LOSS AVERSE INVESTINGI N V E S T I N G W I T H A N E M P H A S I S O N C A P I TA L P R E S E RVAT I O N

P V G A S S E T M A N A G E M E N T

L O S S AV E R S E I N V E S T I N G

PVG Market Outlook Update

2018

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PVG PORTFOLIO MANAGEMENT TEAM

Mr. Patrick Adams, CFA, has over 30 years of investment experience with an intense, bottom-up research process to invest both long and short in the U.S. equity markets. Mr.Adams is also the Chief Executive Officer and Lead Portfolio Manager of PVG Asset Management. He is the chair of the investment committee. He has been managing hedge fundssince 1999 and private equity funds since 2005. Prior funds managed at Berger Funds, Kemper, Founders, and Parkstone were all sizable funds and some over $3 billion in size. Mr.Adams has an outstanding long term track record significantly outperforming the S&P 500. Barron’s recognized Mr. Adams as having “All the Right Moves” and “Perfect Timing-because he knows when to get into a stock and when to exit.” Mr. Adams received his MBA from Xavier University and graduated B.S. from the Ohio State University. He has passedrigorous requirements to earn his international professional certification as a Chartered Financial Analyst issued by the CFA Institute.

Patrick Adams – CEO/CIO

Joseph Pecoraro – CCO/Portfolio ManagerMr. Joe Pecoraro, CFA, has been managing money since 1969. Mr. Pecoraro’s career includes experience as a securities analyst with Security Pacific National Bank and the Britishbrokerage firm, Joseph Sebags, in Los Angeles and London. Mr. Pecoraro was a top performing fund manager with the Oppenheimer Funds Group from 1974 through 1981, afterwhich he helped form an investment advisory firm, Alpine Capital Management, which he sold in 1988 to form PVG Asset Management. Mr. Pecoraro developed the Loss AverseInvesting approach during 1998/1999 when he became concerned about the possibility of unfavorable future market conditions and the impact of such conditions on clients. Heearned MS and BA Economics degrees from California State University, Fullerton. He has passed rigorous requirement to earn his international professional certification as a Char-tered Financial Analyst issued by the CFA Institute.

Mr. Rick Garcia is President and a portfolio manager for PVG. His leadership role includes management of the sales and marketing division at PVG Asset Management. Mr. Garcia has been in the financial industry for over 10 years. Prior to joining PVG, he was a Stock Broker for Charles Schwab & Company and a Business Development Consultant with Jackson National Life. Preceding the financial industry, Mr. Garcia served in the United States Marine Corps for 5 years, with overseas deployment during Operation Enduring Freedom (2001) and Operation Iraqi Freedom (2003). He was honorably discharged as a Sergeant in 2003. Mr. Garcia has his Bachelor of Science Finance degree from Metropolitan State University of Denver.

Rick Garcia – President/Portfolio Manager

Mr. Timothy J. McIntosh serves as an Investment Officer for PVG. He oversees all aspects of major client accounts and serves as the lead portfolio manager for the firm's ValueLeaders Long/Short and US Corporate Flexible Bond portfolios. Tim serves on the firm’s investment committee. He also serves as Compliance Officer. He served as a Professor ofFinance at Eckerd College from 1998 to 2008. Mr. McIntosh’s is the author of The Snowball Effect, The Bear Market Survival Guide, The Sector Strategist, and a contributor tothe Comprehensive Financial Planning Strategies for Doctors and Advisors. Tim has a Bachelor of Science Degree in Economics from Florida State University and Masters of BusinessAdministration (M.B.A) degree from the University of Sarasota-Argosy and a Master of Public Health Degree (M.P.H) from the University of South Florida. Tim is a CERTIFIEDFINANCIAL PLANNER™. Tim is an Army veteran, having served active duty in the Army Military Intelligence Unit.

Timothy McIntosh – Portfolio Manager

Mr. Paul MacNamara is a senior market strategist and also provides equity/bond analysis for the firm. He is a member of the firm's investment committee. Paul is the portfoliomanager for the Global Macro Strategy. Paul is a CERTIFIED FINANCIAL PLANNER™. Prior to joining PVG, Paul was CEO for SIPCO Investment Management Company. He also ownedand operated an independent investment advisory firm. He retired from the U.S. Army as a disabled-veteran Lt. Colonel in the Special Forces. He and his wife currently reside inMechanicsburg, PA.

