The Great Economic Reset CMTA Annual Conference Squaw Creek Lake Tahoe April 13, 2016 Presented by Douglas C. Robinson, RCM Robinson Capital Management LLC SEC Registered Investment Advisory Firm Advisory services offered through RCM Robinson Capital Management LLC Securities offered through Foothill Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC RCM Robinson Capital Management, and Foothill Securities are unaffiliated.
Immigration Adjusted Birth Index 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009 Data Source: U.S. Census Bureau, National Center for Health Statistics, Dent Research
Key Consumer Expenditures/Investments Spending 18 20 Apartments Shopping Centers Offices Colleges 21 25.5 Starter Homes 33 Trade-Up Homes Peak in Spending 44 47 Consumer Life Cycle Age Autos Vacation Homes Resorts 52 Retirement Homes 24 28 32 36 40 44 48 52 56 60 64 68 Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Annual Surveys and Research Memorandum-H.S. Dent RV s 60 65
Men's Apparel 100 80 Expenditures 60 40 20 0 20 30 40 50 60 70 80 Age Source: U.S. Bureau of Labor Statistics Consumer Expenditure, H.S. Dent
Spending on Drugs Expenditures 180 160 140 120 100 80 60 40 20 0 20 25 30 35 40 45 50 55 60 65 70 75 80 Age Source: U.S. Bureau of Labor Statistics Consumer Expenditure, H.S. Dent
Funeral, burial or cremation 300 250 Expenditures 200 150 100 50 0 20 30 40 50 60 70 80 Age of Head of Household Source: U.S. Bureau of Labor Statistics Consumer Expenditure, H.S. Dent
Healthcare Spending Wave 5000000 Births on a 80-Year Lag Immigration-Adjusted Births 4500000 4000000 3500000 3000000 2500000 2004 2014 2024 2034 2044 2054 Source: U.S. Bureau of Labor Statistics Consumer Expenditure, H.S. Dent
Total U.S. Debt Outstanding 1977- Q3 2015 Trillions Federal Govt Trust Funds $60 Federal Govt State and Local Govt $50 Financial Sector Foreign $40 Corporate Consumer Credit $30 Home Mortgage $20 $10 $- 1977 1982 1987 1992 1997 2002 2007 2012 Data Source: Federal Reserve Flow of Funds Report, Treasury Direct, 2016 Government $22.5Trn Financial $15.3Trn Foreign $3.0Trn Corporate $12.6Trn Consumer $13.0Trn Total: $66.4 Trn
Total U.S. Debt Growth vs. GDP 1983-2015 Total Debt GDP $70 Debt Growth= 833% $60 Trillions $50 $40 $30 $20 $10 Debt Growth=2.66x GDP Growth GDP Growth= 313% $- 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Current Debt is 3.54x GDP Data Source: St. Louis Federal Reserve, Treasury Direct, 2016
China Debt Growth vs. GDP 2000-2015 $35 GDP China Total Debt Debt Growth= 2,635% $30 Trillions $25 $20 $15 Debt Growth=3.43x GDP Growth Current Debt is 2.64x GDP GDP Growth= 768% $10 $5 $0 2000 2002 2005 2008 2011 2013 2016 Data Source: Bloomberg, 2016
China Export - Import 1995-2016 Data Source: Bloomberg, 2016
Central Banks Balance Sheet Explosion $14 Federal Reserve European Central Bank Bank of England Bank of Japan People's Bank of China (less forex) Swiss National Bank $12.9T +$8.2T $12 $10 Trillions $8 $6 $4.7T $4 $2 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: St. Louis Federal Reserve, Yardeni Research, 2016
Italy, Bad Loan Ratio 17 Bad Loan Ratio 15 Percent 13 11 9 7 5 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Data Source: Bloomberg, as of 12/31/14
Deutsche Bank Stock Crashes Down 87% from 2008, and 60% from 2015 high 120 Price 100 80 60-87% 40 20 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Data Source: Bloomberg, as of 4/8/16
Total Derivatives Market Over-the-Counter Notional Value Currently 7x Global GDP 800 700 Trillions 600 500 400 300 200 100 0 1998 1999 2001 2002 2004 2005 2007 2009 2010 2012 2013 2015 Data Source: Bank for International Settles, Bloomberg, 2016
U.S. Total Debt as Percent of GDP by Sector, 1916-2014 390% During the last great economic reset, non-government debt fell dramatically to 50% of GDP. Today all debt exceeds 360% of GDP. GSE Financial 150% 50% Corporate Consumer Total Government Data Source: Deleveraging? What Deleveraging? Geneva Reports on the World Economy 16, Luigi Buttiglione, Philip R. Lane, Lucrezia Reichlin and Vincent Reinhart, St. Louis Fed, 2014
$160 $140 $120 $100 $80 $60 $40 $20 $0 Crude Oil 1983-Present 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Data Source: Bloomberg, as of 4/8/16 WTI, $/Barrel
500 450 400 350 300 30-Year Commodity Cycle CRB Index (PPI before 1947) 1980 2008-2011 2038-2040 250 200 150 100 50 Peak 1920 1949-1951 0 1913 1918 1923 1928 1933 1938 1944 1949 1954 1959 1964 1969 1975 1980 1985 1990 1995 2000 2006 2011 2016 2021 2026 2031 2037 Source: Bloomberg, Future assumptions are the opinions of Dent Research and are not guaranteed.
