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Got Income? 24 April 2014

War Room. Got Income? 24 April 2014. HiddenLevers War Room. CE Credit. Macro Coaching. Idea Generation. Archived webinars. Open Q + A. P resentation deck. Product Updates. Scenario Updates. Got Income?. Market Update Scenarios – First World Deflation Got Income ?

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Got Income? 24 April 2014

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  1. War Room Got Income? 24 April 2014

  2. HiddenLevers War Room CE Credit Macro Coaching Idea Generation Archived webinars Open Q + A Presentation deck Product Updates Scenario Updates

  3. Got Income? • Market Update • Scenarios –First World Deflation • Got Income? • Do Income Strategies Work?

  4. HiddenLevers Market update

  5. Market Update New Cold War BRICS baton passing Greece celebration Canada Middle Class

  6. Macro Snapshot Nasdaq saw a slight correction - Was that it? S&P earnings good, driving down P/E. New home sales are bucking the uptrend.

  7. HiddenLevers Scenarios – First world Deflation

  8. Deflation Review – How did we get here? Fed Funds Rate Near 0% = CDs Near 0%. Falling 10-Year Interest Rate = Shrinking Annuity Income sources: HiddenLevers, TSPstrategies , MoneyCafe

  9. Deflation Review – Global technology automation decreasing birth rate commodities sinking sluggish GDP growth first world baby bust sources: HiddenLevers, Economist,

  10. Deflation Review – USA ZIRP = Zero Interest Rate Policy - max that monetary policy can do - ensures housing loans are cheap - will outlast quantitative easing - makes returning to normalcy hard (Japan) 5 years USD d 5 years no inflation zero rates ZIRP – the costs No interest ZIRP has cost savers 760 billion usd in interest Just inflation Bank customers 100 billion in purchasing power each year since 2009 because inflation, while low, isn’t zero sources: HiddenLevers, LA Times, Bloomberg

  11. Scenario: First World Deflation • Good • rates and inflation at 0 • Bad • worldwide ex-US • Ugly • worldwide including US The Goldilocks scenario – can the Fed keep the bowl warm but not hot? Sweden and Japan already at/near deflation – if EU tips, this might push US to correction. If entire first world falls into deflation, a global recession is likely close behind.

  12. HiddenLevers Got Income?

  13. Got Income? – Overview MLPs and Energy Trusts REITs + mREITs Municipal CEFs Buy-Write on Dividend Stocks

  14. Got income? – MLPs + Trusts • Master Limited Partnerships • Many with 7%+ yields • Almost all in energy sector • Be aware of MLP tax complexity • ETFs and MFs exist as well • Energy Trusts • Simply a share of royalties in certain oil/gas fields • Double-digit yields common • Beware new finite life trusts! Older is often better here source: HiddenLevers

  15. Got income? – REITs Correlation Screener source: HiddenLevers

  16. Got income? – Muni Bond Closed-End Funds High leverage = risk • Muni Closed-End Funds • Trade like stocks and ETFs • Tax-equivalent yields of 10-15% for many clients • Less liquid than MFs and large ETFs Discount to NAV = opportunity source: HiddenLevers, CEFConnect.com

  17. Got income? – Dividend Equities + Call Writing • Buy-Write Strategy • Buy the stock, sell the call • If the call expires, repeat • If call is exercised, capital gains realized • Quarterly writes work well • GE Example • Sell July $27 call for 0.57 • 4 writes/year = 8.5% income • 11.8% total yield • Equity downside remains source: HiddenLevers, Yahoo Finance

  18. HiddenLevers Do income strategies work?

  19. Risk versus Income – MLP review MLPs have generally outperformed the S&P over the last 10 years. 5 years shows MLPs keep pace, struggle to outperform recent bull market. source: HiddenLevers

  20. Risk versus Income – REITs review Traditional REITs have recovered with S&P in current bull market. Mortgage REITs have been crushed by rising rates– bonds in equity clothing? source: HiddenLevers

  21. Is income generation really that difficult? Meredith Whitney Bonds + CDs suck easy to give up and chase S&P short term thinking boomers more used to volatility no one wants to do the homework pervasive marketing of ETFs and MFs Life of Pi “You might think I lost all hope at that point. I did. And as a result I perked up and felt much better.” Yann Martel

  22. Got income? – Recap demographics = destiny global deflation happening under your nose sky high yields = caveat emptor yes, you too can generate income

  23. HiddenLevers Use Cases Got Income? scenario First World Deflation Macro Theme Mega Caps with Yield Macro Theme MLPs with 5%+ Yield War Room Tech Bubble 2.0 scenarioCommodities Perfect Storm scenarioEnd of QE War Room Demographic Shift Data CenterCPI + 10y rates

  24. Product Update • Overall Performance improvements • Risk Monitoring – export to MS Excel, re-run stress test • Proxy mapping improvements • Cross Correlations - Color Highlighting in Matrix • Coming soon: • Annuities Support (Fixed / Variable / Equity Indexed) • Advisor Fees Support • Options Support – Call Writing

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