From: US GIO <[email protected]> To: Undisclosed recipients:; Subject: Eye on the Market, September 18, 2012 Date: Tue, 18 Sep 2012 16:42:50 +0000 Attachments: 09-18-2012_-_EOTM_-_Coast_is_Clear_investing.pdf Inline-Images: image003.png; image005.png; image007.png; image009.png; image0 1 1 .png; image013.png; image015.png; image017.png; image004.png; image006.png Eye on the Market, September 18, 2012 (attached PDF easier to read) Topics: On staying invested over time; Market update; and the magic elixir of the Clinton Recovery The "By Any Means" necessary mantra of the world's central banks remains in place, boosting global equity markets again last week, now up 16% for the year. This theme has trumped any other with regards to financial markets in 2012. With US and European core inflation below 2% and falling, it's full steam ahead for the printing presses. Milton Friedman expressed concern about a system which "gives so much power and so much discretion to a few men", and "without any effective check by the body politic". Let's hope the Fed and the ECB are doing the right thing in the long run; their track record is mixed. More details below in the Market Update. On staying invested: the consequences of "Coast is Clear" investing Most of the time, we focus here on issues affecting the global business cycle and their impact on portfolio investments, with the goal of emphasizing ones we think offer good value (e.g., large cap US growth stocks, public and private credit), and ones we don't (European equities over the prior 3 years). While these portfolio emphases can be valuable if executed at the right time (i.e., S&P 500 outperfonned Europe by 34% since 2010, and Japan by 380% during the 1990's), the benefits of staying close to some kind of "normal" investment position over time has been just as important. Here's an example of how investors sometimes vary from their normal risk objectives, and what the consequences can be. The most frequent