May 2015

The month ended with a selloff of 1.5 % wiping out most of April’s gains yet the market eked out a gain of 0.1% on the DJIA and 1.3%, on the S&P 500 year to date.

The yield on the 10 year Treasury closed at 2.03% down from 2.13% at year end. I shares Core U.S. Aggregate Bond Index – AGG, closed up 1.5%. Gold closed lower on the year while WTI oil has rebounded sharply from its $44/bbl. January and March lows.

We are in the midst of earnings season. With 201 companies reporting as of April 24th, 73% were above the mean estimate while only 47% reported sales above mean estimates. The 12 month forward P/E ratio is 16.8 x S& P 500 estimates of $123.83 according to Factset.

The Euro currency has rallied 7% off its March lows after a 17% plunge from the first day of 2015.

German 10 year bund yields settled at 0.36% after dropping to merely 0.7 %.

Switzerland has a negative 0.02% yield out 10 years and Japan pays a paltry 0.33%.Central Bank demand for sovereign bonds exceed issuance in major developed economies.

Bill Gross says shorting the German Bund may be the greatest opportunity of his lifetime! Negative yields are a certain loser for savers.

We conclude that with historic low yields, stocks are better bargains than bonds and perversely may be less risky.

These quotes from the WSJ illustrate the principal dilemma faced by investors. “The yield on the U.S. Treasury 2-year note is 0.52% and has averaged 0.73% since the beginning of 2008. In contrast, from 1988 through the end of 2007, the average yield on the two-year Treasury note was 5.23%....At the end of 2006 the average yield on a one-year CD was 3.8% and the average yield on a five-year CD was 4.1%, according to Bankrate.com.

Persistent low rates have forced investors into dividend paying equities. 47 % of S&P 500 stocks have dividend yields greater than the 10 year U.S Treasury yield.

Currently U.S. treasuries yield 2.03%. We don’t have strong conviction whether 10 year Treasuries will go 50 basis points higher or lower by year end.

We believe 2% inflation targets in the U.S., Europe and Japan will be a stretch in 2015. We do however expect better GDP and profit numbers in the second half of 2015.

With a forward estimate of $123.83 on the S& P 500 index, we calculate as follows:
123.83 of earnings / 2085 the SPX close on April 30 the = 5.9 % earnings yield.

This is a risk premium of 3.87 percent over the 10 year note, enough to compensate for holding riskier shares.

Other methods to measure value argue stock prices may be too high but low rates are here for some time to come and underpin prices as earnings and dividends both move higher.

Stocks look attractive in Europe and Japan where weak currencies and massive QE monetary programs are driving savers and pension funds into stocks given near zero bond yields. China has moved toward easy money and it has ignited a heretofore under performing market.

The wealth gap continues to widen as the rich have gotten richer as owners of shares, bonds, and high end urban real estate. Investor’s Business Daily points out that had we experienced a Reagan like economy with annualized 4% GDP versus the 2% annual pace we have seen since 2009, the U.S. would be richer by $2.5
Trillion in GDP terms or nearly $20,000 for an average American household.

Lack of investment due to low capital spending, weak employment and slow wage gains are the result of higher taxes, burdensome regulation, and low confidence in future growth.

Many nervous investors have stayed on the sidelines due to mistrust of markets and policymakers. This scenario leads us to conclude we will experience a longer than average economic and market cycle.

2015 is unfolding much like 2014 with GDP adjusted for price changes, up 0.2% in the 1st quarter.

The U.S. Federal Reserve Bank is preparing to raise in short term rates as economic data is expected to strengthen later this year.

Stocks should be able to weather turbulence created by higher rates, if they are modest and gradual. Stocks tend to climb after the first rate hike.

Needless to say too much U.S. dollar strength, the Iranian nuclear negotiation, Russian aggression and the
Al Qaeda/ ISIS war on the civilized world are possible roadblocks to higher prices.

Doug Coppola

John Coppola

May 1, 2015

Communication is for informational purposes only & doesn’t constitute offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by CFA or an associated person or entity. CFA does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. We do not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein & not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed

April 2015

The S&P 500 closed the quarter at 2067.89, + 0.04% year to date but 2.3 % below its March 3rd all time high. The DJIA edged down 0.03% year to date at 17,776.12. According to Fact Set the SPX sells at 16.7 times forward 12 month earnings above the 14.1 times ten year average. Only 6 SPX companies have issued positive guidance for the first quarter the lowest number since 2006.

