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SPECIAL SUMMER 2015 ISSUE

I

GREECE: SHOULD WE CARE

By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.

t seems all we see and hear about these days in the financial news is about Greece. What’s it all about? Simple. Money! Should we care? In a word—YES! The Summation: The Greeks don’t want to pay their debts and as a result, want their lenders to forgive their debt. The lenders prefer that Greece raise its taxes (although it should be known that many, almost two-thirds, of their citizens do not pay the taxes that they owe already), and reforms its pension system. Complicating matters, the citizens of Greece are withdrawing cash from banks, creating a liquidity crisis. Now, Greece has closed its banks to stem the flow of cash. Greece, continued on page 12

A QUICK OVERVIEW OF PREFERRED SECURITIES

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

THE DOG DAYS OF SUMMER

FEDERAL RESERVE INTERVENTION HAS PROPPED UP THE STOCK AND BOND MARKETS By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.

As can be seen in the chart on page 12 created by dshort.com, since 2009, the Federal Reserve Board (FED) has kept the FED Funds Rate (the interest rate that the FED charges banks for overnight lending) at abnormally low interest rates historically. The chart also indicates the Quantitative Easing (QE) programs which were initially designed to stimulate the U.S. economy, but really only stimulated the U.S. stock and bond markets. As these programs have ended and we are near the time where the FED will likely start increasing the FED Fund Rates (probably sometime in the next six months), it would appear that all stimuli will Federal Reserve, continued on page 12

Preferred securities are somewhat of an enigma. They have a fixed return over time (although some preferred securities have an adjustable rate payout), but can suffer a major loss if the corporation issuing them has financial difficulties. It should be noted that “preferred” means these securities have a preferred position in the event of a liquidation of a corporation over that of common equity holders, but behind bank and bond debt holders. The only upside, other than the coupon payout, is if a preferred security is convertible into common equity. Complicating matters is the fact that Preferred Securities, continued on page 13

REAL ESTATE INVESTMENT TRUST (REITS) UPDATE

By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. Fundamentals for U.S. commercial real estate continue to be strong across nearly all property types, as reflected in 2015 earnings so far that generally met high expectations. While earnings have been good, stock prices have been mixed. Self storage has been the best-performing REIT sector in 2015 buoyed by strong earnings reports, with year-over-year rental growth running as high as 10.0%. Apartment landlords REITs have modestly advanced in 2015, aided by sustained household formation that kept demand REITS, continued on page 13

THE GLOBAL INVESTMENT PULSE June, 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 offer so much more than wealth managers, financial advisors, financial planners and/or investment managers. 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. 2

THE GLOBAL INVESTMENT PULSE June, 2015


A GREAT CHART OF INVESTOR BEHAVIOR

By Diane M. Pearson, CFP®, PPCTM, CDFATM, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. To the right is a great chart for understanding investor behavior during a stock market cycle. Currently, it appears we are definitely north of the “Excitement” phase and are probably just passing the “Thrill” phase. The good news is we probably haven’t peaked yet, but we are probably approaching the top. However, it could be another one to three years before we head downward. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

As of: May 22, 2015 Source: CMG CAPITAL MANAGEMENT, INC. On My Radar, May 22, 2015, www.cmgwealth.com COPYRIGHT 2015 CMG CAPITAL MANAGEMENT, INC. REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT, INC.

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THE PROBABILITY OF LOSS “The probability of loss is no more measurable than the probability of rain. It can be modeled, it can be estimated (and by experts pretty well), but it cannot be known.” By Howard Marks Chairman, Oaktree Capital Source: This article was excerpted from “Three-Way Asset Strategy”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc., (On My Radar, June 19, 2015), www.cmgwealth.com COPYRIGHT 2015 CMG CAPITAL MANAGEMENT GROUP, INC. REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

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SECULAR BEAR MARKET WATCH April 1, 2000 to May 31, 2015 (15 years and 2 months) Annual Compound Return

Total Return

Consumer Price Index (Inflation)

2.17%

38.20%

90-Day Treasury Bills Index-Total Return

1.73%

29.68%

Barclays Aggregate Bond Index-Total Return

5.55%

126.95%

HFRX Global Hedge Fund Index

2.85%

53.25%

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

4.25%

88.12%

MSCI EAFE Index (Developed Foreign Equities)

