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Kevin M. Wilson, PhD Chairman/CEO 1405 Medical Arts Building 324 W. Superior Street Duluth, MN 55802 Office: 218-464-4399 Toll Free: 877-327-5062 Fax: 218-464-4397 Email: info@bluewater-cap.com www.bluewatercapitaladvisors.com Bi-Monthly Market Review “Consensus and Contrarian Bets” (Knowing When To Bet With Or Against The Herd) May 15 th, 2014 1 Ted A. Pavlovich, WMS President/Wealth Mgmt. Advisor 1
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INTRODUCTION TED A. PAVLOVICH 2
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PIVOTAL INVESTOR CHOICES THIS YEAR KEVIN M. WILSON 3
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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?
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Inflation Low To Falling, Except for Japan 5
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6 Fed Policy Changing With Taper; Inflation Outlook Uncertain; But Debt Has Not Fallen, Only Transferred
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7 Consensus: Global Growth Is Stable & Modestly Increasing
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8 2013’s Huge Return Driven By Higher Prices, Not Growth
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9 Price/GDP Very High; Expected Returns Can Go Higher Only If There’s A Correction
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10 Contrarian Bet: Low Yields For Long Treasuries
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11 Four Consensus Themes: El Nino, Energy, Food, Climate
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ROTATION TO VALUE PLAYS WILL PERSIST KEVIN M. WILSON 12 Value Stocks Outperform
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Most Stocks Are Priced Expensively Value Measures: P/B P/E EV/EBITDA P/S P/CF 13
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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
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The High Flyers Fell First, But The Avg. Stock Is Already In A Correction, Further Favoring Value Stocks 5/09/2014 15
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Some Examples of Potential Contrarian Value Plays 16
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EL NINO PLAYS WILL RETURN KEVIN M. WILSON 17 Warm Water in Equatorial Pacific Changes Precipitation Pattern
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18 El Nino Switches Off Upwelling In Western South America Peruvian Fisheries Severely Impacted
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El Nino’s Changes In Precipitation Patterns Affect Food Production, Coal Mining, Copper Mining 19
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20 But El Nino May Finally End The Drought In The Western USA
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ELECTION CYCLE WILL PROVIDE A Q4/2014 LIFT TED A. PAVLOVICH 21
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22 The Four-Year USA Election Cycle Can Strongly Affect Markets
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23 Consensus: We Are Tracking The Avg. Midterm Election Year Pattern, But With More Volatility Than Normally Experienced ?
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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
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Q & A 25 KEVIN M. WILSON TED A. PAVLOVICH
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This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for its accuracy and interpretation are not guaranteed. Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication of guarantee of future performance and no representation, express or implied, is made regarding future performance. The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax matters. “BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.” Disclaimer 26
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