Page 1

August, 2015

EXPECT SHORT-TERM DOWNSIDE VOLATILITY By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. So far, this latest downturn appears to be a Stock Market correction. Investors though should probably expect more volatility moving forward (both upside and downside). Another important point to make is that the U.S. Stock Market could correct more than it has so far over the next month or two. No one can pick the bottom or the top, or how quickly it will fall or rebound. It’s not possible. Many investors concerned about volatility try to “time the market”. The problem is they have to get two decisions correct; when Expect Short-Term Downside Volatility, continued on page 4

THE U.S. STOCK MARKET CORRECTION WAS NOT ONLY OVERDUE, BUT ALSO ROUTINELY NORMAL By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. Since 1980, despite average intra-year drops of 14.2%, the market finished positive in 27 of those 35 years—or 77.0% of the time. Put another way, 23.0% of the time, the year ended up negative or roughly a quarter of the time. Since 2010, we’ve seen six pullbacks, a couple of them sizable, only to have the market finish higher each time (with the exception of 2011): See the chart on the top of page 4. U.S. Stock Market Correction, continued on page 4

THE GLOBAL INVESTMENT PULSE August, 2015

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ABOUT LEGEND FINANCIAL ADVISORS, INC.® Legend Financial Advisors, Inc.® (Legend) is a Non-Commission, Fee-Only U.S. Securities and Exchange Commission (SEC) registered investment advisory firm with its headquarters located in Pittsburgh, Pennsylvania. Legend provides a multitude of services, including Wealth Advisory Services, which incorporate Financial Planning and Investment Management strategies to affluent and wealthy individuals as well as business entities, medical practices and non-profit organizations. We analyze each client’s financial strengths and weaknesses, then recommend creative solutions for improvement. Additionally, we work closely with our client’s other professional advisors to achieve optimal results. WHY LEGEND IS DIFFERENT? 1. Legend is compensated exclusively by client fees, known as a Non-Commission, Fee-Only firm. Legend is unlike Fee-Based Advisors and brokerage firms who have numerous conflicts of interest due to the fact that both types of firms receive commissions. 2. Members of Legend’s Financial Advisory Team have been selected by National Publications such as Worth, Medical Economics and Barron’s more than 50 times as “The Best Financial Advisors In America”. 3. Legend and its advisors have chosen to be governed by the Fiduciary Standard of law, differentiating itself from most other advisory and brokerage firms. Fiduciaries are required to always work in their clients’ best interests. 4. Legend designs dynamic, creative and personalized financial planning and investment solutions for its clients.

ABOUT EMERGINGWEALTH INVESTMENT MANAGEMENT, INC. EmergingWealth Investment Management, Inc. (EmergingWealth), is the sister firm of Legend Financial Advisors, Inc.® (Legend) and is a Non-Commission, FeeOnly Securities and Exchange Commission (SEC) registered investment advisory firm. EmergingWealth provides Investment Management services to individuals as well as business entities, medical practices and nonprofit organizations whose wealth is emerging. All investment portfolios are sub-advised by Legend. Both Legend and EmergingWealth share a common advisory team, Investment Committee and Fee Schedule.

LOUIS P. STANASOLOVICH, CFP®, EDITOR Louis P. Stanasolovich, CFP® is founder, CCO, CEO and President of Legend Financial Advisors, Inc.® (Legend) and EmergingWealth Investment Management, Inc. Lou is one of only four advisors nationwide to be selected 12 consecutive times by Worth magazine as one of “The Top 100 Wealth Advisors” in the country. Lou has also been selected 11 times by Medical Economics magazine as one of “The 150 Best Financial Advisors for Doctors in America”, twice as one of “The 100 Great Financial Planners in America” by Mutual Funds magazine, four times by Dental Practice Report as one of “The Best Financial Advisors for Dentists In America” and once by Barron’s as one of “The Top 100 Independent Financial Advisors”. Lou was selected by Financial Planning magazine as part of their inaugural Influencer Awards for the Wealth Creator award recognizing the advisor who has made the most significant contributions to best practices for portfolio management. He has been named to Investment Advisor magazine’s “IA 25” list three times, ranking the 25 most influential people in and around the financial advisory profession as well as being named by Financial Planning magazine as one of the country’s “Movers & Shakers” recognizing the top individuals who have done the most to advance the financial advisory profession.

