RPT MTA 2016 02 PEEK

Monthly Market Analytics & Technical Analysis
FEBRUARY 2016 Edition
SECTIONAL REPORT
MATA- FEBRUARY 2016
2/15/2016
1 FEBRUARY 2016 Edition

Copyright 2016 Gordon T. Long All Rights Reserved
Restricted & Confidential

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Monthly Market Analytics & Technical Analysis

FEBRUARY 2016
HIGHLIGHTS - WHAT YOU NEED TO KNOW ................................................................................................................................. 14
SUMMARY ANALYSIS ............................................................................................................................................................................................ 14
Era of Delusional Distortions & the Super Cycle Pivot b .................................................................................................................................... 27
Defining Chart #1 - "Delusional Distortion" Expectations & the Log-Periodic Cycle ......................................................................................... 29
Defining Chart #2 - Finding the Longer Term Super Cycle Pivot b ................................................................................................................ 30
Defining Chart #3 - The Big M and Super Cycle b ....................................................................................................................................... 31
Defining Chart #4 Intermediate Term Topping Process ................................................................................................................................. 33
The Bottom Line................................................................................................................................................................................................. 41
OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 45

FEBRUARY 2016: Global Macro Drivers ................................................................................................................................................................ 47
NEW-WEALTH .................................................................................................................................................................................................. 49
UPDATED-HARD ASSETS - Gold ................................................................................................................................................................ 49
UPDATED-HARD ASSETS Silver .............................................................................................................................................................. 51
UPDATED-HARD ASSETS - Commodities .................................................................................................................................................. 53
UPDATED-NEW-EXCHANGE .......................................................................................................................................................................... 54
CURRENCIES - USD .................................................................................................................................................................................... 54
UPDATED-CURRENCIES - EURO ............................................................................................................................................................... 55
CURRENCIES - YEN ..................................................................................................................................................................................... 57
UPDATED-CARRY TRADE - The : Cross ............................................................................................................................................... 59
UPDATED-CARRY TRADE - The $: Cross ............................................................................................................................................... 62
NEW-YIELD, CREDIT & SPREAD .................................................................................................................................................................... 63
NEW-EQUITIES - Global ................................................................................................................................................................................... 65
CHARTS & RESEARCH OF NOTE .................................................................................................................................................................. 66
CREDIT .......................................................................................................................................................................................................... 66
NEW- CREDIT Leveraged Loans and HY Corporate Bond Yields Point to Lower Equities .................................................................. 67
NEW- CREDIT SP500 Financial Stocks versus UST 2-10s ................................................................................................................... 68
NEW- CREDIT UST 2-10s 2003-2008 versus 2014-Present .............................................................................................................. 68
NEW- CREDIT SP500 Financials (Sub) Credit Risk .............................................................................................................................. 69
NEW- CREDIT US Financials Stocks versus Credit ........................................................................................................................... 69
NEW- CREDIT US Sovereign Credit Risk .............................................................................................................................................. 70
CREDIT Sector Distress Ratios in US HY (over 1,000bps).................................................................................................................... 71
CREDIT Deep Distress (over 2,000bps) ................................................................................................................................................. 72
CREDIT Number of Distressed Bonds.................................................................................................................................................... 72
CREDIT Leveraged Loan Credit Steadily Falling ................................................................................................................................... 73
CREDIT US High Yield CCC or Below ................................................................................................................................................... 73
CREDIT Credit Index Tranches Slicing & Dicing Credit ...................................................................................................................... 74
CREDIT S&P 500 and US High Yield Spreads (Ex Energy) .................................................................................................................. 75
CREDIT S&P 500 / LSTA US Leveraged Loan 100 Index ..................................................................................................................... 75
CREDIT US High Yield Corporate Bond Default Rate ........................................................................................................................... 76
CREDIT Weak Balance Sheets under Pressure - Concerns about Credit Risk..................................................................................... 76
CREDIT Something Up in the Repo Market? ......................................................................................................................................... 77
CREDIT High Yield Credit 2007 versus Today .................................................................................................................................... 77
CREDIT High Yield Spread the Largest Since June 2012 ..................................................................................................................... 78
CREDIT The spread between BAA and 10-year treasuries is the widest since July 2012 .................................................................... 78
CREDIT The spread between BAA and Industrial Production ............................................................................................................... 78
CREDIT High Yield Spreads to 10Y UST & 10Y Breakeven Inflation .................................................................................................... 79
CREDIT Credit Stress Intensifies US Corporate HY ........................................................................................................................... 80
YIELD ............................................................................................................................................................................................................. 81
NEW-YIELD Flattening UST Yield Curve Moving Towards Inversion ................................................................................................. 81
NEW-YIELD US Financials Subordinated Bonds ................................................................................................................................ 82
NEW-YIELD Global Bond Yields ............................................................................................................................................................ 82
NEW-YIELD HY Spreads by Industry Have Widened Across Industries ............................................................................................ 83
NEW-YIELD Aggregate Treasury Future Net Position ........................................................................................................................... 83
NEW-YIELD 10 UST Yield Technical Breakdown ............................................................................................................................... 84
NEW-YIELD Flattening US Yield Curve -2-10s ...................................................................................................................................... 84
YIELD The Smart Money Has Never Been This Long the Long Bond ................................................................................................... 85
YIELD Goldman Joins Chorus Warning on Bank Market Liquidity ......................................................................................................... 85
YIELD Change In Trend May Be About Concerns With Credit & Cash Flows ....................................................................................... 85
YIELD Expect 1.00% Yield on 10Y UST ................................................................................................................................................. 86
YIELD Primary Dealer: Investment Grade Net Positions ....................................................................................................................... 86
YIELD Primary Dealers: Junk Bond Net Positions ................................................................................................................................. 87
YIELD 10Y EU Country Government Bond Yields ................................................................................................................................. 88
YIELD UST Note Yields Fall the Most Since 2009 after the Fed Goes On Hold ................................................................................... 88
YIELD German & US 10Y Bonds Fall Dramatically In Yield Trend is Now Down ............................................................................... 88
CURRENCIES ............................................................................................................................................................................................... 90
NEW-CURRENCIES Retreating USD Index .......................................................................................................................................... 90
NEW-CURRENCIES Stunning is the collapse in the USDJPY since Kuroda unleashed NIRP ............................................................ 90
NEW-CURRENCIES Energy Currencies versus USD and Oil Price ..................................................................................................... 91
CURRENCIES EURUSD continues to weaken as Draghi reinforces the ECB's dovish stance ............................................................ 91


