Page 1

September, 2017

THE STATE OF BRICKS AND MORTAR RETAIL STORES

W

By James J. Holtzman, CFP , Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® ®

e used to say that many “Mom and Pop” retailers were being put out of business by Wal-Mart. They were being “Wal-Marted”.

Today, retail stores, even big ones, are being “Amazon-ed”. Wal-Mart is fighting back so we expect them to surBricks and Mortar, continued on page 10

FED ACTIONS LEAVE MANY SCRATCHING THEIR HEADS

By Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc. As edited by Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® “The message from a string of Bank of International Settlements reports that the U.S. Dollar is both the barometer and agent of the global risk appetite and credit leverage. Episodes of U.S. Dollar weakness— such as this year—flush the world with liquidity and FED Actions, continued on page 10

COULD IT BE A “TWO-FER”? By Doug Ramsey, CFA, CMT, Chief Investment Officer, The Leuthold Group, LLC As edited by Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® The milestones achieved by the current Cyclical Bull Market have been so numerous that we hope you’ll forgive us for missing one back in May. While the world watched Amazon break $1,000.00 per share, the U.S. Stock Market upswing that began in March 2009 became the first-ever Cyclical Bull to last longer than a prior Secular Bull. We’re referring, of course, to the Secular (long-term markets usually lasting 15 to 25 years) and Cyclical (usually lasting 18 months to six years) Bull Market which lasted from July 1921 to September 1929 (98 months), which took the S&P 500 up 385.0% with no intervening setback of more than 19.0% (See Chart 1 on page 6). While the current Cyclical Bull Market has been considerably more shallow (with a price gain of 267.0%), it’s now outlasted the 1920s’ Secular Bull Market by about four months. What constitutes a cyclical trend versus a secular one? It’s often semantics, and investors shouldn’t let either of those terms lock them into a particular mindset. However, that goes both ways. It’s comCould It Be A “Two-Fer”?, continued on page 6

THE GLOBAL INVESTMENT PULSE, September, 2017

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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, September, 2017


WHAT A GREAT GROWTH STORY? By Blaine Rollins, CFA, 361 Capital, LLC For the first time in a decade, the world’s major economies are growing in sync. A result of lingering low-interest-rate stimulus from central banks and the gradual fading of crises that over years ricocheted from the U.S. to Greece, Brazil and beyond.

ate from a year ago, according to the OECD. It is the first time since 2007 that all are growing and the most countries in acceleration since 2010, when many nations enjoyed a fleeting snapback from the global financial crisis. The International Monetary Fund in July projected global economic output would grow 3.5% this year and 3.6% in 2018, up from 3.2% growth in 2016.

All 45 countries tracked by the Organization for Economic Cooperation and Development (OECD) are on track to grow this year, and 33 of them are poised to acceler-

Source: This article was excerpted from “A Bit Cloudy…”, by Blaine Rollins, CFA, 361 Capital, LLC, (Weekly Research Briefing, August 28, 2017), www.361capital.com COPYRIGHT 2017 361 CAPITAL, LLC REPRINTED WITH PERMISSION OF 361 CAPITAL, LLC PULSE

WORLD’S TEN FASTEST-GROWING ECONOMIES

All Are Emerging-Market Countries And Eight Are Frontier Countries Annual Average GDP Growth 2012 – 2016 and 2017 Forecast (%) 2012-2016

2017 F

ETHIOPIA

9.1

7.5

CÔTE D’IVOIRE

8.8

8.0

MYANMAR

7.9

7.7

UZBEKISTAN

7.7

6.0

CHINA

7.3

6.2

D.R. CONGO

7.2

4.2

CAMBODIA

7.2

6.9

INDIA

6.9

7.6

TANZANIA

6.7

7.2

RWANDA

6.7

6.0

Five of the world’s ten fastest-growing economies were in Africa, four were in Asia and one in the Commonwealth of Independent States. Our ranking excludes countries with a population of less than 10m as well as Iraq and Afghanistan; 2017 F as of February 2017. There is no assurance that any estimate, forecast or projection will be realized. As of: August 28, 2017 COPYRIGHT 2017 361CAPITAL, LLC.

