Muhlenkamp & Company Webinar December 1, 2016 Ron Muhlenkamp, Portfolio Manager Jeff Muhlenkamp, Portfolio Manager Tony Muhlenkamp, President Muhlenkamp & Company, Inc. Intelligent Investment Management 2016. All rights reserved.
Welcome All participants are in a listen-only mode. We will conduct a question-and-response session after the presentation. This webinar is being recorded. Muhlenkamp & Company, Inc. Intelligent Investment Management
Tony, Ron, and Jeff Muhlenkamp
Agenda Currencies and Interest Rates U.S. Economic Charts, Business Charts, and Consumer Charts Investment outlook Question-and-response session
150 140 CNYUSD GBPUSD EURUSD JPYUSD Spot Exchange Rates Value of Currency vs. U.S. Dollar Jan2005-Nov2016 Normalized: January 1, 2005=100 (Daily) Chinese Renminbi 130 120 110 European EURO Japanese Yen 100 90 80 70 60 British Pound Sterling 1/05 5/06 9/07 2/09 6/10 11/11 3/13 8/14 12/15 Source: Bloomberg
Nominal Sovereign Interest Rate (%) November 16, 2016 Duration 1 Yr. 3Yrs. 5 Yrs. 10 Yrs. 30 Yrs. France -0.64-0.49-0.14 0.74 1.50 Germany -0.70-0.56-0.33 0.30 0.92 Switzerland -1.17-0.89-0.67-0.14 0.34 Belgium -0.66-0.42-0.17 0.67 1.59 UK 0.11 0.31 0.65 1.39 2.01 Norway 0.48 0.78 1.15 1.63 N/A U.S. 0.76 1.27 1.66 2.22 2.95 Japan -0.28-0.09-0.05 0.02 0.56 Source: Bloomberg
Real Sovereign Interest Rate (%) November 16, 2016 Duration 1 Yr. 3Yrs. 5 Yrs. 10 Yrs. 30 Yrs. France -1.04-0.89-0.54 0.34 1.10 Germany -1.5-1.36-1.13-0.50 0.12 Switzerland -1.19-0.91-0.69-0.16 0.14 Belgium -2.47-2.23-1.98-1.14-0.22 UK -0.62-0.42-0.08 0.66 1.28 Norway -3.22-2.92-2.55-2.07 N/A U.S. -0.84-0.33 0.06 0.62 1.35 Japan -0.78-0.59-0.55-0.48 0.06 Source: Bloomberg
7 10-Year U.S. Treasury Note Rate 2005-Nov2016 Nominal (Daily) Real (Monthly) 6 5 4 Percent 3 2 1 0-1 -2-3 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year Source: Bloomberg
10 9 8 Real Moody's BAA Corporate Bond Rate Real 30-Year Mortgage Rate 2005-Nov2016 (Monthly) Real Moody's BAA Corporate Bond Rate Real 30-Year Mortgage Rate 7 Rate % 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year Source: Bloomberg
Source: US. Bureau of Economic Analysis Shaded regions = Economic Recessions
Recessions Real Gross Domestic Product per Capita 1968-Jun2016 (Yearly) 50,000 Chained (2009) Dollars 40,000 30,000 20,000 10,000 0 1968 1973 1978 1983 1988 1993 Year 1998 2002 2007 2012 Jun-16 Source: US. Bureau of Economic Analysis Shaded regions = Economic Recessions
U.S. Employment - Total Full Time 1968-Oct2016 (Monthly) 140,000 120,000 Thousands of People 100,000 80,000 60,000 40,000 20,000 0 Recessions 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Shaded regions = Economic Recessions Year Source: U.S. Bureau of Labor Statistics Survey includes persons 16 years of age and over
66 Recessions Total Employment Population Ratio 1968-Oct2016 (Monthly) 64 62 Percent 60 58 56 54 1968 1970 1973 1976 1978 1981 1984 1987 1989 1992 1995 1998 2000 2003 2006 2009 2011 2014 Shaded regions = Economic Recessions Year
120 Recessions U.S. Industrial Production 1968-Sep2016 (Monthly) 2007=100 100 Percent of 2007 Base Year 80 60 40 20 0 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Shaded regions = Economic Recessions Year Source: Bloomberg
95 Recessions Capacity Utilization: Total Industry 1967-Oct2016 (Monthly) 90 85 Percent (%) 80 75 70 65 60 Jan-67 Jan-69 Jan-71 Jan-73 Jan-75 Jan-77 Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Shaded regions = Economic Recessions Date Source: Bloomberg
New Orders for Durable Goods $ Billion - Seasonally Adjusted 1968-Sep2016 (Monthly) 350 Recessions $ Billion (Seasonally Adjusted) 300 250 200 150 100 50 0 1968 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Shaded regions = Economic Recessions Source: U.S. Census Bureau Year
U.S. Household Median Income Real Chained 2015 Dollars 1970-2015 (Yearly) $59,000 $57,000 $55,000 $53,000 $51,000 $49,000 $47,000 $45,000 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015 Source: U.S. Census Bureau Year NOTE: In 1996, the U.S. Department of Commerce introduced the chained-dollar measure. The new measure is based on the average weights of goods and services in successive pairs of years. It is "chained" because the second year in each pair, with its weights, becomes the first year of the next pair. The advantage of using the chained-dollar measure is that it is more closely related to any given period covered and is therefore subject to less distortion over time.
