July 17, 2008

TIME TO BE OPTIMISTIC
Yes, the financial news gets worse every day. Yes, the average stock is down more
than 25% over the past thirteen months. Yes, the housing market is still reeling and
foreclosure activity is rising. Yes, the price of gas is skyrocketing. And yes, this too
will pass, and the economy and stock market will begin a new expansion and
sustainable bull market, as all business cycles have. Over our several decades of
investment management experience, we have witnessed many business cycle
recessions and stock market declines. They all have one thing in common. In the
midst of the most negative financial news, the stock market (fulfilling its role as an
accurate leading economic indicator) begins to move higher in anticipation of the
next economic recovery. We believe the market has more than discounted all
the bad news out there and is putting the finishing touches on the bottoming
process for stocks. Yes, a significant advance is set to begin that will take stocks
much higher in the year ahead.
Considering all the negative financial headlines, is it any wonder investor psychol-
ogy has reached a gloomy extreme? Legendary value investor and philanthropist
Sir John Templeton made a career (and fortune) taking advantage of bargains that
showed up during recessionary periods and bear markets. His foremost investment
discipline was geared to wait patiently for stock prices to reach the point of maxi-
mum pessimism and then he invested. It is some-
what ironic that this pioneer of value investing, who
began his career in the 1930s, would pass away
this month at the age of 95, just when the markets
have hit an emotional low point. We know Sir John
would be buying stocks during todays financial
turmoil. Investor psychology has reached that
pessimistic extreme and conversely sets up the year
ahead to be a very profitable one. In the remainder of this newsletter, we expand on
four potent reasons to support our forward-looking optimism.
FOUR KEY REASONS TO BE OPTIMISTIC TODAY
1. Low Consumer Confidence = Profits Ahead
2. Bull Markets Always Follow Bear Markets
3. Lower Oil Prices Ahead
4. Record Cash Levels on Sidelines
Bull markets are born on
pessimism, grow on
skepticism, mature on
optimism, and die on
euphoria.
Sir John Templeton
1600 S. Main Street, #375
Walnut Creek, CA 94596
Tel: (925) 287-8527
Fax: (925) 287-8653
www.pringturner.com
Registered Investment Advisors
Capital group
p r i Ng turNEr
Reason #1: Low Consumer Confidence = Profits Ahead
This may at first sound a bit counterintuitive, but the good news is American consumers level of
confidence has reached a 28-year low. How can that possibly be good news? In the 40-year
history of gauging consumer confidence, whenever attitudes tumble to this pessimistic extreme,
stocks have already greatly digested and discounted the bad news. As detailed in the chart and
table, we have identified six prior times when consumer confidence had fallen to this extreme
low level. Each time, despite all the bad news, a new bull market for stocks began and
significant stock market gains followed. We expect this seventh episode to end profitably as
well.
BULL MARKETS START WHEN CONFIDENCE IS LOW!
50
60
70
80
90
100
110
120
130
140
50
60
70
80
90
100
110
120
130
140
1970 1975 1980 1985 1990 1995 2000 2005
Economic Confidence
Economic Pessimism
Conference Board Consumer Confidence Indicator
7
6
5
4 3
2
1
Low Confidence Bull Market Dow Jones Average
Bull Market Start Length/Months Percent Gains
1 1974 19 +75%
2 1980 13 +28%
3 1982 60 +250%
4 1990 45 +74%
5 1994 60 +158%
6 2002 60 +99%
7 2008 ? ?
History Shows Buying When Consumer Confidence Is This Low
Significant Stock Market Profits Follow!
Reason #2: Bull Markets Always Follow Bear Markets
To add perspective to current market conditions, we have compiled information summarizing
past bull and bear market cycles since 1960. Since then, there have been 11 bear markets with
each followed by new long term bull markets. Please take some time to study the table of infor-
mation on the accompanying page, particularly the News Events of the Day column. There are
two key points about bear markets we would like to highlight: First, investors are always faced
with intensely negative news and many times a crisis atmosphere which pushes stock prices
temporarily lower; second, bull markets begin in the middle of all the bad news. Historically
the bull markets rewarded investors with gains on average exceeding 90%.
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#
2
:
6 Year Oil Price Rate of Change
Record High
Price Momentum
Unsustainable
Extreme Price Move for Only 3
rd
Time in 120 Years!
Reason #3: Lower Oil Prices Ahead
$40
$3
$145
Major Positive Surprise Lower Oil Prices Ahead!
$11
?
$145
$40
$11
$3
Crude Oil
A major factor influencing consumer pessimism is oil prices have doubled in the last year. At every
level of spending, consumers are feeling pain of higher energy costs, whether it is filling the car up
with gas or buying groceries. Any relief from spiraling energy costs would be a major step toward
improving investor psychology. Looking at our chart of the 120-year history of oil prices, clearly the
recent price gains are at unsustainable levels. The chart depicts oil prices and our long-term momen-
tum tool (6 year rate of change) showing only two other times in history oil prices have been this
stretched. Each time was followed by a significant price decline. While others are projecting $200
oil, our tools and research suggest an important turning point forecasting lower prices. We think
the most likely outcome will be a significant decline in oil to $100 or lower before the year is
over. This positive surprise for investors will be a major catalyst for the next bull market lift-off.
Source: Pring Turner Capital Group
Investment decisions formulated by Pring Turner Capital Group, Inc. are based on proprietary research and methods developed since 1977 by the owner/managers of the firm. None of the material
contained herein is intended as a solicitation to purchase or sell a specific investment. Readers should not assume that all recommendations will be profitable or that future performance will equal
that referred to in this material.
$3500
$3000
$2500
$2000
$1500
$1000
$500
$0
Jan 80 Jan 84 Jan 88 Jan 92 Jan 96 Jan 00 Jan 04 Jan 08
Recent record level: $3.36 Trillion
Total Money
Market Funds Levels
Last Major Bear
Market Low
Reason #4: Record Cash Levels on Sidelines
Ratio of Cash to U. S. Stock Value
Money Market
Funds $3.36 Trillion
Total Value $12.39 Trillion
U. S. Stocks
or
=
Cash to Market Value at 27%
is the Highest Level Ever !
Fuel for Bull Market Liftoff
Another positive sign is the enormous cash pile investors have sitting in money market funds.
This record amount of cash is fuel for the next bull market advance. In fact, cash levels in money
funds as a percent of the total value U.S. stocks equals a record high 27%! This level is higher
than the start of any bull market of the past 30 years. A little improvement in the news, an end
to the oil price spike, and a shift in investor attitudes toward optimism will open the flood-
gates of money fund assets flowing back into stocks. A virtuous cycle can begin once again.
So Much Money . . . So Little Stock!
Conclusion
In this expanded newsletter we have laid out four key reasons to expect a strong stock market
going forward. Consistent with our January newsletter message, we expected 2008 would be a
transition year from bear market to new bull market. We have arrived at that important transition
point. History shows that just as day follows night, bull markets always follow bear markets. It
is time to be optimistic!
Pring Turner Capital Group portfolios held up very well during this tumultuous past year. You
are positioned to easily achieve new levels of wealth. We appreciate your continued confidence
and trust. As always, please feel free to contact us with any questions regarding your portfolio or
any significant changes in your circumstances.