WHILE YOU ARE WAITING ANSWER: 190 HOW? There are N people (20) You can’t shake hands with yourself (N-1) You can only shake one hand of each person: divide by 2 = (N-1)/2 So: N(N-1)/2 = 20*19/2 = 380/2 = 190

IT WAS BAD AFTER IT WAS BAD????

OFF WE GO!

BIGFOOT INVESTMENTS - OPEN FORUM Oct 19, 2017 WELCOME! Volume #310

AGENDA WELCOME! ADMIN NOTES QUOTE OF THE DAY SWAPS AND SPREADS OPTIMISM GAUGE DIAGNOSTICS GAGE FED TRACKER SUM AND SUBSTANCE WEEKLY INTELLIGENCE HIGH IMPACT - RISK GLOBAL PERSPECTIVE DAVID’S CORNER ADVISOR INPUT QUESTIONS/COMMENTS

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Presentation to the Peterson Institute Oct 12, 2017 “QUOTE” OF THE DAY: They {Central Bankers} are looking forward to an era of relative financial and economic stability in which the pressing economic issues will relate to growth, globalization, and distribution issues…. …....that are the responsibility of other policymakers and not primarily the province of central bankers. Ben Bernanke Presentation to the Peterson Institute Oct 12, 2017

Optimism Gauge As of: 10/19/2017

>50-day MA/>100-Day MA Change Measuring Our Economy Last Update: 10/19/2017 Weekly Updates New Monthly Updates Indicator Current Value Prior/Metric Value St Louis Fed Financial Stress Index - 1.550 - 1.538 (Rev) +1.0 Chicago Fed National Act Index (3 Mon M/A) - 0.04 0.00 (Rev) -.50 Unemployment 4.2% (Sep) 4.4% (Aug) +2.00 Weekly Jobless Claims (4Wk Mov Av) 248,250 257,750 (Rev) +.50 ECRI Weekly Index (Against 52 Wk Av) 145.2 144.5 (Rev) Conf Board Leading Indicators (NEW) 128.6 (Sep) 128.8 (Aug) -1.0 University of Michigan Sentiment – Final 95.1 (Final – Sep 2017) 96.8 (Final – Aug 2017) Monthly Retail Sales – ex Autos (Adjusted) 383,834 (Sep -2017) 379,849 (Aug-2017) Rev NFIB Small Business Sentiment 103.0 (Sep -2017) 105.3 (Aug -2017) ISM Manufacturing 60.8 (Expansion Line = 50) 58.8 Economic Capacity Utilization 76.0% 75.8% (Rev) 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% (Jul) 5.6% (Jun)

Economic Optimism Index Measuring our Economy 10 20 30 40 50 60 70 80 90 100 Economic Optimism Index Current: Prior: 90.13% READING AS OF: 10/19/2017 Current Reading: 90.13% Trend: Negative Prior Reading: 91.37% (Rev) Bias: Positive

Week of: Oct 16th, 2017 BigFoot Investments Market Diagnostics Week of: Oct 16th, 2017 BigFoot Investments

SENTIMENT INDICATORS Week of Oct 16th - 2017 1. AAII Investor Survey 2. TSP Sentiment Survey 3. NAAIM Survey of Manager Sentiment 4. CBOE Volatility Index INTERNAL INDICATORS 5. S&P500 - 50D MA and 200D MA AND 2/10 MA 6. NYSE Bullish % 7. S&P 500 Bullish % ($BPSPX) 8. Percent of NYSE stocks above 200DMA 9. Percent of NYSE stocks above 10WMA or 50DMA ($NYA50R) 10. NYSE 52-Week New Highs and New Lows 11. Percent of S&P500 stocks above 200DMA 12. Percent of S&P500 stocks above 50DMA ADDED INDICATORS 13. Option Sentiment 14. Option Buyers Sentiment Gauge (OBSG) 15. Consumer Sentiment Index 16. Nasdaq Sentiment Index 17. Rydex Nova/Ursa Sentiment Indicator

