On December 6, 1910, the San Diego Symphony performed its first concert in the Grand Ballroom of the U.S. Grant Hotel.  Today the Symphony performs in downtown San Diego’s majestic Copley Symphony Hall, built in 1929 as the Fox Theatre, a splendid movie palace.  The San Diego Symphony is the oldest orchestra in California and thus the first symphony in the state to reach this centennial-year milestone.  Now approaching it 102nd year, the San Diego Symphony offers a wide array of music series including the Jacobs Masterworks, Winter Pops, Symphony Exposé, Family Festival, and Young People’s Concerts along with its popular outdoor series, the Summer Pops.   

Jacobs Masterworks
The San Diego Symphony has just recently announced its Jacobs Masterworks for 2012-2013.  Its star-studded line-up includes the internationally acclaimed pianist Lang Lang, who will open the San Diego Symphony’s season this October, and violinist Joshua Bell, who will close the season in May 2013. 

Others on next season’s roster include The Romeros, otherwise known as “The Royal Family of the Guitar”, and John Williams, the Academy Award-, Golden Globe- and Grammy-winning composer of movie classics such as Star Wars, Jaws, E.T., and Jurrasic Park among many others.

Summer Pops
Before the fall rolls around, the San Diego Symphony will move to its picturesque waterfront site, Embarcadero Marina Park South, as the 2012 Summer Pops gets underway.  Always a favorite of both native San Diegans and tourists alike, the Summer Pops is simply a “must-see.”  The Summer Pops is located on San Diego Bay downtown, behind the Convention Center.  It’s the perfect way to spend an evening under the stars with the today’s top entertainment - always accompanied by the San Diego Symphony.

This year’s line-up includes a patriotic Star Spangled Pops led by the Symphony’s principal pops conductor, Marvin Hamlisch.  Other guest artists include Roberta Flack, Neil Sedaka, Dave Koz and Wilson Phillips.  The Summer Pops concludes with the traditional and rousing 1812 Tchaikovsky Spectacular complete with fireworks to light up the sky.

Visit the San Diego Symphony
With a budget of nearly $20 million, the San Diego Symphony has grown into one of the leading orchestras in the country.  In addition, the San Diego Symphony reaches up to 53,000 students annually through its education and outreach program.   Led by music director Jahja Ling, whose contract has recently been renewed through June 2014, the San Diego Symphony includes 82 members, 51 of which have been hired by Mr. Ling as he continues to build a world-class orchestra. 

We invite all those planning a trip to San Diego to visit the San Diego Symphony.  For more information, please call the ticket office at 619.235.0804 or visit www.sandiegosymphony.com.

It is uncertain what Congress will do.  No one expected Congress to fail to act and cause the estate tax to be repealed in 2010, but that is exactly what happened.  With the health care law currently under review by the Supreme Court and the upcoming elections this fall, there is no indication of a bipartisan desire to proactively address this expiration deadline anytime soon.  

Congressional inaction would lead to reversion of estate tax law back to a $1 million basic exclusion amount with 55% tax rates in place of the $5 million exclusion and 35% tax rate currently in existence.    Although conventional thinking would lead most planners to believe we will eventually get an exclusion amount between $3 and $5 million, this could take a while to be implemented.

Despite all the best intentions of advisors suggesting strategies for clients to save significant amounts of estate, gift or GST tax, clients are reluctant.  It is human nature to want to control our assets while living, for fear we may someday need the funds.   The most recent stock market roller coaster has served to further exasperate the situation.

Don’t let inactivity cause you to miss out on some great planning opportunities.  If you have not updated your estate plan within the last few years, you owe it to yourself to discuss it with Miller/Russell as your financial advisor or your attorney.  Talk, strategize, and catch up on the latest trust code revisions which, in Arizona, mandate disclosure to beneficiaries.  Now is a great time to ensure that your estate plan aligns with your intentions.  It is a good exercise to check the titling of your assets, your designated retirement plan beneficiaries, and make sure you have made provisions for all of your loved ones including any unborn grandchildren.  The beauty of a Revocable Living Trust is that you can modify it to carry out your wishes as they grow and change. 

Real estate values are currently depressed. By gifting these assets now or any assets expecting significant appreciation, you could remove the future appreciation from your taxable estate and create significant estate, gift, or generational skipping tax savings.
  
There is a limited period of time to take advantage of potentially significant estate, gift and GST tax benefits that will terminate at the end of 2012 without Congressional action.  You make it a point to get checkups for your health, your teeth, your eyes, and your automobiles.  Take the time to make sure that your final wishes will be executed as you intended, with minimal stress to your heirs and as little depletion from estate, gift and generation skipping taxes as possible.  It could be one of the best gifts you ever give your family.

If fear drove investors away from risk and towards safety (Treasuries) in 2011, one would think greed is driving them back to equities, but that is still not the case.  While one could argue investors are less fearful and more willing to take on risk, there is still an estimated $9 trillion dollars in cash on the sidelines, and mutual fund flows continue to favor bond funds over stock funds.  Treasury yields continue to vacillate, moving up on positive news and back to 2.0% with any economic hiccup.  When considering inflation at 2.5%, it is not long-term investment returns that make Treasuries appealing but their perceived safety.

Even with a 12% return in the S&P 500, the market is still priced at a low multiple relative to historical averages.  Multiple expansion, or going from a price to earnings ratio of 13 on the S&P 500 to 15, is one of the opportunities for a strong 2012.  Economically, unemployment continues to trend down, although March’s reading was a very small improvement.  Even the Fed is indicating they won’t need to carry out additional Quantitative Easing, as they are seeing signs of improvement in the economy.

The market isn’t without its risks, however.  Perhaps the largest of all is the threat of conflict in Iran, which has the potential to cut off 18% of world oil supply and would have a significant effect on gas prices locally.  The US has done well increasing oil reserves to 224 days, however conflict alone would likely cause consumers and investors to panic.  The upcoming election could stall action on key tax issues that would have a meaningful impact on investors. 

