Event 2013 Q3 - The Great Reversal - Repealing Quantitative Easing · 2013. 12. 2. · The Great...
Transcript of Event 2013 Q3 - The Great Reversal - Repealing Quantitative Easing · 2013. 12. 2. · The Great...
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3rd Q t 2013 W b t3rd Quarter 2013 Webcast
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Quarter End PerformanceQuarter-End Performance
(1/2/2008) (12/18/2009)Qtr YTD 1 Year 3 Year 5 Year Since Incept. Since Incept.
Average Annualized Total Returns as of September 30, 2013
(1/2/2008) (12/18/2009)(1/2/2008) (12/18/2009)
Smead Value Fund Investor Share Class (SMVLX)
5.28% 26.12% 27.37% 22.81% 13.73% 6.39% -
Smead Value Fund Institutional Share Class (SMVMX)
5.34% 26.37% 27.69% 23.11% - - 18.97%
(1/2/2008) (12/18/2009)
Institutional Share Class (SMVMX)
Russell 1000 Value Index 3.94% 20.47% 22.30% 16.25% 8.86% 4.07% 14.26%
S&P 500 Index 5.24% 19.79% 19.34% 16.27% 10.02% 4.95% 14.20%
Investor Shares Net Expense Ratio 1.40%*Investor Shares Gross Expense Ratio 1.50%Institutional Shares Net Expense Ratio 1.15%*Institutional Shares Gross Expense Ratio 1.20*The Adviser has contractually agreed to waive its fees and/or reimburse expenses of the Fund to ensure that Total AnnualFund Operating Expenses (exclusive of Acquired Fund Fees and Expenses) do not exceed 1 40% and 1 15% of the Fund'sFund Operating Expenses (exclusive of Acquired Fund Fees and Expenses) do not exceed 1.40% and 1.15% of the Fund saverage annual net assets, for the Investor Class shares and the Institutional Class shares, respectively, through March 30,2014, subject thereafter to annual re-approval of the agreement by the Trust's Board of Trustees.
Performance data quoted represents past performance; past performance does not guarantee future results. The investmentreturn and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more orless than their original cost. Current performance of the fund may be lower or higher than theperformance quoted. Performance data current to the most recent month end may be obtained by calling1-877-807-4122. Investment performance reflects fee waivers. In the absence of such waivers, total returnswould be reduced.
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The Great Reversal: Repealing Quantitative EasingQuantitative Easing
Presented by:
Lead Portfolio Manager Bill Smead
© 2010 Smead Capital Management, All Rights Reserved.
www.smeadcap.comwww.smeadfunds.com
Opinions expressed are those of Smead Capital Management, are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security.
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The Great Reversal: Repealing Quantitative Easing
“It’s quite possible that even a small taper will be too h f i t b t th lt ti t t i i tmuch for investors, but the alternative to tapering is to
make an already precarious situation more precarious, while damaging the Fed’s credibility in the process.”
John H ssman
g g y
-John Hussman“Psychological Ether”, September 23, 2013
Source: http://www.gurufocus.com/news/229686/john-hussman-psychological-ether
The Great Reversal: Repealing
T d ’ A d
Quantitative Easing
Today’s Agenda
The Fed's Easy Money PolicyThe Fed s Easy Money PolicyDomestic Winners of Easy MoneyDomestic Losers of Easy MoneyDomestic Losers of Easy MoneyInternational Winners of Easy MoneyI t ti l L f E MInternational Losers of Easy MoneyWhat the Reversal May Look Like
The Great Reversal: Repealing Quantitative Easing
Quantitative Easing Bond BuyingQuantitative Easing – Bond Buying
Source: “What Will Fed Tapering Mean for Investors?” by Madison Advisors, September 2013
The Great Reversal: Repealing Quantitative Easing
Quantitative Easing – Expansion of Fed Balance SheetQuantitative Easing Expansion of Fed Balance Sheet
Source: http://fabiusmaximus.com/2013/09/19/monetary-bubble-55375/
The Great Reversal: Repealing Quantitative Easing
Near Zero Fed Funds RateNear-Zero Fed Funds Rate
Source: Thomson Reuters Baseline
The Great Reversal: Repealing Quantitative Easing
Near Zero Discount RateNear Zero Discount Rate
Source: Bloomberg
DISCPRIM = Federal Reserve US Primary Credit Discount Rate
The Great Reversal: Repealing
Th G t R l R li Q tit ti
Quantitative Easing
The Great Reversal: Repealing Quantitative Easing