CURRENCIES Strong USD a Driver of Falling Commodities, Falling Energy and EM Problems ......................................................... 92
CURRENCIES It is Still About the Japanese Carry Trade But Concerns Growing ............................................................................. 93
CURRENCIES Everyone Is Probably Wrong About the US Dollar ........................................................................................................ 93
COMMODITIES ............................................................................................................................................................................................. 97
NEW-COMMODITIES WTI- Log Scale of Price and Percentage Change ............................................................................................. 97
NEW-COMMODITIES Real Oil and Average Oil Price Since 1861 ....................................................................................................... 97
COMMODITIES Copper Falls To Fresh 6 Years Low After $GS Says Metal "Poised To Move Even Lower" ...................................... 98
COMMODITIES Algos Locked into WTI Crude & Alternatively the USDJPY ........................................................................................ 99
COMMODITIES Why commodities are dying the death of 1,000 cuts ................................................................................................... 99
COMMODITIES The Weak Trend In EM currencies and Commodities Isnt Abating .......................................................................... 100
COMMODITIES How Saudi Arabia Sets the Global (Currency) Markets ............................................................................................ 101
INFLATION .................................................................................................................................................................................................. 105
NEW-INFLATION Probability of March Fed Rate Hike = Zero = Weak Inflation.................................................................................. 105
NEW-INFLATION March Rate Hike Odds Falling Rapidly ................................................................................................................... 106
INFLATION Expected Inflation- One Year and Three Years Ahead .................................................................................................... 106
INFLATION Inflation Expectations & Relative Performance................................................................................................................. 106
INFLATION US CPI 1958 2015 Annual Percentage Change ........................................................................................................ 108
INFLATION The Rise of Deflation ......................................................................................................................................................... 109
INFLATION World Inflation Falls To 59-Month Low ..................................................................................................................... 109
PRECIOUS METALS ................................................................................................................................................................................... 111
NEW- PRECIOUS METALS Gold Breaking Out Deutsche Bank Driven? ........................................................................................ 111
NEW- PRECIOUS METALS Gold Breaks Out At Exactly Year Beginning? ........................................................................................ 111
NEW- PRECIOUS METALS Barrels of Oil per Ounce of Gold ............................................................................................................ 112
NEW- PRECIOUS METALS Gold-Oil Ratio ......................................................................................................................................... 112
NEW- PRECIOUS METALS Gold Breakout Percentage Move Comparable to 2008 Financial Crisis ................................................ 113
NEW- PRECIOUS METALS Long Term Perspective of YB Gold Breakout ........................................................................................ 113
PRECIOUS METALS Gold demand in Asia hit by weak local currencies; Indian prices at discount .................................................. 114
PRECIOUS METALS Gold Tracked US Debt Until Recently Will Likely Re-Establish Long Term Pattern .................................. 115
RISK: Risk-On versus Risk-Off .............................................................................................................................................................................. 116
CHARTS OF NOTE ......................................................................................................................................................................................... 117
NEW-RISK New Global Risk US Growth European Financial Conditions .......................................................................................... 117
NEW-RISK Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 .............................................................. 117
NEW-RISK Global Financial Risk ............................................................................................................................................................. 118
NEW-RISK US Financials Stocks versus Credit ................................................................................................................................... 118
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ................................................................... 119
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison ...................................................... 119
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower ......................................... 120
NEW-RISK Small Cap Stocks versus HY Bond Spread .......................................................................................................................... 120
NEW-RISK Net Cash Companies Scarce EBITDA Cash Flow .......................................................................................................... 121
NEW-RISK Falling Animal Spirits - Sinking CEO Confidence .................................................................................................................. 121
NEW-RISK Bull-Bear Ratio Collapses ...................................................................................................................................................... 122
NEW-RISK SPX Percent off 2009 High .................................................................................................................................................... 123
NEW-RISK SPX Price-Earnings-PE Ratio ............................................................................................................................................... 123
RISK Stock market more Over-valued than prior to Previous Crashes! .................................................................................................. 124
RISK Coppock Signaling Problems Ahead ............................................................................................................................................... 124
RISK Junk Bond Movements Have Been Dependable Warning Indicators Since Dotcom Bubble Burst ............................................... 125
RISK Corporate Profits and Wages Diverge ............................................................................................................................................ 125
RISK Russell 1000 Equal Weight: Cap-Weight Ratio ........................................................................................................................... 126
RISK Long Term Monthly Reversal Signal ............................................................................................................................................... 126
RISK Markets Historically Fail after Three months of Falling Margin Debt We Have 2 Months ........................................................... 127
RISK Margin Debt Channel is Pretty Clear High Odds of Troubles Ahead........................................................................................... 127
RISK Goldman Joins the Chorus Warning on Bond Market Liquidity ...................................................................................................... 128
RISK So Goes Retail So Goes the US Economy .................................................................................................................................. 128
RISK Consumer Discretionary Sending Signals....................................................................................................................................... 129
RISK Net EBITDA 2x Highest since 2006 % of companies with net cash Lowest since 2006 ................................................................ 131
RISK US Corporate Net Debt Has Exploded & Now Massively Exceeds EBITDA .................................................................................. 131
RISK CBOE Skew Index ........................................................................................................................................................................... 132
RISK Gap Between Uncertainties Priced in the Debt & Equity Markets .................................................................................................. 132
RISK Beware of EPS manipulation........................................................................................................................................................... 133
RISK Total NYSE Short Interest & Monthly Change ................................................................................................................................ 134
RISK Contrasting Post October Market Drawdowns 1973s Slow Pain versus 1987 Crash............................................................... 134
RISK Historical Post-Crash Price Actions 1950 to 2015 ....................................................................................................................... 135
RISK Historical Post-Crash Price Pattern Has Taken an Average of 27 days to Double Bottom ........................................................... 135
RISK Credit Fleeing IG,HY & EM ............................................................................................................................................................. 136
RISK Credit Fleeing IG,HY & EM ............................................................................................................................................................. 136
RISK Margin Debt in NYSE Accounts versus S&P 500 ........................................................................................................................... 137
RISK Credit Risk Increasing ..................................................................................................................................................................... 138
RISK TED Spread Increasing ................................................................................................................................................................... 138
RISK VIX Pricing in Credit Problems ........................................................................................................................................................ 139
RISK Credit Always Leads Markets Its the Life Blood! ...................................................................................................................... 139
RISK The Pattern is Clear QE the Market Driver .................................................................................................................................. 140
RISK Internal deterioration in the market is more consistent with the development of more major bull market peaks ........................ 141
RISK A huge gap has opened up between reality and perceptions ......................................................................................................... 142
RISK Economic Surprise Index lower highs, lower lows and a reluctant bounce ................................................................................. 143
RISK Weekly Equity Outflows ................................................................................................................................................................... 143
RISK Weekly EM Fund Outflows .............................................................................................................................................................. 144


RISK Net Outflows as a % of AUM by Year ............................................................................................................................................. 145

RISK HG Spread Per Point of Equity Volume .......................................................................................................................................... 146
RISK Widening Gap between Debt & Equity ............................................................................................................................................ 146
RISK HY Bond ETF (HYG) versus S&P 500 ............................................................................................................................................ 146
RISK HY Credit versus 2007-2008 Credit Always Leads Equity ........................................................................................................ 147
RISK Leutholds High/Low Logic Index Sending a Clear Signal .............................................................................................................. 148
RISK Just Too Many One in a Million Standard Deviation Events! ....................................................................................................... 149
RISK Days with > 100 NYSE & NASDAQ New Highs AND New Lows ................................................................................................... 149
RISK Correlated, Confirmed Hindenburg Omens .................................................................................................................................... 150
RISK Broad Global Equity Index Sitting on the Precipice ........................................................................................................................ 151
RESEARCH OF NOTE .................................................................................................................................................................................... 151
RISK Apple Accounted For 20% Of All U.S. Margin Expansion Since 2010 - Why This Matters ........................................................... 151
RISK 27 Major Global Stocks Markets That Have Already Crashed By Double Digit Percentages In 2015 .......................................... 153
RISK A major long-term momentum indicator is flashing, sell. .............................................................................................................. 158
RISK Malinvestment Lunacy Exposed As US Money Supply Growth Finally Begins To Crack .............................................................. 159
RISK The Coming Economic Collapse Will Crash Stocks ....................................................................................................................... 162
RISK "Coppock Guide" Signals a Bear Market Is At Hand ...................................................................................................................... 164
RISK Goldman's Clients Are Suddenly Very Worried About Collapsing Market Breadth ........................................................................ 166
TECHNO-FUNDAMENTALS ................................................................................................................................................................................. 171
CHARTS OF NOTE ......................................................................................................................................................................................... 171
NEW-CHARTS MSCI World Index 7.5 Year Cycle ............................................................................................................................... 171
NEW-CHARTS World Equity Markets Have Now Lost Over $16.8 Trillion.............................................................................................. 171
NEW-CHARTS Global Bear Markets........................................................................................................................................................ 172
NEW-CHARTS Possible Head & Shoulders in Play with a Target of 1600 ............................................................................................. 173
NEW-CHARTS Possible Small Degree Head & Shoulders in Play with a Target of 1725 ...................................................................... 173
NEW-CHARTS Possible Corrective A-B-C Near Completion ................................................................................................................ 174
NEW-CHARTS Cumulative Flows By Client Type January 2008-Present ........................................................................................... 174
NEW-CHARTS Total World Index Fund versus Long Term Fund ........................................................................................................... 175
NEW-CHARTS Global DOW Drops To Next Support Level .................................................................................................................... 175
NEW-CHARTS VIM remains negative across the board since mid-Nov. ................................................................................................ 176
NEW-CHARTS A falling VIGOR shows net distribution ........................................................................................................................... 177
NEW-CHARTS The RRG reflects a defensive or risk off market. ............................................................................................................ 178
NEW-CHARTS The average stock in the developed world is off 23% from its 1-year high .................................................................... 179
NEW-CHARTS The average stock in the developed world is down 8% over the past year ................................................................... 179
NEW-CHARTS 52% of all developed world stocks are in a bear market over the past 200-days .......................................................... 180
NEW-CHARTS The average energy company is down an astounding 40% of its 1-year high. ............................................................... 180
NEW-CHARTS The average stock in DM Americas is down 14%in the last year ................................................................................... 181
CHARTS International and Emerging Market Divergence ....................................................................................................................... 181
CHARTS US versus World Stocks ........................................................................................................................................................... 182
CHARTS S&P 500 With and Without FOMC Meeting Dates ................................................................................................................... 183
CHARTS The Median Stock In The World Is Flat YTD ............................................................................................................................ 184
CHARTS 70% of EM Stocks are Still Down More Than 20% from 200-Day Highs ................................................................................. 184
CHARTS Year End Overhead Resistance to Santa Claus Rally ............................................................................................................. 185
CHARTS Professionals Are Leaving the Party Early ............................................................................................................................... 185
CHARTS NYSE Advance-Decline Line versus S&P ................................................................................................................................ 186
CHARTS A month-long bearish divergence for the US 15 most active advance-decline line ................................................................. 187
CHARTS A-D line preceded or coincided with big breakdowns for the S&P 500 in 2000 and 2007 ....................................................... 187
CHARTS A major bearish divergence for global A-D line in US Dollars .................................................................................................. 188
CHARTS Be Alert to Oversold Pull Back Before Seasonal YE Strength ................................................................................................. 189
CHARTS Leading Indicators Support View The Current Weakness May Turn into a Buying Opportunity ............................................. 190
CHARTS Problem in US Retail Developing ............................................................................................................................................. 191
CHARTS Gold Reacted to Chinese Devaluation ..................................................................................................................................... 192
CHARTS The DOW Theory & DOW Transports ...................................................................................................................................... 193
CHARTS October- A Month for the History Books ................................................................................................................................... 194
CHARTS The Smart Money Has Never Been This Long the Long Bond ................................................................................................ 195
CHARTS Real S&P 500 Index Cycles with Recessions .......................................................................................................................... 196
CHARTS Quarterly Overbought Cycles ................................................................................................................................................... 196
CHARTS Monetary Velocity Declines as Excess Leverage Weights on Consumption ........................................................................... 196
CHARTS The Real Value of Cash ............................................................................................................................................................ 197
CHARTS Consumer Sentiment versus S&P 500 ..................................................................................................................................... 197
CHARTS Hedgers Net Long Record of S&P 500 Futures ....................................................................................................................... 198
CHARTS Fed Balance Sheet Changes versus S&P 500 ......................................................................................................................... 199
CHARTS S&P Futures versus Relative Volumes ..................................................................................................................................... 199
CHARTS Japanese Buying Foreign Stocks ............................................................................................................................................. 200
CHARTS Monetary Initiatives versus S&P 500 ........................................................................................................................................ 201
CHARTS Bull Trend Line Support ............................................................................................................................................................ 201
CHARTS DOW Industrial 200 WMA Boundary Condition & Trend Direction Change Indicator.............................................................. 202
CHARTS DOW Industrial 200 WMA Boundary Condition & Trend Direction Change Trigger ................................................................ 202
CHARTS Global 150 Equity Index Bounces off Lower Support Channel ................................................................................................ 203
CHARTS Global 150 Equity Index Potential Key Support Levels ......................................................................................................... 203
CHARTS The Rout May Have Just Began According to Some ............................................................................................................... 204
CHARTS The VIX Termination Algo ......................................................................................................................................................... 204
CHARTS The VIX Termination Algo ......................................................................................................................................................... 205
CHARTS Pick-Up In Buyback Activity ...................................................................................................................................................... 206
CHARTS Buybacks Are Tied to Investment Grade Credit Spreads ........................................................................................................ 206
CHARTS Coincident / Lagging Indicator Ratio ......................................................................................................................................... 207


