The Markets

Three of the things that have made the United States so great are the determination, fearlessness, and entrepreneurial spirit of our people. Unfortunately, that seems to be a bit lacking right now with the leaders of some of our country’s largest companies.

For more than two years now, corporate America has been on a belt-tightening, cost-cutting push that has helped contribute to our high unemployment rate. While that has been bad for employees, it has sparked a significant revival in corporate profits. For example, according to a New York Times article based on data from the Bureau of Economic Analysis, second quarter corporate profits were within 4% of their pre-recession peak. And, by another measure, Barron’s magazine pointed out that corporate profits as a percentage of gross domestic product are near 40-year highs.

So, if corporate America is doing so well, why aren’t they hiring and why is the stock market stuck in neutral?

In a word –uncertainty.

Even top Federal Reserve officials are having a hard time agreeing on what to do next to help the economy. On August 10, 17 of them met and, according to an August 24 Wall Street Journal article, at least seven of them spoke against or expressed reservations about the ultimate decision Chairman Bernanke made to keep the Fed’s balance sheet from shrinking. Toss in government regulation, an upcoming mid-term election, tax policy uncertainty, a deflation/inflation debate, and stubbornly high unemployment, and there’s plenty to muddy up the waters.

Corporate America is reacting to this uncertainty by conserving cash and keeping a lid on hiring. However, this will eventually change, and, on a positive note, we may be starting to see that happen as corporate acquisitions are on the rise. The current bidding war between two blue-chip technology companies for an obscure data-storage company may be one example of gumption returning to the boardroom… and that’s good!

Data as of 8/27/10	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	-0.7%	-4.5%	3.5%	-10.1%	-2.6%	-3.5%
DJ Global ex US (Foreign Stocks)	-0.5	-6.0	2.6	-10.0	1.4	0.7
10-year Treasury Note (Yield Only)	2.7	N/A	3.5	4.6	4.2	5.8
Gold (per ounce)	0.9	11.9	31.0	22.9	23.5	16.3
DJ-UBS Commodity Index	0.1	-5.5	3.8	-7.1	-4.8	2.1
DJ Equity All REIT TR Index	1.8	14.0	31.5	-5.1	1.8	10.5

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, Barron’s, djindexes.com, 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
or not available.

WHO HAS A WORSE DEBT BURDEN, countries in developed markets or countries in emerging markets? Well, by at least one measure, developed countries are in worse shape.

According to the August 2010 newsletter from Research Affiliates, LLC, “Developed markets account for 62% of the world’s GDP and owe 90% of the world’s sovereign bond debt. The emerging markets collectively produce 38% of the world’s GDP and owe just 10% of world sovereign bond debt.” In other words, relative to the size of its economies, developed market countries (like the U.S.) have a much higher debt burden.

This debt level is problematic because it hampers a country’s ability to grow.

On the flip side, emerging market countries that are not swimming in debt are some of the fastest growing in the world. China is a good example. Its breakneck growth has led to a 60-mile long traffic jam on a main highway leading into Beijing that is still unfolding, according to The New York Times. The culprit? A parade of coal trucks trying to supply the rapidly growing energy needs of Beijing.

Over time, as the developed world tries to pare its debt through austerity programs, sluggish growth may result. World leaders are banking on emerging countries like China to help pickup the economic slack. The extent to which these emerging countries can do that may have a big impact on how long the U.S. stays stuck in neutral.

Best regards,

Kevin Sanderford

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.

• This newsletter was prepared by PEAK.

• 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.

Colorado West Investments, Inc.

1731 E. Niagara Rd. Montrose, CO 81401 (Ph) 888-249-9882 (Fx) 970-249-0830

Securities offered through LPL Financial, Member FINRA/SIPC

The Markets

“We don’t think the world has ended.”

With so much doom and gloom being published these days, it’s refreshing to hear a respected leader of a global, blue-chip company make a positive statement. Doug Oberhelman, the chief executive officer of Caterpillar, met with analysts last week and painted a rather bright picture of the world economy, including the quote above.

Oberhelman went on to say that Caterpillar does not expect a double-dip recession because the world’s central bankers are staying on top of the situation and the global economy is improving - especially in the developing world. As the world’s largest maker of construction and mining equipment, Caterpillar is considered a good indicator of worldwide economic health, according to Associated Press.