Small and Mid-cap stocks have begun to outperform their larger brethren. Cold weather, lower oil prices, and dollar strength along with a West Coast port slowdown have reduced earnings estimates along with Q1 GDP forecasts. For Q1 2015 earnings for the SPX are expected to decline by 4.5 % about 45 % of the decline due to energy companies. .

The Russell 2000 which represents the small cap segment of the U.S. equity universe returned 4.3% after under performing last year. Investors crave domestic exposure while the dollar is soaring despite P/E’s that are higher than in the big cap universe.

10 year U.S. Treasury notes closed with a 1.93 % yield versus a January yield of 2.17%. Similar yields in Germany and France are 0.18 % and 0.48 % respectively. European stocks are doing rather well finally as that Continent's QE program drives financial assets higher and the Euro lower.

Some 17 global stock indices set fresh new highs as easy money policies and signs of stability in some troubled economies lifted share prices.

With low yields in the U.S. and some negative yields in Europe savers are coaxed out cash into the longer part of the yield curve or into stocks to earn positive returns.

The savings rate here has risen to 5.8% recently contributing to slower economic activity.

While the Federal Reserve is talks about “ normalizing “ US interest rates European and Japan's QE programs are robust and continuing driving the dollar higher while making European and Japanese companies more competitive and profitable.

Plunging oil prices caused oil futures to drop 11% to $47.60 by quarter end. This is a good thing similar to a tax cut for consumers. The beneficial impact on consumer spending is generally delayed for a few quarters as they decide whether the drop in prices is permanent.

Central bankers see their policies as working to stop deflation, bolster GDP, and give shaky governmental and corporate borrowers a new lease on life.

Investors now appear to fear higher interest rates and bubbles in bond and stock markets. Is growth in our economy real or artificially induced by government policy? Trust of government solutions is near an all-time low even as markets make new highs.

Politicians sit back and let Central bankers do the heavy lifting while they give lip service to fiscal policy reforms.

Markets do what markets do with easy money, they go higher. Yet with little tangible evidence that the economy is safe and on a sound footing we experience periodic bouts of fear, when short sharp sell offs ensue.

As 2016 is a presidential election year, the Fed will only have a small window in which to raise rates. September is our best guess for the first rate rise.

Global conflict concerns center around the Middle East. Iran wants sanctions lifted and the US President and Europe want a deal which will reintegrate Iran into the world economy. Opposition to any agreement is vocal but the world’s desire for greater rapprochement is a strong force. Russia has weathered their own self-inflicted storm and appears to have gone quiet for now.

Energy prices, continued US dollar strength, and a genuine global GDP recovery are open questions. Our US stock market has stalled around levels first reached in late November 2014.

Should proxy wars in Syria and Yemen escalate oil prices could turn quickly and markets will be shaken. A nuclear arms race in the Middle East will be unsettling. More Russian bellicosity could derail the Euro recovery.

For the moment, however the trends of a stronger dollar, a rising Europe, an improving Japan and a steady China are holding in place. An Iranian- Western deal on their nuclear program has not hurt oil prices.

Low rates with low inflation and soon to continue rising earnings indicate stocks are the best choice for most investors. Signs of recession, an inverted yield curve, and an overheated economy are not far away from investors' minds but not imminent.

This recovery was never robust but will likely make up in length what is lacks in strength. We remain more invested in stocks than bonds. For the fourth time in 50 years the SPX yields more than the 10 year Treasury. We do not fear the pending interest rate rise and we see value in global stock markets and specific bond markets.

Doug Coppola

John Coppola

April 6, 2015

Communication is for informational purposes only & doesn’t constitute offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by CFA or an associated person or entity. CFA does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. We do not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein & not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under

applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed

March 2015

Reversing January losses, February proved to be a winner for stocks while 10 year Treasuries sold off to a 1.99 % yield, 32 basis points higher than last month’s close but still lower than year- end levels.

The S&P 500 posted its best monthly performance since October 2011 up 5.5 %, closing +2.2 % YTD. While earnings estimates for the full year 2015 came down, stocks went up.

