Portfolio Management Project

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Portfolio Management Project

Group 7:

Roni Arjang

Jeff Fogel

Barrington Edwards

Zabel Momdjian

Finance 437, Section 23057

Spring 2003

|Contents |

|Style of Fund |3 |

| |Description | |

| |Investment Objectives | |

| |Return Requirements | |

| |Risk Tolerance | |

|Constraints |4 |

| |Liquidity | |

| |Time Horizon | |

| |Tax Considerations | |

| |Legal | |

| |Unique Circumstances | |

|Economic Analysis |5 |

|Asset Allocation |8 |

|Performance |9 |

|Investment Strategies & Selection |10 |

| | |

|Monitoring & Rebalancing |11 |

|Conclusions |14 |

|References |16 |

|Appendix and Attachments |16 |

|Style of Fund |

Description

The fund seeks to provide reasonable high current income and maximum long-term total return while incurring less market risk than a pure equity fund. Our portfolio combines elements of an aggressive growth fund in order to maximize our profits, and an income or blend fund in order to minimize risk. There is a strong emphasis on capital appreciation because of the time horizon and the risks involved. The key in reducing the unsystematic risk is by creating a diversified portfolio. Therefore, we created a diversified portfolio across several major sectors. As a group of young money hungry investors, we have been seeking to increase our investments immensely by taking many risks within certain limits. We attempted to purchase various investments in order to obtain the highest intrinsic value for our portfolio.

Investment Objectives

1. Return Requirement

Based on the Consumer Price Index over the previous one-year period, there has been 2% in excess of inflation. The total return of our portfolio, which continued to show strong growth within the short time horizon, included dividends, interest, capital appreciation, and overall less transaction costs as well as management fees. The funds annual management fees are approximately 1% of the average net asset value for the entire year. Where as current inflation, as measured by the US Consumer Price Index, is approximately 2%.

2. Risk Tolerance

Considering our short time horizon of only 2 months, it was apparent in order to increase our investments immensely we need to be aggressive and take certain risks. Even though the stock market appeared to be at a volatile stage because of inflation, interest rates, and War, we still decided to pursue various aggressive strategies. As young investors we all had a high level of risk tolerance, however by creating a diversified portfolio we minimized our risks and reduced the level of volatility that could have impacted our portfolio negatively. Due to the immense liquidity needs, our fund required an above average amount of cash and short-term investments. Overall, our level of risk was between medium and high.

|Constraints |

Liquidity

Because of our company’s risk adverse nature we maintained at least 31% of our assets in cash. There were not any special circumstances that prevented us from investing in any illiquid assets such as Real Estate or Artwork other than the fact that it was out side the scope of this project.

Time horizon

From 6 February 2003 to 11 April 2003, a period over which are only 46 trading sessions, represented our most limiting constraint. Our goal, HPR > 2% for all invested assets within this narrow trading period mandated vigorous asset management such that speculative gain comprised a large part of our strategy. Throughout the time horizon, while our motivation was not to plunge blindly into the market, we favored risky action to no action: better to swing hard at a low fastball than to let it fly past when you’ve only got one chance at bat!

Tax Considerations

Our investment company realizes that any capital gain on any non-exempt asset is subject to federal tax laws. Long-term capital gains on investments held over one year may be taxed between 10%-20%. Short-term capital gains are considered ordinary income and may be taxed at a higher income tax rate. Therefore, while the investor’s best interest to hold profitable securities longer than one year, our time constraint demanded less passivity, with the associated capital gains tax.

Legal and Regulatory

SEC guidelines represent the only conditions under which our management of assets is bound. This means that we will pursue any and all profitable opportunities that are not inconsistent with SEC rules.

Unique Circumstances

On March 20th 2003, the United States declared War on Iraq. In the days leading up to the war, the stock market was apprehensive to the thought of long term investing in the U.S. economy. It all depended on whether or not the War on Iraq would last longer than expected or suffer large fatalities, which would determine if the U.S. economy would spiral into a deep recession. But as the U.S. war started, the market actually rose; the Down Jones Industrial Average jumped 8.43% from the week before and the price on crude Oil dropped from $38 to $29. This was an indication of investors’ expectations that the war would have a favorable outcome. And indeed it did, lasting only a couple of weeks the U.S. economy came out of the Iraq conflict with only minor cuts and bruises.

|Economic Analysis |

MARKET EVENT ANALYSIS

Two indexes were used in doing the market analysis, these were: The S&P500 Index and NASDAQ.

WEEK 1: 2/06 – 2/07

During the first week S&P500 was at 838.15 points and towards the end of the week it closed at 829.69 points. This means that S&P500 went down –8.46 points. NASDAQ was at 1,301.73 points and then went down to 1,282.47 points at the end of the week, a drop of –19.26 points.

WEEK 2: 2/10 – 2/14

At the beginning of the second week S&P500 closed at 835.97 points, and at the end of the week it went down to 834.89 points, a drop of –1.08 points. NASDAQ closed at 1296.68 points at the beginning of the week and then went up and closed at 1,310.17 points at the end of the second week; a rise of +13.49 points.

