Kevin M. Wilson, PhD Chairman/CEO 1405 Medical Arts Building 324 W. Superior Street Duluth, MN Office: Toll Free: Fax: Bi-Monthly Market Review “Consensus and Contrarian Bets” (Knowing When To Bet With Or Against The Herd) May 15 th, Ted A. Pavlovich, WMS President/Wealth Mgmt. Advisor 1

INTRODUCTION TED A. PAVLOVICH 2

PIVOTAL INVESTOR CHOICES THIS YEAR KEVIN M. WILSON 3

4 Pivotal Choices (Consensus vs. Contrarian): 1) Inflation/Interest Rates (Contrarian) 2) Global Growth Cycle (Consensus) 3) Market Valuations/Risk (Contrarian) 4) Investment Themes (Both) What Happens Next?

Inflation Low To Falling, Except for Japan 5

6 Fed Policy Changing With Taper; Inflation Outlook Uncertain; But Debt Has Not Fallen, Only Transferred

7 Consensus: Global Growth Is Stable & Modestly Increasing

8 2013’s Huge Return Driven By Higher Prices, Not Growth

9 Price/GDP Very High; Expected Returns Can Go Higher Only If There’s A Correction

10 Contrarian Bet: Low Yields For Long Treasuries

11 Four Consensus Themes: El Nino, Energy, Food, Climate

ROTATION TO VALUE PLAYS WILL PERSIST KEVIN M. WILSON 12 Value Stocks Outperform

Most Stocks Are Priced Expensively Value Measures: P/B P/E EV/EBITDA P/S P/CF 13

14 Contrarian Bet: Value Investing Will Tend To Outperform Given High Avg. Prices Value P/E’s Can Go Up Dividends Can Help If You Start With Cheap Prices, You Make More

The High Flyers Fell First, But The Avg. Stock Is Already In A Correction, Further Favoring Value Stocks 5/09/

Some Examples of Potential Contrarian Value Plays 16

EL NINO PLAYS WILL RETURN KEVIN M. WILSON 17 Warm Water in Equatorial Pacific Changes Precipitation Pattern

18 El Nino Switches Off Upwelling In Western South America Peruvian Fisheries Severely Impacted

El Nino’s Changes In Precipitation Patterns Affect Food Production, Coal Mining, Copper Mining 19

20 But El Nino May Finally End The Drought In The Western USA

ELECTION CYCLE WILL PROVIDE A Q4/2014 LIFT TED A. PAVLOVICH 21

22 The Four-Year USA Election Cycle Can Strongly Affect Markets

23 Consensus: We Are Tracking The Avg. Midterm Election Year Pattern, But With More Volatility Than Normally Experienced ?

SUMMARY 24 KEVIN M. WILSON (Both Consensus and Contrarian Plays Will Work This Year) 1. Inflation/Interest Rates Will Strongly Influence Returns 2. Value Plays Will Outperform This Year 3. Energy, Food, and Climate Plays Provide Opportunities 4. The USA Election Cycle Will Drive Returns After The Correction 5. We Are Excited About The Chance To Make Money Later This Year

Q & A 25 KEVIN M. WILSON TED A. PAVLOVICH

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