Growing and preserving wealth for generations requires a long-term perspective and disciplined process. In 2012, markets remained volatile due to ongoing challenges in Europe and moderate economic growth. However, stock valuations are reasonable and corporate profits remain strong. Looking ahead, following a prudent process focused on risk management and capital preservation should serve investors well, even if surprises emerge.

1. Growing and preserving wealth for generations

2. THE ROAD AHEAD FOR 2012
The financial consultants of Zeller Kern are registered representatives and investment adviser representatives with and offer securities and advisory services
through Commonwealth Financial Network, Member FINRA/SIPC, a registered investment adviser. Financial planning services and fixed insurance products and
services offered by Zeller Kern Private Wealth Management, Inc., a registered investment adviser, are separate and unrelated to Commonwealth. Zeller Kern
Private Wealth Management Inc, 11335 Gold Express Drive, Suite 155, Gold River, CA 95630, 916-436-8270.

3. It’s Time To Play..
Source: esquire.com, Clipart, Hark.com

4. Choose a Team Name
Be Creative!!

5. Rules of The Game
1. Each table plays as a team. No mobile
devices allowed.
2. Points are given for correct answers
only.
3. Team with the highest dollar value
receives a prize.

6. Money
$100

7. Money
On average, the life span of a $1
bill is:
a. 18 months
b. 3 years
c. 5 years
d. 6 months

8. Recessions
$100

9. Recessions
During the last 20 years, the U.S. has
been in a recession for a total of:
a. 5 years
b. 12 months
c. 8 years
d. 26 months

10. Credit
$100

11. Credit
Negative financial information
(excluding bankruptcy can stay on
your credit report for:
a. 2 years
b. 5 years
c. 7 years
d. 10 years

12. Income
$200

13. Income
Which company was the first to
earn $1 billion in net income?
a. Apple Computer
b. General Electric
c. Goldman Sachs
d. General Motors

14. Inflation
$200

15. Inflation
According to the Bureau of Labor
Statistic’s Consumer Price Index Inflation
Calculator, $1 in 1917 has the same
buying power as $20.77 does today:
True or False?

16. Millionaires
$200

17. Millionaires
What percentage of millionaires
drive used cars?
a. 50%
b. 25%
c. 10%
d. 80%

18. Stocks
$500

19. Stocks
The term “Blue Chip” comes from:
a. The sky
b. The color of the poker chip with the
highest value
c. The inside lining color of the royal
crown belonging to Queen Elizabeth

20. Housing
$500

21. Housing
What is the average home price in
Vancouver, B.C.?
a. $58,000
b. $362,700
c. $165,450
d. $207,560

22. Mutual Funds
$1000

23. Mutual Funds
In what year did the U.S. mutual
fund industry surpass $1 trillion in
assets?
a. 1999
b. 1984
c. 2007
d. 1990

24. Debt
$1000

25. Debt
What is the current debt to GDP of
Japan?
a. 50%
b. 78%
c. 102%
d. 229%

26. Final Jeopardy
Question
Currency

27. Currency
How many ways are there to make
change for $1?

28. Our Objective
Our objective at
this event is to
review where
we’ve been,
where we are,
and where we
may be going.

29. Topics To Discuss
• What We Were Saying Last Year
• Where We’ve Been
• What To Watch In 2012
• Current Views On The Market
• Our Advance & Preserve Process

30. The Big Story in 2011… Europe in Crisis
Three main causes:
• Excessive government spending leading to
• Excessive government debt coupled with
• Slow economic growth
And, let’s not forget another biggie…
Monetary union without fiscal union.

31. “When the history
books are written,
2011 may go down
as the year when
political risk trumped
economics, earnings,
and interest rates as
the main force
driving capital
markets.”
--CNBC

32. What Were the “Pros” Saying for 2011?
• David Bianco, Bank of America Merrill
Lynch, said "We're broadly bullish on U.S.
equities.
• Bob Doll, Blackrock, forecast low double-
digit returns, including dividends. “If we're
wrong, I think our forecast is too low.”
Sources: USA Today; CNBC; Yahoo! Finance

33. What Were the “Pros” Saying for 2011?
• Dan Chung, Alger Funds, said stocks
could rise more than 20 percent sometime
in 2011.
• Binky Chadha, Deutsche Bank, forecast
the S&P 500 would rise 23 percent and
close 2011 at 1550.
Sources: USA Today; CNBC; Yahoo! Finance

34. Oops…
John Paulson… from
a $3.7 billion profit in
2007 and a $4.9
billion profit in 2010 to
a 51 percent loss in
2011.
Sources: Bloomberg; Business Insider

