July 1, 2011 to September 30, 2011

October 25, 2011

Dear Investors and Friends of Clausen Capital Management,

The Third Quarter of 2011 (3Q11) is complete and earned the rather dubious award as the worst performing quarter in years with volatility reminiscent of 1929, 1987, and 2008. During 3Q11, the S&P continued to bounce across support, unable to get the momentum to breakout and move higher.  It certainly felt more like capitulation than capitalization.

From a performance standpoint, the Benchmark S&P 500 declined -14.3% with half of the loss coming in September.  The “experts” suggested the losses were the result of the debt issues in Europe, the probable default in Greece, and the poor economic climate here in the U.S as well as U.S. political uncertainties.   There are a myriad of reasons for the strong sell off but the number one reason for this past quarter sell off was the total lack of investor confidence.  Investors are voting with their feet and moving out of the markets or turning more defensive.  Clausen Capital Management began to make its defensive move in early June.  As a result our average account declined only -2.4% during 3Q11 which also included fees and cash distributions.

We do not believe the market is going to crash as it did in 2008.  However, we do expect the markets to remain mired in a Bear Market environment for the foreseeable future.  Corporations and banks are better capitalized but we also expect their growth to be a challenge. Political shenanigans, threats of taxes, slowing growth and increasing debt are not market drivers.  We find it difficult to get overly aggressive in this type of market environment.

The good news is this decline will end at some point which will result in an eventual opportunity to make a reasonable gain when the markets recover. The question is “when” will the market recovery begin?

Seasonally, the period between October and late April provides the strongest market gains but during uncertain economic and political times such as these, there is no guarantee.  Until we can confirm a market recover is underway, our only option is to remain defensive.

With so many external forces potentially affecting the market environment, we opted to remain conservative in our investment allocations during 3Q11.  Our first responsibility is to protect your assets during periods of increased market risk.

Our Conservative, Moderate, and Growth portfolios continue to focus on our philosophy of “Participate and Protect”.  While 2011 has been challenging to grow account values, we have clearly side stepped the vast majority of the volatile market declines.  Even with the current daily market volatility, our defensive actions have protected our client assets from any significant sell off.

We are committed to you, our clients.  Your trust in Clausen Capital is what motivates us to excel. As always, we value your business, our financial relationship with you and the trust you place in our company.

Please visit our website:   www.clausencapital.com

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CCM Quarterly Performance

Compared with the S&P 500 Index

CCM Performance from April 1, 2011 through September 30, 2011 compared with the S&P 500 Index

The following chart depicts the performance of our three CCM portfolios (Green Line) averaged into a single equity curve which is compared to the S&P 500 (Red Line) for the past six months ending September 2011. While we usually review the performance of our portfolios based on the quarterly outcome we feel it is important to step back and review the performance over a specific period of time. Between April 2011 and July 2011, the market environment began to turn volatile and decay. (Point 1).  In July, the markets became quite negative with the S&P falling in excess of -14%. (Point 2).  Our average portfolio decline was about -2.4%, largely due to the drop in the price of gold, commodities, and international emerging market bond funds. For the majority of 3Q11, the markets remained in a wide and volatile trading range with marginal volume (investor buying and selling) (Point 3).

Average of CCM Portfolios

Annualized Performance Comparison to the S&P 500 Index

January 1, 2002 through September 30, 2011

Clausen Capital Management strives to provide independent and objective investment advisory services to enhance the returns of our clients by investing when market risk is in our favor.  If you have any questions, please contact us at

704-847-8467 or mail to:  gclausen@clausencap.com.

Thank you for investing with Clausen Capital Management.

Please visit our website:   www.clausencapital.com  For our weekly opinions of the market, please visit our blog at,   http://clausencapital.com/wordpress/

Notes: Quarterly performance is calculated using the beginning of the month equity balances; this method is more indicative of actual returns. Individual performance may vary.  Performance Charts are not net of fees.  This analysis does not constitute an offer to sell or a solicitation to buy a security.  Past performance does not predict future results.   ADV Part II is available upon request.