October 21, 2012

these stocks is turned off. Therefore, at the moment, we are receiving straight cash for our dividends, rather than more partial shares. Waste Management (WM): Not really interested in purchasing this stock, and to be honest when it gets closer to the $37 to $41 region; I'll probably be selling it off. I believe it's a good company in a very tough sector. It's very difficult to grow E.P.S. in the Waste Services business. Not only has WM been growing their E.P.S., they've also impressively been cutting their SG&A costs (to the tune of 200 bps if memory serves, with further cuts to that cost in the future ) as well as smart and well-timed M&A's (Mergers and Acquisitions). The problem, I have found well .. it's the Waste Mangement (WM) equities market itself. But to use some terminology that may not be kind ... I think it's attracted a lot of stupid money. Every single stupid / silly "High Dividend Payers" blog / Seeking Alpha I read, they mention the stock. I think it's possible that it's attracted a lot of the crowd that are emotional, silly yield chasers, and that may be why we're getting these incredibly volatile spikes up one way, down another. Upgrades and downgrades yank this stock around to the point that well .. I've just gotten sick of the volatility. It's a good company though, in a very tough sector. They've been performing as I have thought. So until I see the stock between $37 and $41? I'll enjoy my nice 4.38% cash yield on cost. Conference Call Date: October 30, 2012 Aflac (AFL): Fantastic company. I personally bought my Aflac (AFL) around $45.05. We're now crossing $50. Would I necessarily purchase Aflac (AFL) now? No. Their F.A.S.T.graphs data is just beautiful. You look at the diluted earnings intrinsic value on this stock? On a 5 year historical basis this is a $92 to $135 stock. I'm getting paid cash to own it. If it were me? Any pullbacks to Aflac (AFL) I think would be beautitful to purchase a reasonable position with the company. Earnings Release and Conference Call Date: October 23 and October 24, 2012

Aileron Market Balance

Issue 51
Visit Us: NoNonsenseTrading.com Email: aileronmarketbalance@gmail.com Twitter: @NoNonsenseTrade

Each

newsletter on Sunday that will contain my thoughts for the week ahead will have an audio file that accompanies it. The audio file that is associated with this PDF will contain my detailed thoughts moving forward into the next week. This PDF file is meant to serve as a rough, general outline to the audio file that many subscribers are finding more advantageous.

Investing Outlook:
Note: As a reminder. 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. The Dividend Investing 'Sister' Account will also implement the Permanent Portfolio Method beginning in April 2012 with $1,120.00 of the cash dedicated towards it..

For the sake of new subscribers, let's go through our portfolio, mention the stocks we hold at the moment, and talk about my current thoughts on each of these stocks First of all, it is important to know that I have the DRIP (Dividend ReInvestment Program) for each of

October 21, 2012

Medtronic (MDT): Now Medtronic (MDT) is starting to pullback in price. There has been some talk of concern over their purchase of Kanghui Holdings for $755 million. Medtronics (MDT) management has impressed me enough with their very conservative, yet very consistent growth in E.P.S. Kanghui Holdings will allow Medtronic (MDT) to operate in China, and at times, getting that foot in the door is difficult enough. Some have compared this to a purchase that has sunk other similar companies. Which I think is truly a silly, silly comparison. This purchase is only 2% of the current total assets of Medtronic (MDT). The reward of this M&A far exceeds the risk in my view. But with a pullback to the $40.00 region? Oh yes, I think Medtronic (MDT) is a very attractive purchase. Conference Earnings Call: November 20, 2012 Johnson Controls (JCI): Jonson Controls (JCI) I believe is a beautiful purchase here at any price. They do have exposure in China, however seventy percent of their capex expenditures will be freed up for future cash flow. That's signficant. This is because their work on veritical integration is about complete. Much of the 'conversation' regarding their cash flow will therefore be a mute point at this quarters earnings release. Conference Earnings Call: October 30, 2012 Seagate Technologies PLC (STX): For the second time this year, we have bought Seagate (STX), this time 8 shares at $28.48. Unless we bounce underneath $26.00, I think this is a good purchase, especially above $28.41. Matter of fact, we have a trade on with Seagate (STX) on the long side. Conference Earnings Call: October 30, 2012 Anyone that hasn't started Permanent Portfolio yet, I think it's a good idea to start with the SHY, and TLT first, and then add in SPY after that. The GLD can then be added in last once Gold has experienced a signficant pullback (which it has). We're now around a 3.55% return, but the portfolio has dived underneath it's mean average, as can be seen in the cart above. Remember permanent portfolio generally keeps a straight slope higher. So if it dives underneath the mean average then It's my way of saying that that Permanent Portfolio has pulled back is a great thing for anyone looking to start (for folks looking to start, I generally believe personally that it's good to keep this in the valuedividend investing side of the portfolio, and to use $2,000 to start, since most people don't get the break in commissions that I receive from brokers). I will rebalance my permanent portfolio once I see about a 10% return on that portion of the book. Overall View of the Markets: Very critical support at the 1414 region on the e-mini S&P 500 December Futures; or the S&P 500 Index around 1420. We've been in this channel on equities. With that, I'm watching risk currencies as they relate to 'risk' (AUD/JPY, NZD/JPY and TRY/JPY) I'm watching to make sure that we don't have a pullback on the risk currencies and this bleeds into a pullback Permanent Portfolio (SHY, TLT, SPY, GLD): We've experienced a bit of a leg back. Permanent Portfolio S

