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Kevin M. Wilson, ChFC , PhD President/CEO/CIO

Blue Water’s Monthly Market Review: “Election Year Rally May Continue” September 20, 2012. Kevin M. Wilson, ChFC , PhD President/CEO/CIO. Dheenu Sivalingam, MBA AVP/CCO/Senior Analyst. Ted A. Pavlovich, WMS VP Wealth Management. Office: 218-464-4399 Toll Free: 877-327-5062

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Kevin M. Wilson, ChFC , PhD President/CEO/CIO

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  1. Blue Water’s Monthly Market Review: • “Election Year Rally May Continue” September 20, 2012 Kevin M. Wilson, ChFC, PhD President/CEO/CIO Dheenu Sivalingam, MBA AVP/CCO/Senior Analyst Ted A. Pavlovich, WMS VP Wealth Management Office: 218-464-4399 Toll Free: 877-327-5062 Fax: 218-464-4397 Email: info@bluewater-cap.com www.bluewatercapitaladvisors.com 1405 Medical Arts Building 324 W. Superior Street Duluth, MN 55802 1

  2. IntroductionTed a. pavlovich 2

  3. We Seem To Be Following The Pattern

  4. Global economic slowdown - the evidenceKevin m. wilson 4

  5. Eurozone GDP Still Falling

  6. Short-Term Central Bank Loans Expanding in Europe

  7. Chinese Economic Activity Reduced That Sinking Feeling

  8. Japan Strongly Impacted

  9. US Mfg. Indexes Dropping Sharply (Source: www.hussmanfunds.com)

  10. Leading/Coincident Indicators Falling NR NR

  11. Other Indicators Negative ?

  12. NBER Recession Measures Mixed

  13. The summer rally and its election year sequeldheenu v. sivalingam 13

  14. The Stock Market in Presidential Election Years 14

  15. The Seasonal and Not-So-Seasonal Facts Historically, there is a strong seasonality in the stock market where the majority of stock market gains have been made in the November-April time period–and this effect has become more pronounced in the past 50 years. Sell in May… 15

  16. Economic Surprise Index Partly Responsible

  17. Month-by-Month Seasonal Pattern 17

  18. 2012 S&P500 PR Q1: 12% Q2 :-3.29% Q3: ??? (Should be Positive) 18

  19. The fed/ecb will (Continue to) intervene, but will it matter?Kevin M. Wilson 19

  20. Fed Worried About Deficits And Diminishing Rate of GDP Growth

  21. Fed Deeply Concerned About Structurally High Unemployment

  22. Other Concerns Include Interest on the Debt… …and the “Fiscal Cliff” – But Note That Effects of Cliff Are Exaggerated

  23. Structural Limitations on GDP Growth Make the Situation Precarious

  24. Fed Bal. Sheet Assets Projected To Reach $3.5T in 2013 The Fed’s Response Has Been Bold Fed Will Now Buy $50B of MBS Per Month

  25. Other Central Banks Have Printed Far More Than The Fed

  26. In Spite of Monetary Support, Big Banks Are Just Piling The Money Up Instead of Lending It Out

  27. QE’s Effect on Bonds

  28. Fed’s QE Has Simply Offset The Dips In the S & P 500 52 26 23 -58 -17 -20

  29. Many Risk Assets Have Soared, But Especially Gold +166% +119%

  30. Dow (in Gold Terms) “Low”

  31. Jan. 2000 Sept. 2012

  32. The importance of income strategies TED A. PAVLOVICH 33

  33. Valuations May Limit Upside SELL Aug. 2012 Aug. 2012 P/B Ratio = 2.20; Bond/Stock Yld. Ratio = 0.76 BUY

  34. Avg. Expected Returns Are Low for Next 7 Years www.GMO.com, July 2012

  35. It May Be That If Market Rally Continues, Obama Will Win… It May Be That If Market Corrects, Romney Will Win… Unless Something Else Happens! In Any Case, Money Printing Will Continue Around The World In This Environment, An Income Orientation May Work Well In This Environment, Gold May Help Offset Falling Dollar Summary & Conclusions KEVIN M. WILSON 39

  36. Disclaimer This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for its accuracy and interpretation are not guaranteed. Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication of guarantee of future performance and no representation, express or implied, is made regarding future performance. The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax matters. “BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.” 40

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