092,231
DY Dycom Industries, Inc. NYSE Capital Goods Construction Services 7.53 7.89 7.3 7.86 478,627
STM STMicroelectronics NV NYSE Technology Semiconductors 6.91 6.93 6.67 6.82 2,883,650
MYE Myers Industries, Inc. NYSE Basic Materials ContainersAuto
& Packaging
& Truck 6.42 6.56 6.3 6.4 181,669
FSS Federal Signal Corp. NYSE Cons. Cyclical Manufacturers
Oil Well Services & 5.11 5.15 4.91 5.13 361,599
DVR Cal Dive Intl., Inc. NYSE Energy Equipment 4.76 4.8 4.66 4.71 1,016,584
SD Sandridge Energy, Inc. NYSE Energy Oil & Gas Operations 4.08 4.08 3.87 4 14,483,104
ODP Office Depot, Inc. NYSE Services Retail (Specialty) 3.58 3.63 3.45 3.58 6,582,386
RRI RRI Energy, Inc. NYSE Utilities Electric Utilities 3.42 3.49 3.35 3.47 3,228,140
UMC United Microelectronics, Inc. NYSE Technology Semiconductors 2.65 2.7 2.6 2.7 1,211,148
CBB Cincinnati Bell Inc. NYSE Services Communications Services 2.39 2.41 2.32 2.37 938,849
NLS Nautilus Group, Inc. NYSE Cons. Cyclical Recreational Products 1.35 1.38 1.3 1.33 128,221
JTX Jackson Hewitt Tax Service Inc. NYSE Services Personal Services 0.79 0.91 0.75 0.78 340,453
Cal Dive International Inc <1.00 Ideal
Cal Dive International, Inc. is a marine contractor. The Ideally > 2.0; = cash liquidity
Company provides manned diving, pipelay and pipe
burial, platform installation and platform salvage services
to a diverse customer base in the offshore oil and natural
gas industry. It offers its customers these services on an
integrated basis for more complex subsea projects. Its
global footprint encompasses operations in the Gulf of
Mexico Outer Continental Shelf (OCS), the Northeastern
United States, Latin America, Southeast Asia, China, Fwd P/E. . . . . . 7.88
Australia, the Middle East, India and the Mediterranean.
The Company owns and operates a fleet of 31 vessels,
<1.00 Ideal; Room to rise 2x
including 21 surface and saturation diving support
Room to rise 3x
vessels, six pipelay/pipebury barges, one dedicated
Room to rise 2x
pipebury barge, one combination derrick/pipelay barge
and two derrick barges.
Cal Dive Awarded $56M Bahamas Contract 9/1/10

I bought in at $4.59

Support

Positive Positive
Divergence Divergence
 Top 20 Takeover Targets in the Options Market
August 30, 2010