3.77%

75.42%

MSCI Emerging Market Index (Equities)

7.46%

197.78%

Newedge CTA Index (Managed Futures)

5.64%

129.80%

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

0.16%

2.46%

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

11.18%

398.92%

Gold Bullion

10.05%

327.23%

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: May 31, 2015

April 1, 2000 to May 31, 2015 (15 years and 2 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 2 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. PULSE 4

THE GLOBAL INVESTMENT PULSE June, 2015


2015 PERFORMANCE YEAR-TO-DATE January 1, 2015 to May 31, 2015 (5 months) Year-to-Date Total Return Consumer Price Index (Inflation)*

0.76%

90-Day Treasury Bills Index-Total Return*

0.01%

Barclays Aggregate Bond Index-Total Return

1.00%

HFRX Global Hedge Fund Index

2.55%

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

3.23%

MSCI EAFE Index (Developed Foreign Equities)

8.98%

MSCI Emerging Market Index (Equities)

5.72%

Newedge CTA Index (Managed Futures)

2.01%

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

-3.24%

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

-1.00%

Gold Bullion

0.45%

Compound and Total Returns include reinvested dividends. Newedge Index is equally-weighted. * Performance is through April 30, 2015 due to monthly reporting ** USD = U.S. Dollar Source: Bloomberg Investment Service

As of: May 31, 2015

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

WHEN SPECULATION IS REASONABLE “Emphatically, I am not suggesting that one should seek to be invested in stocks only when the potential return of the market itself is expected to be durable (long-term returns that will not be given back over the long term). Rather, one should recognize the environment that is operating at any given moment. When expected market returns are likely to be durable, the ability to exit is not particularly important provided one has a sufficiently long investment horizon. “However, when expected returns are likely to be transitory, [a market gain (that is beyond market norms) that will be wiped out over the completion of the market cycle (including the marketing downturn phase)], one should realize that one is speculating, and the ability to exit can be valuable or even critical.” By John P. Hussman, Ph.D. The Hussman Funds Source: This article was excerpted from “Durable Returns, Transient Returns”, by John P. Hussman, Ph.D., The Hussman Funds, (Weekly Market Comment, June 29, 2015), www.hussman.com COPYRIGHT 2015 THE HUSSMAN FUNDS REPRINTED WITH PERMISSION OF THE HUSSMAN FUNDS

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U.S. U.S. DOMESTIC DOMESTICEQUITY EQUITYMARKET MARKETPERFORMANCE PERFORMANCE 2015 29, 2015 2015YEAR-TO-DATE YEAR-TO-DATE AS AS OF OF JUNE JUNE 29, 2015 Style

Capitalization Size

Value

Blend

Growth

Large-Cap

-0.58%

-1.50%

4.99%

Mid-Cap

0.20%

2.72%

5.59%

Small-Cap

-1.16%

3.94%

7.10%

All performance based on Morningstar U.S. Style Indexes

EUROPEAN EQUITY MARKET PERFORMANCE EUROPEAN EQUITY MARKET PERFORMANCE 2015 YEAR-TO-DATE AS OF JUNE 29, 2015 2015 YEAR-TO-DATE AS OF JUNE 29, 2015 Style Capitalization Size

Value

Blend

Growth

Large-Cap

In Local Currency: 5.76% In USD: 1.93%

In Local Currency: 7.91% In USD: 4.74%

In Local Currency: 10.19% In USD: 7.73%

Mid-Cap

In Local Currency: 11.66% In USD: 7.44%

In Local Currency: 11.80% In USD: 7.92%

In Local Currency: 11.86% In USD: 8.18%

Small-Cap

In Local Currency: 13.87% In USD: 10.28%

In Local Currency: 13.02% In USD: 9.47%

In Local Currency: 15.40% In USD: 11.80%

All performance based on MSCI EUROPEAN Style Indexes

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THE GLOBAL INVESTMENT PULSE June, 2015

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“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 June, 2015

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THE WORLD’S ECONOMIC CENTER OF GRAVITY By far the most rapid shift in the world’s economic center of gravity happened in 2000 to 2010, reversing previous decades of development. Evolution of the earth’s economic center of gravity1 AD 1 to 2025