October 21, 2012

on the S&P 500 Index as well. Because that's sort of a setup for a more signficant pullback. If our risk currencies begin to pullback, I'd really want to make sure that the support regions 'hold' in the equities markets before making any purchases. I'm also watching the earnings release dates that I have noted on each of the above companies. for a profit (We currently have a little over $100 in profit on that option), and sell a December call, but first I would like to wait about 42 days before December option expiration to do so. That means I'll hold on for another 20 days to see if I'll lock in the profit (buy to close on the November 31 call ) on the current option, and then turn around and sell a December 31 call. But again, I want to wait a few more days, and get closer to November Options Expiration before doing that. As we approach the earning release on October 30 th, I might hedge This is slow. It's not the fast, fun way that I usually like to trade. But it's much safer. Heck, as I've said before, I continue to sell option premium until I have $3,000 or $4,000 in premium sold here, or until the position gets called away at the profit. But for newer subscribers, the strategy is to pull in 500 bps to 600 bps before risking another 90 bps on a commodity futures trade. What if no one had any Seagate (STX) stock? I'd maybe look to buy 100 shares around $28.33, I'd probably look to simultaneously sell ONE December 30 Call for 1.06 to 1.09 ($106 to $109).

Trading Outlook:
Note: By way of reminder, since the Model Portfolio has only $9,815.42 in the Commodity Futures and Stock Trading portion of the portfolio, there will only be ' brief day trades' at this stage of the game for Commodity Futures trading in order to escape the risk of over-leveraged gap opens in the commodity futures markets. Stock trades may last more than one day. There will be income trades as well, using stock options. This is an attempt to demonstrate how account size relates to trading style. As I mention in my methodology series1, as the commodity 'trading sister' approaches $30,000 I will graduate the account into 'swingtrading' and demonstrate how I would go about doing this. The Forex account has $69.73 and is considered a micro-forex account for the purposes of the model portfolio.

Also, I mentioned selling a GLD Vertical Call spread on the Forums two weeks ago for October Calls. That's turned out to be easy $146.00 for every $10,000 in the account. Last week, for those folks that have not already started the STX trade, I mentioned selling October STX 27.50 Puts or October STX 28 Puts. Again, profitable. Even if assigned if STX would have settled below 28 or below 27.50, then you have 100 shares of STX at that price, and you could turn around and sell the December 2012 STX 31 Call. But if not exercised, then you got that premium, and it's yours, and the option has expired.

Micro-Forex Methodology Creation

Well, I have been in Phase 3 of my Forex Methodology creation since May of 2012. It's taken over a year of Forex Trading in a MicroForex 'learning account', and three 'phases' ... but I think I have it. The chart below demonstrates all of Phase 3

The STX Income Trade

In the audio file, I review the STX trade as it exists to date, for new subscribers. As I stated on the forums and in the audio updates last week, I am willing to close out the November 31 Call
1 Exact Link http://nononsensetrading.com/methodology.html

