Page 1

January, 2017

BONDS LOSE VALUE “FAST” AS RATES RISE

By Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc. as edited by The Global Investment Pulse’s Editor, Louis P. Stanasolovich, CFP® Here is how you read the chart on page 17: 1. The yield on the 10-year Treasury Note was 1.40% in July 2016. It is now 2.40%. That rise in rates equates to a -8.84% decline in value. Bonds Lose, continued on page 17

ETF’S SECRET SAUCE

HUSSMAN FUND’S EXPECTED RETURNS FOR THE S&P 500 OVER NEXT 12 YEARS – 2.0%?

By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® The chart on page 9 indicates projected performance utilizing Mr. Hussman’s long-term performance forecasting tool. This performance has been uncannily accurate for many decades as can be seen in the chart on page 9.

Hussman, continued on page 9

THE UPS AND DOWNS OF THE U.S. STOCK MARKET (S&P 500)

By Robert Gordon, Twenty-First Securities Corporation ® Inc.® ETFs (Exchange-Traded Funds) are known to be more income By James J. Holtzman, CFP , CPA, Legend Financial Advisors, ® and EmergingWealth Investment Management, Inc. tax friendly than open-end mutual funds even though both are governed and taxed as Regulated Investment Companies 53.0% of all trading days for the S&P 500 over the last 50 (RICs). The difference is that ETFs routinely use IRC Section 852(b)6 EFT’s Secret, continued on page 19

THE SANTA CLAUS RALLY WAS ALL CINDERS

By Blaine Rollins, CFA, 361 Capital, LLC as edited by Louis P. Stanasolovich, CFP®, CPA, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® So much for the Santa Claus rally. The red sled never even left the garage. Why were the last two weeks of 2016 a dud? The reasons include: Santa Claus, continued on page 18

years (i.e., 1967 to 2016) have been positive or “up” and 47.0% have been negative or “down”. The split during calendar year 2016 (over a total of 252 trading days) was 52.0% up and 48.0% down. 140 stocks of the 500 S&P stocks or 28.0% of the stocks finished the year with lower stock prices. 160 of the 500 individual stocks (i.e., 32.0% of the stocks) in the S&P 500 gained at least +20.0% in 2016. The total return for the S&P 500 was a gain of +12.0%,

Ups and Downs, continued on page 19

2016: TWO DIFFERENT YEARS IN ONE

By Diane M. Pearson, CFP®, PPCTM, CDFATM, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® 2016 was a strange year for equity investing. During the first 40 days of 2016 the S&P 500 declined approximately 11.0%. As the reader may recall in 2015, if stocks paid a dividend they usually lost money. 2016, from almost day one, the sectors that historically have done well when the stock market goes into a recession such as utilities, consumer staples, and telecom stocks (known as the high dividend paying stocks) had strong performance with the exception of healthcare, while most other sectors, except for energy, lost money or broke even. Gold also had an exceptionally strong first half of 2016. During the summer and into the summer many of these same sectors declined in value while most of the other sectors started to climb ever so slowly. Then in early November, the week before the election, these sectors that Two Different Years, continued on page 12

THE GLOBAL INVESTMENT PULSE, January 2017

1


ABOUT LEGEND FINANCIAL ADVISORS, INC.® Legend Financial Advisors, Inc.® (Legend) is a Non-Commission, Fee-Only, Fiduciary U.S. Securities and Exchange Commission registered investment advisory firm with its headquarters located in Pittsburgh, Pennsylvania. Legend provides Personalized Wealth Management Services Including Financial Planning And Investment Management Strategies to affluent and wealthy individuals as well as business entities, medical practices and non-profit organizations as well as retirement plans. Legend and its award-winning advisors are Fiduciaries.

FIVE REASONS TO CHOOSE LEGEND 1. Legend is a Non-Commission, Fee-Only, Fiduciary advisory firm. Fee-Only means Legend is compensated exclusively by client fees. Unlike Legend, fee-based advisors and brokerage firms have numerous conflicts of interest due to the fact that they 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 60 times as “The Best Financial Advisors In America”. 3. Unlike most advisory firms and all brokerage houses, Legend and its advisors have chosen to be governed by the Fiduciary Standard of Law. Fiduciaries are required to work in their clients’ best interests at all times. 4. Legend designs dynamic, creative and personalized financial planning and investment solutions for its clients. 5. Legend emphasizes low-cost investments where possible that are allocated and traded in an income tax-efficient manner.

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, Fee-Only Securities and Exchange Commission (SEC) registered investment advisory firm. EmergingWealth provides Investment Management services to individuals as well as business entities, medical practices and non-profit 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 13 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, five 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. 2

THE GLOBAL INVESTMENT PULSE, January 2017


MEDIAN PRICE-TO-EARNINGS RATIO FOR S&P 500 IS A GOOD INDICATOR OF 10 YEAR RETURNS By Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc.

