1. 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 55802 Office: 218-464-4399 Toll Free: 877-327-5062 Fax: 218-464-4397 Email: info@bluewater-cap.com www.bluewatercapitaladvisors.com Blue Water’s Monthly Market Review: “Election Year Rally May Continue” September 20, 2012 Ted A. Pavlovich, WMS VP Wealth Management 11

2. INTRODUCTION TED A. PAVLOVICH 2

3. We Seem To Be Following The Pattern 3

4. GLOBAL ECONOMIC SLOWDOWN - THE EVIDENCE KEVIN M. WILSON 4

5. Eurozone GDP Still Falling 5

6. 6 Short-Term Central Bank Loans Expanding in Europe

7. 7 Chinese Economic Activity Reduced That Sinking Feeling

8. 8 Japan Strongly Impacted

9. 9 US Mfg. Indexes Dropping Sharply (Source: www.hussmanfunds.com)

10. 10 Leading/Coincident Indicators Falling NR

11. 11 Other Indicators Negative ?

12. 12 NBER Recession Measures Mixed

13. THE SUMMER RALLY AND ITS ELECTION YEAR SEQUEL DHEENU V. SIVALINGAM 13

14. The Stock Market in Presidential Election Years 14

15. The Seasonal and Not-So-Seasonal Facts Historically, there is a strong seasonality in the stock market where the majority of stock market gains have been made in the November-April time period–and this effect has become more pronounced in the past 50 years. Sell in May… 15

16. 16 Economic Surprise Index Partly Responsible

17. Month-by-Month Seasonal Pattern 17

18. 2012 S&P500 PR Q1: 12% Q2 :-3.29% Q3: ??? (Should be Positive) 18

19. THE FED/ECB WILL (CONTINUE TO) INTERVENE, BUT WILL IT MATTER? KEVIN M. WILSON 19

20. 20 Fed Worried About Deficits And Diminishing Rate of GDP Growth

21. 21 Fed Deeply Concerned About Structurally High Unemployment

22. 22 Other Concerns Include Interest on the Debt… …and the “Fiscal Cliff” – But Note That Effects of Cliff Are Exaggerated

23. 23 Structural Limitations on GDP Growth Make the Situation Precarious

24. 24 The Fed’s Response Has Been Bold Fed Bal. Sheet Assets Projected To Reach $3.5T in 2013 Fed Will Now Buy $50B of MBS Per Month

25. 25 Other Central Banks Have Printed Far More Than The Fed

26. 26 In Spite of Monetary Support, Big Banks Are Just Piling The Money Up Instead of Lending It Out

27. 27 QE’s Effect on Bonds

28. 28

29. 29 Fed’s QE Has Simply Offset The Dips In the S & P 500 52 -58 26 -17 23 -20

30. 30 Many Risk Assets Have Soared, But Especially Gold +166% +119%

31. 31 Dow (in Gold Terms) “Low”

32. 32 Jan. 2000 Sept. 2012

33. THE IMPORTANCE OF INCOME STRATEGIES 33 TED A. PAVLOVICH

34. Aug. 2012 SELL BUY Valuations May Limit Upside Aug. 2012 P/B Ratio = 2.20; Bond/Stock Yld. Ratio = 0.76 34

35. 35 www.GMO.comwww.GMO.com, July 2012 Avg. Expected Returns Are Low for Next 7 Years

36. 36

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38. 38

39. SUMMARY & CONCLUSIONS 39 KEVIN M. WILSON 1)It May Be That If Market Rally Continues, Obama Will Win… 2)It May Be That If Market Corrects, Romney Will Win… 3)Unless Something Else Happens! 4)In Any Case, Money Printing Will Continue Around The World 5)In This Environment, An Income Orientation May Work Well 6)In This Environment, Gold May Help Offset Falling Dollar

40. This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for its accuracy and interpretation are not guaranteed. Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication of guarantee of future performance and no representation, express or implied, is made regarding future performance. The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax matters. “BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.” Disclaimer 40