AAII Silicon Valley Meeting Saturday November 13, 2010 Presented by: Tom Kopas Since 2000 a “Lost Decade” For Investors… Are you Prepared for Another “Lost Decade?” The Secular and Cyclical Outlook for Stocks, Bonds, and Commodities

19-years/ 69% decline/ 6 recessions 19-years/ 67% decline/ 4 recessions 16-years/ 62% decline/ 4 recessions 10-years/ 38% decline/ 2 recessions ? ?

Halfway Through Secular Bear Completed Secular Bear Target Area

U.S. Stock Prices (Inflation Adjusted) U.S. Commodity Prices Commodity Oscillator (72/240)

Key Points: Secular Trend for Stocks  Long Periods of Alternating Good and Bad Performance  Secular Trends Change at Extreme Valuation Levels  Currently Halfway through our 4 th Secular Bear Market  Be Aware of Commodity Secular Bull Market  Capitalize on Cyclical Stock Market Opportunities  Understanding Secular Environment is Key to Success

Financial markets are linked in a logical, rational, and sequential relationship to business activity. Financial markets have tracked these business cycle sequences for over 150 years. Pring Turner Investment Approach

The Random Noise of Economic News!

Money Supply Commodities Bond Prices Stock Prices Economy ? Secular Bear Secular Bull

4 to 5 YEARS Bonds Stocks Inflation Sensitive

Utilities Food Producers U.S. Treasuries Banks Technology Consumer Discretionary Technology Transports Oil Drillers Diversified Metals Energy Oil DrillersU.S. Treasuries Diversified Metals Healthcare

 Markets are Linked in a Logical, Rational, Sequential Relationship  For over 150 Years, Markets have Tracked Business Cycle Sequences  During Secular Bear Markets Economy in Recession More Often  Pring Turner Organizes the Business Cycle into 6 stages  Currently in Stage 4  Good for Stocks and Inflation Sensitive Securities  Bad for Bonds  Business Cycle Drives Profitable Asset Allocation Decisions Key Points: Investing Around the Business Cycle

…Uptrend still intact. Oscillator registered sell signal but…

Green/Red highlights show when KST is above/below its 12 Month Moving Average

Green highlights show when our secular model is bullish

Green highlights show when this cyclical model is bullish

Trading Range likely to be broken this cycle Early phase of Commodity Outperformance over Bonds

Key Points: Secular Trend Bonds/Commodities  Bonds have been in a Secular Bull Market for nearly 30 years  Bond Owners Beware: Secular Trend is at a Critical Juncture  Cyclically Bonds are Vulnerable to Interest Rate/Inflation Risks  Small Rise in Interest Rates Leads to Substantial Losses in Bonds  Commodities Continue Secular Uptrend  Risky for Bonds  Opportunities in Inflation Sensitive Securities

ClassSecularCyclicalTactics StocksBearBull Use Business Cycle to Tactically Allocate Assets Inflation Themes are in Secular Bull Resourced Based, Foreign-Emerging Markets Quality with International Exposure Income Producers BondsBear?Bear Review and Reconsider Risks Lower Bond Allocation Reduce Bond Maturities Set up Short-term Bond Ladder Hedge Bonds with Inflation Sensitive Securities Inflation Sensitive Assets Bull Favor Natural Resource Companies “Chindia” Theme, Global Resource Demand Precious Metal Exposure Resource Based Countries Canadian Royalty Trusts Pring Turner Capital Group Tactics to Protect and Grow Your Wealth Secular Trend at Critical Juncture

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