October 21, 2012

Three guesses at which point that I had my Forex Epiphany I had a few months ago, helped in great part to comments and help from the user Cosmosgato? At the moment, we have no trades on, but I want to outline my Forex strategy now, moving forward with the Micro-Learning account balance at $69.73. I will still be engaging in short-term trading. But before I take any more short-term trades, I want to first further develop some profitable carry trades. So how do I plan on implementing a carry trade? I will now outline the process I plan on taking ... 1) The first step is disciplined patience. Because I plan to use Carry Trades to fund trades that I'll have on a smaller time frame. So the point, is to build some profitable carry trades. And that's going to take patience. 2) I will wait for a strong enough pullback to show up in either AUD/JPY, NZD/JPY or TRY/JPY to begin a carry trade position. 3) Once I begin with the carry trade, I can start off with a initial unit position size of buying 25 Units for either AUD/JPY, buying 25 Units for NZD/JPY or buying 25 Units for TRY/JPY as long as there are no major underlying changes to the carry trade's structure itself (Interest Rates, Geo-Political Situation, War (especially watching Syria in that regard) , etc.). These sizes are larger than what engaged with before although I believe these unit sizes will be adequately sized to take advantage of gains in the market, while not over-extending myself. 4) If I have more than one carry trade ( for example, 25 AUD/JPY and 25 TRY/JPY) on at 25 units, then I purchase 2 USD/CHF as a hedge. Two units is the maximum size of USD/CHF, even if I'm long 25 AUD/JPY, 25 TRY/JPY and 25 NZD/JPY. 5) If I have to average in again on any position, I increase the position by an additional 32 units. So if I had long 25 AUD/JPY and long 25 NZD/JPY, and if it's time to average in, increase the total position to 57 units each. I would then increase the USD/CHF position to 3 units total. 6) If I have to average in after that, I increase the position size by an additional 40 units. If there are two carry trades on, then I would increase the USD/CHF position to 5 units total. 7) Rebalance USD/CHF when necessary, and rebalance and sell out for profits on the Carry Trade when appropriate. I'm now allowing myself to add capital from other profitable accounts (such as value-dividend investing or short term trading). The goal here is to get the account to a place where well I'm 'well on my way'. That equity graph has to continue upwards. When enough gains are booked through Carry Trading, I'll attempt some short term trades based on regressions and pivots. The summary of the portfolio is on the following pages

October 21, 2012

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 Balance2 for an explanation of this system).

Permanent Portfolio S $1,120.00 of cash I reserved for Permanent Portfolio Purchases Return from $1082.72 = + 3.55 % from 4/23/12
- 2 shares @ 156.12 of GLD ( $312.24 ) ( Currently $333.94 ) ( 29.79 % of P.P ) - 2 shares @ 139.58 of SPY ( $279.16 ) ( Currently $286.77 ) ( 25.58 % of P.P ) - 2 shares @ 118.17 of TLT ( $236.34) ( Currently $243.48 ) ( 21.72 % of P.P ) - 3 shares @ 84.45 of SHY ( $253.35) ( Currently $253.14 ) ( 22.58 % of P.P )

S&P 500 Year to Date: + 13.96 % AMB Total Portfolio Return Year to Date: + 2.06 % Investing Account Balance: $4,182.19 4 Positions have been sold YTD for profit on each ... 0.71 % Yield redistributed to other accounts year to date Return / Yield up + 3.804 % year to date Return / Yield up + 4.55 % since inception 8.081305 shares of WM (DRIP off Current Yield is 4.37 % 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 Next Dividend: Not Yet Announced

Remaining Cash: $1,792.92 ( 42.87 % )

Percentages of that Cash -$1,484.92 of this Remaining Cash I reserve for Hedging and New Purchases ( 82.82 % ) - Removing Cash Reserve to DCA Waste Management (WM) since plan is to sell of this stock when opportunity presents itself between $36.50 and $41.00 -$85.00 ( 5.724 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost AFL further in the future DCA Price w/ no fundamental changes on AFL $40 to $38 region -$80.00 ( 5.387 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost MDT further in the future DCA Price w/ no fundamental changes on MDT $37 to $35 region -$75.00 ( 5.051 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost JCI further in the future DCA Price w/ no fundamental changes on JCI $22 to $24 region -$68.00 ( 4.579 % ) of this Hedging and New Purchases Cash I reserve to Dollar Cost STX further in the future DCA Price w/ no fundamental changes on AFL $20 to $21 region

6 shares of AFL (DRIP off Current Yield is 2.66 % - Yield on Cost is 2.93 % )
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 Next Dividend: Not Yet Announced

6 shares of MDT (DRIP off Current Yield is 2.48 % Yield on Cost is 2.54 % )
6 shares at $40.94 on 8/29/2012 w/ $5.00 Commissions Next Dividend: October 26, 2012 Ex-Dividend Date: October 3, 2012

9 shares of JCI (DRIP off Current Yield is 2.75 % Yield on Cost is 2.63 % )
9 shares at $27.41 on 9/6/2012 w/ $5.00 Commissions Next Dividend: October 2, 2012 Ex-Dividend Date: September 5, 2012 (Not entitled To Oct Div)

