The difference a couple of decades can make!

streettalklive.com
With Lance Roberts

Economic growth and the Grand Illusion. 80s and 90s A distant memory 5 things that will crush your retirement 30 Years to yield 10 Investment Guidelines Q&A

180% GDP & Debt As % Of GDP 160% 140% 120%

72%

70%
Consumption 68% 66%

100%

80%
60% 40% 1959 1965 1972 1979 1986 1993 2000 2006

64% 62% 60% Household Debt To GDP GDP - 10 Yr Rolling % Chg. Consumption As A % Of The Economy

15%

2.5 Debt to Consumption Ratio 2.3

Annual % Change

10%

2.1 1.9

5%

1.7 1.5

0%

1.3 1.1

-5% 1959

0.9 1966 1973 1980 1987 1994 2001 2008

YoY % Change In GDP PCE - YOY % Change

Wages YOY % Change Debt to Consumption Ratio

Government Financial Assistance At Record Levels

2500.0

STREETTALKLIVE.COM

2000.0

1500.0 $ Billions 1000.0 500.0 0.0 1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

Medicare Social Security Other Social Benefits

Unemployment Insurance Medicaid Veterans' Benefits

Food Stamp Usage & Costs

50,000 45,000 40,000 # Of Participants (000's)

STREETTALKLIVE.COM
80 70 60 50 40 30 20 Total Costs (Billions)

35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1969 1975 1981 1987 1993 1999 2005 2011 10 0

Total Costs ($ Mil)

Avg. Participation (000's) - Left Scale

Deficits Impede Economic Growth

20.0

STREETTALKLIVE.COM
200.0

0.0 15.0 Annual % Change In GDP Growth -200.0 Budget Surplus / Deficit ($ Bil)

10.0

-400.0

-600.0 5.0

-800.0

-1000.0 0.0 -1200.0

-5.0 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 Surplus/Deficit Gross Domestic Product, 1 Decimal Poly. (Gross Domestic Product, 1 Decimal)

-1400.0

DJIA - 1964-1980 Secular Bear

1100 Int Rate 12% Fed Funds 14% Inflation 12% PE's 9x Div Yield 5% 25

1000

20

900 15 800 Int Rate 4.14% Fed Funds 5.5% Inflation 1.1% PE's 23x Div Yield 3% 10

700

5 600

500 1964 DJIA

0 1967 INT RATE 1970 FED FUNDS 1973 INFLATION 1976 PE's 1979 DIV YIELD

DJIA 1980-2000 Secular Bull

14000 45 40 35 30 25 20 15 4000 10 2000 5 0 1983 DJIA 1986 INT RATE 1989 FED FUNDS 1992 INFLATION 1995 PE's 1998 DIV YIELD

12000 Int Rate 6.46% Fed Funds 6.5% Inflation 2.2% PE's 42x Div Yield 1.14%

10000 Int Rate 12.15% Fed Funds 14.5% Inflation 13.5% PE's 9x Div Yield 5%

8000

6000

0 1980

DJIA 2000-Present Secular Bear

14000 45 40 12000 35 10000 Int Rate 1.8% Fed Funds 0.25% Inflation 2.5% PE's 17x Div Yield 2.56% 30 25 20 15 10 5 2000 0 0 1999 -5 2012

8000 Int Rate 6.46% Fed Funds 6.5% Inflation 2.2% PE's 42x Div Yield 1.14%

6000

4000

2000

2001 DJIA

2002

2003

2004

2005

2006

2007 INFLATION

2008

2009 PE's

2010

2011

INT RATE

FED FUNDS

DIV YIELD

S&P 500 Reported Earnings Per Share

$120

STREETTALKLIVE.COM

4Q 2012 Est.
$100

1Q 2012 Est.

$80

$60

$40

$20

$0 1936

1944

1952

1960

1968

1976

1984

1992

2000

2008

2016

Recessions Growth Trend Line EPS Growth Rate (6% Peak To Peak)

S&P 500 Earnings EPS Growth Rate Lower Bound (5% Trough to Trough) Projected Earnings Reversion Within Norms

Real S&P 500 Index And Earnings

(Robert Shiller Real Price Data)

STREETTALKLIVE.COM
100.00

1,250.00

10.00 250.00

50.00 Jan-1871

1.00 Jan-1886 Jan-1901 Jan-1916 Jan-1931 Jan-1946 Jan-1961 Jan-1976 Jan-1991 Jan-2006

S&P 500 (Real Price)

Real Earnings

You wont live long enough

Allocation & Risk Managment
No professional investor implements buy and hold strategies why should you? Risk is about how much you will lose when you are wrongyou will be wrong.

You cant time the market but you can control investment risk.
The stock market is irrelevant to your retirement.

Market Based Portfolio Returns Vs. Conservative 80/20 Strategy

$180,000.00

5 Mistakes That Will Crush Your Retirement Dreams!

1) 2) Not correctly managing your 401k plan. Investors take on too much risk.

$160,000.00

$140,000.00

$120,000.00

$100,000.00

401k plans are primarily a disaster. Individuals urged to take on excessive risk. Destruction of free money. Compound returns are a myth.

$80,000.00

$60,000.00

Market Based Compounded Value

80/20 Compounded Value

Wall Street Has Wanted Investors To Stay In Stocks

$100k Invested In VFINX (stocks) vs VBTIX (bonds) - Capital Appreciation Only
120000

110000

100000

90000

80000

70000

60000

50000 2000 2001 2002 S&P Index 2003 2004 Bond Market 2005 2006 2007 2008 2009 2010 2011 2012 60/40 Model 50/50 Model 40/60 Model

The Negative Effects Of Risk Taking

130,000.00

STREETTALKLIVE.COM

5 Mistakes That Will Crush Your Retirement Dreams!

4) Not saving enough Wealth is created from SAVINGS. Investing is a tool used to offset the effects of inflation. The stock market is not a wealth creator it is a wealth preserver.

120,000.00

110,000.00

100,000.00

90,000.00

80,000.00

70,000.00

60,000.00

50,000.00 0 1 2 3 4 5 6 7 8 9 10 11 12

Conservative Investor (60/40)

Aggressive Investor (Benchmark)

Be realistic about your situation. If you sacrifice everything for your children, you won't be able to retire. However, it gets worse. You won't live forever, and the average American will spend the bulk of his or her retirement on healthcare in the last few years of their life. Guess who gets to foot the bill when you can't care for yourself?

5 Mistakes That Will Crush Your Retirement Dreams!

5) Time to close the Parents Bank Spending yourself into bankruptcy only insures that you will ultimately become a burden upon your children.

Investing is not a competition. There are no prizes for winning but there are severe penalties for losing. Emotions have no place in investing. You are generally better off doing the opposite of what you "feel" you should be doing. The ONLY investments that you can "buy and hold" are those that provide an income stream with a return of principal function. Market valuations (except at extremes) are very poor market timing devices. Fundamentals and Economics drive long term investment decisions - "Greed and Fear" drive short term trading. Knowing what type of investor you are determines the basis of your strategy.

 "Market timing" is impossible - managing exposure to risk is both logical and possible. Investing is about discipline and patience. Lacking either one can be destructive to your investment goals. There is no value in daily media commentary - turn off the television and save yourself the mental capital. Investing is no different than gambling - both are "guesses" about future outcomes based on probabilities. The winner is the one who knows when to "fold" and when to go "all in". No investment strategy works all the time. The trick is to understand the difference between a bad investment strategy and one that is temporarily out of favor.