Transcript Houston Investors Association Monthly SIG

Economic Predictions 2014
John P. Bott, II
Tri-Star Financial
John P. Bott, II
 Chairman of Tri-Star Financial
 GP of Parallax Investments,
 GP& CIO of Parallax Capital Partners,
LP Hedge fund and Portfolio Manager
of Parallax Asset Management
 “What’s Working Now” radio show
1110 AM 4pm-5pm, M-F
 Full service Houston-based brokerage firm founded in 1986
 Fixed income specialists
 Success is built upon long-standing client relationships based
on trust, honesty, and quality service
Economic Predictions for 2008
 Several major U. S. financial institutions will no longer exist
 Short term interest rates fall below 3.25%
 Long term rates between 3.50% and 5.00%
 Housing continues to decline, over 25.00% drop in value
 Leverage buyouts dead
 Gold breaks $1,000 per ounce
 Oil prices will be flat again this year
 The Yen will rally sharply against the US Dollar
 Stocks will be 25% lower by the end of the 2008
 Unemployment rate over 6.00% by the end of 2008
Economic Predictions for 2009
 Several major U.S. Financial Hedge Funds and Insurance Companies will go out
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of business
Short Term Interest Rates will hit zero
Long Term Rates between 1.5% and 3%
30 Year Mortgage rates will hit 4%
Housing will bottom in Q3
Gold breaks $1,200 per ounce
Oil prices will hit $30 per barrel
Unemployment will hit 8.5%
Mark to Market will no longer be the driving factor in losses
Municipalities will begin to Meltdown
Economic Predictions for 2010
 300 banks will be taken over by the FDIC
 CPI will begin systemic deflation, down 1% for year
 Commodities will be lower then current 280 level at year end
 Dow will test or break 7500 lows
 Gold breaks $1,800 per ounce
 Oil prices will hit $30 per barrel
 Unemployment will peak at 12% but bottom at 9.5% first.
 Fed will attempt to raise interest rates, withdraw quant ease
 Commercial Real Estate will bottom in Q3 2010
 Residential Real Estate will begin to fall again.
Economic Predictions for 2011
Fed QE2 is an attempt to drive dollar lower
Short Term Interest Rates will remain at zero
Long Term Rates between will rise to a high of 5%
30 Year Mortgage rates will hit 5%
China turns out, not to be the “economy” we think
Gold breaks $2000 per ounce
Unemployment will hit 12%
Stock Market will trade in range 12000 to 8000, buy it for the
long run at 8000
 European Union will begin to disintegrate
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Economic Predictions for 2012
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Short Term Interest Rates will remain at zero
Dollar much stronger (if no QE3)
Gold breaks $3000 per ounce (final leg up)
Unemployment will hit 8%
Stock Market weaker (if no QE3)
Crude Oil prices crushing world economy
Long bond rates down to 1.5% to 2%
European Union institutes QE1
Inflation to remain very low
Economic Predictions for 2013
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Short Term Interest Rates will remain at zero
Dollar continues Pushing Down
Gold breaks $3000 per ounce (final leg up)
Unemployment will hit 6%
Stock Market makes new all time highs (DOW)
Crude Oil pushes down
Long bond rates trade to 2.0% to 2.5%
U.S. Battles Deflation
Economy gets worse
Battle turns to debt Ceiling
2013-Short Term Interest Rates
Will Remain at Zero
 Fed has kept rates at zero all year
 Fed has promised to keep rates at zero all this coming year also.
 Great call
2013
Dollar Continues to Push Lower
 Dollar index did not go lower for the year
 World Economic weakness kept dollar stronger than it would have
been
 Q infinity strengthened economy slightly compared to rest of
world
 Low interest should have weakened dollar, but strong stock
market off set.
2013-Gold breaks $3,000 per ounce
 Gold predictions go back 10 years and have been extremely
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accurate.
This was a Prediction Based on QE3 coming in January or
February. QE3 came in August
Gold Has yet to make new highs
Missed This Prediction
Still believe Gold will go up to $3000, but higher Stocks
Continues to hold back Market
2013-Unemployment will hit 6%
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Unemployment Will Hit 6%
Unemployment only went down to 7.2%
Unemployment fell all year.
Missed Call due to slow down in the Economy
2013-Stock Market Will Push to
New All time Highs
 Stocks went to New All time Highs Several Times this Year
 Great Call
Data as of 11/7/2013
Crude Oil Prices Will Push Down
 Oil headed down hard now.
 Year is not over
 Right now prices are same as end of last year.
 Incorrect call
Data as of 11/7/2013
Long Bond Rates Will Trade at 2.0% to 2.5%
 10 year Bond traded between 1.66% and 2.98%
 Good Call
Data as of 11/7/2013
US Battles Deflation
 Inflation went lower in 2013
 Consumer Price Index YoY 1.2%
 Producer Price Index YoY 0.3%
 Export/Import Index YoY -1%
 Core PCE YoY 1.2%
 Great Call
Data as of 11/7/2013
Economy Gets Worse
 Although the Economy continues to lag, GDP does not
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reflect that downward move because of consumption.
Capacity Utilization still reflects a very weak economy.
Small Business and Middle Class have lost the most.
Gains this year have been related to big business restructure
of the balance sheet.
Not right, but not totally wrong either.
Battle Turns To Debt Ceiling
 The big story of the year was the Shutdown caused by the
Debt Ceiling Battle
 Correct Call
Economic Predictions for 2014
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Short Term Interest Rates will remain at zero
Dollar continues Pushing Down
Gold great buy at $1200
Unemployment will hit 6%
Stock Market makes new all time highs (DOW)
Crude Oil pushes down
10 Year Bond trades between 2.5% and 3.5%
U.S. Battles Deflation
Capacity Utilization begins to Rise
European unemployment rates continue to rise
Talking Points
 The current state of middle class Americans
 What happens if Freddie and Fannie are shut down
 Why deflation should not automatically be seen as bad
 Taxation through regulation
 Economic issues vs. social issues in politics
 K Street, Wall Street and Inside The Loop
 What happens when the FED finally tapers
 Current SEC enforcement policies
 Investing through betting against America
 Recalling Senators and Congressmen
 The younger generation fighting for America
 Bott Inflection Point
 QUESTIONS?
Disclaimer
 The preceding presentation has been prepared for informational purposes only. It does
not constitute an offer, recommendation, or solicitation to buy or sell, nor is it an
official confirmation of terms.The above is based on information generally available
to the public from sources reasonably believed to be reliable. Note that for any
collateralized mortgage product, (CMO), the yield and average life will fluctuate
depending on the actual rate at which mortgage holders prepay the mortgages
underlying the CMO and changes in the current interest rates. Past performance is not
indicative of future returns.Tri-Star Financial makes no representations or warranties,
express or implied as to the accuracy or completeness of the above information or that
any returns indicated will be achieved.