Response to President Fisher's Keynote Address

Global Interdependence Center Abu Dhabi March 26, 2013

David Kotok Chairman and Chief Investment Officer (800) 257-7013 ext. 320 David.Kotok@Cumber.com Twitter: @CumberlandADV

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Factors Adding to Reserves Factors Adding to Reserves on Federal Reserve's Balance Sheet (Assets) Plus Off-Balance TSLF from 6/27/07 to 3/13/13 $3,300 $3,150 $3,000 $2,850 $2,700 $2,550 $2,400

Mortgage Backed Securities

$2,250 $1,950

$1,500 $1,350

$1,200 $1,050

PDCF-3/16/08 TSLF-3/11/08

$1,650

Series Break

$1,800

TAF-12/12/07 Series Break "TDWP - 8/17/07"

$ Bn

$2,100

US Treasuries

$900 $750 $600 $450 6-Feb-13 26-Dec-12 14-Nov-12 3-Oct-12 22-Aug-12 11-Jul-12 30-May-12 18-Apr-12 7-Mar-12 25-Jan-12 14-Dec-11 2-Nov-11 21-Sep-11 10-Aug-11 29-Jun-11 18-May-11 6-Apr-11 23-Feb-11 12-Jan-11 1-Dec-10 20-Oct-10 8-Sep-10 28-Jul-10 16-Jun-10 5-May-10 24-Mar-10 10-Feb-10 30-Dec-09 18-Nov-09 07-Oct-09 26-Aug-09 15-Jul-09 03-Jun-09 22-Apr-09 11-Mar-09 28-Jan-09 17-Dec-08 5-Nov-08 24-Sep-08 2-Apr-08 20-Feb-08 9-Jan-08 28-Nov-07 8-Aug-07 Note: Data are weekly averages for all but the Foreign Central Bank TAF which are as of the last day of the week.

Source: Federal Reserve Board of Governors Statistical Release H.4.1.

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Factors Using Reserves Factors Using Reserves on Federal Reserve's Balance Sheet (Liabilities) from 6/27/2007 to 3/13/2013

$3,300 $3,150 $3,000 $2,850 $2,700 $2,550 $2,400 $2,250

Billions

$2,100 $1,950

$1,500 $1,350 $1,200 $1,050

TAF-12/12/07 Series Break "TDWP - 8/17/07"

$1,650

Series Break PDCF-3/16/08 TSLF-3/11/08, 950

$1,800

Reserve Balances

$900 $750 $600

Currency in Circulation

$450 6-Feb-13 26-Dec-12 14-Nov-12 3-Oct-12 22-Aug-12 11-Jul-12 30-May-12 18-Apr-12 7-Mar-12 25-Jan-12 14-Dec-11 2-Nov-11 21-Sep-11 10-Aug-11 29-Jun-11 18-May-11 6-Apr-11 23-Feb-11 12-Jan-11 1-Dec-10 20-Oct-10 8-Sep-10 28-Jul-10 16-Jun-10 5-May-10 24-Mar-10 10-Feb-10 30-Dec-09 18-Nov-09 07-Oct-09 26-Aug-09 15-Jul-09 03-Jun-09 22-Apr-09 11-Mar-09 28-Jan-09 17-Dec-08 5-Nov-08 24-Sep-08 2-Apr-08 20-Feb-08 9-Jan-08 28-Nov-07 8-Aug-07 27-Jun-07 Note: Data are weekly averages for all but the Foreign Central Bank TAF which are as of the last day of the week.

Source: Federal Reserve Board of Governors Statistical Release H.4.1.

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Projected Baseline Assets

Source: “Crunch Time: Fiscal Crises and the Role of Monetary Policy.” Greenlaw, Hamilton, Hooper, and Mishkin (2013).

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Projected Baseline Liabilities

Source: “Crunch Time: Fiscal Crises and the Role of Monetary Policy.” Greenlaw, Hamilton, Hooper, and Mishkin (2013).

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Everyone is Now Looking at Jobs • When will unemployment – most recently at 7.7% hit 6.5%?

• We have looked at job formation assuming 0.7% annual growth in labor force and -0.3% annual change in participation rate.