One question that many analysts and economists are struggling with is, “Can the world recover without the United States?” As the world’s largest economy, there’s an old saying that when our economy sneezes, the world catches a cold. Well, we’ve certainly done more than sneeze in the past three years. Optimists say that yes, the U.S. is still important in the world economy, but other countries, most notably China, India, and Brazil, can still prosper even if the U.S. is down for a few counts. They call this “decoupling.”

Underscoring this idea of decoupling is the fact that China just passed Japan as the world’s second largest economy, according to The New York Times. Forecasters are predicting that China will surpass the U.S. as the largest economy by as early as 2030.

Caterpillar, for one, thinks the world will continue recovering even if the U.S. is a bit weak. And the stunning growth of China makes that idea plausible.

Data as of 8/20/10	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	-0.7%	-3.9%	4.4%	-9.5%	-2.6%	-3.3%
DJ Global ex US (Foreign Stocks)	-0.5	-5.5	5.0	-8.5	1.2	0.9
10-year Treasury Note (Yield Only)	2.6	N/A	3.4	4.6	4.2	5.8
Gold (per ounce)	0.8	10.8	30.1	22.9	22.7	16.1
DJ-UBS Commodity Index	-1.0	-5.6	4.3	-6.7	-4.4	2.2
DJ Equity All REIT TR Index	-0.5	11.9	35.2	-6.0	1.3	10.1

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, Barron’s, djindexes.com, 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
or not available.

YOU MAY NOT HAVE HEARD OF STANLEY DRUCKENMILLER, but he will be remembered as one of the most successful investors (speculators?) of all time. Since 1986, Druckenmiller has generated average annual returns of 30%, according to an August 18 article by Bloomberg. Incredibly, in 30 years of managing money, he’s never had a losing year, according to Bloomberg.

Perhaps his most famous moment came in 1992 when he was working for famed investor George Soros. Together, they made a multi-billion dollar bet that the Bank of England would be forced to devalue the pound. Sure enough, that occurred and the duo made a $1 billion profit for their investors –in a single day –according to Forbes. Over the years, Druckenmiller did well personally, too, as Forbes magazine estimated his net worth at $3.5 billion in 2009.

When it comes to making money, Druckenmiller said, “It is not whether you are right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

Last week, Druckenmiller announced that he was retiring from managing client money.

The fact that he was retiring was not unusual, rather, as it was the reasons he gave for the retirement. According to The New York Times, Druckenmiller said, “I have had to recognize that competing in the markets over such a long timeframe imposes heavy personal costs.” He went on to say, “While the joy of winning for clients is immense, for me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain.”

Two days after Druckenmiller announced his retirement, another famous investor, Paolo Pellegrini, said he was getting out of the business of managing other people’s money. Pellegrini is famous for betting against risky mortgages and helping his former boss, John Paulson, score a $15 billion profit a few years back, according to The Wall Street Journal. This coup was chronicled in the bestselling book, The Greatest Trade Ever, by Gregory Zuckerman.

Why should you care that these two famous investors are exiting the business of managing other people’s money? It’s important because of the possible signal that it sends.

Back in August 1979, BusinessWeek magazine ran a cover story titled, “The Death of Equities.” It concluded by saying, “The old attitude of buying solid stocks as a cornerstone for one’s life savings and retirement has simply disappeared…The stock market is just not where the action’s at.” Exactly three years later –in August 1982 –the stock market took off on an 18-year bull run that was one of the greatest in history. That story, in hindsight, served as an early inverse indicator of the future direction of the market.

Could the disappearance of Druckenmiller and Pellegrini be a signal similar to the infamous BusinessWeek story?

A stretch, perhaps, and there’s no way of knowing what the market will do until after it happens. But it’s interesting to consider what non-traditional clues like this might mean. Food for thought.

Best regards,

Kevin Sanderford

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.

• This newsletter was prepared by PEAK.

• 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.

Colorado West Investments, Inc.

1731 E. Niagara Rd. Montrose, CO 81401 (Ph) 888-249-9882 (Fx) 970-249-0830

Securities offered through LPL Financial, Member FINRA/SIPC

The Markets

One week, the glass is half full, the next week, it is half empty.

Investor’s lack of conviction was on full display last week as a scandal at Hewlett Packard, a change of heart from the Fed, a revenue miss from tech bellwether Cisco Systems, and an unexpected rise in weekly jobless claims led to a decline in global stock markets, according to Bloomberg.

