Through the summer, we enjoyed our

time off as well as time working from our Houston ofce.

We shed for salmon in Astoria, Oregon, and for red sh in Clear Lake,
Texas. Amy Johnstone remains the reigning champion of our ofce
shing trips. Katie LaPlante is pregnant and expecting a girl in
November. The name theyve chosen is Madeline, but we welcome you
to e-mail your own suggestions (since this is the season to cast your
vote and express your opinions). Mark
Buser continues to run triathlons and inspires
those around him to get t. At 45, hes in the
best shape of his life. Grant Johnstone is
following Marks lead with regular exercise in
his garage (exercise room) to the Insanity
and P90-X DVD programs, but he says its a
constant challenge because, the Mexican
food in Houston is the bomb, and Portland is
an international foodie heaven! Nathalie
Christensen visited her family in Spain and
came back tan, rested, and with her French
accent in full force. We also redesigned our
website over the summer, so check in and see
the new look at www.johnstonenancial.com.
4q
:
2012
investment news & updates
As a measure of investor uncertainty and an accommodative Federal
Reserve, interest rates on ve-year certicates of deposit (CDs) in the
U.S. dropped below 1 percent for the rst time on record, according to
Market Rates Insight. At the same time, the S&P 500 has gained 13.5
percent YTD through August 30th. Our summer reviews coincided with
the June swoon in the stock market and, at the time, many of our clients
voiced frustration with their investment returns and wondered if there
wasnt something with greater growth potential to invest in. We continue
to believe in the value of asset allocation and diversication, and we have
seen the market post impressive returns since this summer.
For investors seeking secure retirement income, very low yields are
limiting their range of choices. We have seen advertisements for high
yielding xed income investments that have very attractive yields and
returns. While its tempting to invest in these enticing investments, its
important to consider two things when considering these investments:
1) Fixed income investments have historically performed best when
interest rates are dropping, and interest rates have now dropped about
as far as they can go. 2) They are currently efciently priced, so when the
yield is well above the expected market norm, there is likely additional
credit risk. If interest rates rise, the values of these xed income invest-
www.JohnstoneFinancialAdvisors.com
While cyclical
trends in the stock
market make for
interesting study
and speculation,
they rarely lend
themselves to
increased investor
performance.
Johnstone Financial Advisors
19161 Willamette Drive
|
West Linn, OR 97068
503-699-2929
|
TF 866-989-2929
www.JohnstoneFinancialAdvisors.com
Advisory services are not designed for excessively traded or inactive accounts, and may not be suitable for all investors. Please carefully
review the Wells Fargo Advisors advisory disclosure document for a full description of our services. The minimum account size for these
programs is $25,000 to $200,000.
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not
guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors
Financial Network or its afliates. The material has been prepared or is distributed solely for information purposes and is not a
solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available
upon request.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), member SIPC.
Johnstone Financial Advisors is a separate entity from WFAFN.
Quarterly
3 2
ments will be under pressure to drop in value. Right now, since many investors are willing to
pay a premium to chase investment yield, the valuations and risks of these investments appear
to be quite high.
Our research on this subject has brought us full circle. When constructing our managed
portfolios, we seek both high dividend stocks and a broad selection of bonds. Distributed
income could consist of dividends, interest and appreciation.
The charts below represent historical returns of blended indexes from 20032012 YTD,
arguably one of the most volatile periods for stocks since the great depression. You will note
that increasing bonds in the strategy seeks to reduce volatility and preserve principle, but
sacrices potential growth. In other words, risk and reward go hand in hand.
Presidential Market Cycles
It is well known that investment performance as measured by the S&P500 has historically
been better under Democrats than Republicans. The problem with this simple analysis is that
it doesnt take into account scal and monetary policies put into place during a previous term
that may have created strong investment performance for a subsequent term. A better gauge
of the relationship between investment performance and elections is to look at changes in the
S&P500 index value over a full presidential cycle. Over the past 24 years, there have been six
4 year cycles. Markets have tended to decline during the rst half of the Presidential cycle and
rise during the second half. This phenomenon has to do with the authority granted Congress
to control scal policy, which amounts to pulling levers to heat the economy. Once in power,
politicians want to remain in ofce and use scal policy to their advantage - boosting markets
prior to elections.
In May 2003, when President George W. Bush passed the Jobs and Growth Tax Relief Recon-
ciliation Act, the market rose sharply and unemployment dropped helping him win a second
term. In the rst half of his second term, the market traded at to down as Congress grappled
with ballooning decits and budget ghts. In 2006, new budgetary reforms eased some of the
uncertainty, and the S&P500 surged 27 percent.
While cyclical trends in the stock market make for interesting study and speculation, they
rarely lend themselves to increased investor performance. In fact, study after study show that
staying in the market through all market cycles is better than trying to time the market. If you
are currently invested, we recommend that you stay the course. If you currently have cash on
the sidelines, look for a market correction within the next 6 months to put it to work.
While this is a difcult market environment to navigate, we want you to know we are here for
you. We enjoy hearing from you, and we appreciate you referring your friends.
Be sure to check out the back panel for summer photos and updates!
S&P 500 Index: The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index
with each stocks weight in the Index proportionate to its market value.
MSCI EAFE