$ 288.10 ( 6.889 % of this account ) available from Slush Fund Dividend Investing Sister Year to Date

8 shares of STX (DRIP off Current Yield is 4.59 % Yield on Cost is 4.49 % )
9 shares at $27.41 on 9/6/2012 w/ $5.00 Commissions Next Dividend: October 2, 2012 Ex-Dividend Date: September 5, 2012 (Not entitled To Oct Div)

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

October 21, 2012

Total Trading Balance: $9,885.15 ( Return / Yield up + 1.517 % Year to Date ) Commodity Futures and Stock Balance: $9,815.42 Current Mark Included of Long 100 STX at $30.45 and sold 1 November 31 STX Call at 1.52 Already Profited One Oct 30 Call of 1.1150 profit on same position Return / Yield up + 1.553 % Year to Date Next Re-Distribution Goal: $10,700.00 Original 3% risk tolerance gives us approximately $282.54 for my drawdown tolerance ALREADY USED $ 288.10 available from Slush Fund The account balance current includes the floating trade we have on with STX ... Futures and Stock 'Sister' Account Year to Date

Micro-Forex Balance: $69.73 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. Capital up from January 1, 2012: + 3.92 % Return / Yield - 3.287 % Year to Date Return / Yield + 0.213 % in Phase 3 $ 288.10 available from Slush Fund Last week, we ended our carry trades. Both of them profitably.

We completed one portion of this STX trade. We bought back the October 30 Call and took $111.50 in profits (before commissions) to close the position. We kept the 100 shares at $30.45, and then sold that November 31 Call at 1.52, the portion of the trade that is still 'on'. The November 31 Call is profitable and the current mark is approximately 0.445, so a shown profit of 1.075. The Money Management Metrics in the larger trading account are as follows.

Exit 2 @ NZD/JPY @ 64.88(9) on 10/17/2012 PROFIT 233.2 Pips - $0.0589 (Plus Interest Earned) Exit 4 @ NZD/JPY @ 64.88(9) on 10/17/2012 PROFIT 107.6 Pips - $0.0544 (Plus Interest Earned)

October 21, 2012

As I stated on the forums, and earlier in this newsletter, we will patiently await a spot to instigate the carry trade once again according to the rules that I outlined earlier. Micro Forex Account Year to Date However, the carry trades, although profitable, will not count towards the money management statistics. These metrics will only count the profitability of short term trading in the Micro-Forex accounts.

As well as the Capital Graph for the Forex Account in Phase 3 that we posted earlier in this newsletter.

Savings Side-Pocket Account Balance: $1,824.01 As stated, remember that today, on the 21 st is when it's considered that A.M.B. purchases a $10.00 CD at an online bank, one such as at ING Direct or other online banks that allow for small one year CD's to be purchased.

October 21, 2012

And today is the 21st. With the CD that will be considered as purchased for A.M.B. today, the CD ladder is complete. 12 rungs, and each month, from this point forward, a one year CD will come due. Capital is - 10.08 % Year to Date. Yield Return on Capital + 1.1 % $288.10 ($217.04 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 % )

Total Portfolio Breakdown Return Graph

Total Portfolio Balance: $15,891.35 - Total AMB November 2011 Inception to Date Return: + 5.942 % Return / Yield up + 2.06 % year to date) S&P 500 Year to Date: + 13.96 %

$505.14 for Emergency Savings Getting Paid Fund: $20.48 If you have any questions regarding my personal outlook, or any other comments, please feel free to contact us at aileronmarketbalance@gmail.com. Our twitter account is @NoNonsenseTrade. I will say that if you have questions about your own trading and you want to ask for my input? Please include your most recent money management performance statistics in any email correspondence.
Until next time, stay safe trade well, and remember that loving other people doesn't cost a dime.
Note: 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. The above statements should not be construed as an investment or trading recommendation. Aileron Market Balance is a

October 21, 2012

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. 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. Any trades or investments that I discuss within this newsletter are simply my own thoughts regarding my own investing and trading outlook. I discuss which trades I take and do not take on the No Nonsense Trading Forums, as well as the Ventrilo Voice Server. Remember that entering any market is an individual decision. This newsletter simply contains my trading and investing thoughts for the next week. I personally only enter any market after watching and reading the tape and I trade using money management principles3. 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 16 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.

Exact Link - http://nononsensetrading.com/MoneyManagement.html