Black Gold?

by Shawn Narancich, CFAExecutive Vice President of Research

Decoupling

With the holiday season in full swing and U.S. investors rejoicing about another year of solid U.S. equity returns, most international investors may be forgiven for feeling like they are getting a lump of coal in their Christmas stocking. In an increasingly decoupled global economy, where China’s growth is slowing and Europe and Japan teeter on the brink of recession, 11 percent returns domestically reflect, in part, the increasingly attractive growth profile of the U.S. economy. What’s surprising is the fact that China’s stock market has risen over 30 percent so far this year, helping buoy emerging market equity returns in a year where stocks have fallen in most foreign markets. Providing better investor access to mainland Chinese equity markets (through linking the Hong Kong and Chinese markets) has helped stimulate investor demand, but the flow of economic data out of the Red Giant remains rather discouraging. Slowing industrial production growth, weaker retail sales, and moribund manufacturing activity all speak to the challenges that Chinese policy makers confront in transitioning the world’s second largest economy from an investment led juggernaut to one better balanced by consumption.

Leading the Way

In contrast, the U.S. economy is moving full speed ahead. The November retail sales growth that came in at the high end of estimates reaffirms our thesis of a healthier U.S. consumer boosted by healthy job gains, rising home prices and the falling price of oil. Healthy retail sales data bely the 11 percent sales decline over the long Thanksgiving Day weekend, indicating that the weak sales numbers were more a function of an earlier start to the holiday selling season. With government spending having apparently bottomed and capital spending on the rise, the error of estimates for Q4 GDP is once again higher.

Crude Thoughts

All of which brings us to the topic that seems to be on everyone’s mind nowadays – oil. Now down 46 percent since June, U.S. black gold is far from it at the moment. Yet we continue to believe that the fundamentals of oil aren’t as bad as the price implies. Developed economy inventories are near five-year averages, global demand continues to grow and, most importantly, because of oil’s correlation with economic growth, GDP globally continues to expand in a world of accommodative monetary policy. Contrast today’s environment with 2008, when oil plummeted over 70 percent in eight months, a washout that coincided with consumer price shocks from $4.40/gallon gas and a global economy on the verge of collapse. The best cure for low oil prices is low oil prices, and at today’s level of around $60/barrel, we expect global petroleum exploration and development spending to fall by 25 percent or more in 2015, sowing the seeds for tighter markets and higher prices.

Indeed, evidence of the supply response to come is already upon us. Lower prices are reducing oil companies’ cash flow, leaving them with less money to reinvest in new wells. We are just beginning to see U.S. shale producers announce their 2015 capital budgets and, so far, the anecdotes support our contention that investment levels will drop dramatically. Indeed, November’s new U.S. well permits number, down 45 percent sequentially, offers investors a taste of the supply response to come. Conoco has announced a 20 percent drop in its capital spending and small independent producer Oasis is cutting its 2015 cap ex budget by 44 percent. Dozens of other independent U.S. producers, those responsible for the domestic energy boom of recent years and which are largely responsible for doubling U.S. production over the past six years, will come to the confessional between now and the end of January.

With less money being expended to replenish reserves from shale wells that deplete up to 50 percent of recoverable reserves in the first two years of production, we expect the oil markets to tighten faster than investors currently believe. We would observe that the incremental U.S. liftings that have driven production growth globally are of much shorter duration than the marginal production of 2008 from the Gulf of Mexico. Deepwater projects can take 5-10 years to produce first oil and, when it finally comes, wells under extreme pressure miles below the seafloor produce at persistently high flow rates for project lives that can last up to 30 years. The point is that supply elasticity is likely to bite much faster this time around and, even with the production backdrop pre-shale, low prices didn’t last for long in 2009. So in this festive season, be thankful for the boost to disposable income that today’s low oil prices provide, but don’t expect them to last.

Our Takeaways from the Week

• The U.S. continues to demonstrate its global economic leadership as blue chip stocks prepare to close out another good year
• $60 oil prices provides a meaningful boost to U.S. consumers, but low prices are likely to prove fleeting

Disclosures

A Pleasant Shade of Gray

by Jason Norris, CFA Executive Vice President of Research

Headline sales numbers from Black Friday looked disappointing with revenues falling 11 percent in 2014, which follows a negative year in 2013 as well. However, when we dig into the data, we see that sales have spread out over the entire week. Many stores have been starting their promotions earlier in the Thanksgiving week, meaning Black Friday is not the seminal event it once was. Coupled with an increasing amount of shoppers going online, the post-holiday shopathon is not the signal to the markets it once was.

Data from the entire weekend looked fine with sales rising approximately four percent, with a 15 percent clip coming from online sales. In forecasting the entire holiday season, industry analysts still expect low to mid-single digit growth. In light of gasoline prices down 35 percent from last year, we are comfortable with that growth forecast. In fact, this led us to increase our allocation to the consumer discretionary sector recently.

Quantitative Speaking

With the Fed wrapping up its quantitative easing last month, the European Central Bank has upped their rhetoric. This week, ECB president Mario Drahgi was more adamant that the ECB will be in the markets buying bonds. This put a small bid on the Euro; however, we are still waiting for the ECB to actually make meaningful purchases. Since 2012 when Drahgi stated the bank would do "whatever it takes" to prop up the Euro economy, there has been a lot of speaking, with little actual easing.

The economic data points coming out of Europe have been neutral at best. While the old adage of "don't fight the Fed" may be appropriate for the ECB and European equities, we would rather focus on large cap U.S. stocks due to a strong economy, falling commodity prices and low interest rates. One potential headwind for multinationals is going to be the strength of the U.S. dollar. The dollar has rallied 10 percent the past few months and this will start effecting overseas results this quarter. Due to this, recent portfolio additions have focused on the domestic economy, rather than the global economy.

Our Takeaways for the Week: 

• Falling gas prices and an improving U.S. economy keeps us bullish on U.S. stocks
• Continued dollar strengthening will benefit U.S. stocks and bonds, while pressuring commodity prices, thus keeping inflation low

Disclosures

10 Investment Themes to be Thankful For

by Brad Houle, CFA Executive Vice President

This week as we gather with friends and family to celebrate Thanksgiving we thought it appropriate to reflect upon recent investment themes for which we are thankful.