Week of Oct 16th, 2017 29.41% Prior: 23.52%

THE BATTLE RAGES Kaplan Dallas Evans Chicago Williams San Francisco VOTING MEMBER MEMBER DISTRICT TOPIC LINK TO SOURCE Kaplan Dallas concerned that globalization and technology are keeping inflation muted https://www.cnbc.com/2017/10/10/feds-kaplan-says-keeping-an-open-mind-on-u-s-rate-hikes.html Evans Chicago We should not fear 2.5% inflation…if inflation expectations don’t start to move up….next couple of moves may not be constructive https://www.wsj.com/articles/u-s-unemployment-could-fall-further-says-chicago-feds-evans-1507722204 Williams San Francisco …expects the U.S. central bank to raise interest rates later this year, three times next year, and a little bit further in 2019. In the new world of moderate economic growth, we all need to plan for relatively low rates for the foreseeable future. http://www.frbsf.org/our-district/press/presidents-speeches/williams-speeches/2017/october/whats-the-future-of-interest-rates-the-answers-in-the-stars/ Brainard FOMC Federal Reserve could better time interest rate hikes following future recessions by pledging to hold fire until inflation rises above its target.. policymakers will likely need to lower rates to near zero again in the future and will likely also struggle with worrisomely low inflation. https://www.federalreserve.gov/newsevents/speech/brainard20171012a.htm Powell ….challenges posed to EMEs by the normalization of global financial conditions will be manageable. https://www.federalreserve.gov/newsevents/speech/powell20171012a.htm

FED CONTINUED Yellen Chair Rosengren Boston Harker Philly Dudley MEMBER DISTRICT TOPIC LINK TO SOURCE Yellen Chair our framework for understanding inflation dynamics could be mis-specified in some way.,,, neutral rate currently appears to be quite low by historical standards, implying that the federal funds rate would not have to rise much further to get to a neutral policy stance https://www.federalreserve.gov/newsevents/speech/yellen20171015a.htm Rosengren Boston Policy should not adhere to rules-based approach. Fed will probably need to raise rates in Dec and then 3-4 times next year https://www.bostonfed.org/ Harker Philly One more rate hike this year is appropriate but cautioned his forecast could change if inflation doesn’t pick up. No firm commitments https://www.wsj.com/articles/philadelphia-fed-president-projects-one-more-rate-increase-this-year-1508273366 Dudley New York Overhaul to U.S. tax code should foster business investments and productivity https://www.cnbc.com/2017/10/18/us-tax-reform-may-help-economy-ny-feds-dudley.html Kaplan Dallas Slippage in the10-year Treasury may be an indicator of expectations for slower long-term domestic growth https://www.cnbc.com/2017/10/18/us-10-year-yield-flashes-possible-warning-dallas-feds-kaplan.html George Kansas City N/A

THE INFLATION “FIGHT” – FED MINUTES Anecdotal reports from the hurricane-affected regions, as well as daily data on capacity outages in selected Gulf Coast industries, indicated that production had already started to recover Real PCE was likely increasing at a slower rate in the third quarter than in the second Median of longer-run inflation expectations from the Desk’s Survey of Primary Dealers and Survey of Market Participants were relatively little changed in September Hurricanes were expected to reduce real GDP growth in the third quarter and to boost it in the fourth quarter as production returned to its pre-hurricane path and as a portion of the lost spending was made up Most participants had not assumed enactment of a fiscal stimulus package in their economic projections or had marked down the expected magnitude of any stimulus Many participants thought that another increase in the target range later this year was likely to be warranted if the medium term outlook remained broadly unchanged Several others noted their decision on whether to take such a policy action would depend importantly on whether the economic data in coming months increased their confidence that inflation was moving up toward the Committee’s objective A few thought additional increases in the federal funds rate should be deferred Source: Federal Reserve Minutes – Sep 2017

SHORT VERSION OF THE BEIGE BOOK Source: Federal Reserve

THE PLAYERS FOR FED CHAIR LATEST (DOWN TO 5) LAST Source: PREDICTIT

IT IS UNTIL IS ISN’T! Now: 93.1% Previous: 82.9% http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html Source: CME; Federal Reserve

Credit Anticipates-Equity Confirms Swaps and Spreads Rate Prior Current Status* Libor/OIS 0.27 0.19   Euribor/Eonia -0.027 -0.032 Markit CDX NA - IG Spread 54.45 54.10 Markit CDX NA- HY Index 108.04 108.20 DTCC Repo - MBS 1.145 1.169 DTCC Repo – Treasury 1.094 1.161 High Yield 3.55 3.50 Fed Reserve Currency Swaps-Short 35 (ECB) 2 (BOJ) 1 (BOJ) Fed Reserve Currency Swaps-Long 2-Year Swap Spread 0.261 TED Spread 0.270 0.267 As of: 10/18/2017 COB *Note: Status = No major impact Status = Moving Worse Status = Negative Impact

