2014.09 IceCap Global Market Outlook

Our view on global investment markets:
September 2014 The Ski Holiday

Keith Dicker, CFA
Chief Investment Officer
keithdicker@IceCapAssetManagement.com
www.IceCapAssetManagement.com
1
The Wager
Whispers, murmurs and furrowed brows filled the room. Without
looking harder, you could also sense puzzlement, bafflement and
even obfuscation. Yes, it was scene.

Only minutes earlier the room was filled with laughter, bubbles and
the very best French and Italian foods only a local could find. And
then it happened someone dared to suggest all wasnt quite well in
the mathematically challenged land called Europe.

Defensive arguments tilted heavily towards subjective and emotional
appeals stammering that only Europeans know what it is to be
European. Offensive arguments simply deteriorated to offensive
name calling.

Just when we thought the momentum peaked, it reached another
level with the wager - Ill bet you a ski holiday that the Euro doesnt
break apart.

Now, it was at this point our original conclusion was confirmed, and it
was also the point when we felt a bit uneasy about the entire
situation. After all, if we declined the wager we would be seen as not
being a true believer in our investment outlook for Europe. And, as
our readers know, nothing could be further from the truth.

Yet, the wager itself was laced with irony. The exact moment in time
when we are in fact proven correct, ironically will also be the exact
moment in time when anyone with a vested interest in the Euro loses
significant wealth. How would we ever collect on our well-earned ski
holiday? As we are not supporters of stealing from the future poor,
we declined the wager - but retained our dignity.

The un-lazy summer
Lazy summers are usually the time when you invest in lazy days at
lazy parks, lazy lakes and even lazier beaches. Yet, if one took their
nose out of their favourite summertime book, they would be shocked
by the rather un-lazy restlessness enveloping the world.

During this usually slow time of year, world events have been
anything but slow. For starters, another military conflict escalated
between Israel and Palestine. Whereas previous conflicts were
dominated by missiles and bombs fired across the border, this one
saw the dreaded boots on the ground. In adition, Israels latest
military strategy to protect its people has resulted in over 30,000
artillery shells being fired into Gaza. As you would imagine, damage is
extensive. Cease fire and peace talks are being mediated by Egypt, all
while the rest of the middle east stews.

If that wasnt enough to interrupt your summer of bocce, then
consider the newest, current situation in Iraq. Yes, only a few short
months ago, Nobel Peace Prize winner, President Obama declared
that American troops had finally finished their jobs meaning Iraq was
now free to stand on its own two feet.
Laughter and bubbles followed by
2 www.IceCapAssetManagement.com
Literally hours later, the entire country returned to chaos as the
jihadist group ISIS (Islamic State of Iraq and Syria) violently took
control over many parts of the country. What makes this latest Iraq
situation interesting is that ISIS was heavily involved in the Syrian civil
war and received substantial military equipment and support from
none other than - America.

Today, President Obama has reordered American military advisors
back into Iraq to help the local government fight ISIS. So, now we
have American troops using American military equipment, fighting
against a American declared Islamic terrorist group who also happen
to be using American military equipment, who also happened to be
supported by the American government while fighting against the
Syrian government.

Confused yet? It gets worse
It also just so happens that there is another country who doesnt care
much for ISIS. But it also just so happens that this country has
interesting relationships with America, Iraq and Syria. This is where
everyones favourite axis of all evils enters the fray yes, we are
talking about Iran.

Whereas Iran is predominantly Shia, ISIS is predominantly Sunni. In
the middle east, these two major Islamic denominations have long
been at odds and have been a key dividing line between the various
conflicts in the region.
As there are no free lunches anywhere in the world Irans offer to
help the Americans fight ISIS comes with a small cost or favour. In
exchange for helping the next good fight, Iran simply asks for the
nuclear sanctions to be lifted.

What could possibly go wrong with this arrangement?

The entire situation reeks of military equipment and foreign policy
irony at the highest levels. While Iraq yet again, burns to the ground,
there is some good news. In 2002, the Bush government estimated a
war with Iraq would cost about $60 billion. Today, the final
calculations are reporting the total cost to be closer to $6 trillion.

Naturally, this must be great news for the economy, and will only
further help the accelerating recovery. We say this tongue in cheek,
of course, yet when the talking heads and big bank economists
sharpen their pencils while calculating the latest GDP figures
defense spending and procurement are major contributors.

And speaking of boots on the ground, it appears that any day now the
Russia-Ukraine conflict will also escalate to boots, rifles, humvees and
other ground hitting equipment. This too will be good for the global
economy at least thats what you will be told.

