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First Half 2016 Contents First Half Performance Equity markets started the year under pressure which was generally thought to be driven by concerns over the prospects for a Yuan 1 devaluation from the Chinese Central Bank. The Chinese banks were Brexit expected to act in response to the dollar’s escalation however as the 1 Debt & Price Discovery Fed changed its posture on raising rates, concerns regarding a Yuan 2 devaluation dissipated and the markets moved higher. Domestic The Ideal Gas Law Mainstay Municipal Bond Fund 3 equities rallied on the prospects of supportive monetary and fiscal policies and ended up 3.6% (Russell 3000) on the year (through 8 1H2016). Non-US developed market equities finished the first half of Angel Investors 10 2016 down 4.4% (MSCI EAFE) and emerging market equities were up Energy Investments? 6.4%. As interest rates continued to drop, bonds churned out a 12 positive return with longer bonds up 5.3% (Barclays Aggregate) and Sector Performance 13 shorter bonds (Barclays 1-3month) up 0.1%. Commodities bounced Flash Report with the more energy centric GSCI up 9.9% and the Bloomberg Commodity index up 13.3%. First Half Performance 1 Brexit On June 23rd, the United Kingdom held a non binding nationwide referendum to decide to “Remain” or “Leave” the European Union. The “Leave” side prevailed which now puts the UK’s economic future in limbo and the financial markets struggling to make sense of what happens next. Prime Minister David Cameron had urged the country to vote “Remain” but was defeated by 52% to 48% despite London, Scotland and Northern Ireland opposed to Brexit. Clearly, the financial markets were surprised and rattled by the vote Continued on page 7 For Harpswell, manager selection and our value tactical tilt proved to provide a meaningful tailwind for performance while our more conservative posture on our fixed income (bond) investments detracted from our performance, relative to benchmarks. Overall, performance was very solid and we are pleased with returns. Public Policy, Debt & Price Discovery We recently came across David Stockman’s report titled Price Discovery, R.I.P and thought it rhymed well with a notion that we have been discussing for some time. Harpswell has suggested for over a year now that the extraordinary monetary (and perhaps soon to be fiscal policies) have blown us into uncharted waters. The central bank actions deployed to first resurrect the economy and now support the market are truly remarkable and beyond the imagination of our most notable economists (Keynes, Smith….). Stockman explores the result of these policies in the context of asset prices in his compelling essay. Continued on page 4 This commentary is prepared by Harpswell Capital Advisors for informational purposes only and is not intended as an offer of solicitation for the purchase or sale of any security. The information contained herein is neither investment advice nor a legal option. The views expressed are those of Harpswell Capital Advisors as of the date of publication of this report, and are subject to change at any time due to changes in market or economic conditions. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. Harpswell Capital Advisors cannot assure that the type of investments discussed herein will outperform any other investment strategy in the future, nor can it guarantee that such investments will present the best or an attractive risk-adjusted investment in the future. Although information has been obtained from and is based upon sources Harpswell Capital Advisors believes to be reliable, we do not guarantee its accuracy. There are no assurances that any predicted results will actually occur. Past performance is no guarantee of future results. Registration with the SEC or with any state securities authority does not imply a certain level of skill or training. 1 The Ideal Gas Law, Tom Brady, and cutting your losses. At Harpswell we thought Tom Brady’s decision to take a knee after the judicial process ran its course was a good illustration of how good business folk cut their losses, even when they are clearly right on the merits of their argument. And in some sense it is a mini-Br(ady)exit. That said, the Patriots and Tom Brady have done what they can to create a certain environment for them to do business this fall. Had Brady continued his appeal, the Supreme Court would have decided the timing of the 4 game suspension. Surely sitting the first 4 games is much less risky than sitting 4 playoff games. The Patriots and Brady also renegotiated his contract this spring which lowered his base salary from $9 million in 2016 to $1 million, in exchange for an up-front payment. So sitting 4 of 16 games will cost Brady a quarter of $1 million (or $250K) instead of a quarter of $9 million ($2.25 million). At Harpswell we appreciate the planning that went into this. This is a great example of minimizing the downside and cutting your losses even when you are right. A friend from Buffalo visited recently. At dinner, I took her wine bottle out of the fridge, poured a glass, and replaced the stopper. About 5 minutes later the cork popped out and wound up on the floor. Aha I said to the Bills fan, “the Ideal Gas Law in