Source: Economist Intelligence Unit via 361 Capital, LLC ,Weekly Research Briefing, August 28, 2017, www.361capital.com REPRINTED WITH PERMISSION FROM 361 CAPITAL, LLC

PULSE THE GLOBAL INVESTMENT PULSE, September, 2017

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SHILLER P/E RATIO FORECASTS NEGATIVE S&P 500 RETURNS FOR NEXT 12 YEARS! By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.®

SHILLER STOCK MARKET FORECAST CHART

As of: September 18, 2017 COPYRIGHT 2016 HUSSMAN FUNDS

Source: Federal Reserve Economic Database, Standard & Poors, Robert Shiller via Hussman Funds, Weekly Market Comment, September 18, 2017, www.hussman.com REPRINTED WITH PERMISSION FROM HUSSMAN FUNDS

Any point on the blue line in the chart above is the forecasted return for the following 12 years based upon current valuations at that point in time. Any point on the dark red line indicates what the compounded return actually was for the S&P 500 for the prior 12 years ending at that point in time. However, we won’t actually know what the return is until 12 years in the future.

riod of the actual S&P 500 performance. That’s the good news.

When comparing the blue line to the red line over time, the reader will notice that the blue line is a highly accurate forecasting tool for the majority of the entire time pe-

Also keep in mind, returns do not occur in a straight line. In all likelihood, to achieve the forecasted returns of -1.0% per year over a 12year period, the stock market will

4

The bad news is the blue line is forecasting a -1.0% return approximately for the S&P 500 over the next 12 years. Please keep in mind that the blue forecast line is based upon current valuations (mathematics is used to create the forecast) and is not an individual’s or organization’s guess/prediction.

THE GLOBAL INVESTMENT PULSE, September, 2017

have some very big gyrations both on the upside as well as downside. So, expect to see performances on the downside similar to 2000 to 2002: -49.0% (a 31-month period) and 2007 to 2009: -55.0% (a 17-month period) somewhere within the next 12 years. Source: The chart was created by The Hussman Funds. COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® PULSE


RETURN OF THE MSCI EUROPE INDEX When Consumer Price Index (Inflation Rate) Is

Occurs % Of Time

%Gain/ Annum

Exceeds 2.57%

25.18

-6.74

Between 2.1% and 2.57%

25.19

15.91

Between 1.34% and 2.10%

25.11

11.02

Below 1.34%

24.52

11.31

As of: September 15, 2017 COPYRIGHT 2017 CMG CAPITAL MANAGEMENT GROUP, INC.

Source: CMG Capital Management Group, Inc. ,On My Radar, September 15, 2017, www.cmgwealth.com REPRINTED WITH PERMISSION FROM NED DAVIS RESEARCH AND CMG CAPITAL MANAGEMENT GROUP, INC.

JUST HOW BIG ARE THE NUMBERS? By Diane M. Pearson, CFP®, PPCTM, CDFA®, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® According to Direxion Funds as of June 30, 2017, the size of the U.S. economy is $19.227 trillion as measured by Gross Domestic Product (GDP), the size of the U.S. national debt is $19.845 trillion (total U.S. Government borrowings). Oh, and by the way; the market capitialization (the total value—each of the companies’ stock prices times the number of shares outstanding) of the S&P 500 Stock Index is $21.832 trillion. COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ PULSE THE GLOBAL INVESTMENT PULSE, September, 2017

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Could It Be A “Two-Fer”?, continued from page 1

CHART 1 Secular Bull Market High

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

6

THE GLOBAL INVESTMENT PULSE, September, 2017

Could It Be A “Two-Fer”?, continued on page 7


Could It Be A “Two-Fer”?, continued from page 6

monplace for stock market bulls to observe that “Cyclical Bull Markets” don’t die of old age”. Maybe not. Age doesn’t necessarily always matter.

and “E” (Earnings).