Several high profile investors such as Warren Buffett and Burton Malkiel have made cases for where opportunity is and isn’t in the world.  We would agree that the housing market has likely bottomed and provides opportunity for those with cash to invest.  Equities are not far behind.  What we can all agree on is that the risk/reward tradeoff in fixed income is the least appealing, as inflation trends at 2.5%, yields remain at all time lows, and capital appreciation has almost all been realized.  We continue to be strategic in our fixed income allocation, favoring higher returns outside the U.S. as well as Corporate Bonds and Agency Mortgages, and underweighting Treasuries.

What matters these days is how people feel.  Consumer sentiment is still 15-20 points below long-term averages.  There are plenty of good reasons to buy stocks, but until people start feeling more confident and secure in the direction of the economy, they will continue to put money in savings accounts and bond funds.  Although we’ve had a great start to the year, we can’t expect the market to move in a straight line, and April is already starting to show signs of a pullback.  We expect it to be temporary, and that 2012 is the year where good news outweighs the bad and risk becomes appealing again.

Combined, the four new team members have 67 years of tax experience serving this niche market at both wealth management and tax firms.  They are experienced in providing tax consulting and compliance services to their clients, which includes individuals, businesses, trusts, estates, gifts, family partnerships and foundations.  In addition, every member of the tax practice is also registered as an investment advisor representative.

The addition of these tax-minded professionals supports Miller/Russell’s business plan to provide exemplary service as a firm that takes a holistic approach to complete financial planning, which includes asset allocation, wealth management services and complex tax planning and preparation.  By having tax professionals available locally who work in conjunction and are integrated with their advisory staff, Miller/Russell has enhanced its competitive advantage in the marketplace.

Miller/Russell’s tax practice has a strong base of clients and their first season has been very successful thus far.  In the future, tax services will be available and marketed to both new and existing Miller/Russell clients.  For more information, please contact your Miller/Russell advisors.

PHOENIX (MARCH 6, 2012) - Miller/Russell & Associates, a Phoenix-based registered investment advisor providing wealth management and investment consulting services, has been certified by the Centre for Fiduciary Excellence (CEFEX) to the standard “Prudent Practices for Investment Advisors.” Miller/Russell is among the first investment advisors globally to successfully complete the independent certification process.
 
The standard describes how an investment advisor assumes the responsibility for managing a client’s overall investment management process, which includes the selection, monitoring and de-selection of investment managers, as well as developing processes to implement investment strategies and fiduciary practices on an ongoing basis.

“This certification provides further assurance to our clients that Miller/Russell continually demonstrates adherence to the industry’s best fiduciary practices,” said Brad Lemon, senior managing partner of Miller/Russell.
 
Miller/Russell has been certified for its provision of discretionary investment management services for endowments, foundations, corporate clients and ERISA retirement plan clients serving in both a 3(21) and/or 3(38) fiduciary role. The annual certification process involves a detailed assessment of operational data and procedures, followed by on-site interviews with key personnel. Miller/Russell is registered at www.cefex.org, where its certificate can also be viewed.

The standard is substantiated by legislation, case law and regulatory opinion letters from the Employee Retirement Income Security Act (ERISA), Uniform Prudent Investor Act (UPIA), Uniform Prudent Management of Institutional Funds Act (UPMIFA) and the Uniform Management of Public Employee Retirement Systems Act (MPERS) in the U.S.

About CEFEX:
CEFEX, Centre for Fiduciary Excellence, LLC is an independent certification organization. CEFEX works closely with industry experts to provide comprehensive assessment programs to improve the fiduciary practices of investment stewards, advisors, recordkeepers, administrators and managers. CEFEX has offices in Toronto, Canada, and Pittsburgh, PA.

The City of Scottsdale enjoys a well-deserved reputation as a leading tourist destination and a highly desirable community in which to live, work and play. The arts are essential to that image, and the Scottsdale Cultural Council plays a vital role in fostering the arts in Scottsdale.

The Scottsdale Cultural Council was established in 1987 as a private, nonprofit management company contracted by the City of Scottsdale to manage its arts facilities. Since then, the Cultural Council has expanded to include three dynamic operating divisions – each with a distinct focus and mission – that span the visual and performing arts: Scottsdale Center for the Performing Arts, Scottsdale Museum of Contemporary Art (SMoCA) and Scottsdale Public Art.

Scottsdale Center for the Performing Arts
One of the premier performing-arts halls in the western United States, Scottsdale Center for the Performing Arts showcases the finest dance, music, theater and film from around the world. More than 1,000 performances, educational programs, festivals and other events are presented and hosted at The Center each year serving 200,000+ visitors and contributing substantially to Scottsdale’s high quality of life and vibrant arts scene. The Center’s education and outreach programs reach more than 20,000 children and adults each year. Most performances take place in the state-of-the-art, 853-seat Virginia G. Piper Theater, recognized for its intimacy, superior acoustics and comfort. Additional venues include the Center’s 137-seat Stage 2 theater and neighboring 2,000-capacity Scottsdale Civic Center Amphitheater. The Center is located a short walk from Scottsdale’s Old Town and gallery districts on the 21-acre Civic Center Park, which serves as the setting for the award-winning Scottsdale Arts Festival, in addition to many other community events.

Scottsdale Museum of Contemporary Art
Founded in 1999, Scottsdale Museum of Contemporary Art is an educational institution dedicated to the art, architecture and design of our time. Global in its focus, SMoCA is a gathering place, connecting visitors to new art and ideas through a variety of exhibitions and programs, including lectures, docent-led tours, workshops and classes. Designed by Arizona architect Will Bruder, SMoCA’s minimalist building – an ingenious renovation of a former movie theater – has four galleries for showcasing changing exhibitions and works from the Museum’s growing collection, as well as the newly opened SMoCA Lounge, a multi-purpose educational and event space. The Museum’s outdoor sculpture garden houses James Turrell’s skyspace Knight Rise and James Carpenter’s prismatic glass Scrim Wall, both commissioned by Scottsdale Public Art.

Scottsdale Public Art
Since its founding in 1985, Scottsdale Public Art has transformed the 184-square-mile city into an interactive outdoor museum, where art is an everyday encounter for residents and visitors alike.