WEEK 3: 2/17 – 2/21

During the beginning of the third week the S&P500 closed at 851.17, at the end of the third week it went down and closed at 848.17 points; a decline of -3.00 points. At the beginning of this week NASDAQ closed at 1,346.54 points and then it increased to 1,349.02 points, an increase of +2.48 points.

WEEK 4: 2/24 – 2/28

At the beginning of the forth week the S&P500 closed at 832.58 points, at the end of this week it went up and closed at 841.15 points; a rise of +8.57 points. At the beginning of the week NASDAQ closed at 1,322.38 points and at the end of the week it closed at 1,337.52 points, an increase of +15.14 points.

Anxiety over the possible war weighted on Wall Street. Worries about Iraq have largely eclipsed other economic news in recent weeks, and are expected to keep the market on edge.

WEEK 5: 3/03 – 3/07

During the fifth week the S&P500 closed at 834.81 on the first day of this week, and at the end of the week it closed at 828.89 points; it went down by –5.92 points. At the beginning of the week NASDAQ closed at 1320.29 points and then went down to 1305.29 points at the end of the fifth week; a decline of –15.00 points in one week.

Stocks continue to slip day-by-day because war is on its way with almost 200,000 troops poised to invade Iraq and some intelligence analysts saying the initial attack could come as soon as this weekend. Because of this, consumer confidence is at a 9-year-low, suggesting heightened fear of terrorism. Companies are stalling on business expenditure decisions, and investors are selling stocks.

WEEK 6: 3/10 – 3/14

At the beginning of the sixth week the SAP500 closed at 807.48 points, and then towards the end of the week it went up and closed at 833.27 points; an increase of +25.79 points. During the beginning of this week the NASDAQ closed at 1,278.37 points and then went up and closed at 1,340.33 points at the end of the week; a rise of +61.96 points.

Even though the S&P500 and NASDAQ ended up positive at the end of the week, stocks ended mostly flat after talk from the White House which persuaded investors that a war in Iraq is imminent even without broad international backing. Wall Streets flat finish on Friday was from Thursday’s rally from hopes for a short war in Iraq, or no war at all.

WEEK 7: 3/17 – 3/21

During week seven S&P500 closed at 862.79 points at the beginning of the week, and then it went up to 895.79 point at the end of the week; a rise of +33.00 points. The NASDAQ closed at 1,392.27 point at the beginning of the week, and then went up and closed at 1,421.84 points at the end of the week; NASDAQ went up by +29.57 points.

Shares on Wall Street were set to head lower on Monday in light volume as fears of an imminent US-led war in Iraq kept investors at large. However, as war with Iraq intensified on Friday, stock prices went sharply higher because this seemed to ease doubts about the course of action and allowed investors to begin looking past the war’s eventual end. Stocks rose strongly when it was thought that the war would end swiftly; and, rumors that Saddam was dead sent investors pouring their cash into stocks.

WEEK 8: 3/24 – 3/28

During week number eight, both S&p500 and NASDAQ went down. At the beginning of this week S&P500 closed at 864.23 points, and towards the end of the week it went down and closed at 860.50 points; a decline of –3.73 points. NASDAQ closed at 1,369.78 points at the beginning of the week, and then slightly went down to 1369.60 point at the end; a minimal decline of –0.18 points.

On Monday stocks plunged on fears of long war. Many investors chose to cash in profits following a stunning eight-day rally by Dow and S&P500 index. Dow Jones Industrials gave back more than 300 points following its best week in two decades with its worst day of the year. Gainers included defense companies on expectations of greater demand for their products.

WEEK 9: 3/31 – 4/04

During the ninth week both S&P500 and NASDAQ had increased. At the beginning of the week S&P500 closed at 848.18 points, and at the end of this week it has risen to 878.85 points; an increase of +30.67 points. NASDAQ closed at 1,341.17 points at the beginning of the week, and then went up and closed at 1,383.51 points; a rise of +42.34 points.

A warning from the Iraqi government that it might take nonconventional action against U.S. forces who had seized the capital’s main airport worried stock investors, who largely shrugged off a large drop in March’s payrolls.

WEEK 10: 4/07 – 4/11

During the tenth and last week of trading, both S&P500 and NASDAQ had declined from the previous week. At the beginning of this week S&P500 closed at 879.93 points, and towards the end of the week it went down and closed at 868.30 points; a decline of

-11.63 points. At the beginning of this week, NASDAQ closed at 1,389.51 points and by the end of the week it closed at 1,358.85 points; down by –30.66 points.

Wall Street was set to soar at the opening of Monday, amid perceptions that the U.S.-led war against Iraq is entering its final phase after troops entered central Baghdad.

The market had discounted success in Iraq ahead of time. Initial enthusiasm had waned, and investors were wrestling with the economy’s poor health and consumer confidence. Companies had been hesitant to increase capital spending, which is the cornerstone of economic growth.

