Hi Everyone,

The strengh of U.S. equity markets these past few weeks has prompted questions regarding whether or not our outook has changed. It has not. The following is the 2012 Outlook from late 2011. Please feel free to call with questions.

~Susan
2012 Outlook
Meeting in the Middle

Over the last four years, the market declined in excess of 2% in a single day around 100 times, more than any other four-year period since the S&P 500 Index’s formation in 1957. On the flipside, the market also recorded a 2% or greater gain in a single day more than any other four-year period. While the last few years have been highlighted with record swings in market returns and widely oscillating data, we expect 2012 will be less about the fringes and more about the middle.

While moving away from the drastic extremes will be a welcome environment for whipsawed investors, the center offers its own distinct challenges and opportunities. In 2012, finding a middle ground, or Meeting in the Middle, is going to be key for growth in the markets and economy. We believe that:

We expect the U.S. economy to grow about 2%, while emerging markets post stronger growth and Europe experiences a mild recession. U.S. gross domestic product is likely to be supported by solid business spending and modest, but stable, consumer spending.

The U.S. stock market is likely to post a high single-digit to low double-digit gain, supported by earnings growth and a boost from a slight improvement in valuations.

While volatility is likely to remain elevated, the market and its economic backdrop may begin to migrate from the extremes toward a more normalized period where investor sentiment, economic activity and the market’s direction start to move increasingly in alignment.

Until next week,
Susan R. Linkous

This research material has been prepared by LPL Financial. The opinions voiced are for general information only and not intended as specific advice. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Thank you.

Securities offered through LPL Financial
Member FINRA and SIPC

Hi Everyone,

For the week of Valentine’s Day, I couldn’t help but remember how many times I’ve been told I love lists. It’s true and I have a few of them working right now. If you love them as much as I do, here are a few things you can add to yours.

But first . .

Quote of the Week:

“Honesty is the recognition of the fact that the unreal is unreal and can have no value, that neither love nor fame nor cash is a value if obtained by fraud.”

~Ayn Rand

TAX MATTERS
LPL Financial has opted to take an IRS allowed extension regarding issuance of 1099 documents. Data such as investment fees paid and IRA distributions taken can be provided by me prior to receipt of 1099 if needed. Clients can expect my assistance where needed this tax season. Please keep in mind that I will be traveling outside of the U.S. from March 10th – 19th. During this time, LPL Financial may be contacted directly at 1-800-558-7567 or Natalie Varela in my Fountain Hills office at 480-836-2326.

EQUITY SECTORS
The question I am most frequently asked is “What are you buying?”. It’s the hardest to answer due to each investor having different objectives and the legal disclosures required to even mention certain names or ideas. But, there are certain sectors of the equity market that I am interested in right now:

Agricultural equipment companies
Automobile suppliers, component manufacturers
Consumer goods, beverage companies
Technology, service/solutions providers

You may call me to discuss the firms in these sectors and whether or not they may be appropriate for your portfolio.

Notes: Please seek specific tax advice from your accountant. Stock investing including sector investing involves great risk including loss of principal.

Until next week,
Susan

Value in the Game Plan

Hi Everyone,

I’m writing this on Super Bowl Sunday and really want to emphasize how important game plans can be. The past few weeks have brought a decent rise to the U.S. equity markets. Many clients are feeling confident again and letting go of the nervousness that persisted throughout late 2011. Now, it’s my turn to be nervous.

I find it easier to execute game plans when valuations are low and can feel a bit nervous when they are at multi-year highs.

Game plans get you through. Game plans get me through too.

~Susan

Valuations, Yields & Staying the Course

Parts of the Plan

Buying investments low and at a good value has seemed fairly easy in the recent past. Especially for those investors with a long-term horizon. Although good values still exist, it is time to be a bit more cautious. One should not overlook the rise that 2012 has brought. Please consider dollar-cost-averaging into purchases even though it is not a guarantee for loss prevention, it may help.

Yields on U.S. Treasuries and many other bonds are very low. Their prices are still quite high even though some investors have obviously moved back into equities. Nervous investors often sit in these “safe” investments too long or pay too much for them. Even when feeling a bit nervous, it potentially pays to look at higher yielding investments with a portion of your portfolio. In other words, maintain some balance between asset classes. Let’s not run too fast one way or the other.

