1. Outlook for the Economy & Financial Markets Robert Genetski Website: ClassicalPrinciples.com 312-565-0112

2. Outline I.Economic Framework II.US economic weakness III.Financial Crisis IV.Global Outlook: Europe, China, Japan V.Outlook for US Economy & Markets VI.Take Away Points

3. Outline I.Economic Framework II.US economic weakness III.Financial Crisis IV.Global Outlook: Europe, China, Japan V.Outlook for Economy 2013 & Markets VI.Take Away Points

4. Outline What causes booms and busts in the Economy? 1. Keynesian framework 2. Classical framework

5. Classical Economic Principles 1. Low tax rates & limited government 2. Free Markets 3. Protect individual property rights 4. Sound money Freedom & Prosperity

8. Outline I.Economic Framework II.US economic weakness III.Financial Crisis IV.Govt. Spending & Debt: US, Europe, IL V.Outlook for Economy & Markets VI.Take Away Points

13. Federal Spending & Private Spending with regs 2000-05 2005-10 2010-12 2010-12 Federal Govt. Spending: 38% 40% 2%8% Private Spending 24% 9% 11%8% 2000 2010 2012 2014 Annual Regulatory Compliance expenses: $1.0 $1.8 $2.0$2.2 (trillions of 2010 dollars)

14. Outline I.Economic Framework II.US economic weakness III.Financial Crisis IV.Govt. Spending & Debt: US, Europe, IL V.Outlook for Economy &Markets VI.Take Away Points

18. Outline I.Economic Framework II.US economic weakness III.Financial Crisis IV.Global Outlook: Europe, China, Japan V.Outlook for Economy & Markets VI.Take Away Points

20. World’s Largest Economies Source: IMF Share of Global Output 20132018 United States18.6%17.7% China15.619.0 India 5.8 6.5 Japan 5.5 4.7 Germany 3.7 3.2 Russia 3.0 2.9 Brazil 2.8 2.8 UK 2.7 2.4 France 2.6 2.3 Mexico 2.1 2.0

21. Government Spending as a % of Total Spending 200020132000-2013 France 52%56% +4 Greece 47%50% +3 Germany 45%45% 0 UK 34%44% +10 Spain 39%42% +3 Japan 37%41% +4 United States 34%40% +6 Russia 33%37% +4 India 25%28% +3 China 17%24% +7

27. Net Government Debt to GDP Greece176% Japan143% Italy104% US 89% France 86% UK 86% Spain 79% Germany 56% Mexico 38% Brazil 34% (China, Russia, India have no net debt) Source: IMF, World Economic Outlook Database, October 2012

28. Outline I.Economic Framework II.US economic weakness III.Financial Crisis IV.Global Outlook: Europe, China, Japan V.Outlook for Economy & Markets VI.Take Away Points

29. Factors Boosting the US Economy 2013-2014 Banking system has substantial reserves Fiscal agreement provides more stable tax environment With tax hikes off the table, greater chance of slowing federal spending

30. Factors Restraining the US Economy 2013-2014 higher tax burdens regulatory burdens depressing productivity regulatory burdens depressing job creation regulatory pressure on banks to rebuild capital and limit lending

31. Outline V.Outlook for US Economy & Markets a.Spending pace: 4%-5% b.Inflation: 2%-3% vicinity c.Real growth: 2%-3% vicinity d.Housing prices e.Gold f.Oil g.Interest rates h.Stocks

32. Outline V.Outlook for Economy & Markets a.Spending pace: 4%-5% b.Inflation: 2%-3% vicinity c.Real growth: 2%-3% vicinity d.Housing prices e.Gold f.Oil g.Interest rates h.Stocks

36. Home prices are undervalued 21% Based on Price to Income 8% Based on prices vs. rental costs

45. Takeaway Points Odds are against economic collapse but… US, Europe, Japan slow growth and decline in living standards Interest rates, inflation stock prices artificially low – Avoid bonds – Consider price escalators in longer-term contracts Growth opportunities – areas promoting economic freedom – assist increase efficiencies for your clients – help individuals maintain living standards/save time

46. Questions or Comments Robert Genetski Website: ClassicalPrinciples.com 312-565-0112

47. More Information? Go to: www.classicalprinciples.com Follow me on Twitter: @EconBobG www.classicalprinciples.com Robert Genetski 312-565-0112