The Fed's Easy Money PolicyDomestic Winners of Easy Moneyy yDomestic Losers of Easy MoneyInternational Winners of Easy Moneyy yInternational Losers of Easy MoneyWhat the Reversal May Look LikeWhat the Reversal May Look Like
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money: Bonds
Source: “The RIC in Pictures” by BofA Merrill Lynch September 23, 2013, page 11
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money
Capital Intensive Businesses: Energy CompaniesCapital Intensive Businesses: Energy Companies
Source: ThomsonReuters Baseline
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money
Capital Intensive Businesses: Basic Materials CompaniesCapital Intensive Businesses: Basic Materials Companies
INDU = Dow Jones Industrial Average
SPBMS = S&P Basic Materials Sector
Source: ThomsonReuters Baseline
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money
Capital Intensive Businesses: Heavy IndustrialsCapital Intensive Businesses: Heavy Industrials
SPIN = S&P Industrial Sector
INDU = Dow Jones Industrial Average
Source: ThomsonReuters Baseline
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money
Commodities Commodity ProducersCommodities, Commodity Producers
Source: ThomsonReuters Baseline
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money: Big-Ticket Item Buyers
Source: Wells Fargo; Business Insider “Chart of the Day” September 25, 2013
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money: Housing
Source: Wells Fargo Securities Economics Group August 30, 2013
The Great Reversal: Repealing Quantitative EasingDomestic Winners of Easy Money: Common Stocks
Fed B00
Inde
xond H
oldingS&
P 50
gs, in $US (BB
illions)
Source: http://www.asx.com.au/education/investor-update-newsletter/201210-what-is-quantitative-easing.htm
Note: “LHS” = Left Hand Side; “RHS” = Right Hand Side
The Great Reversal: Repealing Quantitative Easing
Th G t R l R li Q tit tiThe Great Reversal: Repealing Quantitative Easing
The Fed's Easy Money PolicyDomestic Winners of Easy Moneyy yDomestic Losers of Easy MoneyInternational Winners of Easy Moneyy yInternational Losers of Easy MoneyWhat the Reversal May Look LikeWhat the Reversal May Look Like
The Great Reversal: Repealing Quantitative Easing
Domestic Losers of Easy Money: Savers
Source: ThomsonReuters Baseline
The Great Reversal: Repealing Quantitative EasingDomestic Losers of Easy Money: Cash Rich Companies
Source: http://qz.com/98877/a-brand-new-reason-us-companies-arent-spending-their-cash-hoard/
The Great Reversal: Repealing Quantitative Easing
Domestic Losers of Easy Money: Generators of High Free Cash FlowGenerators of High Free-Cash Flow
Free Cash-Flow per Share
S5INFT Index =
S&P 500 Information Technology Index
P/E = Price / Earnings Multiple
Source: Bloomberg
The Great Reversal: Repealing Quantitative Easing
Domestic Losers of Easy Money: States Which Use CommoditiesStates Which Use Commodities
Source: http://www.usatoday.com/story/news/nation/2012/11/26/personal-income-2011-oil-gas-boom/1728123/
The Great Reversal: Repealing
Th G t R l R li Q tit ti
Quantitative Easing
The Great Reversal: Repealing Quantitative Easing
The Fed's Easy Money PolicyDomestic Winners of Easy Moneyy yDomestic Losers of Easy MoneyInternational Winners of Easy Moneyy yInternational Losers of Easy MoneyWhat the Reversal May Look LikeWhat the Reversal May Look Like
The Great Reversal: Repealing Quantitative Easing
International Winners of Easy Money: Emerging Markets (Especially China)
FXI = iSharesChina Large-Cap ETF
EEM = iSharesMSCI Emerging Markets ETF
SPX = S&P 500 Index
Source: ThomsonReuters Baseline
Index
The Great Reversal: Repealing Quantitative Easing
International Winners of Easy Money: Yuan / Dollar Peg
Source: ThomsonReuters Baseline
The Great Reversal: Repealing Quantitative Easing
International Winners of Easy Money: Commodity-Exporting Nations
Source: BBVA Research, January 2013 “Evaluating Latin America’s Commodity Dependence on China”, Chart 3
The Great Reversal: Repealing Quantitative Easing
International Winners of Easy Money: Currencies of Commodity-Exporting Nations
Fed Br /
US
Dol
lar ond H
oldingra
lian
Dol
lar gs, in $U
S (BA
ustr
Billions)
Source: http://www.asx.com.au/education/investor-update-newsletter/201210-what-is-quantitative-easing.htm