The following is a list of 20 takeover targets, based on open interest in the options market. To develop the list, we started by creating a universe
of about 80 stocks that have been labeled as takeover targets by various publications, including Barrions, Wall Street Journal, Marketwatch,
TheStreet.com and StreetInsider.
We then collected data on open options positions for this universe of takeover targets. The stocks mentioned here have the lowest Put/Call ratios
in this universe of takeover targets (i.e. most bullish sentiment in the options market).
1. Cott Corporation (COT): Soft Drinks Industry. Market cap of $566.61M. Call open interest at 21,408 contracts, vs. put open interest at 274 contracts (Put/Call
ratio of 0.01). Price/FCF ratio at 5.79. Short float at 3.21%, which implies a short ratio of 2.92 days.
2. Falconstor Software Inc. (FALC): Business Software & Services Industry. Market cap of $152.64M. Call open interest at 250 contracts, vs. put open interest at
10 contracts (Put/Call ratio of 0.04). Price/FCF ratio at 90.86. Short float at 4.18%, which implies a short ratio of 9.35 days.
3. California Pizza Kitchen Inc. (CPKI): Restaurants Industry. Market cap of $375.03M. Call open interest at 7,021 contracts, vs. put open interest at 866
contracts (Put/Call ratio of 0.12). Price/FCF ratio at 9.17. Short float at 5.79%, which implies a short ratio of 3.99 days.
4. Quicksilver Resources Inc. (KWK): Independent Oil & Gas Industry. Market cap of $2.01B. Call open interest at 31,886 contracts, vs. put open interest at 3,762
contracts (Put/Call ratio of 0.12). Short float at 7.63%, which implies a short ratio of 2.86 days.
5. Cal Dive International Inc (DVR): Oil & Gas Equipment & Services Industry. Market cap of $443.73M. Call open interest at 4,139 contracts, vs. put open
interest at 647 contracts (Put/Call ratio of 0.16). Price/FCF ratio at 5.14. Short float at 4.82%, which implies a short ratio of 4.29 days.
6. Ameristar Casinos Inc. (ASCA): Resorts & Casinos Industry. Market cap of $974.98M. Call open interest at 3,712 contracts, vs. put open interest at 678
contracts (Put/Call ratio of 0.18). Price/FCF ratio at 11.18. Short float at 7.15%, which implies a short ratio of 5.53 days.
7. Sourcefire, Inc. (FIRE): Security Software & Services Industry. Market cap of $747.04M. Call open interest at 7,230 contracts, vs. put open interest at 1,309
contracts (Put/Call ratio of 0.18). Price/FCF ratio at 25.34. Short float at 12.08%, which implies a short ratio of 6.21 days.
8. Fortinet Inc. (FTNT): Computer Peripherals Industry. Market cap of $1.43B. Call open interest at 10,460 contracts, vs. put open interest at 1,934 contracts
(Put/Call ratio of 0.18). Price/FCF ratio at 20.96. Short float at 6.69%, which implies a short ratio of 4.62 days.
9. Biogen Idec Inc. (BIIB): Biotechnology Industry. Market cap of $13.21B. Call open interest at 25,185 contracts, vs. put open interest at 6,864 contracts (Put/Call
ratio of 0.27). Price/FCF ratio at 11.67. Short float at 4.42%, which implies a short ratio of 3.16 days.
10. Smithfield Foods Inc. (SFD): Meat Products Industry. Market cap of $2.71B. Call open interest at 22,031 contracts, vs. put open interest at 6,310 contracts
(Put/Call ratio of 0.29). Price/FCF ratio at 35.88. Short float at 6%, which implies a short ratio of 3.89 days.
11. Novell Inc. (NOVL): Security Software & Services Industry. Market cap of $2.00B. Call open interest at 18,853 contracts, vs. put open interest at 7,111
contracts (Put/Call ratio of 0.38). Price/FCF ratio at 37.96. Short float at 2.02%, which implies a short ratio of 2.21 days.
12. SLM Corporation (SLM): Credit Services Industry. Market cap of $5.47B. Call open interest at 76,919 contracts, vs. put open interest at 29,024 contracts
(Put/Call ratio of 0.38). Short float at 5.68%, which implies a short ratio of 5.81 days.
13. Hasbro Inc. (HAS): Toys & Games Industry. Market cap of $5.72B. Call open interest at 8,135 contracts, vs. put open interest at 3,179 contracts (Put/Call ratio
of 0.39). Price/FCF ratio at 14.44. Short float at 2.15%, which implies a short ratio of 1.25 days.
14. Barnes & Noble, Inc. (BKS): Specialty Retail, Other Industry. Market cap of $868.09M. Call open interest at 23,178 contracts, vs. put open interest at 9,475
contracts (Put/Call ratio of 0.41). Short float at 42.77%, which implies a short ratio of 11.83 days.
15. AK Steel Holding Corporation (AKS): Steel & Iron Industry. Market cap of $1.39B. Call open interest at 103,026 contracts, vs. put open interest at 44,553
contracts (Put/Call ratio of 0.43). Short float at 10.85%, which implies a short ratio of 1.29 days.
16. E*TRADE Financial Corporation (ETFC): Investment Brokerage Industry. Market cap of $2.83B. Call open interest at 335,934 contracts, vs. put open interest
at 146,076 contracts (Put/Call ratio of 0.43). Price/FCF ratio at 7.98. Short float at 2.53%, which implies a short ratio of 1.4 days.
 DIA AND QQQQ FILL THEIR GAPS WITH
BREAKOUTS -- OFFENSIVE SECTORS
GAP AND SURGE HIGHER -- BONDS
DECLINE AS MONEY FLEES SAFETY --
Sept. 01, 2010 SHANGHAI COMPOSITE SHOWS
4:57 PM ET RELATIVE STRENGTH

OFFENSIVE SECTORS GAP AND SURGE HIGHER... The next four charts show the offensive sectors: consumer discretionary,
finance, industrials and technology. I focus on these four to ascertain the underlying strength or weakness in a broad market move.
Consumer discretionary represents the most economically sensitive sector. Finance represents the banks and financial system.
Industrials represent manufacturing might. Technology represents the appetite for risk at the high-beta end of the market. It is
important to see upside leadership from at least two of these sectors. Overall, the performance of these four remains mixed. All four
gapped higher and broke short-term resistance with big moves on Wednesday. At the very least, these gaps and breakouts are
bullish until proven otherwise. Chart 3 shows the Industrials SPDR (XLI) breaking resistance with a long white candlestick. Chart 4
shows the Consumer Discretionary SPDR (XLY) holding well above its July low and surging above resistance. Both formed higher
lows and today‟s breakouts reversed the August downtrends. No signs of weakness here.
 LONG-TERM BONDS ARE NOT A WISE INVESTMENT IN OUR
OPINION
Posted: August 27, 2010 By: Monty Guild
It is disturbing to us when a huge percentage of investors agree that one type of investment is the superior vehicle. We recall the era of 1998 to
2000, when tech stocks could do no wrong and many unsophisticated investors and speculators believed that tech stocks were a one way street
to riches. Today, we have a similar mania where 98 percent of investors believe that buying U.S. treasury bonds including long-term bonds is a
wise idea. We dispute this idea and strongly warn our readers to watch out. In our opinion, longer term investors should avoid long duration
bonds!