35. Oops…
Meredith Whitney…
went on national
television and warned
“hundreds of billions of
dollars” of municipal
bond defaults in 2011.
The total through
December 13, 2011, a
meager $1.68 billion.
Sources: Bloomberg

36. Oops…
Bill Gross… bet heavily
against U.S. Treasurys
in mid-2011 only to see
them become one of the
biggest outperforming
asset classes of 2011.
He issued a formal
apology to clients in
October saying, “I’m just
having a bad year.”
Source: CNBC

37. Forecasting is Not Easy!
 Economy was expected to grow 2.4
percent in 2008, instead, it shrank 0.3
percent.
 In 2009, it was expected
to shrink 0.8 percent,
instead, it shrank 3.5
percent.
Source: CNBC

38. “When you make
a prediction, never
put a prediction
time
on it.”
--Marc Faber

39. What We Were Saying Last Year
• S&P 500 range of 1325 to 1358 by Q1-Q2
• Market correction possible, aging cyclical
bull market
• Moderate GDP growth 2%-4%
• High unemployment remaining
• Continued pressure on real estate prices
• Credit market challenges with states and
municipalities

40. What We Were Saying Last Year

41. Were We Have Been

42. Were We Have Been

43. Market Performance
Significant declines across all equity indexes
occurred during the year.
Measuring from the April 29th high, to the low
achieved on October 3rd:
S&P 500 Index: -19.39%
Russell Mid Cap Index: -23.92%
Russell Small Cap Index: -28.82%
MSCI EM Index: -29.22%
MSCI EAFE Index: -22.27%

44. The Four Phases Of A Secular Bear Market

45. Long-Term View
India,
China,
and
Hong
Kong
were Best
Performer
s
Between
2000 and
Past performance is no
guarantee of future results.

46. Q Ratio and Market Valuation

47. Frequency of Declines
Number Average Frequency
Bear Markets 11 Once every 6.3 years
Corrections 22 Once every 3.1 years
Bear Markets and
33 Once every 2.1 years
Corrections
The S&P 500 Index is a capitalization-weighted index of 500 widely-traded stocks. Created by Standard & Poor’s, it is considered to represent the performance of the stock
market in general. It is not an investment product available for purchase. A bear market is defined as a 20% decline in an index from its previous peak. A bear market ends
when the index reaches its low and subsequently rises by 20%. A bull market is defined as a 20% rise in an index from its previous low. A bull market ends when the index
reaches its high and subsequently declines by 20%. A correction is a decline of at least 10%, but not more than 20%, in an index. Corrections only occur during bull markets.
Sources: Standard and Poor’s; American Century

48. Stock Market Up Sharply From
March 2009 Lows
Past performance is no
guarantee of future results.

49. Current Market Not Tracking Past
Mega-Bears

50. Where We Are Now
2011 Performance
• S&P 500 Index +2.1%
• Russell Mid Cap Index -1.5%
• Russell Small Cap Index -4.2%
• MSCI Emerging Markets Index -18.2%
• MSCI EAFE Index -11.7%
• 10-year Treasury Note Yield +1.9%
• Gold (per ounce) +11.6%
• DJ-UBS Commodity Index -13.4%
Sources: Yahoo! Finance; Russell; Barron’s; djindexes.com,;London Bullion Market Association; Treasury.gov.

51. Where We Are Now
Negatives:
• Unemployment rate, while
improving, is still high.
• Economic growth is still
modest coming off a major
recession.
• Euro-area sovereign debt
problems remain.
• Housing is still weak.
Sources: Bureau of Labor Statistics; Barron’s; The Wall Street Journal

52. Where We Are Now
Positives:
 Retail sales have been
solid.
 Consumer debt load is
easing.
 Consumer confidence
hit an eight month
high in December.
 After-tax corporate
profits are at a record
high.
Sources: CNBC; St. Louis Fed; Bloomberg

53. “More than any other
time in
history, mankind
faces a crossroads.
One path leads to
despair and utter
hopelessness. The
other to total
extinction. Let us
pray we have the
wisdom to choose
correctly.”
--Woody
Allen

54. 2012 Surprises From Doug Kass
1. The U.S. stock market approaches
its all-time high in 2012.
2. The growth in the U.S. economy
accelerates as the year progresses.
3. Former Presidents Bill Clinton
and George Bush form a
bipartisan coalition that persuades
both parties to unite in addressing
our fiscal imbalances.
Source: thestreet.com

