January 09, 2012 Greetings All: The New Year has begun and on a good note as we had a nice upward market move on January 3rd and several reported and notable economic indicators are also showing improvement; the Institute for Supply Management (ISM) reported its manufacturing index rose to 53.9 in December (the best result in seven months); Goldman Sachs on January 4, 2012 reported that factory orders were up for the month of November, 2011 and that their most recent estimate for quarter four, 2011, Gross Domestic Product (GDP – the market value of all final goods and services produced within our country) was also positive. Recently we have seen improvement in new orders, production, and on January 6th, employment numbers showed progress. The consumer seems to be more optimistic and looking at the most recent numbers from the housing industry there are signs of improvement there as well (more later on housing). And, all of this, there is a continuation of the generally solid US economic data seen in recent months. So what’s the bad news? Not sure it is “bad” but we must consider our political machine and the smog it is producing! The concern here is our national debt and our politician’s inability to act upon reducing it! This affects our creditworthiness as a nation but we still remain the highest quality investment on the globe. As we move forward into 2012 we need to focus upon the positive economic momentum happening within the United States, the economic progress that is occurring in Europe, and the fact that global political policy is accommodative to long-term economic growth. Here is my main concern (and I have mentioned it before) and it truly perplexes me… predominantly, everything right now that moves these markets, up or down, hundreds of points on a daily basis, are headlines, China, Europe, Korea, ignorance stemming from our politicians, etc., not news that is financially important. However our account values reflect this “headline” negativity but underlying all of this is measureable domestic economic improvement. When the markets finally realize this and place rational and logical emphasis upon it, we do not want to have our money sitting idly by in money markets. We do not want to be in a position where we are vulnerable to upside surprises on any bit of, reasonable, understandable or expected for that matter, news. For the past several years now, the big question from many of my clients has been, “should we be investing?” and of course my answer has always been the same, “yes”. I know it has not been an easy road but I believe in our nation’s capitalist mantra. As I guide you into 2012 I maintain much of the same. I am looking at the expectations for inflation and interest rates to remain low. I feel volatility may remain high because of poor political response to several issues – European Credit Crisis; Expiration of Bush-Era Tax Cuts; Expiration of Payroll Tax Cut; Unemployment Benefits; Financial Deleveraging; Rating Agency Downgrades; Debt Ceiling; Fiscal Retrenchment; General Election; Emerging Markets Inflation; Liquidity – but issues that I feel will be solved in an economically satisfactory manner. The wild card and one that must be watched closely is that “issues” mentioned above have gotten way to complicated for the existing intelligence level of our political machine. Either personnel changes (it is an election year) or resolution to these “issues” will remain slow thus creating continued uncertainty, confusion and volatility; volatility again stemming from headlines and not from economically sound improvement; improvement that is presently occurring but being overlooked. Many have asked me the state of housing. After all this is what many feel started the financial chaos that has been in existence for the past 3 – 4 years. Best I can ferret out from the reports that I have are mixed but I am consistently reading that a bottom should be solidly in place sometime during the first half of this year, real estate appreciation should start to increase over the next 18-24 months but the long term appreciation expectation is very low over the next decade. I have seen target numbers as low as 1% or less annually. I chuckle at how anyone can put a number to something like this but the “take away” is slow appreciation ahead? Inventories of existing homes and foreclosed homes are declining. This is good. New construction is increasing; also good. Mortgage rates are very low; really good. So my expectation is that this bump in the road is behind us and the goods outweigh the bad. My position right now is that the markets will be range bound this entire year. I agree that overall economic growth this year will be less than robust; in fact probably very mediocre but growth never the less. My conservative approach of value investing will continue to be appropriate in the majority of situations but as your financial guide, I must assess your specific situation. That situation may require a more aggressive stance or a more conservative stance depending. There are many routes to the top of a mountain. I endeavor to find the best route for each one of my clients individually. My talent is in my ability to confidently assess investment suitability and properly educate my clients on the options that lie before them. I look forward to a new year of challenges and being available for you at your convenience. Remember, you know others that are not receiving the level of service that I, Heidi and Legacy Wealth Planning provide. Tell them about us! Regards, Martin The opinions voiced in this material are for general information only and are 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. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.