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November 13, 2012

Dan Shy


Newsletter Structure and Features

Special Reference Issue:

Twelve Months of Aileron Market Balance

What We Have Accomplished

What We Have Done Right

What Needs Further Correction

now have been publishing Aileron Market Balance for twelve months. This issue will take a look at those twelve months of portfolio performance and specifically, what we have accomplished, what we have done right, and what needs further tweeking and correction. This summary does not contain year to date performance numbers for 2012, which differs from our November 2011 Inception to date performance numbers. This summary will be accompanied by an audio file which can be found here1.

Model Portfolio Summary

Newsletter Structure and Features

The most obvious change to the newsletter itself in the last 12 months, is that we have changed from the strict PDF version, to an abbreviated PDF, with an expanded accompanying audio file for each weeks outlook in the Capital Markets. In addition, we have added a Ventrilo Voice Server for times that I am actively trading throughout the day, or when anyone has a specific question they would like to ask. We have also added Forums to the Website itself, and those Forums also contain a special area that is reserved for subscribers. As well, Tuesday through Friday, we now send out an audio MP3 each

1 Exact Link - https://www.fortune3.com/Aileron/11_15_12_Aileron_Market_Balance_12_Months_of_AMB_Review.mp3

November 13, 2012

morning with our thoughts on the market, possible impacts to the portfolio as well as any potential trades. This is all in an effort to make ... A) Aileron Market Balance easy to follow along. I run a somewhat involved 'book', or portfolio, so I want to make it as easy to 'look over my shoulder as possible'. That is, after all, what this newsletter really is. B) Aileron Market Balance easier to produce. If I can comprise an issue and update of AMB quickly, then the information can be more relevant and also be easier to transmit. profitable trade, but was not at my desk managing that trade ...then no matter how profitable, I would not add it towards the success of the portfolio. In the beginning of the year, I was stacking profit on top of profit, on top of profit. In reality. But there were other profitable ideas that I had, that I did not profit on. I did not add those successes into the portfolio.. This is about No Nonsense. Reality. No hypothetical trades'. And then there was May of 2011. I had the death of a dear friend. I was sick with E. Coli. I was in a foreign country. But when it comes down to it I pushed the Sugar trade too hard. I think it's providing much more service if you provoide an honest, no nonsense look over the shoulder.

What We Have Accomplished

Proper Portfolio Management: I have really tried to highlight the need to properly weight a portfolio so that 'all of your eggs are not in one basket', so that when you are having a difficult time in one area, how you can use the strengths and weaknesses of risk to accomplish growth. I have tried to show percentages of each of my endevours in the capital markets. I have tried to demonstrate why I have some value dividend investing, as well as cash instruments, as well trading endevours. I truly believe a 'trade alerts' service is doing it's customers a disservice. Why? Because one would need to mimick, closely, and exactly, every single movement of such a 'trade alerts'. If you're off on any one trade, you might be missing the one trade that's the 50% or 60% trade, while the rest are 4% losses. It is very difficult to shadow someone. Indeed, with such services, it becomes about trying to 'mimick' the person, instead of seeing what the reality of investing and trading is all about. Afterall, the name on the website is No Nonsense. So I have tried to provide just that. An 'over the shoulder' look at what I'm doing. How an investor and trader looks at the markets, and adjusts his portfolio accordingly. Honesty and No Nonsense: I have not tried to hide anything. I have shown all of my successes, as well as all of the pain of the last twelve months. And that includes the 'successes' as well. If you go look at the free issues of Aileron Market Balance in the beginning, I made it very clear that if I outlined a

What We Have Done Right (Profits)

Income Stream: We have been able to generate almost $40.00 in dividends in this first twelve months of operation. Value Investing: We sold off 5 positions during the last 12 months, all of them profitably. Coca-Cola (KO). Pepsi-Cola (PEP). Seagate Technologies (STX). Abbott Labrotories (ABT). Johnson & Johnson (JNJ). We are seeing good capital appreciation and returns, despite this being a small account. CD Ladder: It's now built, and in place. Each and every month, on the 21st of each month, a one year CD will return it's interest. So rather than complain about rising interest rates, I have positioned myself for when that time comes about. Forex Trading: This one well Forex nearly broke me. What I mean is, I had a moment when I said: If I'm not profitable in Forex by such and such a date, I'm going to stop trying. I listened to profitable, professional Forex traders. I tried to stay humble. I tried to apply their advice. I am now in Phase 3 of Forex trading and I honestly believe I have it. I showed tremendous losses in Phase 1 of building this methodology. I

November 13, 2012

was net profitable in Stage, or Phase 2. And in Phase 3, I had what I am calling my Forex epiphany moment. Since that time, I am up over 1 %, and net profitable for this entire stage of the game; and I believe now I have it and have a methodology.