55. Goldman Sachs 2012 Forecast
1. 2012 U.S. real GDP up 1.8 percent, and global
GDP up 3.2 percent.
2. 2012 S&P 500 operating profits of $100 a share.
3. Year-end 2012 S&P 500 price target at 1250.
4. 2012 inflation of +1.7 percent.
5. 2012 closing yield on the U.S.10-year Treasury
note at 2.50 percent.
Source: thestreet.com

56. What To Watch in 2012
Global Economy
1. Possible recession in Europe (Austerity).
2. Risk that the euro crisis could deepen
(Wildcard).
3. Slower growth in China (Property Bubble?).
4. Continued record corporate profits in U.S.
(Revert to mean?).
Source: The Wall Street Journal; St. Louis Fed

57. What To Watch in 2012
U.S. Housing Market
1. Housing starts are still near record lows.
2. Housing prices are still falling and at about
the same level as mid-2003.
3. ―Shadow‖ inventory of 3.4 million homes
that are either being foreclosed on or in
delinquency may keep a lid on the housing
recovery.
Sources: The Wall Street Journal; Standard & Poor’s; St. Louis Fed

58. Housing

59. Home Sales

60. What To Watch in 2012
U.S. Job Market
1. Unemployment rate still hovering in the 8.5-
9.0 percent range.
2. Projected job growth in 2012 will only keep
pace with population growth.
3. Structural mismatch between skills of the
unemployed and the skills demanded by
employers.
Source: The Wall Street Journal; Bloomberg

61. Unemployment

62. What To Watch in 2012
Federal, State, and Local Government Belt
Tightening
1. It’s a ―good news, bad news‖ situation.
2. Good news that budget cuts may help reduce
deficits.
3. Bad news that lower government spending
may reduce economic growth in the short
term.
Sources: The Wall Street Journal; St. Louis Fed

63. What To Watch in 2012

64. Where Are We Going?
• S&P 500 key target 1,376, extreme 1,511
• Technical patterns are becoming positive
• Muted uneven economic growth in 2012
• High unemployment remaining
• Continued pressure on real estate prices
• Credit market challenges with states and
municipalities

65. Intermediate Term Projections for S&P 500

66. Long Term Projections for S&P 500

67. Bob Farrell’s 10 Market Rules to
Remember
1. Markets tend to return to the mean
over time.
2. Excesses in one direction will lead to
an opposite excess in the other
direction.
3. There are no new eras–excesses are
never permanent.
Source: MarketWatch

68. Bob Farrell’s 10 Market Rules to
Remember
4. Exponential rapidly rising or falling
markets usually go further than you
think, but they do not correct by going
sideways.
5. The public buys the most at the top and
the least at the bottom.
6. Fear and greed are stronger than long-
term resolve.
Source: MarketWatch

69. Bob Farrell’s 10 Market Rules to
Remember
7. Markets are strongest when they are
broad and weakest when they narrow
to a handful of blue-chip names.
8. Bear markets have three stages–sharp
down, reflexive rebound, and a drawn-
out fundamental downtrend.
9. When all the experts and forecasts
agree— something else is going to
happen.
Source: MarketWatch

70. Bob Farrell’s 10 Market Rules to
Remember
10. Bull markets
are more fun
than bear
markets.
Source: MarketWatch

71. “When dealing
with
people, remember
you are not
dealing with
creatures of
logic, but
creatures of
emotion.”
--Dale
Carnegie

72. Advance & Preserve Investment Process
 A capital preservation model with an offensive strategy.
 A risk balancing process to capture growth when the
market is rising and protect capital when the market is
falling.
 Employs a strict buy and sell discipline.
No strategy ensures a profit or protects against a loss. Investing involves risk including the loss of principal. Past performance is no
guarantee of future results. Observed market movement may not persist in the future. There is no way to determine the ―right‖
time to enter or exit the market. Signals for offensive/defensive action may be inaccurate.

75. Advance & Preserve Investment Process
There is no guarantee this strategy will meet its objectives. The strategy does not guarantee a profit or guarantee
protection against a loss. This illustration is hypothetical and is intended to illustrate the strategy only. The “right” entry or
exit point is not guaranteed.

76. Questions
Source: virulentwordofmouse.wordpress.com

77. And The Winner Is…….

78. Thank you!
The financial consultants of Zeller Kern are registered representatives and
investment adviser representatives with and offer securities and advisory services
through Commonwealth Financial Network, Member FINRA/SIPC, a registered
investment adviser. Financial planning services and fixed insurance products and
services offered by Zeller Kern Private Wealth Management, Inc., a registered
investment adviser, are separate and unrelated to Commonwealth. Zeller Kern
Private Wealth Management Inc, 11335 Gold Express Drive, Suite 155, Gold River,
CA 95630.