Note: “LHS” = Left Hand Side; “RHS” = Right Hand Side
The Great Reversal: Repealing Quantitative Easing
International Winners of Easy Money: Emerging Market Bonds
Emerging Market Debt tied to Indices (Investable Emerging Market Debt), 2001-2012
Source: http://www2.blackrock.com/us/individual-investors/insight-education/featured-insight/point-of-view-with-sergio-trigo-paz-and-ernesto-bettoni
The Great Reversal: Repealing
Th G t R l R li Q tit ti
Quantitative Easing
The Great Reversal: Repealing Quantitative Easing
The Fed's Easy Money PolicyDomestic Winners of Easy Moneyy yDomestic Losers of Easy MoneyInternational Winners of Easy Moneyy yInternational Losers of Easy MoneyWhat the Reversal May Look LikeWhat the Reversal May Look Like
The Great Reversal: Repealing Quantitative EasingInternational Losers of Easy Money:
Developed Economies (versus Emerging Economies)Developed Economies (versus Emerging Economies)
Source: https://www2.blackrock.com/us/defined-contribution/news-insight/market-commentary/point-of-view-with-luiz-soares-and-jeff-shen
The Great Reversal: Repealing Quantitative EasingInternational Losers of Easy Money: Developed Stock Markets
MEMF = MSCI Emerging Markets Index
MWRLD = MSCI World Index
Source: ThomsonReuters Baseline
The Great Reversal: Repealing Quantitative EasingInternational Losers of Easy Money: Commodity Users
Russian RTS Stock Market IndexIndex
Tokyo Nikkei 225 Stock Market Index
Source: http://tomjconley.blogspot.com/2012/06/commodity-prices-and-commodity.htmlSource: Thomson Reuters Baseline
The Great Reversal: Repealing
Th G t R l R li Q tit ti
Quantitative Easing
The Great Reversal: Repealing Quantitative Easing
The Fed's Easy Money PolicyDomestic Winners of Easy Moneyy yDomestic Losers of Easy MoneyInternational Winners of Easy Moneyy yInternational Losers of Easy MoneyWhat the Reversal May Look LikeWhat the Reversal May Look Like
The Great Reversal: Repealing Quantitative Easing
What the Reversal May Look Like2 Seminal Dates SCM looks at in the Past Year2 Seminal Dates SCM looks at, in the Past Year
1. October 24, 2012The last time the Japenese Currency traded at 80 YEN / USD, before it became clear to us that Monetary Policy was to Weaken
Source: Thomson Reuters Baseline
The Great Reversal: Repealing Quantitative Easing
What the Reversal May Look LikeWhat the Reversal May Look Like2 Seminal Dates SCM looks at, in the Past Year
2 S t b 18 20132. September 18, 2013The Fed’s Press Release, saying they will:
• “continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month”
• “keep the target range for the federal funds rate at 0 to 1/4 percent”
• “employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially”
Source: http://www.federalreserve.gov/newsevents/press/monetary/20130918a.htm
The Great Reversal: Repealing Quantitative EasingWhat the Reversal May Look Like: Gold Weakens
Source: Thomson Reuters Baseline
The Great Reversal: Repealing Quantitative EasingWhat the Reversal May Look Like: Emerging Markets Weakens
Source: Thomson Reuters Baseline
The Great Reversal: Repealing Quantitative EasingWhat the Reversal May Look Like: Commodities Weakens
Source: Thomson Reuters Baseline
The Great Reversal: Repealing Quantitative EasingWhat the Reversal May Look Like: Commodities Weaken
Source: Stifel Nicolaus / Barry Bannister May 23, 2013
Past Performance is not a guarantee of future results
The Great Reversal: Repealing Quantitative Easing
What the Reversal May Look Like: Housing Improves - Demographics
The Millennials may be the largest generation, and will be a boon for the market. History indicated thatthe stock market performs well whenever middle-agers, who save and invest, outnumber young adults. p g , , y g
Past Performance does not Guarantee Future ReturnsSource: “On the Rise” Barron’s April 27, 2013 cover story
The Great Reversal: Repealing Quantitative Easing
What the Reversal May Look Like: Housing Improves - Affordability
Past Performance does not Guarantee Future ReturnsSource: Wells Fargo Securities Economics Group August 30, 2013
The Great Reversal: Repealing Quantitative Easing
What the Reversal May Look Like: Consumer Confidence Gets Restored
Past Performance does not Guarantee Future ReturnsSource: “How Are You Feeling?” by Hays Advisory September 30, 2013
