November 8, 2010

Dan Shy
dan.shy@davianletter.com

IN FOCUS:

Redistribution of Model
“Three Sisters” Accounts

Model Portfolio Dividend

Investing Outlook for the Redistribution of Model “Three Sisters” Accounts
Week of 11-08-2010 This marks the final 'full' issue of “Airelon's Market Tactics”. After
November 9th, 2010, the entire newsletter will be brought to an end. I
would like to take this opportunity to thank everyone that had a part in this
newsletter. This project has most definitely made me a better investor, and
Trading Thoughts for the a better trader.
Week of 11-08-2010
As I conclude the Model “Three Sister” Accounts that benchmark the
results of this newsletter? I thought it best that I initiate one final 'three-
sisters' distribution. I
realize that the newsletter
Summary of Hypothetical will be brought to an end,
Model Portfolio and that save myself …. no
one will probably give
these “Model accounts” a
second thought. But in the
spirit of “leaving the
newsletter” on a healthy
note, I initiate this
redistribution transfer
among the 'three sister'
accounts to better establish
those accounts for future growth.
Yes, growth that may never be tracked again. But I was taught that if you
are 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 quicken
your pace. You complete the race … completely and totally. I will go
beyond simply explaining my thoughts for the next week in the capital
markets. I will describe my overall thoughts in the time frame of the next
quarter. Therefore, to adjust to these circumstances, I am obviously setting
aside the $20,600 goal before the next redistribution.
Since October 5th, 2010 we have had almost $1,220 in trading profits, in

1

the newsletter in the model trading account.
Therefore, I will take half of that, $610.00 and send it
to the Model Dividend Investing account. I will take
$305.00 from the trading account and send it towards
the 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 a
close 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, in
the 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 discuss
the management of such a hypothetical portfolio until the close of
this newsletter in November.
Last week, I explained parameters for an index hedge
via the SDS and a three-sisters distribution to coincide
with that hedge. Obviously, with the new
redistribution in the Model Account, and with the S&P
500 Index rocketing higher, I would now completely
set aside such a plan.
Let's talk for a moment about the 'big' picture when it
comes to the equities market. Let's look at the big
picture while examining not only the positive
influences on current stock prices, but also the
negative factors.
Since March of 2009, we have experienced an
incredible rally in stocks. I don't try to 'blow smoke' at
anyone. I missed some of the lowest prices back in
March, but finally became publicly bullish on stocks
since August of 2009.
The economic picture, slowly … very … very slowly,
is improving. As I discussed in my newsletter that
outlined my thoughts for the year of 2010, there are
1 Exact Link -
http://investorandtrader.blogspot.com/2010/10/annouce
ment-end-of-airelons-market.html
2 Exact Link -
http://investorandtrader.blogspot.com/2010/08/surprise-
no-one-and-challenge-project.html
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November 8, 2010
serious headwinds to the economy overall; and I
believe that those headwinds remain.
As I discussed in the “Week in Review” podcast3, I'm
watching productivity numbers for the economy
overall. I'm waiting to see if we enter a time period
where those productivity numbers begin to flat-line.
At the present time, productivity is climbing, which
tells me that although the payroll picture seems to be
improving; companies are focusing on increasing
productivity of your average employee, rather than
simply 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 many
scenarios 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 positive
influence for the next payroll numbers.
Recoveries are a process. They are not a single event.
And a recovery out of the single greatest credit
recession since the Great Depression will be no
exception to that well known market mantra.
However, in looking at the 'big picture' I always
maintain that any investor and traders primary concern
… is … what? Risk control … right? So it is vital to
examine risks, in addition to positive economic
The single greatest risk that I see to the stock market
overall … is something I have discussed for some
time. It hasn't gone away, by any stretch of the
imagination.
Uncovered Interest Parity.
A true unwind of the Carry trade through uncovered
interest 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 technical
analysis 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
 November 8, 2010

