Memorandum-April

Memorandum

To: WLM Client Base

From: William L. Meyer, CLU, ChFC

Re: April Commentary

This memo is a follow-up to the January newsletter outlook and comments on Camac Energy.

Camac, in particular, has caused a drag on first quarter returns in many of your accounts compared to the index. The amount of higher yielding positions (preferred stocks) to reduce risk is also not expected to participate in gains similar to the S&P index. Camac is a US company with operations in China and Nigeria. Their main oil well off the coast of Nigeria stopped producing and they needed 30 million+ to refract the well. Their financing fell thru at the last minute, which required them to issue equity diluting all the shareholders. I have dollar cost averaged and kept the stock for now to see if the well, in time, will produce over 8,000 barrels a day again, and to see if the Zijnshan Block gas asset located in Shanxi Province, China proves to be the large find Camac expects. The project is in close proximity to Beijing, and has a major pipeline already in place. The company has stated it has the financing to drill three wells in 2011 to prove the reserves and discover if they are economically recoverable.

INFLATION

Some of you have been asking me about inflation and the risks and opportunities associated with it. Historically large budget deficits financed by aggressive money printing has led to high inflation. High unemployment here, and the ability of the US to import excess capacity from China and other countries will likely mute inflation this year. That said, the global manufacturing capacity utilization numbers have risen to 77.4% according to Bloomberg—numbers in the mid 80s would allow for manufacturers pricing power prospectively. The new release of current numbers is 4/15/11. Interest rate risk is a concern with the second round of Quantitative Easing ending in June, but US government bonds will likely benefit from safe-haven buying and the fact that the US dollar is still the dominant reserve currency. The Fed’s printing of money in its reflation efforts is good for the stock market, because some of that money will likely be used to finance stock buybacks and acquisitions; but does little to create jobs. Too, US Quantitative Easing will likely force China to allow the Yuan to rise going forward. Bottom line is, I believe while inflation is not as big of a problem this year as some headlines indicate, but inflationary pressures will surface in 2012 absent of a double dip or reversals in either fiscal or monetary policy.

ECONOMIC RECOVERY & STOCK MARKET

Broadly speaking, the underlying trends that support further economic & earnings growth are still in place. These major trends have been somewhat clouded by near-term uncertainties in Japan and the Middle East. The ongoing shift of purchasing power to emerging market consumers as the dollar drops in value continues, while developed market households deleverage. This explains why there are interest rate differentials between developed and emerging markets. Hopefully, the global economic recovery will transition to sustainable growth as global trade patterns rebalance towards a more stable configuration; helping our unemployment rate to decline further.

The main risk for global stock prices at the moment is higher food and energy prices, because that will lead to further tightening by central banks around the world. It also saps the developed market household incomes prolonging the deleveraging process. However, it appears farmers have increased plantings in response to prices and therefore perhaps food prices are peaking for now. If oil & gas prices don’t go much higher, I don’t believe the uptrend in the stock market this year will be derailed.

That said, quarterly earnings reports are now forthcoming and I am paying close attention to management comments about current and future earnings outlook in your equity positions. Additionally, the leading index numbers, which are good, continue to play a major role in my outlook and decision making process regarding your investments.

The market has been on a tear since last August, therefore it is likely in the next 30 or 40 days I will take some profits and raise cash in your accounts in hopes of being able to buy securities at lower prices in the summer. The risk, of course, is the market’s continued rise and you miss some of the market gains, but history suggests a correction greater than the recent 7% down move would be normal, especially since the pullback was unusually short. I will not likely raise more than 20% cash, and for accounts invested primarily for income, I will not be selling those positions.

Finally, for the record, I still believe we are in a cyclical bull mode within a secular bear market that started in 2000. Because I believe that we are in a secular bear market, I don’t have an expectation of multiple year double digit returns and expect a return to poor market conditions (and-delete) perhaps as early as next year in spite of an improving global economy. What this means to you, is that I continue significant exposure to higher yielding securities and will lean towards downside protection if the leading indicators and technical trends warrant it. I have had two clients impart to me that they desire a more aggressive investment posture going forward, which I have accommodated. I encourage you to please tell me if your risk tolerance has changed or if you desire a different investment strategy than what I am currently implementing for your money. Please also make time in your schedules to meet with me in person for reviews.

Thank you for your introductions and continued business!