However, the situation in Ukraine is anything but positive for the
global economy. Now, there will be many investment reporters and
analysts who will tell you that Ukraine doesnt matter. After all, the
countrys economy is roughly the same size as that of Oregon.
American guns vs American guns
And, while Oregon may lay claim to producing some of the best pinot
noir and micro brews in the world it cannot lay claim to being the
spark that ignites the latest reincarnation of the cold war.

While, the good old days of Reagan vs Gorbachev have passed us bye,
the days of Obama vs Putin are just getting started. In effect,
investors will be wise not to mistake the Ukrainian crisis as a civil war
drummed up through years of domestic cultural differences.

Recall that the real sparks started to fly just as Ukraine declared itself
broke yes, yet another country discovered that you cannot
indefinitely spend more money than you collect in taxes. And it was
at this moment, Europe strolled in offering a bailout package to help
the Ukraine government get through their little money problem.

Problem solved or at least thats what we were told. Of course,
never to let a good crisis go to waste, Russia saw this as a perfect
opportunity to gallop into Kiev offering an even better money saving
deal. Fast forward through Maiden Square riots, strong-armed riot
police, a fleeing president and an annexed peninsula and you will get
the Ukraine-Russia conflict of today.

There are two reasons why understanding this is important for your
wealth. First, the long-term prospects for the next great war have
increased significantly. Domestically, Russia is really struggling from
an economic perspective. The growing divide between the wealthy
and everyone else is perhaps greater in Moscow than anywhere else
including London and New York.
Obama vs Putin
The wealth gap in Russia is especially sharp due to the lack of true
capital markets. Instead of having free competition and objective
regulation, Russias economy is dominated and completely controlled
by the business oligarchs. If you are in doubt about the strangle hold
of these modern day business barons, we invite you to open a
restaurant in Moscow and see what happens. We await your reply.

Meanwhile, many non-oligarchs are suffering economically and are
simply not happy. And it is this unhappiness that is the target of
America and Europe. The western world believes the best way to
defeat Putin is for him to be defeated by his own people. And the
easiest way to achieve this is to cut off Russia from the rest of the
world and then literally watch the government and oligarchs fall apart
as well.

Obamanomics
Reaganomics accomplished this in the 1980s, so why not
Obamanomics in the 2010s? This is why the Western World has
embarked on a coordinated strategy to impose various economic
sanctions against Russia.

To get started, Canada, USA, the entire European Union, Australia,
Norway, Switzerland, and Japan all listed the names of various
Russian individuals and Russian companies who are no longer
permitted to travel within these countries and who have had their
financial assets frozen.

Failure and confusion
There are two challenges with this strategy. For starters, the worlds
economy is incredibly complex and dynamic using linear thinking to
solve a non-linear problem can only end with failure, confusion and
the inevitable finger pointing. In this case, assuming trade sanctions
against Russia will only hurt Russia is a little naive. Yet, this is exactly
what has been happening.

As you would expect, Russia responded with their very own sanctions
against all of these countries making it illegal for Russia to buy any
meat, fish, milk, cheese, yogurt, fruit, and vegetables, from anyone
outside of Russia.

While this playground-style tit for tat may appear predictable, the
results have been unpredictable not to the average person, but to
the governments at least.

In Russia, it seems that the slowing economy, impending war in
Ukraine and sanctions by the west have had the opposite effect.
Putin is in fact gaining from this charade. The Russian people are
rallying behind him and against the evil Americans and Europeans.

At the same time, European farmers are also up in arms, but not
against Russia and Putin. Instead they want to be compensated for
their lost revenues and blame only their European governments.
European Union flags and fresh peaches have been burned, with the
threat of more harm against fresh produce should the farmers not be
paid for their lost sales.

From an economic perspective, sanctions from both sides of the
latest cold war are hurting the entire world. Latest European GDP
data surprised both the talking heads and big bank strategists by
barely producing any growth during the last 3 months. The European
Union proclaim this is merely a pause to refresh the great European
recovery will go on as they command.

Unfortunately, the now broad European recession is only getting
started and the effects of Russian sanctions will really start to bite as
the summer turns into autumn. Charts 1 and 2 illustrate the value of
international trade between Russia with America and Europe. Its
very obvious, the longer these trade sanctions continue the worse it
will be, especially for Europe.

Regarding the sudden lack of European growth, the real surprise
wasnt from Italy or France, but rather Germany. Yes, the German
admittance of a recession fell like a lead balloon. It seems that the
economic roaring engine of Europe has finally succumbed to the
economic stalled engines of the rest of Europe.