Index (Europe, Australasia, Far East): The Morgan Stanley Capital International Europe, Australasia and Far East (MSCI EAFE) Stock Index is an
unmanaged group of securities widely regarded by investors to be representations of the stock markets of Europe, Australasia and the Far East. Source: MSCI. MSCI
makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may
not be further redistributed or used as a basis for other indices or any securities or nancial products. This report is not approved, reviewed or produced by MSCI.
Merrill Lynch U.S. Corporate Master Index: The Merrill Lynch U.S. Corporate Master Index tracks the performance of U.S. dollar-denominated investment grade
corporate public debt issued in the U.S. domestic bond market. Qualifying bonds must have at least one year remaining term to maturity, a xed coupon schedule
and a minimum amount outstanding of $150 million. Additional sub-indices are available that segment the Index by maturity, rating and sector (Industrial, Finance,
Utility, etc.).
Indices are unmanaged and you cannot invest directly in an index. This is a hypothetical illustration based on an assumed withdrawal rate and is not intended to portray your particular investment. Withdrawals are taken at the end of each year. Fees and expenses are not taken into account in this illustration.
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
02 03 04 05 06 07 08 09 10 11 12 YTD
A
c
c
o
u
n
t

V
a
l
u
e
4%
5%
6%
Withdrawal
Conservanve Growth (70 Stocks, 30 8onds)
50% S&P500 / 20% MSCI AC World ex US / 30% Barclays U.S. Aggregate
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
02 03 04 05 06 07 08 09 10 11 12 YTD
A
c
c
o
u
n
t

V
a
l
u
e
4%
5%
6%
Withdrawal
Conservanve Growth & Income (3S Stocks, 6S 8onds)
25% S&P500 / 10% MSCI AC World ex US / 65% Barclays U.S. Aggregate
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
02 03 04 05 06 07 08 09 10 11 12 YTD
A
c
c
o
u
n
t

V
a
l
u
e
4%
5%
6%
Withdrawal
Conservanve Income (10 Stocks, 90 8onds)
8% S&P500 / 2% MSCI AC World ex US / 90% Barclays U.S. Aggregate
Past performance is not a guarantee of future results.
Indices are unmanaged and you cannot invest directly in an index.
The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with
each stocks weight in the Index proportionate to its market value.
The Dow Jones Industrial Average is an unweighted index of 30 blue-chip industrial U.S. stocks.* The price to earnings ratio is a measure of how much
an investor is willing to pay for one dollar of a companys earnings, and reects the relative value of stocks
3 2
ments will be under pressure to drop in value. Right now, since many investors are willing to
pay a premium to chase investment yield, the valuations and risks of these investments appear
to be quite high.
Our research on this subject has brought us full circle. When constructing our managed
portfolios, we seek both high dividend stocks and a broad selection of bonds. Distributed
income could consist of dividends, interest and appreciation.
The charts below represent historical returns of blended indexes from 20032012 YTD,
arguably one of the most volatile periods for stocks since the great depression. You will note
that increasing bonds in the strategy seeks to reduce volatility and preserve principle, but
sacrices potential growth. In other words, risk and reward go hand in hand.
Presidential Market Cycles
It is well known that investment performance as measured by the S&P500 has historically
been better under Democrats than Republicans. The problem with this simple analysis is that
it doesnt take into account scal and monetary policies put into place during a previous term
that may have created strong investment performance for a subsequent term. A better gauge
of the relationship between investment performance and elections is to look at changes in the
S&P500 index value over a full presidential cycle. Over the past 24 years, there have been six
4 year cycles. Markets have tended to decline during the rst half of the Presidential cycle and
rise during the second half. This phenomenon has to do with the authority granted Congress
to control scal policy, which amounts to pulling levers to heat the economy. Once in power,
politicians want to remain in ofce and use scal policy to their advantage - boosting markets
prior to elections.
In May 2003, when President George W. Bush passed the Jobs and Growth Tax Relief Recon-
ciliation Act, the market rose sharply and unemployment dropped helping him win a second
term. In the rst half of his second term, the market traded at to down as Congress grappled
with ballooning decits and budget ghts. In 2006, new budgetary reforms eased some of the
uncertainty, and the S&P500 surged 27 percent.
While cyclical trends in the stock market make for interesting study and speculation, they
rarely lend themselves to increased investor performance. In fact, study after study show that
staying in the market through all market cycles is better than trying to time the market. If you
are currently invested, we recommend that you stay the course. If you currently have cash on
the sidelines, look for a market correction within the next 6 months to put it to work.
While this is a difcult market environment to navigate, we want you to know we are here for
you. We enjoy hearing from you, and we appreciate you referring your friends.
Be sure to check out the back panel for summer photos and updates!
S&P 500 Index: The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index
with each stocks weight in the Index proportionate to its market value.
MSCI EAFE