The Great Reversal: Repealing Quantitative EasingWhat the Reversal May Look Like
Heavy Borrowers: Utilities & Telecommunication ServicesHeavy Borrowers: Utilities & Telecommunication Services
A g C d A l G th R t (CAGR) D i g P i d f Ri i g R l 10 Y R tAverage Compound Annual Growth Rate (CAGR) During Periods of Rising Real 10-Year Rates
Telecommunication Services SectorS&P 500 Sectors
COND = Consumer DiscretionaryCONS = Consumer StaplesENRS = EnergyFINL = FinancialsHLTH = Health CareINDU = IndustrialsINFT I f ti T h l
Utilities Sector
INFT = Information TechnologyMATR = Basic MaterialsTELS = Telecommunication ServicesUTIL = UtilitiesSPX = S&P 500
Source: BMO Capital Markets – US Strategy Weekly, September 13, 2013
The Great Reversal: Repealing Quantitative Easing
What the Reversal May Look Like: Savers Revived
Past Performance does not Guarantee Future ReturnsSource: Thomson Reuters Baseline
The Great Reversal: Repealing
Th G t R l R li Q tit ti
Quantitative Easing
The Great Reversal: Repealing Quantitative Easing
The Fed's Easy Money PolicyDomestic Winners of Easy Moneyy yDomestic Losers of Easy MoneyInternational Winners of Easy Moneyy yInternational Losers of Easy MoneyWhat the Reversal May Look LikeWhat the Reversal May Look Like
Smead Value FundKey Facts & Characteristics (as of 9/30/2013)
Past Performance does not Guarantee Future ReturnsEarnings Growth is not a measure of the fund's future performance
Disclosure (cont )Disclosure (cont.)Top Ten Holdings (as of 9/30/2013)
EbayGannett
Percentage
AmgenWalgreenCabela's
Ebay
Walt DisneyBank of America
AflacAmgen
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
Wells FargoJP Morgan Chase & Co
Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
The Great Reversal: Repealing
Portfolio Additions / DeletionsQuantitative Easing
Third Quarter, 2013Additions:
EbEbay
Trims:Mylan
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security.
DefinitionsDefinitionsS&P 500 Index: A market-value weighted index consisting of 500 stocks chosen for market size, liquidity, andindustry group representation.industry group representation.Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocksthat are generally the leaders in their industry. It has been a widely followed indicator of the stock market sinceOctober 1, 1928. See DIA US Equity for the tradeable equivalent.Tokyo Nikkei 225: The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated Japanese companieslisted in the First Section of the Tokyo Stock Exchange The Nikkei Stock Average was first published on May 16listed in the First Section of the Tokyo Stock Exchange. The Nikkei Stock Average was first published on May 16,1949, where the average price was ¥176.21 with a divisor of 225.Russian RTS Stock Market Index: The Russian Trading System Index is a capitalization-weighted index that iscalculated in US Dollars. The index is comprised of stocks traded on the Russian Trading System, and was developedwith a base value of 100 as of September 1, 1995.NYSE: A stock exchange based in New York City which is considered the largest equities based exchange in the NYSE: A stock exchange based in New York City, which is considered the largest equities-based exchange in the world based on total market capitalization of its listed securitiesRussell 1000 Value Index: A measure of the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. One cannot invest directly in an index.Price/Earnings: the ratio of a firm’s closing stock price & its trailing 12 months’ earnings/share.EBITDA: Earnings before interest, taxes, depreciation and amortization (EBITDA) is Net Income with interest, taxes,depreciation, and amortization added back to it.Gross Domestic Product (GDP): the measure of an economy adopted by the United States in 1991; the total marketvalues of goods and services produced by workers and capital within a nation's borders during a given period (usually1 year)Free Cash Flow (FCF): measures the cash generating capability of a company by adding non-cash charges (e.g.depreciation) and interest expense to pretax income.Book Value: is the net asset value of a company, calculated by subtracting total liabilities from total assets.Price / Book ratio: current price / most recent book value per share.