One of the most comprehensive and respected programs of its kind in the country, Scottsdale Public Art has commissioned 85 artworks throughout the city, from Robert Indiana’s iconic LOVE sculpture in Civic Center Park to the walls of the Pima Freeway and new Soleri Bridge at Scottsdale Waterfront. Many of these projects have earned local, regional and national awards. The program also maintains a municipal art collection for the city and offers free temporary projects and installations, exhibitions and educational events for the entire community, all funded with both public and private funds through city arts ordinances.

New Year’s resolutions often involve making promises to ourselves we can never keep. But instead of tilting at windmills, we can often generate better results by merely resolving to be less dumb in certain areas. And money is a good place to start.

One human tendency is to judge the effectiveness of our retirement savings strategies by looking at performances on one-, two-, or three-year horizons. We do this because we are wired to be more sensitive to short-term losses than to long-term gains.

This is why much of the financial services industry and media encourage a short-term focus for an audience with a long-term horizon. This is akin to looking through the wrong end of a telescope. The thing you should be focusing on looks even farther away.

The result of this short-term mindset is that investors end up following the herd and seeking safety when opportunities are plentiful and seeking risk when opportunities are few. The less dumb thing is to maintain a level of discipline amid the noise.

Another human tendency—and one allied to our built-in loss aversion—is to be suckers for the supposedly “free” or discounted offer. Like Homer Simpson, a zero price tag makes us fall for pitches selling us stuff that is neither necessary nor good for us.

In the world of investment, it’s this tendency that makes people gravitate to strategies that headline high returns without mentioning the risk, or that conveniently bury fees, commissions, and other costs. Regret lies on the other side of those decisions.

A less dumb thing is to focus on return and risk. They’re related. Focusing exclusively on return can lead to rude awakenings when risk shows up. Focusing exclusively on risk can lead to disappointment when returns are delivered.

A third tendency among humans is to succumb to what behavioural scientists call “hindsight bias.” Essentially, this is our habit of viewing events as more predictable than they really were. Call it the “I saw it coming” syndrome.
There is a fair bit of this around at the moment, with plenty of “experts” saying the sovereign risk crisis was completely predictable. This is strange, because as we saw in my previous column “Things Change,” the overwhelming consensus among institutional investors a year ago was that fixed income would underperform in 2011. The crisis may have been predictable, but the market reaction wasn’t.

The consequence of hindsight bias for investors is they tend to be forever rewriting history and forever seeking to interpret performance based on what they know now rather than what they knew a year or more before.

A less dumb thing is to accept there will always be a level of uncertainty. The future is unknowable. And all we can do as investors is to ensure the risks we take are related to an expected return, that we diversify around those risks as much as possible, and that we exercise a level of discipline amid the noise.

It’s a way of embracing your imperfection, and it’s a New Year’s resolution you have a chance of sticking to.

About the author
As a vice president in the Communications group in Sydney, Australia, Jim Parker presents strategies to communicate Dimensional’s philosophy and process in ways that engage clients, prospects, regulators, and the media. He does so through presentations, books, papers, and articles, including his “Outside the Flags” column. Jim joins Dimensional after twenty-five years in journalism, most recently as a senior editor and financial markets writer with the Australian Financial Review. Jim holds an economic history degree from Deakin University and a journalism degree from Auckland Technical Institute

By:  Nathan Erickson, CFA®, Portfolio Manager

From time to time we are asked why we don’t pick individual stocks.  Our response answers the question, and gives meaningful insight into our investment philosophy.

The father of Security Analysis is the British-born American economist Benjamin Graham.  Graham was considered the first proponent of value investing, and along with his colleague David Dodd, wrote one of the most renowned books on analyzing stocks called “Security Analysis”.  A name you may be more familiar with, Warren Buffett, actually studied under Graham at Columbia Business School.

Graham famously personified the stock market in terms of “Mr. Market”.  Mr. Market, he would say, is a fellow who turns up every day at the stock holder’s door offering to buy or sell his shares at a different price.  Rarely, the price quoted by Mr. Market seems plausible, and most of the time it is deceiving.  The investor is free to either agree with his quoted price and trade with him, or to disregard him completely.  Mr. Market does not mind this, and will always be back the following day to quote yet another price.

Given that Mr. Market gives you little clues in terms of fair value, determining the price of a security becomes complex.  Hence the writing of Graham’s book, which leads you through the process of valuing the cash flows of the company based on various financial metrics and observations.  This is an extremely tedious process, requiring analyzing and understanding corporate quarterly and annual reports, industry trends, and consumer behavior among other things.  The successful active investor is one who has more time, interest, and possibly more specialized knowledge to seek out exceptional buys in the market.

In addition, there is another headwind to success, and that is other investors who are buying or selling stocks.  Charles Ellis, while overseeing the $15 billion Yale Endowment fund, had this to say:

“Watch a pro football game, and it’s obvious the guys on the field are far faster, stronger and more willing to bear and inflict pain than you are.  Surely you would say, ‘I don’t want to play against those guys!’ Well 90% of stock market volume is done by institutions, and half of that is done by the world’s largest investment firms, deeply committed, vastly well prepared - the smartest people in the world working their tails off all day long.  You know what? I don’t want to play against those guys either.”

In some areas of the market, it is very difficult for anyone to be successful because there is so much competition.  Consider the US Large Cap market, where most stocks in the S&P 500 have anywhere between 20 and 50 hired analysts assigned to them at one time.  These are people whose full-time job is to follow 10 stocks in one sector (eg. Technology or Financials) all year long.  The analysts know these companies inside and out, are on a first-name basis with the Chief Financial Officer, and visit the company’s headquarters frequently.  The opportunity to outperform the market based on arbitrary information is very limited.  In fact, we believe it is so difficult, that we would rather approach this asset class strategically and cost effectively than to find a manager who thinks he can pick the best stocks, given the competition.

In other areas, however, the market is not  as competitive.  For instance, in the US Small Cap or International Markets, there are more stocks to choose from and fewer analysts operating in that space.  We believe that opportunities exist in these asset classes for stock pickers to outperform competition.  Yet the complexities and level of commitment still exist, and frankly we couldn’t be great advisors if we tried to be stock pickers.  Instead, we prefer to have the professionals working for us, so we focus on finding managers who have a well-defined track record of outperformance relative to their benchmarks.