1Economic center of gravity is calculated by weighting locations by Gross Domestic Product (GDP) in three dimensions and projected to the nearest point on the earth’s surface. The surface projection of the center of gravity shifts north over the course of the century, reflecting the fact that in three-dimensional space America and Asia are not only “next” to each other, but also “across” from each other. As of: June, 2015 COPYRIGHT 2015 Evensky & Katz/Foldes Financial Wealth Management

Source: McKinsey Global Institute analysis using data from Angus Maddison; University of Groningen via Evensky & Katz/Foldes Financial Wealth Management, Newsletter, Volume 8, No. 3—June, 2015, www.EK-FF.com REPRINTED WITH PERMISSION FROM EVENSKY & KATZ/FOLDES FINANCIAL WEALTH MANAGEMENT

1983 AND NOW – INTEREST RATE HIKES WHEN DATA IS NOT NECESSARILY CALLING FOR IT

YoY = Year Over Year GDP = Gross Domestic Product CPI = Consumer Price Index CFNAI = Chicago Fed National Activity Index EPS = Earnings Per Share PCE = Personal Consumption Expenditure As of: June 15, 2015 COPYRIGHT 2015 361 CAPITAL

8

Source: 361 CAPITAL, 361 Capital Weekly Research Briefing, June 15, 2015, www.361capital.com REPRINTED WITH PERMISSION FROM 361 CAPITAL

THE GLOBAL INVESTMENT PULSE June, 2015


HOUSEHOLDS ARE NEARLY “ALL IN” By Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc. The yellow circles mark the percentage of household financial assets that were invested in stocks. The yellow circle at the far right shows where we were at year-end (more recent data is not available, but given the market’s relatively flat year, it would seem that it is up marginally from 41.5%.). One can see the yellow arrow and reflect on investor behavior. The reader can see that ownership of stocks dropped significantly after the 2000 market peak and similarly post all prior peaks. Source: This article was excerpted from “Investor Behavior, Margin Debt & The Merciless Mathematics of Loss”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc., (On My Radar, May 22, 2015), www.cmgwealth.com COPYRIGHT 2015 CMG CAPITAL MANAGEMENT GROUP, INC. REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

As of: May 22, 2015 COPYRIGHT 2015 CMG CAPITAL MANAGEMENT, INC.

Source: Ned Davis Research via CMG CAPITAL MANAGEMENT, INC. On My Radar, May 22, 2015, www.cmgwealth.com REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT, INC.

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BARCLAYS U.S. HIGH YIELD BOND MINUS TREASURY BOND YIELD High Yield Bonds Move Upward In Price Thereby Decreasing Their Yield Advantage 20

15

10

Median: 5.07%

May-15: 4.56%

5

1987

1990

1993

1996

As of: June 5, 2015 COPYRIGHT 2015 THE LEUTHOLD GROUP, LLC

1999

2002

2005

2008

2011

2014

Source: The Leuthold Group, LLC, Perception Express, June 5, 2015, http://leuth.us/bond-market REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

SMALL CAP TO LARGE CAP HISTORICAL PRICE TO EARNINGS (P/E) RATIO Small Caps Are More Expensive But Barely So

120

120

110

110

100

100

90

90 Note: Small Caps are selling at a 7.0% valuation premium relative to Large Caps, using non-normalized (nonaveraged) trailing operating earnings. This is an increase from last month’s reading of 6.0%. The recent peak premium for U.S. Small Cap stocks remains at 23.0%. Small Caps still remain at above normal valuation levels—the medium premium is 3.5% on a historical basis.

80

70

60 1983

1985

1987

1989

1991

1993

As of: June 5, 2015 COPYRIGHT 2015 THE LEUTHOLD GROUP, LLC

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THE GLOBAL INVESTMENT PULSE June, 2015

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

80

70

60 2015

Source: The Leuthold Group, LLC, Perception Express, June 5, 2015, http://leuth.us/market-internals REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC


LONG-TERM EXPECTED INFLATION IS EXPECTED TO BE 2.0%

By James J. Holtzman, CFP®, CPA, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. The chart below depicts the implied inflation rate (the red line) is derived by subtracting the Treasury Inflation Protection Securities (TIPS) yield curve (the yellow line) from the Treasury Bills, Notes and Bonds Yield Curve (the blue line). In short, the TIPS yield is much lower due to the fact that the total TIPS yield adds an inflation adjustment factor after the fact. Hence, that adjustment is the expected (implied) inflation rate. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