Index (Europe, Australasia, Far East): The Morgan Stanley Capital International Europe, Australasia and Far East (MSCI EAFE) Stock Index is an
unmanaged group of securities widely regarded by investors to be representations of the stock markets of Europe, Australasia and the Far East. Source: MSCI. MSCI
makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may
not be further redistributed or used as a basis for other indices or any securities or nancial products. This report is not approved, reviewed or produced by MSCI.
Merrill Lynch U.S. Corporate Master Index: The Merrill Lynch U.S. Corporate Master Index tracks the performance of U.S. dollar-denominated investment grade
corporate public debt issued in the U.S. domestic bond market. Qualifying bonds must have at least one year remaining term to maturity, a xed coupon schedule
and a minimum amount outstanding of $150 million. Additional sub-indices are available that segment the Index by maturity, rating and sector (Industrial, Finance,
Utility, etc.).
Indices are unmanaged and you cannot invest directly in an index. This is a hypothetical illustration based on an assumed withdrawal rate and is not intended to portray your particular investment. Withdrawals are taken at the end of each year. Fees and expenses are not taken into account in this illustration.
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
02 03 04 05 06 07 08 09 10 11 12 YTD
A
c
c
o
u
n
t

V
a
l
u
e
4%
5%
6%
Withdrawal
Conservanve Growth (70 Stocks, 30 8onds)
50% S&P500 / 20% MSCI AC World ex US / 30% Barclays U.S. Aggregate
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
02 03 04 05 06 07 08 09 10 11 12 YTD
A
c
c
o
u
n
t

V
a
l
u
e
4%
5%
6%
Withdrawal
Conservanve Growth & Income (3S Stocks, 6S 8onds)
25% S&P500 / 10% MSCI AC World ex US / 65% Barclays U.S. Aggregate
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
02 03 04 05 06 07 08 09 10 11 12 YTD
A
c
c
o
u
n
t

V
a
l
u
e
4%
5%
6%
Withdrawal
Conservanve Income (10 Stocks, 90 8onds)
8% S&P500 / 2% MSCI AC World ex US / 90% Barclays U.S. Aggregate
Past performance is not a guarantee of future results.
Indices are unmanaged and you cannot invest directly in an index.
The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with
each stocks weight in the Index proportionate to its market value.
The Dow Jones Industrial Average is an unweighted index of 30 blue-chip industrial U.S. stocks.* The price to earnings ratio is a measure of how much
an investor is willing to pay for one dollar of a companys earnings, and reects the relative value of stocks
Through the summer, we enjoyed our
time off as well as time working from our Houston ofce.
We shed for salmon in Astoria, Oregon, and for red sh in Clear Lake,
Texas. Amy Johnstone remains the reigning champion of our ofce
shing trips. Katie LaPlante is pregnant and expecting a girl in
November. The name theyve chosen is Madeline, but we welcome you
to e-mail your own suggestions (since this is the season to cast your
vote and express your opinions). Mark
Buser continues to run triathlons and inspires
those around him to get t. At 45, hes in the
best shape of his life. Grant Johnstone is
following Marks lead with regular exercise in
his garage (exercise room) to the Insanity
and P90-X DVD programs, but he says its a
constant challenge because, the Mexican
food in Houston is the bomb, and Portland is
an international foodie heaven! Nathalie
Christensen visited her family in Spain and
came back tan, rested, and with her French
accent in full force. We also redesigned our
website over the summer, so check in and see
the new look at www.johnstonenancial.com.
4q
:
2012
investment news & updates
As a measure of investor uncertainty and an accommodative Federal
Reserve, interest rates on ve-year certicates of deposit (CDs) in the
U.S. dropped below 1 percent for the rst time on record, according to
Market Rates Insight. At the same time, the S&P 500 has gained 13.5
percent YTD through August 30th. Our summer reviews coincided with
the June swoon in the stock market and, at the time, many of our clients
voiced frustration with their investment returns and wondered if there
wasnt something with greater growth potential to invest in. We continue
to believe in the value of asset allocation and diversication, and we have
seen the market post impressive returns since this summer.
For investors seeking secure retirement income, very low yields are
limiting their range of choices. We have seen advertisements for high
yielding xed income investments that have very attractive yields and
returns. While its tempting to invest in these enticing investments, its
important to consider two things when considering these investments:
1) Fixed income investments have historically performed best when
interest rates are dropping, and interest rates have now dropped about
as far as they can go. 2) They are currently efciently priced, so when the
yield is well above the expected market norm, there is likely additional
credit risk. If interest rates rise, the values of these xed income invest-
www.JohnstoneFinancialAdvisors.com
While cyclical
trends in the stock
market make for
interesting study
and speculation,
they rarely lend
themselves to
increased investor
performance.
Johnstone Financial Advisors
19161 Willamette Drive
|
West Linn, OR 97068
503-699-2929
|
TF 866-989-2929
www.JohnstoneFinancialAdvisors.com
Advisory services are not designed for excessively traded or inactive accounts, and may not be suitable for all investors. Please carefully
review the Wells Fargo Advisors advisory disclosure document for a full description of our services. The minimum account size for these
programs is $25,000 to $200,000.
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not
guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors
Financial Network or its afliates. The material has been prepared or is distributed solely for information purposes and is not a
solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available
upon request.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), member SIPC.
Johnstone Financial Advisors is a separate entity from WFAFN.
Quarterly