Dear

We apologize for the delay in publishing the newsletter, this was due to some technical difficulties uploading the pdf files to the website.

At the end of May, bank profits were reported as rising substantially in the first quarter with institutions reporting their best quarterly results since the second quarter of 2007.  This is despite the number of problem banks in the U.S. continuing to rise.  In international economic news, the leaders of the Group of Eight nations ended their summit Deauville, France, saying relatively little about the economic challenges they face other than that the global economic recovery was gaining strength and becoming more self-sustained whist warning that downside risks remained.  The G-8 singled out the sharp rise in commodity prices as a headwind to the recovery

In the US, job gains slowed to a crawl in May, and the unemployment rate moved higher.  Nonfarm payrolls rose by a seasonally adjusted 54,000, the smallest gain since September and a fraction of the 125,000 jobs expected by economists.  In the housing market, U.S. home prices fell in March for the eighth straight month, confirming the beleaguered housing market has entered a double-dip recession.  The Case-Shiller 20-city home-price index dipped below its April 2009 trough, meaning that home prices have fully retreated from the gains posted from May 2009 through June 2010.

Still with housing news, at the beginning of June, the values on the country's most modestly priced homes took a harder hit than their upscale counterparts during the downturn.  Houses priced at the low end of housing markets typically fell about three times more than those at the upper end in the last year, according to reports.

Last week, as fears stirred by Greece's deepening debt crisis raced through global financial markets, a quick check of U.S. banks showed they risk losses of tens of billions of dollars should the Mediterranean nation default on its payments.  U.S. banks had total exposure of $41 billion to Greece by the end of 2010 although most of the commitments appeared to be indirect.

In company news there were highs and lows: J.C. Penney Co. shares saw their biggest single-session percentage gain in at least 10 years after the midmarket department-store operator surprised investors with an executive coup, hiring Apple's retail-store chief, Ron Johnson, as its new CEO.  Johnson, senior vice president of retail at Apple for the past 11 years, was credited with pushing the iPod and iPhone manufacturer's retail presence to its approximately 323 stores in the United States and abroad.  For the lows, more investors threw in the towel on Research In Motion Ltd. after the company's latest disappointing report, with half a dozen brokers downgrading the stock and more scaling back their price targets.  The stock's 24% drop for the week put the shares at a record-low valuation.

Anacott subscribers saw a quiet expiration with two positions having calls that expired worthless and one position assigned.  AOL Inc. a Covered call conservative position was assigned for a profit of 47.21% annualised.  Full details on all these positions can be seen in the newsletter or on our website.

Graham J O'Connor - President
Anacott Investments LLC

The DOW opened at 12,511.29 on 23 May 2011 and closed at 12,004.36 on 17 June 2011, a decrease over the period of 4.22%.

The Nasdaq Composite opened at 2,761.96 on 23 May 2011 and closed at 2,616.48 on 17 June 2011, a decrease over the period of 5.56%.

The S&P 500 opened at 1,333.07 on 23 May 2011 and closed at 1,271.50 on 17 June 2011, a decrease over the period of 4.84%.

These portfolios were set up on 1st January 2005 and are operated exactly the way our subscribers operate their accounts. The returns are shown NET of OptionsXpress commission rates. Each portfolio was set up with the following parameters:

Equity LEAPs: $50k and up to 10 positions
Positions:  DELL, HPQ, MSFT, CVS, MRK, GILD, LOW, FCX, TGT
Basis Date:  1/1/2005  Market Value:  $ 31,542.00
Starting Basis: $50,000.00  Total Income: $4,178.20  Cash on Hand: $ 3,436.11
Return on Account: -30.0%  Total Value:  $ 34,978.11

INDEX LEAPs: $50k and up to 4 positions
Positions:  XLK, GDX, SMH
Basis Date:  1/1/2005  Market Value:  $ 43,776.00
Starting Basis:  $50,000.00  Total Income:  $ 10,326.30  Cash on Hand:  $ 8,171.33
Return on Account:  3.9%  Total Value:  $ 51,947.33

Covered Calls - Conservative: $50k and up to 5 positions
Positions:  UTSI, SPLS, MSFT, SVU, GLW
Basis Date:  1/1/2005  Market Value:  $ 39,977.00
Starting Basis:  $50,000.00  Total Income:  $ 2,880.15  Cash on Hand:  $ 10,887.18
Return on Account:  1.7%  Total Value:  $ 50,864.18

Covered Calls - Aggressive: $75k and up to 5 positions
Positions:  CWTR, CSCO, MRVL, TLM, MXIM
Basis Date:  1/1/2005  Market Value:  $ 73,961.00
Starting Basis:  $75,000.00  Total Income:  $ 2,775.35  Cash on Hand:  $ 36,778.91
Return on Account:  47.7%  Total Value:  $ 110,739.91

To view the Benchmark portfolio performance charts, please CLICK HERE

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To view the monthly analysis sheet for all our services please CLICK HERE

You will need Adobe Acrobat reader to view the charts, you can get a free copy by clicking  HERE

Money Flow Index (MFI)

The Money Flow Index (MFI) is a momentum indicator that is similar to the Relative Strength Index (RSI) in both interpretation and calculation. However, MFI is a more rigid indicator in that it is volume-weighted, and is therefore a good measure of the strength of money flowing in and out of a security. It compares "positive money flow" to "negative money flow" to create an indicator that can be compared to price in order to identify the strength or weakness of a trend. Like the RSI, the MFI is measured on a 0 - 100 scale and is often calculated using a 14 day period.