Definitions (cont )Definitions (cont.)Earnings per share (EPS): is calculated by taking the total earnings divided by the number of shares outstanding.Price to sales ratio: is a tool for calculating a stock's valuation relative to other companies calculated by dividing aPrice to sales ratio: is a tool for calculating a stock s valuation relative to other companies, calculated by dividing astock's current price by its revenue per share.Return on Equity (ROE): ROE is equal to a fiscal year's net income (after preferred stock dividends but beforecommon stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage.Cash Flow: A revenue or expense stream that changes a cash account over a given period.N t P fit M i (NPM) E i di id d b Net Profit Margin (NPM): Earnings divided by revenue.Debt/Equity: A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders'equity.Debt/Total Capital: A measurement of a company's financial leverage, calculated as the company's debt divided byits total capital.Earnings Stability: The complement of the standard deviation of annual earnings from those which would be plottedon reconstructed regression slope lines determined by the stock's annual rate of growth of earnings.Price to Cash Flow (P/CF): A ratio used to compare a company's market value to its cash flow. It is calculated bydividing the company's market cap by the company's operating cash flow in the most recent fiscal year (or the mostrecent four fiscal quarters); or, equivalently, divide the per-share stock price by the per-share operating cash flow.MSCI World Index: The MSCI World Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31 1969. MXWO includes developed world markets, and does not include emerging markets. MXWD includes both emerging and developed markets. CRB Index (Commodity Research Bureau): With Commodity Index Report, you will receive complete coverage of all Commodity Research Bureau indexes in both tabular and graphical format. Included are the seven CRB BLS Spot Indexes. This weekly publication helps economists, researchers, and traders track the current strength of the national economy, offering daily prices of all 23 of the raw industrials and foodstuffs components of the CRB BLS Spot formula.
Definitions (cont )Definitions (cont.)Household Debt Service Ratio: The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt. MSCI Emerging Market Index: An index created by Morgan Stanley Capital International (MSCI) that is designed to measure equity market performance in global emerging markets. The Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, p , gyp , g y, , , , y , , , , pp , , ,South Africa, Taiwan, Thailand, and Turkey. “S5INFT Index” (S&P 500 Information Technology Index): Standard and Poor's 500 Information Technology Index is a capitalization- weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The parent index is SPXL1. This is a GICS Level 1 Sector group. Intraday values calculated by Bloomberg and not supported by S&P. Ticker “FXI” (iShares China Large-Cap ETF): iShares China Large-Cap ETF is an exchange traded fund incorporated in the USA. The ETF seeks investment results that correspond to the price and yield performance of the FTSE China 25 Index. The ETF invests at least 90% of its assets in the underlying index, which represents the performance of the largest companies in the China equity market.Ticker “EEM” (iShares MSCI Emerging Market ETF): iShares MSCI Emerging Markets ETF is an exchange-traded fund ( g g ) g g gincorporated in the USA. The ETF seeks results that correspond generally to the price and yield performance of the MSCI TR Emerging Markets Index. The ETF will concentrate its investments in a particular industry or geographic region to approximately the same extent the Index is so concentrated. Housing Affordability Index: When the index measures 100, a family earning the median income has exactly the amount needed to purchase a median-price resale home using conventional financing. An increase in the home affordability index means that a family is more likely to be able to afford the median priced house.
It is not possible to invest directly in an index
DisclosuresDisclosures
The fund's investment objectives, risks, charges and expenses must be consideredcarefully before investing. The summary and statutory prospectuses contain this andother important information about the investment company, and it may be obtainedby calling 877-807-4122 or visiting www.smeadfunds.com. Read it carefully beforeinvesting.
Mutual fund investing involves risk. Principal loss is possible. The Fund is non-diversified meaning it may concentrate its assets in fewer individual holdings thandiversified, meaning it may concentrate its assets in fewer individual holdings thana diversified fund. Therefore, the fund is more exposed to individual stockvolatility than a diversified fund.
The Smead Value Fund is distributed by Quasar Distributors, LLC.
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