Kevin M. Wilson, ChFC, PhDPresident/CEO/CIO

Dheenu Sivalingam, MBAAVP/CCO/Senior Analyst

1405 Medical Arts Building324 W. Superior StreetDuluth, MN 55802

Office: 218-464-4399 Toll Free: 877-327-5062

Fax: 218-464-4397Email: info@bluewater-cap.com

www.bluewatercapitaladvisors.com

Monthly Market Review

“Looking Ahead to 2013”December 13, 2012

 

Ted A. Pavlovich, WMSVP Wealth Management

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SEASON’S GREETINGS

TED A. PAVLOVICH

2

JACK BE NIMBLE…

KEVIN M. WILSON

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US Deficit Will Shrink, But Debt Will Still Grow

5

Fed Will Continue To Monetize The Debt…

…And The Risk Of An Inflation Spike Will Increase OverTime – But No CrisisIn 2013

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Unemployment Issues Will Continue To Slow Down Spending…

…Many New Jobs Are Part-Time

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Commodity Cycle Will Stabilize After Recession Risk Fades

1. Oil stable2. Nat. Gas stable3. Food stable4. Metals higher5. Water higher6. Timber higher

The Street Is Much Less OptimisticThan Last Year – So Where Are We?

LEI = Past PeakFed. = Mid-RecoveryStocks = Mid-RecoveryBonds = RecessionBalance Sheet Model/Demographics =

Extended Muddle-Through

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Two Outcomes Possible

A

B

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LT Market Returns Expected To Be Tame, But ST Returns Will Fluctuate

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Record High Profit MarginsWill Drop A Bit, Putting TheStock Market Under Pressure

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So Our Response Is To Stay Nimble And Pivot To Different Asset Allocations As Needed

1. EM Bonds2. Corp. Bonds3. Gold4. European Stocks5. Resource Plays6. EM Stocks

A STITCH IN TIME…

TED PAVLOVICH13

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Safe Assets Have Been Redefined By The Crisis

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Treasury Yields Are Dangerously Low,Suggesting Change Is Coming

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2012

Hedging Characteristics Of Gold May Be Changing

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In Spite Of Tax Increases, Dividend Stocks Remain A Good Bet

NOTHING VENTURED…

DHEENU V. SIVALINGAM18

*) Surging imports have caused Japan to fall into a trade deficit

*) Japan will most likely try to devalue the Yen, so short the yen.

*) Go long the Japanesestock market if you are arisk-taker

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Continued QE program favors:*) long physical gold*) long bank stocks

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Gold Miners Unbelievably Cheap,But This Is Not For The Faint of Heart

*) long gold miners

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S&P Correlation to Euro currency tells us to be long S&P if Euro continues to go higher

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Emerging Market Stocks And Bonds Will Outperform

*) Go Long EM Debt

FORECAST SUMMARY FOR 2013

1. EUROPEAN RECESSION WILL DEEPEN, BUT RECOVERY LATE IN YEAR2. US WILL EXPERIENCE MILD RECESSION/MUDDLE-THROUGH3. FISCAL CLIFF PROBLEM TO BE RESOLVED, BUT UNCERTAINTY WILL

REMAIN ABOUT INCOME TAXES, ESTATE TAXES, OBAMACARE4. QE3/QE4 WILL ACCELERATE UNTIL RECESSION RISK FADES5. GOLD WILL FALL IN SHORT-TERM, RISE IN LONG-TERM6. OIL WILL STABILIZE (ASSUMING NO WAR)7. DEFLATION AND DELEVERAGING WILL CONTINUE AS THEMES8. SAFE ASSETS CHANGING – CAUTION NEEDED W/TREASURIES,

BUT HIGH DIVIDEND STOCKS WILL REMAIN ATTRACTIVE9. UNEMPLOYMENT WILL REMAIN STUBBORNLY HIGH10. CORP. PROFIT MARGINS WILL BE LOWER THAN CONSENSUS11. BUY-AND-HOLD STRATEGIES WILL AGAIN UNDERPERFORM12. EM DEBT AND EUROPEAN STOCKS WILL OUTPERFORM13. DOLLAR TRENDS WILL DRIVE STOCK MARKETS

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KEVIN M. WILSON

HAPPY NEW YEAR

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KEVIN M. WILSON

This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for its accuracy and interpretation are not guaranteed.

Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication of guarantee of future performance and no representation, express or implied, is made regarding future performance.

The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax matters.

“BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.”

Disclaimer

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