U.S. GDP saw + 2.2 % growth in the final quarter of last year, 2014 finished with + 2.4 % GDP growth. The Federal Reserve is” patiently” waiting to raise rates according to Janet Yellen’s latest testimony. According to 39 forecasters surveyed by the Federal Reserve of Philadelphia real GDP will grow 3.2 % in 2015 and 2.9 % in 2016.

Cold weather plus a major port slowdown likely hurt retail sales in the first two months of this New Year. SPX consensus earnings forecasts are now $120.37 for 2015 versus $117.77 in 2014 up only 2.2 %. Earnings growth in the 4th quarter was 3.7 % with 485 of 500 companies reporting. At 2104.50 on the SPX we have a forward P/E multiple of 17.48 X earnings, higher than the 10 year average.

Low energy prices have hurt recent earnings and forecasts. Low energy costs, however, are clearly a positive for future GDP growth. WTI crude rose to $49.76 or +3.1 % in February along with Brent Crude’s rise to $62.58 both measures saw their first gains since last June when WTI crude was near $ 106 /bbl. Precious metal commodities lost 3.24 %

While earnings growth has slowed dividends continue to rise with the SPX yielding about 2.00 % despite higher prices. .Thirty three S&P 500 companies increased dividends in January 2015 while only one company decreased their payout, 375 companies in the index increased dividends in 2014.

With the 9th of March being the 6th anniversary of this Bull market and the NASDAQ having regained 5000 many ask: Is the Bull Run at its end? We think the answer is no, due to ample credit availability, a steep yield curve , growing consumer confidence, growing earnings and residue fear from 2 major declines keeping sentiment in check.

German and Japanese bond yields are only 37 and 36 basis points respectively. Europe has 5 countries that have negative yields, with Swiss yields at -.05 % at 10 years.

Domestic bond yields, while historically low, are attractive relative to foreign yields and current inflation of 1.5 %. If the Fed raises short rates this summer long rates will likely rise more slowly than we saw in 2013 or during past rate hike cycles. Both Europe and Japan are aggressively pursuing QE policies which help GDP growth overseas and add to our virtuous circle.

Douglas Coppola

John Coppola

March 4, 2015

Communication is for informational purposes only and doesn't constitute offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by CFA or an associated person or entity. CFA does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. We do not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein & not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended

to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed

February 2015

As January goes so goes the market is part of market lore. Except for 2014 when the SPX declined 3.6 % and finished the year up. This barometer has an 89% accuracy ratio. Investors now hope for a second “ bad “reading as stocks had another down January with the Dow Jones Industrials -3.7 % and the SPX -3.1% in early 2015.

Perhaps it was leftover profit taking from 2014 or perhaps it was fear of global deflation?

There are a plethora of worries as earnings reports have been less than robust with 227 of the 500 Index companies having reported earnings +2.1 % on sales+1.4 %. So far 37 large U.S. companies are reducing forecasts while 9 have issued positive guidance.

U.S. GDP rose 2.6 % in the last quarter, down from a 4.8 % average the previous two quarters.

Our 10 year Treasury note yield has continued to rise in price and the yield has dropped to 1.64 %. Global money flows have gone into” safe haven” bonds, even after amazing gains in 2014.

Since the ECB announced a 60 Billion/month QE program of its own; German 10 year yields moved to 0.30%, France 0.53%, UK 1.33%, Spain 1.41% and Italy 1.59%, all below U.S. levels.

30 year U.S. Treasuries now yield an historic low of 2.22%. Inflation and inflation expectations remain well below the FOMC’s target of 2%.

Japan and Switzerland with yields of +0.27% and -0.11% are some of the lowest in the world. Imagine paying a government to hold your funds for 10 years? Germany bunds have a negative 0.05% yield out to 5 years.

This price action scares investors into thinking that we may be on the verge of a global recession, contrary to the continuous happy talk from “money printing” Central bankers and politicians worldwide.

The U.S. economy is still the best in the West yet GDP grew only 2.4% last year.

Our Central bankers forecast a 3% GDP year in 2015, as they have for the past two years, and warn they may raise rates later this year.

The current 12 month forward P/E for the SPX is 16.3x earnings. This is above the 13.6, 5-year average and the 14.1, 10 year average. Earnings in 2015 are now expected at $123.47 versus $116.77 last year an increase of 5.7% although this consensus estimate has come down in the past few weeks.