At the closing of Friday, investors deemed the worst of the fighting to be over and drew comfort from the upbeat economic news. Even though at this time there was a sharp rise in consumer confidence the stocks were hurt because many dealers had expected an even bigger increase then there was.

|Asset Allocation |

| | |

|General Allocation |By Class |

|Asset |Asset |

|Value |Value |

|Percent |Percent |

| | |

|Equity |Stocks (US) |

|$217,112.75 |209,812.75 |

|42.99% |41.54% |

| | |

|Debt |Stocks (Foreign) |

|28,597.40 |7,300.00 |

|5.66% |1.45% |

| | |

|Cash |Mutual Fund |

|259,410.34 |28,597.40 |

|51.36% |5.66% |

| | |

| |Cash |

| |259,410.34 |

| |51.36% |

| | |

|[pic] |[pic] |

|Allocation by Specific Holdings |

| |

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| |

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| |

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| |

| |

| |

|Cash |

|51.24% |

| |

| |

| |

| |

| |

| |

| |

| |

| |

|QQQ |

|10.20% |

| |

| |

| |

| |

| |

| |

| |

| |

| |

|MRK |

|5.48% |

| |

| |

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| |

| |

| |

| |

| |

| |

|MMM |

|5.70% |

| |

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| |

| |

| |

| |

| |

| |

| |

|FNM |

|5.48% |

| |

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|MRO |

|3.89% |

| |

| |

| |

| |

| |

| |

| |

| |

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|HD |

|2.57% |

| |

| |

| |

| |

| |

| |

| |

| |

| |

|FDX |

|2.28% |

| |

| |

| |

| |

| |

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| |

| |

| |

|G |

|0.63% |

| |

| |

| |

| |

| |

| |

| |

| |

| |

|LAB |

|1.80% |

| |

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| |

| |

| |

| |

| |

| |

|NDN |

|0.84% |

| |

| |

| |

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| |

| |

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|NOK |

|1.45% |

| |

| |

| |

| |

| |

| |

| |

| |

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|PG |

|1.68% |

| |

| |

| |

| |

| |

| |

| |

| |

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|PRULX |

|6.76% |

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|100.00% |

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|Allocation by Sector |

|  |

|  |

|  |

|  |

|  |

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|Sector |

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|Value |

|Percent |

| |

| |

| |

| |

| |

|Industry |

| |

| |

| |

| |

| |

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| |

| |

| |

|Conglomerates |

|  |

|  |

|  |

|$28,708.56 |

|5.68% |

| |

| |

| |

| |

| |

| |

|3M |

| |

| |

| |

|$28,708.56 |

|5.68% |

| |

| |

| |

| |

|Consumer, Noncyclical |

|  |

|  |

|11,664.59 |

|2.31% |

| |

| |

| |

| |

| |

|Personal&Hosehold Products |

| |

| |

| |

| |

| |

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|Gillette |

| |

| |

| |

|3,190.59 |

|0.63% |

| |

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| |

| |

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|Procter&Gamble |

| |

| |

|8,474.00 |

|1.68% |

| |

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| |

|Energy |

|  |

|  |

|  |

|  |

|19,584.00 |

|3.88% |

| |

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|Oil and Gas |

| |

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|Marathon Oil |

| |

| |

|19,584.00 |

|3.88% |

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| |

| |

| |

|Financial |

|  |

|  |

|  |

|18,100.00 |

|7.26% |

| |

| |

| |

| |

| |

|Investment Services |

| |

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|LaBranche & Co. |

| |

| |

|9,050.00 |

|1.79% |

| |

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|Consumer Financial Services |

| |

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|Fannie Mae |

| |

| |

| |

|27,604.00 |

|5.46% |

| |

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|Technology |

|  |

|  |

|  |

|7,300.00 |

|1.45% |

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|Communications Equipment |

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|Nokia ADR |

| |

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|7,300.00 |

|1.45% |

| |

| |

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| |

|Health Care |

|  |

|  |

|  |

|33,529.10 |

|6.64% |

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|Major Drugs |

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|Merck |

| |

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|33,529.10 |

|6.64% |

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|Services |

|  |

|  |

|  |

|  |

|  |

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|Retail (Specialty) |

| |

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|$.99 Only Stores |

| |

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|4,210.50 |

|0.83% |

| |

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|Retail (Home Improvement) |