The same could be said of the current cyclical bull (See Chart 3 The valuation low made in the sum- on page 9). Normalized S&P 500 mer of 1921 would certainly meet EPS grew only 15.0% cumulaanyone’s definition of a Secular tively (in total, not per year) from low. The S&P 500 bottomed at late 1919 to the early 1930 peak, 6.8x (times) Normalized (The Five- although it should be noted the The Leuthold Group (of which the author is the Chief Investment Of- Year average) Earnings Per Share Consumer Price Index was down (EPS) based on the Cowles Comficer) emphasizes that their prealmost 10.0% over that period. Unmission’s retrospective estimates of ferred investment horizon is cyclifortunately, we do not have good that index, below the Secular lows profit margin data from that era. cal, not secular, and their stock of 8.0x (times Earnings Per Share) market disciplines are geared for later seen in April 1942 and again At first blush, recent earnings that purpose. A “garden variety” in August 1982. From the 1921 performance looks superior to the cyclical gain of, say, 90.0-100.0% low, the Normalized P/E would 1919 to 1929 episode—with curis worth capturing regardless of nearly quadruple to 25.4x at the rent S&P 500 5-year Normalized one’s view relating to the stock September 1929 top (See Chart 2 EPS more than a third above its market’s broader 15-to-25-year on page 8). 2008 peak. After adjusting for trend. the cumulative 11.0% CPI increase over that period, Still, the current Cyclical Bull Market has taken valuations CYCLICAL AND SECULAR BULL growth in real (after inflation), Normalized EPS of 24.0% to the point where we should AND BEAR MARKETS during the current cyclical at least entertain the possibull is identical to the 1919 to Cyclical markets (short-term) occur bility that the entire run from the 2009 lows could, upon within a Secular Market. Usually three 1929 performance. In truth, though, similar earnings perits expiration, be considered to five cyclical markets occur within a formance in both episodes a single Secular Bull Market Secular Market. may be just coincidental. It’s as well. Yes, a two-for-one! the valuations that might well Admittedly, the single exammake this bull a “two-forple from the 1920s is a pretty thin Valuations at the 2009 low didn’t one”. reed on which to rest this case. quite reach single digits, as they We concede that today’s investor did in 1921, 1932, 1942,1974, and mindset does not compare with 1982. However, if the Normalized the late 1920s’ rampant optimism. P/E of 10.7x seen at the February Source: This article was exUnfortunately, the investment 2009 low (month-end) was sufcerpted from “Could Be A “Twomath is similar as we will state our ficient for a secular low, then it’s Fer?”, by Doug Ramsey, CFA, case below. certainly possible that the current 23.9x could be in the vicinity of not CMT, Chief Investment Officer, The Leuthold Group, LLC, (PerThere are many parallels between just a cyclical high but a secular ception Express, September 8, the Cyclical and Secular Bull one as well. Today’s Normalized 2017), www.leutholdgroup.com Market of 1921 to 1929 and the P/E is sandwiched between the cyclical bull market that began in readings seen at the secular valuaMarch 2009. In particular, Fed tion highs of 1965 (23.3x) and 2000 COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC policy could certainly be charac(33.3x). terized as extremely accommodaREPRINTED WITH PERMISSION tive in both episodes. However, P/E expansion, rather than earnOF THE LEUTHOLD GROUP, LLC we’ll limit our analysis to the basic ings growth, was the key driver stock market building blocks— of the 1920s’ cyclical/secular bull. “P/E” (Price-To-Earnings Ratio)

Could It Be A “Two-Fer”?, continued on page 8

THE GLOBAL INVESTMENT PULSE, September, 2017

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Could It Be A “Two-Fer”?, continued from page 7

CHART 2

As of: September 8, 2017 COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC

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

Could It Be A “Two-Fer”?, continued on page 9

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THE GLOBAL INVESTMENT PULSE, September, 2017


Could It Be A “Two-Fer”?, continued from page 8

CHART 3

As of: September 8, 2017 COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC

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

PULSE THE GLOBAL INVESTMENT PULSE, September, 2017

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Bricks and Mortar, continued from page 1

vive and probably thrive. There will be a number of others, but it appears most will have to have an Internet strategy. Brick and mortar stores, shopping malls and centers will continue to struggle. Most real estate experts believe malls nationwide will fall from the current 1,250 to between 500 and 600 within five years.