In particular, the Federal Open Market Committee last week slightly changed its economic outlook by saying, “The pace of economic recovery is likely to be more modest in the near term than had been anticipated.” To help the economy maintain momentum, the Fed announced that it will goose the economy a bit by reinvesting the principal payments it receives on its agency securities in longer-term Treasury securities and that it will roll over its maturing holdings of Treasury securities in new Treasury securities. Effectively, this means the Fed will not shrink its balance sheet for the time being.

Whether this move is good or bad for the economy is subject to debate. One camp says it will help keep interest rates low, which could be good for the economy. Another camp says it will help keep interest rates low, which could be bad for the economy at this stage of the economic recovery. That was not a misprint –smart people are taking opposite views on whether low rates are good or bad for the economy. Kansas City Fed President Thomas Hoenig leads the dissenters. In a speech in Lincoln, NE last week, Hoenig said, “We need to get off of the emergency rate of zero, move rates up slowly and deliberately” and “We will repeat the cycle of severe recession and unemployment in a few short years by keeping rates too low for too long.”

This tug-o-war between smart people makes for interesting reading (at least for us, anyway!)… but generates no clear trend in the market.

Data as of 8/13/10	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	-3.8%	-3.2%	7.5%	-9.4%	-2.6%	-3.2%
DJ Global ex US (Foreign Stocks)	-4.2	-5.0	4.4	-9.6	1.2	1.0
10-year Treasury Note (Yield Only)	2.7	N/A	3.6	4.8	4.3	5.8
Gold (per ounce)	0.5	10.0	27.3	22.0	22.3	16.0
DJ-UBS Commodity Index	-1.9	-4.6	1.4	-7.6	-4.2	2.5
DJ Equity All REIT TR Index	-3.8	12.5	33.2	-4.9	1.3	10.0

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, Barron’s, djindexes.com, 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
or not available.

IF YOU HAD TO DESCRIBE THE STATE OF THE ECONOMY as an animal, which animal would you pick? This may sound like a silly question, but it is an actual question from a national survey released last month and sponsored by the Certified Financial Planner Board of Standards.

Some of the less common survey responses included cow, kangaroo, lamb, dinosaur, possum, rat, giraffe, hyena, and, not surprisingly, bull. Looking at this list makes us wonder… what attribute does a giraffe or a possum have that can be compared to the economy? Let us know what you think.

The most common responses were bear, snake, turtle, sloth, lion, pig, dog, and skunk.

Okay, have you picked your animal?

For discussion purposes, let’s say that you picked a bear as your animal. Of course, a “bear” is also commonly used to describe a weak stock market. Now, here’s the point. Often, investors get an idea in their mind –e.g. this is a “bear” market –and have a hard time changing their perception even in the face of new evidence that would suggest their perception is inaccurate. Psychologists call this “anchoring” and it has led many investors astray, according to Investopedia.

The key to overcoming anchoring is to keep an open mind, be willing to change, and utilize rigorous thinking.

So, no matter what animal you picked, whether it be bull, bear, turtle, sloth, or skunk, be alert to new information that may suggest that it’s time to pick a new animal. As your advisor, we are mindful of the “anchoring” bias and we do our best to base our decisions on rigorous thinking and not on an outdated opinion.

Best regards,

Kevin Sanderford

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.

• This newsletter was prepared by PEAK.

• 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.

Colorado West Investments, Inc.

1731 E. Niagara Rd. Montrose, CO 81401 (Ph) 888-249-9882 (Fx) 970-249-0830

Securities offered through LPL Financial, Member FINRA/SIPC

The Markets

Despite a disappointing jobs report, stocks still managed to post a solid gain last week. In fact, all three major U.S. indexes –the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite –ended last week in positive territory for the year, according to CNBC.

Strong corporate earnings are helping to keep a floor under the market. Roughly 75% of the companies that have reported second quarter earnings beat Wall Street estimates, according to CNBC. Of course, one factor that helped corporate America post strong earnings was keeping a tight rein on employment costs. Unfortunately, what’s good for corporate America may not always be good for “employment” America.

Bond yields continued to decline last week as the 2-year Treasury hit a record low of 0.50%. The 10-year Treasury yielded 2.82%, which is a 15-month low. Foreign country bonds are sporting low yields, too. The 10-year German Bund hit a record low yield of 2.51% last week, while the benchmark Japanese 10-year government bond yielded just 1.05% last week, according to Barron’s.