Long-term bonds in this country are discounting a continuation of a low inflation environment; and we all know that inflation in the U.S. is currently
not a problem. How do we know that inflation will not return in the future? Many investors seem to be discounting a non-inflationary or even a
deflationary environment for years to come. If inflation were to return, purchasing a 30 year bond at current low interest rates could produce
immense losses for the unwary.

We further believe that people are ignoring certain signs. For example, there is high and rising inflation in India and rising inflation in China, Brazil
and many other parts of the world. Just as the United States engendered inflation in the 1970‟s and exported it to Europe and much of the world,
the inflation currently taking place in Asia and elsewhere could easily be exported to the U.S. and Europe in coming years.

GOLD AND STOCKS

Clearly, the stock markets of the developed world have spoken. They are interested in high yielding stocks with assured and growing income
and they are not interested in most other stocks. Gold related shares are the only sector that does not pay high dividends which appears to be
doing well in this environment.

Gold itself is acting brilliantly, as continued efforts to hold the price down by those who do not like to see the price of gold rise, are being
neutralized by those governments, institutions, and individuals who continue to use every price decline as a buying opportunity. Wise gold
investors will use dips to buy.

SUMMARY
Investors should avoid long-term bonds, and continue to focus on using dips to buy gold and high yielding income stocks [especially in the oil
sector]. We believe that the recent decline in oil prices has ended, and expect oil prices to rise over the next few weeks and months. Demand
for energy from the developing world continues to grow and Saudi Arabia is starting to think more about conserving some of their oil resources for
future generations.

China, India, and other growing nations will be well situated for investment, but we prefer to wait to add money to global stock markets until we
see how the seasonally volatile September-October time frame unfolds.

Historically, many stock markets, especially in the U.S. and Europe have been very weak in September and into October as investors return from
summer holidays. Accordingly, we hold large cash positions and very few equity positions other than high yielding energy stocks or gold stocks
in the portfolios.

Thanks for listening.

 Leaked German Military Report Warns Of Apocalyptic
Peak Oil Scenarios
Gus Lubin | Sep. 1, 2010

The German army doesn't want you to know how freaked out it is about peak oil. But an internal report has leaked to the internet,
with excerpts translated by Spiegel.
The report says there is "some probability that peak oil will occur around the year 2010 and that the impact on security is expected to
be felt 15 to 30 years later."
Nightmare scenarios include:
• Market failures: The authors paint a bleak picture of the consequences resulting from a shortage of petroleum. As the
transportation of goods depends on crude oil, international trade could be subject to colossal tax hikes. "Shortages in the
supply of vital goods could arise" as a result, for example in food supplies. Oil is used directly or indirectly in the production
of 95% of all industrial goods. Price shocks could therefore be seen in almost any industry and throughout all stages of the
industrial supply chain. "In the medium term the global economic system and every market-oriented national economy
would collapse."
• Global chain reaction: "A restructuring of oil supplies will not be equally possible in all regions before the onset of peak oil,"
says the study. "It is likely that a large number of states will not be in a position to make the necessary investments in time,"
or with "sufficient magnitude." If there were economic crashes in some regions of the world, Germany could be affected.
Germany would not escape the crises of other countries, because it's so tightly integrated into the global economy.
• Crisis of political legitimacy: The Bundeswehr study also raises fears for the survival of democracy itself. Parts of the
population could comprehend the upheaval triggered by peak oil "as a general systemic crisis." This would create "room for
ideological and extremist alternatives to existing forms of government." Fragmentation of the affected population is likely
and could "in extreme cases lead to open conflict."

Energy Update with David Hill

 Bullish
Energy
Services
Enterprise Products Partners LP (EPD)
Enterprise Products Partners L.P. is a North American midstream energy
company providing a range of services to producers and consumers of
natural gas, natural gas liquids (NGLs), crude oil, refined products and
certain petrochemicals. In addition, the Company is engaged in the
development of pipeline and other midstream energy infrastructure in the
continental United States and Gulf of Mexico. It operates through its
subsidiary, Enterprise Products Operating LLC. It has five segments:
NGL Pipelines & Services; Onshore Natural Gas Pipelines & Services;
Onshore Crude Oil Pipelines & Services; Offshore Pipelines & Services,
and Petrochemical & Refined Products Services.

