Liquidity

As we wrap up the first half of 2018, Liquidity is still king.  Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price. It also refers to the flow of purchasing power into or out of a market. In recent years the largest source of liquidity entering the market has been central bank asset purchases (aka Quantitative Easing or QE). These asset purchases started as a reaction to Great Recession of 2008-2009. The largest three central banks (the US Federal Reserve, the European Central Bank, and the Bank of Japan) have added liquidity to global markets in relay fashion over the past eleven years as shown here in the following charts from Haver Analytics and Yardeni Research:

While each of these banks have not individually bought continuously, the combined effect has been continuous purchases of nearly $12 Trillion of assets bought with money created  "out of thin air" for that purpose.

Rather unsurprisingly, these continuous asset purchases, and the confidence such liquidity has inspired among investors, have driven prices of stocks and bonds upwards for years...

(Additional investment specific commentary follows for client subscribers)

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References:

http://stockcharts.com
https://www.yardeni.com/pub/peacockfedecbassets.pdf
https://abcnews.go.com/Politics/wireStory/trump-backs-off-imposing-china-investment-limits-56197065
https://www.yardeni.com/pub/peacockfedecbassets.pdf
https://www.investopedia.com/terms/l/liquidity.asp

SVANE CAPITAL, LLC IS A REGISTERED INVESTMENT ADVISOR.  INFORMATION PRESENTED IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. INTERNATIONAL INVESTING INVOLVES SPECIAL RISKS INCLUDING THE POSSIBILITY OF SUBSTANTIAL VOLATILITY DUE TO CURRENCY FLUCTUATIONS AND POLITICAL UNCERTAINTIES. AN INVESTMENT CONCENTRATED IN SECTORS AND INDUSTRIES MAY INVOLVE GREATER RISK THAN A MORE DIVERSIFIED INVESTMENT. THERE IS NO ASSURANCE THAT A DIVERSIFIED PORTFOLIO WILL PRODUCE BETTER RETURNS THAN AN UNDIVERSIFIED PORTFOLIO, NOR DOES DIVERSIFICATION ASSURE AGAINST MARKET LOSS.  ANY GRAPH PRESENTED CANNOT IN AND OF ITSELF BE USED AS THE SOLE DETERMINANT IN MAKING AN INVESTMENT DECISION. GRAPHS ARE HISTORICAL DEPICTIONS AND HAVE INHERENT LIMITATIONS IN MAKING INVESTMENT DECISIONS AND CANNOT PREDICT THE FUTURE RESULTS OF ANY INVESTMENT. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Personal Financial Strategy: The Big 3

Keeping things simple is often best in many areas of life. This applies to personal finance too. Following a few key principles stacks the odds in the practitioners favor. These the most important:

1. Always save 10% of your income.  Always. No excuses. If you make only one hundred dollars in some difficult month, save ten of them. Work to improve this toward 25% over time by saving one half of any raise you get. Feel free to enjoy the rest.

2. Spend as little as possible on houses and vehicles. This is generally true, but is especially important rising interest rates. Lifestyle expenses expand to fit increased income. Often houses and vehicles lead the way.

3. When you retire, don't withdraw more than 4% of your portfolio value in any year. Shoot for 3% if possible, but never go over 4%. Find a way. Making a few cuts early means you don't have to make big cuts later.

Success doesn't require perfection, just consistent focus on the right principles.

(Additional investment specific commentary follows for client subscribers)

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SVANE CAPITAL, LLC IS A REGISTERED INVESTMENT ADVISOR.  INFORMATION PRESENTED IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. INTERNATIONAL INVESTING INVOLVES SPECIAL RISKS INCLUDING THE POSSIBILITY OF SUBSTANTIAL VOLATILITY DUE TO CURRENCY FLUCTUATIONS AND POLITICAL UNCERTAINTIES. AN INVESTMENT CONCENTRATED IN SECTORS AND INDUSTRIES MAY INVOLVE GREATER RISK THAN A MORE DIVERSIFIED INVESTMENT. THERE IS NO ASSURANCE THAT A DIVERSIFIED PORTFOLIO WILL PRODUCE BETTER RETURNS THAN AN UNDIVERSIFIED PORTFOLIO, NOR DOES DIVERSIFICATION ASSURE AGAINST MARKET LOSS.  ANY GRAPH PRESENTED CANNOT IN AND OF ITSELF BE USED AS THE SOLE DETERMINANT IN MAKING AN INVESTMENT DECISION. GRAPHS ARE HISTORICAL DEPICTIONS AND HAVE INHERENT LIMITATIONS IN MAKING INVESTMENT DECISIONS AND CANNOT PREDICT THE FUTURE RESULTS OF ANY INVESTMENT. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Everything is Awesome!!

