Panic Is Not An Investment Strategy....

1. “ Panic Is Not An Investment Strategy” Straight answers for high net worth investors facing a volatile market Welcome

2. 1. Independent Registered Investment Advisor 2. Fee-Only Advisor 3. Use Pure No-Load Mutual Funds, ETFs, Stocks & Bonds 4. Design Portfolios to Reduce Risk 5. Motivated by Making YOU Successful 6. Service is the Bottom Line! Who is All Star Financial?

28. How Long Will This Last?

29. How Long Will This Last? 1970s Vietnam War Nixon Devalues Dollar OPEC Oil Embargo Nixon Resigns Iran Hostage Crisis 1980s Reagan Shot U.S. Becomes Debtor Nation Insider-Trading Scandal S&L Bailout U.S. Invades Panama 1990s Gulf War Orange County Default Oklahoma City Bombing Government Shutdown Asian Economic Crisis Russian Bond Default New Millennium Crash of the Dot-coms 9/11 Corporate Accounting Scandals War in Iraq Subprime Mortgage Fallout Credit Crisis in the U.S.

35. Two emotions drive investment decision making. The stock market is an emotional place to keep your money. Asset Allocation

36. GREED motivates the investor to buy. The stock market is an emotional place to keep your money. Asset Allocation

37. GREED motivates the investor to buy. The stock market is an emotional place to keep your money. Asset Allocation FEAR motivates the investor to sell.

38. Asset Allocation During a given economic cycle there are many opportunities to make poor investment decisions. GREED GREED GREED FEAR FEAR FEAR GREED

39. Asset Allocation During a given economic cycle there are many opportunities to make poor investment decisions. Strategic Asset Allocation helps investors manage their emotions of fear and greed. GREED GREED GREED FEAR FEAR FEAR GREED

40. Asset Allocation A diversified investment portfolio typically will not grow as fast... + - + - +

41. Asset Allocation - - + - + Which investor is in a better position when the market turns around? A diversified investment portfolio typically will not grow as fast… However, a diversified investment portfolio will not go down as fast.

42. Asset Allocation + + - + - “ It’s Not How Much You Make, It’s How Much You Keep” “ Slow But Sure Wins The Race”

43. Compare Two Portfolios Portfolio A $10,000 Year % Return 1 15 2 15 3 15 4 15 5 15 5 Yr Avg 15% Portfolio B $10,000 Year % Return 1 45 2 30 3 0 4 -20 5 20 5 Yr Avg 15% $20,114 $18,096

44. Economic Cycle Recession Start of Recession Stagflation Mature Growth Initial Growth Stabilization 6 12 9 3

45. Economic Cycle Central Banks Begin Restraint 12 Short Term Rates Up Short Term Rates Higher than Long Term Profits Peak Fed Relaxing 3 Raw Materials Costs Falling Short Term Rates Peak New Orders Falling Money Supply Tightens Profits Declining Mature Growth Stagflation

46. Economic Cycle At Least 6 Months Since Stock Market Peak Long Term Rates Peak and Fall Inflation Rates Fall Yields on S&P 500 > 3.7%, P/E Ratios < 14 Bank Loans Shrinking Short Term Rates Low Consumer Spending Down Consumer Confidence Falling News Event May Cause Panic in Market Advertisements Stressing Fear Bankruptcies High 3 6 Start of Recession Recession

47. Economic Cycle Raw Material Prices Up Business Activity Up Income Rising Faster than Prices Monetary Attitude Relaxed Business Activity Moderate Housing Starts up sharply Prime Rate 1st Increase Money Flowing into securities Mortgage Rates Declining New Orders Up Interest Rates Stable Inflation Stable 6 9 Recession Stabilization

48. Economic Cycle Inflation Soars Market Peaks Corporate Expansion Confidence High Labor Costs Increasing High P/E’s Short Term Rates up Prime Rate Up Sharply Short Term Rates Nearer to Long Term Bank Loans Accelerating 12 9 Initial Growth Mature Growth

49. Economic Cycle Recession In Cash Defense Aerospace Utilities Bonds Financial Services Gold, Energy, Natural Resources Service, Technology Leisure, Health Care Blue Chip Basic Industries Out of Cash 6 9 12 3 Mature Growth Initial Growth Stabilization Start of Recession Stagflation

50. Thrill Anxiety Depression Hope Panic Desperation Euphoria Denial Capitulation Relief Optimism Fear Despondency Excitement 3 6 9 12 Recession Start of Recession Stagflation Stabilization Initial Growth Mature Growth Point of Maximum Financial Opportunity Point of Maximum Financial Risk Blue Chip Basic Industries OUT OF CASH Leisure, Health Care SMALL CAPS Service, Technology Gold, Energy, Natural Resources LARGE CAPS INTO CASH Defense, Aerospace BONDS Utilities Financial Services

51. Why You Don’t JUST Diversify - You STAY Diversified B A Initial Allocation Initial Asset Allocation A=$10,000 B=$10,000 $20,000 $10,000 $10,000

52. B A Initial Asset Allocation A=$10,000 B=$10,000 $20,000 $10,000 $10,000 Initial Allocation B A End of First Year $25,000 $5,000 $20,000 1st Year A= -50% (Lost $5,000) B=+100% (Gained $10,000)

53. B A Initial Asset Allocation A=$10,000 B=$10,000 $20,000 $10,000 $10,000 Initial Allocation B A End of First Year $25,000 $5,000 $20,000 1st Year A= -50% (Lost $5,000) B=+100% (Gained $10,000) B A 2nd Year A= +100% (Gained $5,000) B= -50% (Lost $10,000) $20,000 $10,000 $10,000 End of Second Year

54. B A Initial Asset Allocation A=$10,000 B=$10,000 $20,000 $10,000 $10,000 Initial Allocation B A End of First Year $25,000 $5,000 $20,000 1st Year A= -50% (Lost $5,000) B=+100% (Gained $10,000)

55. B A Rediversified Asset Allocation A=$12,500 B=$12,500 $25,000 $12,500 $12,500 End of First Year Rediversified B A End of Second Year $31,250 $25,000 $6,250 2nd Year A= 100% (Gained $12,500) B=-50% (Lost $6,250)

56. B A 2nd Year A= +100% (Gained $5,000) B= -50% (Lost $10,000) $20,000 $10,000 $10,000 End of Second Year No Rediversification B A End of Second Year Rediversified $31,250 $25,000 $6,250 2nd Year A= 100% (Gained $12,500) B=-50% (Lost $6,250)

57. It's NOT how much you MAKE! It's how much you KEEP! $ $ $ $ $ $ $ $ $

58. Questions?

60. Thank You!