CHARTS Annual Change in Durable Goods Orders ................................................................................................................................ 207

CHARTS Durable Goods v Core-Durable Goods (Ex Defense) .............................................................................................................. 208
CHARTS Real Gross Domestic Investment ............................................................................................................................................. 208
CHARTS Total Real Private Fixed Investment as % of Real GDP .......................................................................................................... 209
CHARTS Businesses Operate Against Actual Demand ........................................................................................................................... 209
CHARTS ISM Composite Index ................................................................................................................................................................ 210
CHARTS Capacity Utilization versus Industrial Production ..................................................................................................................... 210
CHARTS Retail Sales (NSA) Annual % Chg of 12 Month Average ......................................................................................................... 211
CHARTS Monthly Retail Control Purchases Y-o-Y % Chg ................................................................................................................. 212
OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 213

Q4 EARNINGS Earnings Recession .................................................................................................................................................................. 214
STUDY: Q4 EARNINGS - ...................................................................................................................................................................................... 214
CHARTS OF NOTE ......................................................................................................................................................................................... 214
NEW-Q4 EARNINGS SPX Earnings 2007-2009 versus 2014-Today .................................................................................................. 214
NEW-Q4 EARNINGS Dividend Cuts Accelerate ...................................................................................................................................... 214
NEW-Q4 EARNINGS EBITDA Growth Is the Worst Since 2000 ............................................................................................................. 215
NEW-Q4 EARNINGS All Country World Earnings and BCAs EPS Model .............................................................................................. 215
RESEARCH OF NOTE .................................................................................................................................................................................... 216
NEW-Q4 EARNINGS The 4 Key Themes from Q4 Conference Calls ..................................................................................................... 216
NEW-Q4 EARNINGS Avondales CEO Feedback Company Notes Digest 02.12.15 .......................................................................... 221
NEW-Q4 EARNINGS Here's How Much The Strong Dollar Hurts US Companies ................................................................................. 238
NEW-Q4 EARNINGS Q4 Will Be The Worst U.S. Earnings Season Since The Third Quarter Of 2009 ................................................. 241
2016 EARNINGS Earnings Projections .............................................................................................................................................................. 245
STUDY: 2016 EARNINGS - ................................................................................................................................................................................... 245
CHARTS OF NOTE ......................................................................................................................................................................................... 245
NEW-2016 EARNINGS Historical Global Consensus Earnings Estimates ............................................................................................. 245
NEW-2016 EARNINGS 12 Month Forward EPS Consensus .................................................................................................................. 245
NEW-2016 EARNINGS SPX Earnings CY 2016 ................................................................................................................................... 246
NEW-2016 EARNINGS A 2016 Hockey Stick Forecast Only the Nave Would Believe ....................................................................... 246
NEW-2016 EARNINGS US Forward PE versus Fed Funds Rate ........................................................................................................... 247
NEW-2016 EARNINGS US Operating Profit Margin versus US Monetary Indicators ............................................................................. 247
RESEARCH OF NOTE .................................................................................................................................................................................... 248
NEW-2016 EARNINGS 2016 EPS Growth Estimates Slashed By 50% Just One Month Into The Year ................................................ 248
NEW-2016 EARNINGS Another Data Point To Ignore: Dividend Cuts Have Surpassed 2008 .............................................................. 250
NEW-2016 EARNINGS Profit, Multiple & Margin Trouble Are In Store For Global Equities In 2016 ...................................................... 252
CREDIT CYCLE Confirmations That It Has Turned ........................................................................................................................................... 254
STUDY: CREDIT CYCLE - UPDATE..................................................................................................................................................................... 254
CHARTS OF NOTE ......................................................................................................................................................................................... 254
NEW-CREDIT CYCLE Leveraged Loans and HY Corporate Bond Yields Point to Lower Equities ........................................................ 254
NEW-CREDIT CYCLE SP500 Financial Stocks versus UST 2-10s ........................................................................................................ 255
NEW-CREDIT CYCLE UST 2-10s 2003-2008 versus 2014-Present ................................................................................................... 255
NEW-CREDIT CYCLE SP500 Financials (Sub) Credit Risk .................................................................................................................... 256
NEW-CREDIT CYCLE US Financials Stocks versus Credit ................................................................................................................. 256
NEW-CREDIT CYCLE US Sovereign Credit Risk .................................................................................................................................... 257
NEW-CREDIT CYCLE Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 ............................................ 257
NEW-CREDIT CYCLE Global Financial Risk ........................................................................................................................................... 257
NEW-CREDIT CYCLE Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ................................................. 259
NEW-CREDIT CYCLE Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison .................................... 259
NEW-CREDIT CYCLE Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower ...................... 260
NEW-CREDIT CYCLE Small Cap Stocks versus HY Bond Spread ........................................................................................................ 260
NEW-CREDIT CYCLE Net Cash Companies Scarce EBITDA Cash Flow........................................................................................ 261
NEW-CREDIT CYCLE Falling Animal Spirits - Sinking CEO Confidence ............................................................................................... 261
BUYBACKS Slowing Due to Debt-Credit Rating Concerns ............................................................................................................................... 262
STUDY: BUYBACKS ............................................................................................................................................................................................. 262
CHARTS OF NOTE ......................................................................................................................................................................................... 262
NEW-BUYBACKS Net Cash Companies Are Increasingly Scarce ........................................................................................................ 262
NEW-BUYBACKS EBITDA Growth Is the Worst Since 2000 .................................................................................................................. 262
NEW-BUYBACKS Buybacks v SPX Total Return Indices ....................................................................................................................... 263
NEW-BUYBACKS Proof that Buybacks Mainly Funded By Debt ............................................................................................................ 263
NEW-BUYBACKS US Companies Continuing to Borrow To Buyback Stock .......................................................................................... 264
NEW-BUYBACKS Debt/EBITDA v FCF-Cost of Debt - 2013 .................................................................................................................. 264
NEW-BUYBACKS Debt/EBITDA v FCF-Cost of Debt 2015 ................................................................................................................. 265
BUYBACKS Buybacks & Dividends as a Percentage of Net Income ...................................................................................................... 266
BUYBACKS After Historic Buybacks the Y-o-Y Change in 12 Month Profits Per Share Still Shrinks! .................................................... 266
BUYBACKS Buybacks & Dividends as a Percentage of Net Income Against Spending on Buybacks................................................... 267
BUYBACKS Outperformance of Stocks with Large Buybacks Programs vs S&P 500 ............................................................................ 267
BUYBACKS Gross Leverage for Typical IG/HY Non-Financial Debt-EBITDA ..................................................................................... 267
BUYBACKS Equity Market Performance v S&P 500 Uses of Cash ........................................................................................................ 269
BUYBACKS Default Rate v Net Equity Buybacks .................................................................................................................................... 269
BUYBACKS S&P 500 Buyback Index 200 DMA ................................................................................................................................... 270


BUYBACKS S&P 500 v Buyback Index Performance.............................................................................................................................. 270

BUYBACKS S&P 500 Annualized Share Buybacks, Dividends and Earnings ........................................................................................ 271
BUYBACKS Falling Investment Grade Spreads Hurting Buybacks ......................................................................................................... 271
BUYBACKS Quarterly Share Repurchases & No. of Companies Repurchasing Shares Slows ............................................................. 271
BUYBACKS Dollar-Value Buybacks to Free Cash Flow Trailing Twelve Month Basis ........................................................................ 272
BUYBACKS Nearly 25% of Annual Buybacks Occur in November & December .................................................................................... 273
RESEARCH OF NOTE .................................................................................................................................................................................... 274
NEW-BUYBACKS This Is The Biggest EBITDA Drop Outside Of A Recession Since 2000 ................................................................... 274
NEW-BUYBACKS Stock Buybacks In Jeopardy: Investment Grade Bond Funds See Biggest Outflow In 17 Weeks ............................ 275
NEW-BUYBACKS MacroStrategy Explains Why Most Stocks Have Already "Crossed The Rubicon" .................................................. 278
BUYBACKS The Cannibalized Corporation- Corporate America is undermining itself. ........................................................................... 283
BUYBACKS The Fly In The Buyback Ointment- Corporate Leverage Is At Record Levels .................................................................... 290
BUYBACKS Why Stocks Are Sliding: For The First Time Since 2009 Spending On Buybacks Surpasses Free Cash Flow ................ 295
BUYBACKS When Buybacks Fail... ......................................................................................................................................................... 299
BUYBACKS "Risky Business": Companies Are Now Funding Share Buybacks By Selling Bonds To Other Companies ...................... 300
SHORT TERM TECHNICAL ANALYSIS ..................................................................................................................................... 304