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THE GLOBAL INVESTMENT PULSE August, 2015


THE RUNDOWN OF LAST WEEK (Beginning August 24, 2015) Market volatility spiked dramatically early last week as fears about the depth of China’s economic downturn escalated. Asian markets were hit the hardest while European shares were also unstable, and Japan’s Nikkei 225 and U.S. stock indices had six-day stretches of losses before rallying as strong U.S. economic data countered worries about China’s weakness. 1.

The VIX index, which measures U.S. stock market volatility, hit 53 intraday on Monday, then dropped back below 27 on Friday.

2.

The Yield on the 10-year U.S. Treasury note touched 1.9% on Monday, August 24, 2015, the lowest since April, then rebounded to settle at 2.18% on Friday.

3.

U.S. West Texas Intermediate crude oil prices recovered from Monday lows near $38.00 per barrel, ending the week close to $45.00 per barrel.

4.

Second-quarter Real (After Inflation) Gross Domestic Product (GDP) growth was revised up to 3.7% quarter-over-quarter seasonally adjusted annual rate (QoQ saar) from 2.3% QoQ saar in the initial release. This was above the expected revision to 3.2% QoQ saar and shows above trend growth in the U.S.

5.

U.S. new home sales rose 5.4% in July to a seasonally adjusted annual rate of 507,000 units. Sales were 25.8% above on a year-over-year basis. The S&P/Chase Schiller composite index of 20 metropolitan areas increased 5.0% in June from a year earlier. The Pending Home Sales Index increased 0.5% to 110.9%, suggesting further housing market improvements.

As of: August 28, 2015 COPYRIGHT 2015 U.S. GLOBAL INVESTORS

Source: U.S. Global Investors, Advisor Alert, August 28, 2015, www.usfunds.com REPRINTED WITH PERMISSION FROM U.S. GLOBAL INVESTORS

IS CHINA GOING TO DEVALUE THE YUAN AGAIN 1.

First Devaluation – August 11, 2015 – By Approximately 1.9% Versus U.S. Dollar

2.

Effect: Worldwide Stocks, Commodities, Other Asian Currencies Were Negatively Affected.

3.

Why Devalue? – To Boost China’s Exports And Economy. Devaluation Makes Exported Goods Cheaper.

4.

Will Devaluation Succeed And/Or Increase Inflation In China? – Probably Not

5.

If Exports Don’t Increase – Will China Devalue Again? – Probably

6.

If China Devalues Again, They Will Do So Cautiously.

7.

Other Effects Of Chinese Devaluation a.

Japanese Corporate Earnings To Suffer Causing Japanese Economic Problems

b.

Probably Will Delay U.S. Interest Rate Hikes THE GLOBAL INVESTMENT PULSE August, 2015

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U.S. Stock Market Correction, continued from page 1

S&P 500 Pullback Within That Year

S&P 500 Total Return

Year

Event

2010

Severe Correction3

-16.0%

15.06%

2011

Severe Correction3

-19.0%

2.11%

2012

Correction2

-10.0%

16.00%

2013

Dip1

-6.0%

32.39%

2014

Dip1

-7.0%

13.69%

Dip - 5.0% to 10.0% loss Correction - 10.0% to 15.0% loss 3 Severe Correction – 15.0% to 20.0% 1 2

Bear Market - 20.0% to 30.0% loss Severe Bear Market – Over 30.0% loss As of: August 30, 2015 COPYRIGHT 2015 ZACKS INVESTMENT MANAGEMENT

The Bottom Line For Investors: If there is not any fundamental change in the global economic or corporate earning environment, there probably isn’t any reason to run for cover. Generally, if the world’s economies are growing and are expected to continue on that path as well as more corporations overall are posting higher earnings growth than those that are reporting declining earnings growth