beginning the unwind in uncovered interest parity, I December Corn – Daily Chart
will 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 Federal
Reserve tries to do, is not dictate market behavior, but
they do try to guide the capital markets and market
sentiment.
It may be, that the Fed will manage to change the
focus of market participants from a 'fearful
contraction' outlook, towards a expansive GDP
productive outlook. Once QE 2.0 begins to shrink
from the public consciousness, market guidance
towards expansive GDP production could (note I said, Wheat futures prices remain at their high plateau.
could, not 'will') lead to underlying U.S. Dollar
strength; as well as an underlying strength to equities. December Wheat – Daily Chart
To overcome the unwind in the carry trade through
outright uncovered interest parity will take some
doing. But stranger things have happened in the
capital 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 say
that, to reiterate my thesis that you must keep your eye
not 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 in Soybean futures prices have gone through the roof.
the future. January Soybeans – Daily Chart

Now, although I may not buy more shares of the

following stock for some time, but I did want to give
you a 'heads up' to something you may see me
purchase in the future.

General Mills (GIS): As I will discuss in the trading

section of this newsletter, nearly all foods in the
commodity markets are undergoing a great deal of
futures inflation. Corn is going through the roof.
This all has an impact on a company like General
Mills (GIS) who is in the business of buying such
commodities to make cereals for public consumption.
As I have discussed in the past, to some extent,

3

General Mills (GIS) can hedge such higher operating
costs. And over the lifetime of the company … they
have 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 have
seen displayed over Q.E. 2.0 in the rest of the equities
market.
General Mills (GIS) – Daily Chart
Therefore, I will wait for a bit of price congestion, and
as I will soon discuss, I will be keeping an eye on the
commodity markets, specifically the grain sector as it
relates to General Mills (GIS). Eventually, we'll be
looking 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, and
only after I believe that such commodity futures food
inflation is coming to an end … you may see me buy
General Mills (GIS) for my small little Challenge
Project; which is now my main dividend investing
vehicle.
I thought I would give you an advance 'heads up' in
this last issue; that my 'eye' is turned in that direction.
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November 8, 2010
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 the
game in order to escape the risk of over-leveraged gap opens in the
commodity 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 the
account into 'swing trading'. In addition, it is understood that I
trade according to the methodology outlined in my YouTube
series4.
Last week I had no trades at all. I have now liquidated
all of my trading accounts, and therefore … I spent
last 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 trading
accounts, 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 I
will be trading in any markets, when I most definitely
will not be trading.
I can however, speak to my overall thoughts on the
state of the commodity markets, especially as it relates
to the foods. What I find when I look over the
commodity markets is that I couldn't have found a
better time to liquidate my personal accounts, and
begin anew with the Challenge Project. Because
many of these markets are behaving in a manner, such
that 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 have
already described in this newsletter, the Grain markets
are undergoing tremendous futures inflation. Corn,
Soybeans, Wheat … they are all up.
As I have previously mentioned in my podcasts, prices
have inflated in the grain markets is not due to
currency inflation, but actual fundamental problems
facing 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 as
Soybeans and Corn.
And I have absolutely zero edge in these sorts of
4 Exact Link -
http://www.youtube.com/user/AirelonTrading#g/c/61DC
BF4BF4E93A0F

scenarios. I have made public my own trading
methodology; and anyone can see that it is not built to
take advantage of these sorts of situations. Turtle
momentum traders must be having a field day in the
grains right now.
As for myself? I stand aside from the entire sector,
and wait for things to calm down. It goes back to an
old rule that I try to adhere to: If it's in the news? I
don't want anywhere near it.
So this happenstance coincides well with the
liquidation of other personal accounts. I will wait for
the grains markets to cool down a bit, before
attempting to trade them again.
Sector No. 2
The Softs (Sugar, Cocoa, Coffee, Orange Juice):
Speaking of 'in the news', the Sugar market has not
even begun to pause in the midst of it's incredible
rally.
March 2011 Sugar – Daily Chart
As with the grains, Sugar is undergoing incredible
problems in terms of the actual crop. Brazil's drought
has all but decimated any excess Sugar that Brazil
could 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 well
coincides with the fact that I have liquidated my
personal accounts. Because I will simply have to wait
for 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 next
seasonal 'buy point'; although I will not be trading that
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November 8, 2010
market for the aforementioned reasons of account
liquidation.
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 markets
that is behaving in a manner that I find 'tradeable', as it
is behaving according to seasonal norms. Usually,
around December 5th of each year, we find a good
opportunity to short the OJ market based on such
seasonality. This is not a market for the feint of heart
however, 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 my
intent 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' portfolio
management system5
We began this newsletter with a Model Portfolio of
$15,000.00 in 2009. We have grown that $15,000.00
to $27,433.81. Therefore, since inception, we have
grown 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 $60.75
0.01522 shares at $64.388962
0.0235 shares at $64.255319
2 shares at $64.94
1 share at $60.61
0.046582 @ $58.391653
5 Exact Link -
http://investorandtrader.blogspot.com/2010/07/three-
sisters.html
 November 8, 2010

