Dear Investor:

In this Quarter’s Newsletter, the lead investing article is about entering a period of “Black Ice” investing. The possible mistake is the tense as we stumbled into the end of this quarter in rather wobbly fashion, dragging almost all assets to a loss for the quarter and leading us to think we may already be in a period of “Black Ice” investing. This being the case, “historically” the final quarter is the best if history continues to rhyme.

Last quarter we mentioned possibly “leaning” towards international markets. While the Ukraine situation is disturbing, it has so far, been much less disruptive than many initially expected. Global sanctions have greatly inhibited their fledgling economic recovery. Our possible “lean” has been delayed as of yet. No one rings a bell when it’s time to move, but with a comfortable position currently we can afford to wait.

Even with “guarantee” being a four letter word of investing, we decided to use it anyway. We do “guarantee” that economic cycles will occur, over and over again. We “guarantee” there will be another recession, and this very weak recovery cycle is also long in the tooth. We look for continued economic recovery, but a slowdown is a possibility, and increasing in probability as time continues.

Interest rates have behaved better than we could have imagined this year. We have had no spikes upward and little disruption in the fixed income markets. We believe higher rates are in the cards sooner rather than later, and continue to protect against major downside in this area of the capital markets.

Getting back to our “Black Ice” investing theme:

A “Black Ice” situation for driving rhymes with our current investment backdrop. We are not sure if it is dangerous our not, or even if we will hit any. A few highlights of our “Black Ice” investment parity from the Newsletter:

• Do not hit the Brakes
• Can we pull over and wait it out?
• Enter “Black Ice” at the correct speed for your safety
• I am skidding, so counter steer!
• There will be back seat drivers (Cassandra and Pollyanna’s)

Enclosed is your Q 3 2014 Quarterly Performance report. With only a smidgen of gains in larger US company equity asset classes, most other asset classes retreated. While we want to always make money, given our belief of a frothy environment, and entering “Black Ice” we are fine with minor moves at this time. Working off the excesses in a sideways fashion is better than the alternative.

Sincerely,

John A. Kvale CFA, CFP

Enclosure (Q3 2014 Performance Report)