Q 4 2015 Quarterly Report Cover Letter

After dropping dramatically in the third quarter, global equity markets rebounded somewhat in the fourth to finish the year 2015. The Santa rally; a tendency for capital markets to rise between Christmas and New Year’s, was met with Coal, as markets finished the very end of the fourth quarter similar to the end of the prior quarter, leaving almost all asset classes red for the year.

European markets continued to struggle as the US Dollar’s strength, along with sluggish growth kept a lid on appreciation. We believe this may change in the near future, especially for the Emerging Capital Markets, international developed markets’ little brother.

Commodities, mainly oil, continued its descent. Long-term we find it very difficult to believe that oil will stay at this low level forever, however it may be a little bit longer before it begins to rise. Many strategists are now calling for a double or triple in oil price from here.

Interest rates- they finally move them! While many said that the increase in interest rates are the headwind that the markets are currently experiencing, Santa’s coal, we disagree. As mentioned in our Q1 2016 newsletter, this economic expansion is currently 83 months long, with a 53 month hundred year average. While expansions don’t die of old age they do tend to be more vulnerable as they get long in the tooth, especially if they are frothy, as we believe. With the aforementioned increase in interest rates we believe that this income from prior low yielding fixed income instruments will eventually filter through the system and help increase overall growth and consumer spending. This is exactly the opposite of what many think, however coming from such a low interest rate environment we believe many are underestimating what the ultralow yields have done to the consumer’s purchasing power.

Yep it’s a presidential election year. While historians point to the year AFTER an election as the volatile one, recent experiences also have shown that the year OF the election as also volatile. Watch out for many outlandish headlines and negative statements about our current situation from possible candidates trying to gain attention, this is the norm in an election year, and given the aforementioned length of the expansion, volatility may be at hand.

We continue to like our asset allocation and look forward to a great New Year.

We will be sending a separate tax report mid February that will summarize taxable items and help in your government tax filing requirements should you have a taxable account. IT IS VERY IMPORTANT YOU WATCH FOR THIS REPORT AS IRS RULES HAVE MANDATED CUSTODIAL REPORTING, WHICH WILL NOT BE 100% ACCURATE DURING THE TRANSITION PHASE. OUR REPORT WILL BE THE MOST ACCURATE.

We have included our latest private policy statement for your review. Also, we want to take this opportunity to offer our latest ADV filings; Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.

Sincerely,

John A. Kvale CFA, CFP

Enclosures (Fourth Quarter 2015 Performance Report)

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