Further proof lies below as published by Credit Suisse: As of June 30, 2017), 5,300 retail stores have closed, equal to more than 200 per week. In summary, this trend has been affecting Retailing REITs that many Real Estate Funds own. Sub 6.0% returns have been earned by the NAREIT (real estate) Index for the

last four out of five years including 2017. A close eye needs to be kept on the situation. COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.® PULSE

FED Actions, continued from page 1

nourish asset booms. When the U.S. Dollar strengthens, it becomes a headwind for stock markets and credit.” Quote by Ambrose EvansPritchard Ambrose Evans-Prichard is the International Business Editor of The Telegraph. He has covered world politics and economics for 30 years. Commentary below by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc.: The U.S. Federal Reserve (FED) and fellow central banks of other countries can be forgiven by telling us a white lie: nothing would be gained from admitting that they do not know how to extricate the world safely from their extreme monetary experiment (zero and negative interest rates). Federal Reserve Chairwoman, Janet Yellen, has finally pulled one major trigger (the selling of non-U.S. Government mortgages) after countless retreats. The longawaited reversal of Quantitative

Easing (QE) will kick off in October. The puzzle is why the Yellen FED—usually so cautious—has chosen to enter these treacherous waters when there is no strict need to do so and before it has raised interest rates to minimum safe levels. This tightening sequence makes no sense. FED day has passed and consensus is that the FED is hawkish (Pulling the punch bowl from the party by raising rates and reducing its balance sheet of assets purchased during QE). Yields around the globe moved higher, the 10year Treasury note is trading back above 2.25%, the U.S. Dollar rallied and remains slightly higher than prior to the FED announcement. Gold sold off on the news and is testing its recent upside movement. U.S. equities weathered the news with the broad markets mostly unchanged and financials (beneficiaries of higher rates) rallied. International developed and emerging makets are slightly lower.

August and September are the two worst performing months for stocks each year. You wouldn’t know it from the relative calm in the market. From Bloomberg’s David Wilson, “This month’s pattern of calm for U.S. stocks persisted even after Federal Reserve officials laid out plans to begin selling some of the central bank’s bond holdings. The CBOE Volatility Index, or VIX, is headed for its lowest daily average in any September since calculations began in 1990. The VIX’s recent decline to 9.78 occurred as the FED announced the monetarypolicy shift.” The all-time low was in early 2007 at 9.39. Readings below 10 are rare. Source: This article was excerpted from “The Flow That Conquers All”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc., (On My Radar, September 22, 2017), www.cmgwealth.com COPYRIGHT 2017 CMG CAPITAL MANAGEMENT GROUP, INC. REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC. PULSE

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THE GLOBAL INVESTMENT PULSE, September, 2017


“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 (888) 236-5960

www.legend-financial.com THE GLOBAL INVESTMENT PULSE, September, 2017

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SECULAR BEAR MARKET WATCH April 1, 2000 to August 31, 2017 (17 years and 5 months) Annual Compound Return

Total Return

Consumer Price Index (Inflation)

2.09%

43.41%

90-Day Treasury Bills Index-Total Return

1.56%

30.85%

Barclays Aggregate Bond Index-Total Return

5.16%

140.36%

High Yield Corporate Bond Index – Total Return

9.08%

354.67%

S&P Leveraged Loan Index – Total Return

4.94%

131.62%

HFRX Global Hedge Fund Index

2.48%

53.24%

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

4.93%

131.53%

MSCI EAFE Index (Developed Foreign Equities)

3.69%

87.95%

MSCI Emerging Market Index (Equities)

7.36%

244.87%

Newedge CTA Index (Managed Futures)

4.56%

117.37%

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

-0.87%

-14.08%

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

10.80%

497.39%

9.37%

376.51%

Gold Bullion As of: August 31, 2017

Compound and Total Returns include reinvested dividends. MSCI Indexes do not include dividends prior to 2002. Newedge Index is equally-weighted. COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC. ® ** USD = U.S. Dollar REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ® Source: Bloomberg Investment Service

12

THE GLOBAL INVESTMENT PULSE, September, 2017


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 17 years and 5 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.