0.045497 @ $60.443679 The following graph displays this account visually …

• 7.169285 shares of KO (DRIP is on)
2 shares at $56.58 Hypothetical Investing “Sister” Account
0.013891 shares @ $59.031027 Year to Date
3 more shares at $56.16
0.040033 shares @ $54.954662
1 share at $53.66
1 share at $51.25
0.061832 shares @ $50.135852
0.053529 shares @ $58.472977
• 5.08562 Shares of PG (DRIP is on)
2 shares at $61.16
0.014121 shares @ $62.318533
2 shares at $62.08
0.030738 shares @ $62.788363
1 share at $61.85
0.040761 shares @ $59.615809
• 10.10951 Shares of GIS (DRIP is on)
2 shares at $70.30
2 shares at $70.61
0.013743 shares at $71.31
1 share at $71.07 Stock / Futures Trading Balance: $18,417.63
Experienced a 2:1 stock split
0.082024 shares at $34.258266
• Donated $610.00 to the Model Dividend
• Cash: $4,767.40 Investing “Sister” Account
-$75.00 of this cash I reserve to Dollar Cost Average JNJ further
in the future • Donated $305.00 to the Model Side-pocket
-$75.00 of this cash I reserve to Dollar Cost Average KO in the “Slush” “Sister” Account
future
-$75.00 of this cash I reserve to Dollar Cost Average PG in the • 3% risk tolerance gives us approximately
future $552.52 for my drawdown tolerance.
-$75.00 of this cash I reserve to Dollar Cost Average GIS
-This leaves $3,877.40 available for new purchases • $692.00 available from Side-pocket Fund
• 76.31 % Cash
• $692.00 available from Side-pocket Fund Hypothetical Trading “Sister” Account
Year to Date
I am increasing the amount of cash reserved for dollar
cost averaging each position. Again … since this
newsletter is coming to an end, I'm doing this to
illustrate a point.
This account received a distribution from the trading
account in the amount of $610.00. But I only
increased the amount reserved to dollar cost average
each dividend bearing stock by $5.00, or $25.00
cumulatively.
Thus, the majority of the cash from this distribution
was to increase the background capital for the
dividend bearing account; in accordance with the risks Now as follows is my current money management
that I discussed earlier in this newsletter. performance metrics which have not changed from
last week …

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 November 8, 2010

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

0.15 Monthly)
Trading Performance • $692.00 for a Slush fund / Drawdown Kill
Airelon's Market Tactics Since Launch Switch fund
Per Contract Basis (American Decimal • $1,384.55 for a Base Savings
Notation) • $692.00 for Emergency Savings
Total Trades: 94
Largest Drawdown: -1.785 % of current
total or $345.00 per contract. -2.805 % of Hypothetical Side-pocket “Sister” Account
total account at the time drawdown Year to Date
occurred.
Maximum Consecutive Losing Trades: 3
Average Intra-Trade Drawdown:
0.2588% currently or $50.04 per contract
Average Loss: 0.5875 % currently or
$111.55 per contract
Accuracy Rate: 75.53 %
Average Reward: 1.035 % currently or
$200.17 per contract
Average Risk: Reward Ratio: 1 Risk to
1.8 Reward

Once again, I would like to take this opportunity to thank everyone that has in any way been connected with this
newsletter; 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 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 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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 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, can
exceed 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