SUPPORT & RESISTANCE .................................................................................................................................................................................. 304
Gann Analysis .................................................................................................................................................................................................. 304
Boundary Conditions ....................................................................................................................................................................................... 305
Channels & Regressions ................................................................................................................................................................................. 306
Fibonacci - Controlling Time Extensions ......................................................................................................................................................... 309
Fibonacci - Controlling Price Extensions ......................................................................................................................................................... 312
Elliott Wave ...................................................................................................................................................................................................... 313
The Bottom Line............................................................................................................................................................................................... 316
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ........................................................................................................................... 320
SENTIMENT & CONFIDENCE Shifting Trend ................................................................................................................................................... 320
A GRAPHIC HIGHLIGHT ................................................................................................................................................................................ 320
NEW-SENTIMENT - Consumer, Investor & Trader ............................................................................................................................................... 322
NEW-Consumer Confidence - Conference Board .......................................................................................................................................... 322
NEW-Consumer Sentiment - Michigan ........................................................................................................................................................... 325
NEW-Consumer Comfort - Bloomberg ............................................................................................................................................................ 327
NEW-American Association of Independent Investors ................................................................................................................................... 329
NEW-Investors Intelligence ............................................................................................................................................................................. 329
NEW-National Association of Active Investment Managers (NAAIM) ............................................................................................................ 330
NEW-Small Business Optimism ...................................................................................................................................................................... 331
NEW-Percentage Stocks above 50 & 200 DMA ............................................................................................................................................. 333
NEW-Margin Levels ......................................................................................................................................................................................... 334
Real Margin Debt as % of GDP ....................................................................................................................................................................... 339
Margin Debt versus S&P 500 .......................................................................................................................................................................... 339
Mutual Fund Cash Levels v S&P 500 .............................................................................................................................................................. 340
NEW-OSCILLATORS & BREADTH: Indicators of Importance ............................................................................................................................ 342
NEW-NYSE Overbought / Oversold ................................................................................................................................................................ 342
NEW-OEX Open Interest (Puts/Calls) ............................................................................................................................................................. 343
NEW-TRIN ....................................................................................................................................................................................................... 344
NEW-McClellan Oscillator ............................................................................................................................................................................... 345
CHARTS OF NOTE ............................................................................................................................................................................................... 346
NEW-CHARTS Small Business Sentiment Trending Down Strongly .......................................................................................................... 346
NEW-CHARTS Small Business Sentiment Margin Squeeze .................................................................................................................... 346
NEW-CHARTS Bloomberg Consumer Comfort versus Nasdaq .................................................................................................................. 347
NEW-CHARTS Goldmans Short Term Sentiment Indicator Shows Low Suggests Near Term Counter Rally Likely ............................. 348
NEW-CHARTS Global Consumer Confidence Begins Reversal from Trend Resistance ........................................................................... 349
NEW-CHARTS US Economic Index Steadily Eroding ................................................................................................................................. 350
NEW-CHARTS UMich Consumer Confidence with Biggest Miss on Record .............................................................................................. 350
NEW-CHARTS Economic Surprise Index lower highs, lower lows and a reluctant bounce .................................................................... 350
NEW-CHARTS Cumulative Flows by Client Type - YTD ............................................................................................................................. 352
NEW-CHARTS Historical Risk versus Returns ............................................................................................................................................ 352
NEW-CHARTS Cumulative Flows by Client Type January 2008-Present ............................................................................................... 352
NEW-CHARTS Q Ratio Since 1900 ............................................................................................................................................................. 353
CHARTS Nominal & Real Household Spending Expectations .................................................................................................................... 354
CHARTS Household Spending Expectations by Income Bucket ................................................................................................................ 354
CHARTS A Very Neutral (Highly Unusual) Bull Market ............................................................................................................................... 355
CHARTS Historical Swings in Sentiment ..................................................................................................................................................... 355
CHARTS Investors Intelligence Bulls & Bears ............................................................................................................................................. 356
CHARTS A/D Line Diverging from Price, Suggesting Weakening Momentum ........................................................................................... 357
CHARTS Smart Money OEX Open Interest Put/Call Ratio Now Off the Charts! .................................................................................... 357
CHARTS UMich Consumer Sentiment Tumbles Most In 16 Months ........................................................................................................... 358
CHARTS Consumer Comfort Plunges Most In 10 Months .......................................................................................................................... 359
CHARTS Only 16% Think Future Employment Opportunities Will Be Better .............................................................................................. 360
CHARTS Inequality Eventually Leads to Economic Adjustments Often Precipitously ............................................................................. 360
CHARTS - NFIB Small Business Sentiment ................................................................................................................................................... 361
CHARTS - Orange Book .................................................................................................................................................................................. 361
CHARTS Asset Allocation Global Equities ................................................................................................................................................ 362
CHARTS Asset Allocation Global Bonds .................................................................................................................................................. 362
CHARTS Active versus Passive Funds Allocation ....................................................................................................................................... 363


CHARTS Investors Intelligence Survey of % Bears ..................................................................................................................................... 363

CHARTS Sentiment at Post 2008 Crisis Highs ............................................................................................................................................ 364
CHARTS CNBC Viewership Steadily Falling ............................................................................................................................................... 365
CHARTS Investor Allocation Trends for Stocks, Bonds and Cash .............................................................................................................. 366
CHARTS Uptick in Feds Financial Stress Index Composite ....................................................................................................................... 367
CHARTS Fear Barometer Diverges with VIX, CDS IG Index ...................................................................................................................... 368
CHARTS Extreme Complacency Seen Near End of Cycles ........................................................................................................................ 368
CHARTS Complacency Seen In PE/VIX ....................................................................................................................................................... 369
CHARTS Post Crisis Sentiment Profile Shows a Clear Ending Pattern ...................................................................................................... 369
CHARTS Smart Money Flows ...................................................................................................................................................................... 370
CHARTS Fed Assets versus Bullish Sentiment ........................................................................................................................................... 370
CHARTS Macro Support Has Technically Broken Down ............................................................................................................................. 371
CHARTS US Surprise Index Setting Up for Downturn ................................................................................................................................. 371
CHARTS The Public No Longer Trusts the Market Feel it is Manipulated and Ineffectively Regulated ............................................... 372
RESEARCH OF NOTE .......................................................................................................................................................................................... 373
NEW-SENTIMENT: Its like someone just flipped the Switch to OFF? ........................................................................................................ 373
NEW-SENTIMENT: Oblivious To Risk - Complacency Still Reigns ............................................................................................................... 377
NEW-SENTIMENT: UMich Consumer Confidence Tumbles to 12-Month Lows with Biggest Miss on Record ............................................. 381
NEW-SENTIMENT: Elderly Americans' Confidence Collapses To 11-Month Lows (As Middle-Aged Hope Surges) ................................... 382
NEW-SENTIMENT: Post Q2 Quadruple Witch - Institutional Money Changing Direction ............................................................................. 384
NEW-SENTIMENT: The Worst Time In History To Be Invested In Stocks ..................................................................................................... 388
SENTIMENT: This Wasn't Supposed To Happen: Household Spending Expectations Crash ...................................................................... 393
SENTIMENT: Something's Happened To Investor Sentiment Since The Financial Crisis............................................................................. 394
SENTIMENT: The "Smart Money" Has Never Been More Bearish ................................................................................................................ 396
SENTIMENT: US Economic Confidence Crashes Most Since July to Lowest Since December ................................................................... 399
SENTIMENT: We Are All Bulls Now ................................................................................................................................................................ 401
SENTIMENT: No More Greater Fools: Retail Traders Are "Pretty Fully Invested" In Stocks, TD CEO Says ................................................ 402
SENTIMENT: One Heckuva Bull Market but Momentum Weakening! ........................................................................................................... 403
SENTIMENT: Small Business Confidence is a Major Problem in America .................................................................................................... 405
SENTIMENT: Americas Crisis of Trust ........................................................................................................................................................... 407
SENTIMENT: "Everything Is Awesome" American Consumers Are The Happiest In 11 Years .................................................................... 408
SENTIMENT: For CNBC, 2014 Was The Worst Year. Ever. .......................................................................................................................... 409
SENTIMENT: An Astounding Number Of Americans Aren't Investing A Cent ............................................................................................... 411
SENTIMENT: US Households to Withdraw $430 Billion From Stocks In 2014 .............................................................................................. 416
SENTIMENT: Elliott Wave's View from the Top .............................................................................................................................................. 419
SITUATIONAL SUMMARY & ANALYSIS .................................................................................................................................................... 423
INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 427

UPDATED-AGGREGATED GLOBAL FINANCIAL RISK INDEX .......................................................................................................................... 427
NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 428
NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 428
NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 429
NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 429
NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 430
NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 430
NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 432
NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 432
MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 433
NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 433
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 434
CHARTS OF NOTE ............................................................................................................................................................................................... 436
NEW-RISK: Only a Few Key Stocks Holding Up the Market .......................................................................................................................... 436
NEW-RISK: Economic Output Composite Failing ........................................................................................................................................... 436
NEW-RISK: 5 Year Cyclically Adjusted P/E Ratio versus S&P Price ............................................................................................................. 437
NEW-RISK: Margin Debt Shrinking ................................................................................................................................................................. 438
NEW-RISK: xxxx.............................................................................................................................................................................................. 438
RISK: Leutholds High/Lpw Logic Index Warns .............................................................................................................................................. 438
RISK: Megaphone Top with Confirming Oscillator .......................................................................................................................................... 439
RISK: We Have Confirmed and Unusual Hindenburg Omens ........................................................................................................................ 440
RISK: It's been a while since we corrected! .................................................................................................................................................... 441
RISK: "Seven Signs" Flash Red ...................................................................................................................................................................... 443
RISK: When these Two Charts Appear Simultaneously, Bad Things Normally Follow!................................................................................. 444
RISK: Well That's Never Happened Before - Exhibit 1 US Macro versus S&P 500 .................................................................................... 444
RISK: Well That's Never Happened Before - Exhibit 2 Long- and Short-end of the Treasury yield curve so anti-correlated. ................... 445
RISK: Well That's Never Happened Before - Exhibit 3 Fed-Fueled, Mal-Investment Boom ....................................................................... 446
RISK: Well That's Never Happened Before - Exhibit 4 Market breadth diverge from performance for such an extended period.............. 447
RISK: Well That's Never Happened Before - Exhibit 5 More trades per second in stocks ......................................................................... 449
RISK: Well That's Never Happened Before - Exhibit 6 The "Smart Money" Has Never Been More Bearish .............................................. 450
RISK: Well That's Never Happened Before - Exhibit 7 Big decoupling in recent weeks between US equity flows and prices ................... 450
RISK: Well That's Never Happened Before - Exhibit 8 Cumulative 3 Mo net flows out of equities, is now the largest on record ............... 451
RISK: World Stocks versus World 2015 GDP Estimate.................................................................................................................................. 453
RISK: World Stocks versus World 2014 & 2015 GDP Estimates ................................................................................................................... 453
RISK: World Stocks versus 10Y UST Yield, WTI Crude 2015 GDP Estimates .............................................................................................. 454
RISK: Fat Tails Have Disproportionately Large Impact on Returns................................................................................................................ 455
RISK: Statistically We Are Due for a Drawdown ............................................................................................................................................. 456


