Transcript 2 - Houston Investors Association

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Investments L.L.C.
ECONOMIC
PREDICTIONS 2016
John P. Bott, II
Parallax Investments, LLC
March 12, 2016
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John P. Bott, II
• Tri-Star Group a division of
Calton & Associates, Inc.
• President and Chief Investment
Officer of Parallax Investments,
LLC
Parallax Investments, LLC
Phone: 713-400-4555
Fax: 713-400-4550
www.parallaxinvestments.us
5718 Westheimer Suite 955
Houston, TX 77057
713-400-4555
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Economic Predictions for 2015
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Short Term Interest Rates will rise by 25bp *
Dollar continues to Rally *
Gold great buy at $1,200 (not so far)
Unemployment will hit 5.2% *
Stock Market makes new all time highs (DOW) *
Crude Oil pushes down to 39/bb *
10 Year Bond trades between 1.5% and 2.5% *
U.S. Battles Deflation *
Capacity Utilization continues to Rise
European economy begins to recover with QE1
If FED begins to roll out of 4.5 T portfolio rates will rise
sharply. (n/a)
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Short Term Interest Rates will rise by 25bp
• Good Call
• The FED raises rates 25bps on December 16th.
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Dollar continues to Rally
• Good Call
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Gold great buy at $1,200
• Undecided
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Unemployment will hit 5.2%
• Good Call
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Stock Market makes new all time highs
(DOW)
• Good Call
• The DOW hit an all time high of 18,351.36 on 5/19/15.
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Crude Oil pushes down to 39/bb
• Good Call
• Hit a low of 34.19 on 12/21/15
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10 Year Treasury Bond trades between
1.5% and 2.5%
• Good Call
• Low of 1.6357 on 01/30/15. High of 2.4985 on 6/11/15
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U.S. Battles Deflation
PPI
• Good Call
PCE
Import
CPI
Export
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Capacity Utilization continues to Rise
• Miss
• Dropped from 78.6685 to 76.4873
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European economy begins to recover with
QE1
• Recovery has begun.
Eurozone CPI
• EU began QE in March 2015
Eurozone Unemployment Rate
Eurozone GDP
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If FED begins to roll out of 4.5 T portfolio
rates will rise sharply. (n/a)
• N/A
• The FED did not begin to roll out their portfolio
http://www.federalreserve.gov/monetarypolicy/quarterly-report-20150930.htm
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Historic Prediction Accuracy 2007-2015 53/78 Correct
2007
2008
2009
2010
2011
2012
2013
2014
2015
Stocks will peak in the
first quarter &
Recession begins before
year end
Several Major U.S.
Financial Institutions
will no longer have
same name or remain
in business
Several major U.S.
Financial Hedge
Funds and Insurance
Companies will go out
of business
300 banks will be taken
over by the FDIC
Fed QE2 is an Attempt
to Drive Dollar Lower
Short Term Interest Rates
Will Remain at Zero
Short Term Interest Rates
Will Remain at Zero
Short term interest Rates
will remain at zero
Short Term
Interest Rates will
rise by 25bp
Short Term interest rates
fall below 4.25%
Short Term interest
rates will fall below
3.25%
Short Term Interest
Rates Will Hit Zero
CPI will begin systemic
deflation,
down 1% for year
Short Term Interest Rates
Will Remain at Zero
Fed QE3 is an Attempt
to Drive Dollar Lower
Dollar Continues to Push
Lower
Dollar continues pushing
down
Dollar continues to
Rally
Long Term interest rates
will hover between
4.50% and 5.00%
Long Term Rates low
3.5% and high 5%
Long-Term Rates
Between 1.5-3%
Commodities will be
lower than
current 280 level at year
end
Long Term Rates Will Rise
to a High of 5%
Gold breaks $3,000 per
ounce
Gold breaks $3,000 per ounce
Gold great buy at $1,200
Gold great buy at
$1,200
Housing will Continue to
Decline
Housing will continue to
decline, over 25% in
price
30 Year Mortgages
Will Hit 4%
Dow will test or break
7500 lows
30-Year Mortgage Rates
Will Hit 5%
Unemployment will hit 8%
Unemployment will hit 6%
Unemployment will hit
6%
Unemployment will
hit 5.2%
Investors learn about
Credit Derivative
Obligations
Gold will break $1000
per ounce
Gold breaks $1,200
per ounce
Gold breaks $1,800 per
ounce
China turns out, not to be
the “economy” we think
Stock Market Weaker if
no QE3
Stock Market Will Push to New
All time Highs
Stock Market makes new
all time highs (DOW)
Stock Market
makes new all time
highs (DOW)
Gold will hit a minimum
of $800 per Ounce
Oil prices will be flat
again this year
Oil Prices Will Hit $30
per Barrel
Oil prices will hit $30 per
barrel
Gold breaks $2,000 per
ounce
Oil Prices Destroying
World Economy
Crude Oil Prices Will Push
Down
Crude Oil pushes down
Crude Oil pushes
down to 39/bb
Oil prices will be flat
again the year