Low yields suggest either slower economic growth ahead or little to no inflation, or both, according to Barron’s. Low rates are generally good for businesses because it makes their cost of capital lower and makes it easier for them to reinvest for future growth. So far, the low rates appear to have helped stabilize the economy, but robust growth and reinvestment has yet to materialize, according to The New York Times.

Overall, the mixed economic data is helping keep the market stuck in a broad range.

Data as of 8/6/10	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	1.8%	0.6%	11.0%	-8.6%	-1.7%	-2.7%
DJ Global ex US (Foreign Stocks)	2.8	-0.9	9.6	-8.7	2.5	1.5
10-year Treasury Note (Yield Only)	2.8	N/A	3.8	4.7	4.4	6.0
Gold (per ounce)	3.3	9.4	25.3	21.6	22.6	16.0
DJ-UBS Commodity Index	0.8	-2.8	3.8	-6.9	-3.6	3.0
DJ Equity All REIT TR Index	1.3	16.9	39.8	-3.6	2.8	10.6

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, Barron’s, djindexes.com, 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
or not available.

“WE ARE IN A NEW NORMAL WORLD in which the distribution of outcomes is flatter and the tails are fatter,” according to a July 2010 Global Perspective report from Richard Clarida of PIMCO. What in the world does that mean?

Clarida’s words might sound like mumbo jumbo, but he actually makes a solid case that planning for “extreme” outcomes rather than “average” outcomes might be the appropriate investment strategy in the current climate.

History tells us that the average annualized total return on the S&P 500 between 1926 and 2009 was 9.9% and the standard deviation was 19.2, according to TD Ameritrade. Standard deviation is a measure of volatility and at 19. 2 (one standard deviation), it means that about 68% of the time, we would expect the S&P 500 annual return to be somewhere between a loss of 9.3% and a gain of 29.1%. At two standard deviations, it means that about 95% of the time, we would expect the S&P 500 to return somewhere between a loss of 28.5% and a gain of 48.3%. At three standard deviations, it means that about 99.7% of the time, we would expect the S&P 500 to return somewhere between a loss of 47.7% and gain of 67.5%.

Clarida is suggesting that, in the future, more of the returns in the financial markets will fall in the 2^nd or 3^rd standard deviation range (the “fat tail”) instead of the 1 standard deviation range (the “hump”). If true, this means we could expect more volatility — both positive and negative - in the future.

The future could be more volatile due to such things as the unpredictable nature of government regulation and bailouts, sovereign debt levels, high-frequency trading, geopolitical flare-ups, social unrest, high unemployment, and medical or scientific breakthroughs.

Recent events such as the May 6 “Flash Crash,” the 2008 financial crisis, the 2007-2009 bear market, and the 2008 spike and then collapse in oil prices, support Clarida’s idea that we live in volatile times.

So, if we are temporarily living in a “fat tail” world, then it makes sense to plan accordingly. And, that’s what we’re trying to do on your behalf.

Best regards,

Kevin Sanderford

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.

• This newsletter was prepared by PEAK.

• 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.

Colorado West Investments, Inc.

1731 E. Niagara Rd. Montrose, CO 81401 (Ph) 888-249-9882 (Fx) 970-249-0830

Securities offered through LPL Financial, Member FINRA/SIPC

The Markets

“The economy is still struggling; too many Americans are still out of work; and the Nation’s long-term fiscal trajectory is unsustainable, threatening future prosperity,” according to the Mid-Session Review submitted by the White House last week.

This supplemental update of the annual budget contained a number of projections that are of interest to us. Here are a few:

• A projected federal deficit of $2.9 trillion over the next two fiscal years.
• Gross Domestic Product projected to grow 3.2% this year, 3.6% in 2011, and 4.2% in 2012.
• Unemployment projected to average 9.7% this year, 9.0% in 2011, and 8.1% in 2012. It is projected to stay above 6% until 2015.
• The consumer price index projected to rise 1.6% this year, 1.3% next year, and 1.8% in 2012.
• The 10-year Treasury projected to yield on average 3.5% in 2010, 4.0% in 2011, and 4.6% in 2012.