Summary of the A.M.B. Model Portfolio

Note: In the beginning of this hypothetical portfolio, the share purchases of the Dividend Investing 'Sister' will be extremely small. It is my intent to demonstrate how to grow the size of these positions from 2 shares, to 300 shares using the three sisters portfolio management style. It is also understood that readers of this newsletter have a firm understanding of my 'three sisters' portfolio management system (See the Special Reference issue of Aileron Market Balance 2 for an explanation of this system).

What Needs (Losses)



Very obviously, the portion that needs attention is my trading account. Since May of 2011, I've seen some heavy drawdown. And then after that drawdown, I've been stuck in this plateau where I haven't been able to pull ahead. To correct that, I have added further strength to one of the strong areas of my portfolio that was not involved in trading. Namely, Permanent Portfolio. Since April 23rd, I'm up 3.65% on my money. But the real key with Permanent Portfolio is that not that it is quick, or fast, or that it quickly corrects the trading account. But that it strengthens an already strong portion of the entire portfolio. It's Sharp Ratio is superb. As well to correct the drawdown in the trading account, I have begun income trading in this account. Now this form of trading takes time. But it's possible to take a 4% annual yield stock, to a 20% annual yield stock. For example, let's say you have a stock that is trading at $28, and gives you between a $0.30 and $0.35 dividend. Well, sell enough options around your position, and you can increase what you're pulling off of that stock. Last quarter, we were able to pull out $1.37 on such a $28 stock by selling options around the stock. This method is slower. This will slowly, more steadily add in more income into the account. We're in the midst of a bit of drawdown on the stock itself. And then, once we have some gains booked enough, we can risk 89 bps out of 600 bps on a commodity futures trade.

S&P 500 2011 Inception to Date: + 8.76 % Aileron Market Balance Total Portfolio 2011 Inception to Date: + 5.085 % Investing Account Balance: $4,165.92 4 Positions have been sold YTD for profit on each ... 0.71 % Yield redistributed to other accounts year to date Return / Yield up + 4.148 % since inception 8.081305 shares of STOCK ONE (DRIP off Current Yield is 4.50 % Yield on Cost is 4.38 % )
8 shares at $32.39 on 12/22/2011 w/ $5.01 Commissions 0.081305 shares DRIP at $34.93 on 3/23/2012 $2.86 in Cash on 6/22/2012 Sent $1.43 to Sav. Side-Pocket $2.86 in Cash on 9/21/2012 Kept entire amount in Account

6 shares of STOCK TWO (DRIP off Current Yield is 2.80 % - Yield on Cost is 3.11 % )
6 shares at $45.05 on 8/6/2012 w/ $5.00 Commissions $1.98 in Cash on 9/1/2012 Keeping full amount in Account

6 shares of STOCK THREE (DRIP off Current Yield is 2.52 % Yield on Cost is 2.54 % )
6 shares at $40.94 on 8/29/2012 w/ $5.00 Commissions $1.56 in cash on 10/26/2012

9 shares of STOCK FOUR (DRIP off Current Yield is 2.86 % Yield on Cost is 2.79 % )
9 shares at $27.41 on 9/6/2012 w/ $5.00 Commissions

8 shares of STOCK FIVE (DRIP off Current Yield is 4.58 % Yield on Cost is 4.49 % ) The portfolio summary is as follows ...
9 shares at $27.41 on 9/6/2012 w/ $5.00 Commissions

2 Exact Link http://www.scribd.com/doc/73238645/Aileron-MarketBalance-Special-Reference-Issue-Portfolio-Management

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Permanent Portfolio S $1,120.00 of cash I reserved for Permanent Portfolio Purchases Return from $1082.72 = + 3.65 % from 4/23/12
- 2 shares @ 156.12 of GLD ( $312.24 ) ( Currently $334.20 ) ( 29.78 % of P.P ) - 2 shares @ 139.58 of SPY ( $279.16 ) ( Currently $275.58 ) ( 24.56 % of P.P ) - 2 shares @ 118.17 of TLT ( $236.34) ( Currently $253.22 ) ( 22.56 % of P.P ) - 3 shares @ 84.45 of SHY ( $253.35) ( Currently $253.32 ) ( 22.57 % of P.P )