Top 10 Investment themes to be thankful for:

1. The midterm elections are over. More important than the outcome is the fact that the elections have been decided and the markets have a reprieve from the election cycle until mid-2015. However, like Christmas displays now appearing in stores prior to Halloween, the 2016 election will start to dominate the news far sooner than it needs to.
2. The Federal Reserve is more open and transparent than it has ever been in its history. As part of the Bernanke Fed, there was an attempt to be more open and transparent relative to communicating interest rate moves to the markets. This transparency has been continued with the Yellen Fed and has been effective in setting the expectations for investors as to the next moves of the Federal Reserve. This openness helps to mitigate the uncurtaining around Fed actions.
3. Unemployment is at 5.8 percent. At the end of 2009 unemployment was at nearly 10 percent. While the labor market has been painfully slow to heal, the rate jobs are being added each month means we should reach theoretical full employment sometime in 2015. Theoretical full employment is thought to be around 5.4 percent unemployment, as every person of working age cannot be employed in the economy due to a variety of reasons.
4. Oil prices have declined precipitously this year. While a decline in oil prices has been a headwind for energy stocks, it is great for U.S. consumers. When gas prices decline, it directly puts money into consumers’ pockets and should help consumer discretionary stocks.
5. The municipal bond market has extraordinarily low default rates. Despite the recent default in Detroit and Puerto Rico's widely publicized troubles, the municipal bond market defaults are exceedingly rare. According to Moody's, the default rate for the entire 43 years in which the data is available is .012 percent.
6. The Federal Reserve is expected to raise short-term interest rates sometime in 2015. This is good news because if this does indeed happen it demonstrates the strength of the U.S. economy. If the Federal Reserve is compelled to raise rates to keep the economy from overheating, it speaks volumes about the robust economic growth in the U.S.
7. The United States has a healthy level of inflation in the economy. Inflation as measured by the Consumer Price Index is running at around 1.7 percent annually. Too much inflation in an economy is damaging, such as what was experienced in the United States in the 1970s. Conversely, too little inflation can be toxic to an economy. Deflation is when inflation turns negative and prices grind lower. This can cause a negative feedback look whereby consumers and businesses delay purchases in hope of getting lower prices
8. The U.S. dollar is strong. It is said that money flows where it is treated best, and, with the robust U.S. economy, our dollar is appreciating against many foreign currencies. This will spur foreign investment in our financial markets.
9. The current economic cycle shows no signs of overheating. A question we get asked frequently is how much longer does this business cycle have to go? Economic cycles die of overheating, not old age. This has been a painfully slow economic recovery that has been around for approximately 5 years. A slow growing economic expansion with no signs of a bubble in the economy has the potential to last.
10. Corporate earnings remain strong. According to FactSet Research, of the 487 companies in the S&P 500 that have reported earnings for the third quarter of 2014, 77 percent have reported earnings above the mean estimate and 59 percent have reported sales above the mean estimate. This equated to a blended earnings growth rate of 7.9 percent for the previous year as of the end of the third quarter.

Disclosures

Easy Money

by Ralph Cole, CFA Executive Vice President of Research

The global economic expansion continues to run at very different speeds around the world. However, the common thread among most all developed economies has been easy money. Today, China joined the party by lowering interest rates for the first time since 2012. The reasons for lower rates has been stubbornly slow growth, and as long as inflation remains low, central banks can feel confident in their choice to stimulate their economies.

Markets were also buoyed this week by dovish comments out of the European Central Bank. With most European economies mired in little to no growth, and the ECB has embarked on its own version of quantitative easing (QE). Mario Draghi hinted in a speech yesterday that their asset-buying program could expand if necessary. The lack of economic growth in Europe can at least be partially explained by Draghi’s habit of speaking about, rather than actually enacting, central bank policy. In Texas, they would call this “all hat and no cattle”.

Thrift Shop

This week just about wrapped up earnings season for retail companies. Earnings were basically strong across the board for retailers from Dollar Tree and Target to Foot Locker and Best Buy. We believe retailers and consumers are starting to feel the benefits of lower prices at the gas pump. Lower gas prices often coincide with higher consumer confidence numbers, which in turn leads to increased consumer spending.

What makes the retail industry so interesting is the plethora of stores from which shoppers have to choose. I don’t think any of us would argue that we aren’t over-retailed in the U.S. This abundance is one reason we don’t see much inflation. Despite a zero percent interest rate policy and a massive expansion of the Fed’s balance sheet, inflation is not yet finding its way onto store shelves. Competition for the consumer’s discretionary dollar remains fierce. Case in point: the phenomenon of Black Friday sales moving earlier into our Thanksgiving holiday week.

Our Takeaways from the Week

• Global markets continue to respond positively to easy money policies around the world
• Lower gas prices should lead to positive sales for retailers this Holiday season
• Have a Happy Thanksgiving and travel safely

Disclosures

Notably Accomplished

  by Shawn Narancich, CFA Executive Vice President of Research

Onward and Upward

As the sun sets on another round of quarterly earnings that again proved the ability of companies to stay ahead of expectations, investors are left to observe that the “mini-correction” stocks experienced a month ago proved to be a fleeting buying opportunity. With just a small handful of retailers left to report, blue-chip stocks at record levels are in part a reflection of corporate America’s winning scorecard for the quarter, one in which S&P 500 companies produced sales growth of 4 percent that combined with better margins and share buybacks to generate high single-digit earnings gains. Not bad for a quarter where many feared that a suddenly stronger dollar would wreak havoc with so many blue-chip companies doing business overseas.

Puts and Takes

Topping the list of key themes we've observed over the past month’s reporting season is a stronger U.S. economy that companies are seeing juxtaposed against incrementally weaker economic conditions in Europe and slower growth from China. The stronger dollar is a by-product of a globally decoupled economy. But while it creates challenges for multinationals translating earnings from countries using the weaker euro and yen, it has had a silver lining for the American consumer. The comparative strength of the U.S. dollar has coincided with lower commodity prices in general and oil prices in particular. Each one-cent-decline in fuel prices at the pump boosts consumers’ disposable income by $1 billion, providing a major boost to household budgets ahead of the holiday selling season.

Ka-Ching!

Investors got their first glimpse into how this dynamic might play out with Macy’s kicking off the third quarter reporting season for retailers with mixed results. The company delivered earnings above expectations, but on disappointing same-store sales that fell in the period. Despite management lowering earnings expectations, investors bid the stock higher, perhaps acknowledging Macy’s solid track record of expense controls, capital returns and the stock’s undemanding valuation. Whether the twin tailwinds of lower energy prices and a strengthening job market will fuel better holiday sales of the apparel, accessories and footwear that Macy’s sells is open to debate, but our bet is that Americans will spend their newfound income; it might just be that what they’re after turns out to be new gaming consoles, smartphones and SUVs!