RISK: The Buffett Indicator .............................................................................................................................................................................. 457

RISK: Speculation Has Taken Control of the Markets .................................................................................................................................... 458
RISK: MSCI versus World GDP Divergence - Unsustainable ........................................................................................................................ 458
RISK: High Yield Credit Risk At Elevated Levels ............................................................................................................................................ 458
RISK: Active Hindenburg Omen ...................................................................................................................................................................... 459
RISK: An Over-Levered Hedge Fund Index Ending ABC Consolidation Pattern ........................................................................................... 459
RESEARCH OF NOTE .......................................................................................................................................................................................... 461
NEW- RISK: Expert That Correctly Predicted Market Moves In July, August And September Says Stocks Will Crash In November ......... 461
NEW- RISK: 4 Warnings And Why You Should Pay Attention ....................................................................................................................... 463
NEW- RISK: According To Bank of America, This Is "The Biggest Risk to Global Equities" ......................................................................... 468
NEW- RISK: The "Smartest Money" Liquidating At a Record Pace: "Selling Everything ............................................................................. 470
NEW- RISK: Top CEO Warns Of Global Reset: "It's In The Cards For Sure... It Could Happen This Year" ................................................. 473
NEW- RISK: $140 Billion Bond Fund Goes To Cash As It "Braces For Bond-Market Collapse" ................................................................... 474
NEW- RISK: "It's Time To Hold Physical Cash", Fidelity Manager Warns Ahead Of "Systemic Event" ........................................................ 477
NEW- RISK: Sweden's Largest Fund Manager Is Quietly Dumping Stocks Before The "Herd" Is Caught In A Selling Vortex .................... 479
RISK: 12 Signs That An Imminent Global Financial Crash Has Become Even More Likely .......................................................................... 480
RISK: World's Largest Sovereign Wealth Fund Is About To Become A Seller .............................................................................................. 481
RISK: When Hindenburg Omens Are Ominous .............................................................................................................................................. 485
RISK: The Canaries Continue To Drop like Flies ............................................................................................................................................ 487
RISK: Deutsche Suggests 'Caution' As "Seven Signs" Flash Red ................................................................................................................. 489
RISK: "The Top's In" David Stockman Warns Of "Epochal Deflation" ............................................................................................................ 490
RISK: When Hindenburg Omens Are Ominous .............................................................................................................................................. 491
RISK: Two Point Three Sigmas Above the Norm ........................................................................................................................................... 493
RISK: No Really, Who is Buying? ................................................................................................................................................................... 501
RISK: Curious Sightings .................................................................................................................................................................................. 502
RISK: Even the BIS Is Shocked At How Broken Markets Have Become ....................................................................................................... 509
RISK: The Line between Rational Speculation and Market Collapse ............................................................................................................. 513
RISK: Global Economy Will Shrink By $2.3 Trillion In 2015 ........................................................................................................................... 518
RISK: Market Action Suggests Abrupt Slowing in Global Economic Activity.................................................................................................. 518
RISK: Warnings Signs Are Everywhere .......................................................................................................................................................... 522
RISK: Hindenburg Signals a Warning ............................................................................................................................................................. 523
RISK: Americans say they're too broke to invest ............................................................................................................................................ 525
RISK: The Biology of Risk ............................................................................................................................................................................... 529
RISK: More Signs Of Bullish Excess ............................................................................................................................................................... 533
RISK: Markets Have Left the "Complacency" Phase, Have Entered Full Blown "Mania" .............................................................................. 535
RISK: VIX Sends Message of Complacency ................................................................................................................................................... 536
RISK: CS Warns Volume & DeMark Raise "Topping Threat" In Stocks ......................................................................................................... 537
RISK: No One Will Ring the Bell at the Top .................................................................................................................................................... 541
Cassandra's - New Additions to the List ................................................................................................................................................................ 548
CASSANDRA: "Severe Correction Or Cyclical Bear" Ahead: Leuthold Major Trend Index Turns Negative ................................................. 549
CASSANDRA: CANARIES - Warnings Everywhere! ...................................................................................................................................... 550
CASSANDRA: Stephen Schork: The Commodity Crash Is "A Canary In The Coal Mine For The Global Economy" ................................... 552
CASSANDRA: Emerging Market Mayhem: Gross Warns Of "Debacle" As Currencies, Bonds Collapse ..................................................... 554
CASSANDRA: "Another Crisis Is Coming": Jamie Dimon Warns Of the Next Market Crash ........................................................................ 561
CASSANDRA: Steen Jakobsen: Get Ready For The Biggest Margin Call In History .................................................................................... 562
CASSANDRA: Wynn Calls "Big" Recovery "Complete Dream" As Gaming Revenues Collapse .................................................................. 564
CASSANDRA: Stan Druckenmiller's "Horrific Sense" Of Deja Vu: "This Will End Very Badly" ..................................................................... 566
CASSANDRA: Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble" ............ 571
CASSANDRA: Kyle Bass Warns "The Fed Is Backed Into A Corner... Equities Are My Biggest Liquidity Worry" ........................................ 572
CASSANDRA: Paul Tudor Jones Warns "Disastrous Market Mania" Will End In "Revolution, Taxes, or War" ............................................ 573
CASSANDRA: John Hussman - A Who's Who Of Awful Times To Invest ..................................................................................................... 575
CASSANDRA: Carl Icahn - One Day You'll See A Break Like A Few Weeks Ago But The Market Won't Come Back ................................ 578
CASSANDRA: Sam Zell Warns Of Stock Market Correction On CNBC ........................................................................................................ 579
CASSANDRA: Billionaire Carl Icahn warns on US stock prices ..................................................................................................................... 579
CASSANDRA: Soros Bets $2 Billion on Stock Market Collapse .................................................................................................................... 580
CASSANDRA: Dont Ignore Janet Yellens Stock Market Warnings 07-21-14 Fiscal Times ......................................................................... 581
CASSANDRA: Doug Kass: We're Heading for a Bear Market So Plan Accordingly ...................................................................................... 584
CASSANDRA: Comstock Funds Weighs In .................................................................................................................................................... 586
CASSANDRA: Michael Lombardi Weighs In ................................................................................................................................................... 588
CASSANDRA: Ron Paul Portfolio, 'Craziest' we've ever seen? ..................................................................................................................... 590
CASSANDRA: John Mauldin Goes Negative .................................................................................................................................................. 591
CASSANDRA: Hayman Capital Dramatically Reduces Risk .......................................................................................................................... 599
CASSANDRA: Byron Wien Warns "Oblivious Markets" Of 20% Correction ................................................................................................... 600
CASSANDRA: Harry Dent Warns Stocks to Sink More than 60% by End of 2014 ........................................................................................ 600
CASSANDRA: Stanley Druckenmiller: "When You Get This Kind Of Rigging, It Will End Badly".................................................................. 601
CASSANDRA: Mohamed El-Erian: "Prices Are Artificially High - Its Time to Take Profits" .......................................................................... 602
CASSANDRA: Felix Zulauf: World Headed Toward 1987 Style Market Collapse .......................................................................................... 603
CASSANDRA: Doug Kass: 'I'm Getting The Summer Of 1987 Feeling' In The Market Right Now ............................................................... 603
CORRELATION & COMPLACENCY A PROBLEM .............................................................................................................................................. 605
EVENT RISK A PROBLEM .................................................................................................................................................................................... 608
Q2 EARNINGS & THE R WORD .............................................................................................................................................................. 608
POLITICAL-ECONOMIC TENSIONS .......................................................................................................................................................... 608
CENTRAL BANK POLICY MISCUES.......................................................................................................................................................... 608
ASIAN ECONOMIC SLOWDOWN SPILLAGE ............................................................................................................................................ 608
PETRO$ CRISIS BREWING IN BRIICS...................................................................................................................................................... 608


LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 609

HIGHLIGHTS ......................................................................................................................................................................................................... 609
ASSET & LIABILITY OWNERSHIP ................................................................................................................................................................. 609
PANIC TOTAL RETURN DISTRIBUTION SINCE 1974 ................................................................................................................................. 609
PANIC CHASE FOR YIELD ............................................................................................................................................................................ 610
REAL S&P MARKET CAP / REAL GDP ......................................................................................................................................................... 610
UNSUSTAINABLE GAP BETWEEN PROFITS AND INCOME ...................................................................................................................... 611
ADJUSTED CORPORATE PROFITS FROM DOMESTIC OPERATIONS .................................................................................................... 611
TRAILING 10Y 12 MONTH NET MARGINS ................................................................................................................................................... 612
INVESTMENT CLASS PERFORMANCE ....................................................................................................................................................... 613
NEW-VALUATION SUMMARY ....................................................................................................................................................................... 614
VALUATION: Alternative Methodologies ............................................................................................................................................................... 619
NEW-FOUR SET CONSOLIDATED MARKET VALUATION INDICATORS .................................................................................................. 619
NEW-Crestmont from the Arithmetic ............................................................................................................................................................... 623
NEW-Cyclical PE 10 Ratio............................................................................................................................................................................... 628
NEW-Q Ratio ................................................................................................................................................................................................... 635
NEW-S&P Composite Regression-to-the-Trend ............................................................................................................................................. 640
NEW-Reference Methodologies Analysis ....................................................................................................................................................... 642
CHARTS OF NOTE ......................................................................................................................................................................................... 648
VALUATIONS Forward 12-Month P/E Ratio 10 Years.......................................................................................................................... 648
VALUATIONS Forward 12-Month EPS versus Change in Price 10 Years ........................................................................................... 648
VALUATIONS Net Margin Growth ............................................................................................................................................................ 649
VALUATIONS 10 Year Trailing 12 Mo Net Margin Growth Historically High ........................................................................................ 649
VALUATIONS Record Profits Yet Historically Low Capital Asset Growth ............................................................................................... 650
VALUATIONS Historical Ranking of PE Values ....................................................................................................................................... 651
VALUATIONS Median Price/Cash Flow Multiple for US Stocks .............................................................................................................. 652
VALUATIONS Median Price/Earnings Multiple for US Stocks ................................................................................................................. 653
VALUATIONS Median Price to Book Multiple for US Stocks ................................................................................................................... 654
VALUATIONS Price/Book; Price/Cash flow; Price/Sales ......................................................................................................................... 655
VALUATIONS Global Equities Reported PE, PE before XO & Fwd PE ............................................................................................... 656
YE EARNINGS 2015 Forecasts.......................................................................................................................................................................... 657
CHARTS OF NOTE ......................................................................................................................................................................................... 657
2015 EARNINGS 2015 & 2016 Annual Earnings EPS Estimate v Historical........................................................................................... 657
2015 EARNINGS Q3 Earnings Estimate Revisions v Change in Price ................................................................................................... 658
2015 EARNINGS Consumer Staples & Discretionary are sending a Pretty Clear ( Worsening Since Q1) Message ............................ 659
2015 EARNINGS Consensus Long-Term Growth versus Forward PE ................................................................................................... 660
2015 EARNINGS Consensus Analysts Estimates 1979-1995 ............................................................................................................. 661
2015 EARNINGS Consensus Analysts Estimates 1995-2014 ............................................................................................................. 661
2015 EARNINGS CY 2015 Earnings Growth ........................................................................................................................................... 662
2015 EARNINGS CY 2015 Revenue Growth ........................................................................................................................................... 662
2015 EARNINGS Q2 Forward 12 Mo EPS versus Change in Price ..................................................................................................... 663
2015 EARNINGS Q1 Forward 12 PE Ratio ........................................................................................................................................... 664
RESEARCH OF NOTE .................................................................................................................................................................................... 665
2015 EARNINGS Q1 Earnings Guidance: Negative Guidance (84%) Above Average ........................................................................... 665
Q3 EARNINGS Earnings Now Surfacing as a Problem ..................................................................................................................................... 666
CHARTS OF NOTE ......................................................................................................................................................................................... 666
NEW-Q3 EARNINGS Biggest Drop in Profits Since 2009 ....................................................................................................................... 666
NEW-Q3 EARNINGS Negative Sales Surprise Ran Significantly Higher than Average ......................................................................... 666
NEW-Q3 EARNINGS Y-o-Y Change in Quarterly Earnings and Revenue for S&P 500 ......................................................................... 667
NEW-Q3 EARNINGS Forward Earnings being Brought Down Rapidly ................................................................................................... 667
NEW-Q3 EARNINGS # S&P 500 Companies Citing Negative Q3 Impacts - Reasons ........................................................................... 668
NEW-Q3 EARNINGS Q4 15 Estimated Earnings Growth Rate .............................................................................................................. 668
NEW-Q3 EARNINGS Revenue & Earnings Consensus Estimated Growth Rate .................................................................................. 669
NEW-Q3 EARNINGS Q3 EPS Expected to Fall -4.5% According to Factset .......................................................................................... 670
NEW-Q3 EARNINGS S&P 500 Average Earnings Growth Y-o-Y Not a Good Pattern ........................................................................ 670
NEW-Q3 EARNINGS Revenue Recession and Flat EPS Consensus .................................................................................................... 671
NEW-Q3 EARNINGS Forward EPS Consensus Matches Manufacturing Surveys Declines ................................................................. 671
NEW-Q3 EARNINGS Q3 Earnings Growth (Decline): Ex-BAC ............................................................................................................... 672
NEW-Q3 EARNINGS IT Sector Q3 Earnings Forecast to be Down -5.9% Without Apple (-0.4% With) ................................................. 672
NEW-Q3 EARNINGS A Good Sign that Goldman Must Be Selling? ....................................................................................................... 673
NEW-Q3 EARNINGS It Should Be Expected that Earnings Will Begin to fall ......................................................................................... 673
RESEARCH OF NOTE .................................................................................................................................................................................... 674
NEW-Q3 EARNINGS The Most Important Earnings Report You Should Know About ........................................................................... 674
NEW-Q3 EARNINGS Q3 Earnings -Where We Stand - 4 Main Themes From Calls .............................................................................. 676
NEW-Q3 EARNINGS Goldman's 4 Word Summary Of Q3 Earnings Season- -Adequate Earnings, Dismal Sales ............................... 684
NEW-Q3 EARNINGS Do You See What Happens, Alcoa, When Your "Restructuring" Non-GAAP Add-backs Tumble ....................... 689
NEW-Q3 EARNINGS Q3 Earnings Bloodbath-Terrible Monsanto Results- Company Fires 2,600 - ...................................................... 690
NEW-Q3 EARNINGS Wall Street is preparing for the worst earnings season since 2009 ................................................................... 692
NEW-Q3 EARNINGS The Truth About S&P 500 Earnings: No Growth For 7 Quarters, With A Revenue Recession On Top .............. 696
Q2 EARNINGS Reported Results....................................................................................................................................................................... 697
CHARTS OF NOTE ......................................................................................................................................................................................... 697
Q2 EARNINGS Q2 Earnings Growth by Sector ....................................................................................................................................... 697
Q2 EARNINGS Q2 Revenue Growth by Sector ....................................................................................................................................... 697
Q2 EARNINGS Q2 Earnings Growth by Sector - Estimates .................................................................................................................... 698
Q2 EARNINGS Q2 Revenue Growth by Sector Estimates ................................................................................................................... 698


RESEARCH OF NOTE .................................................................................................................................................................................... 700

