WeeklyCommentary September24,2012

TheMarkets
Corporationsareputtingmorecashininvestorspockets. Inthepastweek,morethanhalfadozenBlueChipcompaniesannouncedincreasesintheirdividend payouts.Infact,StandardandPoorsCorporationsaidS&P500companiespaidarecord$34billionin cashpaymentstoinvestorsinAugust.Thatsaprettynicestimulus! And,thelargessemaycontinue.HowardSilverblatt,ananalystfromStandardandPoors,wasquoted inMarketWatchassaying,2012shouldsetarecordhighforcashdividendpayments,16percent abovethatof2011. Whiledividendpayoutslookgood,anotherpartofthestockmarketisdivergingandsendingmixed signals. TheresacenturyoldinvestmentmanagementsystemcalledTheDowTheorywhichwasdeveloped byCharlesDowthroughaseriesofeditorialsinTheWallStreetJournalbetween1900and1902. Accordingtothistheory,inahealthystockmarket,theDowJonesIndustrialAverageandtheDow JonesTransportationAverageshouldriseinsync. Thetheoryisbasedontheideathatcompaniesintheindustrialaveragemakethestuffwhile companiesinthetransportationaverageshipthestuff.Iftheresadivergenceinthemovementof theindustrialaverageandthetransportationaverage,thenyouhavetowonderwhichoneis potentiallygivingamisleadingsignalaboutfutureeconomicactivity. So,whatsTheDowTheorysignalingnow?Itsflashingredbecause,asoflastweek,theDowJones IndustrialAveragewasupabout11percentfortheyearwhiletheDowJonesTransportationAverage wasdownmorethan2percent.And,justlastweek,theindustrialaveragewasflatwhilethetransport indexdroppedasignificant5.9percentasubstantialdivergenceinjustoneweek. Likeallinvestmentsystems,though,TheDowTheoryisnotfoolproofandthisdivergencecouldjustbe noise.Inanycase,itsworthkeepinganeyeonitasapossibleearlywarningsign.
Dataasof9/21/12 Standard&Poor's500(DomesticStocks) DJGlobalexUS(ForeignStocks) 10yearTreasuryNote(YieldOnly) Gold(perounce) DJUBSCommodityIndex DJEquityAllREITTRIndex 1Week 0.4% 0.8 1.8 0.5 2.9 3.1 YTD 16.1% 10.1 N/A 13.3 5.0 17.5 1Year 25.2% 8.6 1.9 0.5 4.1 31.1 3Year 11.1% 1.6 3.5 21.4 5.7 19.9 5Year 0.9% 5.6 4.6 19.4 3.6 2.8 10Year 5.8% 7.9 3.7 18.7 3.3 11.4

Notes:S&P500,DJGlobalexUS,Gold,DJUBSCommodityIndexreturnsexcludereinvesteddividends(golddoesnotpayadividend)andthe three,five,and10yearreturnsareannualized;theDJEquityAllREITTRIndexdoesincludereinvesteddividendsandthethree,five,and10 yearreturnsareannualized;andthe10yearTreasuryNoteissimplytheyieldatthecloseofthedayoneachofthehistoricaltimeperiods. Sources:Yahoo!Finance,Barrons,djindexes.com,LondonBullionMarketAssociation. Pastperformanceisnoguaranteeoffutureresults.Indicesareunmanagedandcannotbeinvestedintodirectly.N/Ameansnotapplicable.

CANYOUIMPROVEYOURINVESTMENTPERFORMANCEBYTAKINGATRIPtothelocaldrugstoreand forkingovertwodollarstobuyaspiralboundnotebook?Yes,saysNobelPrizewinnerDaniel Kahneman,oneofthecountryspreeminentpsychologists. InarecentconversationwithTomGardnerofTheMotleyFool,LeggMasonCapitalManagementchief investmentstrategistMichaelJ.Mauboussinrecountedaconversationhehadmanyyearsagowith ProfessorDanielKahneman.MauboussinaskedKahnemanthisquestionWhatsinglethingcanan investordotoimprovetheirinvestmentperformance?Kahnemansaidbuyanotebookandwhenyou makeaninvestment,writedownwhyyoumadetheinvestment,whatyouexpecttohappenwiththe investment,andwhenyouexpectittohappen. Hmm.Howdoesthattranslateintoimprovedinvestmentperformance? Ashumans,weoftensuccumbtowhatscalledhindsightbias.Hindsightbiasmeanswetendtothink ourforecastswerebetterthantheyreallyare.Forexample,fewpeoplepredictedtheseverityofthe GreatRecession,but,afterthefact,manypeoplesaidtheysawthesignsofabubbleabouttoburst. ThesepeoplemisrememberedwhattheywerethinkingpriortotheGreatRecession. Kahnemansayswritingdownwhatyourethinkingandwhatyourexpectationsareatthetimeyou makeaninvestmentallowyoutogobackafterthefactandseehowaccurateyouwere.Thisblack andwhiteanalysishelpskeepyouhonestaboutyourabilitytomakepredictionsandmakegood investmentdecisions.Ithelpsyouavoidbecomingoverconfident.Overconfidenceisbadbecauseit makesyouthinkyouresmarterthanyoureallyarewhichcouldleadtomakingriskierinvestmentsand losinglotsofmoney. Sometimesthebestideasarealsothesimplest. WeeklyFocusThinkAboutIt Well,Ithinkwetriedveryhardnottobeoverconfident,becausewhenyougetoverconfident,that's whensomethingsnapsupandbitesyou. NeilArmstrong,astronaut,firstpersontowalkonthemoon

Bestregards,

PattyLoris,MBA,CFP LPLFinancialAdvisor

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*ThisnewsletterwaspreparedbyPeakAdvisorAlliance. *TheStandard&Poor's500(S&P500)isanunmanagedgroupofsecuritiesconsideredtoberepresentativeof thestockmarketingeneral. *TheDJGlobalexUSisanunmanagedgroupofnonU.S.securitiesdesignedtoreflecttheperformanceofthe globalequitysecuritiesthathavereadilyavailableprices. *The10yearTreasuryNoterepresentsdebtowedbytheUnitedStatesTreasurytothepublic.SincetheU.S. Governmentisseenasariskfreeborrower,investorsusethe10yearTreasuryNoteasabenchmarkforthe longtermbondmarket. *GoldrepresentstheLondonafternoongoldpricefixasreportedbytheLondonBullionMarketAssociation. Preciousmetalinvestingissubjecttosubstantialfluctuationandpotentialforloss. *TheDJCommodityIndexisdesignedtobeahighlyliquidanddiversifiedbenchmarkforthecommodityfutures market.TheIndexiscomposedoffuturescontractson19physicalcommoditiesandwaslaunchedonJuly14, 1998. *TheDJEquityAllREITTRIndexmeasuresthetotalreturnperformanceoftheequitysubcategoryoftheReal EstateInvestmentTrust(REIT)industryascalculatedbyDowJones. *Yahoo!Financeisthesourceforanyreferencetotheperformanceofanindexbetweentwospecificperiods. *Opinionsexpressedaresubjecttochangewithoutnoticeandarenotintendedasinvestmentadviceorto predictfutureperformance. *Pastperformancedoesnotguaranteefutureresults. *Youcannotinvestdirectlyinanindex. *Consultyourfinancialprofessionalbeforemakinganyinvestmentdecision. *TounsubscribefromthePattyLorisWeeklyCommentarypleasereplytothisemailwithUnsubscribein thesubjectline.

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