Median P/E [Median Price-To-Earnings Ratio (P/E) means the P/E ratio of the 500 companies of the S&P 500 in this case. So 250 companies are higher than the mid-point P/E and 250 companies are lower.] is a good indicator of 10-year probable returns (this process is based on valuations). Below are a quick few examples of how helpful median P/E can be:

Note the dates, the starting median P/E on those month-end dates and the subsequent 10-year annualized returns. Green is good, red is bad. Source: This article was excerpted from “The Italian Referendum; What It Means To You, Me And The Markets”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management

Group, Inc., (On My Radar, December 2, 2016), www.cmgwealth.com COPYRIGHT 2016 CMG CAPITAL MANAGEMENT GROUP, INC. REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

STARTING MEDIAN PRICE-TO-EARNINGS (P/E) RATIO AND 10-YEAR RETURNS

Starting Date

Starting Median P/E

10-Year Annualized Return

December 31, 1989

13.9

12.28%

December 31, 2000

20.6

-0.48%

December 31, 2001

23.5

0.92%

December 31, 2002

18.8

4.94%

February 28, 2003

16.9

6.06%

December 31, 2003

21.2

2.17%

December 31, 2004

20.3

5.54%

December 31, 2005

19.0

5.24%

December 31, 2008

12.5

13.21%*

February 28, 2009

11.0

16.69%*

November 30, 2016

22.8

???

* Less than 10 years (through December 2015) As of: December 2, 2016 REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT GROUP, INC.

Source: CMG Investment Research, Ned Davis Research, Worldscope via CMG Capital Management Group, Inc., On My Radar, December 2, 2016, www.cmgwealth.com COPYRIGHT 2016 CMG CAPITAL MANAGEMENT, INC.

PULSE THE GLOBAL INVESTMENT PULSE, January 2017

3


THE AVERAGE MATURITY OF U.S. DEBT IS AT THE SECOND HIGHEST LEVEL SINCE 1980 By Eric Bush, CFA, Gavekal Capital, LLC

The recent increase in bond yields is happening at an unfortunate time. In nominal terms, U.S. Treasury Debt held by the public is at an all-time high (approximately $14.3 trillion). Toss in the fact that the average maturity of U.S. Treasury Debt has increased from 49 months on December 31, 2008 to 70 months as of September 30, 2016 and this all adds up to a situation where it is becoming much more expensive for the U.S. Government to finance its budget deficit. This is particularly worrisome with the prospect of larger U.S. budget deficits on the horizon.

Source: This article, as edited by The Global Investment Pulse’s Editor, Louis P. Stanasolovich, CFP, was excerpted from “Average Maturity Of U.S. Debt At Second Highest Level Since 1980”, by Eric Bush, CFA, Gavekal Capital, LLC, (Gavekal Capital Blog, December 5, 2016), http://blog. gavekalcapital.com COPYRIGHT 2016 GAVEKAL CAPITAL, LLC REPRINTED WITH PERMISSION OF GAVEKAL CAPITAL, LLC

U.S. GOVERNMENT BONDS

United States Average Maturity of U.S. Treasury Debt 75

70

Months

65

60

55

50

45

40

’81

’83

’85

’87

’89

’91

’93

’95

’97

’99

’01

’03

’05

’07

’09

’11

’13

’15

Average Maturity of Total Outstanding Marketable Debt As of: December 5, 2016 COPYRIGHT 2016 GAVEKAL CAPITAL, LLC

Source: Gavekal Capital, LLC, Gavekal Capital Blog, December 5, 2016, http://blog.gavkalcapital.com REPRINTED WITH PERMISSION FROM GAVEKAL CAPITAL, LLC

PULSE

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THE GLOBAL INVESTMENT PULSE, January 2017


THE NUMBER OF DAYS BEFORE THE START OF 5.0%, 10.0% AND 20.0% CORRECTIONS—WE ARE OVERDUE

By Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc. Please note the chart below is as of December 8, 2016. The top section of the chart shows the history of the S&P 500 Index from 1928 to present. [Please Note: This chart is a bit more difficult to understand so please read slowly.] The next three sections show the number of days prior to the start of a 5.0%, 10.0% and 20.0% correction. Think of this as a study of history. It is normal to get corrections in the markets. The reader will see that it has been 116 days without a 5.0% correction. The average number of days since 1928 was 50 days before a 5.0% correction occurred. In Secular Bull Market periods the average number of days was 84. In Secular Bear Market periods the

average number of days was 31. The next section of this indicates that it has been 210 days without a 10.0% correction. The average number of days since 1928 was 167 days before a 10.0% correction occurred. In Secular Bull Market periods the average number of days was 331. In Secular Bear Market periods the average number of days was 91. The third section indicates that it has been 1,955 days without a 20.0% correction. The average number of days since 1928 was 635 days before a 20.0% correction occurred. In Secular Bull Market periods the average number of days was 1,105. In Secular Bear Market periods the average number of days was 486.

The current case of 1,955 days without a 20.0% correction is more than three times the average of 635 days (January 3, 1928 to December 8, 2016). Source: This article was excerpted from “Finito! For Bonds And Italian Banks”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc., (On My Radar, December 9, 2016), www. cmgwealth.com COPYRIGHT 2016 CMG CAPITAL MANAGEMENT GROUP, INC.  REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

S&P 500: NUMBER OF DAYS BEFORE THE START OF 5.0%, 10.0% AND 20.0% CORRECTIONS Daily Data January 3, 1928 To December 8, 2016 (Log Scale) 10,000

BEAR

BULL

3,162

BEAR

BULL

BEAR

BULL

10,000 3,162

S&P 500 Index

1,000

1,000

316

316

100

100

32

32

10 2 400

10 Shaded areas represent secular bull markets Number of Market Days Prior to the Start of a 5.0% Correction

Counts for current cases stop at market high December 8, 2016 = 116 Days

2 400

300

300

200

200

100

100

1,750 1,500 1,250 1,000 750 500 250

Number of Market Days Prior to the Start of a 10.0% Correction

December 8, 2016 = 210 Days

1,750 1,500 1,250 1,000 750 500 250

3,500 3,000 2,500 2,000 1,500 1,000 500

Number of Market Days Prior to the Start of a 20.0% Correction

December 8, 2016 = 1,955 Days

3,500 3,000 2,500 2,000 1,500 1,000 500

1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 As of: December 9, 2016 COPYRIGHT 2016 CMG CAPITAL MANAGEMENT GROUP, INC.