Q2 EARNINGS Q2 Summary ................................................................................................................................................................... 700
Q2 EARNINGS Percentage of Companies Beating Revenue Estimates (52%) is Below 5 Year Average ............................................. 701
Q2 EARNINGS Forward Earnings, Revenue and Margins ...................................................................................................................... 702
Q2 EARNINGS First Decline in Earnings (-1.3%) Since Q3 2012 (-1.06%) ............................................................................................ 703
Q2 EARNINGS First Back-to-Back Declines in Revenue Since Q2 2009 and Q3 2009 ......................................................................... 704
Q1 EARNINGS Reported Results....................................................................................................................................................................... 705
CHARTS OF NOTE ......................................................................................................................................................................................... 705
Q1 EARNINGS Q1 Earnings Growth by Sector ....................................................................................................................................... 705
Q1 EARNINGS Q1 Revenue Growth by Sector ....................................................................................................................................... 705
Q1 EARNINGS Q1 Earnings Growth by Sector - Estimates .................................................................................................................... 706
Q1 EARNINGS Q1 Reveue Growth by Sector - Estimates ...................................................................................................................... 706
RESEARCH OF NOTE .................................................................................................................................................................................... 707
Q1 EARNINGS Q1 Summary ................................................................................................................................................................... 707
Q1 EARNINGS Fewer Companies Beating Estimates and Sales Estimates Than Average .................................................................. 707
Q1 EARNINGS Forward Earnings, Revenue and Margins ...................................................................................................................... 709
Q1 EARNINGS First Decline in Earnings (-0.4%) Since Q3 2012 (-1.06%) ............................................................................................ 710
Q1 EARNINGS First Decline in Revenues (-2.6%) Since Q3 2012 (-11.5%) .......................................................................................... 711
BUYBACKS Widening Credit Spreads Become A Problem ............................................................................................................................... 712
CHARTS OF NOTE ......................................................................................................................................................................................... 712
NEW-BUYBACKS Outperformance of Stocks with Large Buybacks Programs vs S&P 500 .................................................................. 712
NEW-BUYBACKS Gross Leverage for Typical IG/HY Non-Financial Debt-EBITDA............................................................................ 712
NEW-BUYBACKS Equity Market Performance v S&P 500 Uses of Cash ............................................................................................... 713
NEW-BUYBACKS Default Rate v Net Equity Buybacks .......................................................................................................................... 713
NEW-BUYBACKS S&P 500 Buyback Index 200 DMA ......................................................................................................................... 714
NEW-BUYBACKS S&P 500 v Buyback Index Performance .................................................................................................................... 714
NEW-BUYBACKS S&P 500 Annualized Share Buybacks, Dividends and Earnings .............................................................................. 715
NEW-BUYBACKS The real reason for the slowdown has to do with the spread on investment grade debt .......................................... 715
NEW-BUYBACKS Falling Investment Grade Spreads Hurting Buybacks ............................................................................................... 716
NEW-BUYBACKS Quarterly Share Repurchases & No. of Companies Repurchasing Shares Slows ................................................... 716
NEW-BUYBACKS Dollar-Value Buybacks to Free Cash Flow Trailing Twelve Month Basis ............................................................... 716
NEW-BUYBACKS Nearly 25% of Annual Buybacks Occur in November & December .......................................................................... 717
RESEARCH OF NOTE .................................................................................................................................................................................... 719
NEW-BUYBACKS The Fly In The Buyback Ointment- Corporate Leverage Is At Record Levels .......................................................... 719
NEW-BUYBACKS Why The Stock Buyback Party Is Ending .................................................................................................................. 723
NEW-BUYBACKS Goldman Finds Buybacks No Longer Work To Boost Stock Prices: Two Reasons Why ......................................... 725
NEW-BUYBACKS Why Stocks Are Sliding: For The First Time Since 2009 Spending On Buybacks Surpasses Free Cash Flow ....... 728
NEW-BUYBACKS When Buybacks Fail... ................................................................................................................................................ 732
NEW-BUYBACKS "Risky Business": Companies Are Now Funding Share Buybacks By Selling Bonds To Other Companies ............ 733
NEW-BUYBACKS 94% of total S&P in 2015 will go back to shareholders, as dividends and buybacks................................................ 736
NEW-BUYBACKS CEO Pay Boosted from Giving Shareholders Cash .................................................................................................. 737
NEW-BUYBACKS Investor-CEO Feedback Loop .................................................................................................................................... 738
NEW-BUYBACKS Buybacks Account for Substantial Share of Corporate Profits .................................................................................. 739
NEW-BUYBACKS Quarterly History of Buyback Announcments ............................................................................................................ 739
NEW-BUYBACKS Buybacks as a Percentage of Total Cash Use at the Highest Level Since 2007 ...................................................... 740
NEW-BUYBACKS Weekly Buybacks and Rolling 3 Month Sum ............................................................................................................. 740
NEW-BUYBACKS What Sustained Buybacks Look Like To Rating Agencies IBM Example .............................................................. 741
NEW-BUYBACKS Dollar Volume of Share Buybacks and Dividends at Record Levels ......................................................................... 741
NEW-BUYBACKS Buybacks & Dividends Hurdle $900B in 2014 ........................................................................................................... 741
NEW-BUYBACKS The Growth of Stock Buybacks .................................................................................................................................. 742
NEW-BUYBACKS Buybacks & Dividends as a Percentage of Operating Earnings ................................................................................ 742
NEW-BUYBACKS Executive Compensation Structure ............................................................................................................................ 743
BUYBACKS During 2014 virtually 100% of S&P 500s reported profits of $1T were disgorged as shareholder distributions ................ 744
BUYBACKS 2015 US Equity Flows Forecast ........................................................................................................................................... 744
BUYBACKS Announced Gross Share Buybacks ..................................................................................................................................... 745
BUYBACKS Global IPO /Secondary Offerings versus Announced Gross Share Buybacks ................................................................... 745
BUYBACKS Actual Net Share Buybacks ................................................................................................................................................. 746
BUYBACKS US IPOs-Actual Buybacks and LBO .................................................................................................................................... 746
BUYBACKS Cash to Stockholders Exceeds 90% of Profits .................................................................................................................... 747
BUYBACKS Stock Repurchases Surge 30% in Q3 ................................................................................................................................. 747
BUYBACKS Stock Repurchases 2nd Highest on Record at $145B.......................................................................................................... 747
BUYBACKS 2914 YTD Stock Repurchases By Corporation 20 Corporations Over $4B ..................................................................... 748
BUYBACKS Operating EPS With / Without Buybacks ............................................................................................................................. 748
BUYBACKS Sales & Revenue Doesnt Support Reported EPS Due to Buyback Distortion ................................................................... 749
BUYBACKS S&P 500 Buyback Index versus S&P 500 ........................................................................................................................... 750
BUYBACKS The New S&P 500 Buyback Index TR ................................................................................................................................. 750
BUYBACKS The New S&P 500 Buyback Index Since Start of QE ......................................................................................................... 751
BUYBACKS IBM Total Debt to Equity (to Fund Buybacks) ..................................................................................................................... 751
BUYBACKS IBM Debt Issuance v Buybacks ........................................................................................................................................... 752
BUYBACKS Global FDI into Finance versus Productive Assets ............................................................................................................. 753
BUYBACKS Total Corporate Debt 35% Higher than 2008 Peak Used for Buybacks .......................................................................... 753
BUYBACKS Buyback Bonanza ................................................................................................................................................................ 754
BUYBACKS Buybacks Have Made a 1% Earnings Growth Distortion to Median S&P 500 Company ................................................... 754
BUYBACKS Top 10 Buyback Companies ................................................................................................................................................ 755
BUYBACKS Intel Buybacks ...................................................................................................................................................................... 755
BUYBACKS Shares Outstanding Back at 2000 Level ............................................................................................................................. 756
10


BUYBACKS Largest Volumes of Buybacks by US Listed Corporation in Last Year ............................................................................... 756
BUYBACKS Corporations Are No Longer Investing But Rather Financial Engineering Stock Prices ..................................................... 757
BUYBACKS Q2 Drop-Off Closer to Normal .......................................................................................................................................... 758
BUYBACKS Borrowing to Buy back Shares ............................................................................................................................................. 758
BUYBACKS Cyclical Nature of Buybacks Evident ................................................................................................................................... 758
BUYBACKS Major Q2 Repurchases ........................................................................................................................................................ 759
BUYBACKS Major Q1 Repurchases ........................................................................................................................................................ 759
BUYBACKS Quarterly Repurchase & Buyback Yield ............................................................................................................................... 760
BUYBACKS US Corporate Cash versus Buybacks .................................................................................................................................. 761
BUYBACKS Net Debt/EBITDA of American Non-Financial Corporations ............................................................................................... 761
BUYBACKS Stock Buybacks To Grind To A Halt Following Massive Credit Fund Outflows, "Bond Carnage" ....................................... 762
BUYBACKS"The End Of The Road" - Debt-Funded Buyback Boosts Are Finite ..................................................................................... 764
BUYBACKS Why There Is No Growth: The Entire S&P 500 Free Cash Flow Is Going Back To Shareholders ...................................... 767
BUYBACKS Do Share Buybacks Create Value? (Spoiler Alert: No) ........................................................................................................ 768
BUYBACKS Surprise! CEOs Are Getting Rich by Buying Back Stock ..................................................................................................... 770
BUYBACKSThe End of Buybacks? Goldman Warns Political Pressure On Share Repurchases Is Rising ............................................ 775
BUYBACKSCorporate Buybacks: Connecting the Dots to the F-Word .................................................................................................... 777
BUYBACKS Capex Recovery Is Worst In History, BoAML Says .............................................................................................................. 782
BUYBACKS Stock Buybacks Move to the "Terminal" Next Stage ............................................................................................................ 785
BUYBACKSOne Heckuva Bull Market ...................................................................................................................................................... 787
BUYBACKS - The US Equity Bubble Depends On Corporate Buybacks; Here's the Proof ....................................................................... 788
BUYBACKS - Why Markets Are Manic - The Fed Is Addicted To the "Easy Button" ................................................................................. 792
BUYBACKS - When $140 Billion In Buybacks Isn't Enough... .................................................................................................................... 794
BUYBACKS - "Obsessive" Buybacks Could Be Big Mistake, "Serious" People Tell Unserious People .................................................... 794
BUYBACKS - Q3 Buybacks Surging, These Are The Top 20 Repurchasers Of Their Own Stock ............................................................ 798
BUYBACKS - Accounting Magic .................................................................................................................................................................. 800
BUYBACKS - The largest source of overall US equity demand in recent years......................................................................................... 802
BUYBACKS - Has Boosted Median Earnings Growth by 100 bps for S&P 500 ......................................................................................... 805
BUYBACKS - Companies Spend Almost All Profits On Buybacks ............................................................................................................. 810
BUYBACKS - Buyback At Biggest Pace Since 2007 .................................................................................................................................. 815
BUYBACKS - Buyback Party Slowing ......................................................................................................................................................... 817
BUYBACKS - Buyback Party Slowing ......................................................................................................................................................... 822
THE $2T TAX RUSE Its a Free Ride for US Corporations ......................................................................................................................... 827
UNPRECEDENTED BUYBACKS LEVELS ................................................................................................................................................. 827
A FREE TAX RIDE....................................................................................................................................................................................... 829
GENERIC TAX EXAMPLE ........................................................................................................................................................................... 829
CHARTS OF NOTE ............................................................................................................................................................................................... 834
CHARTS Finance the Biggest Source of Corporate Funds rising from 19% to 30% .................................................................................. 834
CHARTS Average Age of Private Fixed Assets ........................................................................................................................................... 835
CHARTS Percent of Families With Business Equity .................................................................................................................................... 835
CHARTS Percent of Families With Business Equity .................................................................................................................................... 836
CHARTS New England Patriots NFL Franchise Valuation ......................................................................................................................... 837
CHARTS US Equity Market is Not Outgrowing the Economy AS Measured by the Coincident Indicator .................................................. 838
CHARTS Deviation of Earnings Above / Below Long Term Growth Trend ................................................................................................. 839
CHARTS S&P 500, Moodys Baa Corporate & 30Y UST Yields ................................................................................................................. 839
CHARTS Corporations Carrying Higher Levels of Leverage than a Few Years Ago .................................................................................. 840
CHARTS US Corporate CFROI (Cash Flow ROI) ....................................................................................................................................... 841
CHARTS Weakening Sector Retunrs ........................................................................................................................................................... 841
CHARTS SPX, Corporate Profits versus Employed Population % .............................................................................................................. 842
CHARTS Executive Incentives Distort Earnings .......................................................................................................................................... 842
CAPITALIZATION Market Capitalization as a % of Nominal GDP .............................................................................................................. 843
CAPITALIZATION Market Capitalization Adjusted by Gold and CPI ........................................................................................................... 844
CAPITALIZATION Market Capitalization versus Total Federal Reserve Assets ......................................................................................... 845
CAPITALIZATION Total Market Capitalization versus M2 ........................................................................................................................... 846
CAPITALIZATION Total Market Capitalization versus Monetary Base ....................................................................................................... 847
CAPITALIZATION Total Market Capitalization versus Gross Federal Debt ................................................................................................ 848
CAPITALIZATION Market Capitalization Ratios .......................................................................................................................................... 849
CAPITALIZATION Regional Corporate Loss Comparisons Problems in Japan....................................................................................... 849
CHARTS 7 Year Total Return Cycle ............................................................................................................................................................ 850
CHARTS Profit Margins Shrink as Proportion of GDP ................................................................................................................................. 850
CHARTS Q1 Earnings Pre-Announcements ................................................................................................................................................ 851
CHARTS Q1 Earnings Taken Down Dramatically ....................................................................................................................................... 851
CHARTS Q1 Earnings Already Taken Down By 5% since January ............................................................................................................ 852
CHARTS Positive & Negative Q1 Pre-Announcements .............................................................................................................................. 852
CHARTS Q1 Revenue Slippage in Last 60 Days ........................................................................................................................................ 853
CHARTS Forward 12 Month EPS vs Price: 10-Year ................................................................................................................................... 854
CHARTS Forward 12 Month EPS vs Price: 10-Year ................................................................................................................................... 854
RESEARCH OF NOTE .......................................................................................................................................................................................... 856
FUNDAMENTALS A Bad Equilibrium & How Speculative Distortion Ends ................................................................................................. 856
FUNDAMENTALS Valuations ...................................................................................................................................................................... 864
FUNDAMENTALS Corporate Profits Vaporizing .......................................................................................................................................... 869
FUNDAMENTALS Fundamentals No Longer Currently Matter - Proof ....................................................................................................... 873
FUNDAMENTALS Profit Margins - Is the Ladder Starting to Snap? ........................................................................................................... 874
FUNDAMENTALS The Great PE Multiple Expansion of 2011-2014 ........................................................................................................... 881
FUNDAMENTALS Stocks Have Never Been More Expensive Based On Long-Term Growth Forecasts .................................................. 885
FUNDAMENTALS Long Term Return Trends ............................................................................................................................................. 887
11