| |

| |

| |

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|Home Depot |

| |

| |

| |

|12,950.00 |

|2.56% |

| |

| |

| |

| |

|Transportation |

|  |

|  |

|  |

|11,492.00 |

|2.28% |

| |

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| |

| |

|Air Courier |

| |

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| |

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|Fedex Corp. |

| |

| |

| |

|11,492.00 |

|2.28% |

| |

|166,092.75 |

|32.88% |

| |

| |

| |

| |

| |

| |

| |

| |

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|Other |

|  |

|  |

|  |

|  |

|339,027.74 |

|67.12% |

| |

| |

| |

| |

|Mutual Funds |

| |

| |

| |

| |

| |

| |

| |

| |

| |

| |

|T. Rowe Price US Treasury Long Term |

|28,597.40 |

|5.66% |

| |

| |

| |

| |

|Stock Trust (ETP) |

| |

| |

| |

| |

| |

| |

| |

| |

| |

| |

|Nasdaq-100 |

| |

| |

| |

|51,020.00 |

|10.10% |

| |

| |

| |

| |

|Cash |

| |

| |

| |

| |

|259,410.34 |

|51.36% |

| |

|339,027.74 |

|67.12% |

| |

| |

|Total |

|: |

| |

| |

| |

| |

| |

| |

|$505,120.49 |

|100.00% |

| |

Performance

| |YTD |

| |(as of 4/18/03) |

|Portfolio Fin437 |3.12% |

|S&P 500 |1.56% |

|Investment Strategies and Selection of Securities |

Fundamental security analysis reveals a domain of intermediate to long-term investment possibilities, not a domain of possible short-term gains in price appreciation, which depend largely on aggressive speculation. While technical strategies are dangerous and often doubtful as to their validity, they can provide guidelines which, when moderated with prudent and fundamental financial principles, often produce desired results in the way of successful price predictions. To accomplish this, we’ve chosen to employ technical (aggressive) strategies with which to manage assets that have been initially selected according to criteria reflecting established principles from fundamental analysis.

This combined strategy –aggressive management of passively selected assets -- allows for broad parameters, unique to our fund, and under which a solid and well-diversified portfolio of securities is chosen and aggressively managed without the level of risk typical of funds that depend only on price speculation for short-term gains. The Intrinsic value of an asset, while relegated somewhat behind timing and speculation strategies, is not supplanted by, but rather combined with, aggressive but disciplined price speculation. Our selection of assets is according to 10 general criteria that reflect fundamental principles:

1. For all equity investments, each of the last 2-years’

- Rate of earnings increase ≥ 20%

- ROE ≥ 15%

- Sales rate (for the last 3 quarters) increasing

2. Net income for last quarter up at least 20%

3. Stock price ≥ $12/share

4. Sell all holdings for which loss equals or exceeds cost by 8%.

5. Buy only in sectors or industries that show an increasing trend as indicated by sustained volume increases.

6. Management ownership of stock

7. Improving after tax profit margins,

8. Earnings, ROE, and sales growth are preferred to P/E as indicators.

9. Stock repurchases greater than 7%, or new management warrant purchase considerations.

10. For mutual funds: no-load, passively managed, with beta less than 1.02.

11. Diversification across sectors.

The result is aggressive management of mostly low risk assets –a style designed to achieve our goal of superior returns within a short time horizon. Most equity holdings (74%) fall within a low risk category defined as any security having a value for beta less one. A large cash balance (50.7%) was maintained for two reasons: low stock-market performance and the possibility of foreign funds flowing into U.S. dollars after the war in Iraq. High to medium risk securities constitute the remainder such that our target proportions were as follows:

|Security |Beta |Percent of Portfolio |Period Return (2/6/03 –4/11/03) |

|LabRanche |2.24 |1.79 |% | |-7.46 | |

|Nokia |2.04 |1.45 | | |.14 | |

|.$99 cent stores |1.46 |.83 | | |19.97 | |

|Home Depot |1.37 |2.56 | | |19.69 | |

|Nasdaq-100 Trust |1 |10.1 | | |-2.62 | |

|FedEx |.79 |2.28 | | |1.52 | |

|Marathon Oil |.72 |3.88 | | |-.21 | |

|3M |.53 |5.68 | | |2.72 | |

|Gillette |.47 |.63 | | |6.54 | |

|Merck |.46 |6.64 | | |1.31 | |

|Fannie Mae |.26 |5.46 | | |4.66 | |

|T-Rowe Price (Long US Treasury) |0.00 |5.66 | | |-1.06 | |

|Procter & Gamble |0.00 |1.68 | | |-.24 | |

|Cash | |51.36 | | | | |

| | | | | | | |

|Portfolio Monitoring and Rebalancing |

After initial selection based on the criteria discussed above, all assets were subdivided evenly; 50% of the value of each holding was designated for aggressive speculation while the other half was reserved for holding over the time entire time horizon horizon. But we disposed entirely of those few assets for which price declines were decreasing at an increasing rate for a predetermined time limit of 10 days, or when depreciation in price exceeded 10% of cost.

A decision to sell was also based on an increasing rate of price increase of at least 50% persisting for five or more days. Conversely, a decision to either increase an existing position or purchase a new asset was based on a sustained price appreciation of 50%, with the rate of change increasing, over at least 10 days. Certain anticipatory decisions based on favorable company news or economic events outside the stock exchange were also made and occasionally would supersede the more rigid monitoring rules. Our purchase of Marathon oil on news of the war in Iraq is an example.

A flaw in this algorithm, however, is indicated by the retention of certain assets for which prices, on average, had been decreasing at a decreasing rate; such assets produced negative holding period returns without falling in value by more the drop-off 10% of cost. Our retention of LaBranche Investment Services and T. Rowe Price U.S. Treasury fund are examples.