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How Many Jobs Does the Economy Create?

Estimated Number of Quarters to Estimated Number Create 3.217 of Jobs Created Million Jobs Within Quarter Low (95%) Interval 17 134 9 268 6 402 4 536

Estimated Number of Estimated Number of Assumed Quarterly % Jobs Created within Quarters to Create 3.217 Real GDP Growth the Quarter Million Jobs Average 1 161 20 2 322 10 3 483 7 4 644 5

Estimated Number of Jobs Created Within Quarter Hi (95%) Interval 188 377 565 753

Estimated Number of Estimated Number of Assumed Quarterly % Jobs Created per Months to Create 3.217 Real GDP Growth Month Million Jobs Average 1 54 60 2 107 30 3 161 20 4 215 15

Estimated Number Estimated Number of Months to Estimated Number of Jobs Created per Create 3.217 of Jobs Created Month Million Jobs Within Month Hi (95%) Interval Low (95%) Interval 63 51 45 126 26 89 188 17 134 251 13 179

Estimated Number of Quarters to Create 3.217 Million Jobs 24 12 8 6

Estimated Number of Months to Create 3.217 Million Jobs 72 36 24 18

Source: Haver and Cumberland Advisors Florida Office One Sarasota Tower 2 N. Tamiami Trail, Suite 303 Sarasota, FL 34236

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GDP Growth Needed to Create Enough Jobs for Unemployment to Hit 6.5%

Source: Cumberland Advisors Florida Office One Sarasota Tower 2 N. Tamiami Trail, Suite 303 Sarasota, FL 34236

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Job Growth Needed to Hit 6.5% Unemployment

Source: Cumberland Advisors Florida Office One Sarasota Tower 2 N. Tamiami Trail, Suite 303 Sarasota, FL 34236

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U3 Through U6 U4 : U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.

U5 : U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.

U6 : U5 + Part time workers who want to work full time, but cannot due to economic reasons.

18

U6

U5

U4

U3

16 14

Percent

12 10 8 6 4 2

Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012 2013

Source: BLS and Cumberland Advisors, Inc.

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Sources of Difference Between U6 and Standard Employment Statistic % Discourage Workers

%Marginally Attached Workers

%Partime Workes Who Want Full Time Work

8

7

Percent

6

5

4

3

2

1

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Jan

Sep

Jan May

Sep

May

Sep Jan

Jan

May

Jan

May Sep

May Sep

Jan

Sep

Jan May

Sep

May

Sep Jan

Jan

May

May Sep

Jan

Sep

Jan May

Sep

May

Sep Jan

May

Jan

Jan

May Sep

0

2012 2013

Source: BLS and Cumberland Advisors, Inc.

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The Beveridge Curve: Job Vacancy Rate vs.

U-3 Unemployment Rate (Seasonally Adjusted) 3.5 3.0

Job Vacancy Rate

Nov '07

Dec '01

Jan '13

Dec '07

2.5

Dec '12

2.0 Jun '09

1.5

Jul '09

1.0 3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

U-3 Unemployment Rate Dec '01- Nov '07

Dec '07- Jun '09

Jul '09- Jan '13

Source: Bureau of Labor Statistics, Current Population Survey and Job Openings Labor Turnover Survey, March 12, 2013 Florida Office One Sarasota Tower 2 N. Tamiami Trail, Suite 303 Sarasota, FL 34236

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Monthly Unemployment vs. Inflation 11.0

Unemployment Rate (U-3)

Nov-09 Apr-10

Oct-09

10.0 Jul-09

9.0

Post Crisis (Jul '09-present)

Mar-10 Dec-09 Nov-10 Feb-10 Jan-10 Oct-10 May-10 Jul-10 Jun-10Aug-10 Dec-10 Feb-11 Apr-11 Jul-11 Jan-11 May-11 Jun-11Sep-11 Mar-11 Aug-11 Oct-11 Nov-11 Dec-11 Jun-12 Feb-12 Jan-12 Jul-12 May-12 Mar-12 Apr-12 Jan-13 Oct-12 Aug-12 Sep-12 Dec-12 Nov-12