Projections like this are, of course, notoriously difficult to get right. So much can happen in a short period and throw off the best laid plans. But, looking at the projections at least gives us a place to start. Overall, the projections are a mixed bag. The deficit numbers are problematic. The GDP growth projection is good if we can hit it. The unemployment numbers are painful. The inflation outlook is stable and the Treasury yield is favorable for business growth.

If, by the end of 2012, the above numbers come to fruition, then we would likely avoid a double-dip recession and the economy would probably “muddle along.” So far, corporate America is doing its part by showing really solid earnings for the second quarter. Companies such as Caterpillar, 3M, AT&T, and UPS notched solid quarters and suggest there is underlying strength in the economy, according to MarketWatch. In fact, of the 175 companies in the S&P 500 that have already reported their second quarter earnings, a whopping 78% have beaten analysts’ estimates while only 12% missed, according to data from Thomson Reuters as reported by MarketWatch. Buoyed by good earnings and relief over the European bank stress tests, the S&P 500 rose a solid 3.6% last week.

Given all the volatility we’ve had over the past 2½ years, “muddle along” might not be so bad!

Data as of 7/23/10	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	3.6%	-1.1%	12.6%	-10.6%	-2.1%	-2.8%
DJ Global ex US (Foreign Stocks)	1.9	-4.8	10.1	-11.9	2.2.	0.8
10-year Treasury Note (Yield Only)	3.0	N/A	3.7	5.0	4.3	6.0
Gold (per ounce)	0.1	7.8	25.3	20.4	22.9	15.6
DJ-UBS Commodity Index	1.8	-6.7	5.5	-8.6	-3.6	2.7
DJ Equity All REIT TR Index	6.3	13.5	56.1	-6.1	0.9	10.5

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, Barron’s, djindexes.com, 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
or not available.

WHETHER AN INVESTOR LEANS BULLISH OR BEARISH, there is ample data to support either view. This situation may explain why Fed Chairman Ben Bernanke told Congress last week that the economic outlook was “unusually uncertain.” For those investors who lean bullish, here are several supporting points courtesy of economist David Rosenberg as reported by Financial Times:

• Congress extended jobless benefits, which is one form of stimulus.
• Some Democrats are now in favor of delaying tax hikes.
• China is having some success slowing its property bubble without bursting it.
• Confidence is growing that the emerging markets may keep world growth positive even if more mature countries slow down.
• Eurozone debt and money markets have settled down after the problems with Greece sparked default fears.
• The European bank stress tests contained no major surprises and added clarity to the soundness of the banking system.
• Consumer credit delinquency rates in the U.S. are improving.
• Mortgage delinquencies in California, one of the hardest hit real estate markets, are at a three-year low.
• The BP oil spill is coming under control and is no longer each day’s top headline.
• The passage of the financial regulation bill removed one more cloud of uncertainty.
• Corporate America is reporting solid earnings for the second quarter and their future outlook has been, on balance, positive.
• Fed Chairman Ben Bernanke indicated he’ll keep using monetary policy to stimulate the economy and he’ll get even more aggressive if need be.

So, yes, there are reasons why the markets and the economy could do okay in the months to come. But, in this “unusually uncertain” time, it still makes sense to be “on guard.”

Best regards,

Kevin Sanderford

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.

• This newsletter was prepared by PEAK.

• 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.

Colorado West Investments, Inc.

1731 E. Niagara Rd. Montrose, CO 81401 (Ph) 888-249-9882 (Fx) 970-249-0830

Securities offered through LPL Financial, Member FINRA/SIPC

The Markets

What is the most actively traded security on the planet?

The answer is the two-year Treasury note and its current yield is sending us a signal, according to Bloomberg, July 17. Last week, the yield on the two-year note fell for the seventh straight week and touched its lowest level ever. At just under 0.6%, it is now lower than during the peak of the financial crisis in the fall of 2008.

What does this signal?

In short, it suggests the economy is slowing down, inflation is not a threat, deflation is a possibility, and money-market rates will remain historically low, according to BusinessWeek, July 15, Barron’s, July17, and Bloomberg, July 17. Here’s a list of several economic reports released last week that help support this view:

• U.S. consumer sentiment tanked in early July, according to a survey by Reuters and the University of Michigan (MarketWatch, July 16).
• The consumer price index dropped for the third straight month in June, according to data from the Labor Department (Market Watch, July 16).
• Industrial production rose a modest 0.1% in June after having risen 1.2% in May,
  according to the Federal Reserve, July 15.
  
