Minutes

AAII Orange County Chapter

Monthly Meeting, November 7, 2009

Balearic Community Center

1975 Balearic Dr.

Costa Mesa, CA 92626

President Bob Welge brought the meeting to order at 1 pm. Beginning with preliminary announcements, Bob drew members’ attention to the availability of Chapter contact information and handouts for today’s talk on the back table, and of water at the back table. Bob acknowledged the efforts of the Chapter’s leaders: Facilities Chair Craig Stoddard, Vice President Ed Castleman, Treasurer Dave McMillin, and Bill Phillips, Hospitality Chair, for putting up signs and setting up the room.

Bob next announced the schedule of future chapter meetings. There will be no meeting in December. The next meeting will be at the normal 8:45am time on January 9^th, 2010, when Jonathan Lansner from the Orange County Register will return to discuss Has the Market Bottomed? – and What’s Next?. Although regular chapter meetings are held at the Balearic Community Center on Saturdays at 8:45am, Bob emphasized that the February and March meetings will indeed be held at Balearic but with a different day and time - Friday evenings at 6:30pm. On Friday February 12^th, Jim Trippon will discuss Chinese stock investing, and on Friday March 12^th, Mark Skousen will present Forecasts and Strategies for 2010: Opportunities and Dangers Ahead. Further details on these future events and other Orange County Chapter information can be viewed on Bob’s website www.robertsgeneral.com.

Bob then introduced today’s speaker, Carl Birkelbach, Founder and CEO of Birkelbach Investment Securities Inc. and his presentation Three Pillars of Recovery in a Volatile Market. Bob noted that Carl had left his home in Chicago at 3am, arrived in Orange County at 9am, and would return again to Chicago on a 5pm flight directly following his presentation. We are indeed privileged to have a speaker willing to keep a commitment entailing such sacrifice!

Carl began his investment research as a young man by reviewing stock market history since 1926. As a result of his analysis, he identified three stock investment principles, or pillars:

o Investors are irrational in a predictable way

o Listen to the markets

o Let the markets tell you what to do

These three pillars are augmented by five additional guidelines:

o Nobody controls the market

o But the individual investor can control his selection and timing

o We can’t tell the market what to do

o But we can let the market tell us what to do

o THE TREND IS YOUR FRIEND

Using these principles, along with identifying the current underlying economic trends, Carl aims to profit by correctly timing future market moves. As a technician, his primary inputs are historical price patterns, although he takes volume into account also. Using these principles, Carl has been able to correctly call a number of crucial market turning points.

Carl identified three economic realities that will impact market price action as (1) global competition, (2) a redistribution of wealth from shareholders to management, and (3) a need for banks, corporations and individuals to rebuild their balance sheets.

Carl admonishes investors to expect increased market volatility, avoid a buy-and-hold strategy, and avoid investing in mutual funds. Instead, he recommends employing market timing techniques using ETFs (Exchange-Traded Funds). He favors ETFs because of their diversification, low management fees, tax efficiency, and because they can be traded any time the market is open and can be used for hedging.

Carl shared his views on the economic fundamentals that will affect the market going forward. We have avoided a depression at the cost of taking on a huge amount of new government debt; moreover, the recession has ended. Corporate earnings are improving because of expense cutting and reduced employee numbers. The downstream effect of these factors will be negative, resulting in an L-shaped economy and a flat market for the next 2 to 3 years. The new normal economy will be characterized by the reverse wealth effect generated by protracted high unemployment. Later, Carl predicts the flat market will end on the upside, driven by biotech companies and firms exploiting new energy sources.

To avoid the inverse wealth effect on an individual basis, Carl recommends, “Find a stream of income not dependent on a corporation.”

In his final segment, Carl discussed chart patterns he uses for estimating future market action. He looks at historical market peaks and troughs, and estimates future market price targets as a percentage of these historical ranges, such as a 62% retrenchment from a market peak or the 50% point of a previous market price range. He likes to identify chart patterns, such as inverse head and shoulders, etc.

For those with questions or seeking further information, Carl’s website is www.my-broker.com or one can contact him at 800.458.2358 or carlbis@aol.com. Birkelbach Securities is a broker offering a variety of financial products, as well as offering to manage accounts of $100K or more, on a full-discretionary basis.

Following the conclusion of Carl’s talk, Bob adjourned the meeting at 3 pm.

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Minutes by Ed Sharman