Paul MacNamara – Portfolio Manager

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PVG 2018 OUTLOOK

The spread between the P/E multiple of value versus growth is very wide currently by

historical ranges, dramatically favoring value. This market cycle is now the second longest in

history and has propelled the momentum sectors much further than nearly any other market

cycle. Technology is now nearly 30% of the S&P 500, consistent with other very risky periods

such as 1999. With the large amount of fiscal stimulus, the tax cut, repatriation of overseas

money, less regulation, and a potential infrastructure bill, this will help broaden out the

overall market and should give a big lift to the traditional value sectors of the market.

This has been a very odd market cycle with much of the market driven by Federal Reserve

liquidity, and now that liquidity is reversing. The economy is now getting a major dose of

fiscal stimulus that you would typically get to in the early part of a market and economic

cycle. This year should be a very strong year for earnings growth from the cyclical areas of

the economy, interest rates will likely rise more than expected, and valuations for the market

will likely be under some pressure. We would expect a much slower rate of growth for the

economy in 2019 and perhaps a recession depending on how much interest rates rise. The

market is way overdue for a significant correction, if not a bear market. The valuation of the

market now above 21 times trailing earnings is very richly valued and above 20 times

earnings has always had a significant bear market after experiencing an economic cycle.

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PVG LOSS AVERSE INVESTING

Bulls and Bears…

Given the duration of this currentbullish move for the stock market,the probability that a cyclical bearmarket will occur is rising. Thecurrent Bull Market is now the 2nd

longest in modern history.

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PVG LOSS AVERSE INVESTING

Stock and Bond Market ValuationBoth stocks and bonds are overvalued

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The yield of the 10 year treasury iscurrently 2.65%. Generally, the 10 yearnote trends around the nominal GDPgrowth rate. For instance, real GDPgrowth of 3% plus inflation rate of 3%,plus a risk premium, gets an expectedyield on the 10 year treasury of 6-7%.When the bond yields more than 6% itgenerally represents good value, andbelow 4% has a high degree of risk.

The current S&P 500 Shiller P/E ratio shows34.36x. Generally, 15 times earnings orlower, represents attractive periods forowning stocks, and above 15 times, higherrisk periods. It should be noted that thereare periods during recessions whenearnings fall to very low levels and shouldnot be used to assess the value of theequity markets for these purposes like in2008 and 2009.

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As of 1/25/2018, the Total Market Indexis at $ 29.5 Trillion, which isabout 151.3% of the last reported GDP.

As pointed by Warren Buffett, thepercentage of total market cap (TMC)relative to the US GDP is “probably thebest single measure of where valuationsstand at any given moment.”

PVG LOSS AVERSE INVESTING

Stock Market vs. GDP Valuation

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PVG LOSS AVERSE INVESTING

Technicals

• Stocks generally perform in line with commodity prices.

• Since 2013 when the Federal Reserve implemented QE3 there has been a dislocation between commodity prices and equities.

• If the economy heats up, commodity prices should escalate quickly. If not, then equities have a long way to drop to meet commodity prices.

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PVG LOSS AVERSE INVESTING

Technicals

• Fed Policy and central banks around the world have driven valuations to excessive levels.

• Collectively, Central Banks have purchased over $20 Trillion in Debt since 2009.

• The US Federal Reserve will now begin rolling off their balance sheet which should lead to higher rates.

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PVG LOSS AVERSE INVESTING

Technicals

• With the Tax Reform now passed by Congress the economy should heat up and drive inflation higher.

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PVG LOSS AVERSE INVESTING

Technicals

• During the last year, value stocks have dramatically underperformed growth stocks.

• Value stocks are generally much more dependent on the economy, and this underperformance disparity tends to happen at the end of a bull market.

• Many value stocks also tend to be nice income producers as well.

Bottom of Wave 4

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4

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1

5

• 5 Major Waves• Waves 1, 3, and 5 are up• Waves 2 and 4 are corrective waves that move

between optimism and pessimism

• Wave 5 is the final leg up in the cycle

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History may not repeat, but it sure does rhyme…

S&P 500 – 20-50-200 MDA (1965-1975)

S&P 500 – 20-50-200 MDA (1985-1988)

S&P 500 – 20-50-200 MDA (2003-2009)

S&P 500 – 20-50-200 MDA (2009-201???)

Bottom of Wave 4

Below Bottom of Wave 4

Current Wave 4 Bottom is at 1175

PVG LOSS AVERSE EQUITY INCOME STRATEGY

Elliott Wave Theory

P V G A S S E T M A N A G E M E N T

L O S S AV E R S E I N V E S T I N G

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