“Everything is awesome
Everything is cool when we’re part of a team
Everything is awesome
When we’re living our dream”

— The Lego Movie theme song (2014 Warner Brothers)

The theme song (at least the first line of it) from Warner Brothers 2014 surprise hit, The Lego Movie, is an apt illustration of our current market and economic situation. Everything is awesome. US construction spending increased to an all-time high of $1.25 trillion. Payrolls are increasing and unemployment has reached official levels only rarely seen in the past century. According to ADP and Moody's Analytics, private companies hired 234,000 jobs in January. This was well above expectations for 185,000. Service-related industries led with 212,000 new jobs; manufacturing added 12,000 and construction 9,000.

Not only are jobs being added, but wages are now increasing at the highest rate since 2008 (shown below in the rising Employment Cost Index YoY as calculated by Bloomberg).

Stock markets remain in one of the biggest bull markets in history. Over the past year, rising prices and optimism have surged to new highs. In fact just this week the Conference Board Consumer Confidence released data showing that the percentage of respondents who think the stock market will be higher this year reached an all-time record. Since the question was first asked back in early 1987, we can't look back any farther than 30 years with this data point. But this much is clear, at no time in recent decades have people been as bullish on stocks as they are today.

Everything is awesome, indeed!

If you've seen The Lego Movie (and we highly recommend it), you know that when everything is awesome, it might only be surface deep. That, in fact, is one of the main points of the wonderful satire. Smiley faces are not the same as deeply anchored joy.  Bread and circuses (Starbucks, Netflix, and XBox?) are entirely different than independence, freedom, and opportunity. But, we digress.

As bond market maven, Jeffrey Gundlach (he of Bond King fame) succinctly pointed out this week, there is another way to look at things.

“Interest rates up, $ down, and mania sentiment everywhere...a dangerous cocktail.”

— Jeffrey Gundlach (CEO of DoubleLine Capital)

At the same time that stock markets and optimism have surged, interest rates have soared, inflation has gathered steam, and the international purchasing of the US dollar has fallen off the proverbial cliff. Why?

One reason is the long term structural concerns of the United States' fiscal position. This has recently been far from the radar of most casual economic observers. Do you even hear about  budget deficits anymore?  According to this chart of Google searches over the past decade, it has clearly fallen from public conscience.

Household Net Worth to US GDP

In 2017, the US Federal budget deficit was $700 billion in round numbers. The public debt surpassed $20 trillion. Only a few years ago, (2008) the debt surpassed $10 trillion for the first time. The budget deficit is expanding and doing so late in the market/business cycle which would typically be a period of decreasing deficit (and ideally a surplus). Under the new tax bill, this yawning discrepancy will grow by hundreds of billions. 

Rising interest rates will likely have a significant additional impact. The Congressional Budget Office (CBO) estimates that for each percentage increase in interest rates, the deficit will rise by about $140 billion. This impact will be felt soon because about half of the debt matures in the next three years.

On top of that, there isn't much room for a reduction in total government spending without cutting welfare and other transfer program payments (and breaking the associated social contracts). 70% of federal spending is either interest payments or these transfer programs. (The largest remaining component, defense spending, appears more likely to increase than decrease in the current geopolitical environment.) 

Additionally, a large amount of tax receipts are directly or indirectly related to rising asset prices. Capital gains account for about $0.20 of every tax dollar brought in by the Treasury. If asset prices were to stop rising (no decline necessary) then this alone would substantially impair the fiscal outlook.

In recent years, much of the debt financing was absorbed by the Federal Reserve (and other central banks) quantitative easing (QE) programs. As central banks shift policies away from bond buying (QE) to bond selling or balance sheet reduction known as quantitative tightening (QT), the net issuance of bonds that the rest of the market has to support increases dramatically. For example, the US net issuance of treasury bond in 2017 was $357 billion, but in 2018 is forecast by JPMorgan to increase to $828 billion.    

