MEAT!! WHILE YOU ARE WATING MIKE IS A BUTCHER – He’s 5’10”, has brown hair, runs 2 miles a day, and wears “slim” blue jeans….. ….WHAT DOES HE WEIGH? MEAT!!

THESE SHOES ARE JUST THE CUTEST THINGS ANDY SPENDS TIME WITH HIS DOLL HOBBY THESE SHOES ARE JUST THE CUTEST THINGS

LOGAN FINALLY GETS HIS TESLA

BIGFOOT INVESTMENTS - OPEN FORUM Feb 18, 2016 WELCOME! Volume #236

AGENDA WELCOME! ADMIN NOTES QUOTE OF THE DAY OPTIMISM GAUGE SWAPS AND SPREADS FED TRACKER MACRO ASSESSMENT READING THE “TEA LEAVES” DAVID’S COMMENTS ADVISOR INPUT LEE’S COMMENTS QUESTIONS/COMMENTS

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“QUOTE” OF THE DAY: …we are in a precarious position in the U.S. with so many of our institutions going down. Many of those pushing against the system have no idea how precarious it is or what they will be destroying….. …Those defending it don’t know how precarious its position is or even what they’re defending, or why. But people lose respect for a reason. Peggy Noonan - WSJ

Optimism Gauge As of: 2/18/2016

>50-day MA/>100-Day MA Change Measuring Our Economy Last Update: 2/18/2016 Weekly Updates New Monthly Updates Indicator Current Value Prior/Metric Value St Louis Fed Financial Stress Index - 0.241 - 0.474 (Revised) -1.0 Chicago Fed National Act Index (3 Mon M/A) -0.24 -0.19 (Revised) -.50 Unemployment 4.9 5.0 +2.0 Weekly Jobless Claims (4Wk Mov Av) 273,250 281,250 (Revised) +.50 ECRI Weekly Index (Against 52 Wk Av) 130.0 129.6 Conf Board Leading Indicators (NEW) 123.2 123.4 (Revised) University of Michigan Sentiment – Final 92.0 (Final – Jan 2016) 92.6 (Final – Dec 2015) Monthly Retail Sales – ex Autos (Adjusted) 354,159 (Jan-2016) 353,978 (Dec) Revised NFIB Small Business Sentiment 93.9 95.2 ISM Manufacturing 48.2 (Expansion Line = 50) 48.0 (Revised) Economic Capacity Utilization 77.1 76.4 (Revised) Stock Market Moving Averages Weekly Data Points >50-day MA/>100-Day MA N/A S&P Case-Shiller 20 City Comp Index (YoY) 5.8% 5.5%

Economic Optimism Index Measuring our Economy 10 20 30 40 50 60 70 80 90 100 Economic Optimism Index Current: Prior: 46.98% READING AS OF: 2/18/2016 Current Reading: 46.98% Trend: Negative Prior Reading: 52.48% Bias: Negative POSITIVE SINCE: 8/22/2012

STRESS INDICATOR UP STRONGLY -0.241 FROM -0.474 HIGHEST SINCE DEC 2011 Source: FRED

WEBSITE VERSION

FINANCIAL STRESS INDEX

2/10 INDICATOR

Credit Anticipates-Equity Confirms Swaps and Spreads Rate Prior Current Status* Libor/OIS 0.24   Euribor/Eonia -0.066 -0.055 DTCC Repo - Agency 0.504 0.522 DTCC Repo - MBS 0.507 0.525 DTCC Repo – Treasury 0.495 0.506 High Yield 8.62 8.45 Fed Reserve Currency Swaps-Short 91 90 Fed Reserve Currency Swaps-Long 2-Year Swap Spread 0.0460 0.0249 TED Spread 0.2740 0.3097 As of: 2/17/2016 *Note: Status = No major impact Status = Negative Impact Status = Moving Worse

FED BET Source: Federal Reserve Board staff calculations based on an econometric model described in the appendix to Janet L. Yellen (2015), “Inflation Dynamics and Monetary Policy,” speech delivered at the Philip Gamble Memorial Lecture, University of Massachusetts, Amherst, Mass., September 24, www.federalreserve.gov/newsevents/speech/yellen20150924a.htm.

DOWNSIDE RISK/VOLATILITY REMAIN HIGH Source: AlphaSimplex

MARKET REPEATS: NO RATE INCREASE THIS YEAR http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html Source: CME; Federal Reserve

FED TALK? MEMBER DISTRICT TOPIC LINK Harker Philadelphia These {inflation} considerations make me a bit more conservative in my approach to policy, at least in the very near term. Although I cannot give you a definitive path for how policy will evolve, it might prove prudent to wait until the inflation data are stronger before we undertake a second rate hike. https://www.philadelphiafed.org/publications/speeches/harker/2016/02-16-16-an-economic-outlook Dudley New York Two main dangers to expansions: Inflation, adverse impacts Fed can’t control. Inflation risk low so current focus on adverse shocks. Assets/Liabilities of households crucial to economy absorbing shocks Household debt situation much better than previous years https://www.newyorkfed.org/newsevents/speeches/2016/dud160212 Rosengren Boston "In my own view, if inflation is slower to return to target, monetary policy normalization should be unhurried. A more gradual approach is an appropriate response to headwinds from abroad that slow exports, and financial volatility that raises the cost of funds to many firms." http://www.bostonfed.org/news/speeches/rosengren/2016/021616/index.htm FOMC Minutes - Jan - See Slide http://www.federalreserve.gov/newsevents/press/monetary/20160217a.htm Bullard St Louis Federal Open Market Committee’s (FOMC) case for monetary policy normalization in 2015 rested on several key assumptions and that two of these assumptions have now been called into question in 2016 https://www.stlouisfed.org/news-releases/2016/02/17/st-louis-feds-bullard-discusses-changing-imperatives-for-us-monetary-policy-normalization Williams San Francisco Later Today Mester Cleveland Friday Kaplan