And when speaking of the rest of Europe, investors should first spend
time in Italy. The country has the 3
rd
highest debt total in the world -
only America and Japan have borrowed more. Italys economy is so
bad, that it has been in recession in 11 of the last 12 quarters.

Fans of the Euro argue that newly appointed (not elected) Prime
Minister Matteo Renzi is going to turn things around. It is said his
5
Chart 1: Trade sanctions will hurt Europe a lot more than America
Source: CNN
6
Chart 2: Trade sanctions will hurt Europe a lot more than America
Source: CNN
If you exclude the debt, theres no debt problem
youthful enthusiasm and penchant for getting people to work
together is the perfect recipe for Italys future.

Weve never met the new Prime Minister, but were sure hes a swell
guy. Unfortunately, unless hes prepared to pull Italy out of the
Eurozone, Italy will meet economic and financial failure. Those in
denial, simply grab a calculator and pour over Italys debt load and
their tax revenues its beyond us how this can work.

Italys Primary Surplus
Of course, one of the main financial arguments supporting Italys
return to sound fiscal health is their primary account surplus. It is
true Italy is running an enormous surplus and this is good. However,
before one runs off touting the strength of Italys finances, one
should really sit back and ask what is a primary account surplus?

Economists everywhere will tell you that the primary account
calculates how much a country collects in taxes while subtracting
how much it spends. Simple enough but there is one minor
adjustment. Interest payments on debt are excluded from the
calculation.

Recall that Italy has the 3
rd
highest debt total in the world. The
country and the entire Eurozone is in the middle of a severe debt
crisis. In other words, if you leave out any accounting for debt and
interest, you are ignoring the very item that is causing all of the
problems to begin with. In effect, if you dont count the debt, theres
no debt problem.
Its akin to saying if you exclude all of the body fat, that person isnt
overweight. Or, if you exclude all of the people who finished ahead of
me in the running race, I finished first. We think you get the point.

Excluding the interest payments on debt seems a tad disingenuous.
Others may call it deceitful, or dishonest. We often refer to old world
as the mathematical fantasy land called Europe - this misuse of the
primary account surplus data is simply another example of why the
situation is so bad in Europe.

And then theres France
We will be the first to admit that when describing and forecasting
Frances economic fortune, we have been rather unkind. Yet, as the
data continues to roll in we continue to be proven correct.

France remains an economic nightmare, and we believe a negative
wave of social protest is building across the country. Economic
despair breeds social despair France is in serious trouble and the
longer Europe ignores the problem the more difficult it will be for
France to recover. And if France doesnt recover, it will be the final
beginning of the end for the Euro.

To understand just how bad the economy is deteriorating in France
look no further than the most obvious the job market. At the end of
July, over 3.4 million people were without work. In addition, there are
another 1.4 million people who want to work but have completely
given up hope of ever finding a job. By comparison, at the worst
France where everything soars
moment in 2009 only 2.5 million people were without work. And if
deteriorating economic news isnt enough to convince you that
France is unraveling, then simply spend a few minutes following the
people in charge yes, the countrys political leaders.

It has been well documented how previous French President Nicolas
Sarkozys approval rating went from hero to zero in less than two
years. This record breaking feat resulted in him being voted out of
office in record breaking fashion.

At the time, the French thought it couldnt get any worse but it did.
Newly elected President Francois Hollande strode into the Elysee
Palace with a commanding 62% approval rating and quickly shed the
marble floors of anything associated with Sarkozy and his right-
leaning policies. Taxes on the rich soared, taxes on business soared,
political patronage spending soared, which inevitably caused
unemployment to soar and the amount of borrowed money to soar.

The only thing that didnt soar was Hollandes approval rating. Today
at 17%, it is perhaps the lowest political score ever registered by any
elected official on the planet. What does Hollande do? He blames
everyone but himself and cans most of his cabinet.

We doubt Hollandes latest economic revival plan will dig France out
of its economic hole yes, France has a problem but so does Spain,
Portugal, Italy, Greece and others sharing the Euro currency. On the
face of it, the differences between all of the struggling Euro countries
are a combination of both internal and external factors.
Internally, the various governments are all clinging to the hope
(theres that word again) that things will pick up and companies will
begin to hire again.

Externally, the folks at the European Central Bank (ECB) are hoping
governments can continue to borrow and that the banks remain
solvent. Of course, both of these wish list items are contingent upon
companies feeling more comfortable to begin hiring again.

