1. Rational Investing Special Interest Group Economic Climate and Market Weather Conditions Presented by Herb Geissler, Managing Director of St.Clair Group February 2014 combines fundamental and technical analysis Without Using VectorVest

2. Current Bear Market Not As Severe as prior secular bears (yet) 50% below today’s level

3. Production of Goods and Services Been Declining for Over Two Years

4. US Economy Sliding Downhill

5. Because Rising Federal Debt Stifles Economic Growth

6. Employment Still Stagnant Claims decreasing as workers leave workforce

7. And Social Benefits Consume More of Limited Incomes

8. Further Dampening Retail Sales

9. All Key Measures Show Continual Weakening Since 1990

10. Key Economic Indicators Improved But Are Still Weak

11. Global Economy Also Still Weak Bulk of dry-ship volume is moving Asian goods to US and returning with commodities for Asian production

12. Yet Stock Market Advanced Fearlessly, Sucking In Money As It Did During Roaring 90s

13. Market Gains Primarily From Expanding PE Multiple

14. QE Provided That Liquidity Anomaly: Stock market gains despite higher interest rates means over-abundant cash

15. Resulting in Only Two Corrections During Past Five Years

16. Major Indexes Pressing Against Long-term Resistance Levels

17. Pushing Market Valuation To A Dangerous Extreme Q Ratio = Market Valuation to Replacement Cost

18. Key Points  Federal spending, funded by debt, is choking economic growth, as dysfunctional Federal Government avoids addressing core problems  Fed Reserve IOUs (to fund excessive debt) lubricates stock prices, but make inevitable solutions increasingly more painful  Market Valuations are at unsustainable extremes, but can remain so for quite a while

19. Implications For Investors  Despite the facts, Media and Wall Street Analysts are extremely bullish for 2014  But remember Warren Buffet’s advice to:  Sell during greed; Buy during panic  For Individual Investors, this means:  Sell when proven market-measures roll to downside  Buy back-in when those measures rollover to upside  Monitor moving averages weekly or monthly  Discipline to act promptly

20. What To Do?  Keep drinking, as long as bartender keeps pouring cheap drinks  Benny’s Bar “flicked the lights” in January  Remain sober and watchful to jump out of harm’s way, before “last call” (2/1/14???)  Use disciplined decision-making tools to know when to shift positions

21. Index ETFs Were Up Over 20% But Turned Bearish on January 31

22. Defensive Asset Class Strategy Missed the Strong Stock Surge

23. Sector Strategy Gained 19%, But Now Moves Into Cash

24. Troubled Emerging Markets Have Gone From Bad to Worse

25. Intermediate-Term Net- Out  Economic uncertainties churning markets and sectors into short, choppy trends  Excessive liquidity raised aggregate, causing Index Funds to perform well as stock market “melted upward”  Risk and size of correction increased daily and finally has arrived  Knowing “How big and how long” is less important than “when to get out and when to get back in”

26. Weather Forecast for Swing and Position Traders  It’s hard to outperform Index Funds  Stock selection remains challenging; holding periods tend to be short  Short, choppy trends makes trading rules and discipline more imperative than ever

27. Fed Reserve Turned Corrections Into Dips

28. Optimism Remains High, Intuitionals Remain “Fearless”

29. McClellan Summation Turned Bearish on Wed. January 29 And rebounded from trendline support

30. Barely 1/2 of S&Ps Are Bullish And fewer big stocks get out of bear territory, creating an unsettling divergence

31. Now, Correction Is Underway MA 50 Broken but Trendline Held 185-170 = 8% 185-159 = 17%

32. 50/50/0 Rules Keep Position Traders on the Right Side of the Market Still below zero

33. Net-Out for Position Traders  It’s hard to outperform Index Funds  Simple MA timing keeps you out of trouble  Stock selection remains challenging; holding periods tend to be short  Use 50/50/0 rules to avoid excessive whipsaws  Short, choppy trends makes trading rules and discipline more imperative than ever  Monitor daily as position trader or monthly with diverse strategies in the spreadsheet CD

34. Any Questions?