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Our Visit to Morningstar 2012On June 20 – 22 Ryan Gilmer and I traveled to Chicago to participate in Morningstar’s annual conference. Each year the best and brightest mutual fund managers gather there, in Morningstar’s corporate home town, for a discussion of the latest in finance, politics and money management.

This conference is always the highlight of our year since we get to discuss real issues directly with mutual fund managers. Access to the mutual fund managers greatly helps us understand their thought processes, their personal understanding of the financial world, and provides a first glimpse at what they are worried or excited about. The following blurbs are some highlights of what we discussed.

Eurozone – While news of economic conditions in Greece, Spain, and Italy has recently dominated headlines, there is little chance that the Euro will go away. The pain of separating will be far greater than the messiness of staying together. We were reminded that the US dollar had the same struggles after the Civil War. The Euro is here to stay.

US Deficits and Debt – There are real concerns about the United States’ current fiscal path. One portfolio manager (PM) said the Federal Reserve is trying to create inflation and in time will get it through an increased money supply. Another PM is really bothered that there are no real solutions being sought. Of primary concerns are the US pension and healthcare obligations from an aging and less productive population.

US GDP Growth – The latest expectation is around 2% annually.

US Treasuries – Most managers do not like the present risk in US Treasuries at all! Most PMs believe they are severely over bought, which drives prices very high and yields very low. In fact, the only reason people now prefer them is their perceived insurance against volatility. This “insurance” is currently very expensive.

No More Risk-Free Assets – The most memorable quote of the conference was by Michael Hasenstab, portfolio manager of the Templeton Global Bond fund, during his opening keynote address, “There are no more risk-free assets. We now have to take risk to preserve capital.” He was referring to the risk in all assets, even three month US Treasury bills, which have in the past been considered risk-free.

China – Growth in China is slowing. Some believe the increasing number of middle class households remains a strong force of future growth there. However, cheap labor in China is ending even now. The Chinese are starting to demand higher wages.

Emerging Markets – While emerging markets have sold off in recent months, they continue to be strong players in global economies.

These countries have better balance sheets and more growth than the “developed” world.

Corporate Earnings – After emerging from the crisis of 2008, US companies have to-date been able to maintain high profit margins. These may come under pressure if taxes increase or companies begin to lose market share.

Investor Behavior – Morningstar research overwhelmingly demonstrates that most investors pick the right investments but at the wrong times, and individual investors may choose good investments but set the wrong allocation over asset classes. “Good picks will never outrun a bad allocation” – Don Phillips, Morningstar.

Risk On/Risk Off – This is the new term for when the market sells everything indiscriminately and then buys everything without

discrimination. One portfolio manager has been in the business a long time and this is the first he has seen this phenomenon.

In summary, we must keep in mind that nothing happens in a vacuum, and all these things are interconnected. While many investors

have tried to find new short cuts and gimmicks, the same time-tested laws of finance are still at play.

Fear and greed remain strong drivers of behaviors that distort reality in the short-term, but the long term perspective seeks to identify companies who grow their earnings consistently over time. As one portfolio manager declared, “Most people are worried about outlook – we are worried about price.”

In the end, we came away with a renewed sense of confidence that the money managers we use have a great understanding of the financial world and are committed to the time-tested disciplines that work.

If you’d like to hear more about our trip to the Morningstar Conference or have questions about what we learned, give us a call or shoot us an email.

InFormSummer 2012 www.whitcomb.com

By Aaron Bates, CFP®, Investment Advisor Representative

Aaron Bates, CFP®, Investment Advisor Representative Direct Line: 419.496.2226 e-mail: abates@whitcomb.com Call for: general investment needs,questions on specific investments and investment performance

“The same time-tested laws of finance are

still at play.”

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Social Security Statements & Earnings RecordsBy Tracy Eichelberger, Investment Advisor Representative

You may have noticed that the Social Security Administration didn’t mail you a copy of your Social Security Statement and Earnings Record this year prior to your birthday. The SSA stopped mailing paper benefit estimates to workers in April 2011 as part of a budgetary cut.

In February of 2012 the SSA resumed mailing paper statements to a select group of workers – those age 60 and older who are not currently receiving benefits.

If you don’t fall in the select group of those receiving paper statements, you can now access your information online.

In addition to retirement benefit estimates, estimates for disability and survivors benefits are also provided. You can even confirm your earnings record, which is used to determine your benefits.

To access your information online, go to www.socialsecurity.gov/mystatement. You must be age 18 or older and must be able to provide information about yourself that matches information on file with Social Security. (Social Security also uses Experian, an external authentication service provider, for additional verification.)

To get started, select the button: “Sign In or Create an Account”.

Once you are verified, you can set up “My Social Security” account with your user name and password. I signed in and it wasn’t a long process to set up my own account. And I have to admit, I like having instant, up-to-date access to my Social Security Statement and Earnings Record.

Once you have access to your Social Security Statement & Earnings Record, then what? These reports provide some key information for your retirement planning. According to the SSA, Social Security replaces only about 40% of your preretirement income. Most individuals can start taking Social Security at age 62, but delaying to age 70 may create even larger benefits.

When to start taking your benefits can be confusing and overwhelming, especially if you are looking to maximize your benefits for both you and your spouse. Do you start taking benefits at age 62? Or at your full retirement age? Or do you wait until age 70? Do you file at your full retirement age and suspend your benefits until age 70? Do you take spousal benefits? Or draw off your own work record? And the answer to all those questions is…it depends!