action! The bottle got warm and the gas pressure increased!” I got a new cork, re stoppered the bottle, and put it back in the fridge to get cold. About 15 minutes later I got it out to pour another glass, and darn if the stopper wasn’t sucked into the neck of the bottle. Aha I again said to the Bills fan, “the Ideal Gas Law in action! The bottle got cold and the gas inside shrank!” And as for Tom Brady’s legacy, we share some lyrics from Robert Hunter: “Don’t waste your breath to save your face, when you have done your best, and even more is asked of you, let Fate decide the rest”. I’m not sure that the obvious physical evidence changed her mind, anymore than it changed Roger Goodell’s. The ideal gas law is a good approximation of the behavior of many gases under many conditions (including a change in temperature). It was first stated by Émile Clapeyron in 1834 as a combination of the empirical Boyle's law, Charles' law and Avogadro's Law.[1] The ideal gas law is often written as: PV=nRT (via wikedpedia) P is the pressure of the gas V is the volume of the gas n is the amount of substance of gas (in moles) R is the ideal, or universal, gas constant T is the temperature of the gas (Kelvin) NFL officials suggest the “n” changed. The Patriot’s fans suggest the “T” changed. 2 Mainstay High Yield Municipal Bond Fund When choosing an Investment Advisor, a number of factors should be considered before engaging any firm. These factors often include evaluating the firm’s knowledge and experience, ability to communicate, business stability and proven success in managing an investment program. In addition to Asset Allocation and manager and/or fund selection, access and fees typically play an important role in determining if an investment program has been successfully managed. Typically, fees are incurred both at the Advisor and fund levels, so high fees can significantly impact performance. fees). We recognize that when our clients realize lower fees this translates into higher returns, relative to that paid by other retail investors. The example below illustrates an investment that we utilize for some taxable clients when appropriate. The investment, Mainstay High Yield Municipal Bond Fund, seeks a high level of current income exempt from federal income taxes; the secondary objective is total return. The fund invests at least 80% of its assets in lower quality municipal bonds. This is an area where we feel fundamental research can generate alpha (positive returns) for our clients. At the retail level, the Fund charges .87% while the fee for the institutional share class is .62% but has a $5 million minimum which would eliminate many of our clients. However, due to our custodial relationship, the minimum has been waived and our clients benefit from lower costs. There are many funds that Harpswell can access that would otherwise be unavailable or more expensive. Harpswell continuously looks to find attractive investment opportunities for our clients. At Harpswell Advisors, we offer quality service at attractive fee levels and we always strive to minimize the fees that our clients pay. While we use passive (index) investments whenever appropriate to maximize returns and minimize costs, there are areas where active management is most beneficial. Although active management fees are typically higher, several of Harpswell’s deep rooted relationships provide our clients with access to high quality investments generally available only to larger investors (and we can sometimes get lower Not only are the fees lower, but Mainstay has added value as compared to other tax exempt investments as shown in the chart below. History (06/30/2016) MMHIX Barclays Municipal TR USD Category (HM) +/- Barclays Municipal TR USD +/- Category (HM) Annual Report Net Expense Ratio Turnover Ratio Rank in Category Fund Category 2011 2012 2013 2014 2015 YTD 12.18 10.70 10.18 1.48 2.00 0.60 154 17.14 6.78 13.82 10.36 3.32 0.60 117 -5.63 -2.55 -5.99 -3.08 0.36 0.62 95 17.80 9.05 13.86 8.75 3.94 0.62 67 5.86 3.30 4.09 2.56 1.78 0.62 31 7.29 4.33 5.86 2.96 1.44 — — 12 16 37 5 9 13 HM HM HM HM HM HM MMHIX return as of 06/30/2016 Barclays Municipal TR USD return as of 06/30/2016 Category: HM return as of 06/30/2016 3 Debt & Price Discovery (continued from page 1) What becomes apparent is the fact that sovereign debt is being priced on the perception that central banks will run up their prices (buy aggressively) rather than pricing being a function of investors’ perceived risks. Stockman refers to and it is essential for efficient markets. Currently, central bankers are buying bonds as a means to drive up prices (and down yields) forcing investors to reach for higher risks and higher yields. The central banks have basically anaesthetized investors to the signals that denote risk (pain) resulting is a trend of more and more assets being accumulated by investors whose risk tolerances are unlikely to be consistent with the assets they are holding. Currently, $11.7 trillion of sovereign debt trades at a negative yield. This amounts to over a quarter of all sovereign debt globally. There are several important repercussions and implications of this phenomenon that we have been focused on and feel it is worthy of discussion here. The New York Times recently (July 