OUTLOOK

"Taking Profits on High Yield Bonds"

8/30/2007

On 8/2/07, we stated that we were bullish on high yield bonds and expected an upcoming rally.  In particular, we forecasted the Merrill Lynch High Yield Index to rally to 840 or more from its close of 825.31 on 8/1/07.  During our holding period from 8/2/07 to 8/30/07, the Merrill Lynch High Yield Index rallied to close as high as 837.53 on 8/27/07 which was slightly less than forecast.

Based on our bullish forecast on high yield bonds, our long position in high yield bonds achieved a profit of 4% in 4 weeks.  Year to date, the YieldSafe Signal has outperformed the S&P 500 with significantly less volatility (as shown by the graph verified by TimerTrac).  From a trade perspective, 8 out of 10 completed trades have been profitable in 2007 for a winning percentage of 80%.

Mark Yuan, CFA