If you think youve come full circle, you have. The more the European
governments and the ECB try to stimulate the economy, the more
companies and wealthy individuals withdraw from the economy.

What happens next
Given this current and future economic landscape, in our opinion it is
all but certain that Mario Draghi and his friends at the ECB will begin
to print money soon enough.

To demonstrate the intellectual acumen of Europes greatest central
bankers, all you need to understand is that in yet another attempt to
stimulate the economy, they announced that short-term interest
rates would become negative. This means instead of an investor
receiving interest on their investment, they will pay interest on their
investment. Yes, this isnt a typo. Please read it again and let it sink in.

To further grasp this perspective, consider that many in the
investment industry believe and support this latest and greatest
Here comes more stimulus
stimulus tool. Go ahead and ask your investment advisor their
thoughts on negative rates, their answer will probably surprise you.

In September, the ECB will announce yet another new round of
stimulus (yes, theyll never stop). This time theyll launch the TLTRO
(Targeted Longer Term Refinancing Operations). This is the 4th
generation of their scheme to indirectly fund the European banking
system. At this time, success is an apparent subjective measurement.
We can only assume that since the Euro is still alive, the first 3
attempts of LTRO have been labeled a smashing success. The fact that
the Euro area remains in recession, with rising unemployment and
the shadow of deflation hanging from above, doesnt matter.

The ironic thing is that even though the TLTRO hasnt even started or
has been given a chance to succeed, the ECB is already talking about
providing yet more stimulus this time in the form of direct money
printing. At that time, investors should expect the ECB to begin
buying government bonds directly from the Euro-zone countries, as
well as buying newly created Asset Backed Securities directly from
banks.

On the tax side, we have warned that if you have bank or investment
accounts in Europe, you are about to slapped with a tax on your
savings. This 10% tax has already been implicitly and explicitly
approved by the IMF, the EU, and the ECB. For those in denial, take a
few minutes and read up on Spain, after all theyve already got this
tax ball rolling and the real surprise here shouldnt be that theyve
started it, but that theyve made the tax retroactive.
The 0.03% tax on deposits was announced in June, but to make
things simpler, the Spanish government has decided to make the start
date January 1, 2014. The tax is expected to raise around EUR 400
million for the government. We suggest the number will be lower as
smart investors and savers will see that this will be the first of many
new taxes on savings, and begin to withdraw their hard earned
money from the country.

And keeping with Spain, to better understand the true wave of
unemployment sweeping the country, simply notice the entrance
fees for museums and other national points of interest. In addition to
the traditional tired pricing for Seniors/Children and Adults, a third
tier for the Unemployed has been added no further comments are
necessary.

As of today, we believe Europe has about 12-24 months before it falls
into a very deep recession. As the economic situation regresses, so
too will the social and political situation. As a result, we fully expect
private capital (ie. wealth from individuals and companies) to flee and
seek home in other countries, markets and currencies. Our view has
not changed the US Dollar and US stocks will become a major
destination for this money.

The Bond Market
At IceCap, we certainly dont yet grace the covers of any celebrity-
esque magazines, nor do we attract throngs of paparazzi whenever
we leave the cozy confines of our offices. Yet for some strange reason
Become a dinner party maestro
many people are oddly interested in what we do on a daily basis.
While investors everywhere have an obsessive fascination with the
stock market - something that is a little too unhealthy in our opinion,
we start off every morning with a good look at the bond market.

In some ways, its perhaps easy to understand why the bond market
attracts so little attention in the media and the regular big bank
quarterly market updates. After all, if you want to host the most
boring dinner party in the neighbourhood, simply serve some merlot
and drone on about the yield curve, credit spreads and basis points.

Alternatively, its pretty easy to turn into a dinner party maestro
crack open any bottle of pinot noir, don your newly purchased
Google-Glasses and talk about your latest win in the stock market.
Theres no doubt everyone will have a smashing time, yet when you
wake the next morning you really should toss aside your previous
nights feats of strength stories and dive head first into the bond
market.

Unknown to most investors and advisors, the global bond market is
valued at over $70 trillion and larger than their beloved stock market.
More importantly, well share with you why you should shed your
stock market envy, and develop a better understanding of the bond
market. Because, whats about to happen next in the global financial
system will certainly create severe morning headaches for investors
and tax payers everywhere.

Whereas stock market groupies will tell you that strong profits and
earnings are the key drivers of stock market returns they are in fact
missing the boat. In fact, since 1927 stock markets generally do
better when profits are growing slowly, and actually do worse when
profits are soaring.

