Global Economics: Investment Trends for the Rest of the Decade - …naepc.yolasite.com/resources/2012 3Q GTA Final.pdf · 2012. 9. 24. · Core’s institutional business and Mr

© 2012 JAForlines Global. All Rights Reserved.

JAForlines Global 63 Forest Avenue

Locust Valley, NY 11560

Telephone: 516.609.3370

www.jaforlines.com

September 25, 2012

Global Economics:

Investment Trends for the

Rest of the Decade

How We Manage Money

• Tactical: The key to long term success is avoiding large

annual losses--we take a long term view but manage the short

term (less than one year) tactically

• Diversified: We utilize global asset allocation—three asset

classes in one account, no danger of dispersion or overlap

• Benchmark Free: We utilize our own risk guidelines in asset

allocation to provide growth and capital preservation

• Exclusive: We work only with a select group of Independent

Advisors and Consultants

Investment in the JAForlines Global Tactical Allocation Composite, or any other investment or investment strategy involves risk,

including the loss of principal; and there is no guarantee that investment in JFG’s Global Tactical Allocation Composite, or any

other investment strategy will be profitable for a client’s or prospective client’s portfolio.

Tactical Allocation is Market Driven

Opinions are of JFG & may not be suitable for individual client needs.

2007-2012 In One Picture


US Real GDP Growth

Unemployment is Still Persistently High


Going To Be A Close White House Race


Big Trends in United States

• 12 million manager jobs in US--same as 1929,

which had half of current population

• 6 million manager jobs lost between 1999 and

2009--same # as created from 1930—1999

• No one is going to be paid to be smart anymore,

yet schools still test for smart (G.P.A.’s SAT’s etc.)

• Most global companies don’t promote “smart”,

they promote “intelligence”


Big Trends in US/Global Economy

• Accelerating rate of change in cyclical economic

periods…first lasted 10,000 years, the most recent

one thirteen years

• New technologies causing job transformation:

combined with echo and boomers in labor force =

high unemployment; THEN rise in

Entrepreneurialism

• High demand for people to figure out things they

haven’t seen before; it’s the difference between

complicated (smart solutions) and complex (open

systems, less predictable outcomes


Big Trends in Investments

• Food and water resource constraints are at the

forefront of global problems

• New technologies can prolong energy supplies

more effectively than food

•Technology advancement and investment is

crucial part of the future

•The US, restructured for entitlements and

investment policy and Emerging markets are

winners…watch for CanAmerica


Global Imbalances Mean Macro is Key


EU is Germany’s to Lose


EU Banks are Huge and are Way Behind

Global Peers

Loan to Deposit Ratio


China Coming on Strong… Again

US is New to Global Leadership


Similar Physical Footprint

…And are Complementary

US Still the 800 lb. Gorilla

Monetary Policy Alone Won’t Fix This Mess


Wheel of Fortune is in Congress’ Hands Now


Sustaining Fiscal Stimulus in Democracy is Hard

Source: Nomura


What Discretionary Spending?

US Has Been Here Before

G.A.M.E. is a Synthesis of “Best Practices”

Global: The world is “tri-polar” as sector opportunities are global and can

be found in the Americas, Euro- land and Asia

Active: Global Macro top-down allocation through ETFs captures returns

across assets, regions, countries and sectors. Active indexing is a very

efficient and cost effective investment strategy

Macro: Top-down investing captures the most important factors: government

intervention in markets; demand drivers shifting from developed to developing

countries; the importance of tactical agility during rapid market shifts

Endowment: JFG’s framework is the U.S. large endowment model where

clients obtain all three major asset classes: global equities, fixed income, and

alternatives in one Collective Fund

Returns Since Last Risk Markets Peak*

*Oct 2007 – June 2012

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

Growth of $100,000

GTA

S&P TR

Past performance is no guarantee of future returns.

YTD Performance

YTD Returns of GTA and MSCI All Country World Index

*01/01/2012 – 07/11/2012. Data from Foliofn

Past performance is no guarantee of future returns.

Conservative Approach to Asset Selection

Asset Prices

Credit •Capital Availability

•Central Bank Policy

•Public/Private Tradeoff

Country/Sector •Economic Activity

•Structural Changes

•Policy Decisions

Conditions •Liquidity of Asset

•Scarcity Factor

•Earnings Volatility

Interest Rates Future Earnings Risk Premium


ETFs Low Fees Help Reduce Expenses

Expense Ratio Comparison

Average Active Mutual Fund and ETFs ETFs low fees

• 70 funds with an expense ratio of

30 bps or less in iShares alone

0.74%

1.32%

1.11%

0.24%

0.35%

0.09%

Average Active Mutual Fund

iShares ETF

Source: BlackRock, Morningstar as of 12/09 The annual management fees of iShares funds may be substantially less than those of most mutual funds. iShares transactions may result in record-keeping fees, but the savings from lower annual fees can help offset these costs. Other plan fees may apply.

Large Cap

S&P 500 Index Fund

International

MSCI EAFE Index Fund

Intermediate Fixed Income

Barclays Aggregate Bond Fund

Single Stocks vs. the Sector: Managing Risk

Three-Year Risk/Return Profile Dow Jones U.S. Technology Index vs. Index Constituents

–40.0

–30.0

–20.0

–10.0

0.0

10.0

20.0

30.0

40.0

0.0 20.0 40.0 60.0 80.0 100.0 120.0

Risk (Standard Deviation) %

Thre

e-Y

ear

Annualiz

ed R

etu

rn

Dow Jones U.S. Technology Index Index Constituents

Compared to the index, 98% of the index constituents had greater risk, while only 36% had greater return.

