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Economic OutlookEconomic Outlook forfor
2014 and BeyondMike PeQueen CFA CFP
2014 and BeyondMike PeQueen, CFA, CFP
HighTower Las Vegas2360 Corporate Circle, Suite 160
Henderson, NV 89074(702)567-5100
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Global Macro ThemesChina Slower Growth & ReformUS Energy BoomUS Energy BoomUS Recovery ContinuesEurope Fragile RecoveryEurope Fragile RecoveryJapan Reflation ExperimentE i M k t U d PEmerging Markets Under PressureStronger Dollar
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As the World Turns
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Real GDP GrowthReal GDP Growth2013 A 2014 E 2015 E2013 A 2014 E 2015 E
ChinaUS
7.61 7
7.52 6
7.23 0US
BrazilCanada
1.72.51.7
2.62.52.3
3.02.92.5
UKGermanyJ
1.40.5
2.31.7
2.31.75
JapanEuro AreaSpain
1.9-0.41 3
1.551.0
0 45
1.21.41 1Spain
GreeceSource: Bloomberg
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-1.3-4.0
0.45-0.35
1.11.4
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2014 Y E d F t2014 Year End Forecasts
Current YE2014US 10 Year T-Note 2 7% 4 0%US 10 Year T NoteUS Unemployment
2.7%7.3%
4.0%7.0%
Euro – US DollarUS Dollar – Japanese Yen
1.3498
1.25108US Dollar Japanese Yen
British Pound – US DollarUS Dollar – Swiss Franc
981.610 92
1081.561.04
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US Dollar Swiss FrancSource: BAML RIC Report
0.92 1.04
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China
Slower GrowthSlower GrowthMarket – Oriented Reforms
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US E BUS Energy Boom
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King DollarKing Dollar
Abe’s Weak Yen PolicyWh t It T k P li E+ Whatever-It-Takes Policy Europe
+ EM Slower Growth Era+ US Energy Boom+ 2014 Fed Tapering+ 2014 Fed Tapering
Stronger US Dollar8
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US Macro ThemesUS Macro Themes
Energy BoomFed Tapering p gImproving EmploymentHousing Recoveryg yConsumer Deleveraging Almost CompleteState / Local Government SpendingLow InflationMid-Term ElectionsI i B d t D fi it
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Improving Budget DeficitCorporate Financial Actions
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US E BUS Energy Boom
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US Natural Gas Production
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Employment Improvement
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H i RHousing Recovery
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Deleveraging Over?Deleveraging Over?Household debt as a % of total assets
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Source: US Federal Reserve
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H h ld d bt i tHousehold debt service costs
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Source: US Federal Reserve
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US Household Net Worth
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Source: US Federal Reserve
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US Household balance sheet
Assets $83.7 trillion Liabilities $13.4 trillion
Real Estate $20.7 trillionFinancial $57.7 trillionDurable goods $4.9 trillion
Mortgage debt $9.4 trillionConsumer credit $2.8 trillionOther $1.2 trilliong
Other $.04 trillion
Net worth $70.3 trillion
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Source: US Federal Reserve Q1-2013
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Municipal Revenue
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Source: Lord Abbett
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Low Inflation
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Health Care Costs
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China’s Impact on US InflationChina’s Slower Growth =
Lower Commodity Prices =Lower Commodity Prices =Lower US Inflation =
Stronger US Purchasing Power =Stronger US Economy =g y
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US B d t D fi itUS Budget Deficit
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Corporate Financial ActionsHigh Cash Level
+ Low Growth+ Low Growth+ Shareholder Activism
M&ABuybacksyDividend Increases
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R d fi i Ri kRedefining RiskCDS 5-Year Spreads
Exxon 10 Germany 23UK 28
Merck 10
Disney 13
UK 28US 31Switzerland 34Disney 13
Johnson & Johnson 17Japan 54France 58S i 182Google 22
Wal-Mart 22
Spain 182Italy 205Greece 736
Source: Bloomberg
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Greece 736
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Great Rotation 2nd InningMutual Fund Flows June – Sept 2013 ($B)p ($ )
Domestic International Bond Money MarketEquity
y(1.6) 36.9 (117.3) 75.0
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Our ViewUS DollarUS StocksUS StocksGoldCommoditiesBondsEmerging Markets Equities
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How Are Family Offices Allocated?Allocated?
Equities 25%Equities 25%Fixed Income 17%Less Liquid / Alternatives 19%C h 39%Cash 39%
100%
Average Expected Return 8%More likely 4.4%
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Source: Citi Private Bank
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The Dollar Rises
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“If we are in a bubble, it’s the weirdest bubble I have ever seen, where
everybody hates everything.”everybody hates everything.
- Mark Andreesen
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Asset Allocation Inflection PointInflection Point
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Thank YouMik P Q CFA CFPMike PeQueen, CFA, CFP
Managing Director, Partner2360 Corporate Circle, Suite 160
Henderson, NV 89074(702)567-5100