2005 2010 2015

Source: S&P Dow Jones Indices, Ned Davis Research via CMG Capital Management Group, Inc., On My Radar, December 9, 2016, www.cmgwealth.com REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT, INC.

PULSE THE GLOBAL INVESTMENT PULSE, January 2017

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BARCLAYS U.S. HIGH YIELD BOND MINUS TREASURY BOND YIELD High Yield Bond Yields Decrease Again, But Still Attractive 20

Differential Median: 5.13

15

10

Dec-16: 4.23%

5

1987

1989

1991

1993

1995

As of: January 7, 2017 COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Source: The Leuthold Group, LLC, Perception Express, January 7, 2017, http://leuth.us/bond-market REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

GREAT QUOTE BY SIR JOHN TEMPLETON “Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” - Sir John Templeton Source: This quote was excerpted from “What Are The Risks Of A U.S.China Trade War?”, by Frank Holmes,

CEO and Chief Investment Officer, U.S. Global Investors, (Advisor Alert, December 16, 2016), www.usfunds. com COPYRIGHT 2016 U.S. GLOBAL INVESTORS REPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS PULSE

6

THE GLOBAL INVESTMENT PULSE, January 2017


THE DOW JONES INDUSTRIALS – YEAR ONE OF THE FIRST TERM By Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc.

If the chart below is to be any guide to 2017 (and there is most certainly no guarantee), then expect a market top in January followed by a retest of the high in September and a sell-off into year-end. It suggests a negative return year for equities. Of course, no guarantees and the data set is fairly small. Keep in mind that if you gained 1.0% in 2015 and 10.0% in 2016 and the market corrects 6.0% to 10.0% in 2017, then your equity gains for the

full three years will be close to 0.0%. Overall, high valuations and high debt and low growth are the culprits. We remain in a low coming 10-year return world. The S&P 500 was up just 3.0% going into the election. The prior two years of gains stood near that same number—up 3.0% over 24 months. Frustrating. To the surprise of all of us, the market gained 7.0% from the election into year-end. So far, 2017 is off to a pretty good start.

Source: This article was excerpted from “The Bond Market Is Facing The “Perfect Storm” Plus Latest Equity Market Valuation Charts”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc., (On My Radar, January 6, 2017), www. cmgwealth.com COPYRIGHT 2017 CMG CAPITAL MANAGEMENT GROUP, INC. REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

DOW INDUSTRIALS – PRESIDENTIAL ELECTION YEAR CYCLE I 113

113

All Elections Republican Party Wins Democratic Party Wins Incumbent Party Wins Incumbent Party Loses

112 111

112 111

110

110

109

109

108

108

107

107

106

106

105

105

104

104

103

103

102

102

101

101

100

100

99

99

98

98

97

97

96

96

95

95

94

94

93

93

92

92 Jan

Feb

Mar

Apr

May

Jun

Jul

As of: January 6, 2017 REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT GROUP, INC.

Aug

Sep

Oct

Nov

Dec

Jan

Source: S&P Dow Jones Indices via CMG Capital Management Group, Inc., On My Radar, January 6, 2017, www.cmgwealth.com COPYRIGHT 2017 CMG CAPITAL MANAGEMENT, INC.

PULSE THE GLOBAL INVESTMENT PULSE, January 2017

7


SMALL CAP TO LARGE CAP HISTORICAL PRICE TO EARNINGS (P/E) RATIO Small Caps Valuations Cheaper Than Large Stocks By 8.0%

120

120

110

110

100

100

90

90

80

80

70

70

60

60 1983

1986

1989

1992

As of: January 7, 2017

1995

1998

2001

2004

2007

2010

2013

2016

Source: The Leuthold Group, LLC, Perception Express, January 7, 2017, http://leuth.us/market-internals REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

MONTHLY RISK AVERSION INDEX (RAI)

RISK INDEX DECREASED TO LOWEST LEVEL EVER Note: The Risk Aversion Index combines ten market-based measures including various credit and swap spreads, implied volatility, currency movements, commodity prices and relative returns among various high- and low-risk assets.

4

4

3

3

2

2

1

1

0

0

1980

1982

1984

1986

1988

1990

1992

As of: January 7, 2017 COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC

8

THE GLOBAL INVESTMENT PULSE, January 2017

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Source: The Leuthold Group, LLC, Perception Express, January 7, 2017, http://leuth.us/bond-market

REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC


Hussman, continued from page 1

The right scale measures the compound performance for both the projected returns (in blue) as well as the actual returns (in red). Please note that the actual returns end 12 years before the end of the chart because 12-year performance is being measured. Anything shorter than 12 years does not incorporate an actual 12-year performance.

COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

HUSSMAN FUND’S EXPECTED RETURNS FOR THE S&P 500 OVER NEXT 12 YEARS – 2.0%? 0.3

Compounded Expected Return

20.0% 18.0% 16.0% 14.0%

0.5

12.0% 10.0% 8.0% 6.0%

1.0

4.0% 2.0% 0.0% Some missing values in pre-war (War World II) data imputed using proxy variables highly correlated in available data.

