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Economic Developments Global Interdependence Center Argentina and Uruguay David R. Kotok Chairman & Chief Investment Officer david.kotok@cumber.com

ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

Total Assets: Central Banks 25

2015 20

15

10

5

1995 0

Source: David Stockman ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

2

Total Assets: Fed January 1975 - April 2016 5

Trillions

4

3

2

1

Pre-Tarp Average $678 billion

0

Source: Haver Analytics ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

3

Fed Maturity Structure: Assets Less than one year

One to 10 Yr

Over ten yr

$5.0

QE-3 $4.5

$4.0

QE-2

$3.5

$ Trillions

$3.0

QE-1

$2.5

$2.0

$1.5

$1.0

$0.5

$0.0 2005 2006 Source: Haver Analytics

2007

2008

2009

ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

2010

2011

2012

2013

2014

2015

4

Fed Duration Estimated Duration of Federal Reserve Asset Holdings As of 4/27/16

6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2006

2007

2008

2009

2010

Source: Haver Analytics ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

2011

2012

2013

2014

2015

2016

Weekly Data

5

Federal Deficit

Source: Haver Analytics and Ned Davis Research ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

6

Interest Expense: Debt Outstanding Interest Expense on Debt Outstanding US Treasury (Fiscal Year End) through March 2016 500 450

2006 $405.87

2015 $402.44

400

Billions

350 300 250 200 150 100 50 0

Source: Department of the Treasury, Bureau of the Fiscal Service. Treasurydirect.gov. ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

7

Historical Debt Outstanding US Government 25

2020 $22.41 2015 $18.63

20

Trillions

15

10

2006 $8.51

5

0

Source: www.whitehouse.gov ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

8

Monthly Central Bank Assets Monthly Central Bank Assets for US, Japan, and Euro Area Jun-06 to Apr-16 $12,000

Cumberland Advisors YE2016 Estimate $12,320.0

Estimate includes ECB

$10,000

$ Billions

$8,000

$6,000

$4,000

$2,000

$0

Source: Haver Analytics

Federal Reserve

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ECB

Bank of Japan

9

G7 Government Bond Yields Country

2-year Yields

10-year Yields

As of May 3, 2016

USA

0.74

1.78

Canada

0.65

1.44

UK

0.47

1.52

France

-0.42

0.56

Germany

-0.50

0.20

Italy

-0.06

1.46

Japan

-0.25

-0.13

Swiss

-0.96

-0.32

Source: Bloomberg ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

10

10-yr Treasury vs. 10-yr Bund 4.5

4

NIRP 3.5

3

2.5

2

1.5

1

LEHMAN-AIG End of 2008

0.5

0

GT10 Govt

GTDEM10Y Govt

Source: Bloomberg ©Copyright 2016 Cumberland Advisors®. Further distribution prohibited without prior permission.

11

10-yr TIPS vs. 10-yr FIPS 3.5

3

2.5

2

NIRP

1.5

N I R P

1

0.5

0 -0.5

-1

-1.5

GTII10 Govt

GTFRFII10Y Govt

Source: Bloomberg ©Copyright 2016 Cumberland Advisors®. Further distribution prohibited without prior permission.

12

2-yr Treasury vs. 2-yr Bund 4

3.5

3

2.5

NIRP

2

1.5

1

0.5

0

-0.5

LEHMAN-AIG End of 2008

-1

GT2 Govt

GTDEM2Y Govt

Source: Bloomberg ©Copyright 2016 Cumberland Advisors®. Further distribution prohibited without prior permission.

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Disclosure All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed. Past performance is no guarantee of future results. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk.

ŠCopyright 2016 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

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