Investment Club Meeting

May 2nd, 2014

Agenda

1. Market Update

2. Portfolio Hedging

3. The End

Market update

*Minimum wage debate

Senate started discussion about raising minimum wage to $10.10 from $7.25

Effects

Effects large employers of minimum wage workers eg: consumer discretionary companies like McDonalds

Short-term vs Long-term

Mon

Exports in Asia

Combined export slid 3% in 1st three months

Cheap labor pushed them to the forefront of factory production

Overall growth is slowing

Different US recovery: investment in oil & less consumption (higher manufacturing costs in Asia)

Mon

China, Japan, Taiwan, Korea

Siemens vs GE for Alstom (power turbine industry)

Complements power generation operations

Market-Portfolio watch

Mon

Seriously, BofA?

March, shareholders happy about dividend increase & buyback

Joke! Resubmit for error in allocation = 4B reduction in capital

Stock got pushed down 6.3%, largest one day plunge since 2012

Tue

“Markets Brace for Return of El Nino”

Tue

• Analysts predict that special commodities: coffee, soy beans, sugar, global food prices• Food prices may affect to stock market behavior

Showing a little life

The Dow rose 0.3% on Thursday (approx 4 points above Dec 31)

Has risen < 0.1% 2014

Slow down in corporate earnings growth

S&P Utility is outperforming

Up 14% before dividend payments

Thur

Economic ‘stunted’ growth

First quarter shows poor growth

GDP grew at ‘seasonally adjusted rate’ of 0.1% 1st quarter

Fed still voted for bond buy back 10B/month

Purports: harsh weather, blocked exports, pent-up demand

“watch, plan, wait” mode

Continue to keep interest rates near zero even after program ends

Summer Hedging

Risks:

-We cannot touch the portfolio over the summer

-If the market tanks, we can't sell our stocks to cut losses

Solution:

-Stop-Loss Orders

-Sell our stocks if they drop more than 10%

Symbol Name Beta

MFC MANULIFE FINANCIAL CORPF 2.35

BIDU BAIDU INC 2.05

DNR DENBURY RES INC NEW 1.86

CAT CATERPILLAR INC 1.81

JPM JPMORGAN CHASE & CO 1.71

GS GOLDMAN SACHS GROUP INC 1.69

JAH JARDEN CORP 1.64

GE GENERAL ELECTRIC COMPANY 1.6

EXPE EXPEDIA INC NEW 1.58

SCCO SOUTHERN COPPER CORP 1.56

Put Stop-Loss Orders on:

MFC, BIDU, DNR, CAT, JPM, GS, JAH, GE, EXPE, SCCO to sell if they drop 10%

Hedgin

g With

ETF

s

What is Hedging

Dictionary.com: “To enclose with or separate by bushes or low trees: to hedge a garden”

Taking an offsetting position to limit the risk.

ETFs

Exchange Traded Funds

Used for: Speculation Hedging

Hedging with ETFs

If we invest in inverse SP500 ETFs, we limit the market exposure.

Hedging with ETFs

IC Portfolio:

Beta = .98Using inverse SP500 ETF: Portfolio Beta = .84

Using double-leveraged inverse SP500 ETF: Portfolio Beta = .77

CLOSING REMARKS

SeniorsPresident- Tim Simon

VP- Annalaura Linder

Market Analyst- Ryan McCormick

Analyst- Sean O’Toole

Treasurer- Brendan Gover