Total Trading Balance: $9,771.48 ( Return / Yield up + 8.572 % November 2011 Inception to Date ) Commodity Futures and Stock Balance: $9,701.72
Current Mark Included of Long 100 _____ at ____ Sold 1 ________ ______ Call at ______

Return / Yield up + 8.399 % Inception to Date Next Re-Distribution Goal: $10,700.00 Original 3% risk tolerance gives us approximately $282.54 for my drawdown tolerance ALREADY USED THIS YEAR $ 289.40 available from Slush Fund The account balance current includes the floating trade we have on with ___________ ... Futures and Stock 'Sister' Account November 2011 Inception to Date

Remaining Cash: $1,796.67 ( 43 % )

Percentages of that Cash -$1,488.73 of this Remaining Cash I reserve for Hedging and New Purchases ( 82.86 % ) - Removing Cash Reserve to DCA STOCK ONE plan is to sell for profit when price reaches ________ -$85.00 ( 5.71 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost STOCK TWO further in the future. DCA Price w/ no fundamental changes at ________ -$80.00 ( 5.374 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost STOCK TWO further in the future. DCA Price w/ no fundamental changes at ________ -$75.00 ( 5.038 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost STOCK TWO further in the future. DCA Price w/ no fundamental changes at ________ -$68.00 ( 4.568 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost STOCK TWO further in the future. DCA Price w/ no fundamental changes at ________

$ 289.40 available from Slush Fund Dividend Investing Sister Inception to Date

November 13, 2012

The Money Management Metrics in the larger trading account are as follows. As follows are our current Carry Trades that have only just begun

CARRY TRADE POSTIONS _______ current mark at _______ _______ of _______ at _______ on _______ _______ of _______ at _______ on _______ _______ current mark at _______ _______ of _______ at _______ on _______ _______ current mark at _______ _______ of _______ at _______ on _______ _______ of _______ at _______ on _______ HEDGE _______ current mark at _______ _______ of _______ at _______ on _______

Micro Forex Account November 2011 Inception to Date

Micro-Forex Balance: $69.76 Currently in Phase 3 The totals for the Forex account do not include the unrealized gain / loss from the Carry Trades. It does count the interest earned from those trades. Return / Yield + 0.251 % in Phase 3 $ 289.40 available from Slush Fund

November 13, 2012

The Money Management Statistics for the trades thusfar in Phase 3 ... Savings Side-Pocket Account Balance: $1,825.31 Capital is - 10.02 % Year to Date. Yield Return on Capital + 1.172 % $289.40 ( $215.74 owed to this Fund ) $1,010.29 for a Base Savings
Percentages of that Cash: $814.29 of this cash reserved for Long Term Variable Capital PP - ( 80.60 % ) $120.00 of this cash reserved for CD Ladder creation ( 11.88 % ) - One $10.00 One Year CD purchased on 11/21/2011 at 0.60% - One $10.00 One Year CD Purchase on 12/21/2011 at 0.50% - One $10.00 One Year CD Purchase on 1/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 2/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 3/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 4/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 5/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 6/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 7/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 8/21/2012 at 0.50% - One $10.00 One Year CD Purchase on 9/21/2012 at 0.50% - One $10.00 One Year CD purchased on 10/21/2012 at 0.50% $20.00 of this cash reserved for the first side-pocket purchase ( 1.98 % ) $20.00 of this cash I reserve for the second sidepocket purchase ( 1.98 % ) $36.00 of this cash I reserve for the hedging account ( 3.563 % )

$505.14 for Emergency Savings Getting Paid Fund: $20.48 Total Portfolio Breakdown Return Graph

Total Portfolio Balance: $15,762.71 - Total AMB November 2011 Inception to Date Return: + 5.085 % S&P 500 2011 Inception to Date: + 8.76 %

Until next time, stay

November 13, 2012

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. Aileron Market Balance 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 discuss within 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 or smaller 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 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 principles. The losses in trading can be very real, and depending on the investment vehicle and market, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 15 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 and benchmark 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.