Source: Zacks Investment Management, Market Insight, August 30, 2015, www.zacks.com REPRINTED WITH PERMISSION FROM ZACKS INVESTMENT MANAGEMENT

each quarter (this is normal in healthy stock market periods)—then stocks should continue to do relatively well. Overreacting to short-term news and market volatility often leads investors to mistakenly change their asset allocation and investment approach, which can potentially harm their ability to achieve the long-term returns necessary to meet their investment goals. Rather than fear vola-

tile markets, investors that maintain their composure by staying focused on longterm economic and market expectations, which are positive, should be successful. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® PULSE

Expect Short-Term Downside Volatility, continued from page 1

is it best to get out and when it is best to get back in. More often these timing decisions result in an investor getting whipsawed—capturing the downside, but missing the upside, which often can ruin long-term returns. Stock market corrections (losses of 10.0% to 15.0%) and severe corrections (losses of 15.0% to 20.0%) by definition, are generally short (the average one lasts 10

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months), sharp declines in the market, accompanied by sensationalized stories (think European sovereign debt crisis, The Fiscal Cliff, the possibility of a Greek exit from the Euro, and now, China’s slowdown). Corrections thrive and often become self-fulfilling when investors become focused on the headlines and ignore underlying fundamentals of the financial markets.

THE GLOBAL INVESTMENT PULSE August, 2015

Especially, with no recessions, worldwide political crises or financial calamity in sight, investors need to keep their cool. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® PULSE


THE IRON LAW OF VALUATION AND SPECULATION By John P. Hussman, Ph. D., The Hussman Funds If I were to choose anything that investors should memorize—that will serve them will over a lifetime of investing—it would be the following two principles:

market valuation are driven by revenues, not earnings.

Valuations control long-term returns.

Risk-seeking and risk-aversion control returns over shorter portions of the market cycle.

The higher the price you pay today for each dollar you expect to receive in the future, the lower the long-term return you should expect from your investment. Don’t take current earnings at face value, because profit margins are not permanent. Historically, the most reliable indicators of

The difference between an overvalued market that becomes more overvalued, and an overvalued market that crashes, has little to do with the level of valuation and everything to do with the attitude of investors toward risk. When investors are risk-seeking, they are rarely selective

about it. Historically, the most reliable way to measure risk attitudes is by the uniformity or divergence price movements across a wide range of securities. Source: This article was excerpted from “Thin Slices From The Top Of A Bubble”, by John P. Hussman, Ph. D., The Hussman Funds, (Weekly Market Comment, August 10, 2015), www.hussman.com COPYRIGHT 2015 THE HUSSMAN FUNDS REPRINTED WITH PERMISSION OF THE HUSSMAN FUNDS

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STOCK MARKET CIRCUIT BREAKERS AND RULE 48 By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. In light of recent stock market volatility, we thought it would be appropriate and prudent to explain to our readers what circuit breakers and Rule 48 is and how they work. Under extreme conditions that could trigger market disruptions, U.S. Stock Market Exchanges can invoke Rule 48 to make it easier and faster to open stock trading on an exchange. Under the revised rules approved by the Securities and Exchange Commission (SEC) in 2012, market-wide circuit breakers kick in when the S&P 500 Index drops 7.0% (Level 1), 13.0% (Level 2), and 20.0% (Level 3) from the prior day’s close. A market decline that triggers a Level 1 or Level 2 circuit breaker before 3:25 p.m. will halt market-wide trading for 15 min-

utes, while similar market declines “at or after” 3:25 p.m. will not halt market-wide trading. A Level 3 circuit breaker will halt market-wide trading for the rest of the day.

Those conditions include:

Rule 48 is somewhat related and can be used the day after a circuit breaker has been enforced.

2. Trading in foreign markets before the open

Rule 48 speeds up the opening of the next trading day’s trading by suspending the requirement that stock prices be announced at the market open. Those prices have to be approved by stock market floor managers before trading actually begins. Without that approval, stock trading can begin sooner. To invoke Rule 48, an exchange would have to determine that certain conditions exist that would cause market disruptions.

