Kevin M. Wilson, ChFC, PhD President/CEO/CIO Dheenu Sivalingam, MBA AVP/CCO/Senior Analyst 1405 Medical Arts Building 324 W. Superior Street Duluth, MN Office: Toll Free: Fax: Monthly Market Review “Jelly Donuts, Marshmallows, Elections, And Cliff Diving” November 15, 2012 Ted A. Pavlovich, WMS VP Wealth Management 11

INTRODUCTION TED A. PAVLOVICH 2

QE3 AND THE JELLY DONUT ANALOGY KEVIN M. WILSON 3

4 Debt is the Problem

5 Collapse Ruined Banks

6 Corporations Saving Too Much

7 Households Also Deleveraging

8 Unemployment Stubborn, Wages Falling, Middle Class Getting Squeezed

9 GDP Fading, Deflation Cycle Scares the Fed

10 Fed’s Solution is QE, Operation Twist, etc., With Mixed Results

Fed’s Balance Sheet is Nearing $3 T, But No Joy 11

12 Bond Yields Still Falling In Spite of QE, etc. 2000

13 Debt Scares Investors Into Gold

14 Devaluation of Currencies Has A Very Long and Very Bad History

15 WW I Reparations Led to Money Printing In Weimar Republic, Hyperinflation, Rise Of Radical Left

16 The Real Solution is Increased Savings to Finance Deleveraging… …But the Opposite is Happening

HURRICANE SANDY, MARKETS, AND THE MARSHMALLOW ANALOGY FOR HUMAN BEHAVIOR TED PAVLOVICH 17

18 Psychology of Patience Very Important

Preparation for Troubles Requires Planning ? 19

THE WAY TO PROFIT FROM THE ELECTION RESULTS KEVIN M. WILSON 20

21 We Know A Few Things… ?

22 …Markets Also Know Some Things, But Some Trends Seem to be Changing ? ?

23 ObamaCare Will Probably Go Operational, Changing 16% of the Economy to Government Control (But There Will Be Some Winners)

24 Energy and Its Impact on Inflation May Change A Lot

25 Certain Industries and Sectors Will Prosper

EUROPE, CHINA, AND THE FISCAL CLIFF: OPPORTUNITIES 26 DHEENU V. SIVALINGAM

Opportunities: The Fiscal Cliff  Sectors to focus on: 1)Healthcare (Long term structural change) 2)Financial (More clarity about regulations, and we will start to see big banks make major shifts in how they do business) 3)Consumer Goods (People need to eat even in a recession!) 27

Opportunities: Europe  European Companies Are Looking For Cheaper Options (Companies are dropping high cost advertising companies and looking for major online advertisers like Google as an alternative)  It's More Economical To Do Business in Europe (Weaker Euro allows US firms to buy with US Dollars, giving them an advantage) 28

Opportunities: Europe (Cont.)…  European Products Will Cost You Less (Especially luxury products from Europe are seeing sales increase)  European large cap stocks (Large European companies that also do business in countries outside Europe. There are many companies who are domiciled in Europe but do majority of their business outside of Europe) 29

Opportunities: China  Leadership change gives clarity, unlike most other developed countries the leadership will stay in power for next 10 years.  As China rebalances its economy towards being more domestically-driven rather than export oriented, there are going to be a lot of new winners who are more focused on domestic Chinese markets 30

Opportunities: China (Cont.)…  Low inflation allows the Chinese leadership to do more monetary easing if needed or more than the need if they decide to bring the momentum back into the economy. 31

Q & A 32 KEVIN M. WILSON We Will Soon Regress to the Mean

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