Sources: BlackRock, Morningstar, as of 12/31/09.

•The “New Normal” favors tactical strategies

• Our Global Tactical Allocation portfolios

consistently provide top performance relative to

global allocation category mutual funds

•JFG’s cost structure is 1/2 of a mutual fund

program and 1/3 of most TAMP Platforms

•JAForlines Global is a partnership with

Advisors, not a traditional TAMP

Past performance is no guarantee of future results. See slide 14 for representative Global Allocation funds

Why Use JFG in Your Client Practice?

• Employs a “Singles and Doubles” strategy

• Monthly tactical analysis to prevent drawdowns

• Advisors & Clients read and appreciate Advisor

Updates®

• JAForlines Global provides quarterly webinars

to support Advisors, and involve clients in the

process


GTA Portfolios are a “Sticky” Core Holding

• GTA available in a Collective Fund at Most

B/D’s, including Matrix, Schwab, TD Ameritrade

• GTA and Capital Preservation portfolios on

ProEquities’ Private Access platform

• GTA for your wealth practice also available at

Schwab, TD Ameritrade and a select number of

independent B/D’s.

• Ask for a webinar or email us at

[email protected]

Where Can You Find Us?

The Best Single Argument For

Global & Tactical Investing over Buy & Hold: Japan

This is Not a Call We Would Need To Make

Don’t Watch Financial Channels on TV!

The composite returns are prepared in compliance with Global

Investment Performance Standards (GIPS).

Core Asset Management (Core) and JAForlines Global (JFG) are

defined as an independent investment management firms that are

not affiliated with any parent organization. Information regarding

the firms’ policies and procedures for calculating and reporting

performance results is available upon request. The JAForlines

Global Tactical Allocation Composite consists of exchange traded

products (ETPs) that reflect JFG’s global macro view. The ETPs

may contain fixed income, equities or derivative contracts, which is

reflective of JFG’s multi-asset strategy for this Composite and

which trade on the U.S. exchanges. Prior to 2009, the Composite

also contained mutual funds where no ETPs were available. The

accounts included in the Composite will invest primarily in ETPs in

which the constituent companies have market capitalizations

similar in size to those found in the S&P 500 Index. However, our

composite accounts will differ from its benchmark with holdings

concentrated in fewer economic sectors that may be global and

will also contain exposure to other asset classes such as fixed

income and alternatives. Performance results are calculated on a

time weighted total return basis, using trade date accounting and

the accrual basis for all income. Performance results are size-

weighted based on the beginning period market value. All returns

are calculated and reported in U.S. Dollars and are calculated as

of calendar month ends. Cash reserves and equivalents are

included in performance results. Returns include the reinvestment

of all income. No leverage was used.

The Composite was created on January 1, 2004. JAForlines

Global (JFG) became registered with the SEC as a Registered

Investment Advisor on May 15, 2009. The Composite was

previously managed under Core Asset Management, where

John Forlines III and Jack Mayberry served as co-principal

investment officers over all portfolios. JFG is a spin-off from

Core’s institutional business and Mr. Forlines continues to serve

as the co-principal investment officer over the accounts in the

Composite, with Mr. Mayberry as Senior Advisor. In addition Mr.

Forlines remains a Senior Advisor at Core. Seed accounts were

opened on 1/1/09 to prevent a break in the Series performance

and allow for a linking of future performance as the

organizational change was in process. There has been no break

in performance and JFG believes it has met the GIPS

requirements for portability.

Returns are calculated gross of fees. Returns include the

deduction of ETF management fees. Performance for periods

less than one year is not annualized. JAForlines Global’s (JFG)

Global Tactical Allocation Portfolio invests in global securities

(excluding the U.S. market) which trade on the U.S. exchanges.

Beginning in June 1, 2009 the composite’s minimum account

size is $100,000. At least 20 randomly selected accounts are

included in the composite after the first full month of performance

to the present or to the cessation of the client relationship with

the firm. Investment results are time weighted performance

calculations representing total return. An Investment in JFG’s

Global Tactical Portfolio, or any other investment or investment

strategy involves risk, including the loss of principal; and there is

no guarantee that investment in JFG’s Global Tactical Allocation

Portfolio, or any other investment strategy will be profitable for a

client’s or prospective client’s portfolio. Investments in the JFG’s

Global Tactical Portfolio, or any other investment or investment

strategy, are not deposits of a bank, savings and loan or credit

union; are not issued by, guaranteed by, or obligations of a bank,

savings and loan, or credit union; and are not insured or

guaranteed by the FDIC, SIPC, NCUSIF or any other agency.

Past performance is not indicative of future results.

Disclosure

63 Forest Avenue, Suite 1

Locust Valley, NY 11560

Telephone: 516.609.3370

[email protected]

Contact Us

Documents

Global Economics: Investment Trends for the Rest of the Decade - …naepc.yolasite.com/resources/2012 3Q GTA Final.pdf · 2012. 9. 24. · Core’s institutional business and Mr