1. Volatility during the previous day’s trading session

3. Substantial activity in the futures market before the open 4. The volume of pre-opening indicators of interest 5. Government announcements COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® PULSE

S&P 500 INVESTING: EASY? By Diane M. Pearson, CFP®, PPCTM, CDFATM, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. If an investor selected any single month at random to invest in the S&P 500 (before that month begins) they would have earned a positive total return 65.0% of the time after June 30, 1990 for that one-month. If the investment time horizon was extended to one year, a positive

total return was earned 82.0% of the time (Please keep in mind, these are rolling 12-month periods.). If the period was extended to two years (This would be rolling two year periods.), a positive total return was earned 80.0% of the time.

COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

PULSE THE GLOBAL INVESTMENT PULSE August, 2015

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NOT ALL BEAR MARKETS ARE ALIKE By James J. Holtzman, CFP®, CPA, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. During the most recent U.S. Bear Stock Market, the Dow declined 55.0% from its high in October 2007, the largest drop since the 1930s. In contrast, the average bear market decline has been 32.0% since 1946, but most have been less. The October 9, 2007 to March 9, 2009 U.S. Bear Stock Market was harsh, but fairly short, since it lasted 17 months, similar to the longterm U.S. Bear Stock Market average since 1900 of 15 months. While one might think it’s prudent to prepare for another severe bear market (a loss of 30.0% or more) like the 17-month one that occurred during 2007 – 2009, it is important to realize that such extreme bear markets are infrequent. In fact, only three of the 12 bear markets that occurred in the U.S. since 1946 (almost 70 years) have had declines of 40.0% or more. Those were the following: January 11, 1973 to December 6, 1974 March 24, 2000 to October 9, 2002 October 9, 2007 to March 9, 2009

-45.0% -49.0% -55.0%

In addition, severe bear markets tend to be followed by short rebounds. In each case when stocks dropped 40.0% or more,

they rebounded by more than 33.0% during the first year of the upswing. Whether they are severe or mild, long or short, bear markets tend to recover just as abruptly as they start. One caveat, the U.S. Stock Market crash of September 13, 1929 to July 8, 1932 was actually a series of quick severe bear markets (six declines of 30.0% or more) and subsequent recoveries that not one of them reached the previous breakeven point. In fact, the total loss during that period was 86.0%. No investor knows when the stock market will begin to rebound. Investors who reinvest distributions, dividends or are able to add to their investments during bear markets tend to be even betterpositioned for any rebound because they have added to their equity holdings when prices were down. This is a form of dollarcost averaging. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® PULSE

THE BEAR AWAKENS By Diane M. Pearson, CFP®, PPCTM, CDFATM, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. Hibernating U.S. Bear Stock Markets are almost always awakened by unpredictable events, especially recessions, political events and moves by Central Banks. Listed below are some of the most famous Bear Markets since 1960. 1961 To 1962: After President John F. Kennedy verbally attacked U.S. steel companies for raising prices, calling them inflationary, the U.S. Stock Market fell more than 25.0%. 1973 To 1974: The U.S. Stock Market dropped by 45.0% when inflation rose from 3.0% to 11.0% in just two years. The Arab oil embargo (Implemented by OPEC in protest of The 1973 Arab-Israeli War also known as the Yom Kippur War) also substantially impacted both inflation and the U.S. Stock Market.

1981 To 1982: U.S. stocks declined 25.0% as the Federal Reserve Board (Fed) lead by Fed Chairman Paul Volker, who vowed to crush inflation, raised interest rates sharply (Actually, they raised interest rates twice over a two year period; the first time to 20.0%, the second time to 21.5%.) to combat 14.0% inflation. Also pushing U.S. stock prices downward while the Fed increased interest rates were twin recessions caused by the steep interest rate increases. 1990: The U.S. Stock Market slid approximately 24.0% within seven weeks’ time when Saddam Hussein invaded Kuwait.

pushing up liquidity as well as already record-level pricing for tech stocks. When the tech bubble burst, the U.S. Stock Market fell over 20.0% through the end of 2001. 2002: The U.S. Stock Market fell 30.0% during the year due to double-dip recession concerns, but eventually recovered to a 22.0% loss for the calendar year. 2007 To 2009: The U.S. Stock Market declined 55.0% over 17 months due to the global financial crisis from which we still, economically speaking, have not fully recovered.

