When to Bailout?When to Bailout? The Water is Deep …

Interest Rates are Cruel …

But, cash can be safer!

Presented by

OutlineOutline

1.1. Legal Mumble-JumboLegal Mumble-Jumbo

2.2. EconomyEconomy

3.3. Stock MarketStock Market

4.4. Inflation/SequestrationInflation/Sequestration

5.5. Market Timing or NotMarket Timing or Not

6.6. SELL Strategy - WhenSELL Strategy - When

AboutAbout Jim FlinchumJim Flinchum• B.S. - Old Dominion University B.S. - Old Dominion University

• M.B.A. - College of William & Mary M.B.A. - College of William & Mary

• M.S. in World Trade - University of M.S. in World Trade - University of Dallas Dallas

• Taught economics – American Institute Taught economics – American Institute of Banking and the University of Texas of Banking and the University of Texas

• Certified Financial Planner® and Certified Financial Planner® and Certified Investment Manager Analyst®Certified Investment Manager Analyst®

AboutAbout Jim FlinchumJim Flinchum• Managing Principal of BayCapManaging Principal of BayCap

• 35-year career in banking & investing35-year career in banking & investing

• Jobs included Vice President of Jobs included Vice President of Citigroup, Senior Vice President for Citigroup, Senior Vice President for Bank of America, and retired as Senior Bank of America, and retired as Senior Vice President for SunTrust Vice President for SunTrust

AboutAbout Jim FlinchumJim Flinchum• Former city councilman in TexasFormer city councilman in Texas

• Gubernatorial appointee to the Gubernatorial appointee to the State Depository Board in Texas and State Depository Board in Texas and currently Virginia Public Building Authoritycurrently Virginia Public Building Authority

• Officer, Army Special Forces (1967-’70)Officer, Army Special Forces (1967-’70)

• Past Chairman of the Virginia Beach Past Chairman of the Virginia Beach Chamber of Commerce Chamber of Commerce

About This PresentationAbout This Presentation• Bay Capital Advisors is a registered investment adviser.Bay Capital Advisors is a registered investment adviser.

• This presentation is only intended for clients and interested This presentation is only intended for clients and interested investors residing in jurisdictions in which the Adviser is qualified investors residing in jurisdictions in which the Adviser is qualified to provide investment advisory services. The Adviser does not to provide investment advisory services. The Adviser does not attempt to furnish personalized investment advice or services attempt to furnish personalized investment advice or services through this presentation. Any subsequent, direct communication through this presentation. Any subsequent, direct communication with a prospective client will be conducted by the Adviser’s with a prospective client will be conducted by the Adviser’s investment advisory representatives. Some of the information investment advisory representatives. Some of the information given in this presentation has been produced by unaffiliated third given in this presentation has been produced by unaffiliated third parties and, while it is deemed reliable, the Adviser does not parties and, while it is deemed reliable, the Adviser does not guarantee its timeliness, sequence, accuracy, adequacy, or guarantee its timeliness, sequence, accuracy, adequacy, or completeness and makes no warranties with respect to results to completeness and makes no warranties with respect to results to be obtained from its use. Sooner or later, you will die . . .be obtained from its use. Sooner or later, you will die . . .

Economists vs StrategistsEconomists vs Strategists

Where’s the economy ?Where’s the economy ?

Contrary to popular belief . . .Contrary to popular belief . . .

•The Sky is NOT Falling !The Sky is NOT Falling !

It Ain’t That Bad - IIt Ain’t That Bad - I

• Unemployment is improving Unemployment is improving 3+4.9=7.9%3+4.9=7.9%

• Q3 GDP = 3.1% vs 30 yr avg of 2.9%Q3 GDP = 3.1% vs 30 yr avg of 2.9%

• Early-cycle sectors (homes & auto) greatEarly-cycle sectors (homes & auto) great

• Consumer confidence is up but only 58.6Consumer confidence is up but only 58.6

• Corporate profits are goodCorporate profits are good

• Dollar is stronger – Deflation - War?Dollar is stronger – Deflation - War?

• Inflation is low . . . now!Inflation is low . . . now!

