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When to Bailout? The Water is Deep … Interest Rates are Cruel … But, cash can be safer! Presented by Outline 1. 2. 3. 4. 5. 6. Legal Mumble-Jumbo Economy Stock Market Inflation/Sequestration Market Timing or Not SELL Strategy - When About Jim Flinchum • B.S. - Old Dominion University • M.B.A. - College of William & Mary • M.S. in World Trade - University of Dallas • Taught economics – American Institute of Banking and the University of Texas • Certified Financial Planner® and Certified Investment Manager Analyst® About Jim Flinchum • Managing Principal of BayCap • 35-year career in banking & investing • Jobs included Vice President of Citigroup, Senior Vice President for Bank of America, and retired as Senior Vice President for SunTrust About Jim Flinchum • Former city councilman in Texas • Gubernatorial appointee to the State Depository Board in Texas and currently Virginia Public Building Authority • Officer, Army Special Forces (1967-’70) • Past Chairman of the Virginia Beach Chamber of Commerce About This Presentation • Bay Capital Advisors is a registered investment adviser. • This presentation is only intended for clients and interested investors residing in jurisdictions in which the Adviser is qualified to provide investment advisory services. The Adviser does not attempt to furnish personalized investment advice or services through this presentation. Any subsequent, direct communication with a prospective client will be conducted by the Adviser’s investment advisory representatives. Some of the information given in this presentation has been produced by unaffiliated third parties and, while it is deemed reliable, the Adviser does not guarantee its timeliness, sequence, accuracy, adequacy, or completeness and makes no warranties with respect to results to be obtained from its use. Sooner or later, you will die . . . Economists vs Strategists Where’s the economy ? Contrary to popular belief . . . • The Sky is NOT Falling ! It Ain’t That Bad - I • Unemployment is improving 3+4.9=7.9% • Q3 GDP = 3.1% vs 30 yr avg of 2.9% • Early-cycle sectors (homes & auto) great • Consumer confidence is up but only 58.6 • Corporate profits are good • Dollar is stronger – Deflation - War? • Inflation is low . . . now! It Ain’t That Bad - II • Fed remains dovish • Energy independence by 2020? • Manufacturing improving • Foreign wage disparity decreasing • Best looking horse in glue factory Q4 Anomaly Q4 Anomaly Q4 Anomaly The U-Word • Uncertainty has a chilling effect on business spending (Q4) but did you ever see high certainty with an under-valued stock market? • Affects both the economy & the market Where’s the stock market ? It Ain’t Bad At All • PE on trailing 12 months only 14 • Only 10% of equity outflows back • Up 5% already this year • Cash-financed wave of M&A? • Large caps are still lagging • Opportunity cost embarrassment • Best looking horse in glue factory Fearless Prediction 1575 3+ Wet Blankets • Presidential Election – Recession? • Fiscal Cliff – Recession or Crisis? • European Financial Crisis – 3 events Debt “Jaws” Protect yourself from what? • Recession . . . or Financial Collapse ? 130 Data Points/Month Pick Your Focal Points Congress to the Rescue Bernanke to the Rescue Sugar High ? Uncle Milton • “Inflation is always and everywhere a monetary phenomenon.” GDP = PT = MV Velocity is Dropping • Recession . . . or Financial Collapse ? • Muscle Pull or Heart Attack? • A Jim Fixx Moment ? Congressional Cooperation Let Us Pray . . . Market Timing ? • Or . . . Time in Market S E L L Strategy • Identify the particular triggers for implementation of a program to sell particular securities over a pre-specified period. European Financial Crisis Domestically Garden-Variety Recession • The “Death Cross” My Conclusion • “Buy & Hold” is a good strategy for long term equity investors to survive garden-variety recessions, but you need a SELL strategy to survive a financial collapse. Complaint Department? Contact information • Jim Flinchum, CFP®, CIMA® • (757) 963-5699 • www.baycapitaladvice.com “The Flinchum File” • “For Honest Economic Analysis and Existential Opinions” • Go to . . . • http://baycapitaladvice.blogspot.com/ Shameless Commercial Plug Happy Mardi Gras !! •Questions ??