So why don’t we pick stocks?  It really comes down to expertise.  We feel our expertise is in asset allocation and monitoring economic risks, within the context of our holistic approach to wealth management.  Furthermore, we feel expertise is only effective in some areas of the market, reflecting our belief in taking “intelligent risk”.  Where the opportunity exists, we focus our efforts on finding the best managers and implementing their skill in the context of our clients’ portfolios.  Where it doesn’t, we work to keep costs low while diversifying our clients’ asset class exposure.  In the end we feel a portfolio built in this way gives our clients the best opportunity to reach their long-term investment goals.

After a 3rd quarter that saw the S&P 500 down 13.9%, the 4th quarter rebounded significantly, delivering an 11.8% return.  Small Cap outpaced their large cap counterparts, returning 15.5% for the quarter.  Despite this positive 4th quarter volatility, the S&P 500 ended the year up 2.1% on a total return basis (including reinvested dividends).  After such a year of uncertainty, most investors are breathing a sigh of relief about their domestic stock portfolio.

International equity, however, didn’t recover all of their losses from earlier in the year.  Despite a positive 4th quarter in developed and emerging markets (3.3% and 4.4% respectively), the MSCI EAFE index ended the year down 12.1%, and the MSCI EM index ended the year down 18.4%.  Treasury outperformance continued to aid domestic bonds, with the BarCap Aggregate Bond Index ending the year with an equity-like 7.8% return.  Non-US bonds finished 2011 with a 5.2% return.

Politically, 2011 was a year of indecision.  We still have yet to see a permanent solution in Europe, and the focus in the U.S. has shifted away from the national debt and towards the upcoming presidential elections.  Unemployment has shown positive gains, with the current rate at 8.5%.  Most economic indicators have improved such as consumer sentiment, housing, and manufacturing.   4th quarter GDP numbers haven’t been reported yet, however expectations are for around 3%.  Economically it would appear things are turning around, yet markets still appear undervalued.

2012 is positioned to be a year with multiple catalysts that can affect client portfolios.  Most of the negative news from Europe has already been priced into markets, as almost all developed markets are trading well below their historical average.  There are always unpredictable risks that could affect markets in a negative way, such as a natural disaster or military conflict.  However there is potential for a number of positive events as well.  To the extent that Europe is successful in developing a long-term solution, we would expect markets to price more fairly.  Continued positive U.S. economic news will also benefit markets, as will improved consumer sentiment.  While we make no attempt to predict market returns in 2012, we see much more upside potential than downside risk in global equity markets. 

The fixed income market is a little different, after Treasuries were the best performing asset class of 2011.  10 year yields are still under 2.0%, and inflation expectations are at least 2.5%.  That means investors in 10 year treasuries actually lose money after inflation.  This relationship is primarily because treasuries fulfilled their role as a safe haven in 2011.  However with most economic and political risks known and priced into markets, we would expect owners of Treasuries to start seeking higher returning assets in 2012.  Of course, there are always unknown risks that can reignite fear at anytime, but for the long-term investor, Treasuries appear to have more downside risk than upside potential. 

With a presidential election on the horizon, many promises will be made for positive change in the future.  We hope some of this change will come to fruition, especially in the area of long-term debt management.  In the meantime, we believe the best approach to 2012 is a diversified portfolio across all asset classes that maximizes return for the appropriate level of risk.  We will continue to monitor macroeconomic risks and discuss any potential implications to your portfolio throughout the year.  Happy 2012!

For Immediate Release      

Miller/Russell & Associates Hires Mark Feldman as Chief Executive Officer

25-Year Industry Veteran Will Lead Phoenix Registered Investment Adviser to Offer More Full-Service Wealth Management Services

 
PHOENIX (January 16, 2012) - Miller/Russell & Associates, a Phoenix-based registered investment adviser providing wealth management and investment consulting services, announced today that Mark Feldman has joined the company as chief executive officer (CEO).

As CEO, Feldman will lead the company to be a more full-service wealth management company in order to help clients, both institutional and private, make better investment decisions. Dennis Miller, currently the president of Miller/Russell, will move into the role of Chairman, and Brad Lemon, principal and senior investment counselor, will continue serving in a key role as part of the executive management team and as chairman of the Investment Policy Committee.

“Mark’s prior work experience, leadership skills, and passion for the wealth management business will greatly strengthen our management team,” said Miller.  

According to Miller, the expansion of the management group will both broaden the breadth of services available to Miller/Russell clients and will also ensure an orderly internal succession plan that support employee ownership into the future.

Before joining Miller/Russell & Associates, Feldman was the senior partner of integration for the GenSpring Family Offices, where he advised ultra-high net worth clients in the United States. In 2002, he founded Inlign Wealth Management, LLC before merging the company with GenSpring Family Offices, LLC in 2008. Prior to that, Feldman was the partner in charge of the Arizona Private Client Services practice, the National Investment Advisory resource center partner, and was a critical partner in setting strategy for the National Private Client Services practice at Arthur Andersen LLP.

“Having had the opportunity to work in the community and to become friends with Dennis Miller, the choice to join Miller/Russell was an easy one,” said Feldman. “Miller/Russell has been a top RIA for the past two decades, and now the company is looking to deliver a more complete wealth management service to clients. This change is that opportunity.”
 
Recognized multiple years as a Barron’s top independent financial advisor, Feldman possesses extensive credentials in the wealth management industry with more than 25 years of experience. He is a Certified Public Accountant and holds the CERTIFIED FINANCIAL PLANNER™ certification. His past roles included supervising a wide range of client relationships, including multi-generational family groups, high net worth individuals, corporate executives and institutions. 
 
He was appointed as the Commission Chair for the Arizona Commission on the Arts by Arizona Governor Jan Brewer. Feldman also serves on the Board of Directors for the Arizona Science Center and the Free Arts of Arizona. He is a past member of Greater Phoenix Leadership, past President of the Make-A-Wish Foundation of Southern and Central Arizona and a past Trustee of the Desert Botanical Garden.
  