Yen will rally sharply
against the U.S. Dollar
Unemployment Will
Hit 8.5%
Unemployment will peak
at 12%
but bottom at 9.5% first
Unemployment will hit 12%
Long Term Rates Will Fall
to 1.5% to 2%
Long Bond Rates Will Trade at
2.0% to 2.5%
10 Year Bond trades
between 2.5% and 3.5%
10 Year Bond
trades between
1.5% and 2.5%
The Yen will rally against
the U.S. Dollar
Stocks will be 25%
lower by the end of the
year
Mark to Market will no
longer be the driving
factor in losses
Fed will attempt to raise
interest rates, withdraw
quant ease
Stock Market will trade in
range 12,000 to 8,000, buy
it for the long run at 8,000
Inflation Will Remain Very
Low
US Battles Deflation
U.S. Battles Deflation
U.S. Battles
Deflation
Japanese Stock Market will
Rally
Unemployment over 6%
by end of year
Municipalities Will
Begin to Meltdown
Commercial Real Estate
will
bottom in Q3 2010
European Union will begin
to disintegrate
Economy Gets Worse
Capacity Utilization
begins to Rise
Capacity Utilization
continues to Rise
Battle Turns To Debt Ceiling
European unemployment
rates continue to rise
European
economy begins to
recover with QE1
Residential Real Estate
will begin to fall again
If FED begins to
roll out of 4.5 T
portfolio rates will
rise sharply. (n/a)
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Economic Predictions for 2016
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Short Term Interest Rates will rise to 75bp
Dollar continues to Rally
Gold great buy at $1,000
Unemployment will hit 4.7%
Stock Market begins downward move
10 Year Bond trades between 1.5% and 2.5%
Russia and Middle East go to war, to raise oil prices
Crude Oil temporarily rally’s to $60
CRB bottoms at 163
European economy begins to recover with QE and
strong dollar
• Hillary Clinton will not win the Democratic nomination
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US National Debt
As of March 10thth, 2016 US National Debt is
$19,108,064,334,131
Based on current US population estimates that is $59,133 of
debt per person.
http://www.usdebtclock.org/
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Three Legs of the Economic Recovery
Bank Capital
Ratios
Mark to Market
Modification
Small Business
and
Job Creation
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THE FED
BETWEEN A ROCK AND A
HARD PLACE
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Reasons To Raise
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Unemployment Rate 4.9%
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Initial Jobless Claims 278,000
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Monthly Gain in Nonfarm Payrolls 242,000
0
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University of Michigan Consumer
Sentiment 91.7
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Reasons Not To Raise
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Crude Oil Futures 36.53
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CRB Commodity Index 171.58
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Underemployment Rate (U6)
2009-Present 9.7%
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Underemployment Rate (U6)
1994-Present 9.7%
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Labor Force Participation Rate 62.9%
1978 Levels
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US Auto Sales Total Annualized 17.43M
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US New One Family Houses Sold
Annual Total 494,000
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US Existing Home Sales (SAAR) 5.47M
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ISM Prices Paid 38.5
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Export Price Index YoY % Change -5.7%
0
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Import Price Index YoY % Change -6.2%
0
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Producer Price Index YoY % Change -1.2%
0
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Consumer Price Index YoY % Change 1.4%
2
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Personal Consumption Expenditure
Core Price Index YoY 1.67%
2
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WHAT I THINK THE FED
SHOULD DO
• The dollar
• The economy (GDP)
• Inversion of yield curve
They should not raise rates because it will put
us at a competitive disadvantage in trade.
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WHAT I THINK THE FED
WILL DO
• They feel employment is what it should be but
it is not
• The inflation rate is still stable
• Political pressure
They will raise rates twice.
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Investments L.L.C.
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. Parallax investments, LLC 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.
Parallax Investments, LLC is a Registered Investment Advisor, in the
State of Texas, and offers securities through Calton & Associates,
Inc. member FINRA/SIPC. Parallax Investments, LLC acts in a
principal capacity when trading securities in your accounts through
Calton & Associates, Inc.