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Just a quick note to let everyone know that the sun is still shining (somewhere). Seriously though, after another tough week in the market two things are fur sure; 1) The volatility is not going away any time soon and 2) We will not change our discipline.

We have stayed true to our discipline of finding the best value(s) around the world. As a consequence however, we have underperformed the last three quarters because our emerging market exposure and our underweight in treasuries. We continue to believe that value will be rewarded with patience. The emerging worlds currently have a lower P/E ratio (cost per dollar of earnings) at 5-8 and better growth potential with GDP growth estimated at 4-9% in the next 12 months.

So, the big question is why have the emerging markets fallen faster than U.S. large cap? The simple answer is because they went up faster and are perceived to have more risk politically with the problems of pseudo-capitalistic environments.

If you look at your individual portfolios we are still outperforming most indices with less risk over the last 3 and 5 year time periods.

We are continuing to monitor your portfolios daily and want to let you know to look for additional changes on the next few up days. We are going to put a bit of our cash to work and use a couple of new managers that will help us keep more money in the market when the time is right.

For those of you who are taking a regular withdrawal as part of your monthly income stream, we will be calling you this next week (or you call us) to discuss any potential changes to how much you are taking out. It is always better to take less, if you can, when the markets are down.

Have a great weekend!

Bob and the All Star Team

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