2.0

-2.0% -4.0%

Market capitalization of nonfinancial equities / nominal Gross Domestic Product (left scale, log, INVERTED) Actual subsequent S&P 500 nominal annual total return over following 12-year period (right scale) As of: October 24, 2016 COPYRIGHT 2016 HUSSMAN FUNDS

Source: Federal Reserve Economic Database, Standard & Poors, Robert Shiller via Hussman Funds, Weekly Market Comment, October 24, 2016, www.hussman.com REPRINTED WITH PERMISSION FROM U.S. GLOBAL INVESTORS PULSE THE GLOBAL INVESTMENT PULSE, January 2017

9


CHARACTERISTICS OF CYCLICAL AND SECULAR STOCK MARKETS CYCLICAL BULL STOCK MARKET

Generally 1 to 5 years in length Positive returns far exceed inflation Tend to be shorter within Secular Bear Market Tend to be longer within Secular Bull Market

CYCLICAL BEAR STOCK MARKET

Generally 1 to 3 years in length Characterized by negative returns Tend to be longer within Secular Bear Market Tend to be shorter within Secular Bull Market

SECULAR BULL STOCK MARKET

Generally 10 to 20 years in length Positive returns provide nominal midteens type returns which far exceed inflation

SECULAR BEAR STOCK MARKET

Generally 15 to 25 years in length Nominal returns are usually positive but barely out pace inflation over the entire period if they do at all

Source: Legend Financial Advisors, Inc.® COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® 10

THE GLOBAL INVESTMENT PULSE, January 2017


MARKET FLUCTUATIONS What Past Market Declines Can Teach Us A History Of Declines (January 1, 1900 – December 31, 2016) Type of Decline

Percentage Decline

Number of Declines

Average Frequency

Average Length

Dip

-5.0% to -10.0%

389

About 3 times a year

46 days

Correction

-10.0% to -15.0%

125

About once a year

115 days

Severe Correction

-15.0% to -20.0%

Included in corrections total

About once every 2 years

216 days

Bear Market*

-20.0% to -30.0%

17

About once every 6.25 years

11 months

Severe Bear Market*

-30.0% or more

14

About once every 8.25 years

22.8 months

* Either a Bear Market or a Severe Bear Market occurs approximately every 3.7 years. Source: American Funds Distributors, Inc., Bloomberg, Dow Jones, Ned Davis Research, Edward Jones, The Leuthold Group, LLC

BEAR MARKET DECLINES OF 45.0% OR MORE 100 YEARS OF BEAR MARKET RECOVERIES (DIJA: 1900-1926; S&P 500 TO PRESENT) Stock Market Peaks & Troughs Date Of Market Peak

Bear Market Statistics

Market Peak Level

Market Trough Level

Jun-17-1901 Jan-19-1906 Nov-3-1919

57.33 75.45 119.62

30.88 38.83 63.90

Nov-9-1903 Nov-15-1907 Aug-24-1921

-46.0% -49.0% -47.0%

29 Months 22 Months 21.5 Months

Sep-7-1929 Mar-10-1937 Nov-9-1938 Jan-11-1973 Mar-24-2000 Oct-9-2007

31.92 18.68 13.79 120.24 1527.46 1565.15

4.41 8.50 7.47 62.28 776.76 676.53

Jul-8-1932 Mar-31-1938 Apr-28-1942 Oct-3-1974 Oct-9-2002 Mar-9-2009

-86.0% -54.0% -46.0% -48.0% -49.0% -57.0%

34 Months 12.5 Months 41.5 Months 20.5 Months 30.5 Months 17 Months

Bear Markets Down 45.0% Or More

Average Median

-54.0% -49.0%

25 Months 22 Months

Bear Markets Down Less Than 45.0%

Average Median

-27.0% -27.0%

15 Months 16 Months

As of September 30, 2009

Date Of Market Trough

Peak To Trough Performance

Duration Of Bear Market

Source: The Leuthold Group THE GLOBAL INVESTMENT PULSE, January 2017

11


Two Different Years, continued from page 1

struggled, or were, at best, mildly successful or for much of the year exploded until they slowed a bit in mid-December.

assumed we were near the end of the economic cycle. (Please see corresponding charts on pages 12 to 16.)

Then during the first week of December, the high yielding stocks started to come back.

COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

In conclusion, sector investing did not pay off especially if you

U.S. CONSUMER DISCRETIONARY SECTOR 12/31/2015 - 12/30/2016

14% 12%

High Point (12/13/2016)

10%

9.3%

S&P 500 CONS DISCRET IDX (S5COND)

8% 6% 4% 2% 0% -2%

Still 0.0% (11/2/2016)

-4% -6% -8% -10%

12/29/2016

12/15/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

4/21/2016

4/7/2016

3/24/2016

3/10/2016

2/25/2016

2/11/2016

1/28/2016

1/14/2016

5/19/2016

Low Point (2/11/2016)

-12.4%

12/31/2015

-14%

5/5/2016

-12%

U.S. CONSUMER STAPLES SECTOR 12/31/2015 - 12/30/2016

14%

High Point (7/15/2016) 11.8% 12% 10% 8% 6% 4% 2% 0% -2%

S&P 500 CONS STAPLES IDX (S5CONS)

