About five years ago, October 04, 2002 to be exact, I wrote an essay entitled, "Tomorrow's Paper." It was intended to illustrate how Industry Group performance showed current market trends and possibly project future trends. At that time it appeared that the weakening price performance of housing stocks was projecting rough times for home builders. Because of plummeting interest rates and a torrent of liquidity, the housing market expanded for the next 33 months instead of contracting. Obviously, I was way too early. The Price of the Building(Residential\Comml) Industry Group actually peaked two years ago, on July 28, 2005.

For me, it was very gratifying to see Mr. Matt Blackman use this same technique to write two prescient articles about the housing market. The first, entitled, "To Catch a Falling Knife, was cited in my March 23, 2007 essay called "The Homebuilders Demise." The second article, which addresses the issue of mortgage lenders, is now appearing in the August 2007 issue of Stocks & Commodities. In both articles, Mr. Blackman used VectorVest graphs of stocks and Industry Groups to conduct his brilliant analyses. Not only did he study Price performance, he also analyzed trends of Earnings Per Share, Earnings Growth Rate, and Growth to P/E ratios. In noting the deterioration of Countrywide Financial's earnings forecasts as given by Vectorvest, Mr. Blackman wrote, "Expect more downdrafts to this and other lenders as the subprime storm widens. A perfect storm in the making?"

It has been quite a while since I have written about using Industry Groups and Business Sectors, but a regular examination of their price performance, both by RT rank and graphical analysis should be part of your routine for picking stocks to buy as well as for selling short. I waited a long time to make money by shorting homebuilders and I've been doing it with a vengeance lately. That's the beauty of reading Tomorrow's Paper.

P.S. Today's "Strategy of the Week" will illustrate some of the techniques we use in analyzing Industry Groups. Don't miss it!

The Summer Hiatus Portfolio is a result of the recognition that high VST stocks go up over time. Thousands of tests have shown this to be true. In fact, the most recent results of 2,612 runs of buying and holding the top 20 stocks ranked by VST-Vector for at least one year show a 99.46% success rate. Only 14 runs out of 2,612 did not produce a profit! The average annual return was 18.35% and there was an average of 68.14% winning trades in each 20 stock portfolio. Phenomenal!

So why did the Summer Hiatus Portfolio produce only a 3.70% return with 45% winning trades? You could say it was the luck of the draw, but even that doesn't answer the question. With a standard deviation of 12.05%, there was only a five percent chance that I would get a return less than 6.30%. Am I that unlucky? I don't think so. It's just that I got too damn smart for my own good. See my essay of June 16, 2006 called "My Game Plan". In other words, I did not follow the test procedures exactly as they were conducted, so I learned, once again, that the market will do whatever it takes to keep you humble.

Had I bought the top 20 high VST stocks shown on October 6, 2006 and held them until the end of trading on July 6, 2007, I could have made a 21.31% return with a 55% winning trades. Had I bought the top 20 high VST stocks shown on October 6, 2006, sold on Rec = 'S' and replaced with top VST stocks, I could be up 25.86% with 54.24% winners as of yesterday. Moreover, I would own a blockbuster portfolio of stocks today.

Of course, I could go on and on all day long with should of, would of, could of's, but the test was not a failure. I also learned, once again, that I definitely am not a buy and hold kind of guy. In fact, I am a card carrying control freak. I could never sit still while stocks like SHOO, SYX, SIM and others went down in price. I like stocks that go up. When they don't, I get rid of them. I also learned that my faith in VectorVest is greater than it has ever been. Some high VST-Vector stocks may crash and burn, but over the long-term, they'll make money for you. Even if you get too smart like I did with The Summer Hiatus Portfolio.

P.S. The version of the Summer Hiatus Portfolio in which I used options for some positions made 5.57%.

P.P.S. The exact procedure we used for running the high VST performance tests is illustrated in this week's Strategy of the Week. To see this brilliant presentation, please click here: For further demonstration of this strategy, please see VectorVest University.

Beginning Friday, August 3rd, VectorVest will begin presenting a five-hour, all-new Investment Clinic. It is aimed to help you make money with VectorVest, and will start with a presentation on Buying Low and Selling High. Yes, the essence of making money in the stock market is to master the fine art of buying low and selling high. Everybody knows that, but only a few can do it. We will show you how.

All the tools and information you need to consistently make money with VectorVest is already available to you. After attending this Clinic, there's nothing more to buy and there are no $6,000 courses to attend. Just apply what you've learned, and you're good to go.

So if this Clinic is so good, why isn't VectorVest charging $6,000? The answer is simply because we don't have to. Our job is to help you make money. If you don't make money, we're going to lose you as a customer. On the other hand, you're going tell your friends when you do make money. I know they'll hate you for it, but maybe a few will get wise and sign-up with us. When they make money, they'll tell their friends and so on and so on. In other words, we'll get our $6,000 by having you as a long-term subscriber and by the business you may bring to us. Your success is going to help us grow and prosper.

OK, so your four-hour Investment Reviews were free, why are you charging $19.95 for the Clinic? For two reasons: First to help cover our costs. Attendees will be getting a served lunch at the Clinic while they had to pay for their own lunch at the Reviews. Secondly, we want you to show up. We always had a lot of no-shows at the free reviews. We're hoping that by placing a small, non-refundable charge for the Clinics, people who sign up will show up. People place a value on something when they pay for it, even if it's a small amount.

Other than these details, we have a terrific event here and encourage you to attend The VectorVest All-New Investment Clinic.

SUMMER HIATUS
The good news is that the portfolio made money. The bad news is that it wasn't pretty. I will provide an in-depth discussion of the Summer Hiatus portfolio experiment next week. In the meantime, new subscribers can get background information on this experiment by reading the VectorVest Views essays dated: 06/09/06, 06/16/06, and 10/06/06.