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Kevin M. Wilson, ChFC , PhD President/CEO/CIO

Monthly Market Review “Looking Ahead to 2013” December 13, 2012. Kevin M. Wilson, ChFC , PhD President/CEO/CIO. Dheenu Sivalingam, MBA AVP/CCO/Senior Analyst. Ted A. Pavlovich, WMS VP Wealth Management. Office: 218-464-4399 Toll Free: 877-327-5062 Fax: 218-464-4397

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Kevin M. Wilson, ChFC , PhD President/CEO/CIO

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  1. Monthly Market Review • “Looking Ahead to 2013” December 13, 2012 Kevin M. Wilson, ChFC, PhD President/CEO/CIO Dheenu Sivalingam, MBA AVP/CCO/Senior Analyst Ted A. Pavlovich, WMS VP Wealth Management Office: 218-464-4399 Toll Free: 877-327-5062 Fax: 218-464-4397 Email: info@bluewater-cap.com www.bluewatercapitaladvisors.com 1405 Medical Arts Building 324 W. Superior Street Duluth, MN 55802 1

  2. Season’s greetingsTed a. pavlovich 2

  3. Jack be nimble…Kevin m. wilson 3

  4. 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 Over Time – But No Crisis In 2013

  6. Unemployment Issues Will Continue To Slow Down Spending… …Many New Jobs Are Part-Time

  7. Commodity Cycle Will Stabilize After Recession Risk Fades Oil stable Nat. Gas stable Food stable Metals higher Water higher Timber higher

  8. The Street Is Much Less Optimistic Than Last Year – So Where Are We? LEI = Past Peak Fed. = Mid-Recovery Stocks = Mid-Recovery Bonds = Recession Balance Sheet Model/Demographics = Extended Muddle-Through

  9. Two Outcomes Possible A B

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

  11. Record High Profit Margins Will Drop A Bit, Putting The Stock Market Under Pressure

  12. So Our Response Is To Stay Nimble And Pivot To Different Asset Allocations As Needed 1. EM Bonds 2. Corp. Bonds 3. Gold 4. European Stocks 5. Resource Plays 6. EM Stocks

  13. A stitch in time…Ted pavlovich 13

  14. Safe Assets Have Been Redefined By The Crisis

  15. Treasury Yields Are Dangerously Low, Suggesting Change Is Coming

  16. Hedging Characteristics Of Gold May Be Changing 2012

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

  18. Nothing Ventured…dheenu v. sivalingam 18

  19. *) 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 Japanese stock market if you are a risk-taker 19

  20. Continued QE program favors: *) long physical gold *) long bank stocks 20

  21. Gold Miners Unbelievably Cheap, But This Is Not For The Faint of Heart *) long gold miners

  22. S&P Correlation to Euro currency tells us to be long S&P if Euro continues to go higher 22

  23. Emerging Market Stocks And Bonds Will Outperform *) Go Long EM Debt

  24. Forecast Summary For 20131. 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 KEVIN M. WILSON 24

  25. Happy new year KEVIN M. WILSON 25

  26. Disclaimer 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.” 26

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