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PFS GROUP : THREE COMPANIES SHARING THE SAME VISION

Puplava Financial Services, Inc Registered Investment Advisor
Puplava Securities, Inc Broker/Dealer Member FINRA/SIPC
Financial Sense Investor Education
Wed like to welcome you to PFS Groups first Financial Sense Strategy Conference. PFS Group is
a family of three companiesPuplava Financial Services, Inc. (Registered Investment Advisor),
Puplava Securities, Inc. (broker/dealer, member FINRA/SIPC), and Financial Sense (investor
education)each sharing the same goal: to provide exceptional asset management and
educational resources that help investors build, maintain, and preserve their wealth.

At PFS Group, we are committed to providing asset management and educational resources that
help investors build, maintain and preserve their wealth.

Post Office Box 503147 San Diego, CA 92150-3147

10809 Thornmint Road 2nd Floor San Diego, CA 92127-2403
(888) 486-3939 Toll Free (858) 487-3939 Tel (858) 487-3969 Fax
www.puplava.com | www.financialsense.com

LEGAL NOTICES
Forward-looking statements do not relate strictly to historical or current facts. This
presentation may contain certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including, but not limited to,
statements as to future operating results and plans that involve risks and
uncertainties. We use words such as expects, anticipates, believes,
estimates, the negative of these terms and similar expressions to identify forward
looking statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the companies or events discussed to differ
materially from any future results, performance or achievements expressed or
implied by those projected in the forward-looking statements for any reason.

LEGAL NOTICES
Past performance is not necessarily indicative of future results.
While PFS Group strives for accuracy in its reading of the market, the
market environment, and individual stocks potential, please be aware
and be informed that all statements and assertions made in this
presentation are merely the opinions and beliefs (albeit well-researched)
of the PFS Group staff and should be evaluated as such.

Welcome Becki Sutton, CFA

PORTFOLIO MANAGER
Becki joined PFS Group in 2015. Her
eduction includes a MBA from University of
San Diego and a B.S. in Business
Administration Finance from San Diego
State University. Becki earned the
Chartered Financial Analyst designation in
2000. She has over twenty years of
experience in the investment management
industry, which includes 15 years as a
Portfolio Manager with Brandes Investment
Partners, Inc. Beckys role with Puplava
Financial Service Inc. is managing
portfolios and serving our clients.

Welcome Paul Horn, CFP

FINANCIAL PLANNER
Paul joined PFS Group in 2015. He holds an
M.S. of Investment Management and
Financial Analysis from Creighton
University. Paul earned the Certified
Financial Planner designation in 2013. His
professional designations include FINRA,
Series 7, Series 66, Uniform Combined
State Law Exam; and Life-Only, Accident
and Health, and Variable Contracts
insurance licenses (California insurance
license #0E60881). Mr. Horn has over a
decade of experience with financial
planning and wealth management services.
He oversees the Financial Planning
activities of the firm.

Agenda
Hour 1

Macro
Hour 2

Preparing for the Final Phase of the Bull Market

Hour 3

Financial Planning Education

Themes From Prior Meetings

2009 - Lessons From History, Lessons for Today
2010 - Inflation/Deflation - Which Is It?
2011 - Weve Been Here Before
2012 - Dont Fight the Fed
2013 - More Things That Are Right Than Wrong
2014 - Stay In Our Own Backyard

THE MESSAGE OF THE MEETING

PREPARING FOR THE FINAL PHASE OF THE BULL MARKET

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Macro
A) Where Are We in the Business Cycle?
B) What to Expect When You Are Expecting
C) Overview of Global Monetary Policy

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A) Where Are We in the Business Cycle?

Mid

Late

Early

Recession

12

Mid-Cycle Characteristics

Source: Fidelity Capital Markets

Mid-Cycle Characteristics
Economic Growth Peaking
NBER Recession Variables

Source: Bloomberg

Credit Growth Is Strong

Source: Bloomberg

Personal income less transfer payments

Non-farm payroll employment
Industrial production
Real Retail Sales

Recent string of consecutive 5%+

months of growth in consumer
credit longest since 2003.
Auto loans continue to expand as
consumer take advantage of
cheap rates.