Theres also a failure to understand that there are times when
earnings and profits have very little influence whatsoever on stock
prices. Inflation and real interest rates are also key drivers of stock
market returns yet, if you are going to start talking about inflation
during your dinner party, you might as well start serving merlot and
call it a night. After all, if you think people do not understand the
nuances of the bond market, try sprinkling the conversation with
powdery bits of price increases. Yes a party killer to be sure.

Yet, research has been crystal clear whenever inflation is declining
from high levels, stocks and bonds perform very well. Fortunately, the
alternative is also true whenever inflation begins to rise from very
low levels both stocks and bonds will perform well.

Today, inflation is certainly declining which should elicit yays from
our stock market friends. Yet, if want to be a party pooper (or realist
take your pick), you should also tell your guests that when inflation
continues to decline through a somewhat magical/opaque line the
opposite happens stocks and bonds decline.

In general the biggest problem in our financial world today is that
Keep digging
around the world inflation is declining straight through this magical
line. Chart 3 on the next page shows Europes current experience
with inflation and this is what should be discussed during your dinner
parties. Granted, there are countries who are experiencing price
increases and this will always be the case. However, since 2009
various measures of inflation have been on the downtrend and this
isnt exactly good.

Weve written before how the worlds central banks are completely
occupied with trying to keep inflation at a stable rate, all of the time.
The folks tasked with this job have had some serious training. In fact,
those in charge have pretty well dedicated their entire lives to
understanding why prices move up and down. This group of men and
women are so dedicated to their trade, that theyve spent their entire
career in academics studying and developing economic theory.

Put another way, few of them have actually worked in the real world.
Whereas everyone else in life has to learn through a few hard knocks
every now and then, the biggest knock facing most of our central
bankers is wearing the wrong loafers to their afternoon fireside chats.
Weve been told the mocking and ridiculing can be rather
uncongenial at times.

Understanding the background of our central bankers is crucial to
understanding why and how the global financial system is about to
enter a rather interesting phase.
The worlds challenge is that our central bankers believe they can in
fact control the business cycle and inflation, which will then be
reflected in financial markets. What is making this uncomfortable for
many people in the real world, is that the actions of the central
bankers are doing the opposite they are making matters worse.
And, worst of all, the central bankers dont seem to understand that
it is their very actions that are creating the severe distortions we are
seeing today.

Weve also written before that the central bankers have been digging
a hole now for 5 years, and instead of asking for help to get out, they
are demanding bigger shovels to dig even bigger holes. Look no
further than past, present and future actions by the European Central
Bank for proof of this pudding.

As a result of ineffective actions by our central banks, this global
decline in inflation is a reflection of the lack of consumer and
business confidence to spend and make capital investments. Our
overall investment thesis has been very clear our governments
reaction to the 2008 credit crisis simply transferred all of the bad
investments from the private sector to the tax payer.

And this brings us to the bond market
Virtually every country in the world spends more money than they
collect in taxes, and no group of countries has done a better job at
this than those that formed the Euro-zone.
12
Chart 3: Euro-area inflation
Source: Eurostat
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
The rapid decline in Euro-area
inflation, is a direct result of an
imploding economy
Target = 2.0%
Attempting the impossible
This collective group has so much debt, that a recent study by the
Bank of International Settlements concluded it would take 20
consecutive years of surpluses to simply bring debt loads back to
levels previously reached prior to the current crisis.

Considering that this has never happened before, we have little
confidence that this type of spending constraint can be accepted and
implemented by any of the respective governments.

There is only one way possible for any person, company or
government to spend more money than they earn they must
borrow to make up the difference. And as long as the Euro-zone
countries are able to borrow, theyll be able to extend the charade a
while longer.

This is the point when many investors and pro-Euro supporters will
argue that all of the Euro-zone countries are able to borrow, and in
fact each country is able to borrow at the lowest interest rate in
history for each individual country.

This is indeed true. However, this is the point when IceCap reminds
investors that there are two types of debt markets. The first is the
one where the price or interest rate you pay is determined by the
open market, with no interference or influence by other forces.

In 2012, the Euro crisis reached its latest crescendo and each
countrys ability to borrow was at the mercy of the open market.
Within a span of several months, the cost of borrowing increased
from 50% to 100%. In effect, the open market said these bonds are
very risky and theres a pretty good chance, investors will not get
their money back.

