As we complete another calendar year, we all have the tendency to look back over the last twelve months and examine what has transpired. In reality, it is probably much more important to look ahead for the next twelve months and recognize the opportunities as well as the challenges and how we have positioned our financial lives.

Today, heightened concerns over the Eurozone bank solvency and worries of the possibility of the EMU being dissolved continue to dominate international markets. These concerns are manifested in higher bond rates in Europe, particularly France, Italy and Spain, with Germany being the exception where the rates on long term governments fell below 2%, very similar to the US Treasury market.

Turning to the US, risks appear more balanced and the probability of a double-dip recession has been lessened over the last few months. Given this global dichotomy, we think it is very important for investors to realize that the prospect for growth in the US is between 1½% to 2% with very little risk of inflation or interest rates spiking. These trends reflect basic structural changes in the financial fabric of the country rather than cyclical trends that will rebound. This situation does create some favorable opportunities for investors in the US credit markets and the stock market as corporations have become much more efficient over the last one to two years, strengthening balance sheets and amassing more cash than we have seen in this century.

In summary, we believe the factors that will dominate the financial markets are first the continuation in the US of low interest rates and secondly, over time, lower unemployment as new jobs are created in areas that did not exist. In addition, the situation in Europe will continue to dominate the global scene. On the brighter side the one thing that investors should be cognizant of is that over 80% of economic activity is outside Europe. The growth and dominance of some of the emerging market economies has been dramatic and will continue. A positive result could very easily be significant consumer growth from these sources. The climate for positive intermediate opportunities in these markets will prevail.

We continue to believe the driving force in allocating resources to financial assets should be diversification globally and examining and concentrating on those areas that have strong fundamentals over the next two to three years. We believe that it is a favorable time to be investing if emphasis is placed upon strong fundamentals.

Our very best for health, happiness and prosperity in 2012 from all of us at Payden & Rygel.