1. Investing in Volatile Times Colorado Financial Management Thursday, May 28, 2009 (Gary’s Milestone Wedding Anniversary) 1

2. Market Outlook  Are stock markets experiencing a near-term rally in a long-term slow to no-growth environment?  Long-term market challenges Consumer, corporate and government debt Period of deleveraging and reregulating US consumer spending will contract from 70% of GDP to 60%-65% of GDP Entitlement programs and excessive government debt will limit government’s ability to provide additional stimulus Long-term GDP growth may average 2.5%, not 3.5% 2

3. Market Outlook  Why has the stock market increased so much from the March 9 th low? March 9 low may have been an over-correction The economy has most likely bottomed Consensus GDP forecast indicate very modest growth (not contraction) in second half of 2009 Earnings although far below 2006 and 2007 highs have most likely bottomed Interest rates are probably at their low point, meaning eventually more return potential in stocks vs. bonds. Stock markets anticipate the events above 3

4. CFM Economic Charts Earnings 4

5. Market Outlook  How long will this stock market rally last? No one knows for sure - perhaps 9 to 12 months with intermittent corrections  Stimulus benefits may abate in 2010  Inflation concerns and higher interest rates are possible in 2010  Energy prices will increase with improved global economies  US consumer will remain challenged by debt  Potential for tax increase – corporate and individual  It may likely take 5 - 7years for corporate earnings to reach their pre-recession highs 5

6. Secular Bear Markets 6

7. Evolution of CFM  From individual bonds to PIMCO bond mutual funds  From primarily buy and hold investment strategy, to fundamental and then to tactical asset allocation strategy  Goal to make timelier changes in asset allocation 7

8. Some things don’t change at CFM  Broad bond-stock asset allocation  Incremental movements in allocation  Minimum bonds and maximum stocks based upon client profile and desires 8

9. Some things don’t change at CFM  Core investments have worked well – timely changes in asset allocation were the problem  Core investment characteristics Above average dividend payments High rankings in longer term risk- adjusted performance 9

10. CFM Fund Performance M1 10

11. Relying more on tactical asset allocation  Fundamental analysis is the study of economic factors that ultimately provide the underpinnings for the stock market Earnings Interest rates GDP growth, etc.  Tactical analysis is a study of the market itself – which is the leading economic indicator Momentum Resistance levels Relative bond-stock performance, etc.  We need both 11

12. Relying more on tactical asset allocation  Why Ned Davis tactical research (NDR)? Their philosophy is to remain broadly allocated with bond minimums and stock maximums NDR moves incrementally CFM back tested NDR asset allocation recommendations to 1981 12

13. NDR Tactical Allocation Example of Data Stock/Bond Trend Model (Triple Weighted) Stock/Bond Ratio Trend Stock/Bond Oversold Indicator % of Stocks Above 10W & 30W Moving Average Small-Cap/Large-Cap Ratio ROC Bond Momentum Fed Model Baa Bond Yield – S&P Earnings Yield Spread Real Economic Liquidity Real Monetary, Fiscal & Exchange Rate Weekly Unemployment Claims Money Supply & Demand S&P 500 Real Dividend Growth 13

14. NDR Tactical Allocation Example of Data II Bull/Bear Sentiment + Monetary Commitments of Traders (Sentiment) Unsmoothed Model Reading Final Model Reading (Five-Week Moving Average) Big Mo NDR has over 2,000 charts but boil it all down to ongoing bond-stock asset allocation recommendations based upon judgment 14

15. NDR Bond – Stock Allocation 15

16. NDR Tactical Allocation Data 2007 - 2009 16

17. NDR Tactical Allocation Data 1981- 2009 17

18. 18

19. 19

20. NDR Tactical Allocation  CFM conclusions: Had CFM applied NDR historical tactical allocation recommendations, we would have seen improved performance and reduced volatility Historically NDR recommendations have been timely in up and down markets CFM will increase weighting of NDR recommendations in our asset allocation  Reality Check Is InvesTech tactical allocation moving in the same direction? Are fundamentals trending in the same direction? 20

21. NDR Tactical Allocation  How do we get there from here? The stock markets have increased substantially since the March 9 th low There is a reasonable probability of a correction of 5% to 10% over the next couple of months Maybe not Options  Client choice  Maintain bond/cash minimums by portfolio  Be patient, wait for correction and then rebalance  Move incrementally to NDR allocation - four months?  Do nothing and wait for NDR to lower their stock allocation  Err towards conservative unless client directs otherwise 21

22. Bond Mutual Fund Policy  Two current interest rate dynamics General upward pressure on interest rates, particularly treasuries Interest rate on other bonds compared to (spread) treasuries narrowing  Non-treasury bonds preferred at this time  High quality corporate bonds may have appreciation potential (spread narrowing) Eventually rates will go up and bond maturities will need to be shortened 22

23. Bond Mutual Fund Policy 23

24. Minimum Bonds, but Minimum Stocks Too 24

25. Regional Asset Allocation 25

26. Sector Weightings 26

27. This too shall pass  It will take time but the sun will again shine  Human spirit has incredible capacity to adapt and improve  The emergence of India and China are significantly positive  Global free markets purge excess, correct mistakes and reward efficiency and hard work 27

28. Thank you  We know that this is a challenging and unprecedented situation for all  CFM’s lessons learned The risks with individual bonds are not worth the benefit We must become more timely with changes in asset allocation  Know that our intentions always have been and will always be in the best interest of our clients, our friends  Questions 28