Feldman earned his Bachelor of Science in Accounting from Arizona State University in 1984. He resides in Scottsdale with his wife and has two children.
 
About Miller/Russell & Associates
Miller/Russell is one of the Southwest's largest wealth management and registered investment advisory firms with offices in Arizona, California, and Nevada. Headquartered in Phoenix, the firm employs 25 professionals and support staff. Miller/Russell has been providing investment and wealth management services to individuals and families, corporate retirement plans, endowments, sovereign nations, and foundations throughout the Western United States since 1991. Additional information about Miller/Russell can be found at www.miller-russell.com.
 

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For Immediate Release      

Miller/Russell & Associates Adds Bill Hodges as Vice Chairman
Bill Hodges Joins Growing Phoenix Registered Investment Adviser

PHOENIX (November 22, 2011) – Miller/Russell & Associates, a Phoenix-based registered investment adviser providing wealth management and investment consulting services, announced today that industry veteran Bill Hodges has joined the company as vice-chairman.

Hodges, a Certified Public Accountant who also holds the Personal Financial Specialist designation and the Series 65 license, will provide tax and financial planning services for individuals and private businesses, including estate and succession planning.

Most recently, Hodges was Senior Managing Director in the Phoenix Local Family Office of GenSpring Family Offices. He was responsible for providing leadership and direction to the office and its personnel, as well as assisting clients with their personal financial needs. Prior to that, Hodges had an extensive career in public accounting with a specialty in assisting high net worth individuals, their families and their closely-held businesses with financial and tax matters.

“The addition of Bill Hodges to Miller/Russell is important for the company,” said Miller/Russell President Dennis Miller. “Bill will not only expand and enhance Miller/Russell’s tax consulting practice to better serve the needs of our clients, but he will also strengthen our management team.”

Hodges was a partner with Arthur Andersen for almost 20 years, heading up the tax practices of Arizona and New Mexico and in charge of the Pacific Southwest federal tax practice (including Los Angeles, San Diego, Orange County, Las Vegas, Phoenix, Albuquerque, Tucson and Hawaii).  During his 16 years of Andersen leadership, he assisted in the development and growth of the private client services practice serving high net worth individuals and their families. Hodges joined Inlign Wealth Management in 2004. Inlign Wealth Management was subsequently purchased by GenSpring in 2008.

Hodges is currently chairman of the board of the Arizona Community Foundation (ACF), a past chairman of the Professional Advisory Board of the ACF, as well as a board member and secretary/treasure of the McKenzie Monks Foundation. He received the Distinguished Achievement Award from the College of Business at Arizona State University in 1996, and was the recipient of the James W. Cressman Award of Excellence in 2000 from the Arizona State University Alumni Association.  Hodges is also a former chairman of the Arizona Society of CPAs and recipient of the 2005 Public Service award from the ASCPA.

Hodges and his wife, Sheri, have been married since 1968 and have two children; Christi and Brent and three grandchildren; TJ, Caiden and Addi.

About Miller/Russell & Associates
Miller/Russell is one of the Southwest's largest wealth management and registered investment advisory firms with offices in Arizona, California, and Nevada. Headquartered in Phoenix, the firm employs twenty professionals and support staff.  Miller/Russell has been providing investment and wealth management services to individuals and families, corporate retirement plans, endowments, sovereign nations, and foundations throughout the Western United States since 1991. Additional information about Miller/Russell can be found at www.miller-russell.com.

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Phoenix Children’s six Centers of Excellence provide access to advanced multispecialty care. These programs have grown in size and expertise to place them on par with the most prestigious clinical programs of their kind in the U.S.

The Center for Cancer and Blood Disorders offers 17 subspecialty-trained physicians who provide expert care in the areas of blood and marrow transplants, neuro-oncology, hematology, solid tumors, survivorship, early drug development, and liquid tumors.

The Children’s Heart Center offers a full array of diagnostic and treatment options for children with congenital heart defects and other complications. The Center was recently certified for heart transplantation and has already completed several pediatric heart transplants.

The Center for Pediatric Orthopaedics serves children who are living with musculoskeletal diseases or have an injury. Children and teens with sports injuries, fractures, hip disorders, muscular dystrophy, spinal deformities, or clubfoot find the latest treatment options here.

Barrow Neurological Institute at Phoenix Hospital provides state-of-the-art care for children with neurological and behavioral conditions, including epilepsy, autism spectrum disorder, craniofacial anomalies, spina bifida, headaches, traumatic brain injury and more.

Phoenix Children’s Level 1 Pediatric Trauma Center is Arizona’s premier site for the evaluation, stabilization, treatment, and care of children who have experienced a traumatic injury. Studies show children cared for at a pediatric trauma center have a lower mortality rate and shorter lengths of stay compared to children cared for at adult trauma centers.

The Newborn Intensive Care Unit provides cutting-edge care for early arrivals, along with babies who are born with infection, congenital birth defects, or experienced in-utero drug exposure.

For 28 years, Phoenix Children’s has provided specialized care to the children of this community. And they could not do it without the support of companies and individuals who recognize the value of a hospital that is 100% for children.

To learn more about Phoenix Children’s Hospital, please visit their website at www.phoenixchildrens.com.

Every parent dreads the fateful question from the backseat on a long road trip. Maybe you are an hour or two into a five hour drive to Disneyland; the snacks are gone, the books are boring, and all of a sudden you hear “Are we there yet?” We cannot help but think of this scenario when considering the European Financial Crisis and all it entails.

Although it seems like recent news, the European Financial Crisis has been a problem since the global financial crisis began in 2008. In fact, the eurozone has had 13 summits over the last 21 months in an attempt to address the financial crisis. The reality is that the problem is much more complex than just economic issues or “fixing” Greece. Nicolas Sarkozy, President of France, was quoted saying “Allowing the destruction of the euro is to take the risk of the destruction of Europe. Those who destroy Europe and the euro will bear responsibility for resurgence of conflict and division on our continent.”