Rocket Science

Finally, we would be remiss to deny recognition of Europe’s impressive accomplishment of a space mission this week that, for the first time ever, landed a space probe on a comet. If only a continent with the bright minds required to pull off such a feat could realize and act upon the knowledge that its stagnant economy and accompanying 12 percent unemployment rate aren’t fixable by monetary policy alone. ECB leader Mario Draghi knows that newly enacted European style QE by itself won’t pull Europe out of its funk—only labor market reforms, a more competitive tax system, and lower power prices can pull off that deft landing.

Our Takeaways from the Week

• With all but the last few retailers yet to report, corporate America has delivered another solid quarter of earnings that have helped push stocks to record highs

• Tailwinds for the American consumer should result in healthy levels of holiday spending

Disclosures

Putting It All Behind Us

by Brad Houle, CFA Executive Vice President

More than anything, the financial markets dislike uncertainty and the most recent source of angst was the election. With the mid-term elections behind us, the market participants are free to focus on economic data and not political minutia. One of our research partners, Cornerstone Macro, published a great summary of likely legislative change and probable market impact from the change in control of the U.S. Senate.

The European Central Bank (ECB) met this week and the takeaway from their meeting is the ECB is still poised to take extraordinary measures to keep the Eurozone economy from lapsing into a recession and possible deflation. Mario Draghi, the ECB president, reiterated the ECB's commitment to do whatever it takes to keep Europe's economy staggering forward. He did not go so far as to announce quantitative easing which just ended in the United States. The ECB has been doing some bond buying on a smaller scale and keeping the possibility of a large scale quantitative easing program on the back burner in the event the European economy goes from bad to worse.

The employment data for the month of October was released today. The unemployment rate declined to 5.8 percent and nonfarm payrolls increased 214,000 jobs. In addition, there was a 31,000 revision to the September employment report. While the absolute number of jobs was a bit behind the consensus number, this is a very solid report and continues to demonstrate that the labor market is healing.

Takeaway for the Week

• The equity markets traded around all-time highs this week as the labor markets continue to improve and the uncertainty of the election is behind us

Disclosures

Exit Stage Left

by Jason Norris, CFA Executive Vice President of Research

Exit Stage Left Wednesday’s release of The Federal Reserve’s meeting minutes raised more of a hawkish tone. On the surface, the minutes may be viewed as negative; however, due to an improving labor market and an indication of a better growth environment we would welcome an increase in the Federal funds rate next year. As expected, the Fed did formally end its quantitative easing (QE) program with its final active purchase of mortgage-backed securities and government bonds. This is a positive sign for the equity markets and the U.S. economy at large. Coincidentally, U.S. Gross Domestic Product (GDP) data was released this week showing a solid 3.5 percent growth rate, which was better than most expectations. Our forecast has been for the U.S. economy to pick up steam throughout the year, and this data has confirmed that call. This information has supported stocks, yet it has a minimal effect on the bond market with the 10-year treasury yielding 2.3 percent.

Signals Third quarter earnings reports have reinforced our belief of continued economic growth. Seventy percent of the companies in the S&P 500 index have reported earnings to date and the results have shown year-over-year earnings-per-share growth of nine percent and revenue growth of four percent. Healthcare and technology companies have led the way with higher reporting of 11 percent and nine percent top-line growth, respectively. These are two sectors we favor in our equity strategies. These positive earnings reports have enabled stocks to reclaim their footing in this bull market. From the recent all-time high in September, the S&P 500 fell 10 percent over the subsequent four weeks. However, in the last two weeks we have seen a nice snap back with equities sitting just below the record of 2020 set on September 19, 2014. At current valuations (the market is trading 15.5x forward earnings) and with the strong earnings we are witnessing, we continue to favor stocks over bonds.

Different Stages The quarter’s earnings season has not been friendly to the higher growth, momentum stocks. Last week Amazon “cautioned” investors that they are going to reinvest more money into “growth”. Historically, this wouldn’t have been viewed very negatively but it seems investors may be getting impatient for their return on investment as the stock declined by almost 10 percent. Over the last 10 years, Amazon’s profit margins have fallen from six percent to under one percent, while the stock has been a stellar performer. It looks like investors are shortening the leash. Twitter suffered a similar fate this week. Twitter’s growth metrics (advertising, users, etc.) were disappointing, resulting in a 20 percent decline this week. The overall growth of the company is still strong, but investors may be getting anxious when they are paying over 100x future earnings. While many of us are big users of both of these companies’ services that does not make the underlying stock a great investment. Investors need to make sure that the price they are going to pay for future cash flows allows them to earn a competitive return. We just don’t see that in these two names at this time.

Our Takeaways for the Week: 

• U.S. economic growth is improving which will lead to the Fed raising the funds rate earlier rather than later
• Third quarter earnings growth is healthy which supports a reasonably valued equity market

Disclosures

CPI: The Underestimation of Inflation?

by Brad Houle, CFA Executive Vice President

Inflation is an obtuse concept to fully comprehend. For the month of September, the Bureau of Labor Statistics indicated that the rate of inflation, as measured by the Consumer Price Index (CPI), was 1.7 percent for the last year. This would hardly be considered a noticeable price increase for most items. As a consumer, it seems that everything other than flat screen televisions is more expensive all the time, particularly if you consume prescription drugs, go to the doctor or pay for any type of tuition.

It is a fairly consistent complaint among the investment community that the CPI understates the rate of inflation. In fact, there are often conspiracy theories around the measure of inflation because the CPI is the basis for cost-of-living increases for Social Security recipients and other government payments to individuals which is consuming an ever greater percentage of the national income.

In looking at the detail of how the CPI is calculated, it is apparent that a great deal of thought went into the methodology while its value in measuring the true rate of inflation is questionable. As for the conspiracy theories around the inflation measure, it is unlikely that a giant bureaucracy is organized enough to pull off anything like that. No doubt well-meaning people work hard to produce these statics.