• Another report released by the Federal Reserve, June 22, said, “The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside.”
• The dollar has posted significant declines recently against the euro and yen as traders position themselves for a potential slowdown in the U.S., according to Bloomberg, July 17.

While the data above points toward economic softness, second quarter corporate profits are coming in strong. Of the 48 companies in the S&P 500 index that have reported their earnings, 75% have topped analysts’ estimates, including a blow-out quarter from Intel, according to Reuters, July 16.

The tug-of-war between soft economic data and strong corporate profits is helping keep the market stuck in a bouncy trading range.

Data as of 7/16/10	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	-1.2%	-4.5%	13.2%	-11.8%	-2.7%	-3.4%
DJ Global ex US (Foreign Stocks)	0.6	-6.6	13.7	-12.4	2.0	0.3
10-year Treasury Note (Yield Only)	2.9	N/A	3.6	5.0	4.2	6.2
Gold (per ounce)	-1.6	7.7	27.2	21.3	23.1	15.5
DJ-UBS Commodity Index	0.5	-8.4	7.8	-9.3	-4.2	2.3
DJ Equity All REIT TR Index	-1.8	6.8	53.8	-9.2	0.0	9.9

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, Barron’s, djindexes.com, 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
or not available.

HOW DO YOU SOLVE A PROBLEM LIKE JOBS? This question has a double meaning- jobs as in employment and Jobs as in Steve Jobs of Apple.

Chronically high unemployment in the U.S. is having a debilitating effect on our economy. We can point to many causes for this, but one that receives lots of press is the outsourcing of jobs overseas–and that’s where Steve Jobs comes in.

Without getting into a political debate about the pros and cons of free trade, it turns out that in a little recognized fact, Apple is one of the biggest beneficiaries of outsourcing jobs overseas. We can’t get enough iPods, iPhones, iPads, and Macs, but relatively few of the jobs created by our insatiable demand are sprouting on our shores.

According to Apple and BusinessWeek, as of September 26, 2009, Apple had about 37,000 full-time equivalent employees of which about 25,000 were based in the U.S. By contrast, Apple has subcontracted with a Chinese company called Foxconn that employs roughly 250,000 people who are devoted to building Apple products. Doing the math, for every one Apple employee working in the U.S., there are 10 Foxconn employees building Apple products in China. Knowing that costs are much lower in China (and that Apple products are in high demand), is it any surprise that Apple earned $3 billion in profit with a 42% gross margin in the first three months of this year?

Again, this is not meant to start a political debate about free trade or protectionism as there are many facets to this issue. It simply points out the intractable nature of high unemployment in the U.S., particularly in the manufacturing sector. Some people argue that free trade and capitalism are the best ways to grow jobs and profits. Others, notably former Intel chairman and chief executive officer Andrew Grove (Bloomberg, July 1), argue for protectionist measures to rebuild our domestic manufacturing base.

Ultimately, America needs to get its people back to work. The Apple example shows just how difficult that may be.

Best regards,

Kevin Sanderford

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.

• This newsletter was prepared by PEAK.

• 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.

Colorado West Investments, Inc.

1731 E. Niagara Rd. Montrose, CO 81401 (Ph) 888-249-9882 (Fx) 970-249-0830

Securities offered through LPL Financial, Member FINRA/SIPC

The Markets

The Second Quarter in Review

Data as of 6/30/10	2nd Quarter	YTD	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	-11.9%	-7.6%	12.1%	-11.8%	-2.9%	-3.4%
DJ Global ex US (Foreign Stocks)	-12.6	-11.2	9.2	-12.7	1.3	0.0
10-year Treasury Note (Yield Only)	3.8	N/A	3.5	5.0	3.9	6.0
Gold (per ounce)	11.5	12.7	33.1	24.1	23.3	15.8
DJ-UBS Commodity Index	-4.8	-9.7	2.6	-9.5	-3.8	1.8
DJ Equity All REIT TR Index	-4.1	5.4	53.6	-8.8	0.4	10.2

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, Barron’s, djindexes.com, 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
or not available.

The Markets

Can world governments “cut” their way to prosperity?