2000 To 2001:

COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.®

Leading up to Y2K, the Fed expanded the money supply to record levels further

REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® PULSE

6

THE GLOBAL INVESTMENT PULSE August, 2015


“Do You Want A Second Opinion?” To see if your investment portfolio is built to navigate the pitfalls and opportunities ahead, call us today for a “Free Second Opinion” at (412) 635-9210.

www.legend-financial.com THE GLOBAL INVESTMENT PULSE August, 2015

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RETURNS NEEDED TO REACH BREAK-EVEN POINTS AFTER LOSSES PERCENTAGE LOSS

8

PERCENTAGE RETURN NEEDED TO REACH BREAK-EVEN

5.00%

5.26%

10.00%

11.11%

15.00%

17.65%

20.00%

25.00%

25.00%

33.33%

30.00%

42.86%

35.00%

53.85%

40.00%

66.67%

45.00%

81.82%

50.00%

100.00%

55.00%

122.22%

60.00%

150.00%

65.00%

185.71%

70.00%

233.33%

75.00%

300.00%

80.00%

400.00%

85.00%

566.67%

90.00%

900.00%

95.00%

1900.00%

THE GLOBAL INVESTMENT PULSE August, 2015


CHINA’S CRASH IS BIG, BUT NOT THE BIGGEST Stock Selloffs

Volatility Extreme (VIX Value)

Peak-To-Trough Drawdown, by Percent

Length (Months)

China – 2015

58

-43

2

Dow Jones Industrial Average 1929

75

-89

32

Japan – 1990

50

-36

32

Thailand – 1997

72

-85

31

Russia – 1998

155

-84

12

NASDAQ – 2000

69

-78

31

S&P 500 Index – 2008

75

-57

17

Note: Volatility is 60-day historical.

Source: Bloomberg via U.S. Global Investors, Advisor Alert, August 28, 2015, www.usfunds.com REPRINTED WITH PERMISSION FROM U.S. GLOBAL INVESTORS

As of: August 28, 2015 COPYRIGHT 2015 U.S. GLOBAL INVESTORS

HISTORICAL VALUATIONS, GROWTH VERSUS VALUE U.S. LARGE, MID AND SMALL CAP STOCKS While all growth stock and value stock style categories appear expensive when compared to the Historical Averages (1982 to date) and the Percent Above/Below Historical Average Valuation sections in the chart below, Large, Medium and Small Growth Stock categories appear cheaper relative to the Value categories than the historical averages as evidenced by the Today’s G/V* Ratio versus the Historical Average G/V* Ratio. Median Price-ToEarnings (P/E)

Historical Averages 1982 to Date

Percent Above/Below Historical Average Valuation

Today’s

Historical Average

2000 Extreme

Growth Stocks

Value Stocks

Growth Stocks

Value Stocks

Growth Stocks

Value Stocks

G/V* Ratio

G/V* Ratio

G/V* Ratio

Large Cap

21.8x

13.2x

19.8x

10.7x

10.0%

23.0%

1.65

1.97

5.80

Mid Cap

25.3x

14.3x

23.4x

11.9x

8.0%

20.0%

1.77

2.09

9.30

Small Cap

31.2x

14.0x

27.5x

11.9x

13.0%

18.0%

2.22

2.45

12.50

* Growth To Value As of: August 7, 2015 COPYRIGHT 2015 THE LEUTHOLD GROUP, LLC

Source: The Leuthold Group, LLC, Perception Express, August 7, 2015, http://leuth.us/market-internals

REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

THE GLOBAL INVESTMENT PULSE August, 2015

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POST WWII: LATE CYCLE BULL MARKET = MOMENTUM; BEAR MARKET = VALUE By Doug Ramsey, CFA, CMT, Chief Investment Officer, The Leuthold Group, LLC Post WWII Peaks: Momentum’s Record Not As Strong Prior To 1980: The chart to the below, “Value & Momentum During The Last 12 Months Of Post-WWII Cyclical Bull Markets”, summarizes the late-cycle Momentum/Value

performance from 1980-to-date previously discussed, and also includes six other market peaks from the end of World War II through the late 1970s. The performance edge of Momentum over Value is not as persistent leading into those six earlier market peaks. In fact, Value proved su-

perior in the years leading up to both the 1968 and 1976 market tops. Over the entire postwar period, though, Momentum has clearly been the superior strategy provided a manager is confident that a bull market top is approaching.

VALUE & MOMENTUM DURING THE LAST 12 MONTHS OF POST-WWII CYCLICAL BULL MARKETS

Based on daily total returns. Value = Large Cap, High Book-to-Market portfolio. As of: August 7, 2015 COPYRIGHT THE LEUTHOLD GROUP, LLC

Momentum = Large Cap, High Momentum portfolio. Boxes highlight highest return during last 12 months of bull market.

Source: Ken French Data Library via The Leuthold Group, LLC, Perception Express, August 7, 2015, http://leuth.us/special-interest REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

Post WWII, continued on page 11

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THE GLOBAL INVESTMENT PULSE August, 2015


Post WWII, continued from page 10

Total returns for Large Cap Momentum in the final year of cyclical bull markets have averaged almost +32.0%, about 12.0% better than Large Cap Value, and almost 8.0% better than the S&P 500. We don’t want to come across as shills for Momentum investing. It’s simply that this approach has historically been the better bet in the late-cycle bull environment in which the market now finds itself. But if one’s line of sight is on an impending bear market, Value managers wouldn’t have to wait long for retribution. Not surprisingly, Large Cap Value has declined less than Large Cap Momentum

during post WWII cyclical bear markets — although the edge has been neither as large nor as reliable as the late-cycle bull market phase enjoyed by Large Cap Momentum. (See “Value & Momentum During Post-WWII Cyclical Bear Markets” chart below.)

Source: This article was excerpted from “Post WWII: Late Cycle Bull Market = Momentum; Bear Market = Value”, by Doug Ramsey, CFA, CMT, Chief Investment Officer, The Leuthold Group, LLC, (Perception Express, August 7, 2015), http://leuth.us/ special-interest

Large Cap Value’s total return loss has averaged -22.3% over the last 14 bear markets, compared with a loss of -26.9% for Large Cap Momentum, and -27.5% for the S&P 500. Value’s performance in the last two declines (2007-09 and 2011) broke from this pattern, probably reflecting big losses in the Financial stocks in both episodes.

COPYRIGHT 2015 THE LEUTHOLD GROUP, LLC REPRINTED WITH PERMISSION OF THE LEUTHOLD GROUP, LLC

VALUE & MOMENTUM DURING POST-WWII CYCLICAL BEAR MARKETS

Based on daily total returns. Value = Large Cap, High Book-to-Market portfolio. As of: August 7, 2015 COPYRIGHT THE LEUTHOLD GROUP, LLC

Momentum = Large Cap, High Momentum portfolio. Boxes highlight highest return during bear market.

Source: Ken French Data Library via The Leuthold Group, LLC, Perception Express, August 7, 2015, http://leuth.us/special-interest REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

PULSE THE GLOBAL INVESTMENT PULSE August, 2015

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2015 PERFORMANCE YEAR-TO-DATE January 1, 2015 to August 28, 2015 (8 months) Year-to-Date Total Return Consumer Price Index (Inflation)*

1.64%

90-Day Treasury Bills Index-Total Return*

0.01%

Barclays Aggregate Bond Index-Total Return

0.51%

HFRX Global Hedge Fund Index

-1.01%

S&P 500 Index (U.S. Stock Market)