The general rebalancing formula was based on 50%, cash 40% equity, and 10% debt. Accordingly, $200,000 was allocated stocks, $50,000 to bonds, and the remaining $250,000 was kept out of the market and held as cash. These proportions were roughly maintained by either buying (selling) a security for which a price decrease (increase) brought the value below (above) the appropriate weight. Similar sub-weights were assigned to individual assets within the three classes and maintained according to the same procedure. So, are rebalancing method represented a composition of several functions: (1) a 50-40-10 ratio of cash-equity-debt; (2) equal division of each equity asset between a holding base and a speculative base; (3) closing of any position for which a loss exceeds 10% of that positions cost; (4) purchase of assets showing an increasing rate of price increase over 10 days and exceeding 50%, on average, over that period.

This uncomplicated rebalancing formula was chosen for several reasons. First, it has the advantage of simplicity and flexibility; it can be applied with minimal calculations to any combination of different assets and under all market conditions. Second, the formula is responsive and quickly gives unequivocal results. Rapidity and understandability are essential to portfolio management when constrained by a short time horizon and outweigh any advantages in using more sophisticated analyses that require involved and time consuming calculations. Market efficiency in the classical (Markowitz or Sharpe) was rejected in favor of a more responsive and practical asset allocation strategy.

While more complex models produce proportional asset allocation weights that depend on minimizing the covariance among all assets of a portfolio, the composition and management style of our portfolio produce equivalent or superior returns. Diversification across major sectors with stocks whose distribution of betas is roughly 50% greater than 1 and 50% less than 1 will protect against unsystematic risk, while attentive management will protest against systematic risk.

A weekly evaluation, a summary of which appears below, was used to approximate the magnitude and direction of any deviations from our established weights.

|Weekley Activity | | |

| |

The desire for constant action irrespective of underlying conditions is responsible for most losses in any portfolio strategy; portfolio management is not a job in which the investor is working for wages and must take home some money, or realize gains, everyday. A passive but structured and attentive management style is therefore superior to an active or aggressive strategy.

But successful price speculation, given a narrow time horizon, excludes total passivity and demands regular monitoring and rebalancing, which in turn is not a function daily price movements, for this ignores general principals that determine price behavior. Instead of placing bets on what the next few quotations might be, the investor should anticipate the direction of the entire market or some segment: If the market is bearish, for example, then don’t act bullish! Hence, speculative gains depend mostly on the main movements of the market, not on the individual price fluctuations

Therefore, it is not within changes of an individual stock price that determines the behavior of that stock; this is a fallacy according to which gamblers, not investors, try to play the market. The market as a whole must be evaluated.

“Price momentum” of individual stocks then, is a statistical illusion; it is appropriate only for short-term speculations (one month or even a few days). A passive strategy will outperform aggressive or speculative strategies in the long run.

It is impossible to predict prices. For any price quote, there are just as many buyers, who believe that the price will increase, as sellers, who anticipate a price decrease. It is not reasonable to suppose that one group knows more about the future that the other, and so, as their opinions about price fluctuations diverge, the aggregate of traders in the market at any instant in time should expect that the probability of a correct prediction is zero. (In other words, my observations over the last 4 months have shown that it is equally likely for a price to increase or decrease.)

Insider manipulation must be responsible for some of Wall Street’s biggest losses. I’ve seen certain stocks, LAB, for example, just prior to a sharp dive, fluctuate for weeks within a tight range on low trading volume but with the average rate of change increasing, implying a large number of small investors going long on that stock. It is my conjecture that large brokerages and others with significant holdings manipulate prices in this way just long enough to get customers in and then wipe them out.

Large transactions are a necessary condition of profitable price speculation. A one point, several assets we held enjoyed a $5/share or better price gain over a three-week period (FedEx and 99 Cents only Stores). But the dollar gain to our portfolio from selling these holdings was less than spectacular since it was limited to a small number of shares. Instead of, say, selling 80 shares for a $5/share gain ($400), we should have been in the position to sell 20000, for a total gain of $100000.

As ranking in the top 4 groups, we were able to play the market as a true experienced investor who knew went to come out and when not to. We continued buying different securities and allocated our assets in different investments such as bonds, stocks, and mutual funds to reduce our risks and increase our total return. However, as we became more knowledgeable in our investing we realized that by diversifying we have not alleviated our entire risk factor because systematic risk (market risk) still exists. We gained an understanding that systematic risk is the only risk that we have no control over because the market can be affected by various uncontrollable factors such as War, inflation, depression, recession, and interest rates. These are all factors that can cause an individual’s portfolio to decline immensely. Therefore, by investing in stocks, bonds, and mutual funds we took upon these unavoidable risks in order to increase our total return substantially.

|References |

Historical price and Balance Sheet data provided by

Daily Prices from The Wall Street Journal

Weekly Market Analysis constructed from various sources: The Wall Street Journal, , and the Los Angeles Times, each for the relevant dates.