Staying the course means that we stick to the game plan. My game plan includes systematic investing, quarterly rebalancing, and profit taking where appropriate. Nervousness often subsides when you take action that isn’t predicated on a daily move or headline news. Markets can move dramatically both directions. Your investment game plan should not.

Let’s hope the recent rally holds. Let’s not be too exuberant and overweight asset classes that have already rallied.

Until next week,
Susan R. Linkous

Notes: Dollar-cost averaging involves systematic purchases regardless of price; please consider your ability to do so. Bonds are subject to market and interest rate risk if sold prior to maturity.

Quote of the Week
“What happens is not as important as how you react to what happens.”

~Thaddeus Golas

Hi Everyone,

I thought this week’s article would be about manufacturing having listened to the State of the Union address; however, I found my thoughts on this to be too somber for a beautiful, sunny Sunday in Arizona.

Instead, we’ll take a look at important investment terms and then remember that new technologies like turning kelp into oil are very exciting.

Maybe we need to redefine what U.S. manufacturing should stand for.

~Susan

Alpha, Beta & Kelp

Investment selection and performance measurement can be described in many ways. Understanding certain terms can put things into perspective especially in periods of volatility like 2011. Here are two you should know:

Alpha – Alpha measures the difference between an investment’s actual returns and its expected performance, given its level of risk as measured by beta. A positive alpha figure indicates the investment has performed better than its beta would predict. In contrast, a negative alpha indicates that the investment underperformed, given the expectations established by its beta. Alpha is often seen as a measure of the value added or subtracted by a portfolio manager.

Beta – Beta is a measure of an investment’s sensitivity to movements in a benchmark. A portfolio with a beta greater than one is more volatile than the benchmark, and a portfolio with a beta less than one is less volatile than the benchmark.

The February 6, 2012 issue of Time magazine has a summary of biofuels on page 14 that reignited my interest in this field.

“The perfect biofuel may look a lot like seaweed. It has sugars that can be turned into ethanol, thanks to scientists who created an enzyme that does all the work. Per unit, seaweed could make five times as much ethanol as corn, though we’d need oceans of kelp farms to feed our current appetite for fuel.”

The article has a neat little chart that also mentions how algae can turn sun, water and carbon dioxide into oil too.

It seems to me that the beta of biofuels could be less than one but the alpha of the right one could be very, very positive. Could it be kelp?

Until next week,

Susan R. Linkous

In This Issue
Barrett-Jackson Auto Auction
Tax Season Reminders

Weekly Quote

“The Constitution only gives people the right to pursue happiness. You have to catch it yourself.”
~Benjamin Franklin

Hi Everyone,

Sophia and I attend the Barrett-Jackson Auto Auction most every year. At age 11, she loves cars more than anyone I know. It brings us great happiness to spend time there and this year was just full of fun. It was nice to see people so excited and they were charitable too.
Thanks to those that helped make this annual tradition so special this year!
~Susan

Tax Season Reminders

Investors due to receive a 1099 can expect them to be mailed out by 2/15/2012. Please keep in mind that revisions are common but seldom require one to file a new return. Should you have any questions on any tax related document, don’t hesitate to call.

To have me review any such document, fax it to: (480) 836-2327.

Clients participating in our fee-based asset management program (SAM) may be able to deduct fees paid. You should receive a statement or email from me by the end of January with these figures. If you do not, please call so that I may provide you with this information.

Management fees on IRA accounts may be paid from other investment accounts with us maximizing deductibility. To request this service, please call or send an email to: susan@linkousgroup.com.

As tax deadline approaches, feel free to schedule an appointment should you need help with IRA contributions, charitable donations, 2012 income and tax payment planning or clarification on 2011 taxable events as they relate to your investments.

Here to help!

Securities and Advisory Accounts offered through LPL Financial, A Registered Investment Advisor
Member FINRA and SIPC

Hi Everyone,

Sir John Templeton once said “To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit.”

It’s Sunday and the European debt issues are once again all over the news. I plan on keeping the aforementioned in mind should volatility continue. I hope you do too.

~Susan

“The logic of crowd error is clear and almost mathematical:

*Markets swing dramatically, from bullish to bearish and from overpriced to underpriced.