12

THE GLOBAL INVESTMENT PULSE, January 2017

12/29/2016

12/15/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

Low Point (1/20/2016)

4/21/2016

3/24/2016

3/10/2016

2/25/2016

2/11/2016

1/28/2016

1/14/2016

12/31/2015

-6%

- 4.4%

4/7/2016

-4%

Two Different Years, continued on page 13


-20%

S&P 500 FINANCIALS INDEX (S5FINL)

15%

10%

5%

0%

Still 0.0% (9/29/2016)

-10%

-15%

-17.4% Low Point (2/11/2016)

11/17/2016

THE GLOBAL INVESTMENT PULSE, January 2017

12/29/2016

12/29/2016

12/15/2016

High Point (12/20/2016) 24.9%

12/15/2016

25%

12/1/2016

U.S. FINANCIALS SECTOR 12/31/2015 - 12/30/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

High Point (12/13/2016)

11/3/2016

10/20/2016

10/6/2016

-5%

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

30%

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

4/21/2016

35%

4/21/2016

30%

4/7/2016

3/24/2016

3/10/2016

2/25/2016

2/11/2016

1/28/2016

1/14/2016

-13.3%

4/7/2016

3/24/2016

3/10/2016

2/25/2016

20%

2/11/2016

1/28/2016

1/14/2016

12/31/2015

-15%

12/31/2015

Two Different Years, continued from page 12

U.S. ENERGY SECTOR 12/31/2015 - 12/30/2016 30.9%

25%

20%

15%

10%

5%

0%

-5%

-10%

S&P 500 ENERGY INDEX (S5ENRS)

Low Point (1/20/2016)

Two Different Years, continued on page 14

13


Two Different Years, continued from page 13

U.S. HEALTH CARE SECTOR 12/31/2015 - 12/30/2016

10% 8%

High Point (8/1/2016) 6.0%

6% 4% 2% 0% -2% -4% -6% -8%

S&P 500 HEALTH CARE IDX (S5HLTH)

-10%

12/15/2016

12/29/2016

12/15/2016

12/29/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

Low Point (2/11/2016)

5/5/2016

4/7/2016

3/24/2016

3/10/2016

2/25/2016

2/11/2016

1/28/2016

1/14/2016

-11.9%

12/31/2015

-14%

4/21/2016

-12%

U.S. INDUSTRIALS SECTOR 12/31/2015 - 12/30/2016

26% 24% 22%

High Point (12/7/2016 and 12/9/2016)

20%

21.4%

18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6%

S&P 500 INDUSTRIALS IDX (S5INDU)

-8% -10%

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

4/21/2016

4/7/2016

3/24/2016

2/25/2016

2/11/2016

1/28/2016

1/14/2016

12/31/2015

-14%

3/10/2016

- 9.5% Low Point (1/20/2016 and 1/25/2016)

-12%

Two Different Years, continued on page 15

14

THE GLOBAL INVESTMENT PULSE, January 2017


Two Different Years, continued from page 14

U.S. MATERIALS SECTOR 12/31/2015 - 12/30/2016

24% 22%

High Point (12/8/2016) 20.2%

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10%

S&P 500 MATERIALS INDEX (S5MATR)

-12% -14%

12/29/2016

12/15/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

4/21/2016

4/7/2016

3/24/2016

3/10/2016

2/11/2016

1/28/2016

1/14/2016

12/31/2015

-18%

2/25/2016

-14.1% Low Point (1/25/2016)

-16%

U.S. TECHNOLOGY SECTOR 12/31/2015 - 12/30/2016

20% 18%

High Point (12/20/2016 and 12/27/2016) 16.0%

16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8%

S&P 500 INFO TECH INDEX (S5INFT)

-10% -12%

12/29/2016

12/15/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

4/21/2016

4/7/2016

3/24/2016

2/25/2016

2/11/2016

1/28/2016

1/14/2016

12/31/2015

-16%

3/10/2016

-11.6% Low Point (2/9/2016)

-14%

Two Different Years, continued on page 16

THE GLOBAL INVESTMENT PULSE, January 2017

15


Two Different Years, continued from page 15

U.S. TELECOMMUNICATIONS SECTOR 12/31/2015 - 12/30/2016

32% 30%

High Point (7/22/2016)

28%

26.9%

26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

S&P 500 TELECOM SERV IDX (S5TELS)

-2% -4%

12/29/2016

12/15/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

4/21/2016

4/7/2016

3/24/2016

3/10/2016

2/25/2016

1/28/2016

1/14/2016

12/31/2015

-8%

2/11/2016

-2.6% Low Point (1/13/2016)

-6%

U.S. UTILITIES SECTOR 12/31/2015 - 12/30/2016

32% 30% 28%

High Point (7/5/2016) 24.5%

26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4%

S&P 500 UTILITIES INDEX (S5UTIL)

2% 0% -2%

-0.5%

-4%

Low Point (1/20/2016 and 1/21/2016)

12/29/2016

12/15/2016

12/1/2016

11/17/2016

11/3/2016

10/20/2016

10/6/2016

9/22/2016

9/8/2016

8/25/2016

8/11/2016

7/28/2016

7/14/2016

6/30/2016

6/16/2016

6/2/2016

5/19/2016

5/5/2016

4/21/2016

4/7/2016

3/24/2016

3/10/2016

2/25/2016

2/11/2016

1/28/2016

1/14/2016

-8%

12/31/2015

-6%

PULSE 16

THE GLOBAL INVESTMENT PULSE, January 2017


Bonds Lose, continued from page 1

In other words, more than four years of yield has been wiped out in just four short months— Amazing!