Sep-09 Aug-09 Jun-09 May-09

Sep-10

Apr-09 Mar-09 Feb-09

8.0

Jan-09

Feb-13

During Crisis (Dec. '07-June '09)

Dec-08

7.0

Nov-08 Oct-08

Fed Target

6.0

Sep-08 Aug-08 Jul-08 Jun-08

(6.5% unemployment rate, 2.5% inflation rate) May-08

5.0

Jul-07

Pre-Crisis (Jan '07-Nov '07)

Aug-07

Sep-07

Mar-08 Jan-08 Dec-07 Feb-08

Apr-08

Jan-07 Jun-07 Apr-07 Oct-07 Feb-07 Mar-07 May-07

Nov-07

4.0 -3.0

-2.0

-1.0

Pre-Crisis

0.0

1.0

2.0

Inflation (CPI ) During Crisis

3.0

4.0

5.0

6.0

Post Crisis

Source: Concept: Thomas W. Synnott, Bureau of Labor Statistics March 15, 2013 Florida Office One Sarasota Tower 2 N. Tamiami Trail, Suite 303 Sarasota, FL 34236

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Total Assets of Major Central Banks Monthly Central Bank Assets (Dollar Equivalents on Left Scale $ Billions) for US, UK,Japan, Euro Area, and Swiss National Bank from June-06 to Feb-13 $ Billions

Federal Reserve

Bank of England

ECB

Bank of Japan

Swiss National Bank

X

10000

Mar. 2013 Estimate:

8000

$10020 bn

6000

4000

2000

0

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Oct-08

Jul-08

Apr-08

New Jersey Office 614 E. Landis Avenue Vineland, NJ 08360

Jan-08

Oct-07

Jul-07

Apr-07

Jan-07

Oct-06

Jul-06

Apr-06

Jan-06

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European System of Central Banks European System of Central Banks Assets in Euros from 01/05/07 to 03/01/13 Eurosystem: Other Assets (NSA, Mil.EUR)

3500000

Eurosystem: Asset: General Govt Debt Denominated in Euro (NSA, Mil.EUR) Eurosystem: Asset: Securities of Euro Area Resid in Euro (NSA, Mil.EUR)

3000000

Eurosystem: Asset: Oth Claim on Eur Area Cred Inst in Euro(NSA Mil.EUR) Eurosystem: Asset: Lending to Euro Area Cred Inst in Euro (NSA Mil.EUR)

2500000

Eurosystem: Asset: Claims on Noneuro Residents in Euros (NSA, Mil.EUR) Eurosystem: Asset: Claims on Euro Res in Fgn Currency (NSA, Mil.EUR)

2000000

Eurosystem: Asset: Claims on Noneuro Res in Fgn Currency (NSA Mil.EUR) Eurosystem: Asset: Gold and Gold Receivables (NSA, Mil.EUR)

1500000

1000000

500000

0

10/19/2012 6/1/2012 1/13/2012 8/26/2011 4/8/2011 11/19/2010 7/2/2010 2/12/2010 9/25/2009 5/8/2009 12/19/2008 8/1/2008 3/14/2008 10/26/2007 6/8/2007 1/19/2007 9/1/2006 4/14/2006 11/25/2005 7/8/2005 2/18/2005 10/1/2004 5/14/2004 12/26/2003 8/8/2003 3/21/2003 11/1/2002 6/14/2002 1/25/2002 9/7/2001 4/20/2001 12/1/2000 7/14/2000 2/25/2000 10/8/1999 5/21/1999 1/1/1999 Source: Oesterreichische Nationalbank.