165 145 U.S. Consumer Confidence 1967-Nov2016 (Monthly) Recessions 125 Index Value 105 85 65 45 25 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Shaded regions = Economic Recessions Source: Conference Board; Data Normalized 1985=100 Year
18 U.S. Personal Savings Rate % of Disposable Personal Income 1959-Sep2016 (Monthly) 16 14 12 Percent 10 8 6 4 2 0 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 Source: Bureau of Economic Analysis Year
Recessions U.S. Credit Card Delinquency Rate (All Banks) 1991-Jun2016 (Quarterly) 8 7 6 5 4 3 Percent 2 1 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Shaded regions = Economic Recessions Source: Federal Reserve Date
25 Recessions U.S. Light Vehicle Sales (Seasonally Adjusted Annual Rate) 1970-Oct2016 (Monthly) 20 Units - Millions 15 10 5 15 million units annually is roughly the normal level of sales 0 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2011 2015 Shaded regions = Economic Recessions Date Source: Bureau of Economic Analysis
210 Housing Affordability Index 1970-Sep2016 (Yearly) 180 Index Value 150 120 90 60 When the Housing Affordability Index measures 100, a family earning the median income has exactly the amount needed to purchase a median-priced resale home using conventional financing. An increase in the Index means that a family is more likely to be able to afford the median-priced house. 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Year Source: National Association of Realtors; 2016 Quarterly Data
Total U.S. New Privately Owned Housing Units Started Seasonally Adjusted 1959-Sep2016 (Monthly) 3.0 2.5 Units (Millions) 2.0 1.5 1.0 0.5 "Normal" is probably somewhere between 1 mn and 1.5 mn starts 0.0 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Year Source: U.S. Census Bureau
2,300 S&P 500 Index May14-Nov16 (Daily) Brexit U.S. Election 2,200 2,100 S&P 500 Index 2,000 1,900 1,800 1,700 May-2014 Aug-2014 Nov-2014 Feb-2015 May-2015 Aug-2015 Nov-2015 Feb-2016 May-2016 Aug-2016 Nov-2016 Date NOTE: The S&P 500 Index is a widely recognized, unmanaged index of common stock prices. You cannot invest directly in an index. Source: Bloomberg
1,400 S&P 500 Index Sales and Earnings per Share* 2006-2019 (Yearly) 1,200 * Estimated -------- 160 1,000 140 Dollars per Share 800 600 120 100 Dollars per Share 400 200 Sales per Share Earnings per Share (Left Axis) (Right )Axis 80 60 0 40 2006 2007 2008 2009 2010 2011 NOTE: The S&P 500 Index is a widely recognized, unmanaged index of common stock prices. You cannot invest directly in an index. Past performance of EPS growth is not an indicator of future earnings growth. * Source: Bloomberg: 2017-2019 forward estimates 2012 2013 Year 2014 2015 2016 2017 2018 2019
NOTE: The S&P 500 Index is a widely recognized, unmanaged index of common stock prices. You cannot invest directly in an index.
Top Holdings 11/28/16 Company Industry P/E Fiscal Year 2016 EPS ROE ALLIANCE DATA SYS CONSUMER FINANCE 14 20 APPLE COMMUNICATIONS EQUIPMENT 13 20 ON SEMICONDUCTOR SEMICONDUCTOR 14 8 GILEAD SCIENCES BIOTECHNOLOGY 7 20 ANNALY CAPITAL MANAGEMENT MORTGAGE FINANCE 9 1.5 LANNETT CO GENERIC PHARMA 12 9 CELGENE CORP BIOTECHNOLOGY 21 20 MCKESSON CORP HEALTH CARE 11 20 MICROSOFT SYSTEMS SOFTWARE 29 20 SPDR GOLD TRUST PRECIOUS METALS N/A N/A S&P 500 INDEX 18 15 Holdings are subject to change and are not recommendations to buy or sell any security. The S&P 500 Index is a widely recognized, unmanaged index of common stock prices. You cannot invest directly in an index.
Our Checklist: What we observe as the Current State: 1. Consumer Spending Mixed Mixed 2. Business Investment Low Low Future Outlook: 3. Credit Default/Bank Health Good Good 4. Velocity of Money Declining Unsure 5. Inflation (replaces US Politics) Deflation Risk -> Inflation Unsure 6. Federal Reserve and Treasury Harmful Unsure 7. Taxes Harmful Less harmful 8. Regulation Harmful Less harmful 9. Europe & Japan Potentially disruptive Potentially disruptive 10. China Potentially disruptive Potentially disruptive Source: Muhlenkamp & Company, Inc.
Questions and Responses Click on the orange arrow in the upper right-hand corner of your screen to open the control panel where you may submit questions. For some devices, look for the question mark at the top or bottom of your screen. We will contact you if we did not have time to respond to your question during the event. Muhlenkamp & Company, Inc. Intelligent Investment Management The comments made during this webinar are opinions and are not intended to be investment advice or a forecast of future events.
Muhlenkamp & Company, Inc. Intelligent Investment Management