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January 2012. Market Factors. Tim Vorpahl. Vorpahl Wing Securities, Inc. 505 W. Riverside Ave., Ste 205 Spokane, WA 99201 (509) 747-1749 vorpahlt@vorpahlwingsecurities.com. Vorpahl Wing Securities. INVESTMENT ADVICE FOR EVERY GENERATION.

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slide1

January 2012

Market Factors

Tim Vorpahl

Vorpahl Wing Securities, Inc.

505 W. Riverside Ave., Ste 205

Spokane, WA 99201

(509) 747-1749

vorpahlt@vorpahlwingsecurities.com

Vorpahl Wing Securities

INVESTMENT ADVICE FOR EVERY GENERATION

Not fdic insured. May lose value. No bank guarantee. Not insured by any government agency.

slide2

Market Performance

  • The P/E ratios of the S&P 500 (shown left ending at January 19th 2012, and are for the estimated earnings of the companies next year) help show that the stock market has made a healthy recovery from the lows of 2009.
  • According to the Wall Street Journal, on January 19th, 2012 the forward P/E of the S & P 500 was 12.31

Graph made with information taken from the Wall Street Journal

slide3

Dow Jones Industrial Average

January 19th, 2012

  • While the market seems to be experiencing some turbulence, it was up 5.5% in 2011.

So far in 2012, the market has seen slow, steady increases.

  • Graph Taken From Yahoo! Finance
rule of 20
Rule of 20

Using the current rates (as of 01/19/12), the current rule of 20 comes up with the number 15.31 indicating that the market may be undervalued.

One method of market valuations is the use of the Rule of 20.

This measure takes the P/E ratio of the market (the price per share over the expected earnings per share), a ratio commonly used to determine whether a stock is overvalued or undervalued, and add the current inflation rates as measured by the Consumer Price Index. If the number is more than 20, then the market is overvalued, if it is under 20 than the market is undervalued.

P/E + CPI = Rule of 20

P/E taken from WSJ.com and CPI from the Bureau of Labor & Statistics.

gross domestic product
Gross Domestic Product

Graph taken January 19th, 2011

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Arguably the largest indicators of an economy’s current status is the amount of goods and services it produces (GDP).

As seen in the graph, GDP remained positive the last two years following a down period in 2008-2009.

The current GDP growth rate (using the third quarter of 2011) is 2.5%, up from 1.3% in Q2 2011.

GDP
housing market
Housing Market
  • Housing markets have often been used to help stimulate economies after recessions due to the amount of goods/services required to build a single home.
  • While the housing market may not pull us out of this current slump, the relative stabilization of the market may be a positive sign for early 2012.

This graph taken from Standard and Poors

unemployment
Unemployment

Graph taken January 19th, 2012

slide9
Unemployment continues to be an issue in the recovery from the recent recession. It has hovered between 8.5% and 9.5% for 12 months.
  • Total employment went up by 200,000 in December 2012.
  • Unemployment for December was 8.5%, which was down 0.1% from November.
  • While 8.5% appears to be a move in a positive direction, this may not reflect actual unemployment due to the amount of people who have given up looking for work
payroll employment
Payroll/Employment

While unemployment is slowing down, those who are employed are beginning to see positive changes in terms of overall employment payroll.

Graph taken January 19th, 2011

employment cost index
Employment Cost Index
  • The Employment Cost Index (ECI) measures the cost of labor in a given time period.
  • This can be used to show the quality of employment.

Graph created with data from the Bureau of Labor Statistics on November 18th, 2011

producer price index
Producer Price Index
  • The Producer Price Index (PPI) shows the change in prices received by domestic producers for their output.
  • This is a metric that is used to determine whether total inflation is occurring.

Graph created with data from the Bureau of Labor Statistics on January 19th, 2012

consumer price index
Consumer Price Index
  • Consumer Price Index (CPI) represents the prices paid by consumers for goods and services.
  • It is one of the leading indicators of inflation.
  • Through December 2011, the CPI was at 3.0%, it has remained around this level for the last 7 months, showing that inflation could possibly become more prevalent in the U.S.

Inflation is becoming present throughout parts of the world. China’s inflation for November 2011 was 4.2%.

Graph created with data from the Bureau of Labor Statistics on December 27th, 2011

slide14

Corporate Profits as a % of GDP

  • Looking at the latest (2Q) GDP and Corporate Profit numbers, it is apparent that profits are at 10.1% of GDP. This is the highest it has been in the last 64 years.
  • This number could be a good indicator for a bull market because it helps to show that micro indicators for the economy are still strong despite weak macro indicators.

Graph created with data from the Bureau of Labor Statistics on September 19th, 2011

commodities
Commodities
  • S&P GSCI Commodity 1yr as of January 19th, 2012
  • Commodities performed relatively well in the first 3 months of 2011, but saw a pullback, and have been up and down the last 9 months.
  • With the demand placed on commodities due to the rise of the emerging markets, the continuing rebuilding after the tragic events in Japan, as well as the political shifting in Africa, we believe commodities may continue to rise.
  • Graph taken from Yahoo! Finance
political factors continued
Political Factors (Continued)

Charts taken from The New York Times

bond markets
Bond Markets

After a bailout of Greece and Ireland in 2010, significant downgrades in ratings, and change of leadership in Greece and Italy, confidence in the European bond market has dwindled.

  • More downward pressure may be put on T-bill yields due to investors looking for government bonds, which are already at record lows, or it could put upward pressure in the stock market for investors looking for higher returns.
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Disclosures

Investment decisions should be based on an individual’s own goals, time allowance, and tolerance for risk.

Investing involves risk of loss.

Although bonds generally present less short-term risk and volatility than stocks, bonds do contain interest rate risk and the risk of default, or the risk that an issuer will be unable to make income or principal payments.

Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, market , or economic developments. Foreign securities are subject to interest-rate, currency-exchange rate, economic and political risks, all of which are magnified in emerging markets.

Sources: Bureau of Labor Statistics, Google Finance, Bloomberg, Fidelity, Pioneer as of 3/4/11 and the Wall Street Journal as of 3/20/11

As with all of your investments, you must make your own determination whether an investment in any particular security or fund is consistent with your investment objectives, risk tolerance, financial situation, and your evaluation of the investment option.

Vorpahl Wing Securities is not recommending or endorsing any particular investment option by mentioning it in this presentation or by making it available to its customers. This information is provided for educational purposes only, and you should bear in mind that laws of a particular state and your particular situation may affect this information.

There is no guarantee the trends discussed here will continue. Investment decisions should take into account the unique circumstances of the individual investor.

Past performance is no guarantee of future results. It is not possible to invest directly in an index or average. Index performance is not meant to represent that of any mutual fund.

Before investing, consider the funds’ investment objectives, risks, charges, and expenses.

Not FDIC insured. May lose value. No bank guarantee.