11th) published an article titled Can We Ignore the Alarm Bells the Bond Market Is Ringing?. The Times exclaimed “if the bond market is correctly predicting the economic path ahead, we should be terrified”. In the article, Neil Irwin debated whether the bond market is simply miscalibrated or telling us something. He concluded by suggesting “that something is that we should be worried about the possibility the world is in a nasty deflationary economic trap that won’t get better anytime soon.” First, global central bankers’ actions have essentially thwarted what is typically an efficient means of communication for the capital markets. Assets are typically priced as a result of supply and demand at various levels and this process efficiently allocates resources by aligning prices for assets with the level that clears the buyers and sellers. If a bond is priced with too low of an interest rate, it shouldn’t sell until the rate rises to reflect the risks the buyer is taking. This “price discovery” is what The yield curves for Germany, Japan, and Switzerland currently have negative yields for over 15, 20 and 40 years, respectively. Fundamentally, the only reasons a rationale investor would accept negative 4 yields would relate to the notion that their real yields will be positive or the negative yields are a reasonable price for a safe place to store capital. Either scenario is not positive as the former would suggest deflation and the latter would reflect a lack of confidence in our financial system. Just as a note, deflation is a real concern; if it were to emerge, it would then compound the burden associated with a highly indebted economy. The proportion and level of debt that trades with negative yields continues to grow. This trend is concerning as it may be hard for central banks to reverse. It is worth noting that Italy’s 10 year sovereign debt trades at a much lower rate (1.25%) than that issued from the US (1.58%). This is truly remarkable given the size of Italy’s banking system ($4.4T) and the $400B in non-performing loans they have amassed. These figures, relative to GDP, are a good multiple of the same figures for the United States. In another words, there is no fundamental reason for Italy’s debt to be cheaper than that in the United States. The European Central Bank, along with front running investors, are the predominant buyer of Italy’s debt and they are indifferent to prices and (negative) yields. They have driven bond prices to an extreme never imagined by economists just 5 years ago. Crazy, A Story of Debt Grant Williams is another well-regarded economist who is known for thinking outside the box. We found his recent presentation on debt levels to be particularly interesting (and concerning). Williams highlights the growth in global debt with a focus on the debt levels that have ballooned just since 2008 (the banking crisis). The link for the video is below and we encourage you to watch the 40 minute presentation. https://realvisiontv.com/landing/crazy Williams shows how global debt has grown immensely since 2008. He also highlights how the debt is pretty concentrated among the current issuers. He notes that corporations and the consumer have 5 actually paid down debt levels but governments have more than made up the difference. Our concern with growing government debt is twofold: 1. Artificially low interest rates give a false signal to government officials regarding the level of debt they can support. Once interest rates return to equilibrium levels, many budgets will be dominated by debt servicing expenses. 2. Debt essentially pulls economic activity forward. Thus, our past level of economic activity has been higher than the otherwise equilibrium level and at some point in the future it will be offset by a corresponding amount (plus interest). Tell us everything is OK! So why are equity markets signaling happy days are here again? The S&P 500 is hitting new alltime highs day-after-day and that certainly sends a different message than that we hear from the bond market. We attribute the record equity levels to a few key observations. impression of earnings growth and it also drives up prices. For the near future, we expect the market to continue to react positively to more monetary policies and the prospects of supportive fiscal policies (helicopter money). Until these policies prove to be ineffective, markets will likely continue with their pavlovian reactions to central bank initiatives with occasional “hiccups” associated with reality or unanticipated “events”. We do feel that eventually, the prospects to policy fatigue are real and these forms of stimulus will have run their course. Stocks are generally valued by discounting the future cash-flows at a rate that is determined by interest rates. Therefore, future income is discounted at a much lower rate and this justifies a higher valuation for stocks. Also, investors have been pushed into riskier assets and this too drives up valuations. Finally, corporations are buying back record levels of their own stock and this both gives an 6 Brexit (continued from Page 1) resulting in a global selloff during the course of several days, followed by a recovery as investors adopted a wait and see attitude as events unfold although fund outflows in