Trade Alert - January 9, 2008

Model Portfolio Allocation Changes- This Week

A Heads Up on a Potential "Short Sale"

The purpose of this Alert is to give you a heads up that the model portfolios may issue a trigger to go "short" the US stock market. The new Alert could possibly come in mid-week so keep an eye on your email in-box.

You can also watch the market yourself to know when the models will trigger the new trade. The "short sale" will be triggered by a combination of the following conditions:

• The S&P 500 index breaks down decisively ... on heavy volume ... below 1370
• The Dow breaks down decisively ... on heavy volume ... below 12,455

If the new Trade Alert to sell short is triggered, the Performance Xtender model will take a 40% allocation in the short position.

The Max Xtender will go 100% short if the Alert is triggered.

It might be helpful to discuss what options you may have to make a short sale in your portfolio...

If you have a "margin" account with a brokerage house, you have the option of effecting the short sale by actually "selling short" the ETF ticker symbol "SPY" which is the exchange traded fund that tracks the S&P 500 index.

If your brokerage account is not a "margin" account and/or your account is an IRA, then you will need to purchase either a 1) "Inverse Mutual Fund" or 2) an "Inverse ETF". In either case, we recommend you buy one that tracks the S&P 500 index rather than some other kind of stock market index. And do not purchase at this time any kind of inverse fund with "Ultra" in the name or that is leveraged. We would suggest one of the three following alternative funds:

• An Inverse Fund from Rydex Investments, ticker symbol "RYURX"
• An Inverse Fund from ProFunds, ticker symbol "BRPIX"
• An Inverse exchange traded fund, ticker symbol "SH"

If the short sale is triggered by the models, the position might be held by the portfolios for potentially several months or possibly only several days. The model portfolios may also add to the short position at a later time. In any event, the models' quantitative trade management logic will monitor the short positions daily and trigger an "exit" of the short to lock-in profits after a market decline has run its course, or to avoid a significant loss if the market begins to rally enough to break out of a downtrend.

History of Our Short-Sale Trade Management Logic: To see how short-sale positions were managed during the previous "bear market" to hedge the portfolios, review the following chart in detail.

The chart covers the 2 1/2 year time period that encompassed the last bear market. Each 'bar' on the graph represents the trading during 1 week on the S&P 500 index. The bars shaded "yellow" represent weeks when the portfolios were "out of the market" but not short ... in other words the portfolios were "flat", sitting in cash with neither a short position nor a long position in stocks.

The "pink" shaded bars represent weeks when the portfolios held a partial short position, such as 40% short in the Performance Xtender and 100% short in the Max Xtender.

The bars shaded "red" were weeks when the short position was doubled. During these periods, the Performance Xtender was 80% short and the Max Xtender was 200% short (using a leveraged Inverse Fund).

You can see that the trade management logic of the portfolios was pretty adept at capturing the declines in the market during the recent bear period and exiting the short positions in a timely way to lock-in profits.

But as always, you should beware that "Past performance is not necessarily indicative of future performance". Selling short is an aggressive investment practice. So you should consider your current financial condition and/or seek the counsel of a financial advisor to determine whether "selling short" is consistent with your personal circumstances. If it is not, then you can simply keep your portfolio in money market funds rather than execute the short sales.

New Model Portfolio Allocations

Model Portfolio Details

The tables below provide the percentage allocation details and mutual fund ticker symbols for investors following the Model Portfolios by using funds from either of the Rydex Investments or ProFunds mutual fund companies -- or alternatively, investors using exchange traded funds (ETFs).

'Performance Xtender'

(A model portfolio that invests selectively in stock market index funds, plus certain market sectors such as Energy, Gold and Real Estate, and in an Inverse Fund ("Bear Fund"), depending on current market trends for each type of investment. The allocation mix is designed to beat the market significantly during both bull and bear markets with only limited risk of volatility.)

Model Portfolio Changes for this week	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
SELL International -	-	-	-	-	-	-
Corporate Bonds, or Money Market	-.

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
Energy Sector Fund	10%	RYEIX	10%	ENPIX	10%	XLE
Precious Metals Fund	10%	RYPMX	10%	PMPIX	10%	GDX
Corporate Bonds, or Money Market	80% Money Market Funds.

'Max Xtender'

(A model portfolio that invests selectively in stock market index funds and in an Inverse Fund ("Bear Fund"), depending on current market trends for each type of investment. During strong market trends ... either bullish or bearish ... the model uses up to 2-to-1 leverage to magnify returns. The allocation mix is designed to beat the market substantially during both bull and bear markets but results in a relatively high risk of volatility.)

Model Portfolio Changes for this week	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
-	-	-	-	-	-	-
Corporate Bonds, or Money Market	-.

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
-	-	-	-	-	-	-
Corporate Bonds, or Money Market	100% Money Market Funds.