the financial sense strategy conference – part one
TRANSCRIPT
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PFS GROUP : THREE COMPANIES SHARING THE SAME VIS
We’d like to welcome you to PFS Group’s first Financial Sense Strategy Conference. PFS Group is
a family of three companies—Puplava Financial Services, Inc. (Registered Investment Advisor),
Puplava Securities, Inc. (broker/dealer, member FINRA/SIPC), and Financial Sense® (investor
education)—each sharing the same goal: to provide exceptional asset management and
educational resources that help investors build, maintain, and preserve their wealth.
At PFS Group, we are committed to providing asset management and educational resources that
help investors build, maintain and preserve their wealth.
Puplava Financial Services, Inc Registered Investment Advisor
Puplava Securities, Inc Broker/Dealer Member FINRA/SIPCFinancial Sense Investor Education
Post Office Box 50314710809 Thornmint Road 2nd Floor
(888) 486-3939 Toll Free · (858) 487-3
www.puplava.co
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LEGAL NOTICES
Forward-looking statements do not relate strictly to historical or current facts. This
presentation may contain certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including, but not limited to,
statements as to future operating results and plans that involve risks and
uncertainties. We use words such as “expects”, “anticipates”, “believes”,
”estimates”, the negative of these terms and similar expressions to identify forward
looking statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the companies or events discussed to differ
materially from any future results, performance or achievements expressed or
implied by those projected in the forward-looking statements for any reason.
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LEGAL NOTICES
Past performance is not necessarily indicative of future results.
While PFS Group strives for accuracy in its reading of the market, the
market environment, and individual stocks’ potential, please be aware
and be informed that all statements and assertions made in this
presentation are merely the opinions and beliefs (albeit well-researched)
of the PFS Group staff and should be evaluated as such.
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Welcome Becki Sutton, CFA
Becki joined PFS Group in 2015. He
eduction includes a MBA from Univ
San Diego and a B.S. in Business
Administration Finance from San D
State University. Becki earned the
Chartered Financial Analyst designa
2000. She has over twenty years ofexperience in the investment mana
industry, which includes 15 years a
Portfolio Manager with Brandes Inv
Partners, Inc. Becky’s role with Pup
Financial Service Inc. is managing
portfolios and serving our clients.
PORTFOLIO MANAGER
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Welcome Paul Horn, CFP
Paul joined PFS Group in 2015. He
M.S. of Investment Management an
Financial Analysis from Creighton
University. Paul earned the Certified
Financial Planner designation in 20
professional designations include F
Series 7, Series 66, Uniform CombinState Law Exam; and Life-Only, Acc
and Health, and Variable Contracts
insurance licenses (California insur
license #0E60881). Mr. Horn has ov
decade of experience with financial
planning and wealth management s
He oversees the Financial Planning
activities of the firm.
FINANCIAL PLANNER
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Agenda
Hour 1
Macro
Hour 2
Preparing for the Final Phase of the Bull Market
Hour 3
Financial Planning Education
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Themes From Prior Meetings
2009 - “Lessons From History, Lessons for Today”
2010 - “Inflation/Deflation - Which Is It?”
2011 - “We’ve Been Here Before”
2012 - “Don’t Fight the Fed”
2013 - “More Things That Are Right Than Wrong”
2014 - “Stay In Our Own Backyard”
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THE MESSAGE OF THE MEETING
PREPARING FOR THE FINAL PHASE OF THE BULL
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MacroA) Where Are We in the Business Cycle?
B) What to Expect When You Are Expecting
C) Overview of Global Monetary Policy
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A) Where Are We in the Business Cy
2Mid
1
3
4Early
La
Re
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Mid-Cycle Characteristics
Source: Fidelity Capital Markets
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Economic Growth Peaking
• Personal income less trans
• Non-farm payroll employm
• Industrial production
• Real Retail Sales
• Recent string of consecutiv
months of growth in consu
credit longest since 2003.
• Auto loans continue to expa
consumer take advantage o
cheap rates.
Mid-Cycle Characteristics
Credit Growth Is Strong
Source: Bloomberg
Source: Bloomberg
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Profit Growth Peaks
• McDonalds
• Aetna
• Walmart
• T.J. Max
• Target
• Starbuc
• Costco
• GAP
• The Fed hasn’t raised internearly a decade.
• First step at getting off zerremoving QE, raising rates
Mid-Cycle Characteristics
Policy Is Neutral
Source: Bloomberg
Source: Bloomberg
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Growth Moderating
• Average workweek
• Jobless claims
• Non-defense capital goods o
• Building permits
• 10-yr UST and Fed Funds rate
• M2 growth
•S&P growth
• ISM Manufacturing Index
• Banks raising credit standard
• Banks require larger down pa
• Raise interest rates on loan p
Late-Cycle Characteristics
Credit Tightens
Source: Bloomberg
Source: Bloomberg
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Policy Contractionary
Late-Cycle Characteristics
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There is Still Life in This EconomicRecovery and Bull Market
The two most cyclical areas of the economy have yet to peakHome builder confiOctober 2005
J.D. Power and Asssales of new cars arecord of 13.8 millio
Source: Bloomberg
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Housing Snapshot - Affordability
Historically mortgage
payments average just under
20% of household incomes.
Currently mortgage payments
average just 12.4% of
household incomes.
30-Yr FRM rates currently below4% near generational low levels
Source: JP Morgan Asset Management
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Housing Snapshot - Supply & Deman
Supply Low investment (construction) relative tothe size of the economy
Demand Household formation rates remain e
Source: Bloomberg Source: Bloomberg
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Housing Snapshot - Health of the Consu
• Consumer balance sheets are
• Payroll job growth strong
• Employers raising wages
• Lowest mortgage rates in deca
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Auto production Likely to remain strong while U.S. demandgives motors a boost.