The math fiscal math isn't pretty. Since the need for funding won't slow down, government borrowing will need to increase. This need to attract funds from lenders will put continued upward pressure on interest rates, downward pressure on the purchasing power of the dollar, or both. Financial assets are valued by projecting a future stream of income and then discounting these future dollars by an interest rate. Interest rates and currency concerns affect the value of them all. 

(Additional investment specific commentary follows for client subscribers)

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References:

https://www.cnbc.com/2018/01/31/private-jobs-up-234k-in-january-vs-185k-est-adp-moodys-analytics.html
https://www.bloomberg.com
http://tocqueville.com/tocqueville-gold-strategy-fourth-quarter-2017-investor-letter/
https://www.cnbc.com/2018/02/01/us-construction-spending-rises-as-private-outlays-hit-record-high.html
https://www.ft.com/content/8eae2e72-fb74-11e7-a492-2c9be7f3120a
https://www.etftrends.com/2018-outlook-for-equity-fixed-income-alt-investors/

SVANE CAPITAL, LLC IS A REGISTERED INVESTMENT ADVISOR.  INFORMATION PRESENTED IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. INTERNATIONAL INVESTING INVOLVES SPECIAL RISKS INCLUDING THE POSSIBILITY OF SUBSTANTIAL VOLATILITY DUE TO CURRENCY FLUCTUATIONS AND POLITICAL UNCERTAINTIES. AN INVESTMENT CONCENTRATED IN SECTORS AND INDUSTRIES MAY INVOLVE GREATER RISK THAN A MORE DIVERSIFIED INVESTMENT. THERE IS NO ASSURANCE THAT A DIVERSIFIED PORTFOLIO WILL PRODUCE BETTER RETURNS THAN AN UNDIVERSIFIED PORTFOLIO, NOR DOES DIVERSIFICATION ASSURE AGAINST MARKET LOSS.  ANY GRAPH PRESENTED CANNOT IN AND OF ITSELF BE USED AS THE SOLE DETERMINANT IN MAKING AN INVESTMENT DECISION. GRAPHS ARE HISTORICAL DEPICTIONS AND HAVE INHERENT LIMITATIONS IN MAKING INVESTMENT DECISIONS AND CANNOT PREDICT THE FUTURE RESULTS OF ANY INVESTMENT. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Rubber Duckies

Imagine a bathtub full of rubber duckies. Most of them are bright yellow and cheerful eyed with permanent Mona Lisa beaks. But perhaps there are a few other colors, shapes, and sizes mixed in. Maybe, if this particular bathtub is anything like the one I remember my kids playing in, there are a few plastic sharks, whales, and maybe a penguin or a platypus thrown in for good measure. My favorite was always the wind-up scuba diver flippering along endlessly intrigued by who-knows-what under the bubbles. Regardless of the particulars of the floating toys, when you turn on the bath water they all float. Water in, duckies up. Water out, duckies down.

Asset prices and money (credit) behave in much the same way. When there is more money around, assets appreciate (expansion) and when there is less money around, assets depreciate (contraction). Money in, prices up, Money out, prices down.

This is obviously a simplification excluding the longer term human factors in the economic process (namely innovation and population growth). However, it serves our purpose as a way to visualize boom and bust market dynamics. An booming market can defined as the value of the stuff (stocks, bonds, real estate, money markets) people own going up relative to the size of the economy (GDP) and a bust defined as the inverse. This ratio (Household Net Worth to GDP) is shown in the following chart well over half a century.

Household Net Worth to US GDP

During the period of 1945 to the early 1990's the price of assets (measured in units of economic production) remained range bound. Measured this way, asset valuations gradually rose into the early 1960's, fell as inflation became pronounced and eventually peaked in 1980, and then rose again ending entire fifty-year period close to where they began.

However, since the early 1990's the credit and market cycles have been particularly pronounced with asset valuations rising substantially overall with sharp corrections during the recessions following the tech stock boom of the late 1990's and the housing bubble culminating in the Great Recession of 2008- 2009. Over the past 25 years, aggregate asset valuations rose over 40% according to this measure.

Going back to our rubber ducky analogy, the household net worth line in the chart above is similar to the rise and fall of the floating toys (e.g. prices of stocks, bonds, real estate) in the bath. Why do they go up and down? Because of the amount of water (money/credit) in the tub.

A boom is created by a combination of available money (money, debt, credit are fairly interchangeable) and a reason (a narrative or story) to buy. There are almost as many ways to measure amounts of money and credit in our modern economic system as there are economists. Certain types of credit and debt instruments have become much more liquid and increasingly used to buy assets at the macro (Inter-bank) level. We'll use treasury securities, government agency securities (Fannie Mae mortgage securities for example), and Federal Reserve credit. The prevailing narrative depends on the period.