MORE TALK MEMBER DISTRICT TOPIC LINK Kashkari Minneapolis Large banks must similarly be able to make mistakes—even very big mistakes—without requiring taxpayer bailouts and without triggering widespread economic damage. That must be our goal. TBTF Speech https://www.minneapolisfed.org/news-and-events/presidents-speeches/lessons-from-the-crisis-ending-too-big-to-fail Kaplan Dallas No statements on monetary policy

PRETTY STRONG STUFF Source:

Language of dissent (Bullard) WHAT THE FED SAID Language of dissent (Bullard) “The Committee would be concerned if inflation were running persistently above or below this objective.” Real PCE decreasing – held down by costs of non-energy imports Housing – continued gradual recovery Manufacturing output declined CAPEX slower/Inventory investment decreased Energy pulling down inflation globally Financial markets hampered by oil and concerns about global growth Assessment of financial vulnerabilities as moderate on balance Estimate that negative effects of lower equity prices and FX would be offset by low oil prices and better fiscal results Expect real GDP to expand somewhat faster moving forward Forecast for inflation revised down slightly but would increase gradually through 2018 Premature to change outlook over the medium-term Assessed inconsistencies with consumer spending against strong gains in household income Extended discussion about China’s economy/financial imbalances and impact on EMEs Tighter financial conditions evident – stock market & credit markets Many see increasing downside risks economy Source: Federal Reserve

IT’S BETTER, THE SAME, AND WORSE MACRO DATA IT’S BETTER, THE SAME, AND WORSE

UNTIL WE FIX SOME THINGS MARKETS WILL NOT SETTLE OIL CHINA DOLLAR FED INTEREST RATES INFLATION RECESSION

KEY WEEKLY DATA

LOOKING FOR A HOME Source:

NOTABLE EARNINGS COMMENTS: WITH 76% REPORTING NOTABLE EARNINGS COMMENTS: 69% reported earnings above mean estimate – 49% below Blended earnings decline of -3.7% (12/31/2015 est was -3.9%) Without energy +2.4% 68 companies negative guidance – 17 positive More companies beating EPS estimates – fewer beating Sales estimates 12-month forward P/E is 14.7 based on closing price of 1829.08 (10-year aver = 14.2) With forward EPS of $124.25 market valuation is ≈1827 Themes: Dollar Oil prices (Nets against currencies) Slow global economic growth Labor/wage impacts Source: FactSet

TWO DOWN IN A ROW 123.2 0.2% Decline Source: Conference Board

STILL DECIDEDLY NEGATIVE CFTC S&P 500 speculative net positions - 234,321 Source: CME

WE’LL TAKE IT! Source: Federal Reserve Bank of Atlanta

IMPROVEMENT +0.2% +3.4% Source: Census Bureau

PRELIMARY DATA FOR FEB FALLS… AS EXPECTED 90.7 DOWN FROM 92.0 Source: Univ of Michigan

IMPORT/EXPORT PRICE INDICIES IMPROVE -1.1 VERSUS -1.4 FORECAST -0.8 VERSUS -0.9FORECAST Source: BLS

BUSINESS SALES – INVENTORIES JUST BLAH NEEDS TO START FALLING Source:

COMMENTS REQUIRED! Source: WSJ Junk spreads are mainly in energy Lots of +50 miscues Stocks are still strangely correlated to oil Those darn macro indicators ruin another “theory” Source: WSJ

EMPIRE STATE MANUFACTURING SURVEY NOT GREAT..OUTLOOK WEAK Source: Federal Reserve Bank of New York

HOPEFULLY JUST A BREATHER Source: NAHB

NOT BAD… Down 4% Up 16% Source: MBA

NEW YORK FED SURVEY ON INFLATION/WAGES Steady decline Source: Federal Reserve Bank of New York

IMPROVEMENT Highest since Nov 2015 Source: Federal Reserve

HOUSEHOLD DEBT HIGHER BUT LESS RISK Source: Federal Reserve Bank of New York

STILL GROWING +2.147 mb Source: EIA

U.S. Macro -0.400 -0.450

Oil deal is not a deal – expect lower prices A level of “stress” prevails in credit markets and will cause short-term problems. The Fed should change their “tune.” Thinking they will Bond market volatility will continue until they do No recession at this point Markets trading in a “news range”: Oil – Dollar – Fed – Interest Rates Markets need 2Q to reassess – no relief for now Politics will be a bigger market driver after super Tuesday. March 1st Sidelines (Cash) is fine

David’s Corner

ADVISOR INPUTS

Lee’s Comments

QUESTIONS & COMMENTS THANKS FOR JOINING US!

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