EARNINGS NOTES THAT ARE NOT FOR THE FAINT HEARTED

At the start of the year, the forward 12-month P/E ratio was 16. 8 At the start of the year, the forward 12-month P/E ratio was 16.8. From December 31 through October 11, the price of the S&P 500 increased by 14.1%, while the forward 12-month EPS estimate increased by 6.9%. Thus, the increase in the “P” has been the main driver of the increase in the P/E ratio since the beginning of the year. Source:

the more you want, the less you get. Goldman Sachs We find that selling equities at elevated valuations in anticipation of more attractive entry points is a weak investment strategy. That is because those entry points have often taken years to materialize. In other words, the more you want, the less you get. Goldman Sachs

HOPE SPRINGS ETERNAL Source: FactSet

UP, UP, AND AWAY Source: Yardeni

SUM SUBSTANCE

WEEKLY MACRO DATA FINDING THE LOVE

6 OF 10 COMPONENTS DROP BUT OVERALL STILL HIGH Source: NFIB

MOSTLY GAS AND AUTOS – BUT HECK 1.0% Forecast: 1.7% Actual: 1.6 Prior: -0.1 Source: Census Bureau

HURRICANES – BUT STILL STRONG Source: Conference Board

STINKS AT THE CORE Forecast: 0.2% Actual: 0.1% Prior: 0.2% Source: BLS

PRODUCER PRICES SHOW SOME “LIFE” Forecast: 0.4% Actual: 0.4% Prior: 0.2% PRODUCER PRICES SHOW SOME “LIFE” Source: BLS

SOME SIGNS OF LIFE ON IMPORTS/EXPORTS Source: BLS

BUT, THE “TECHNICAL” PICTURE LOOKS OMINOUS

BETTER BUT NOT SO GREAT 10 Year Mean 76.54 2 High/2 Low Out Current: From: 76.0 75.8 (Rev) 10 Year Mean 76.54 2 High/2 Low Out Source: Federal Reserve

NOT BAD Source: New York Fed

LOTS OF SEASONAL AND STORM THINGS Source: Census Bureau

A SMALL DIP – FIRST IN 12 MONTHS…..AS THEY SAY: “HURRICANES” Source: Conference Board

PHILLY BETTER/MIXED – OUTLOOK ??? Source: Philly Fed

WEEKLY

TWO INTERESTING PREDICTIONS

JUST “SAYIN” Source:

IF YOU SAY SO Source: WSJ; Bloomberg

THE FED IS MOVING Source: NY Fed

Although the global recovery is slow, it is quite steady WHY SUCH LOW VOL Investors appear to be in the “freeze” vs “flight” mode according to Nobel price winner Richard Thaler Many equity investors entered at lower levels and feel they can withstand fairly sizeable negative shocks Although the global recovery is slow, it is quite steady Inflation, although sticky at low levels, is steady Central Banks have contributed to low volatility by pegging yields (BOJ) or keeping bond yields low through easing (ECB and Fed) so there is a strong legacy effect for both the bond and stock markets But we are at the lower limits: Inflation is stubborn but is a worry Because of low volatility, central banks feel they can press forward The mechanics of the Fed’s balance sheet are untested Source: Deutsche Bank

COULD BE A THAW IN THE MAKING

ALL OVER THE PLACE Source:

“LIVIN IS EASY” Source: Bloomberg; Chicago Fed

THE SWORDS OF DAMOCLES Source: Investing.com

OVERALL: DATA POINTS STATUS Comments Inflation Manufacturing Sentiment Which one? Manufacturing Good Sentiment Holding Housing Some issues: costs/supplies/land/specific markets Employment Good – structural issues Retail Sales Not so great Fed To many words Interest Rates Subject to interpretation Oil Volatile Dollar In our favor

EUROZONE CHINA

STABLE AT 1.5% IN THE EURO AREA - UP TO 1.8% IN THE EU Source: Eurostat

CAN THE EUROZONE HOLD ON?

TYPICAL Source: National Bureau of Statistics; Treading Economics

STEADY OR STUCK? Source: National Bureau of Statistics; Investing.com

BUT IF YOU DON’T BELIEVE Source: Capital Economics

0.325 0.275 U.S. Macro Last New

DAVID’S CORNER

ADVISOR INPUTS

QUESTIONS & COMMENTS THANKS FOR JOINING US!

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