2. If an investor has 30-year maturity exposure, the loss is nearly double. 3. Note what happens if interest rates rise another 1.0% from now 2.40% to 3.40%. Like November, Investors will be opening December monthly statements and be

greeted with a degree of shock. Not all bond positions are of 10-year and 30-year durations yet it’s been messy nonetheless. However, we are at the opposite end of the secular cycle (longterm cycle) that began in 1981. A buy and hold bond strategy could be dangerous moving forward. Ultra short bonds, under one year maturities, money market funds, bank loans and other variable rate date make much more sense. Source: This article was excerpted from “Finito! For Bonds And Italian Banks”, by Stephen B. Blumenthal,

Founder and CEO, CMG Capital Management Group, Inc., (On My Radar, December 9, 2016), www. cmgwealth.com COPYRIGHT 2016 CMG CAPITAL MANAGEMENT GROUP, INC. REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

10-Year Treasury Bond assuming a 1.40% Coupon with a 1.40% yield to maturity Yield to maturity Price Change in Price

1.00%

1.40%

2.40%

3.40%

4.40%

5.40%

6.40%

7.40%

103.797

100.000

91.156

83.165

75.940

69.403

63.485

58.124

3.80%

-8.84% -16.83%

-24.06% -30.60% -36.52% -41.88%

30-Year Treasury Bond assuming a 2.25% Coupon with a 2.25% yield to maturity Yield to maturity Price Change in Price

1.25%

2.25%

3.25%

4.25%

5.25%

6.25%

7.25%

8.25%

124.953

100.000

80.928

66.268

54.929

46.100

39.177

33.705

24.95%

-19.07% -33.73%

-45.07% -53.90% -60.82% -66.29%

Current 10-Yr. Yield 1.40% Current 30-Yr. Yield 2.25% As of July 11, 2016

As of: December 9, 2016 COPYRIGHT 2016 CMG CAPITAL MANAGEMENT GROUP, INC.

Source: CMG Investment Research via CMG Capital Management Group, Inc. On My Radar, December 9, 2016, www.cmgwealth.com REPRINTED WITH PERMISSION FROM NED DAVIS RESEARCH AND CMG CAPITAL MANAGEMENT GROUP, INC.

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THE GLOBAL INVESTMENT PULSE, January 2017

17


Santa Claus, continued from page 1

1. Worries about potential roadblocks for the incoming Trump Administration. 2. Trade war concerns hitting retail importers and international manufacturers. 3. The ongoing strength in the U.S. Dollar and its likely appearance in Fourth Quarter 2016 earnings conversations.

Source: This article was excerpted from “Need Some Ideas For 2017?”, by Blaine Rollins, CFA, 361 Capital, LLC, (Weekly Research Briefing, January 3, 2017), www.361capital.com COPYRIGHT 2017 361 CAPITAL, LLC REPRINTED WITH PERMISSION OF 361 CAPITAL, LLC

4. Year-end tactical rebalancing as assets shift from outperforming equities to underperforming bonds.

“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 18

THE GLOBAL INVESTMENT PULSE, January 2017

PULSE


EFT’s Secret continued from page 1

to purge portfolios of holdings with big unrealized gains while mutual funds seldom utilize this powerful tool although they could. Let’s assume a fund (ETF, closed-end fund or mutual fund) has a position in XYZ that the fund bought for $100.00 many years ago. The XYZ position is now worth $1,000.00; with $900.00 of unrealized capital gain. If the fund sells the XYZ, the fund realizes a $900.00 gain that will be passed on to shareholders. If instead the fund gave the $1,000.00 of XYZ to a redeeming shareholder instead of redeeming the departing shareholder with $1,000.00 in cash, no gain would be realized by the fund under IRC Section 852(b)6. This has no negative effects to the redeeming shareholder who would have the same amount of gain or loss as if they received cash (assuming the stock is sold immediately when received for the same value). Thus the fund has exited the shares while triggering no gain at the fund level nor increased the income tax at the fundholder level. ETFs are traded throughout the day and at the end of the day the “authorized” market makers can redeem the ETFs for a slice of the fund’s portfolio. This redemption in kind can be used by the fund to rid itself of low cost basis shares without any negative income tax consequence. If an indexed fund bought shares before the bull market started it is most likely sitting on shares that it recently bought with small gains or losses and shares bought long ago at prices much lower than today’s value. The fund/ETF is allowed to use “specific lot identification” to declare that the shares they are distributing are the shares bought years ago rather than being forced to use shares recently bought as would be necessary under a last in first out methodology. Of course if there are shares with unrealized losses those would not be distributed since the fund will forfeit any income tax benefit from the loss by distributing. All mutual funds have in their documents the ability to make redemptions in kind rather than selling portfolio holdings and triggering gain. This ability has traditionally been reserved in case the