-2.07%

MSCI EAFE Index (Developed Foreign Equities)

0.87%

MSCI Emerging Market Index (Equities)

-12.51%

Newedge CTA Index (Managed Futures)

0.76%

Dow Jones–UBS Commodity Index-Total Return (USD)**

-14.35%

Dow Jones U.S. Real Estate Index-Total Return (USD)**

-4.41%

Gold Bullion

-4.27%

Compound and Total Returns include reinvested dividends. Newedge Index is equally-weighted. * Performance is through July 31, 2015 due to monthly reporting ** USD = U.S. Dollar Source: Bloomberg Investment Service

As of: August 28, 2015

COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC. ® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ®

MSCI WORLD INDEX: Average Monthly Performance, 1988 To Date

As of: August 7, 2015 COPYRIGHT 2015 THE LEUTHOLD GROUP, LLC

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THE GLOBAL INVESTMENT PULSE August, 2015

Source: The Leuthold Group, LLC, Perception Express, August 7, 2015, http://leuth.us/stock-market REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC


SECULAR BEAR MARKET WATCH April 1, 2000 to July 31, 2015 (15 years and 4 months) Annual Compound Return

Total Return

Consumer Price Index (Inflation)

2.19%

39.40%

90-Day Treasury Bills Index-Total Return

1.71%

29.68%

Barclays Aggregate Bond Index-Total Return

5.46%

126.04%

HFRX Global Hedge Fund Index

2.74%

51.30%

S&P 500 Index (U.S. Stock Market)

4.21%

88.28%

MSCI EAFE Index (Developed Foreign Equities)

3.68%

73.98%

MSCI Emerging Market Index (Equities)

6.69%

170.03%

Newedge CTA Index (Managed Futures)

5.48%

126.88%

Dow Jones–UBS Commodity Index-Total Return (USD)**

-0.46%

-6.84%

Dow Jones U.S. Real Estate Index-Total Return (USD)**

11.07%

400.87%

9.34%

293.28%

Gold Bullion

SECULAR BEAR MARKET WATCH (CONTINUED)

* Compound and Total Returns include reinvested dividends. MSCI Indexes do not include dividends prior to 2002. Newedge Index is equally-weighted. ** USD = U.S. Dollar Source: Bloomberg Investment Service As of: July 31, 2015

April 1, 2000 to July 31, 2015 (15 years and 4 months)

COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC. ® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ®

Note: During Secular Bear markets U.S. Stocks have historically returned a little more than inflation or a little less than inflation—plus or minus 1.50%—and generally last between 15 to 25 years. The last Secular Bear market (1966 to 1982) lasted 17 years and underperformed inflation by approximately one-half of one percent per year. The other Secular Bear markets since 1900 were 1901 to 1920 and 1929 to 1949. In both cases, the U.S. Stock market outperformed inflation by approximately 1.50% per year. All of the aforementioned performance numbers are pre-tax. The performance of the U.S. Stock market so far in the current period (April 1, 2000 to the present) certainly appears to indicate that we are in a Secular Bear market. Long-term returns (over the next 10 years) for the S&P 500 will probably be slightly worse than the last 15 years and 4 months. Current 10 year normalized P/Es (long-term valuations) indicate approximate annual compound returns of slightly less than 3.00% over the next 10 years. Of course during the next 10 years, returns during various periods will be significantly higher and lower than the expected return. For example, the more the stock market rises in the near term, the less returns after that period will be and vice versa. THE GLOBAL INVESTMENT PULSE August, 2015

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FOREIGN EQUITY VALUATIONS ARE STILL CHEAP VERSUS U.S. Normalized Price-to-Earnings (P/E) ratios for both the U.S. and Foreign Developed markets peaked June, 2014. The latter is down significantly (16.9x in July, down from a peak of 19.5x). Emerging Market Normalized (Averaged) P/E ratios are flirting with their 2001 and 2011 lows. But the declines have done nothing to close the U.S./Foreign valuation gaps.