Too much or too little inflation is a bad thing. Excess inflation, such as was experienced in the late 1970s in the United States, or hyper-inflation that often occurs in developing nations can create an environment where costs spiral out of control. Conversely, negative inflation or deflation is also a troublesome scenario. In deflation, prices continually drop and as a result, consumption also goes down as consumers wait for lower prices. Japan has suffered from this condition to some degree for the last decade and is attempting to climb out deflation via aggressive economic stimulus.

Following aggressive monetary policy action taken by the Federal Reserve following the financial crisis, there was great concern that excess inflation would follow. Thus far, there has been no excess inflation despite the flood of liquidity put into the financial system to stimulate the economy. In fact, inflation is below where the Fed would like to see it. The Fed's preferred measure of inflation called the PCE Deflator which last month has a yearly increase of 1.5 percent and generally is lower than the CPI. The primary difference between the two measures of inflation is the PCE Deflator allows for the substitution of goods by consumers. The Fed would like to see the PCE Deflator closer to 2 percent.

The attempt to control and measure inflation produces more questions than answers. Inflation is very difficult to quantify and measure. There is no such thing as an average consumer and people are going to experience inflation very differently depending upon their stage in life and level of income. We believe that inflation is muted due to the long, slow recovery we’ve experienced since the financial crisis. The slack in the labor market and broader economy is just now beginning to get wrung out.

Our Takeaways for the Week

The equity markets were strong this week, up around 3 percent as we move through third quarter earnings season. According to data compiled by Bloomberg, about 79 percent of S&P 500 companies that have posted quarterly earnings this season have topped analysts’ estimates for profit, while 60 percent beat sales projections. In addition, the hysteria around Ebola now being called “Fearbola” has hopefully subsided.

Disclosures

Turbulence

by Shawn Narancich, CFA Executive Vice President of Research

Up, Down & All Around

Hello, Volatility. After having very little of it for nearly two years, stocks and bonds rode a roller coaster this week on trading volumes that exploded to the upside. Investors were forced to come to grips with how much could have really changed in such a short period of time. In our view, not nearly as much as the markets would imply. But whatever your persuasion on the topic, what we witnessed this week is exceptional. Blue chip stock gains for the year evaporated Wednesday on nearly 12 billion shares traded and benchmark 10-year Treasuries surged on decade high volumes, all in a remarkable flight to quality bid driven by concerns about a weaker Europe teetering on the edge of recession, plummeting oil prices, and concerns about Ebola. That markets promptly reversed themselves mid-week and stocks moved back into positive territory for the year is a testament to what we believe are still solid fundamentals for the U.S. economy. Healthy levels of job growth, slowing inflation aided by lower energy prices, and newly diminished interest rates that should help extend gains in housing activity all argue for domestic economic growth of 3 percent or better in the second half of this year.

Black Gold?

Unusual markets sometimes elicit misleading interpretations, and no shortages of would-be pundits have attempted to explain a 25 percent free-fall in oil prices since the summer solstice. The Wall Street Journal, as much as we read and respect this quality newspaper, did readers a disservice by proclaiming on Wednesday’s front page banner: Global Oil Glut Sends Prices Plunging. What we observe is that developed market inventories of the black stuff now stand below five-year average levels and, despite the International Energy Agency’s recent minor 200,000 barrel/day reduction in expected global demand for this year, the world is still using more oil than it ever has.

Yes, Chinese demand growth has slowed, the U.S. energy boom has added new production to a global oil market, and OPEC member Libya’s exports have risen by about 500,000 barrels/day recently, but all the hub-bub about swing producers Saudi Arabia, Iran, and Iraq (combined export volumes = 15.5 million barrels/day) cutting official selling prices is nothing more than these countries acceding to recently lower prices on stable sales volume. Although oil demand is unquestionably tied to economic growth, which recent developments have called into question, we still see growing demand for oil tied to what we believe will be record levels of economic output globally. The lack of any smoking gun supply surge and evidence that hedge funds have been exceptionally active in trading oil contracts leads us to conclude that the downside in oil has been more about speculation than physical supply and demand. As seasonal refinery maintenance concludes and crude demand rises into winter, we expect oil prices to climb out of their hole in the low $80’s.

And They’re Off. . .!

Third quarter earnings season has begun and results from the 50 or so companies that have reported to date have been relatively encouraging. Banks like JP Morgan and Citigroup are beginning to benefit from rising loan volumes and higher trading volumes in fixed income, currencies, and commodities, while benchmark industrials like GE and Honeywell are demonstrating the ability to navigate a stronger dollar environment without reporting excessive hits to the bottom line. In part because of the industrials’ foreign currency exposure, investor expectations for earnings in this group were muted into earnings season, so decent results are being met with enthusiasm. Next week the floodgates will open wide, as hundreds of additional companies across industries come to the earnings confessional.

Our Takeaways from the Week

• Modest losses in the stock market belie what was one of the most volatile and actively traded weeks in recent times

• Third quarter earnings season is underway, and results so far are encouraging

Disclosures

Slowdown?

by Jason Norris, CFA Executive Vice President of Research

The first couple weeks of trading in October have been volatile, primarily on the downside. While the U.S. economy continues to print positive data points, most other regions around the globe seem to be experiencing some headwinds. We continue to see deteriorating economic data coming out of the Eurozone. Germany had been stronger; however, recent data is pointing to the country possibly entering into recession. Industrial production and manufacturing orders came in weak, and this concern has pushed the yield on the 10-year German Bund to 0.84 percent.

China is a wildcard as well. Growth has been slowing moderately; however, Thursday evening technology investors were greeted with bad news from a key component supplier. Microchip Semiconductor, a supplier of chips that go into a broad array of consumer, household and industrial products, issued a warning citing weakness in China. The company believes this is a short-term issue, but demand just three months ago was strong. This resulted in a drubbing of the Philadelphia Semiconductor index and caused the industry to be down over 5 percent on Friday. Even though there may be some general hiccups in demand, we continue to play the semiconductor space through specific technologies and applications, primarily in the wireless space.

We don’t anticipate a slowdown here in the states. The U.S. economy should continue to exhibit solid growth and decouple itself from the rest of the globe. The most recent positive development has been the decline in energy prices over the last couple weeks, which will result in a nice increase of discretionary income for U.S. consumers.

When Doves Cry

The Fed released its meeting minutes earlier this week and the capital markets were pleasantly surprised. There had been some concern that the Fed may become more hawkish and looking to tighten. However, contents of the minutes showed the Fed to be focused on the data. They highlighted benign inflation, a strengthening U.S. dollar (which is positive for low inflation) as well as increased risks of a global slowdown due to Europe’s stalling growth. We still believe that the Fed will be looking to raise the funds rate in the second quarter of 2015. Even though inflation remains low, U.S. economic growth will support the beginning of a rate hike cycle.