FUNDAMENTALS Profit Margins Contract as a Percentage of GDP .......................................................................................................... 889

FUNDAMENTALS Stagnant Wages a Major Contributor to Profits ............................................................................................................. 891
FUNDAMENTALS Worsening risk/reward fundamentals in US corporate credit ........................................................................................ 893
TARGETS ................................................................................................................................................................................ 897

CONCLUSIONS....................................................................................................................................................................... 902
I DEFINING CHARTS ......................................................................................................................................................................................... 914
Defining Chart #3 - The Big M and Super Cycle b ..................................................................................................................................... 915
Defining Chart #4 Intermediate Term Topping Process ............................................................................................................................... 916
The Bottom Line............................................................................................................................................................................................... 919
II TARGETS ........................................................................................................................................................................................................ 921
III QUARTERLY SENTIMENT RISK AND FUNDAMENTALS ........................................................................................................................... 925
SENTIMENT .................................................................................................................................................................................................... 925
NEW-RISK ANALYSIS - Complacency .......................................................................................................................................................... 930
NEW-FUNDAMENTAL ANALYSIS Valuation Summary.............................................................................................................................. 931
IV STUDIES ........................................................................................................................................................................................................ 932
Q4 EARNINGS Earnings Recession .................................................................................................................................................................. 932
STUDY: Q4 EARNINGS - ...................................................................................................................................................................................... 932
CHARTS OF NOTE ......................................................................................................................................................................................... 932
NEW-Q4 EARNINGS SPX Earnings 2007-2009 versus 2014-Today .................................................................................................. 932
NEW-Q4 EARNINGS Dividend Cuts Accelerate ...................................................................................................................................... 932
NEW-Q4 EARNINGS EBITDA Growth Is the Worst Since 2000 ............................................................................................................. 933
NEW-Q4 EARNINGS All Country World Earnings and BCAs EPS Model .............................................................................................. 933
STUDY: 2016 EARNINGS - ................................................................................................................................................................................... 934
CHARTS OF NOTE ......................................................................................................................................................................................... 934
NEW-2016 EARNINGS Historical Global Consensus Earnings Estimates ............................................................................................. 934
NEW-2016 EARNINGS 12 Month Forward EPS Consensus .................................................................................................................. 934
NEW-2016 EARNINGS SPX Earnings CY 2016 ................................................................................................................................... 935
NEW-2016 EARNINGS A 2016 Hockey Stick Forecast Only the Nave Would Believe ....................................................................... 935
NEW-2016 EARNINGS US Forward PE versus Fed Funds Rate ........................................................................................................... 936
NEW-2016 EARNINGS US Operating Profit Margin versus US Monetary Indicators ............................................................................. 936
STUDY: CREDIT CYCLE - UPDATE..................................................................................................................................................................... 937
CHARTS OF NOTE ......................................................................................................................................................................................... 937
NEW-CREDIT CYCLE Leveraged Loans and HY Corporate Bond Yields Point to Lower Equities ........................................................ 937
NEW-CREDIT CYCLE SP500 Financial Stocks versus UST 2-10s ........................................................................................................ 938
NEW-CREDIT CYCLE UST 2-10s 2003-2008 versus 2014-Present ................................................................................................... 938
NEW-CREDIT CYCLE SP500 Financials (Sub) Credit Risk .................................................................................................................... 939
NEW-CREDIT CYCLE US Sovereign Credit Risk .................................................................................................................................... 940
NEW-CREDIT CYCLE Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 ............................................ 940
NEW-CREDIT CYCLE Global Financial Risk ........................................................................................................................................... 940
NEW-CREDIT CYCLE Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ................................................. 942
NEW-CREDIT CYCLE Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison .................................... 942
NEW-CREDIT CYCLE Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower ...................... 943
NEW-CREDIT CYCLE Small Cap Stocks versus HY Bond Spread ........................................................................................................ 943
NEW-CREDIT CYCLE Net Cash Companies Scarce EBITDA Cash Flow........................................................................................ 944
NEW-CREDIT CYCLE Falling Animal Spirits - Sinking CEO Confidence ............................................................................................... 944
STUDY: BUYBACKS ............................................................................................................................................................................................. 945
CHARTS OF NOTE ......................................................................................................................................................................................... 945
NEW-BUYBACKS Net Cash Companies Are Increasingly Scarce ........................................................................................................ 945
NEW-BUYBACKS EBITDA Growth Is the Worst Since 2000 .................................................................................................................. 945
NEW-BUYBACKS Buybacks v SPX Total Return Indices ....................................................................................................................... 946
NEW-BUYBACKS Proof that Buybacks Mainly Funded By Debt ............................................................................................................ 946
NEW-BUYBACKS US Companies Continuing to Borrow To Buyback Stock .......................................................................................... 947
NEW-BUYBACKS Debt/EBITDA v FCF-Cost of Debt - 2013 .................................................................................................................. 947
NEW-BUYBACKS Debt/EBITDA v FCF-Cost of Debt 2015 ................................................................................................................. 948
V - TRIGGER$ ZONES .......................................................................................................................................................................................... 949
VI - DRIVER$ & BIA$ ............................................................................................................................................................................................. 950
12


MONTHLY PROCESS OF ABSTRACTION

The Monthly Market Analytics & Technical Analysis Report is an integral part of our monthly Process of Abstraction
research methodology. The process starts monthly from the Tipping Points and completes with a final Synthesis.
The sequence is optimized to align with the established Macro Economic Data releases.
Plan
III.
IV.
II.
Release
Date
4th Week of the
Month
2nd Week of the

month No later
than the 17th
Third Tuesday of
the Month
Service
Focus
Coverage
Tipping Points
Tipping Points
Abstraction
Global Macro
Abstraction
US Economy
Technical Analysis
Technical Analysis
Market Analytics
Fundamental Analysis
Market Analytics
Risk Analysis
Synthesis
Commentary
Thesis
Conclusions
Global Macro Tipping Points

(GMTP)
Market Analytics & Technical

Analysis (MTA)
Monthly Market Commentary

(MMC)
RISK LEVELS: HIGHLY ELEVATED
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Monthly Market Analytics & Technical Analysis

FEBRUARY 2016 Edition

MATA- FEBRUARY 2016

1 FEBRUARY 2016 Edition

Restricted & Confidential

Monthly Market Analytics & Technical Analysis

OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 45

FEBRUARY 2016 Edition

Restricted & Confidential

FEBRUARY 2016 Edition

Restricted & Confidential

RISK Net Outflows as a % of AUM by Year ............................................................................................................................................. 145

FEBRUARY 2016 Edition

Restricted & Confidential

CHARTS Annual Change in Durable Goods Orders ................................................................................................................................ 207

OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 213

FEBRUARY 2016 Edition

Restricted & Confidential

BUYBACKS S&P 500 v Buyback Index Performance.............................................................................................................................. 270

SHORT TERM TECHNICAL ANALYSIS ..................................................................................................................................... 304

FEBRUARY 2016 Edition

Restricted & Confidential

CHARTS Investors Intelligence Survey of % Bears ..................................................................................................................................... 363

INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 427

FEBRUARY 2016 Edition

Restricted & Confidential

RISK: The Buffett Indicator .............................................................................................................................................................................. 457

FEBRUARY 2016 Edition

Restricted & Confidential

LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 609

FEBRUARY 2016 Edition

Restricted & Confidential

RESEARCH OF NOTE .................................................................................................................................................................................... 700

FEBRUARY 2016 Edition

Restricted & Confidential

FEBRUARY 2016 Edition

Restricted & Confidential

FUNDAMENTALS Profit Margins Contract as a Percentage of GDP .......................................................................................................... 889

TARGETS ................................................................................................................................................................................ 897

FEBRUARY 2016 Edition

Restricted & Confidential

MONTHLY PROCESS OF ABSTRACTION

2nd Week of the

Global Macro Tipping Points

Market Analytics & Technical

Monthly Market Commentary

RISK LEVELS: HIGHLY ELEVATED

FEBRUARY 2016 Edition

Restricted & Confidential

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