|Appendix |

| |

|Citigroup |Fannie Mae |FedEx |

|Transaction History |Transaction History |Transaction History |

|  |  |  |

|  | |  |

| | | |

| | | |

| | | |

| | | |

| | | |

| | | |

| |Buy | |

|Buy |Sell |Buy |

|Sell |Price |Sell |

|Price | |Price |

| |3/25 | |

|3/14 |750 | |

|100.00 | | |

| |65.81 | |

|$ 33.74 | | |

| |4/4 | |

|3/18 | |2/11 |

|  |350 |750 |

|100.00 |68.80 | |

|34.51 | |51.52 |

| |  | |

| |  |2/24 |

| |  | |

| |  |572 |

| | |50.95 |

| | | |

| | |3/18 |

| | |  |

| | |178 |

| | |51.39 |

| | | |

|  | |4/4 |

|  | |200 |

|3/14-3/18 | | |

|2/3/-4/11 | |56.10 |

| |  | |

| |  | |

| |3/25 - 4/11 | |

| |2/3 - 4/11 | |

| | | |

| | | |

|AvgPrice | | |

| | | |

|34.2267 | | |

|34.1941 | | |

| |AvgPrice | |

|MaxPrice | |  |

| |67.1936 |2/11-3/18 |

|34.7300 |64.6841 |4/4-4/11 |

|37.6100 | |2/3/-4/11 |

| |MaxPrice | |

|MinPrice | | |

| |69.0100 | |

|33.7500 |69.0100 | |

|31.4200 | | |

| |MinPrice | |

|Spread | |AvgPrice |

| |65.3500 |50.8164 |

|0.9800 |58.9300 |56.2050 |

|6.1900 | |52.9588 |

| |Spread | |

|PricStDv | |MaxPrice |

| |3.6600 |52.3500 |

|0.4905 |10.0800 |57.4600 |

|1.8570 | |57.4600 |

| |PricStDv | |

|Avg%Chg. | |MinPrice |

| |1.0479 |49.0000 |

|1.3204 |2.2567 |55.6100 |

| | |49.0000 |

| |Avg%Chg. | |

|Av%Ret |  |Spread |

| |0.3261 |3.3500 |

|1.4424 |0.1088 |1.8500 |

| | |8.4600 |

| |Av%Ret | |

|$Gain/Share | |PricStDv |

|1.4600 |2.1024 |0.9223 |

|  | |0.6501 |

| | |2.6158 |

| |$Gain/Share | |

| |3.0200 |Avg%Chg. |

| | |-0.0071 |

| | |0.4108 |

| |HPR: |0.1857 |

| |  | |

| |  |Avg$Cng |

| |  |-0.0100 |

| | |0.2300 |

| | |0.0935 |

| | | |

| | |Av%Ret |

| | |-1.3657 |

| | |0.1872 |

| | | |

| | | |

| | |$Gain/Share |

| | |-17.5900 |

| | |0.6300 |

| | | |

| | | |

| | |HPR: |

| | |  |

| | |11.28% |

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|Gillette |Home Depot |International Game Tech. |

