Notes

Outline

Kiawah Golf Investment Seminars Presents: Investment Performance: What You Really Want and How To Get It

Disclosure/Disclaimer Disclaimer Notice: The information contained in this slide presentation is intended by Kiawah Golf Investment Seminars for the use of the named individual or entity to which it is presented, and may contain information that is privileged or otherwise confidential. Any mention or listing of securities, security symbols, or other individual investment entities are not to be considered specific buy, sell or hold recommendations. No information, ideas, suggestions, or thoughts expressed in any verbal communication from Steve Selengut should ever be interpreted as legal or tax advice... EVER! Additionally, The Brainwashing of the American Investor is not the property of Sanco Services, a brochure that describes Sanco Services, or a promotional piece designed by Sanco Services. The book is the sole property of author Steve Selengut and is simply a description and explanation of the methodologies, strategies, and procedures that are used within the Working Capital Model, which is also the exclusive property of Mr Selengut.

How to Become a Happier Investor

What Investors Want/Need Higher Lows During Corrections Correction Preparation Methods Income Maintenance & Consistency Faster Moves to New MV Highs Constant “Working Capital” Growth Annual “Base Income” Growth No Disappearing Profits - - - EVER!

Six Steps to a More Secure  Investment Future Develop an Asset Allocation Plan Apply Risk Minimization Techniques Understand Investment Environment Manage the Income Bucket Managing the Equity Bucket Exorcize the Wall Street Demons

Asset Allocation Model

Risk Minimization Techniques Asset Allocation Security Selection Rules – the QDI Diversification Rules Income Rules Profit Taking Targets Focus on the Rules

Understanding the Investment Environment Three Imbedded Cycles Realistic Expectations--- by class & type Identifying Long-Term Risks - - - The Real Ones.

Market ~ Cycle ~ Statistics Issue Breadth New 52-Week Highs and Lows Actives – Advancers – Decliners Investment Grade Value Stock Index

Interest Rate Expectations

Retirement Income Portfolios Types & Forms Of Income Securities Reasonable Yield Assumptions Intellectual & Emotional Blinders Keeping Your Eye On The Ball

Managing the Equity Portfolio Identify Your Selection Universe Q-D-I Rules & Standards Rules For Buying: Macro & Micro Placing Orders Setting Profit Taking Targets Keeping Your Eye On The Ball

Trading Example - ROK Jun 2006 – Jun 2007

Performance Measurement Growth of base income Profit production from trading Overall growth in working capital Use WC, not market value Calendar year #’s: trading, income, and WC. Market Value #’s: Peak to Peak only

Questions?

Some Key Thoughts No correlation between the calendar year and any economic, market or interest rate cycle. Always control your greed with profit taking Never think of cash as an asset allocation bucket. The income generated by your assets is more important than their current market value. Stop analyzing, charting, predicting, reading, reviewing, classifying, and crying. It’s time for action.

Some More Key Thoughts Trading produces more growth in capital, more growth in income, and more inflation insurance than any other strategy Profit taking is a management or business decision. It is not  an attempt at market timing To benefit from a correction, you must take action during the rally. Working capital is expected to rise every year, even if the market crashes and interest rates rise Aggressive trading of quality issues is a winning strategy.

You Can Become A Happier Investor

Income Security Warnings: Don’t buy anything new or just coming out (“certified pre-owned” is better) Don’t buy short-term maturity dates Wait a week or so after the Fed changes rates before you shop Avoid all gimmicks and complications

Income Portfolio Mechanics Generating cash flow is job one; it’s OK if you never take a profit When prices rise, take profits When prices fall, add to your position, increasing yield and reducing cost basis Actively managed, close-end fund is the investment vehicle of choice

Income Portfolio Performance Measurement Growth of base income Overall growth in working capital Do NOT focus on market value Do NOT compare against indices Do NOT think in calendar year terms Trading profit is gravy

Equity Investing Conservative Trading Approach Trading: Capitalizing on short-term gain opportunities Embrace Market Volatility: Buy below cut off point; sell at prescribed targets Up trend Expectations:  6 month average turnaround – achieve target profit. Above average WC growth. Correction Expectations: Add to positions and add new positions; reduce profit target based on cash position. (DRIPs). Lower WC growth. Smart Cash Allocation: Use Working Capital numbers

Equity Order Mechanics Never use market orders Use day-limit orders only Never use stop loss orders – ever, because: We own high-quality stocks purchased in a down-trend and expect them to move lower We want to add to our position, and have allowed for that in the original purchase We don’t need to protect a profits because?

During Corrections Although there are more sellers than buyers, the buyers intend to make money on their purchases So long as everything is down, don’t worry so much about the price of individual holdings. Fast and steep corrections are better than the slow attrition variety. Always accept even half your normal profit target while buying opportunities are plentiful. Don’t be in a rush to fill your portfolio, but if cash dries up before it’s over, you are doing it correctly.

Working Capital Model (WCM) Allocation based on cost basis (60/40 initial) Working capital = cost basis + deposits + dividends + interest + capital gains – withdrawals – capital losses. Realized proceeds are reinvested at same asset allocation split (60/40)

The Investor’s Creed “My intention is to be fully invested in accordance with my planned equity/fixed income asset allocation. On the other hand, every security I own is for sale, and every security I own generates some form of cash flow that cannot be reinvested immediately. I am happy when my cash position is nearly 0 percent because all of my money is then working as hard as it possibly can to meet my objectives. But, I am ecstatic when my cash position approaches 100 percent because that means I’ve sold everything at a profit, and that I am in a position to take advantage of any new investment opportunities, that fit my guidelines, as soon as I become aware of them.”