U.S. LONG TERM IMPLIED INFLATION RATE NOW BELOW 2.0%

3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%

U.S. Treasuries Bonds and Notes Treasury Inflation-Protected Securities

-0.5%

As of: June 9, 2015

30 Year

28 Year

26 Year

24 Year

22 Year

20 Year

18 Year

16 Year

14 Year

12 Year

10 Year

8 Year

6 Year

4 Year

2 Year

6 Month

1 Month

-1.0%

Implied Inflation

Source: Bloomberg Investment Services Source: COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.

®

Source: REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.

®

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THE DANGER OF GOVERNMENT DEBT

By Diane M. Pearson, CFP®, PPCTM, CDFATM, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc. The U.S.’s national debt (U.S. Government) is $18.2 trillion (102.8%) of $17.7 trillion Gross Domestic Product (GDP). By contrast, Japan’s national debt, in U.S. terms, is $10.1 trillion, more than twice as large (240.5%) as its $4.2 trillion economy. As a result, Japan is considered to be in much worse financial shape than the U.S. In fact, economic experts believe that Japan’s economy could collapse if they cannot stimulate inflation (Yes, they are trying to create inflation because they have been in deflation for most of the past 20 years.). If they can create inflation, the debt, which is fixed, will become a smaller percentage of their GDP. In other words, Japan’s economy would outgrow the total debt. The debt can then be paid back with inflated Yen. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

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Greece, continued from page 1

Many of Europe’s banking institutions and central banks are lenders as well as the International Monetary Fund. The European Central Bank (EBC) has been the guarantor of many of Greece’s loans. If Greece doesn’t pay their debts, then a financial crisis or contagion could occur within Europe thereby throwing the rest of the world into a crisis as well. That is why we should care. However, American stock and bond markets incorrectly view Greece with blinders. Our view: It’s too insignificant to matter. If an agreement is not reached on a bailout plan and Greece defaults, it could set in motion a chain of events that leads to

Greece’s exit from the European Currency Union. This scenario would be disastrous for Greece because their interest rates would skyrocket almost immediately making it impossible for the Greek government to borrow. In all probability, some sort of agreement will likely be reached (with no real reform, just a delay of when debts are owed) further kicking the can down the road. In other words, the inevitable (a collapse of their economy) would be delayed. Hard times are undoubtedly ahead. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

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Federal Reserve, continued from page 1

eventually end causing the equity and bond markets to at least flatten out and, perhaps, even decline. The biggest bubble today is the bond market. In fact, it probably is the biggest bond bubble of all time. A sovereign debt (the home currency of any country) default crisis could be on the horizon, hence all the concern about Greece. Possibly, it may trigger another global financial storm. It also probably won’t be isolated to just Europe or Japan. The effects could cause a global crisis. Given the high valuations of U.S. equity prices, this leaves our

As of: April 24, 2015 COPYRIGHT 2015 CMG CAPITAL MANAGEMENT, INC.

equity markets in a precarious position. Yet U.S. equities could go even higher due to the attractiveness of the U.S. Dollar. Furthermore, overseas monies continue to flow into the U.S. markets. It is also important to remember that bear markets historically have wiped out more than half of the preceding bull market’s gain, although not always. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

Source: dshort.com via CMG Capital Management, Inc., On My Radar, April 24, 2014, www.cmgwealth.com REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT, INC.

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Preferred Securities, continued from page 1

many preferred securities have very low trading volume and approximately 80.0% of the preferred securities universe is concentrated in the finance sector.

ers. Strong and improving credit fundamentals of many preferred issuers at this time, in particular, banks, provide potential for further narrowing in credit spreads.

Normally, it is hard to be excited about these securities, except in a falling interest rate environment. However, in an environment of relatively stable interest rates, preferred securities may offer competitive returns to that of other higher yielding, fixed income securities. Purchasing individual issues, from a liquidity standpoint though, is to be avoided. Mutual funds focusing on preferred securities, depending upon the management team, may be a suitable investment option. Listed below are some other thoughts on this investment category.