While historically U.S. stocks are not cheap they are still attractive compared to current “risk free” interest rate yields. The yield on the SPX now about 2% is higher than our 10 year note as well as that of the developed world.

We have to look back to the 1950’s and prior decades to find a time when stocks paid out more in dividend yields than bonds. Additionally, payouts are now much lower as a percent of total corporate earnings and are tax advantaged. Finally, U.S. companies have enormous cash hordes to maintain those dividends.

The ECB markets save Greece appear to like the new QE program as European stocks have rallied post the Jan 22nd announcement. Global markets through Jan 30th are still -1.9 % year to date. Emerging markets are +0.6 % with positives in China and India. Japan is +2.3 % in 2015.

There are two key reasons why rates are so low around the globe:

1 In normal times, rates rose as economic activity picked up and dropped when it fell. With QE programs from the three major currency blocs; ECB, Japan and the U.S. , Central bank buying of huge amounts of their own as well as corporate bonds has distorted the price mechanism. This begs the question, “What happens when Central Banks stop buying “?

2- Given the period of deleveraging since 2008 we see excess capacity in labor and other capital markets. Time and again governments have not encouraged free markets to work freely. Central bankers, at this juncture seem to have done all they can with monetary policy. Now, it is time for politicians to make fiscal policy reforms including labor and tax laws to stimulate real growth.

Because of QE programs bond and stock prices have rallied however real economies are mired in slow growth.

We anticipate more of the same.

Douglas Coppola 

John Coppola

February 2, 2015

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in

January 2015

U.S. equities and bonds performed better than expected in 2014.

Equities of the large capitalization variety experienced double digit returns while long term Treasuries made surprisingly big gains as global economic forces pushed “safe haven “ government yields down , a reversal from 2013.

Ten year U.S. government yields dropped despite the Fed ending its bond purchase program in October. A 3% yield in January went to 2.17% at year-end versus analysts’ predictions of 3.44% one year ago. The 30 year bonds finished the year at a 2.75% yield versus a year ago Bloomberg forecast of 4.25%.

The IBD Mutual Fund Index which consists of growth oriented funds rose 2.4% for the year far less than the major market averages.

Commodity funds dropped 16.5% as benchmark oil prices plunged nearly 50% mostly in the last quarter of the year.

The S&P 500 (SPX) declined nearly 10% in the October selloff and erased all the gains for the year by October 14th amid Ebola and world recession fears. Energy related sectors were among the worst performers in 2014 dropping further in December as OPEC is no longer limiting supplies of crude oil and shale production in the U.S. reached record levels.

In the last 10 weeks of the year, however , all SPX losses were erased but not before another 5% drop in mid-December after which U.S. markets made new highs as Janet Yellen promised a slow hand on the interest rate rise tiller at the last FOMC meeting of 2014.

Recoveries from recent declines took place at record speed making tactical retreats from stocks and hedging costly. While government debt soared in price, lower quality bonds were negatively affected as energy bonds made up nearly 20% of some high yield portfolios. Negative ripples grew into waves as year-end tax selling put more pressure on prices of effected asset classes which included Energy stocks and MLP’s, negative duration bond funds, plus emerging market bonds and stocks.

Non U.S. stocks finished down in dollar terms as the Wall Street Journal U.S. dollar index rose by 12% against a basket of 16 other currencies.

The primary benchmark MSCI EAFE which excludes the U.S. stocks turned in a negative 6.74 % performance in 2014. The UK, France, and Germany lost 13.5% on average. Japan was -7.4 %. China while slowing its GDP growth to the below 7% level came out of its longer term bear market and made gains as did India while the U.S. was the only positive market otherwise.

Global economic growth experienced notable divergences with European economies slumping from Russian sanctions, few economic reforms, and mere talk of QE with little new action. Northern Europe is producing 1% GDP growth while the Southern countries like Italy are slipping back in recession. Greece may finally depart the EU. These conditions drove yields to historic lows in Europe.

Japan increased its massive QE program with more bond purchases and stock buying. They burst their own recovery balloon, however, with a tax hike increase on consumers pushing them back into recession. President Abe has a new mandate to do more but has yet to address structural reform of the economy. He apparently has not read much about Milton Friedman and the Reagan economic miracle but has embraced the Bernanke approach to Keynesian economic theory.