It Ain’t That Bad - IIIt Ain’t That Bad - II

• Fed remains dovishFed remains dovish

• Energy independence by 2020?Energy independence by 2020?

• Manufacturing improvingManufacturing improving

• Foreign wage disparity decreasingForeign wage disparity decreasing

• Best looking horse in glue factoryBest looking horse in glue factory

Q4 AnomalyQ4 Anomaly

Q4 AnomalyQ4 Anomaly

Q4 Anomaly

The U-WordThe U-Word

• UUncertaintyncertainty has a chilling effect on has a chilling effect on business spending (Q4) but did you business spending (Q4) but did you ever see high certainty with an ever see high certainty with an under-valued stock market?under-valued stock market?

• Affects both the economy & the Affects both the economy & the marketmarket

Where’s the stock market ?Where’s the stock market ?

It Ain’t Bad At AllIt Ain’t Bad At All

• PE on trailing 12 months only 14PE on trailing 12 months only 14

• Only 10% of equity outflows backOnly 10% of equity outflows back

• Up 5% already this yearUp 5% already this year

• Cash-financed wave of M&A?Cash-financed wave of M&A?

• Large caps are still laggingLarge caps are still lagging

• Opportunity cost embarrassmentOpportunity cost embarrassment

• Best looking horse in glue factoryBest looking horse in glue factory

Fearless PredictionFearless Prediction

15751575

33++ Wet Blankets Wet Blankets

• Presidential Election – Recession?Presidential Election – Recession?

• Fiscal Cliff – Recession or Crisis?Fiscal Cliff – Recession or Crisis?

• European Financial Crisis – 3 eventsEuropean Financial Crisis – 3 events

Debt “Jaws”Debt “Jaws”

Protect yourself from Protect yourself from what?what?

•Recession . . . or Financial Recession . . . or Financial Collapse ?Collapse ?

130 Data Points/Month130 Data Points/Month

Pick Your Focal PointsPick Your Focal Points

Congress to the RescueCongress to the Rescue

Bernanke to the RescueBernanke to the Rescue

Sugar High ?Sugar High ?

Uncle MiltonUncle Milton

• ““Inflation is always and everywhere a Inflation is always and everywhere a monetary phenomenon.” monetary phenomenon.”

GDP = PT = GDP = PT = MVMV

Velocity is DroppingVelocity is Dropping

•Recession . . . or Financial Recession . . . or Financial Collapse ?Collapse ?

•Muscle Pull or Heart Attack?Muscle Pull or Heart Attack?

•A Jim Fixx Moment ?A Jim Fixx Moment ?

Congressional CooperationCongressional Cooperation

Let Us Pray . . .Let Us Pray . . .

Market Timing ?Market Timing ?

•Or . . . Time in MarketOr . . . Time in Market

S E L L StrategyS E L L Strategy

• Identify the particular triggers for Identify the particular triggers for implementation of a program to sell implementation of a program to sell particular securities over a pre-particular securities over a pre-specified period.specified period.

European Financial CrisisEuropean Financial Crisis

DomesticallyDomestically

Garden-Variety RecessionGarden-Variety Recession

• The “Death Cross”The “Death Cross”

My ConclusionMy Conclusion

•““Buy & Hold” is a good strategy Buy & Hold” is a good strategy for long term equity investors to for long term equity investors to survive garden-variety survive garden-variety recessions, but you need a SELL recessions, but you need a SELL strategy to survive a financial strategy to survive a financial collapse.collapse.

Complaint Department?Complaint Department?

Contact informationContact information

• Jim Flinchum, Jim Flinchum, CFP®, CIMA®CFP®, CIMA®

• (757) 963-5699(757) 963-5699

• www.baycapitaladvice.com

““The Flinchum File”The Flinchum File”

• ““For Honest Economic Analysis and For Honest Economic Analysis and Existential Opinions” Existential Opinions”

• Go to . . .Go to . . .

• http://http://baycapitaladvice.blogspot.com/baycapitaladvice.blogspot.com/

Shameless Commercial PlugShameless Commercial Plug

Happy Mardi Gras !!Happy Mardi Gras !!

•Questions ??Questions ??