The Economy, The Economy, th M k t & Yth M k t & Ythe Markets & Youthe Markets & You

A Discussion with the Rotary Club of MontereyA Discussion with the Rotary Club of Monterey

Cris Cabanillas, CFPCris Cabanillas, CFP ®® Steve Merrell, Steve Merrell, CFPCFP®®

DON’T BELIEVE EVERYTHING YOUDON’T BELIEVE EVERYTHING YOUDON T BELIEVE EVERYTHING YOU DON T BELIEVE EVERYTHING YOU HEARHEAR

Subsequent returnsSubsequent returns1 Year1 Year 38%38%5 Year5 Year 117%117%

Subsequent returnsSubsequent returns1 Year1 Year 38%38%5 Year5 Year 117%117%10 Year10 Year 326%326%10 Year10 Year 326%326%

bbbbSubsequent returnsSubsequent returns1 Year1 Year 18%18%5 Year5 Year 96%96%10 Year10 Year 397%397%

Subsequent returnsSubsequent returns1 Year1 Year 18%18%5 Year5 Year 96%96%10 Year10 Year 397%397%%%%%

Subsequent returnsSubsequent returns1 Year1 Year 23%23%5 Year5 Year 122%122%

Subsequent returnsSubsequent returns1 Year1 Year 23%23%5 Year5 Year 122%122%10 Year10 Year 455%455%10 Year10 Year 455%455%

2009 Returns2009 ReturnsQ1Q1 ‐‐12.48%12.48%Q2Q2 11.96%11.96%Q3Q3 15 82%15 82%

2009 Returns2009 ReturnsQ1Q1 ‐‐12.48%12.48%Q2Q2 11.96%11.96%Q3Q3 15 82%15 82%Q3Q3 15.82%15.82%Q4Q4 8.10%8.10%

YearYear 22.68%22.68%

Q3Q3 15.82%15.82%Q4Q4 8.10%8.10%

YearYear 22.68%22.68%

source: http://www.businessinsider.com, 10/16/2009

August 2010August 2010

Hindenburg Omen

Pundits declare: “Beware market Pundits declare: Beware market meltdown.”

What did we get?What did we get?Distribution of September S&P ReturnsDistribution of September S&P Returns

1818

1414

1616

88

1010

1212

44

66

88

00

22

Data source: Standard & Poor’s

NOT AS BAD AS IT FEELSNOT AS BAD AS IT FEELS

The Consumer: Not dead yet...The Consumer: Not dead yet...Retail Sales ‐ Pct Change vs. Year Ago

5

10

‐5

0

‐10Source: U.S. Bureau of Economic Analysis

‐15

Industrial ProductionIndustrial ProductionIndustrial ProductionIndustrial ProductionPct Change vs. Year AgoPct Change vs. Year Ago

5

10

‐5

0

‐10

5

Source: U.S. Federal Reserve‐15

Recovery’s rocky roadRecovery’s rocky roadRecovery s rocky roadRecovery s rocky road

SummarySummarySummarySummary

•• Beware of punditsBeware of punditsBeware of pundits.Beware of pundits.

•• The economy is healing, but recovery is rocky.The economy is healing, but recovery is rocky.

Si ifi h ll iSi ifi h ll i•• Significant challenges remain.Significant challenges remain.

•• Portfolio structure is key.Portfolio structure is key.

•• Diversification matters.Diversification matters.

•• Look for opportunitiesLook for opportunitiesLook for opportunities.Look for opportunities.

Questions & AnswersQuestions & AnswersQuestions & AnswersQuestions & Answers