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European System - Liabilities European System of Central Banks Liabilities in Euros from 01/05/07 to 03/01/13 3500000

Eurosystem: Capital and Reserves (NSA, Mil.EUR) Eurosystem: Revaluation Accounts (NSA, Mil.EUR) Eurosystem: Other Liabilities (NSA, Mil.EUR)

3000000

Eurosystem: Liab: Counterpart of SDRs Allocated by IMF (NSA, Mil.EUR) Eurosystem: Liab to Noneuro Area Resid in Fgn Currency (NSA, Mil.EUR) Eurosystem: Liab to Euro Area Residents in Fgn Currency (NSA, Mil.EUR) Eurosystem: Liab to Non-euro Area Residents in Euro (NSA, Mil.EUR)

2500000

2000000

1500000

Eurosystem: Liab to Other Euro Area Residents in Euro (NSA, Mil.EUR) Eurosystem: Liab: Debt Certificates Issued (NSA, Mil.EUR)

1000000

Eurosystem: Other Liab to Euro Area Credit Inst in Euro (NSA, Mil.EUR)

500000

Eurosystem: Liab to Euro Area Credit Institutions in Euro(NSA, Mil.EUR) Eurosystem: Liab: Banknotes in Circulation (NSA, Mil.EUR)

0

11/2/2012 6/22/2012 2/10/2012 9/30/2011 5/20/2011 1/7/2011 8/27/2010 4/16/2010 12/4/2009 7/24/2009 3/13/2009 10/31/2008 6/20/2008 2/8/2008 9/28/2007 5/18/2007 1/5/2007 8/25/2006 4/14/2006 12/2/2005 7/22/2005 3/11/2005 10/29/2004 6/18/2004 2/6/2004 9/26/2003 5/16/2003 1/3/2003 8/23/2002 4/12/2002 11/30/2001 7/20/2001 3/9/2001 10/27/2000 6/16/2000 2/4/2000 9/24/1999 5/14/1999 1/1/1999

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New Jersey Office 614 E. Landis Avenue Vineland, NJ 08360

Source: Oesterreichische Nationalbank.

(800) 257-7013

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Bank of England Assets Bank of England Assets in Pounds Sterling from 01/03/07 to 03/06/13 450000

UK: BoE Consol St: Short-term Open Mkt Operations {RPWB66A} (NSA, Mil.Pounds)

400000

UK: BoE Consolidated Statement: Total Other Assets {RPWB74A} (NSA, Mil.Pounds)

350000

UK: BoE Cons St: Other Sec Acq Via Mkt Transactns {RPWB73A} (NSA, Mil.Pounds) UK: BoE Consol St: Advances to the Central Govt {RPWB72A} -DISC(NSA,Mil.Pounds)

300000

UK: BoE Consol St: Longer-term Reverse Repo {RPWB69A} (NSA, Mil.Pounds)

250000

200000

150000

100000

50000

0

Source: Bank of England.

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Bank of England Liabilities Bank of England Liabilities in Pounds Sterling from 01/03/07 to 03/06/13 UK: BoE Consolidated St: Foreign Currency Securities {RPWB59A} (NSA, Mil.Pounds)

450000

400000

UK: BoE Consolidated Statement: Other Liabilities {RPWB63A} (NSA, Mil.Pounds)

350000 UK: BoE Consolidated Statement: Cash Ratio Deposits {RPWB62A} (NSA, Mil.Pounds)

300000

UK: BoE Cons St: Open Mkt Operatns: Fine-tuning Repo {RPWB58A} (NSA, Mil.Pounds)

250000

200000

UK: BoE Consol St: Standing Facility Deposits {RPWB57A} --DISC (NSA, Mil.Pounds)

150000 UK: BoE Consol St: Reserve Balance Liabilities {RPWB56A} (NSA, Mil.Pounds)

100000

UK: BoE Consolidated St: Notes in Circulation {RPWB55A} (NSA, Mil.Pounds)

50000

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1/3/2013

7/3/2012

10/3/2012

4/3/2012

1/3/2012

7/3/2011

10/3/2011

4/3/2011

1/3/2011

7/3/2010

10/3/2010

4/3/2010

1/3/2010

7/3/2009

10/3/2009

4/3/2009

1/3/2009

10/3/2008

7/3/2008

4/3/2008

1/3/2008

10/3/2007

7/3/2007

4/3/2007

1/3/2007

0

Source: Bank of England.