As of: August 7, 2015

Source: The Leuthold Group, LLC, Perception Express, August 7, 2015, http://leuth.us/stock-market REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

EMERGING MARKETS – 50% OFF SALE MSCI Emerging Markets Vs. USA Relative Price-To-Earnings (P/E) on Five-Year Normalized (Averaged) Earnings Per Share (EPS) (weekly)

Conclusion: Emerging Market Equities Are Now At A 50.0% Discount Relative To U.S. Equities As of: August 7, 2015 COPYRIGHT 2015 THE LEUTHOLD GROUP, LLC

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THE GLOBAL INVESTMENT PULSE August, 2015

Source: The Leuthold Group, LLC, Perception Express, August 7, 2015, http://leuth.us/stock-market REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC


LEGEND FINANCIAL ADVISORS, INC.® & EMERGINGWEALTH INVESTMENT MANAGEMENT, INC.’S INVESTMENT MANAGEMENT SERVICES Legend Financial Advisors, Inc.® (Legend) and EmergingWealth Investment Management, Inc. (EmergingWealth) offer Personalized Investment Management Services to individuals and institutions. Investment portfolios are developed to match the client’s return and risk requirements, which are determined by the clients’ completion of a Risk Comfort Zone Questionnaire, with the guidance of a Legend Wealth Advisor or EmergingWealth Advisor, respectively. Each type of investment portfolio is managed to achieve the short, intermediate and long-term investment objectives of the client, as may be applicable.

INVESTMENT PROCESS Investment Portfolios: Unlike most financial advisory firms that offer one style of investment or portfolio type, we offer a wide array of investment portfolios that usually fit with the large majority of client needs. If necessary, we will create customized solutions as well. For the types of investment portfolios, please see our Investment Portfolios, Potential Return and Risk Spectrum Chart on the next page. For a detailed description of our portfolios, please contact Louis P. Stanasolovich, CFP®, founder, CCO, CEO and President of both firms for a confidential discussion at (412) 635-9210 or e-mail us at legend@legend-financial.com. Investment Research: Our Investment Committee performs extensive research to identify opportunities, mitigate risks and structure investment portfolios. Emphasis is placed on developing portfolios that maximize the potential return relative to the amount of risk taken. In-depth due diligence including face-to-face interviews in many instances with portfolio managers for open-end mutual funds is performed on each investment we select for a portfolio. Factors (both from a qualitative and quantitative standpoint) that we conduct a thorough analysis of each investment include, but is not limited to, liquidity (including the primary investment and/or the underlying investments, if utilizing pass through vehicles such as openend mutual funds or exchange-traded products), income taxation, all related costs, return potential, drawdown potential (historical declines from peak-to-trough), volatility and management issues (Anything having to do with the management team of a stock, open-end mutual fund or an exchange-traded product.). All portfolios for EmergingWealth are subadvised by Legend. Client Education: Education is very important to us. We are dedicated to educating each client about the different investment portfolio types and how they relate to market volatility, time horizons, and investment returns. It is our goal to ensure that the client understands and agrees with our investment philosophy. Furthermore, we assist each client in selecting a risk tolerance level with which they are comfortable. Ultimately, an investment portfolio is designed to meet the client’s objectives.

PERFORMANCE REPORTING Many investment firms only offer monthly brokerage statements, which provide minimal information; typically only account and investment balances. We, on the other hand, provide detailed quarterly reports that outline performance, income and management fees (among other items) in a simple, easy-to-read report. In addition, each performance report is sent with an extensive index page that illustrates the investment environment during the reporting period.

FEES To find out more about the fees for either Legend or EmergingWealth’s Investment Management services, please contact Louis P. Stanasolovich, CFP®, founder, CCO, CEO and President of both firms for a confidential discussion at (412) 635-9210 or e-mail us at legend@legend-financial.com. THE GLOBAL INVESTMENT PULSE August, 2015

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THE GLOBAL INVESTMENT PULSE August, 2015 © 2014 Legend Financial Advisors, Inc. ® All Rights Reserved

The Global Investment Pulse, August 2015 Issue