U.S. Consumer Miles Driven Reaching record levels
11.4
Auto Snapshot
Source: Bloomberg Source: Bloomberg
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Recession Assessment is Paramounfor Risk Management
Sales Peak -> Profits Decline -> Layoffs Occur -> Economy Cont
Source: Bloomberg
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Why We Are Not in the Recession Cam
Durable Goods Consumption andPrivate Investment Still Rising
Jobless Claims Fall Currently at lowest level since 1973.
Source: Bloomberg Source: Bloomberg
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Why We Are Not in the Recession Cam
Federal Reserve Bank of Philadelphia Produces leading indexes for each state.
Chicago Fed National ActivitWeighted average of 85 existing mo
Source: Bloomberg Source: Bloomberg
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Broad-Based National Economic Grow
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B) What to Expect When You Are Expec
R a t e H i k e
I n t e r e s t R a t e s
Fede ra l R ese r ve
FOMC Mee tin
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Broad-Based National Economic Grow
Median Performance During Fed Tightening Cycl
Asset Class 3 Months Prior 6 Months Prior 12 Months
U.S. Equities 7% 9% 10%
DM Equities 6% 7% 14%
EM Equities 5% 8% 16%
Commodities 3% 4% 7%
IG Bonds 0% 1% 3%
Early Mid Late
Source: Fidelity Capital Markets
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Why the Fed didn’t Raise in Sept. or O
“Recent global economic and financial developments may restrainactivity somewhat and are likely to put further toward pressure on the near term.” - FOMC Sept. Statement
Not since the Asian crisis of the fall of 1998 has the Fed been so vocal about fo
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When the Fed Begins to Raise Interest R
• Annrunn
• 80%
econ
are
• Curr
0.2%
globSource: Fidelity Capital Markets
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Declining Global Inflationary Trends
Oil
Copper
Silver
Aluminum
67%
51%
71%
47%
From highs in 2011 to lows in 201
Dollar 38%
Source: Bloomberg
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China’s Slowdown
Germany lowers its 2015
growth estimate. - CBS News, 10.14.2015
IMF lowers growth forecast.
- USA Today, 10.06.2015
Fitch lowers Global Growth
Due to Emerging Markets.- 247 Wall Street, 09.30.2015
Citi bank cuts 2016 global
economic growth forecast
for 5th straight month. - Economic Times, 10.21.2015
Sizable impact on global trade as it’s the world’s 2
Source: Bloomberg
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China’s Importance
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Emerging Markets & Their CurrencieFrom 2010 high relative to the USD
R
63%
36%
61%
Source: Bloomberg
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Volatility Picked Up With a Stronger Dol
U.S. Dollar Credit to Non-residents ($Trillion) Brazil’s dollar-denominated debt:
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FOMC Minutes for Sept.
•Foreign economic growt
• Domestic economy wea
• Increased financial mar
• Global stock markets sh
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The Stock Market and Fed Tightening Cy
Source: BCA Research
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• Phase IV is the best for stocks followed by phase 1
• With the Fed expected to begin raising interest rates next year we are likely moving from
• From 03.06.09—10.21.15 has had 16.8% returns, close to the median 18.2%
Source: BCA Research
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• Moving into Phase 1 still bullish for stocks
•Transition from Phase IV to Phase I to create more volatility
Source: BCA Research
C) O i f Gl b l li
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Big Picture View of Macro Headwinds FaDeveloped Economies
C) Overview of Global Monetary Polic
The Yin & Yang of Monetary Policy
T illi f Fi C i C d
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Trillions of Fiat Currencies Created…So Where’s the Inflation?
Demographics TechnologicalDisruptions
Deleveraging
Demographics Headwinds Facing
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Demographics Headwinds FacingMost of Developed World
Working age population
Source: BlackRock
The Disruptive Power of Technology
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The Disruptive Power of Technology
Source: BlackRock
The Disruptive Power of Technology
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The Disruptive Power of Technology
LinkedIn - Cut down recruit costs
iPhone - Is making the digital camer
Digital Music - Cheaper than buying
Uber - Cutting the cost of transporta
AirBNB - Cutting the cost of hotel ac
Source: BlackRock
The Disruptive Power of Technology
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The Disruptive Power of Technology
Source: BlackRock
The Disruptive Power of Technology
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The Disruptive Power of Technology
U.S. Oil Production Rapid growth not scene since the 1970s.
Oil Trade Deficit Has ShruFewer USD’s being sent abroad.
Source: Bloomberg Source: Bloomberg
No Cost of Living Adjustments in 20
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g j
Source: Bloomberg
Q tit P i
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Quantity vs. Price
• Dollar volume of t
• Unit volume of tra
Source: BlackRock
Quantity vs. Price
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y
Source: BlackRock
Th Yi & Y f M t P li
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The Yin & Yang of Monetary Policy& Activist Central Banks
U.S. Fed
ECB
Bank of Japan
Comme
Broad M
Aging Japan
Fed Prints When Commercial Bank Credit W
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Fed Prints When Commercial Bank Credit W
Source: Bloomberg
ECB Increases Its Balance Sheet
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When European Money Supply Weakens
Source: Bloomberg
China Stimulus
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• Slashed len
• Devalued c
• Cut taxes o
purchases
adoption o
vehicles
• Eased mort
• Adds a two
4.3500
6.9
Source: Bloomberg
Summary and Conclusion
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Summary and Conclusion
A) Where Are We in the Business
• Mid cycle• Late stage cycle ahead of us
B) What to Expect When You Are• Monetary policy - slow and gradual
C) Overview of Global Monetary P• Emerging markets weakening
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Break