It’s clear that many developed countries are more concerned about preserving their social safety nets and the status quo rather than reducing taxes, regulations, and government interference. Socialism does not provide jobs like free market policies do.

The U.S. QE program having come to its end as of October has served to repress interest rates but it has made stock and commercial real estate investors richer. Middle class workers still earn significantly less than they did in 2007. There are more people are on welfare than ever before and we have amassed an 18 Trillion dollar Federal deficit. Government policies here and abroad have deep vested interests in keeping interest rates low, without which, payments on deficits and debt would soar.

The question begs what to expect in 2015? Can long term rates go even lower? Economists and Wall St gurus say no but their record is not very good as we have seen this past year. German 10 year rates are 0.50%, Japanese 10 years are 0.31% and, UK Gilts yield 1.72% so why can’t U.S. rates decline further?

If we raise short term rates here while Europe and Japan pursue QE policies and little else the dollar will likely rally drawing more investors to the U.S. Bloomberg consensus forecasts now predict 10 year UST rates of 3.24% in 2015. One top performing bond manager Jeff Gundlach however believes the opposite direction is more likely. From today’s 2.10 % yield he believes we could revisit the 2012 low yield of 1.38 % as global investors wager on a strong dollar and better US growth prospects.

As for U.S. stocks Ed Yardini puts 2015 consensus estimate for the SPX at $126.50 and 2016 at $141.54. That gives us a current forward P/E ratio of 16.2x and 14.5X next year.

While higher than the trailing 5 and 10 year averages low rates, low inflation, low oil prices keep GDP growing and earnings moving up for another year or two.

Markets traditionally move from fear at the bottom of a cycle to euphoria at the top. We have yet to reach the euphoria stage seen in 2000 or the multiples reached in 2007.

We expect a more volatile year with ample opportunities in quality stocks and bonds.

Without a U.S. recession or an inverted yield curve, where short term rates are higher than long rates, financial assets should experience a positive return in 2015.

Douglas Coppola

John Coppola

January 5, 2015

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this blog.

At The Year End

From the December 5th peak for the Dow Jones Industrial Average, 17,982 major U.S. stock indices dropped 5% through Dec 16th. Additionally, the world was stunned by the 50% drop in oil prices in a matter of months.

Spillover effects from this swift and precipitous plunge in oil prices have crushed energy stocks as well as other investvestment categories such as High Yield bonds and Master Limited partnerships. These MLP’s, popular for their high yield and tax advantages earn money on the volume they move not on the underlying price of the oil and gas. In a panic babies are thrown out with the bath water.

Emerging market bonds and global stocks joined the retreat. Russia has became the poster child for what too much dependence on one commodity can do to your economy. Sanctions from Mr. Putin’s military actions in the Ukraine have reduced Russia’s capital flows and capital raising capacity. The Ruble plunged 50% and Russia’s troubles became a problem for the world of investments.

Many diversified bond funds lost net asset value as their portfolios have significant exposure to high yield energy companies which comprise about 20% of that market niche. At year end prices of losing assets tend to go even lower than seems rational as taxable investors lock in 2014 losses to offset earlier gains.

December which is typically one of the strongest months in the calendar year, up 1.7% on average, has so far proven to be just the opposite. The volatility of the past few weeks reminds us of October with wild swings in both directions. Yesterday the Fed came to the rescue again saying it would be patient before “normalizing “policy.

Long dated Government notes and bonds have soared in price this year as a flight to safety has prevailed. Rates of high quality debtors like Germany 0.58 %, U.K. 1.87% and Japan 0.35 % yield even less than U.S. 10 year notes. 10 year Treasury Inflation Protected Securities - TIPS have a nominal yield of 0.55 %. Bill Gross thinks they are a good buy here.

Our 10 year rates have dropped by more than a third since January from 3% to below 2% in mid-October. As you know the U.S. has seen rising employment and rising GDP in 2014. Not one of 67 Economists in a Bloomberg survey forecasted lower U.S. rates in 2014 this time last year.

Today you get paid 2.2% to loan the government your money for 10 years. This is attractive to many foreign buyers who get more yield than they do at home and benefit from a rising U.S. dollar exchange rate. In addition U.S. banks hold huge amounts of Treasuries as capital on their balance sheets encouraged to do so by bank regulations.

Diversification away from the highest quality US assets has be wrong footed in 2014 as other investments are nearly all lower in U.S. dollar terms.