To better understand the complex issues at hand, it is necessary to consider the origin of the European Union. Thousands of years of intercontinental conflict and the aftermath of World Wars I and II led European policymakers to seek stronger ties between countries as a means to foster both greater economic synergy and peace in the region. The Europeans based peace – and the EU – on one overriding concept: countries that are closely tied together by trade do not usually go to war. In many ways the evolution of the European Union can be viewed as a significant success, measured by decades of peace and moderate prosperity.

However, the creation of a common Monetary Policy, and subsequently the euro as a single currency in 2002, has led to tremendous financial challenges in the wake of the global financial crisis. The issue is difficult to address because of the desire to maintain unity and avoid breaking up the eurozone. At the heart of this issue is Germany, which is currently the most prosperous member of the European Union and largest contributor to GDP growth.

Most suggested plans ignore that Germany’s reasons for participating in the eurozone are not purely economic, and those non-economic motivations greatly limit Berlin’s options for changing the eurozone. Geographically, Germany in any age is best described as vulnerable. Its coastline is split by Denmark, its three navigable rivers are not naturally connected, and the mouths of two of those rivers are not under German control. Most important, the country faces sharp competition from both east and west. Germany has never been left alone: when it is weak its neighbors shatter Germany into dozens of pieces, often ruling those pieces directly. When it is strong, its neighbors form a coalition to break Germany’s power. Germany wants to limit European competition to the field of economics, because on the field of battle it could not prevail against a coalition of its neighbors.

So the reality is that solving the eurozone crisis is more complex than it appears on the surface. Yet in light of that fact, on Thursday, October 27th, a deal among eurozone leaders was finally reached. Details of the plan include a potential 50% write-down of existing Greek bonds, recapitalization of European banks, and the creation of a 1 trillion euro firewall to stem a run on banks. Although the plan is a step in the right direction, many experts believe it will not be enough. In addition, Greece continues to struggle internally with managing the effects of accepting the bailout.

Only time will tell if the plan is a success, but perhaps the most encouraging indicator is that members of the eurozone were able to work together to reach an agreement. This really is a tremendous feat. Consider the difficulty the U.S. Congress had in 2008-2009 passing a bailout for the financial and auto industries. Imagine if the government wanted to allocate trillions of U.S. taxpayer dollars to help another country pay its bills! The European Monetary Union includes 27 countries whose citizens speak 23 languages and boast a variety of proud and distinct cultures. For a German taxpayer to “bail out” a Greek debt problem seems fundamentally wrong, yet the fact that progress is still being made toward a deal is a testament to the member countries’ commitments to the European Union.

The market’s reaction last week was optimistic to the news that the eurozone is close to a solution. We at Miller/Russell have been saying for some time that it is not necessarily the problems in Europe that creates investor uncertainty, but the lack of a plan. Once a plan is in place, even if it is not the perfect solution, it is still an encouraging to the markets that members of the eurozone are willing to work together to solve the problem.

Put this in contrast to the U.S. Sovereign Debt downgrade by S&P Ratings. S&P made it clear that it was not the current state of the U.S. debt and deficit levels, but the lack of a credible plan and the absence of political cooperation that resulted in the downgrade. Putting it plainly, investors and rating agencies are not concerned whether we are “there yet,” they just want to see progress in the right direction, and that those with the power to make changes are willing to work together.

So although the road trip may be far from over, and the investors in the back seat keep asking the question “are we there yet?” and “how much longer?” it is encouraging that progress is being made. Longer term, Europe needs a common vision for its future, which may include steps toward greater integration. The road will be bumpy and include a few detours, but if the member countries remain committed to unity and peace, a successful outcome will likely result.

Excerpted with the permission of the author

Part of our job in assuring that wealth helps youngsters, rather than hurts them, is to demonstrate the importance of intellectual, spiritual, health and relationship capital and how to balance our investment in each of them. This balance is essential if we are to help achieve our goal: to raise healthy, competent adults.

What we know about emotionally healthy, competent individuals is that they have a sense of purpose, a passion in life; and a sense of competence and confidence based on their own experience of accomplishments, on facing and overcoming challenges, and on experiencing reciprocity of responsibility.

• Sense of purpose: I believe there’s a reason I’m on this planet and I seek to achieve this mission, which is often connected to my passions – those things that give me energy.
• Competence: I gain competence through practice, persistence, commitment and achievement, which leads to a feeling of confidence.
• Confidence: When I face adversity and survive, I grow even more confident in my abilities.
• Reciprocity of responsibility: I recognize the two-way nature of relationships and the importance and joy of giving as well as receiving.

As parents or family members, our role is to do what we can to give children or others the opportunity to develop those competencies and achievements.

As parents we are challenged with how to provide the right environment, opportunities and “coaching” so that our children can develop into healthy, competent adults. Many heirs have shared with me how important it is that their parents “parent” them, investing the time and love themselves. In doing this, we must:

• Instill realistic expectations about life and the world. There are limited resources, whether they are money, time, energy or water. Having wealth is lucky; not “deserved” nor a culpable act. Neither is it something to take for granted. We all need to appreciate the limitations on other resources and work to manage them carefully.
• Help youngsters identify their own gifts: talents, interests and mission. Encourage them to develop these gifts with commitment, persistence and joy.
• Share your own views, personal mission and beliefs. Your own clarity about identity helps them feel good about themselves. Demonstrate a work ethic by your own behavior: if they see you gaining pleasure and esteem through your activities and engagement, that is what they will learn for themselves.
• Give them opportunities (and even the necessity) to develop competence, allowing them to do what they are capable of rather than doing it for them…including “stretch” goals. Encourage work and volunteer activities that develop skills and challenge their current capabilities. If a child can dress himself, let him. If a child can make her own sandwich, let her. If he or she can make decision about where to spend allowance, encourage that budgeting.
• Model and teach effective communication, the most essential competence as a human being: including listening, sharing of feelings and constructive feedback.
• Avoid over-indulgence and encourage the capability to delay gratification and develop persistence; let them work through their own problems without “bailing them out.” Allow them to experience the consequences of their own actions and decisions.
• Teach financial competence (making choices, budgeting, good stewardship, etc.) as well as understanding of banking, stocks, bonds and types of investments. Start very early: 5 year olds, who get $1 allowance can learn about saving some, tithing, etc.