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Mid-Cycle Characteristics
Profit Growth Peaks
Firms Raising the Minimum Wage:

Source: Bloomberg

Source: Bloomberg

McDonalds
Aetna
Walmart
T.J. Max

Target
Starbucks
Costco
GAP

Policy Is Neutral

The Fed hasnt raised interest rates in

nearly a decade.

First step at getting off zero rates was

removing QE, raising rates is next

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Late-Cycle Characteristics
Growth Moderating
Conference Boards LEI

Source: Bloomberg

Average workweek
Jobless claims
Non-defense capital goods orders
Building permits
10-yr UST and Fed Funds rate spread
M2 growth
S&P growth
ISM Manufacturing Index

Credit Tightens

Source: Bloomberg

Banks raising credit standards

Banks require larger down payments
Raise interest rates on loan payments

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Late-Cycle Characteristics
Policy Contractionary

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There is Still Life in This Economic

Recovery and Bull Market
The two most cyclical areas of the economy have yet to peak
Home builder confidence highest since
October 2005

J.D. Power and Associates said that

sales of new cars above previous
record of 13.8 million in 2004.

Source: Bloomberg

Housing Snapshot - Affordability

30-Yr FRM rates currently below

4% near generational low levels

Historically mortgage
payments average just under
20% of household incomes.
Currently mortgage payments
average just 12.4% of
household incomes.
Source: JP Morgan Asset Management

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Housing Snapshot - Supply & Demand

Source: Bloomberg

Supply

Low investment (construction) relative to

the size of the economy

Source: Bloomberg

Demand

Household formation rates remain elevated

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Housing Snapshot - Health of the Consumer

Consumer balance sheets are in great shape

Payroll job growth strong

Employers raising wages

Lowest mortgage rates in decades

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Auto Snapshot
11.4

Source: Bloomberg

Auto production

Likely to remain strong while U.S. demand

gives motors a boost.

258.4

Source: Bloomberg

U.S. Consumer Miles Driven

Reaching record levels

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Recession Assessment is Paramount

for Risk Management

Source: Bloomberg

Sales Peak -> Profits Decline -> Layoffs Occur -> Economy Contracts

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Why We Are Not in the Recession Camp

Source: Bloomberg

Durable Goods Consumption and

Private Investment Still Rising

Source: Bloomberg

Jobless Claims Fall

Currently at lowest level since 1973.

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Why We Are Not in the Recession Camp

Source: Bloomberg

Federal Reserve Bank of Philadelphia

Produces leading indexes for each state.

Source: Bloomberg

Chicago Fed National Activity Index

Weighted average of 85 existing monthly indicators.

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Broad-Based National Economic Growth

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B) What to Expect When You Are Expecting

e
k
i
H
e
t

Inter

est R

ates

Ra
e
v
r
e
s
e
R
l
a
Feder
g
n
i
t
e
e
M
C
M
O
F

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Broad-Based National Economic Growth

Median Performance During Fed Tightening Cycles, 1950-2010

Early

Mid

Late

Asset Class

3 Months Prior

6 Months Prior

12 Months After

24 Months After

U.S. Equities

7%

9%

10%

22%

DM Equities

6%

7%

14%

38%

EM Equities

5%

8%

16%

23%

Commodities

3%

4%

7%

34%

IG Bonds

0%

1%

3%

14%

Source: Fidelity Capital Markets

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Why the Fed didnt Raise in Sept. or Oct.

Not since the Asian crisis of the fall of 1998 has the Fed been so vocal about foreign affairs

Recent global economic and financial developments may restrain economic

activity somewhat and are likely to put further toward pressure on inflation in
the near term. - FOMC Sept. Statement

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When the Fed Begins to Raise Interest Rates

Source: Fidelity Capital Markets

Annual inflation is
running at 2.5%

80% of global
economic indicators
are rising

Current inflation is
0.2% and only 58% of
global LEIs are rising.