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Swiss National Bank Assets Swiss National Bank Assets in Swiss Francs from 01/31/07 to 01/31/13 600000

500000

Reserve position in the IF

Other assets

400000

Loan to stabilisation fund CHF securities Clais against doestic correspondents Doestic oney arket clais

300000

Balances fro swap transactions against CHF Clais fro USD repo transactions Clais fro CHF repo transactions 200000

onetary assistance loans International payent instruents Foreign currency investents Gold holdings and clais fro gold transactions

100000

0

01 2013

10 2012

07 2012

04 2012

01 2012

10 2011

07 2011

04 2011

01 2011

10 2010

07 2010

04 2010

01 2010

10 2009

07 2009

New Jersey Office 614 E. Landis Avenue Vineland, NJ 08360

04 2009

01 2009

10 2008

07 2008

04 2008

01 2008

10 2007

07 2007

04 2007

01 2007

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Swiss National Bank Liabilities Swiss National Bank Liabilities in Swiss Francs from 01/31/07 to 01/31/13 600000

Provisions and equity capital 500000 Other liabilities Counterpart of special drawing rights allocated by the IF 400000

Foreign currency liabilities Other tie liabilities SNB debt certificates

300000

Liabilities fro CHF repo transactions Other sight liabilities

200000 Sight deposits of foreign banks and institutions Liabilities towards the Confederation 100000 Sight deposits of doestic banks Banknotes in circulation

0 01 2013

10 2012

07 2012

04 2012

01 2012

10 2011

07 2011

04 2011

01 2011

10 2010

07 2010

04 2010

01 2010

10 2009

07 2009

New Jersey Office 614 E. Landis Avenue Vineland, NJ 08360

04 2009

01 2009

10 2008

07 2008

04 2008

01 2008

10 2007

07 2007

04 2007

01 2007

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Bank of Japan Assets Bank of Japan Assets from 7/ 97 to 2/13 180,000.00

Japan removes QE2 with Bills Purchased

160,000.00 140,000.00 120,000.00 Y 100,000.00 e n 80,000.00 60,000.00 40,000.00 20,000.00

Jul-97 Nov-97 Mar-98 Jul-98 Nov-98 Mar-99 Jul-99 Nov-99 Mar-00 Jul-00 Nov-00 Mar-01 Jul-01 Nov-01 Mar-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12

0.00

Gold (Bil.Yen)

Recei vables Under Resal e Agreements (Bi l.Yen)

Bill s Purchased (Bil.Yen)

Government Securities in Custody (Bil.Yen)

Commercial Bills Discounted (Bil.Yen)

Commercial Paper (EOP, Bil.Yen)

Corporate Bonds (EOP, Bil.Yen)

Pecuniary Trusts [Stocks Hel d as Trust Property ] (Bi l.Yen)

Index-Linked Exch-Traded Funds Held as Trust Prop(Bil.Yen)

Real Estate Invt Trusts (Bil.Yen)

Cash (Bil.Yen)

Japanese Government Securities (Bil.Yen)

Asset -B acked Securities (Bil.Yen)

Loans Excluding Those to the Deposit Insurance Corp(Bil .Yen)

Loans to Deposit Insurance Corporat ion (Bi l.Yen)

Foreign Currency Assets (Bil.Yen)

Deposits with Agents (Bil.Yen)

Cash Collat in Exchange for Govt Securities Borrowed(Bil.Yen)

Other (Bil.Yen)

Tot al Assets (Bi l.Yen)

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New Jersey Office 614 E. Landis Avenue Vineland, NJ 08360

Source: Bank of Japan.

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Bank of Japan Liabilities Bank of Japan Liabilities from 7/ 97 to 2/13

Japan removes QE2 with Current Deposits Removed

180,000.00

160,000.00

140,000.00

120,000.00

Y e n

100,000.00

80,000.00

60,000.00

40,000.00

20,000.00

0.00

Banknotes (Bil.Yen)

Current deposits (Bil.Yen)

Other deposits (Bil.Yen)

Payables Under Repurchase Agreements (Bil.Yen)

Bills Sold (Bil.Yen)

Other (Bil.Yen)

Provisions (Bil.Yen)

Deposits of the Govt(Bil.Yen)

Capital (Bil.Yen)

Legal & Special Reserves (Bil.Yen)

Govt Securities Borrowed (Bil.Yen)

Total Liabilities & Capital Accounts (Bil.Yen)

Source: Bank of Japan.

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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.

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