Health, Wealth and Families: How to Assure Your Wealth Helps, Not Hurts, Your Family. 2nd Edition, 2009 Beowulf Publications

Marc Dacanay joined the Miller/Russell team in August 2011 as a Portfolio Assistant. In his role, he provides direct support to both the institutional and private wealth management teams. Marc holds a Bachelor’s Degree in Finance from Arizona State University, where he graduated summa cum laude.

Marc was born and raised in Honolulu, Hawaii, where he spent much of his free time either in the ocean or on the basketball court. Marc came to Arizona in 2007 to pursue an opportunity-laden education, new experiences, and adventure. He is very happy with his decision to move to the mainland, as he has had an incredible experience in Arizona thus far.

One of Marc’s greatest interests is traveling, which was ignited by his time abroad in Budapest, Hungary in 2010. While having a home-base in Budapest, Marc was able to travel extensively throughout various parts of Europe. He hopes to do more international traveling in the near future.

Although Marc admittedly does miss the ocean at times, he feels very blessed to be in Arizona and a part of the Miller/Russell team. He looks forward to helping Miller/Russell continue to exceptionally serve and add value for clients.

Amber Medina, Operations Associate

Amber joined the Miller/Russell team in August of 2011. As an Operations Associate, she supports back office operations and provides client support. She is an Arizona native and has no intention of leaving the Arizona desert. She has been in the banking industry for nine years and is completing a B.S. in Business Management.

During her spare time she enjoys reading, hiking, swimming, baking, and staying active in the community. To name just a few, Amber has volunteered at Home Base Youth Services, served as a “Big Sister” with Big Brothers Big Sisters of Arizona, Phoenix Children’s Hospital, Habitat for Humanity, and most recently, participated in the Susan G. Komen Race for the Cure.

Amber is also a proud mother of her four year old son, Tyler. He loves reading, outside activities, exploring, bugs, and playing chess. She absolutely loves being a parent!

Amber is very excited to begin her career with Miller/Russell and feels blessed to have been chosen to be part of such a wonderful team.

For the quarter, the S&P 500 was down 13.9%, wiping out all of this year’s gains and bringing the YTD return to -8.7%. Despite the performance of the stock market, corporate earnings continue to strengthen, with quarterly earnings on S&P 500 companies surpassing a previous high from 2nd quarter 2007. From a valuation standpoint, the S%P 500 is trading at 10.6x it’s forward earnings, well below the historical average of 16.3x.

So if stocks are so cheap, why isn’t anyone buying them? The biggest headwind to equity performance and economic confidence continues to be the lack of resolution to the European debt crisis and sovereign budget issues. Both the stock and bond market are priced beyond levels that would reflect a recession, meaning any resolution to either of these crises would boost consumer and investor confidence and hopefully restore an appetite for risk. However these headwinds are not small. Few times in our market’s history have political issues weighed heavier than economics. A resolution may be inevitable in both scenarios, however uncertainty still remains as to the speed and success.

Other markets reflected the classic risk/reward tradeoff, as riskier assets had greater declines. The Russell 2000 finished the quarter down 21.87%, taking the year to date return to -17.02%. International stocks (MSCI EAFE) were down 18.95%, and -14.62% for the year. Emerging markets fared the worst, down 22.56% for the quarter, and -21.88% for the year. Continued flight to treasuries and the implementation of Operation Twist resulted in a strong quarter for the Barclays Aggregate Bond Index, up 3.82% for the quarter, 6.65% for the year. Long Treasuries returned an astounding 24.66% for the quarter, making them the single best performing asset. Going back to our earlier paragraph, if returns in long treasuries are essentially zero after inflation, why are people buying them? It speaks again to the fear and uncertainty dominating the investment markets. Can we quote Warren Buffett here? “Be greedy when others are fearful, and fearful when others are greedy.” Although the political uncertainty persists, once investor confidence returns (and it will), those who stayed patiently invested will be rewarded well.

For Immediate Release      

Miller/Russell & Associates Hires Seasoned Wealth Management Counselor
Christina Burroughs Joins Phoenix Registered Investment Adviser

PHOENIX (October 24, 2011) – Miller/Russell & Associates, a Phoenix-based registered investment adviser providing wealth management and investment consulting services, hired Christina Burroughs as a senior wealth management counselor.

Burroughs will work with client families on a variety of wealth management issues such as investment planning, strategic multi-generational planning and philanthropy. She will also serve as a member of Miller/Russell’s Investment Policy Committee.

As a seasoned wealth management professional, Burroughs has serviced complex wealth management clients in a multi-family office setting for more than a decade. Previously, Burroughs was the president of GenSpring Family Offices’ Phoenix family office. Prior to that, she served as a director at Inlign Wealth Management, the predecessor to GenSpring's Phoenix office where she provided strategic direction for the integration of wealth management disciplines and the delivery of those services to clients.

She also worked as a financial advisor at Tanger Financial Services in Boston, Mass and prior to that, spent seven years working in human services and clinical psychology.

“With Christina’s specialized background and commitment to this community, she is a wonderful additional to the Miller/Russell team,” said Dennis Miller, president of Miller/Russell & Associates. “As we continue to expand both our Private Wealth Management and Institutional Wealth Management practice areas, we look forward to working with Christina to meet the multi-faceted needs of high net worth families and individuals.”

Burroughs received a Bachelor of Science degree in psychology from Northwestern College. She completed graduate coursework in clinical psychology at Wheaton College as well as the Program for Certification of Financial Planners at Northeastern University. She is a CERTIFIED FINANCIAL PLANNER® professional and holds the Series 65 license.

Burroughs serves on the Board of Directors for The Wellness Community of Arizona and the Hunger-Free Communities Plan Steering Committee, a partnership of Association of Arizona Food Banks and Valley of the Sun United Way.  She was in the Phoenix Business Journal’s 2011 Class of 40 Under Forty and Top 25 Businesswomen of the Year. Christina resides in Phoenix with her husband and two children.