Europe were significant. As way of background, David Cameron ultimately decided to put the “Leave” or “Remain” question to public vote. In a speech in January 2013, he said that he had been under pressure by MPs (Members of the House of Commons) to deliver a referendum and that "disillusionment" with the EU was at an "all-time high." So effectively, it was an exercise in party management and a successful one at that. It played at least some part in securing enough votes to return the Conservatives into government with a majority. This referendum was not the result of noble motives but because David Cameron was really worried that he was not going to get re-elected. The referendum gained popularity as concerns regarding a number of issues grew over time. Brexit supporters claimed that the country’s Sovereignty, Immigration policies and cost of EU membership provided ample justification to withdraw from the EU. More specifically, they claimed that: SOVEREIGNTY - Membership in the European Union was undemocratic because the European Commission, which is not elected, has the monopoly of proposing all EU legislation. It also has the power to issue regulations which are binding on all member states. IMMIGRATION - Britain has given away control of immigration within the EU to the EU and retains the power only to control non-EU immigration. This has led to huge disparities where Commonwealth citizens with family in Britain struggle to obtain visas while EU citizens with little link with the UK can obtain work. EU COSTS - Britain pays direct ‘membership’ costs of £17.4bn, which equate to an annual net contribution of £6.7bn and dramatically rising owing to Tony Blair’s surrender of a sizeable part of the British rebate. Now that the referendum has passed and the UK will presumably be leaving the EU, we know that the effects will be significant but difficult to quantify. UK political leaders, including David Cameron and members of the opposition have resigned, leaving a political vacuum for the time being. On July 11th, Theresa Mary May replaced Cameron as Prime Minister of the United Kingdom and is the Leader of the Conservative Party. Following her appointment, May faced immediate pressure from EU leaders to 7 serve formal notice of Britain's withdrawal (Article 50) and set the clock ticking on a two-year countdown to its final departure. During this period, the UK and EU must negotiate new trade and travel agreements. As an added complication, Nicola Sturgeon of Scotland has stated that it was “democratically unacceptable” for Scotland to be taken out of the EU against its will and vowed to hold an independence referendum in the next two years. prior month. The equity markets in the UK stabilized somewhat by month’s end closing down about 4%. However, given the uncertainty as the EU exit process unfolds, the British currency and equity markets are particularly exposed and will experience volatility until the implications of the UK leaving the EU are better understood. At its July 14th meeting, the Bank of England voted to hold rates constant but will meet again on August 4th at which time most of its policymakers expected to approve a stimulus package. An interesting twist to the story lies in the fact that PM May opposed Brexit and urged voters to stay in the EU. Since the referendum is non binding and there is no deadline for invoking Article 50, there has been speculation that she may use this as leverage to negotiate better terms with the EU and ultimately avoid a Brexit. The broader implication of the Brexit vote is the future of the EU itself. Dealing with the departure of the UK will be a daunting exercise. However, if other countries such as France, Italy, which is currently facing a Banking crisis, or even Greece follow suit, the viability of the EU could be in doubt and the effects far worse than what we have seen to date. By the end of June, the British pound had fallen about 9% against the dollar from the Maine Angels We feel it is worthwhile to highlight other forms of investing, on occasion, as one can always learn from examining others’ successes (and failures). Harpswell does not make Angel Investments, however we do find it to be an interesting institution that is shaping our economy. Angel investing refers to local individuals get together to pool resources and expertise to invest in startup firms that have promise for the future. Sometimes investments are made by the individuals and sometimes the Angels pool their assets and invest collectively. The trend for angel investing has grown tremendously nationwide over the last decade. Maine Angels was founded in 2003 to create a private equity accredited investor network to collaboratively identify and vet promising early-stage companies and make investments with an intentional focus on Maine and New England through pooling of the group resources and expertise. Since inception, Maine Angels members have invested over $18 million in 67 8 emerging companies plus 77 follow-on (additional rounds) investments in their strongest portfolio companies. There are over 53 members and the group continues to grow in numbers and impact. portfolio companies), and in 2015 as the 3rd most active angel group in New England in Q2, and number seven for the most active