European Central Bank President Mario Draghi also signaled his dovish intentions for the ECB earlier this week. At a speaking engagement in Washington D.C., he stated that the bank was willing and able to alter its current bond buying program which may eventually move from just asset-backed securities to actual sovereign debt. We believe the ECB will be active in the market and will attempt to push growth higher to fight any possibility of deflation.

Our Takeaways for the Week: 

• While the Eurozone looks to be slowing, U.S. economic growth remains healthy which is positive for both the U.S. dollar and equities
• The Fed will remain data dependent when determining when to increase rates, which probably won’t happen for another 6-9 months

Disclosures

Growing Pains

by Ralph Cole, CFA Executive Vice President of Research

Outside of the United States, global growth is challenged. Stagnant economies in Europe, Japan as well as slowing growth in China have led to concerns that the U.S. economy will have a difficult time moving forward on its own. Economic numbers this week were on the slower side here at home.

On the first Friday of each month the jobs report is released and today’s number was quite strong with the economy generating 248,000 new jobs in September. Wages continue to rise slowly and aggregate work hours are expanding to improve as well.

This slow-and-steady growth should enable the stock market to grind higher in the coming months. Worries about slowing global growth and the end of quantitative easing have led investors to take some profit in the past several weeks. These pullbacks were anticipated with the imminent Fed rate hikes in the second quarter of next year.

It’s All About the Money, Money, Money

Or should we say it is all about the currency? With U.S. growth outpacing all other developed markets around the world, with the exception of the United Kingdom, it has caused the dollar to rally relative to other currencies. This strength has several ramifications.

First, it makes our assets more appealing to the rest of the world. With rising interest rates and higher government bond yields than other developed economies, capital is starting to flow to the U.S. This has led to a drop in interest rates and further strengthening of the dollar. Think of this as a virtuous cycle.

Second, this could act as a headwind for third-quarter earnings for multinational corporations. U.S.-based companies that sell overseas will take a hit on earnings that occur in other countries, depending on how much the dollar has strengthened relative to the currency of the country where the revenue was generated.

Finally, it is very good on the inflation front because a strong dollar allows U.S. consumers to purchase goods brought in from other countries at a lower price, especially commodities. On the margin, this should help keep a lid on inflation.

Our Takeaways from the Week

• Job growth continues at a steady pace. This a big positive for the economy and will eventually lead to Fed tightening next year
• Growth fears in the U.S. and around the world have led to increased volatility in recent weeks

Disclosures

Seasons

by Jason Norris, CFA Executive Vice President of Research

Seasons

The more things change, the more they stay the same. Five months ago, we rebuked the old Wall Street adage of “sell in May and go away” which, through the end of August, was a good call. From May 1^st to Aug 31^st, the S&P 500 was up just over 7 percent. However, just like clockwork, the month of September looks to be producing the same results it historically has. Since 1928, September is the only month out of the twelve that has an average negative return. With only a couple of trading days left, it looks like that trend will not be “bucked” this year. Even though there is still time to pull even, the end of the month is usually the weakest (see below).

Source: Renaissance Macro Research

Send for the Man

While this has been a bad week for stocks, it was also not a good week for healthcare mergers and acquisitions. On Monday afternoon, U.S. Treasury Secretary Jack Lew issued some administrative rules making it harder for U.S. companies to start inversion mergers. This type of merger allows a U.S. company to buy a smaller foreign company and relocate offshore to lower tax jurisdictions (see an earlier post for details). Most of these deals are centered in the healthcare space and while these changes will not stop potential inversions, they are designed to make them more difficult. For example, Medtronic is currently in talks to purchase Covidian (based in Ireland) and would use a meaningful amount of offshore cash to finance the deal. With these new rules, Medtronic would not have access to that cash without paying U.S. taxes. Therefore, they will have to look for other financing means, most likely debt, thus slightly increasing the cost. We still believe the deal will be completed, but it does show that the U.S. Treasury is adamant about changing this part of the U.S. tax code. AbbVie and Shire may also be affected; however, the tax benefits are not as meaningful and the gains from the Shire pipeline are significant enough to proceed.

Lesson Learned

Last week was not a good week for Apple. After announcing a record weekend of sales for the iPhone6 and iPhone6+ with over 10 million handsets sold (and this without shipping any to China), any good financial news was eclipsed by issues with the iPhone6+ bending and a botched iOS update. Investors didn’t have patience for the stock during the last few days. We believe that despite these hiccups, this iPhone launch will net over 60 million units this month, and based on pricing and component costs, should be accretive to gross margins.

What we know

• The trend of September probably won’t be broken and stocks will give back some of their summer gains
• Both buy and sell side analysts have been on the phone with their tax attorneys due to Secretary Jack Lew’s administrative order regarding inversions

Disclosures

Onward and Upward

by Shawn Narancich, CFA Executive Vice President of Research

Investors attempted to divine the future of U.S. monetary policy following this week’s Fed meeting and watched with wide eyes as Alibaba became the largest ever U.S. IPO. For investment bankers underwriting shares of Alibaba, the timing of this $22 billion offering couldn’t have been better as U.S. stocks remain well bid amidst record levels of corporate profits and low inflation. Do record levels for U.S. stock prices and a feeding frenzy for the newly traded shares of Alibaba (trading up 36 percent in its debut) indicate speculation and excess, or is the S&P 500 at over 2,000 simply a marker on the path to further gains? Judging by the amount of retail investor cash on the sidelines and what appears to be an accelerating rate of economic growth domestically, we believe that equity valuations are reasonable. Our call is for stocks to track rising earnings and outperform bonds as the Fed pares its program of QE and ultimately starts raising interest rates next year.