fund must meet a very large redemption or that the underlying shares are so illiquid it would be best for all if the shares were distributed rather than sold. This is used very infrequently because the redemption in kind has always been thought of as a last resort. The Wall Street Journal recently reported that the Sequoia Fund surprised some redeeming shareholders by redeeming in kind. The president of the fund David Pope rebuffed any criticism by pointing out the tax benefit to the continuing shareholders from redeeming in kind versus selling; “We redeem with shares to benefit our continuing shareholders, who might otherwise pay capital-gains taxes on the sale of appreciated stock that might be required for redemptions. By redeeming in kind, our 20,000 continuing Sequoia shareholders will pay lower capital-gains taxes in the future. Innovations that Exploit the Difference: As you can see, the redemption mechanism built into ETFs can make those ETFs much more income tax friendly than an open-end indexed fund run side by side by the same manager. Vanguard: Vanguard’s ETFs are setup differently than everyone else’s ETFs. The Vanguard ETFs are not stand alone ETFs, the Vanguard ETFs are just another share class of the Vanguard open- end index mutual fund. This becomes a very important difference because redeeming Vanguard ETF holders can leave with low basis shares owned by the open-end fund. Thus the Vanguard ETFs become a dialysis machine ridding the mutual fund portfolio of those pesky shares bought long ago at much lower prices. Vanguard has a patent on this setup that will protect the idea for another few years and then I’d expect everyone to rejigger their offerings to create a system as favorable as Vanguard’s is today. Eaton Vance:

(Exchange Traded Mutual Funds) that are something like a crossover between an ETF and an open-ended mutual fund. NextShares will redeem shareholders in kind through Section 852)(b)6. As a result, NextShares are promised to be more income tax-efficient than a “regular” mutual fund run in the exact same manner. Eaton Vance reports that they have a dozen other fund complexes that have indicated their intent to offer NextShares Funds by filing exemptive applications with the SEC and entering into preliminary agreements with NextShares Solutions LLC . Reflow: Reflow (started by Gordon Getty) will eventually either wind up leveling the tax playing field between ETFs and mutual funds OR become the “straw that breaks the camel’s back” that forces the government to remove Section 852(b)6 because it is losing too much revenue for the Treasury. Reflow offers to invest cash in a fund that needs to meet redemptions and then leave the fund with a basket of securities. As Alan Siegerman, COO of Reflow, said “the redemption in kind service allows a mutual fund to experience some of the advantages of an Exchange-Traded Fund in that in-kind exchanges typically have a more favorable tax treatment than purchases and redemptions done directly with the fund.” It is obvious that the opportunity to manage taxes within a fund is becoming available to more types of funds than just traditional indexed ETFs; stay tuned. Source: This article was excerpted from “ETF’s Secret Sauce”, by Robert Gordon, Twenty-First Securities Corporation, (XXI, December, 2016) COPYRIGHT 2016 TWENTY-FIRST SECURITIES CORPORATION REPRINTED WITH PERMISSION OF TWENTY-FIRST SECURITIES CORPORATION

Eaton Vance recently patented NextShares. NextShares are ETMFs

PULSE

Ups and Downs, continued from page 1

including dividends, in 2016. If an investor missed the three best percentage gain days in 2016, the +12.0% gain falls to a +4.4% gain. If an investor avoided the three worst percentage days last year, the +12.0% gain rises to +22.1% gain. Obviously, in such a short investment

period (one year), timing is everything when trying to match the market.

COPYRIGHT 2016 DIREXION FUNDS

Source: This article was excerpted from Direxion Funds (By The Numbers, January 3, 2017), www. direxioninvestments.com

REPRINTED WITH PERMISSION OF DIREXION FUNDS

PULSE THE GLOBAL INVESTMENT PULSE, January 2017

19


SECULAR BEAR MARKET WATCH April 1, 2000 to December 31, 2016 (16 years and 9 months) Annual Compound Return

Total Return

Consumer Price Index (Inflation)*

2.08%

40.98%

90-Day Treasury Bills Index-Total Return

1.59%

30.14%

Barclays Aggregate Bond Index-Total Return

5.15%

131.93%

High Yield Corporate Bond Index – Total Return

9.11%

331.50%

S&P Leveraged Loan Index – Total Return

4.98%

125.81%

HFRX Global Hedge Fund Index

2.35%

47.61%

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

4.43%

106.72%

MSCI EAFE Index (Developed Foreign Equities)

2.84%

59.81%

MSCI Emerging Market Index (Equities)

6.03%

166.95%

Newedge CTA Index (Managed Futures)

4.78%

118.82%

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

-0.70%

-11.17%

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

10.75%

453.65%

8.84%

313.69%

Gold Bullion As of: December 31, 2016

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. * As of November 30, 2016 April 1, 2000 to December 31, 2016 ** USD = U.S. Dollar 2016 LEGEND FINANCIAL ADVISORS, INC. ® (16 yearsCOPYRIGHT and 9 months) Source: Bloomberg Investment Service 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 16 years and 9 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. 20

THE GLOBAL INVESTMENT PULSE, January 2017


2016 ANNUAL PERFORMANCE January 1, 2016 to December 31, 2016 (12 months) 2016 Total Return Consumer Price Index (Inflation)

2.07%

90-Day Treasury Bills Index-Total Return

0.32%

Bloomberg Intermediate Term Corporate Bond Index

5.35%

Barclays Aggregate Bond Index-Total Return

2.65%

High Yield Corporate Bond Index – Total Return

15.68%

S&P Leveraged Loan Index – Total Return

10.14%

HFRX Global Hedge Fund Index

2.50%

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

11.95%

MSCI EAFE Index (Developed Foreign Equities)

1.59%

MSCI Emerging Market Index (Equities)

11.27%

Newedge CTA Index (Managed Futures)

-2.89%

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

11.40%

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

7.56%

Gold Bullion

8.63%

As of: December 31, 2016 Compound and Total Returns include reinvested dividends. Newedge Index is equally-weighted. ** USD = U.S. Dollar COPYRIGHT 2016 LEGEND FINANCIAL ADVISORS, INC. ® Source: Bloomberg Investment Service

REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ® THE GLOBAL INVESTMENT PULSE, January 2017

21


BEWARE MUNICIPALS!