*Their movements are driven by the actions of “the crowd”, “the herd” or “most people.” Bull markets occur because more people want to buy than sell, or the buyers are more highly motivated than the sellers. The market rises as people switch from being sellers to being buyers, and as buyers become even more motivated and the sellers less so. (If buyers didn’t predominate, the market wouldn’t be rising.)

*Market extremes represent inflection points. These occur when bullishness or bearishness reaches a maximum. Figuratively speaking, a top occurs when the last person who will become a buyer does so. Since every buyer has joined the bullish herd by the time the top is reached, bullishness can go no further and the market is as high as it can go. Buying or holding is dangerous.

*Since there’s no one left to turn bullish, the market stops going up. And if on the next day one person switches from buyer to seller, it will start to go down.

*So at the extremes, which are created by what “most people” believe, most people are wrong.

*Therefore, the key to investment success has to lie in doing the opposite: in diverging from the crowd. Those who recognize the errors that others make may profit enormously through contrarianisim.” ~Howard Marks

Currently reading: The Most Important Thing – Uncommon Sense for the Thoughtful Investor by Howard Marks

Note: These opinions are for general information only and are not intended to provide specific advice or recommendations to any individual. No strategy assures success or protects against loss.

Until next week,

Susan

Hi Everyone,

It seems as though the holidays are solidly behind us as media heats up with political and economic news. European debt issues continue to make some cautious about investing abroad. Don’t be too quick to overlook investments that may be a good value during times like this.

Happy reading,
~Susan

International Investing
Understanding the MSCI Indices

Before we get started, I need you to understand something:

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

That doesn’t mean you shouldn’t consider it.

2012 is likely to be a year wherein investors pay much more attention to investing in the U.S. rather than abroad. That may mean value may be found abroad.

To invest in stock right now, especially foreign ones, it helps to decide if you have an interest in long-term growth, basic value, emerging franchises, or consistent earners.

You can get a feel for what this means by educating yourself on MSCI indices commonly used to benchmark international investment returns.

MSCI EAFE (Europe, Australia, Far East) Index – A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. As of May 27, 2010 the MSCI EAFE Index consisted of the following 22 developed country indices: Australia, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

MSCI All Country (AC) World ex-U.S. Index – A market capitalization weighted index representative of the market structure of 44 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim, excluding securities of United States’ issuers. The index is calculated with gross dividends reinvested in U.S. dollars.

Indices such as these are not indicative of any particular investment but can go a long way in educating investors about how foreign securities perform. You may not invest directly into them. You may ask me to ascertain how international investing may benefit you.

Until next week,

Susan R. Linkous

Quote of the Week

“Yes, we have to divide up our time like that, between our politics and our equations. But to me our equations are far more important, for politics are only a matter of present concern. A mathematical equation stands forever.”

~Albert Einstein

Hi Everyone,

It’s Sunday afternoon and I’m trying to prepare for the 4am start to tomorrow. Sophia and I sure have enjoyed these past two weeks. Thanks to those that shared your holidays with us. We had a ball! Now, it’s time to work on generating income for investors in 2012.

~Susan
Income

“Income strategies are becoming increasingly important to a broad universe of investors. That is because in an investment climate marked by moderating market returns and heightened volatility, income can play a positve role in portfolio performance.

80% of affluent investors cite a steady income stream as one of their most important financial concerns. – 2011 Allianz Global Investors Poll

Income doesn’t have to be “fixed”. The good news is that investors need not depend on any one type of investment to generate income. There are actually many opportunities for income across the financial markets – including some with a relatively low sensitivity to changes in interest rates.

Savvy income investors can consider the entire capital structure of a company- looking at both debt and equity investments- to find the point at which there appears to be the best balance of risk and reward.

Many investors are understandably concerned about market volatility. Income strategies are inherently defensive, since an income stream can help offset the impact of short-term price declines.”

~contributed by Allianz Global Investors

My job is to educate you on investment vehicles that may help you generate income and improve your portfolio performance. Please start 2012 off by evaluating your needs and opportunities in this area. I can help.

Susan R. Linkous

Securities offered through LPL Financial
Member FINRA and SIPC

Happy New Year!

Quote of the Week

“Well begun is half done.”

Aristotle

Interesting Fact:

In 1945, there were 42 workers supporting each Social Security beneficiary. Today, there are only three.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.