Angel group nationally for a number of deals for the entire 2015 year. Also in 2015, Maine Angel members had 2 portfolio companies with successful exits. In 2012, Maine Angels invested over $3.4 M in 21 companies. These investments consisted of 13 new investments and 8 follow-on investments and 7 Maine companies were authorized for the Maine Seed Capital Tax Credit Program through FAME. This was the strongest year since inaugural investments in 2004, placing Maine Angels number 10 in the number of deals in the Halo Report survey of most active US angel groups. Harpswell makes no endorsement for these investments which are limited to qualified investors however we do find it worthwhile to share information on this interesting forum for investing. In 2014, Maine Angels was again recognized, for most "follow on" deals nationally (additional investments in Company Stage at Initial Investment Total Maine Angels Investment per Company Company Locations Maine 44% Pre-revenue 40% $100k 27% Post-Revenue 60% $100-$199k 31% $200-$399k 24% >$400k 18% 9 New England 48% Other 5% Oil: short-term support – long-term, serious headwinds. Harpswell, despite having exceptional depth and experience managing energy assets, does not look at investments in crude oil as a constructive long-term plan. We consider assets committed to crude investments (aside from hedged investments) as being more of an exercise in market timing and at the end of the day, that is a hard game to win. Over the last twelve months, we have seen momentous swings in crude prices and few investors profited from both the sell off and then the partial recovery. economic are quickly usurping OPEC market power and position as the global swing producer. Bearish rhetoric from OPEC countries which implied no production adjustments in response to the lower prices were intended to bring a level of financial stress to the new shale producers that would make it hard for them to recover. We did see a dramatic fall in the number of rigs being utilized for exploration and development and this is ultimately a leading indicator for production. Furthermore, speculation on potential disruptions in global supply and theories concerning Saudi Arabia and impending internal conflict there have helped to escalate oil prices. The Bounce The partial rebound in crude prices can be attributed to a number of factors, most of which are legitimate barometers of future supply expectations. Drilling activity, measured by rig counts, has reacted to the soft prices (as well as the curtailed free cash flow generated by energy producers). Furthermore, many key energy producing countries have suggested they intend to restrain production in response to low prices. An Unsustainable Bounce? Oil’s recent bounce and near-term support are the byproduct of supply adjustments and currency swings that could easily reverse. This would result in resumed pressure on oil prices. Rigs can easily be redeployed and it is assumed that much of the rig activity over the last year was aimed at drilling uncompleted wells that can bring on a meaningful amount of production Countries dependant on oil revenue are alarmed As a reminder, the rapid fall in oil prices was predominately the byproduct of over production (versus demand concerns). OPEC countries recognized the shale plays and the new technology that made them 10 with minimal costs and time. Thus, we see reasonable prospects for further pressure on oil prices. other energy demand by two-to-one. They also expect solar and wind generation to represent 80% of net added capacity through 2050 and they expect those sources to represent over a third of all generation. (McKinsey & Company: Is Peak Oil in Sight? June 2016). Where do we stand from a long-term perspective? In the long-term, we look at a continued path of technological innovation to open up more potential reserves and ultimately lower costs that would otherwise be realized. Furthermore, we feel the demographic landscape, along with revolutionary breakthrough advancements in energy efficiency technology, to soften demand considerably. Thus, we expect significant price resistance for oil over the long run with an occasional spike associated with supply disruptions and geopolitical events. Technological advancements that curtail demand are real and will continue to shape the future. We feel this is more of a threat to producers than technological advances on the production side of the equation (such as fracking and directional drilling). We see how fast the electric car has evolved in developed markets and feel the emerging markets will rapidly do the same. Thus, we expect a good portion of the expected growth in demand for hydrocarbons from emerging markets to not come to fruition as they leapfrog older technologies and adopt the latest products. Demand Trends The bottom line is straightforward: we don’t think the fundamentals support a long-term investment in energy. When we see “blood in the streets” (signaled by a extraordinary selloff and long-term valuations that reflect our outlook), we will circle back with you. McKinsey & Company recently published a study which supported Harpswell’s view. McKinsey reduced its long-term growth in demand expectations by 30% through 2050 and attributed 100% of