In 1990, there were about $2.5T of Treasury Securities, $1.5T of Agency Securities and $340B of Federal Reserve Credit. These three sources added up to $4.25T, or 71% of GDP. A decade later, at the end of 2000, the total stood at $8.34T or 81% of GDP (Treasury $3.36T, Agency $4.35T, Fed $635B). The narrative of that era was American Technological Dominance. This was the era when the Cold War was one, when America displayed overwhelming military force in Iraq (Operation Desert Storm), when the personal computer became ubiquitous, and the Internet was born. Confidence and optimism abounded. Booming markets fueled by credit growth certainly didn't hurt.

And then the technology bubble burst, resulting in widespread bankruptcies among Internet, telecom, and technology companies. The result ultimately was large stock market losses (particularly the richly-valued technology stocks), and a US Fed determined to rapidly drop interest rates (at the time the prominent Central Bank tool) and "reflate" the markets.

The chart below shows the course of Federal Reserve interest rates over the same time horizon as the net worth chart from before. This shows the Fed's efforts to react to recessions (the grey bars on the chart) by lowing borrowing rates aggressively. A critical aspect of our analysis is that there is no free lunch in economics and no way to "print to prosperity". Deliberate intervention in markets carries a cost even if that cost is not immediately recognized. 

Effective Federal Funds Rate

In 2002 economist Paul Krugman, Nobel prize winning professor of economics at MIT and Princeton wrote about the difference between typical economic fluctuations and credit boom-bust dynamics. He even specifically called for the Fed to create a housing bubble to replace the Nasdaq bubble! The following is a direct quote from his "Dubya's Double Dip" article written in August 2002 in the New York Times, "The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off." 

The housing bubble was indeed created. As all good replacement bubbles must, it exceeded the previous bubble in scope. Toward the end of the mortgage finance and housing price bubble in 2007, Treasury securities exceeded $6.0T, Agency securities had surged to $7.4T and the Fed's balance sheet chipped nearly another trillion dollars at $950B. The total then stood at $14.4T or 99% of GDP.

The narrative shifted to the American Dream of Home Ownership (also plausibly named "Real Estate Always Goes Up"). With mortgages easy to obtain and rates declining, the lure of gains and fear of missing out combined with widely availability of real estate financing to drive prices upwards. Eventually rising interest rates and declining affordability slowed the boom. A recognizable characteristic of credit booms is that when the growth ends, a bust follows.

We know what happened next. In 2007, the housing bubble popped and credit growth turned sharply negative as one lender after another approached bankruptcy. The Federal Reserve repeated its burst bubble prescription, recently learned in the early 2000's, and turned again to forcing interest rates lower and encouraging credit growth. This time though, lower interest rates and optimistic talk weren't encouraging enough. The FASB accounting standards board changed rules to no longer require banks to value their credit portfolios at market prices and the Fed created a new tool. Called Quantitative Easing (QE), Central Banks led by the US Fed began creating money to purchase bonds and other credit instruments. These efforts stopped the bust in its tracks,and got credit growing again by early 2009. As shown below, heavy Central Bank money creation and asset purchases have been a persistent feature of global financial markets ever since.

Global Quantitative Easing (QE)

What has unfolded in monetary and credit terms since early 2009 is astonishing. As of the end of 2016, Treasury securities had reached $16.0T. Surviving the mortgage bubble bust (Fannie Mae and Freddy Mac insolvency and receivership), and returning to growth, Agency securities stood at 8.52T. The Fed’s balance sheet ended 2016 at $4.43T. Again, the replacement credit boom has exceeded the preceding credit bust. The total of these sources of credit now stands at nearly $29T or 156% of GDP.

Household Net Worth to US GDP

Today's narrative is Interest Rates Will Stay Low (as will inflation and economic growth). This story points to continued scarcity of yield (earnings, cash-flow, profits, and dividends) and the unfortunately common refrain in today's financial media that There Is No Alternative to investing in common stocks even as richly valued as they admittedly are.

It is futile to try to predict exactly when and how the market's prevailing winds will shift, but history shows us that nothing lasts forever. With recent coordinated efforts by Central Bankers to inch rates up and rein in asset purchases (QE), the initial steps may now be taking place.