Dividend Yield 7.71%

Kinder Morgan Energy LP (KMP)
Dividend & Yield 4.36 (6.48%)

Kinder Morgan Energy Partners, L.P. (KMP) is a pipeline

transportation and energy storage company in North America.
KMP owns an interest in approximately 28,000 miles of
pipelines and 180 terminals. It has five business segments:
products pipelines, natural gas pipelines, CO2, terminals and
Kinder Morgan Canada. On October 1, 2009, KMP acquired the
natural gas treating business from Crosstex Energy, L.P. and
Crosstex Energy, Inc. On November 1, 2009, KMP acquired
40% ownership interest in Endeavor Gathering LLC, the natural
gas gathering and compression business of GMX Resources
Inc. In May 2010, the Company completed a 50/50 joint venture
with Kinder Morgan Energy Partners, L.P. (Kinder Morgan)
involving the Company's midstream business in the Haynesville
Shale, and the sale of Terryville Field.
Plains All American Pipeline
(PAA) Dividend & Yield 3.77 (6.23%)
Plains All American Pipeline, L.P. (Plains) is engaged in the
transportation, storage, terminalling and marketing of crude oil,
refined products and liquefied petroleum gas and other natural
gas-related petroleum products. It is also engaged in the
development and operation of natural gas storage facilities. The
Company operates in three business segments: Transportation,
Facilities, and Supply and Logistics. In December 2009, the
Company acquired an additional 21% undivided joint interest in
the Capline Pipeline System and additional tankage in Southcap
Pipe Line Co. (Southcap). In September 2009, Plains acquired
the remaining 50% interest in PAA Natural Gas Storage, LLC. In
May 2008, Plains acquired the crude oil gathering and
transportation assets in Alberta, Canada from Rainbow Pipeline
Company (Rainbow).
 Forbes.com's search for the best places for business and careers spanned 200 communities, ranging in size from the New York
metropolitan area, home to 11.7 million people, to the Merced, Calif., area, with a population of 245,000.
Each community was ranked according to 12 metrics, including costs (business and living), job growth (past and projected), income
growth, educational attainment and projected economic growth.
Quality-of-life issues, including crime rates, cultural and recreational opportunities, migration patterns, were also given weight, as
were such factors as the number of highly ranked four-year colleges in the community and the percentage of subprime mortgages
handed out over three years.

No. 10 – Austin, Texas

Metro-area population: 1.71 million

Rankings
Cost of doing business: 160th
Projected economic growth: second
Projected job growth: second
Educational attainment: 19th
Income growth: 100th
Net inbound migration: sixth

Greater Austin Area

Real Estate Update
Gold Market Update

@ 55:1 gold ratio = +/- $40

 Chinese Gold Demand Explodes As Inflation Fears
And Government Curbs Take Hold
Vincent Fernando, CFA | Aug. 26, 2010,
Chinese demand for gold surged in the second quarter of 2010 according to the latest data from the World Gold Council. Mainland China is the
second largest source of gold demand in the world, after India, and has even closed the gap with India considerably.
Chinese retail demand amounted to 36.3 tons compared to the U.S.'s already size-able 30.3 tons. Note that one year ago, during Q2 of 2009,
U.S. retail demand for gold had been higher than that of China.
According to China Daily, both China's efforts to clamp down on its property and stock markets and domestic inflation concerns have caused a
'buying spree' by Chinese investors seeking a safe haven for their wealth.

Germans, And A Wave Of Swiss Bank Accounts,

Are Piling Into Gold As If It's A New Crisis
Vincent Fernando, CFA | Aug. 26, 2010,

As the Eurozone crisis made headlines, European retail demand for gold surged in the second quarter.
While this was to be expected, given the concerns which emerged in regards to the value of the euro and a European financial crisis, the scale of
the buying is a bit shocking, not to mention the concentrated buying from Germany and its German-speaking neighbors:
World Gold Council:
Net retail investment growth in Europe was again concentrated in the German- speaking countries (Germany, Switzerland and Austria).
Germany (+59% YoY) and the US (+32% YoY) both recorded gains in excess of the 23% global total, while Switzerland posted a solid
+19% gain over Q2 2009. In France, purchases of bars and coins just outweighed profit-taking, with net investment demand scraping in at
0.4 tonnes, which was marginally below the 0.6 tonnes from Q2 2009.
 You must attend
the meeting to get
these stocks
“Luck happens
when
PREPARATION
recognizes
OPPORTUNITY
-- Mark Twain