expected growth to emerging market nations. McKinsey expects electricity demand to outpace all 11 YTD Sector Returns - 6/30/2016 US Real Estate 12.05% Utilities 23.24% Technology 2.23% Materials 7.53% Industrial Health Care 6.76% 0.33% Financial-3.12% Energy 14.69% Consumer Staples 10.43% Consumer Discret 0.60% S&P 500 -5.00% 3.74% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% Sector returns for the first half of 2016 were clearly bifurcated between those that were impacted by lower interest rates and those that were not. Things were relatively quiet for those sectors less impacted by falling rates. With respect to those sectors most impacted, we focus most on banks, utilities and real estate. Clearly utilities, which tend to be higher yielding, enjoyed the best returns. Real estate (12.05%), which was recently added to several indexes and benchmarks, also tends to do well when interest rates drop. They benefit as investors chase yield and real estate prices escalate as borrowing costs go down. Energy bounced after a miserable performance in 2015 and earned 14.69%. Financials were the worst performing sector as low interest rates and a flat yield curve generally make it harder for banks to grow earnings. The financials also bounced around this year when energy bankruptcies were on investors’ minds. Several banks are on the hook for billions of dollars and those write-offs could be painful for some. Thank you your interest in Harpswell. We work hard to surpass high expectations. Please reach out with any questions or comments. 12 Monthly Flash Report Commentary June 30, 2016 Overview On June 24th, Britain's surprising vote to leave the European Union—a development commonly known as the "Brexit"—prompted a sharp decline in global financial markets with volatility continuing into Monday. Some segments of the global equity markets recovered much of their Brexit losses the balance of the week, closiing with modest losses for the month. The U.K. now needs to pass legislation formalizing the referendum results and then request an exit according to Article 50 of the Lisbon Treaty. It is unlikely this will happen before the fall. In the short term, investors can expect increased volatility as the Brexit drama unfolds, but in the long term, it is not expected to result in a material slowdown domestically, However,the Brexit vote does heighten the potential for a recession in Europe and is likely to be a further drag on already slow global growth. Further concern for the near future is the potential for other EU members to consider exiting as well. Equities The U.S. Equity Market unexpectedly rose the last week in June as fears of a post-Brexit tantrum failed to materialize. Broad equities staged a dramatic recovery from Monday’s lows, helped by increased M&A activity, after posting three consecutive days of greater than 1% gains. The S&P 500 index ended the week up 3.3%, which snapped a streak of three consecutive weekly losses. Large Cap stocks outperformed Small Cap with Value outpacing Growth. EAFE declined 3.3% with EU markets contributing more than 6% to the losses partially offset by smaller declines in the Pacific. In contrast, the Emerging markets increased by more than 4% with Latin America leading the way. One Month Three Months One Year Three Years Five Years 1.0% 2.1% 4.3% 4.5% 9.0% 10.4% S&P 500 0.3% 2.5% 3.8% 4.0% 11.7% 12.1% Russell LG Value 0.9% 4.6% 6.3% 2.9% 9.9% 11.4% Russell LG Growth -0.4% 0.6% 1.4% 3.0% 13.1% 12.4% Russell 2000 -0.1% 3.8% 2.2% -6.7% 7.1% 8.4% MLP Index 5.1% 19.7% 14.7% -13.1% -5.4% 3.2% REIT Index 6.7% 7.4% 13.7% 22.7% 13.1% 12.3% -3.3% -1.2% -4.0% -9.7% 2.5% 2.2% EAFE Small Companies -5.2% -2.4% -2.9% -3.3% 7.6% 5.2% Emerging Markets 4.1% 0.8% 6.6% -11.7% -1.2% -3.4% China 1.2% 0.3% -4.5% -23.2% 3.6% -0.2% US Agg 1.8% 2.2% 5.3% 6.0% 4.1% 3.8% US High Yield 0.9% 5.5% 9.1% 1.6% 4.2% 5.8% Municipal Bonds 1.6% 2.6% 4.3% 7.7% 5.6% 5.3% -0.8% -3.2% 1.2% -1.6% -5.8% -5.7% British Pound -8.7% -8.0% -10.4% -16.1% -4.9% -4.1% Japanese Yen 7.8% 9.5% 16.8% 18.7% -1.5% -5.1% 4.1% 12.8% 13.3% -13.3% -10.6% -10.8% S&P GSCI Crude Oil -2.8% 18.9% 6.1% -41.3% -29.9% -20.4% Gold 8.5% 6.8% 24.3% 12.3% 2.2% -3.0% Domestic Equities Dow Jones International Equities EAFE Year to Date Fixed Income Fixed Income The 10 Year Treasury Yield closed at 141 bps, 100 bps below last year's level! Germany, Japan and Switzerland continue to carry negative yields on their 10 year securities. The UK yields was pegged at 84bps at month's end. Domestically, the 90 T Bill remained at 25bps while the 30 Year Treasury yielded 221bps. Tax exempt yields also declined but more modestly than Treasuries. The 10 year municipal rate closed at 136bps, only 5bps below Treasuries making municipals attractive to taxable investors. The 1 Year municipal rate at 50bps was higher than the comparable Treasury. Currencies EURO Commodities Bloomberg Commodity Commodities Crude Oil closed just above $48/barrel at month's end, recovering several $/barrel following the Brexit vote a week earlier but closed lower than the previous month . Gold closed at $1333/oz in June, moving sharply higher from May's close. Both Gold and Oil prices are being impacted by the Brexit vote in terms of economic growth, interest rates and inflation. 13