|Transaction History |Transaction History |Transaction History |

|  |  |  |

|  |  |  |

| |  | |

| | | |

| | | |

| | | |

| | | |

|Avg.Price | |Avg.Price |

| | | |

| | | |

|Buy | |Buy |

|Sell |Buy |Sell |

|Price |Sell |Price |

|Net Comsn. |Price |Net Comsn. |

| | | |

| | | |

| | | |

| | | |

| | | |

| | | |

| | | |

|2/6 | |2/24 |

|200 |2/6 |25 |

| |500 | |

|28.66 | |76.31 |

| |21.59 | |

| | | |

|2/24 | |3/3 |

|481 |  |120 |

| |  | |

|30.44 |  |78.95 |

|29.924 |  |78.5012 |

| |  | |

|3/14 | |3/14 |

| | |  |

|580 | |145 |

|31.17 | |79.13 |

| | |  |

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|  | | |

|  |  | |

|  |  | |

|  |2/6-4/11 | |

|  |  | |

| |2/3-4/11 | |

| | |  |

| |AvgPrice |  |

| |23.4937 |2/24-3/2 |

| |  |3/3-3/14 |

| |23.3573 |3/3-4/11 |

| | | |

|  |MaxPrice |AvgPrice |

|  |26.4300 |  |

|2/6-2/23 | |76.8180 |

|2/24-4/11 |26.4300 |76.9500 |

|2/3-4/11 | |78.8212 |

| |MinPrice | |

| |20.7000 |MaxPrice |

| | | |

| |20.7000 |78.5800 |

| | |78.9800 |

| |Spread |87.2000 |

| |5.7300 | |

|AvgPrice | |MinPrice |

| |5.7300 | |

|29.2536 | |75.0700 |

|31.1577 |PricStDv |74.8000 |

|30.6110 |1.7474 |74.0700 |

| | | |

|MaxPrice |1.7761 |Spread |

| | | |

|30.5400 |Avg%Chg. |3.5100 |

|32.3500 |0.4486 |4.1800 |

|32.3500 | |13.1300 |

| |0.4234 | |

|MinPrice | |PricStDv |

| |Avg$Cng | |

|28.0800 |0.0998 |1.3485 |

|29.8400 | |1.2858 |

|28.0800 |0.0942 |3.3371 |

| | | |

|Spread |Av%Ret |Avg%Chg. |

| |8.8175 |0.5973 |

|2.4600 | |0.1622 |

|2.5100 | |0.0354 |

|4.2700 | | |

| |$Gain/Share |Avg$Cng |

|PricStDv |87.5700 | |

| | |0.4560 |

|0.8287 | |-0.0570 |

|0.5875 | |0.0158 |

|1.0746 |HPR: | |

| |19.96% |Av%Ret |

|Avg%Chg. |  | |

| |  |0.6657 |

|0.5130 |  |-1.9760 |

|0.1058 | | |

|0.1486 | | |

| | |$Gain/Share |

|Avg$Cng | |2.5400 |

|  | |-15.5120 |

|0.1491 | | |

|0.0300 | | |

|0.0425 | |HPR: |

| | |2.25% |

|Av%Ret | |  |

| | |  |

|2.0713 | |  |

|4.0538 | | |

| | | |

| | | |

|$Gain/Share | | |

|6.5300 | | |

|43.1870 | | |

| | | |

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|HPR: | | |

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| | | |

|Merck |3M |NASDAQ 100 Trust |

|Transaction History |Transaction History |Transaction History |

|  |  |  |

|  |  |  |

| |  | |

| | | |

| | | |

| | | |

| | | |

| | |Avg.Price |

| |Avg.Price | |

|Buy | | |

|Sell | |Buy |

|Price |Buy |Sell |

| |Sell |Price |

| |Price |Net Comsn. |

| |Net Comsn. | |

| | |2/27 |

| |2/24 |1200 |

| |141 | |

|3/25 | |24.65 |

|1000 |126.86 | |

| | | |

|54.62 | |3/20 |

| |4/4 |  |

|4/11 |75 |1200 |

|  | |26.70 |

|395 |133.47 |  |

|55.56 |129.1551 | |

| | |3/25 |

| | |2000 |

| | | |

| | |26.16 |

| | | |

| | | |

|  | | |

|3/25-4/11 |  | |

|  |  | |

|2/3-4/11 |2/24-4/3 | |

| |4/4-4/11 | |

| |2/3-4/11 | |

| | | |

| | | |

| | | |

| | | |

|AvgPrice | | |

|55.80 | | |

| | | |

|53.95 |AvgPrice | |

| | |2/27-3/20 |

|MaxPrice |127.6234 |3/25-4/11 |

|57.20 |132.8867 |2/3-4/11 |

| |127.2614 | |

|57.20 | |  |

| |MaxPrice |  |

|MinPrice | |  |

|54.47 |134.3700 |  |

| |133.9800 |  |

|50.77 |134.3700 | |

| | |AvgPrice |

|Spread |MinPrice |25.1906 |

|2.73 | |25.9929 |

| |121.0100 |25.2157 |

|6.43 |131.6100 | |

| |121.0100 |MaxPrice |

|PricStDv | |26.9300 |

|0.82 |Spread |26.5600 |

| | |27.1700 |

|1.76 |13.3600 | |

| |2.3700 |MinPrice |

|Avg%Chg. |13.3600 | |

|0.11 | |23.8000 |

| |PricStDv |25.2500 |

|-0.01 | |23.8000 |

| |3.8688 | |

|Avg$Cng |0.8119 |Spread |

|0.06 |4.0529 | |

| | |3.1300 |

|-0.01 |Avg%Chg. |1.3100 |

| |0.1439 |3.3700 |

|Av%Ret |0.1393 | |

|2.16 |0.1366 |PricStDv |

| | | |

| |Avg$Cng |1.0612 |

| | |0.4340 |

|$Gain/Share |0.1724 |0.9824 |

|16.49 |0.1767 | |

|  |0.1650 |Avg%Chg. |

|  | |0.6534 |

| |Av%Ret |-0.1332 |

| | |0.1013 |

| |0.6018 | |

| |4.0739 |Avg$Cng |

| | |0.1613 |

| | |-0.0379 |

| |$Gain/Share |0.0213 |

| |22.1400 | |

| |22.3894 |Av%Ret |

| | |  |

| | |2.1932 |

| |  |5.1627 |

| |Total $ Gain/Share |  |

| |  | |

| |44.5294 |$Gain/Share |

| | |8.6500 |

| | |18.8000 |

| | | |

| | | |

| | |HPR: (%) |

| | |8.3164 |

| | |-2.4847 |

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|Procter Gamble |Labranche & Co. |S&P 500 |