STRENGTH OF ECONOMIC EXPANSIONS

As of: August 31, 2017

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

As of: June 30, 2017

Source: BEA, NBER, J.P. Morgan Asset Management COPYRIGHT 2016 J.P. MORGAN ASSET MANAGEMENT REPRINTED WITH PERMISSION OF J.P. MORGAN ASSET MANAGEMENT THE GLOBAL INVESTMENT PULSE, September, 2017

13


2017 YEAR-TO-DATE PERFORMANCE January 1, 2017 to August 31, 2017 (8 months) 2017 Year-To-Date Return Consumer Price Index (Inflation)

1.69%

90-Day Treasury Bills Index-Total Return

0.54%

Bloomberg Intermediate Term Corporate Bond Index

5.55%

Barclays Aggregate Bond Index-Total Return

3.63%

High Yield Corporate Bond Index – Total Return

5.37%

S&P Leveraged Loan Index – Total Return

2.59%

HFRX Global Hedge Fund Index

3.81%

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

11.93%

MSCI EAFE Index (Developed Foreign Equities)

17.53%

MSCI Emerging Market Index (Equities)

28.59%

Newedge CTA Index (Managed Futures)

-0.69%

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

-3.27%

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

7.90%

Gold Bullion

14.48%

As of: August 31, 2017 Compound and Total Returns include reinvested dividends. Newedge Index is equally-weighted. ** USD = U.S. Dollar COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC. ® Source: Bloomberg Investment Service

REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ®

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THE GLOBAL INVESTMENT PULSE, September, 2017


PENSION DISASTER IN THE MAKING By Diane M. Pearson, CFP®, PPCTM, CDFA®, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.® According to Bloomberg Businessweek, 95.0% of the companies in the S&P 500 (476 firms) have underfunded pension plans. Generally, that means bigger problems down the line for at least the severely underfunded companies. Many of these firms are also hoping for unrealistic investment returns of 6.0% to 8.0%, thereby further subjecting their pension plans to further underfunding. Remember General Motors’ bankruptcy. The large portion of it was due to underfunding the pension. COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

PULSE

S&P 500 CURRENT SECTOR WEIGHTINGS (%) Sector

Percentage

Technology

23.48%

Health Care

14.50%

Financials

14.32%

Consumer Discretionary

12.07%

Industrials

10.13%

Consumer Staples

8.53%

Energy

5.67%

Utilities

3.28%

Real Estate

2.98%

Materials

2.89%

Telecommunications

2.16%

Total As of: September 5, 2017 COPYRIGHT 2017 361 CAPITAL, LLC

100.00% Source: 361 Capital, LLC, Weekly Research Briefing, September 5, 2017, www.361capital.com REPRINTED WITH PERMISSION FROM 361 CAPITAL, LLC

THE GLOBAL INVESTMENT PULSE, September, 2017

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MONTHLY RISK AVERSION INDEX (RAI)

RISK INDEX DECREASES TO NEAR 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

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Source: The Leuthold Group, LLC, Perception Express, September 8, 2017,