About Miller/Russell & Associates
Miller/Russell & Associates, LLC is a Phoenix-based registered investment adviser with offices in Arizona, California and Nevada. Since 1991, Miller/Russell has been providing wealth management and investment consulting services to individuals and families, endowments, foundations, and retirement plans. Additional information about Miller/Russell can be found at www.miller-russell.com.

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 One of the hottest topics of the past few years has been the meteoric rise of the price of gold.  Over the last 10 years, the price of gold has risen from $300 per ounce to nearly $1,900 per ounce, reflecting an almost 20% annualized gain.  Compare this to the near 0% annualized (price) return of the S&P 500, and one can see why the gold discussion has been front and center.

Despite precious metals dealers insisting that gold should comprise at least 25% of the average investor’s portfolio, very few professional investment advisors agree.  In order to clarify what role gold should play in an investor’s portfolio, it is important to first define and understand gold.

Almost all investments are productive assets.  What this means is that they “produce” something; a product, a service, a dividend, or a yield.  Shares of stock in publicly traded companies increase in value as the company continues to produce.  Rates of return on fixed income are determined up front and pay an agreed upon coupon.  Real estate has the potential to increase in value and produce rental income.  Gold, however, along with most commodities, does not produce anything. 

Perhaps Warren Buffett put it best.  Nine months ago, Ben Stein asked Warren Buffett whether gold was in a bubble, and the Oracle of Omaha rhetorically responded, “Would you rather have a 67-foot gold cube made of all the bullion in the world, or all the farmland in the US, ten Exxon Mobils (XOM), and $1 trillion in walking around money? Because the price is about the same.”  Buffett’s point was simple: Gold is not a productive asset. It just sits. Its value is entirely dependent on the emotions of buyers and sellers.

If we believe that investments are productive and generate a return based on their capability to produce, then we can conclude that gold does not qualify as an investment.  So if it is not an investment, what is it?

Often when people refer to gold, they call it “a store of value”.  Given that the metal has been around for thousands of years, has many uses (including currency), and is very difficult to destroy, this is an accurate definition.  Gold will always have some value in one form or another.  Although the focus has lately been on gold as a financial asset, the reality is that more than two-thirds of all the gold in the world is used in jewelry, electronics, medicine, aerospace, and various other areas.  Its value, like all commodities, is therefore less dependent on its role as a store of value or financial asset, and more on supply and demand.

How then, can we explain the rise in the price of gold over the last 10 years, especially as supply continues to increase due to more productive mining around the world?  If two-thirds of demand is non-financial in nature, could real demand have driven the price up 500% in 10 years?  No, the answer is that gold, like all assets, is subject to speculation and its price can be affected by non-financial factors.

What gold has become to most people is an emotional safe haven.  Gold’s rise in price coincides with the continuing fear that the U.S. financial system is at risk, and that a possible outcome is a complete destruction of the U.S. dollar and fiat currency in general.  Most recently, gold reached new highs as the current administration struggled to come together on a plan to raise the debt ceiling, and the U.S. subsequently lost its AAA debt rating.  However, as we have mentioned in previous communications, investment fundamentals have not changed.  The real supply and demand dynamics for gold have not changed either.  What’s left is the one factor truly affecting the price of gold, and that is emotion.  

In order for this point to be valid, we have to conclude that the risk of complete U.S. dollar destruction is close to zero.  Here are a few relevant facts that support this:

1.      U.S. sovereign debt outstanding is currently $9 trillion dollars (it’s actually $14 trillion, but $5 trillion is held within the U.S.).  

2.     There is currently between 120,000-140,000 tonnes of gold in the world.  There is approximately another 50,000 tonnes of in-ground reserves that will take years to mine.  The value of all the gold in the world is approximately $7-$8 trillion dollars.  However 70-75% of the world’s gold is not available to governments and is held privately as jewelry, bullion, and coin.  Only 30,000 tonnes is held in central bank reserves.  The value of that gold is approximately $1.8 trillion dollars.  

 3.     If the U.S. dollar becomes worthless, all the non-U.S. holders of that $9 trillion dollars in sovereign debt are going to want something for their money.  It logically can’t be gold, because what’s available only amounts to $1.8 trillion dollars.

 4.     The biggest caveat to gold’s inability to replace the U.S. dollar: the U.S. government is the largest owner of gold in the world, with nearly 9,000 tonnes in central bank reserves.  If gold replaces the U.S. dollar, the U.S. will still be the richest country in the world.

 The reality is that our global financial system has become too large and complex to permit gold to be a possible solution to any monetary problem in the future.  There simply isn’t enough of it around, and it is too difficult an asset to exchange.  For the common investor who wants to hold physical gold, it’s estimated that nearly 10% of value is lost in transaction and storage costs.  A scenario where the U.S. dollar becomes worthless is almost impossible, and a more likely outcome would be some other foreign currency or basket of currencies replacing the dollar as the global reserve currency instead of gold.    

So what role should gold play in an investor’s portfolio?  At Miller/Russell, we believe that gold does not make sense as a stand-alone investment for our clients.  We do believe, however, that gold should be part of a diversified basket of commodities.  Most of our clients have 3-5% of their portfolio in commodities via funds that track the Dow Jones/UBS Commodities Index.  Within that index is a 12-13% allocation to gold.  We believe an allocation to commodities adds value to our portfolios, as commodities have historically done an adequate job of hedging inflation and also offer diversification to a traditional stock and bond mix.  Furthermore, assuming global population continues to increase and drive resource demand, we expect a long-term positive return from commodities as demand outstrips supply.  Any return beyond true economic factors is pure speculation, for commodities in general and gold specifically.  As Buffett again says,  

 “Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.”

 Right now, fear is high.  It is quite possible it will go higher, and the price of gold may continue to rise.  However, the U.S. has been through financial crises in the past, as has the rest of the world.  At Miller/Russell, we are optimistic that the U.S. will recover, fear will subside, and the global economy will improve.  When that occurs, those who were heavily investing in the so called “emotional safe haven” of gold may see prices return to normalized levels, reflecting a very risky scenario that we do not find suitable for our clients.