By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors PIMCO’s municipal bond chief recently stated that their company has invested almost all of its municipal portfolio in state and local debt backed by dedicated revenues, arguing they provide higher payouts and better security from pension risk than general-obligation debt. He anticipates investors will demand higher spreads on general-obligation bonds in the coming years as struggling pensions become a bigger driver of credit ratings.

Editor’s Comment: Obviously, this commentary throws up a very large red flag for municipal bonds. In addition, expected lower income tax rates, which are what President Elect-Trump desires, will make municipal bonds less attractive. As a result, municipal bond values have continued to decline since the election. Source: This article was excerpted from “What Are The Risks Of A U.S.China Trade War?”, by Frank Holmes,

CEO and Chief Investment Officer, U.S. Global Investors, (Advisor Alert, December 16, 2016), www.usfunds. com COPYRIGHT 2016 U.S. GLOBAL INVESTORS REPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS

MUNICIPAL TAX EQUIVALENT YIELD / BARCLAYS U.S. CORPORATE BOND YIELD

1.8

Yield Ratio Median: 1.15

1.6

After Municipals Were Beaten Up Badly During November And The First Half Of December, However, They Rose In Price In During The Second Half Of December. As A Result, They Are Not As Unattractive As They Were A Few Months Ago.

1.4

1.2

1.0

Dec-16: 1.3

0.8

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

As of: January 7, 2017 Source: The Leuthold Group, LLC, Perception Express, January 8, 2017, http://leuth.us/bond-market COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

PULSE 22

THE GLOBAL INVESTMENT PULSE, January 2017


2.50

The Leuthold Group Copyright® 2017

Earnings Reports For Oct-Dec 2016 (Q3 2016 Results)

EARNINGS ADVANCE/DECLINE RATIO All Three Months Of Each Quarterly Period Based On Reported Earnings

2.25

2.00 SOFT LANDING

AVERAGE 1.50

SOFT LANDING

1.75

1.50

1.25

1.00 RECESSION

RECESSION

0.75

0.50

RECESSION

Earnings Are Becoming Stronger. Look For The Stock Market To Take This As A Positive.

0.25 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 As of: January 7, 2017

Source: The Leuthold Group, LLC, Perception Express, January 7, 2017, http://leuth.us/market-internals REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

THE STRENGTH OF THE RUSSIAN RUBLE

By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors The Russian ruble was the best performing currency in 2016, gaining 17.0% against the U.S. Dollar. The currency was supported by a rebound in the price of Brent crude oil, which gained more than 50.0%. Oil appreciated strongly after The Organization of the Petroleum Exporting Countries (OPEC) announced production cuts on November 30th. 

Source: This article was excerpted from “Hope For The New Year”, by Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors, (Advisor Alert, December 30, 2016), www.usfunds.com COPYRIGHT 2016 U.S. GLOBAL INVESTORS REPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS PULSE THE GLOBAL INVESTMENT PULSE, January 2017

23


AMAZING CHINESE AUTO SALES NUMBERS LEAD TO AMAZING TRAFFIC JAMS China Expected To Surpass North America In Automobile Sales By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors

Automobile sales in China jumped a phenomenal 32.0% year-over-year in September, the fourth straight month of growth exceeding 20.0%. Sales have been so robust that new vehicle purchases in China are expected to surpass sales in North America for the first time ever this year. This reflects a rush to purchase new cars before the Chinese government’s reduction in sales tax on small vehicles expires at year-end. Such a great number of cars on the road has resulted in famously massive traffic

jams that turned miles of highways into parking lots; some roads are as many as 50 lanes wide. The very worst incidents in Beijing found hundreds of drivers stuck in lines for days. Beijing officials have recently proposed stopgap measures, but the nightmare congestion underscores the need for greater road capacity, which will require even more investment from the Chinese government, not to mention untold amounts of cement, asphalt, steel and other materials.

Source: This article was excerpted from “Manufacturing Activity In China Just Shifted Into Overdrive”, by Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors, (Advisor Alert, November 4, 2016), www. usfunds.com COPYRIGHT 2016 U.S. GLOBAL INVESTORS REPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS

CHINA EXPECTED TO SURPASS NORTH AMERICA IN AUTOMOBILE SALES In Millions Of Cars And Light Trucks 25

20

15

China

10

North America

5

0

1990-1999

2000-2012

As of: November 4, 2016 COPYRIGHT 2016 U.S. GLOBAL INVESTORS

2013

2014

2015

2016

Source: Scotiabank via U.S. Global Investors, Advisor Alert, November 4, 2016, www.usfunds.com REPRINTED WITH PERMISSION FROM U.S. GLOBAL INVESTORS

PULSE 24

THE GLOBAL INVESTMENT PULSE, January 2017


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, January 2017

25


26

THE GLOBAL INVESTMENT PULSE, January 2017 © 2014 Legend Financial Advisors, Inc. ® All Rights Reserved

The Global Investment Pulse January 2017 Issue  

The Global Investment Pulse January 2017 Issue

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