OUTLOOK

"Keeping It Close on a Missed Forecast"

6/27/2007

Our forecast for a decline in the XOI index did not go as expected.  Given the strength of the broader market (S&P 500), it was a difficult market climate to short individual sectors.  In this case, a rising tide lifted all boats.

Despite the difficult environment, we were able to scale into our position and exit with a minor loss of -1.98% on the trade.  Going forward, we will keep a close eye on the broader market before shorting individual sectors.

Midyear, the YieldSafe signal has outperformed the S&P 500 with significantly less volatility, as shown by the graph verified by TimerTrac.  For the second half of the year, we look forward to continuing this path and helping our clients achieve consistent gains.

Mark Yuan, CFA