Fed Semantics

All of which brings us to the details surrounding Yellen & Co.’s Fed meeting this week. Investors expected QE to be trimmed again, but the question for many investors surrounded the language with which Yellen would describe the timeframe between QE termination and the onset of rate increases. Juxtaposed against another benign inflation reading reported earlier this week (1.7 percent on the CPI), considerable time was retained as the Fed’s operative phrase. And why not? Commodity prices are dropping thanks to the stronger dollar and weaker growth from China, while unit labor costs are well contained at +2 percent. Recognizing that the Fed operates under a dual mandate to limit inflation to 2 percent and promote full employment, the error of estimate seems to be lower in deciding how fast the Fed raises interest rates, acknowledging that the 6.1 percent level of unemployment most likely overstates the degree of labor market tightness because labor force participation is so low. So is the market for Fed Funds futures correct in undershooting the FOMC committee’s collective prediction that short-term rates will rise to 1 3/8 percent by the end of next year? Only time will tell, but we believe that the Fed remains dependent on the tenor of incoming economic data to determine how fast rates will normalize.

Approaching Quarter End

With the Fed meeting behind us, a spattering of odd lot earnings reports this week from the disparate ranks of Fed Ex (good numbers, stock up), General Mills (bad numbers, stock down), and Oracle (disappointing numbers, stock down) has investors beginning to consider what could become of the next earnings parade that will start in just a few short weeks. We see puts and takes. Inasmuch as the U.S. economy is outperforming other regions at the same time the trade-weighted dollar has surged, U.S.-centric companies stand a better chance of meeting and/or exceeding estimates. In contrast, larger multi-nationals could struggle with currency translation and economic headwinds from a moribund European economy and slowing growth in China.

Our Takeaways from the Week

• Stocks remain well bid as investors come to grips with the prospects for Fed tightening next year

• Third quarter earnings season is right around the corner amidst currency headwinds for multi-national corporations

Disclosures

Independence for Scotland and a UK haggis famine

by Brad Houle, CFA Executive Vice President

Haggis is a cuisine of Scotland characterized by Wikipedia as a savory pudding containing sheep's pluck (heart, liver and lungs) minced with onion, oatmeal, suet, spices and salt mixed with stock. It is traditionally encased in the animal's stomach and simmered for approximately three hours.

The often lampooned delicacy was featured in the 1993 film, “So I Married an Axe Murder,” staring Mike Meyers. In the comedy, Mike Meyers’ character of Scottish decent when as asked about his fondness for haggis responded, “I think it's repellent in every way. In fact, I think most Scottish cuisine is based on a dare.”

On September 18, a referendum for Scottish independence from the United Kingdom will be put to a vote. Recently, polls suggest that it will be a close outcome. This situation is creating uncertainty and we have seen the pound sterling weaken as a result. At stake is revenue from the oil-rich North Sea which has been greater than 2 percent of the UK's revenues down from over 6 percent of revenue in the 1980s. The North Sea fields are off the coast of Scotland and there is some question about which country would control the revenue after a split. There have been many comparisons of an independent Scotland and Norway based on the countries similar populations and potential energy wealth. While the North Sea fields are in a period of declining production, the revenue would be material to an independent Scotland.

If a vote for independence passes, the UK's fragile recovery from the financial crisis will be called into question. The UK economy has slowly been crawling out of the economic downturn of the Great Recession in a similar fashion to the U.S. A split-off of Scotland would potentially stall the recovery.

The pending referendum has also created uncertainty relative to business investments in that there is a question about the political landscape should a split occur. In a similar situation, Quebec had a referendum for independence in 1995 that failed. However, the uncertainty that it could occur again was at least partly responsible for an economic malaise in the province and reduced business investment.

In Spain, the region of Catalonia has a referendum in November of 2014 for possible secession.  The impact of this would be negative for Spain as its economy is in far worse shape than the U.S. and the UK.

While not a catastrophe in the making, an independent Scotland or Catalonia destabilizes what is a tenuous recovery in Europe. Most of Continental Europe is suffering from anemic growth, continued high unemployment, massive indebtedness and the specter of deflation.  Above all, the financial markets hate uncertainty and these types of changes are potentially disruptive to the European recovery.

Other Takeaways for the Week

• Apple introduced the iPhone 6, Apple Watch and Apple Pay this week, which were generally well received. The Apple Pay secure transaction using an iPhone rather than a physical credit card has the potential to revolutionize how items are paid for at retailers.
• The late Joan Rivers often used humor regarding her financial life as part of her act. One memorable quote that bears mentioning is, “People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made.”

Disclosures

Somebody’s Watching Me

by Jason Norris, CFA Executive Vice President of Research

There were two high profile data breaches this week which highlighted the importance of cyber security, as well as “implied privacy.” Home Depot announced that they had a breach where credit and debit cards used at its stores may have been compromised. Initial speculation was that this may have just happened within the last few weeks; however, some reports indicate the breach may extend back to April of 2014. There were also reports from Goodwill, Dairy Queen and Supervalu that some of their locations may have experienced a data breach. What this shines a light on is the importance of corporate security, as well as vigilant consumers. One potential solution to this problem would be the implementation of “chip and pin” debit/credit cards. Most of the world has already implemented this means of transaction, but the U.S. has not. The main difference between “chip and pin” cards and standard debit cards is, when using a chip card, there is no magnetic strip to swipe. The card is put in a Point of Sale (POS) terminal, the chip is read, and the consumer has to input a PIN number. The security for these transactions is much more reliable. The chip cannot be copied like a magnetic strip can (as we saw in the Target case, and it looks like the Home Depot breach as well.) Visa and MasterCard are big proponents of this technology; however, it has been very slow to roll out in the U.S. The Netherlands company NXP Semiconductor is a key player in the technology for these cards.

The distribution of several celebrities’ nude pictures this week has also highlighted the importance of personal cyber security. Over the weekend, more than 100 personal iCloud accounts were hacked and private photos were leaked to the media, with several prominent actresses being victimized. Apparently, this was a case of hackers easily decoding individuals’ passwords. While this action is not condoned, individuals have to remember that any material that is stored in the cloud runs the risk of being compromised.

Less Than Zero

The European Central Bank continued to take rates lower this week by reducing its deposit rate to -0.2 percent from -0.1 percent. You are reading that correctly, that is a negative number. This seems to be more symbolic, rather than having much of an impact on the market. The market impact decision came in the same announcement that the ECB will increase its purchase of ABS (Asset-Backed Securities). This is very similar to what the U.S. Fed had been doing with its purchase of mortgage-backed securities. The key item missing is that the ECB did not announce a plan to purchase sovereign debt. The ECB is hoping banks will sell their ABS to them and in its place, make loans. Europe continues to sputter out of recession with expectations of GDP growth and inflation below 1 percent. This move by the ECB showed the market that it is willing to support European economies, although one has to wonder if they have enough power to do so.