The Velocity of Money GDP divided by M2 Money Supply 2.15 2.05 1.95 1.85 1.75 1.65 1.55 1.45 2000 2003 2006 2009 2012 2015 Source: Bloomberg, 2016
Fed s Inflation Gauge US Personal Consumption Expenditures Core 2004-Present 4.5 3.5 2.5 1.5 0.5-0.5-1.5 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Inflation Fed Inflation Target 2.00-2.25 Percent Source: Bloomberg, 2016
Employment Growth Since 2007 1.15 Foreign Born Native Born Job Growth Indexed to Jan. 2007 1.10 1.05 1.00 0.95 0.90 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Data Source: BLS, Dent Research, 2016
Who s Working? Source: Advisor Perspectives Doug Short, 2016
Food Service vs. Manufacturing Jobs Source: BLS, Zero Hedge, 2016
Unemployment Insurance Claims Lowest since 1973 Source: Advisor Perspectives Doug Short, 2016
US Household Debt Service Ratio Lowest in 35 years 13.5 13 12.5 12 11.5 11 10.5 10 9.5 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Percent Source: Federal Reserve, Bloomberg, 2016
Sacramento County Median Home Price 2000-2016 +197% Source: California Association of Realtors, Bloomberg, 2016
5 Year Treasury Channel 1980-Present 16 14 12 10 8 6 4 2 0 Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Yield Source: Bloomberg, 2016
5 Year Treasury 2011-Present Source: Bloomberg, 4/08/16
USA # 1 Global 5 Year Treasury Rates Compared 1.5 1 Percent 0.5 0-0.5-1 Source: Bloomberg, March 08, 2016
The Buffett Indicator Market Value of Equities Outstanding to GDP close to 2 standard deviations from mean Source: Federal Reserve Bank of St. Louis, Advisor Perspectives Doug Short, 2016
Record NYSE Margin Debt Source: NYSE, Bloomberg, Advisor Perspectives Doug Short, 2016
450 400 350 300 250 200 150 100 50 0 1749 1759 1769 1779 1789 1799 1809 1819 1829 1839 1849 1859 1869 1879 1889 1899 1909 1919 1929 1939 1949 1959 Sunspot Cycles Recession Number of Sunspots 1969 1979 1989 1999 2009 Sunspot Number Source: European Space Agency, NASA, Dent Research, 2016
Sunspot Cycles Source: European Space Agency, NASA, Dent Research, 2016
Stock Market Bubble? Compare November 1994-March 2000 to March 2009-present Source: Bloomberg, Dent Research, 2016
Who s Buying? S&P 500 companies have bought back $2.1 trillion of their own stock since 2010 Source: Bloomberg, Dent Research, 2016
Are Stocks Set to Fall 70% by 2017? Dow Megaphone Pattern 20,000 E 16,000 C 12,000 8,000 A B D 4,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dow Jones Index 5,500-6,000 Source: Bloomberg, 2016, Future return assumptions are the opinions of Dent Research and are not guaranteed.
The Spending Wave Births Lagged for Peak Spending 5,000,000 19,000 16,000 4,500,000 4,000,000 Dow Adjusted for Inflation 13,000 10,000 3,500,000 3,000,000 Immigrationadjusted Births Lagged for Peak Spending 7,000 4,000 2,500,000 1,000 1953 1963 1973 1983 1993 2003 2013 2023 2033 2043 2053 2063 Source: Dent Research, U.S. Census Bureau, Bloomberg, 2016
Questions? These views represent the opinions of RCM Robinson Capital Management LLC and are not intended as investment advice or to predict or depict performance of any investment. These views are subject to change based on subsequent developments. Advisory services offered through RCM Robinson Capital Management LLC, SEC Registered Investment Advisor. Securities offered through Foothill Securities, Inc., Member FINRA/SIPC. Douglas C. Robinson, Registered Representative. Available at iuniverse, Amazon, Barnes & Noble, and Borders.com
Douglas C. Robinson Independent Registered Investment Advisor Doug Robinson is the principal of RCM Robinson Capital Management, an SEC registered investment advisory and management firm specializing in institutional fixed income management and OPEB trust asset allocation strategies. Doug is a frequent guest speaker and long-time member of the California Municipal Treasurers Association. With over thirty years in the investment industry, he is the editor of robinsoncapital.com, an educational web site providing investors with information on institutional fixed income, GASB 45 mitigation strategies and portfolio management. Doug is also a Branch Manager and Registered Principal with Foothill Securities. Doug received his Bachelors of Science degree in Economics from University of Missouri-Columbia and is co-author of Boom or Bust - Understanding and Profiting from a Changing Consumer Economy. Doug also serves as board member to the California State Treasurer's Office, Local Investment Advisor Board (LIAB) which provides oversight to the Local Agency Investment Fund (LAIF), managing $21.3 billion as of February 2016. www.robinsoncapital.com/fi_main.htm RCM Robinson Capital Management LLC Foothill Securities, Inc. 27 Reed Boulevard Mill Valley, CA 94941 doug@robinsoncapital.com Phone: 415-771-9421 Fax: 415-762-1980 The information contained herein is based on sources and data believed reliable, but is not guaranteed. Advisory services offered through RCM Robinson Capital Management LLC, SEC Registered Investment Advisor. Securities offered through Foothill Securities, Inc., Member FINRA/SIPC. Douglas C. Robinson, Registered Representative.