The "flow" of money is the product of price and volume and shows the demand for a security and a certain price. The money flow is not the same as the Money Flow Index but rather is a component of calculating it. So when calculating the money flow, we first need to find the average price for a period. Since we are often looking at a 14-day period, we will calculate the typical price for a day and use that to create a 14-day average.

Typical Price = Day High + Day Low + Day Close

                                            3

Money Flow = (Typical Price) x (Volume)

The MFI compares the ratio of "positive" money flow and "negative" money flow. If typical price today is greater than yesterday, it is considered positive money. For a 14-day average, the sum of all positive money for those 14 days is the positive money flow. The MFI is based on the ratio of positive/negative money flow (Money Ratio).

Money Ratio = Positive Money Flow

                     Negative Money Flow

Finally, the MFI can be calculated using this ratio:

Money Flow Index = 100 - (100 / 1 + Money Ratio)

The fewer number of days used to calculate the MFI, the more volatile it will be.

The MFI can be interpreted much like the RSI in that it can signal divergences and overbought/oversold conditions.

Divergences: Positive and negative divergences between the stock and the MFI can be used as buy and sell signals respectively, for they often indicate the imminent reversal of a trend. If the stock price is falling, but positive money flow tends to be greater than negative money flow, then there is more volume associated with daily price rises than with the price drops. This suggests a weak downtrend that threatens to reverse as money flowing into the security is "stronger" than money flowing out of it.

Overbought/Oversold: As with the RSI, the MFI can be used to determine if there is too much or too little volume associated with a security. A stock is considered "overbought" if the MFI indicator reaches 80 and above (a bearish reading). On the other end of the spectrum, a bullish reading of 20 and below suggests a stock is "oversold".

Disclaimer: The Curmudgeon offers his opinions freely but cautions the reader that this is what they may be worth.

Someone at AARP realized the coming budget deal will very likely include entitlement reform, which means social security will be carefully scrutinized. And so, the politically powerful American Association of Retired Persons has finally admitted that the federal government's fiscally doomed entitlements must be fixed.

On Friday, the AARP officially decided, after what was reported to be a tumultuous internal debate, that it will no longer reflexively stand in the way of any/all budget deals involving Social Security benefits.

The group immediately tried to make little of the change, issuing a statement Friday claiming that "Contrary to the misleading characterization in a recent media story, AARP has not changed its position on Social Security." The AARP also said, "Any changes to this lifeline program should happen in a separate, broader discussion."

Decoded from lobbyists' lingo into Standard English, "Please give AARP a seat at the negotiating table in some big deal on the future of Social Security, Medicare and maybe other things too."

"The ship was sailing. I wanted to be at the wheel when that happens," said John Rother, AARP's long-time policy chief and a prime mover behind its change of heart.

But moderate Democrats such as the Third Way group in Washington were beside themselves with glee. They told the New York Times that it was "a watershed moment," and now that the AARP has "opened the door to reform, it is time for lawmakers to walk through it," as Third Way President Jonathan Cowan put it.

"If they come around and say they're ready to do something, it will be like the Arctic icecap cracking," said former Sen. Alan Simpson, co-chairman of a White House commission on the deficit. He has frequently assailed the group as a barrier to progress.

The biggest political winner, of course, is House Budget Committee Chairman Paul Ryan, R-Wis., whose bold plan to save entitlements through free-market reform has obviously translated into pressure on the not-an-inch position AARP has held over so many years.

How can the New York Times' Paul Krugman (exposed by KTS as a serial liar), and the Democrats who will be campaigning in 2012, continue to call Ryan an extremist now that his plan -- just by being placed on the table -- has caused such a seismic development in the debate?

It's true that Ryan's plan focuses on Medicare, but each entitlement is chained inexorably to the others. When one is recognized as being in shambles, reform will come into play for the others, too.

Ryan's proposal cast the die in demanding that something be done about Washington's unsustainable fiscal culture of gargantuan, untouchable spending programs that come with automatic annual expenditure increases and phony "trust funds" containing no real assets. Remember Al Gore's "Lock Box?" Yes, Curmudgeon is laughing too.

The pressure that caused AARP to buckle has been building for months.

In January, for instance, Medicare Chief Actuary Rick Foster told the House Budget Committee that he has more confidence in the Ryan plan bringing down costs and saving Medicare from bankruptcy than he does in the ObamaCare law's ability to do so.

On the other side of the Capitol, Sen. Kay Bailey Hutchison, R-Texas, wants to increase the retirement age by three months each year beginning in 2016, with those 58 and over left unaffected. By 2027, the retirement age would be 69.

Cost-of-living-adjustments would be reduced by 1% a year. Social Security's chief actuary believes her plan would reduce the national debt by $7.2 trillion by 2085.

The best long-term plan for Social Security is to give individuals control over their own retirements through personal accounts, allow the accounts to accrue a decent return, and thus prevent government from treating the money as its own.

To be sure, AARP's switch is a vindication for those, such as the analysts at the Cato Institute, who have championed private solutions. Remember G. W. Bush's private accounts proposal in 2005?

It's finally getting harder to pretend that $6.5 trillion in unfunded government obligations isn't really there, and that a cut of more than 20% in benefits in a few years under current law won't happen.

Finally, let Democrats call Paul Ryan an extremist now! And if they do, then Curmudgeon will answer them with a well-deserved "Shame!"