Exchange-Traded preferred securities are normally more sensitive to bond-yield moves than preferred securities traded over the counter (OTC), given a prevalence of longer-duration (Duration is an approximate measure of an investment security’s price sensitivity to changes in interest rates. The longer the duration, the more sensitive the security is.) securities, they have held up better than the OTC market. This situation reflects tighter supply conditions. Notably, Exchange-Traded-focused preferred securities, which are significant investors in the ExchangeTraded Fund group, have had the need to replace redeemed securities with existing issues, recycling capital into a low-supply market.

Preferred securities are well positioned relative to other credit sectors. They offer relatively high income rates and offer taxadvantaged dividend income for U.S. buy-

Over the intermediate term, Treasury yields may see some upward pressure as the U.S. economy accelerates from a, so far, lackluster 2015, and labor markets continue to tighten. As these trends unfold, high income rates offered by preferred securities may help protect investors from a total-return perspective should prices be negatively impacted by higher bond yields. Favoring higherincome securities with wide credit spreads and lower-duration fixed-to-float (The fixed coupon becomes a floating rate one at some point.) structures with significant amounts of call protection, which have the potential to perform well in most interestrate environments, would be prudent. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

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REITS, continued from page 1

ahead of supply. Even apartments in markets vulnerable to lower oil prices, like Houston, Texas, have so far shown a fair degree of resilience. The regional mall sector is slightly negative, so far, in 2015. Manufactured Homes (Trailers) have also performed well in 2015 (see the chart to the right). Health care REITs have been among the poorer performers in 2015 so far. Amid a rise in Treasury yields and a belief that the Federal Reserve could raise interest rates as early as September, the sector was out of favor due to its perceived bond-like characteristics. This perception has frequently weighed on health care’s short-term performance when interest rates rise, even as health care REITs have been transitioning to more economically sensitive business models over the years. Commercial real estate fundamentals will likely continue to strengthen, driving further increases in cash flows, net asset values and dividend distributions. As a result, cyclically sensitive short-lease sectors (hotels, apartments, self-storage) likely will be able to capture the quickest returns from these economic dynamics. Compelling relative value in traditional noncyclical sectors offer potentially better returns, one of which is health care, where certain stocks are trading at discounts to underlying property values for the first time in years. COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

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RISK INCREASED SLIGHTLY

MONTHLY RISK AVERSION INDEX (RAI) 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

As of: June 5, 2015 COPYRIGHT 2015 THE LEUTHOLD GROUP, LLC

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Source: The Leuthold Group, LLC, Perception Express, June 5, 2014, http://leuth.us/bond-market REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

S&P COMPOSITE INDEX, PRICE RETURN (SINCE 1900)

Note: Data shown in log scale to best illustrate long-term index patterns. As of: March 31, 2015

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THE GLOBAL INVESTMENT PULSE June, 2015

Source: Robert Shiller FactSet, J.P. Morgan Asset Management COPYRIGHT 2015 J.P. MORGAN ASSET MANAGEMENT REPRINTED WITH PERMISSION OF J.P. MORGAN ASSET MANAGEMENT


LEGEND FINANCIAL ADVISORS, INC.® AND EMERGINGWEALTH INVESTMENT MANAGEMENT, INC.’S SUMMARY OF MUTUAL FUND CONFERENCE CALLS AND MEETINGS JUNE 1, 2015 THROUGH JUNE 30, 2015 As part of our due diligence responsibility, Legend’s Investment Committee participated in conference calls with the following fund management teams: Ticker

Date

1. Aristotle Capital Management

Various

June 8, 2015

2. ARC Global, LLC

Various

June 17, 2015

3. Montage Investments

Various

June 22, 2015

1. Clearbridge Aggressive Growth

SAGYX

June 19, 2015

2. AMG Yacktman

YACKX

June 24, 2015

Investment Management Private Meetings

Investment Management Private Conference Calls/Webcast

As of: June 30, 2015

COPYRIGHT 2015 LEGEND FINANCIAL ADVISORS, INC. ® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ® THE GLOBAL INVESTMENT PULSE June, 2015

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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. 16

THE GLOBAL INVESTMENT PULSE June, 2015


THE GLOBAL INVESTMENT PULSE June, 2015

17 © 2014 Legend Financial Advisors, Inc. ® All Rights Reserved

The Global Investment Pulse, Special Summer 2015 Issue  
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