(Additional investment specific commentary follows for client subscribers)

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References:

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html?scp=4&sq=krugman%20mcculley%20bubble&st=cse

http://creditbubblebulletin.blogspot.com/2017/06/weekly-commentary-washington-finance.html?m=1

https://fred.stlouisfed.org/graph/?g=cvIg

http://www.bloomberg.com

SVANE CAPITAL, LLC IS A REGISTERED INVESTMENT ADVISOR.  INFORMATION PRESENTED IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. INTERNATIONAL INVESTING INVOLVES SPECIAL RISKS INCLUDING THE POSSIBILITY OF SUBSTANTIAL VOLATILITY DUE TO CURRENCY FLUCTUATIONS AND POLITICAL UNCERTAINTIES. AN INVESTMENT CONCENTRATED IN SECTORS AND INDUSTRIES MAY INVOLVE GREATER RISK THAN A MORE DIVERSIFIED INVESTMENT. THERE IS NO ASSURANCE THAT A DIVERSIFIED PORTFOLIO WILL PRODUCE BETTER RETURNS THAN AN UNDIVERSIFIED PORTFOLIO, NOR DOES DIVERSIFICATION ASSURE AGAINST MARKET LOSS.  ANY GRAPH PRESENTED CANNOT IN AND OF ITSELF BE USED AS THE SOLE DETERMINANT IN MAKING AN INVESTMENT DECISION. GRAPHS ARE HISTORICAL DEPICTIONS AND HAVE INHERENT LIMITATIONS IN MAKING INVESTMENT DECISIONS AND CANNOT PREDICT THE FUTURE RESULTS OF ANY INVESTMENT. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

The most important price in the world

The most important price in the world is the price of money because it affects the price of everything else. How much does it cost in the future to get enough money to buy that tractor now? A farmer knows how much more corn he’ll get by having a newer, larger tractor. He knows the value of the tractor, but the price he’s able to pay depends on the interest rate. The price of money.

If the farmer decides to buy the tractor now, he’ll improve the productivity of the farm. The tractor maker will show a profit and hire more workers. Those tractor workers will buy cars to get to work. The car maker will show a profit and hire more car workers. Those workers will buy houses. You get the point. Lots of good things will happen in the economy if our favorite farmer decides to buy a tractor.

But there is a small catch. He will pay for that tractor in the future. The tractor he buys today means he can’t buy one next year. There is no free lunch. Sandwiches do cost money and the sandwich we eat today can’t be eaten tomorrow. Tractors are similar. But, the interest rate, will determine when the farmer buys the tractor and at what price. By way of example, if he qualifies for a 72 month 0.9% interest only loan, he will likely decide differently about that $100,000 tractor, then if he must come up with $10,000 in interest each year.

We write all that about farming and tractors to say this. The United States is the center of capitalism for the whole world. However, the very most important price, the price of money, is set by a committee sitting in a dark, smoke filled room. Seriously. Okay, it’s 2017 so the room is probably neither dark, nor smoke filled, but the effect is the same. The unelected Federal Reserve sets the most important price in the world by mandate.

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SVANE CAPITAL, LLC IS A REGISTERED INVESTMENT ADVISOR.  INFORMATION PRESENTED IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. INTERNATIONAL INVESTING INVOLVES SPECIAL RISKS INCLUDING THE POSSIBILITY OF SUBSTANTIAL VOLATILITY DUE TO CURRENCY FLUCTUATIONS AND POLITICAL UNCERTAINTIES. AN INVESTMENT CONCENTRATED IN SECTORS AND INDUSTRIES MAY INVOLVE GREATER RISK THAN A MORE DIVERSIFIED INVESTMENT. THERE IS NO ASSURANCE THAT A DIVERSIFIED PORTFOLIO WILL PRODUCE BETTER RETURNS THAN AN UNDIVERSIFIED PORTFOLIO, NOR DOES DIVERSIFICATION ASSURE AGAINST MARKET LOSS.  ANY GRAPH PRESENTED CANNOT IN AND OF ITSELF BE USED AS THE SOLE DETERMINANT IN MAKING AN INVESTMENT DECISION. GRAPHS ARE HISTORICAL DEPICTIONS AND HAVE INHERENT LIMITATIONS IN MAKING INVESTMENT DECISIONS AND CANNOT PREDICT THE FUTURE RESULTS OF ANY INVESTMENT. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

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