It’s no secret that many countries are incurring large–and unsustainable–budget deficits. What’s interesting is the approach each country is taking to try to lower their deficits to a manageable level. Britain, Japan, Germany, and Greece, for example, are focused on cutting government spending, according to Bloomberg, June 22. Conversely, the U.S., while concerned about government spending, seems more focused on keeping the stimulus spending alive and raising taxes until (hopefully) the economy can catch fire and grow on its own.

Who’s right?

According to Harvard University professor Alberto Alesina, “There have been mountains of evidence in which cutting government spending has been associated with increases in growth, but people still don’t quite get it.” In addition, a study by Ben Broadbent and Kevin Daly of Goldman Sachs Group, Inc. as reported by Bloomberg on June 22, “discovered that reducing expenditures by 1 percentage point a year boosted average annual growth by 0.6 percentage point. Raising the ratio of taxes to GDP by the same margin cut growth by an average 0.9 percentage point.” And, from a stock market perspective, the same report said, “The equity markets of the countries that sliced spending beat those of other advanced nations by 64% during a three-year period.”

Like many things related to finance and economics, we won’t know “who’s right” until time passes and the market delivers its verdict. Between now and then, expect the vigorous debate on spending cuts versus stimulus spending to continue among academics, investors, and world leaders.

Data as of 6/25/10	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	-3.6%	-3.4%	17.0%	-10.4%	-2.0%	-3.0%
DJ Global ex US (Foreign Stocks)	-2.0	-8.6	13.9	-11.7	1.9	0.4
10-year Treasury Note (Yield Only)	3.1	N/A	3.6	5.1	3.9	6.1
Gold (per ounce)	-0.2	13.6	33.8	24.4	23.3	16.0
DJ-UBS Commodity Index	0.2	-7.5	3.1	-8.9	-4.2	2.1
DJ Equity All REIT TR Index	-3.0	11.7	65.9	-6.7	1.7	10.6

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, Barron’s, djindexes.com, 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
or not available.

ARE THE FINANCIAL MARKETS “NORMALLY DISTRIBUTED” and should you even care? Consider this. The average height of an American male is 69.4 inches, according to the National Center for Health Statistics, October 22, 2008. If we randomly chose 1,000 American males and calculated their average height, we would likely come up with a number close to 69.4 inches. Now, in an un-random fashion, let’s assume we found an 8-foot tall man–who is clearly an extreme outlier–and we have him join the previous group of 1,000. By recalculating the data, we now find the average height of this group of 1,001 men jumps by a very underwhelming 0.03 inches. In other words, adding an extremely tall outlier to this group of average height men had very little effect on the overall average height of the group. Without getting too technical and assuming “tall outliers” are just as likely to be found as “short outliers,” we can say the height of men follows a “bell curve” or a normal distribution.

By contrast, let’s consider the average net worth of American households. According to the Federal Reserve, February 2009, the average American family had a net worth of $556,300 in 2007. Like above, if we randomly chose 1,000 families, this group would probably have an average net worth near $556,300. However, for fun, let’s add Warren Buffett–and his $40 billion net worth–to the group. Recalculating the data, we find the average net worth of this group of 1,001 Americans jumps to $40.5 million! Clearly, adding an extreme outlier to this sample dramatically changed the average of the sample.

As it relates to the financial markets, do you think their distribution of returns looks more like the average height of American men (where an extreme outlier doesn’t really affect the average) or the average net worth of American households (where an extreme outlier could have an extreme impact)? If you think the returns in financial markets look like the average height of American men, but it turns out they behave more like the average net worth of American households, you could lose a lot of money. In fact, much of modern portfolio theory is based on the assumption that financial markets follow a normal distribution, i.e., they look like the average height of American men. Unfortunately, experience suggests otherwise.

Warren Buffett-type outliers such as the October 1987 stock market crash, the 2000-2002 bursting of the internet bubble, the 2007-2009 bear market, the 2008 credit crisis, and last month’s “flash crash,” suggest that the financial markets are subject to large outliers that can significantly affect your financial well-being. Knowing that, we do our best to try to limit the damage to your portfolio if one of these outliers occurs during your investing lifetime.

Best regards,

Kevin Sanderford

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.

• This newsletter was prepared by PEAK.

• 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.

Colorado West Investments, Inc.

1731 E. Niagara Rd. Montrose, CO 81401 (Ph) 888-249-9882 (Fx) 970-249-0830

Securities offered through LPL Financial, Member FINRA/SIPC