Why Worry

The employment report this morning was a disappointment with the U.S. only adding 142,000 jobs in the month of August; expectations were for over 200,000.  Ferguson Wellman believes this data will eventually be revised upward.  The economic data the last few months has been very robust and is not consistent with this weak jobs number.  Therefore, we aren’t concerned about the number unless other economic data starts to signal a slowdown.

Gameday

With the Seattle Seahawks opening game win Thursday, it reminds us of the Super Bowl stock market prediction. Some may recall when we highlighted the belief that if the Seattle Seahawks won the Super Bowl this year it would foretell a positive year to the market. So far so good with a 9 percent+ gain in the S&P 500 to date. Even with this strong run, we believe that earnings growth and low inflation will continue to be tailwinds for equities, pushing them higher to year-end.

Our Takeaways for the Week

• Internet security will become more of a focus for companies and individuals
• Global central banks are supporting economies - coupled with strong earnings, this is a positive for stocks

Disclosures

The Last Days of Summer

by Ralph Cole, CFA Executive Vice President of Research

Stronger The U.S. economy was indeed stronger than first reported in the second quarter as estimates were revised higher this week when the commerce department reported that the U.S. economy grew 4.2 percent during the quarter. This pace fits with our narrative that the U.S. economy is truly getting healthier, particularly in the aftermath of a very harsh winter.

In fact, there was a lot to like about most of the economic reports this week. For example, durable goods orders grew 22 percent, led by airplanes; unemployment claims came in again under the 300,000 mark - yet another example of vitality in the labor markets; auto sales for the month of July were robust at over a 16 million annual rate of sales. In summary, current economic statistics suggest a sustainable expansion with moderate inflation.

Witchcraft Black magic may be the only explanation for ultra-low interest rates in the face of sound economic numbers. Our industry heuristic states that strong economic growth ultimately must translate into higher interest rates. Not so fast my friend. While the U.S. economy is growing quite nicely, Europe is suffering from falling growth rates, and plunging inflation which has contributed to record lows in interest rates throughout the Eurozone. For example, Germany’s 10-year bund fell to a .88 percent yield while 10-year debt yields touched 1.24 percent in France and hit a 2.22 percent in Italy. With European Central Bank chief Mario Draghi’s most recent speech in Jackson Hole last week, he essentially took perceived credit risk off the table for the Eurozone. With a compelling endorsement of U.S. style quantitative easing on the horizon, investors clearly are (for the time being) comfortable holding European debt.

Lower rates throughout the Eurozone have effectively put a bid under U.S. bonds. In the global market for debt, savers view U.S. debt as a good deal at these levels and continue to buy. Studies estimate that the downward pressure on U.S. rates from lower European rates is anywhere from 20–30 basis points. As you can see from the chart below, U.S. 10-year yields are at their outer-bounds relative to the yield on the 10-year German bund.

Our Takeaways for the Week

• The U.S. economic expansion has taken hold, and looks to be sustainable throughout the second half of 2014
• Lower interest rates around the world and continued quantitative easing by the Fed has kept a lid on interest rates … for now
• The end of summer brings the anticipation of football season, and the end to QE infinity

Disclosures

Ferguson Wellman's Monthly Blog for Oregon Business

Read the blog authored by Ferguson Wellman's Jason Norris @OregonBusiness. http://ow.ly/AI8NU Disclosures: http://ow.ly/AI8P2

The Talking Heads

by Shawn Narancich, CFA Executive Vice President of Research

A good indicator of financial markets adjusting to a slower rate of news flow is the frequency with which the same stories are replayed and debated in the financial press and on television. With retailers now wrapping up second quarter earnings season, Wall Street strategists and commentators have resorted to debating ad nauseum what will happen to short-term interest rates once the Fed ends its program of quantitative easing. Minutes of the latest Fed meeting this week revealed that the Fed will remain data dependent, letting incoming economic reports and anecdotal Beige Book reports tell the story of progress for the economy in general and for the labor markets and inflation in particular.

On the latter topic, policy makers received reassurance this week that inflation is not presently a problem, as headline CPI numbers came in spot-on with the Fed’s 2.0 percent target. Tame inflation indicates that labor markets, absent select areas in energy and manufacturing, still contain the sufficient slack necessary to boost output without spurring a wage spiral. As the old saw says, time will tell. In the meantime, investors seem to be tuning out the chatter as they bid equities to new record highs.

Like Sands Through the Hour Glass. . .

Believe it or not, we’re now halfway through the third quarter and, once again, the error of estimates appears to be on the downside with regard to economic growth forecasts. While this week’s housing statistics were encouraging, with July new housing starts up 16 percent sequentially, a key fly in the ointment was last week’s retail sales report, which came in flat with June numbers and continued a disappointing trend of sequentially slowing retail sales since May. At a time when international headwinds are increasing thanks to Europe teetering just above stall speed and China continuing to undergo a growth-slowing transition away from excessive investment, our forecast for 3 percent GDP growth domestically is starting to feel just a bit optimistic.

Ka-Ching!

As tempting as it might have been to write-off last week’s poor retail sales report as a statistical anomaly when juxtaposed against increasingly positive employment numbers, considerable anecdotal evidence from retailers reporting fiscal second quarter numbers affirms the data. Two key bellwethers of American retailing – Wal-Mart and Target – both reported earnings declines on moribund U.S. sales, and investors have consistently overestimated the companies’ earnings power over the past six months. In addition, Macy’s surprised investors by uncharacteristically missing numbers and lowering sales guidance. Alas, this week brought some better news on the retailing front, with Home Depot reporting strong sales and earnings coupled with a boost to their full year earnings forecast. In contrast to the drubbing that Macy’s took, stock of the home improvement leader broke out to new all-time highs. Similarly, off-price merchandisers T.J. Maxx and Ross Stores both outperformed Wall Street expectations and were accordingly rewarded by investors. With retail earnings reports nearly wrapped up for the quarter, we observe that results are hit and miss, and that investors are best served to take a rifle shot approach to owning specific names advantaged by key trends in retail.