As of: September 8, 2017 COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC

http://leuth.us/bond-market

REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

BARCLAYS U.S. HIGH YIELD BOND MINUS TREASURY BOND YIELD 20

Differential Median: 5.08

15

10 Aug-17: 3.89

5

1987

1989

1991

1993

1995

As of: September 8, 2017 COPYRIGHT 2017 THE LEUTHOLD GROUP, LLC

16

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

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

THE GLOBAL INVESTMENT PULSE, September, 2017


RECESSIONS BY DECADE …WILL THIS DECADE BE THE FIRST WITH NONE? Decade Of

# Of Recessions

1850’s

1

1857

1860’s

3

1860

1870’s

1

1873

1880’s

2

1882

1887

1890’s

4

1890

1893

1900’s

2

1902

1907

1910’s

3

1910

1913

1918

1920’s

4

1920

1923

1926

1930’s

1

1937

1940’s

2

1945

1948

1950’s

2

1953

1957

1960’s

2

1960

1969

1970’s

1

1973

1980’s

2

1980

1990’s

1

1990

2000’s

2

2001

2010’s

0

As of: September 8, 2017 REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT GROUP, INC.

Starting Years Of Recessions 1865

1869

1895

1899

1929

1981 2007

Source: CMG Capital Management Group, Inc., On My Radar, September 8, 2017, www.cmgwealth.com COPYRIGHT 2017 CMG CAPITAL MANAGEMENT, INC.

THE GLOBAL INVESTMENT PULSE, September, 2017

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STARTING S&P 500 MEDIAN PRICE-TO-EARNINGS (P/E) RATIO AND 10-YEAR RETURNS SINCE AUGUST 31, 2017 Please note all starting points, with the exception of the Low Valuation Points, provided poor returns! Starting Date

Starting Median P/E

10-Year Compounded Return

December 31, 1989

13.9

15.28%

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%*

August 31, 2017

24.2

???

* Less than 10 years (through December 2015) As of: September 8, 2017 REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT GROUP, INC.

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THE GLOBAL INVESTMENT PULSE, September, 2017

Source: CMG Investment Research, Ned Davis Research, Worldscope via CMG Capital Management Group, Inc., On My Radar, September 8, 2017, www.cmgwealth.com COPYRIGHT 2017 CMG CAPITAL MANAGEMENT, INC.


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, September, 2017

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HIGHER

POTENTIAL RETURN

THE GLOBAL INVESTMENT PULSE, September, 2017

LOWER

20

For A Description Of Each Investment Portfolio Contact One Of Our Advisors

LOWER RISK (COLD BLUE)

LOWER VOLATILITY

®

®

Global Strategic Balanced 20.0% Equity 80.0% Fixed

Global Strategic Balanced 30.0% Equity 70.0% Fixed

Global Strategic Balanced 60.0% Equity 40.0% Fixed Income

RISK (VOLATILITY/STANDARD DEVIATION)

Global Strategic Balanced 40.0% Equity 60.0% Fixed

Global Strategic Balanced 50.0% Equity 50.0% Fixed Income

®

HIGHER VOLATILITY

Past Performance Does Not Guarantee Future Results

© 2014 Legend Financial Advisors, Inc. ® All Rights Reserved ©2014 Legend Financial Advisors, Inc.® All Rights Reserved

Global Strategic Balanced 70.0% Equity 30.0% Fixed Income

UltraSpeculative 100% Equity

Global Strategic Balanced 100% Equity

Legend MultiStrategy 100% Equity

High Quality 100% Equity

HIGHER RISK (BLAZING HOT)

Global Strategic Balanced 80.0% Equity 20.0% Fixed Income

The Portfolios In Red Despite Their Placement All Have Similar Potential Return And Risk Profiles

ALL PORTFOLIOS ARE MANAGED BY LEGEND FINANCIAL ADVISORS, INC.

MODERATE RISK (WARM)

LEGEND FINANCIAL ADVISORS, INC. AND EMERGINGWEALTH INVESTMENT MANAGEMENT, INC.'S INVESTMENT PORTFOLIOS, POTENTIAL RETURN AND RISK SPECTRUM S&P 500 Risk

The Global Investment Pulse, September 2017 Issue  
The Global Investment Pulse, September 2017 Issue  

The Global Investment Pulse, September 2017 Issue

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