Stocks in hard asset countries such as Canada, Mexico, Brazil, Australia and Russia are down 4.5%,16%, 22%, 12% and 45% respectively.

In Europe; France, Germany and the UK stocks are down about 14%. Japan and South Korea markets are down 7% & 14%. Only China +5% and India +19 % along with the US show gains.

The question is can US stock markets continue to rise with most markets abroad signaling recession? Additionally, will rates rise in the US next year or remain abnormally low due to international concerns?

Oil prices at these low levels benefit consumers worldwide. U.S. inflation numbers will be temporarily below the Fed's 2% target and cheaper energy costs should boost our GDP growth now projected at 2.6% to 3.0% by FED economists. A recession here looks highly unlikely as we have the world’s most diversified economy. The Fed is on hold for at least a few more meetings as of yesterday. While Ms.Yellen would like to “normalize” rates the FED seem fearful of doing so in this climate.

Continued US dollar strength will be a headwind against multinational profit growth. The 4th Q 2014 EPS growth was 3%. Full year 2014 SPX earnings according to Factset will be $119.09, up 7% year over year and at $128.38 up 7.8% for 2015 .

Central bank money printing has helped owners of financial assets far more than the average American or the retired saver. Now these tactics are being embraced in Japan and to a lesser extent in Europe with little economic effect except record low interest rates.

Every forecast we have seen from Wall Street now sees higher stock prices ahead for 2015 .

A Santa Claus rally should lie ahead over these final 8 trading days of the year. There is an old saying, if Santa Claus should fail to call Bears may come to Broad and Wall.

The 67 “wrong way eeconomists” who took the Bloomberg survey noted this past year that market direction and interest rates are no easy call.

In the long run it pays to remember that 11.5% returns from stocks and the 5.21% returns from 10 year bonds are the historical norm from 1928-2013.

These returns are indeed earned by investors who are capable of staying the course. Volatility can be our friend but as it ramps emotions it is often our enemy.

Douglas Coppola

John Coppola

December 18, 2014

CFA is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where CFA and its representatives are properly licensed or exempt from licensure. No representation is being made that the information presented is accurate, current, or complete, and such information

December 2014

November ended another historic month for US stocks with all-time highs in the S&P 500 and DJIA, up 11.9% and 7.6% year to date without dividends respectively.

West Texas Intermediate oil prices dropped 31% from their June highs dragging down energy stocks as well as energy related MLP's. This is a boon to retailers and consumers.

In recent weeks, 2nd and 3rd Quarter GDP were revised up and now GDP is expected to grow over 3% trough 2015. We lead developed countries in growth, albeit the slowest since the 1940’s. Ebola and a global growth scare were quickly forgotten after the nearly 10% SPX correction ended mid-October.

30 year US Treasuries now yield 2.99%. The Treasury yield curve flattened somewhat with 2 year notes at 0.55%, 5 years at 1.61% and the 10 year note at 2.25%, down from 3% in January.

Long maturity U.S. government bonds are outperforming this levitating stock market against all predictions here and elsewhere.

We are experiencing a very strange world; global oil price tanks 30%, long bonds soar, and U.S. stock indices rise simultaneously. This new paradigm is based on rising earnings, low inflation, an abundant new energy supply sprinkled over with low global interest rates. U.S stocks and Government bonds have become assets of choice, here and abroad, despite our $18 trillion U.S. debt and continuing huge deficits.

Europe and Japan are either back in or teetering on recession. The U.S. dollar has appreciated about 10% on a trade weighted basis as our interest rates are significantly higher than nearly all developed counties. Comparatively speaking the U.S is a growth engine. China, Japan, and Europe are all trying to stimulate growth with more QE or lower rates.

Gold closed November down for the year after a horrible 2013 and a 15% rally in the first quarter. The yellow metal is -40% from Sept 2011 highs.

A majority of Hedge funds and Equity mutual fund managers continue to underperform the U.S. broad based stock market indices. Central banks rule the roost and can turn markets on command with words and printed money.

Tax considerations in December will likely exacerbate existing trends until the New Year has begun.

Douglas Coppola 

John Coppola

December 4, 2014

CFA is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where CFA and its representatives are properly licensed or exempt from licensure. No representation is being made that the information presented is accurate, current, or complete, and such information is at all times subject to change without notice. CFA does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.