We want you to make an informed decision about the timing of taking your benefits! One of the tools we have available is a Social Security Analyzer. This tool allows us to input some

of your key information, including your date of birth, life expectancy, marital status and your Primary Insurance Amount (PIA), which is your benefit amount if elected upon reaching your

full retirement age. From this information, we can suggest a recommended timing of when

to start taking benefits whether early, at full retirement age, or delayed.

This is just one tool in our toolbox, but one that is becoming increasingly valuable as you near retirement and qualify for Social Security benefits. If you have any questions, please do not hesitate to contact us.

“We want you to make an informed decision about the timing of

taking your benefits!”

Tracy eichelberger Investment Advisor Representative Direct Line: 419.496.2225 e-mail: teichelberger@whitcomb.comCall for: general investment needs, questions about specific investments and investment performance

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Disclosure StatementPlease contact Whitcomb & Hess, Inc. if there are any changes in your financial situation or investment objectives, or if you wish to impose, add, or modify any reasonable restrictions to the management of your account. Also, as required by the United States Securities and Exchange Commission, a copy of our Form ADV2A and Form ADV2B: Firm Brochure, which provides information about the qualifications and business practices of Whitcomb & Hess, is available upon request. To request a copy contact Rose Anne Kline at 419.496.2137 or 1.800.379.7007 or rkline@whitcomb.com.

Our Privacy PolicyWe limit our employee access to nonpublic personal information to those who need to know this information to provide the best service to you. We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as permitted by law.

Investment UpdateFor the calendar year 2012, the S&P 500 Index was up 9.49%. As you can see from the graph below, there has been significant volatility over the past 5 years, which spans from 2007-2012. There was a sharp bounce off of the market lows in March of 2009, with most of the gains coming in the following 12 months. This underscores the importance of staying invested (I do not remember any bullish clients in March of 2009). After the current pullback in the second quarter, the market is currently trading at levels seen in early 2011.

Also in the past 5 years, as shown in the graph below, the yield on the 10 year Treasury bond dropped from around 5% to around 1.6%. CDs, fixed annuities, and money market yields have declined in kind.

As bond yields drop, bond prices go up and bond investors realize a positive rate of return on their investment. Yields have consistently declined as inflation concerns have abated and problems in Europe have escalated. How much lower can yields go?

What is the market telling us?Massive amounts of fiscal and monetary stimuli from the government and the Federal Reserve drove the markets higher over the past

By Ryan Gilmer, Investment Advisor Representative

three years (post 2008). Now there are concerns that more stimuli will have less of an impact and cause other long term consequences. Without intervention from Congress, there will be tax increases and spending decreases in 2013. While at some point tackling the deficit is necessary, it will lead to short term pain, specifically slower economic growth or possibly another recession.

Problems in the world are obvious and continue to be front page news. In the near term, we would not be surprised to see continued market volatility. Now, maybe more than ever, it becomes necessary to understand your risk tolerance and invest appropriately. The last 12 years have been difficult for the markets, but many of the mutual fund managers we invest with have been able to navigate them well. We continue to expect that a value investing strategy will outperform over the full market cycle.

Longer term, we believe good times will come again. In the next 5–10 years we will continue

to see technological advances that will drive the next wave of strong economic growth.

It will be important for investors to avoid throwing in the towel over the next

few years—so that they will be able to take advantage of the bull market when it arrives.

MaRkEt REcaP As of June 29, 2012

DOW JONeS INDuSTrIAL AVerAGe (Total Return)

2ND QTR | –1.85% 2012 YTD | 6.83% 5YR AVG | 2.00%

S & P 500 COmPOSITe (Total Return)

2ND QTR | –2.75% 2012 YTD | 9.49% 5YR AVG | 0.22%

ruSSeLL 2000 (Total Return)

2ND QTR | –3.47% 2012 YTD | 8.53% 5YR AVG | 0.54%

mSCI WOrLD eX - u.S.* (Total Return)

2ND QTR | –10.66% 2012 YTD | –1.08% 5YR AVG | – 6.16%

BArCLAYS uS AGGreGATe BOND* (Total Return)

2ND QTR | 2.20% 2012 YTD | 2.60% 5YR AVG | 6.92%

Jan 08 Jan 09 Jan 10 Jan 11600

800

900

1,000

1,1001,200

1,400

S&P 500 INDeX

Jan 12

700

1,300

1,5001,600

Billio

ns

Jan 08 Jan 09 Jan 10 Jan 11

3.0

4.5

2.0

1.0

2.5

3.5

5.0

4.0

5.5

CBOe Interest rate 10-Year T-Note

Jan 12

Perc

ent

ryan Gilmer, Investment Advisor Representative, Level III Candidate, CFA program Direct Line: 419.496.2227 e-mail: rgilmer@whitcomb.com

Call for: general investment needs, questions on specific investments and investment performance

1.5

* prices through 6/28/12 – latest available at time of record

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We are available Monday – Friday to help you with your financial and investing questions. Call for your FREE one-hour consultation today! 419.289.7007 or toll free 1.800.379.7007.

We are always open to new clients who value the holistic financial service we provide. Please contact us today at info@whitcomb.com.

If you’d like to find out more about us, check out our website:

www.whitcomb.com

Tami Reynolds CPAtreynolds@whitcomb.com419.496.2207

Aaron Bates CFP®, Investment Advisorabates@whitcomb.com419.496.2226

Bill Harvey CPAwharvey@whitcomb.com419.496.2196

Eric Key CPAekey@whitcomb.com419.496.2181

Jim Hess CPA, CEOjhess@whitcomb.com419.496.2177

Roger Kramer CPArkramer@whitcomb.com419.496.2147

Ryan Gilmer Investment Advisorrgilmer@whitcomb.com419.496.2227

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