What happened next was a second type of debt market where
prices and interest rates are directly and strongly influenced by
governments via their central banks. To prevent the Euro-zone from
collapsing in 2012, the ECB (European Central Bank) implicitly
guaranteed borrowing for each Euro-zone country.

This second type of market is one where prices are not determined
by private investors and a free market. For our economic buffs, this is
similar to a centrally planned market or a closed market place. For
the average investor, simply think about how products and services
were priced in the Soviet Union prior to the collapse of communism.

Our table 1 on the next page demonstrates the key differences
between these two types of markets. Anyone who argues that
todays European bond market is a free market and that current
prices reflect reality, really shouldnt be in the investment business.

Some will argue that the continued bailouts and stimulus packages
from the ECB will allow the Euro-zone to continue on its merry way
into eternity. We believe otherwise. None of these stimulus programs
are feeding money down to the unemployed. Many are becoming
extremely frustrated, and this is being reflected in the high turnover
14
Factor
Free and open
Market
Closed and Centrally
Planned Market
Current Market
Short term interest rates 3% to 6% < 0% <0%
Long term interest rates 5% to 10% 1% to 4% 1% to 4%
Banks Borrow From Private investors Borrow from central banks Borrow from central banks
Govts Borrow From Private investors Borrow from central banks Borrow from central banks
Savings earn interest savings are taxed savings are taxed
Governments Stable Unstable Unstable
Civil Unrest Infrequent Frequent Frequent
Bailouts Infrequent Frequent Frequent
Separatist Movements Few Many Many
Table 1: Open vs Closed Markets
of current governments, increased popularity of extreme right and left wing parties
as well as a rise in popularity of separatists movements.

Every market has a release valve, and for Europe it will be the bond market. The
beginning of the end, so to speak, really starts when social unrest reaches a new
level. Its at that point confidence rapidly declines and so too will the European bond
market.

Today, those that are comfortable investing in bonds issued by European
governments, banks and insurance companies really dont appreciate how far and
hard this market can drop. The entire bond market is really like the Hotel California
getting in was easy, but just dont try to leave. This is the point when the Euro bulls
will discover the true market price for their Euro fixed income bonds.
Investors in Canada, the USA, India, Australia and
elsewhere should really pause to consider what
happens when the ECB is unable to continue its support
of the European bond market.

The breaking of the Euro bond bubble will be much
different than the breaking of the Technology bubble.
The key reason for the difference is that the bond
market is the funding mechanism for banks, insurance
companies and governments. Any struggles in this
market will absolutely ripple across to the equivalent
markets in other countries.

We want to stress that this is a very complicated subject
and perhaps this is the reason why it isnt discussed by
other managers, the big box banks and the main stream
media.

We encourage all investors to further research the
European debt crisis and then to start asking their
investment advisors some serious questions. And once
youve achieved a better understanding, start planning
for a real nice European ski vacation we expect youll
soon find a few bargains.
15
Our Strategy
In our previous market outlook we warned of the potential for a
shallow stock market correction. Markets did indeed pull back, and it
was only a bit but just enough to get the media and market pundits
riled up.

We fielded many questions and concerns from investors asking if this
was the big one. The pressure to sell out of stocks was actually more
intense than at any other time over the last few years. Our research
indicated that conditions for a dramatic market fall were not present
and we therefore maintained the course.

As of today, the situation remains the same. Our internal market
indicators focus on trend, momentum and sentiment and collectively
they are not in a warning position. While our long-term view remains
the same we expect the US Dollar and US stocks to really soar
relative to other markets, we are very aware that a near-term
correction in the 10-20% range is necessary.

Bond markets, and more specifically the high yield bond market
provided investors with a preview of what we believe is coming at
some point down the road. In mid July, our research concluded high
yield strategies had reached its maximum value and we therefore
sold our positions. While we didnt expect it to happen as fast as it
did, but merely days later the high yield market fell over 5% and thus
providing investors with a preview of what we believe will be occur at
some point in the near future. The lack of liquidity in this market is
frightening and anyone with investments in this market should be
aware of the risks.

As always, wed be pleased to speak with anyone about our
investment views. We also encourage our readers to share our global
market outlook with those who they think may find it of interest.

Please feel to contact:

John Corney at johncorney@IceCapAssetManagement.com

Ariz David at arizdavid@IceCapAssetManagement.com or

Keith Dicker at keithdicker@IceCapAssetManagement.com.

Thank you for sharing your time with us.

Be careful with high yield

2014.09 IceCap Global Market Outlook

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2014.09 IceCap Global Market Outlook

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Our view on global investment markets:

September 2014 The Ski Holiday

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