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Elizabeth Wilson, MS, CFP, CMFC

The Monarch Report November 26, 2012

The Markets
What fiscal cliff? Stock prices rose last week to their best weekly gain in five months as investors cheered the start of the holiday shopping season, encouraging economic data from Germany and China, improved housing data, and confidence from President Obama and Congressional leaders that the fiscal cliff will be avoided. Is this the beginning of a Santa Claus rally? Jordan Kotick, global head of technical strategy at Barclays, told CNBC, We are about to head into the best seasonal time for the equity market. Despite this seasonal tailwind, the markets near-term direction may still depend on how Washington handles the pending budget and tax cliff. So far, the market seems to be pricing in a compromise that will avoid the worst-case scenario. Beyond the fiscal cliff and a potential Santa Claus rally, whats in store for the U.S. economy? Well, heres a not-so optimistic take from famed money manager Jeremy Grantham: The U.S. GDP growth rate that we have become accustomed to for over a hundred years in excess of 3% a year is not just hiding behind temporary setbacks. It is gone forever. Yet, most business people (and the Fed) assume that economic growth will recover to its old rates. In his view, our economy will grow at a snails pace of about 1 percent per year after inflation for the next several decades. Without getting bogged down in details, his gloomy case rests on population and productivity changes. However, there are some potential bright spots on the horizon. Please read the second half of this commentary to learn about one important part of our economy that could turn Granthams pessimistic view upside down.

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Data as of 11/23/12 Standard & Poor's 500 (Domestic Stocks) DJ Global ex US (Foreign Stocks) 10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index

1-Week 3.6% 4.0 1.7 1.2 2.2 2.6

Y-T-D 12.1% 8.6 N/A 10.2 2.4 15.0

1-Year 21.3% 14.1 1.9 3.2 1.2 29.4

3-Year 8.4% 0.1 3.4 14.0 2.1 19.1

5-Year -0.4% -5.8 4.0 16.3 -4.8 4.2

10-Year 4.2% 6.9 4.2 18.5 3.2 11.5

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance,, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

THE YEARS 2020, 2030, AND 2035 could turn out to be pivotal years for the United States and the geopolitics of global energy. Heres why. The International Energy Agency (IEA) predicts the following will happen by those years: 2020 The U.S. will overtake Saudi Arabia as the worlds largest producer of crude oil. 2030 The U.S. will become a net exporter of crude oil. 2035 The U.S. will become effectively self-sufficient in meeting its total energy needs through domestic sources.

Source: International Energy Agency World Energy Outlook 2012

Today, the U.S. imports about 20 percent of its total energy needs. Can you imagine a world in which the U.S. is energy self-sufficient and not beholden to foreign energy sources? This could deliver a huge boost to our economy. Five years ago, the IEA predicted the U.S. would pump 10.1 million barrels of oil per day by 2020. In this years report, the IEAs new estimate is 11.1 million barrels per day by 2020. This projected increase in production is, driven by the faster-than-expected development of hydrocarbon resources locked in shale and other tight rock that have just started to be unlocked by a new combination of technologies called hydraulic fracturing, according to MarketWatch. So, we have Jeremy Grantham stating the bear case for the U.S. economy then we have the IEA publishing a report that puts the U.S. in the drivers seat for the world energy market in the next couple decades. Now, heres the thing. Both Grantham and the IEA are making long-range forecasts based on data available today. Yet, we know things can change just as the IEA raised its oil production estimate from 10.1 million barrels of oil per day to 11.1 million. Trends take time to develop and then, all of a sudden, they could change due to some new technology as in the case of fracking. We do keep an eye on these long-term trends, but we also understand that investment decisions to buy and sell have to be made based on whats happening now. This bi-focal approach is one of the many tools we use to manage your assets.

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Weekly Focus Really?

Whoever said money can't buy happiness simply didn't know where to go shopping. --Bo Derek, American actress Best regards, Your Monarch Team P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added. Securities offered through LPL Financial, Member FINRA/SIPC.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. * The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. * The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Past performance does not guarantee future results. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * To unsubscribe from The Monarch Report please reply to this e-mail with Unsubscribe in the subject line, or write us at 903B Murfreesboro Road Franklin, TN 37064 615-614-0070

Sources: dist=beforebell

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