Daniel RoccatoAdjunct Professor of Finance and Economics, Rutgers

University School of BusinessPresident, Quaker Wealth Management, LLC

2014 Headwinds, Tailwinds, Trends, Strategy

Securities & Advisory Services Offered through VSR Financial Services, Inc., A Registered Investment Adviser and Member FINRA/SIPC. Quaker Wealth Management is not owned or controlled by VSR” .

2014 Headwinds, Tailwinds, Trends, Strategy

Securities & Advisory Services Offered through VSR Financial Services, Inc., A Registered Investment Adviser and Member FINRA/SIPC. Quaker Wealth Management is not owned or controlled by VSR” .

This commentary contains opinions and analysis that are provided by the presenter for informational purposes only and should not be used as the primary basis for an investment decision. Please consider your individual investment objectives and risk tolerances before making investment decisions. Not all strategies discussed may be suitable for all investors.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer-term securities.

Investing involves risk including loss of principal. Please consider your individual investment objectives and risk tolerances before making investment decisions. Not all strategies discussed may be suitable for all investors.Mutual Funds are offered by prospectus. Before investing, investors should carefully consider the investmentobjectives, risks, charges and expenses of the fund which are outlined in the prospectus. Please contact your representative or the Company to obtain a prospectus. Please read the prospectuses carefully before investing or sending money.

2014 Headwinds

• Bull market is 4 ½ years old; the average bull market since 1900 lasted 2.1 years. 1

• Market is not cheap. – Current PE is 18.5 vs. historical average of 15. 2

– Current dividend yield is 1.98% vs. historical average of 4.3%. 2

• The job market remains weak, particularly middle class jobs. – Participation is at 30 year low (63% vs. 61% in Italy). 3

– If participation rate was still 67%, unemployment would be 11%. 3

– Demographics, delayed entry to work, 8.8 million on disability vs. 4.4 in 1978. 4

• After a binge of record earnings, corporate profits will slow.

• Fed will reduce stimulus.

• Our President and political leaders are small. Our challenges are big (healthcare, taxes, education).

1. Investor.fisherinvestments.com2. Standard and Poors3. US Dept of Labor and US Dept of Commerce4. QWM research

2014 Tailwinds

• Consumer debt has shrunk to pre-crisis levels thanks mostly to mortgage defaults.

• The “wealth effect” - $77 trillion of household net worth.1

• GDP is growing at 3.4%, unemployment is declining.2

• The U.S. remains a popular choice for foreign investment.

• Interest rates and inflation remain low.

• Housing has stabilized, though some markets remain weak – Weak household growth – 36% of millennials live at home. 3

1. Federal Reserve Bank2. US Dept of Commerce3. Huffington Post

Macro Trends

• The ongoing emergence of the global middle class. – There are now 65 cell phones for every 100 Africans.1

– 15 million cars sold in China in 2012 (GM sold 1.3 million). 2

– Huge opportunities for US companies – KO Europe sales down 2%, India up 22% 3

• Global Demographics – Japan – decline of 284,000, 24% over 65 only 4% under 3 (diapers vs. depends).4

– USA• Birthrate is at a historic low (1.9 vs. 2.1); number of elderly at historic high. 1

• 1.9% fewer high school seniors in 2013 5

• Older and poorer 5– 65+ is 12% of population, will be 20% in 2030 – Wealth is becoming a barbell– 46 million (15%) in poverty ($23,500 for a family of 4)– 09-11, the avg net worth of 8 million wealthiest households surged from $2.7 million to $3.2 million; for the 111 million households that make up the bottom 93 percent, avg net worth plunged from $140k to $134k

• USA regional differences will accelerate (NJ vs. Nevada).• Renting and multigenerational homes are the new normal.• Surplus of workers, but a shortage of skills (e.g. engineers, farmers). • The “baby bust”, over-expansion and an unsustainable economic model, means pain for colleges (1.9%

fewer high school seniors). • New energy sources and efficiency gains will reshape the economy.

1. World Bank2. Motor Authority3. Coca Cola 4. Telegraph UK5. Stateimpact.npr.org

Investment Strategy

• Beware of the yield trap and financial hucksters!– Non-traded REITs, DPPs, annuities

• Fixed Income Ideas– Stay away from long maturities/durations– Core should be high quality, short-term bonds/funds– Add some spice - global bonds, closed-end muni funds

• Stock Ideas– Core should be high quality, dividend stocks/funds– Overweight sectors with good cash flow and dividends (energy, pharma, utilities,

telecom)– Spice with Emerging Markets– Avoid “momentum” stocks, IPOs

• Alternatives– Avoid hedge funds, non-traded REITs, and anything illiquid– Be wary of commodity stories