|Transaction History |Transaction History |[pic] |

|  |  | |

|  |  | |

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| | | |

| | | |

| | | |

|Avg.Price | | |

| | | |

| |Buy | |

|Buy |Sell | |

|Sell |Price | |

|Price | | |

| |3/18 | |

| |500 | |

|3/14 |  | |

|100 |19.51 | |

| | | |

|83.69 | | |

| | | |

| | | |

|3/20 | | |

| | | |

|80 |  | |

|88.10 |3/18-4/11 | |

| |  | |

| |2/3-4/11 | |

|3/25 | | |

|1000 | | |

| | | |

|87.57 | | |

|87.49 | | |

| | | |

|4/3 |AvgPrice | |

|  |18.8547 | |

|600 | | |

|89.80 |19.4037 | |

|  | | |

| |MaxPrice | |

| |20.8500 | |

| | | |

| |24.3000 | |

| | | |

| |MinPrice | |

| |17.3900 | |

|  | | |

|  |15.5100 | |

|3/14-3/24 | | |

|3/25-4/11 |Spread | |

|  |3.4600 | |

| | | |

|HPR: (%) |8.7900 | |

| | | |

|4.62 |PricStDv | |

|1.86 |1.1922 | |

| | | |

| |2.1024 | |

|AvgPrice | | |

| |Avg%Chg. | |

|86.8429 |-0.0138 | |

|89.1871 | | |

| |-0.5202 | |

| | | |

|MaxPrice |Avg$Cng | |

| |-0.0132 | |

|88.9000 | | |

|90.1500 |-0.1292 | |

| | | |

| |Av%Ret | |

|MinPrice |-3.3586 | |

| | | |

|83.4000 | | |

|88.0200 | | |

| |$Gain/Share | |

| |-12.4500 | |

|Spread |  | |

| |  | |

|5.5000 | | |

|2.1300 | | |

| | | |

| | | |

|PricStDv | | |

| | | |

|1.8687 | | |

|0.6382 | | |

| | | |

| | | |

|Avg%Chg. | | |

| | | |

|0.8225 | | |

|0.1343 | | |

| | | |

| | | |

|Avg$Cng | | |

| | | |

|1.0586 | | |

|0.1171 | | |

| | | |

| | | |

|Av%Ret | | |

| | | |

|3.7673 | | |

|1.9398 | | |

| | | |

| | | |

|$Gain/Share | | |

|22.0700 | | |

|23.7600 | | |

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| | | |

| | |For 1 Share Purchased 2/6 |

| | | |

| | |Price Vs. Date |

| | | |

| | | |

| | |RSQ: PvsDate |

| | |0.4638837 |

| | | |

| | | |

| | | |

| | | |

| | | |

| | |Mean |

| | |847.836 |

| | | |

| | | |

| | |Standard Error |

| | |3.477 |

| | | |

| | | |

| | |Median |

| | |843.140 |

| | | |

| | | |

| | | |

| | | |

| | | |

| | | |

| | |Standard Deviation |

| | |23.580 |

| | | |

| | | |

| | |Sample Variance |

| | |555.999 |

| | | |

| | | |

| | |Kurtosis |

| | |-0.950 |

| | | |

| | | |

| | |Skewness |

| | |-0.015 |

| | | |

| | | |

| | |Range |

| | |95.060 |

| | | |

| | | |

| | |Minimum |

| | |800.730 |

| | | |

| | | |

| | |Maximum |

| | |895.790 |

| | | |

| | | |

| | | |

| | | |

| | | |

| | | |

| | |Avg %Ret |

| | |1.18% |

| | | |

| | | |

| | | |

| | | |

| | | |

| | | |

|Market Comparison For Time Horizon |

| |

|  |BasicMaterials |ConsCyc |ConsNonCyc | Energy |Financial |HealthCare |Industrial |Technology |Telecomm |Utilities |

|2/5 |

| | | | | | | | |

|S&P500 |1.00 |0.0156 | |Beta |  |Return |  |

| |Beta |Return | | | |  | |

|FDX |0.80 |0.0200 | |Mean |1.038 |Mean |0.032 |

|FNM |0.30 |0.0760 | |Standard Error |0.205 |Standard Error |0.026 |

|G |0.50 |0.0400 | |Median |0.800 |Median |0.025 |

|HD |1.30 |0.2650 | |Mode |0.500 |Mode |0.020 |

|LAB |2.20 |-0.1570 | |Standard Deviation |0.740 |Standard Deviation |0.093 |

|MMM |0.50 |0.0040 | |Sample Variance |0.548 |Sample Variance |0.009 |

|MRK |0.50 |0.0200 | |Kurtosis |-1.042 |Kurtosis |3.924 |

|MRO |0.70 |0.0140 | |Skewness |0.509 |Skewness |0.630 |

|NDN |1.50 |0.0540 | |Range |2.200 |Range |0.422 |

|NOK |2.00 |0.0730 | |Minimum |0.000 |Minimum |-0.157 |

|PG |0.00 |0.0250 | |Maximum |2.200 |Maximum |0.265 |

|PRULX |2.20 |-0.0600 | |Sum |13.500 |Sum |0.419 |

|QQQ |1.00 |0.0450 | |Count |13.000 |Count |13.000 |

|IGT |0.50 | | | | | | |

|  | | | | | | | |

|Slope |-0.0327839 | | | | | | |

|TotalRet |0.4190 | | | | | | |

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