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Declining Global Inflationary Trends

Oil

67%

Copper

51%

Silver

71%

Aluminum

47%

Dollar

38%

From highs in 2011 to lows in 2015

Source: Bloomberg

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Chinas Slowdown
Germany lowers its 2015
growth estimate.

Sizable impact on global trade as its the worlds 2nd largest economy

- CBS News, 10.14.2015

IMF lowers growth forecast.

- USA Today, 10.06.2015

Fitch lowers Global Growth

Due to Emerging Markets.
- 247 Wall Street, 09.30.2015

Citi bank cuts 2016 global

economic growth forecast
for 5th straight month.
- Economic Times, 10.21.2015

Source: Bloomberg

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Chinas Importance

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Emerging Markets & Their Currencies

From 2010 high relative to the USD

Source: Bloomberg

63%

Brazil Real

36%

Indian Rupee

61%

Russian Ruble

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Volatility Picked Up With a Stronger Dollar

U.S. Dollar Credit to Non-residents ($Trillion)

Brazils dollar-denominated debt:

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FOMC Minutes for Sept. 17, 2015

Domestic
economy
weakened

Increased financial market volatility

Global stock markets sharply lower
Foreign economic growth weak

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The Stock Market and Fed Tightening Cycles

Source: BCA Research

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Source: BCA Research

Phase IV is the best for stocks followed by phase 1

With the Fed expected to begin raising interest rates next year we are likely moving from Phase IV to Phase I

From 03.06.0910.21.15 has had 16.8% returns, close to the median 18.2%

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Source: BCA Research

Moving into Phase 1 still bullish for stocks

Transition from Phase IV to Phase I to create more volatility

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C) Overview of Global Monetary Policy

Big Picture View of Macro Headwinds Facing
Developed Economies

The Yin & Yang of Monetary Policy

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Trillions of Fiat Currencies Created

So Wheres the Inflation?

Demographics

Technological
Disruptions

Deleveraging

Strong USD

Demographics Headwinds Facing

Most of Developed World
Working age population

Source: BlackRock

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The Disruptive Power of Technology

Source: BlackRock

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The Disruptive Power of Technology

LinkedIn - Cut down recruit costs

iPhone - Is making the digital camera obsolete
Digital Music - Cheaper than buying hundreds of CDs
Uber - Cutting the cost of transportation
AirBNB - Cutting the cost of hotel accommodations

Source: BlackRock

The Disruptive Power of Technology

Source: BlackRock

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The Disruptive Power of Technology

Source: Bloomberg

U.S. Oil Production

Rapid growth not scene since the 1970s.

Source: Bloomberg

Oil Trade Deficit Has Shrunk

Fewer USDs being sent abroad.

45

No Cost of Living Adjustments in 2016

Source: Bloomberg

46

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Quantity vs. Price

Dollar volume of trade decreasing

Unit volume of trade increasing

Source: BlackRock

Quantity vs. Price

Source: BlackRock

48

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The Yin & Yang of Monetary Policy

& Activist Central Banks

U.S. Fed

Commercial Banks

ECB

Broad Money Supply

Bank of Japan

Aging Japanese Population

Fed Prints When Commercial Bank Credit Weakens

Source: Bloomberg

50

ECB Increases Its Balance Sheet

When European Money Supply Weakens

Source: Bloomberg

51

China Stimulus

52

Slashed lending rates

Devalued currency
Cut taxes on passenger vehicle
purchases and will support the
adoption of the electric

6.9

vehicles
Source: Bloomberg

4.3500

Eased mortgage requirements

Adds a two baby policy

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Summary and Conclusion

A) Where Are We in the Business Cycle
Mid cycle
Late stage cycle ahead of us

B) What to Expect When You Are Expecting

Monetary policy - slow and gradual

C) Overview of Global Monetary Policy

Emerging markets weakening

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Break