Our Takeaways from the Week

• Stock prices remain resilient despite mixed economic data and geopolitical turmoil globally
• Retailers are book-ending another quarter of better-than-expected earnings in general, though one with more cross-currents below the surface

Disclosures

Sanford and Son: Bonds Hit a Rough Patch

by Brad Houle, CFA Executive Vice President

Sanford and Son was a TV series in the 1970s about a disagreeable junk dealer and his adult son. In one reoccurring gag in the series the main character, Fred Sanford, would dramatically grab his chest and exclaim, "Oooo….It’s the big one….You hear that, Elizabeth… I'm comin' to you."  This simulated heart attack was perpetrated by the Fred Sanford character to make his point when exasperated and was always a false alarm. Recently, the junk bond market hit a rough patch with investors exiting junk bond funds, causing bond prices to decline. The question at hand is, is this correction "the Big One," meaning a new credit crisis, or simply a minor correction akin to the dramatic fake heart attack that Fred Sanford used to torture the other characters on the show?

Bonds that are below investment grade are often referred to as junk bonds due to the lower credit quality of the companies issuing the bonds. Junk bond is somewhat of a pejorative description of an important part of the bond market. Small companies that are growing, which is a large engine for the U.S. economy, often fit into the category of below investment grade credit. It is important that there are public market debt financing options available for these entities. Because of the lower credit quality, investors demand more compensation in the form of interest in order to loan these companies money. Also due to the lower credit quality, there is a higher potential default risk for these bonds.

Recently, there has been an outflow of money from high yield bond funds as investors have become nervous about the risks of below investment grade bonds. With interest rates being so low for an extended period of time, the hunt for yield by investors has been intense. Money has been flowing into the type of investments that can offer a higher income than the traditional bond market. Below investment grade bonds have been one of the asset classes that has benefitted from this cash flow. As a result, the prices of high yield bonds have been bid up and the resulting yields are down because they move inversely to one another.

The higher the risk in a bond, the higher the yield should be to compensate for the risk. The way risk is measured in high yield bonds is the yield spread over U.S. Treasury bonds. Bonds issued with the full faith and credit of the U.S. Government are considered to be riskless with respect to default. High yield bonds can default and, as a result, investors receive additional interest over a treasury bond to compensate for that risk. For example, if a U.S. 10-year Treasury bond is yielding 3 percent, a high yield bond should yield 8 percent, given the historical relationship. Traditionally, the average spread between high yield bonds and U.S. Treasury bonds is 5 percent. With the insatiable demand for income, high yield bond prices have risen to a point where investors are only getting 3 percent more interest than treasury bonds.

Our view is that this is a normal correction that has more to do with the recent stock market volatility than credit quality. The high yield market is often more closely correlated with the stock market as opposed to the bond market.  On average, the underlying credit quality of high yield bonds is better than average as evidenced by the default rate. According to Standard & Poor’s, the default rate on high yield bonds has recently been around 2 percent, well below the long-term average of just over 4 percent.

With the strong demand for high yield bonds, the valuation probably did get extended; however, we don't believe this is the start of another credit crisis.

Our Takeaway for the Week

• Geopolitical events continue to drive equity and bond market volatility

Disclosures

Summertime Blues

by Jason Norris, CFA Executive Vice President of Research

Recent weakness in the S&P 500 has led to a lot of chatter regarding the inevitable pullback in equities. While the last few weeks have exhibited some weakness, stocks are still up close to 5 percent, year-to-date. While the United States continues to show improving growth, as seen in recent jobless claims and the Purchasing Managers Index (PMI), global political affairs have wound the markets tight. Russia continues to make noise in the Ukraine while the Middle East is demonstrating that nothing has (nor will) changed for decades. This uncertainty coupled with growth concerns in both China and Europe has led to a rally in bonds as well as a minor sell-off in equities.

The 10-year Treasury now yields just above 2.4 percent, which is the lowest in over a year, as global investors flock to the U.S. dollar and park cash in “risk free” assets. This flow of funds has resulted in weakness in equities. U.S. equities are down close to 4 percent from recent highs which have led to some talking heads focusing on an impending sell-off. However, these 2 to 5 percent pullbacks are normal in bull markets. For instance, over the last 30 months, we have seen nine 2+ percent pullbacks, but the S&P 500 is up over 60 percent in that period. What we continue to watch is improvement in the U.S. economy, growing corporate revenues and reasonable valuation. The current environment is favorable for all of those.

Messin’ with a Hurricane

This week brought the first hurricane to the Hawaiian Islands in 22 years, as well as a “storm of headlines” regarding U.S. companies relocating offshore. The equity market was not too happy with Walgreens’ decision earlier this week not to seek a “tax inversion” with its pending acquisition of Alliance Boots in Switzerland. While domiciling in Switzerland would have saved Walgreens billions of dollars in tax expenses, the company decided stay committed to the state of Illinois. There is speculation that the Obama administration’s use of the bully pulpit was a key factor in management’s decision to continue to pay higher taxes. We believe that an inversion would be more difficult for Walgreens to pull off since most of their revenues are generated in the U.S., thus no offshore cash to repatriate. On the other hand, companies like Abbvie and Medtronic have meaningful amounts of international business, thus their “inversion” acquisitions (Shire and Covidian, respectively) would be easier to justify.

What this recent trend highlights is the need to restructure the U.S. tax code so companies can be more competitive globally. While many of these deals may still be pursued, the tax savings is a key attribute in the overall structure. What can’t get lost in the noise is that although U.S. companies may change their mailing address, they will still bring their offshore cash back to the U.S. and reinvest domestically. With a mid-term election this year, major tax reform may not happen at least until 2015, and possibly not until after the 2016 presidential election.

Too High to Fly

A few weeks ago, the state of Washington started selling recreational marijuana which coincided with the cracking of the high-yield bubble. High-yield bonds have been a strong performer over the last several years; however, like stocks, the month of July hasn’t been friendly to the high-yield market. Spreads have started to increase in the face of lower Treasury yields. This culminated with over $7 billion exiting high-yield funds last week. We don’t believe this is a “canary in the coal mine” with respect to corporate America; however, we are watching it closely. High-yield bonds are trading at historically tight levels, just over 3 percent above Treasury yields, as investors seek income. The long-term average spread has been close to 6 percent higher than Treasuries. Therefore, we would not be surprised if that market continues to show poor performance as we revert back to the mean. While, there are times we may venture into lower rated bonds, we believe that the market as a whole is a bit rich and would wait for spreads to widen further before we allocate additional capital.

Our Takeaways for the Week

• Minor equity pullbacks are common and investors need to stay focuses on the fundamentals
• While July saw a “risk-off” market, we still believe equities will outperform bonds for the rest of 2014

Disclosures