Tonight’s Agenda

1. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION DISCUSSED DURING HAWKTRADE MEETINGS.  Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Investing in any financial instruments does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing. HAWKTRADE and its members do not bear any responsibility for losses or gains made by members trading on their personal accounts based on analysis from HAWKTRADE meetings.

2. Tonight’sAgenda • Updates • PPI • Wal-Mart (WMT) • China Hackers • Apple (AAPL) • Next Recession? • Gold

3. HawkTrade Updates • Elections will be shortly after Spring Break • President • Vice President • Pres./V.P. appoint market researches at their discression • Director of Group Simulations • Director of Marketing • Director of Finance • Director of Volunteering

4. HawkTrade Updates • Volunteer for HawkTrade – February 27th 7:30PM @ Carver • Tippie Build event, but you’re representing HawkTrade • Contact Alyssa Wahl: • Email: alyssa-wahl@uiowa.edu • Text/Call: (224) 558-1865

5. Wed 20 Feb 2013 8:30 AM PPI Up 0.2% & Housing Starts Down 8.5% in January

6. Housing Starts • # of new residential construction projects that have begun • Critical indicator of economic strength • Housing Starts • Down 8.5% (Jan.) vs. up 15.7% (Dec.) • 890,000 (Jan.) vs. 973,000 (Dec.)

7. Housing Starts Highlights • Housing starts showed some winter volatility in January by declining and showing possible lingering effects from Hurricane Sandy. However, permits continued to trend upward at a moderate pace • The decrease in starts was led by a monthly 24.1 percent drop in the multifamily component after a 34.7 percent spike in December. • By region, the drop in January starts was led by the Midwest region which fell a monthly 50.0 percent. • Weather adds to volatility in starts during winter

8. Building Permits • U.S. Building Permits • 925,000 (Jan.) vs. 909,000 (Dec.) • Up 1.8% (Jan.) vs. up 1.0% (Dec.)

9. Producer Price Index (PPI)

10. Producer Price Index (PPI) • Consensus Range: -0.1% to 1.1% • Actual PPI increased by 0.2% • PPI Less Food & Energy • Consensus Range: 0.0% to 0.5% • Increased by 0.2%

11. Earnings

12. Wal-Mart • Released earnings on Thursday • EPS of $1.67, beat estimates of $1.57 • Revenues ($127.1 billion) did not meet expectations • 1st quarter EPS expectations between $1.11-$1.16 • Weak outlook due to weak Feb. and tax uncertainty

13. Wal-Mart • Down 3.2% on 2/15 • February sales a “total disaster”, according to leaked emails, lowered the stock price • Shares up Friday

14. Wal-Mart • WMT has historically beaten the market • Tends to perform well during economic downturns due to discounted prices

15. Cyber Attacks • Coming from many organizations, groups, countries • Chines have been one that have been identified • Chinese government denies any involvement • Cyber attacks are becoming increasingly dangerous for businesses • Many well known businesses • New York Times, Google, Apple

16. Apple Computer Attacked • Tuesday announcement that some employees had Mac computers attacked • Apple has long touted their unhackable OS

17. Apple (AAPL) Next Big Thing?

18. Apple (AAPL) – iWatch • Next big thing by Apple? • Should work as an ancillary component to iPhone and iPad • In the developmental stage at Apple

19. Who would buy this? Will this Change Apple?

20. Slightly Above 14,000 - Again

21. By: Bryan Dobes The Coming Economic Collapse: How? why?....and what you can do to profit from it.

22. Important Distinction: Market Movers Daily/ Weekly event View Long term Macro View Economy extremely out of balance since 08’ recession. Artificially low interest rates and QE from the Fed. Has facilitated the bubble in Gov. spending and enabled the stock market to go up. We have a “phony” economy. The end result will be high interest rates, a recession much worse than ’08, and U.S. dollar collapse. • Markets move up, down, and sideways in the short term for many reasons such as investor emotions, technical indicators, or outside forces. • Short term the market will keep going up, and I look for good opportunities now. • The market can go a long time w/o reflecting the underlying fundamentals/reality. The Market can stay irrational longer than you can stay solvent! - John Maynard Keynes

23. Economic Bubbles of the Past • Tulip mania (1634-1638) • The Mississippi Bubble (1719-1720) • The South Sea Bubble (1720) • The Stock Market crash of the roaring Twenties (1924-1929) • The Japanese "Bubble Economy" (1984-1989) • The Dot-com Bubble (2000) • The Real estate Bubble (2008)

24. The Nasdaq during Dot-Com 200% 76%

25. So What happened after the 2008 Financial Crisis?

26. The Federal Reserve Dual Mandate 1. Maximum Employment 2. Price Stability (low inflation)

27. Accommodative Monetary Policy • Monetary policy used by US Central Bank (Fed) to help stimulate the economy Known as “Quantitative easing” • Aims to keep interest rates low, which incentivizes people to put their money in the stock market rather than U.S. treasuries. • Fed buys US treasury bonds from banks, who look to loan it out to businesses or individuals. • Hopes to stimulate economic growth through business investment and consumption.

28. U.S. Monetary Base

29. U.S. Monetary Base

30. QE effect on markets since 09’ QE3 122%

31. U.S. Dollar vs. Money Printing U.S. Dollar Index

32. Short-Term Summary: Don’t fight the FED Bernanke's Take • QE helps economy b/c higher stock prices make people feel better and want to spend more. • Keep mortgage rates low to encourage home buying and increase current home values. • Monetary policy will continue until unemployment is around 6.5% with inflation being no more than 2.5%

33. Long-Term Summary: The Side effects Interest on The U.S. Debt

34. Long-Term Summary: The Side effects Interest on The U.S. Debt • In 2007, national debt was 9T • Interest payments were 430B at an average of 5.7% • In 2012, national debt was 16.5T • Interest payments were 359B at an average of 2.59% • If interest rates normalize to 07 levels the interest payments on the 2012 debt will be 950 Billion!

35. Druckenmiller Speaks.. http://video.cnbc.com/gallery/?video=3000149591&play=1 Full interview: http://video.cnbc.com/gallery/?video=3000149591&play=1

36. Long-Term Summary: The Side effects 2012 FED. Revenues and Expenditures Due to demographic changes, and increasing healthcare costs, social security and Medicare costs will increase 700B over the next 3 years. When interest rates go to normal levels, interest on Debt will go from 6% to 18%....

37. Inflation! So what's the trigger for all this to happen?.....

38. CPI Index- Our main “measure” of inflation: Flat • When people realize inflation is much higher than the Gov. CPI numbers, it will trigger bond selling and put upward pressure on interest rates. • To combat inflation, FED will have no choice but to raise interest rates even further.

39. Chain reaction • Raising rates kills economic growth, forces companies to lay off, and Americans to spend less. • Doing this with U6 unemployment as high as it is (10.5%) will push us into a massive recession. • Combined with the increase on our debt payments, the U.S. will not have enough money to pay it’s bills and will have to cut trillions in spending or be forced to default and declare bankruptcy. • The bubble in Gov. spending facilitated by the Fed will come to a crashing end.

40. Ok, so how can I profit off it? • 1. Buy U.S. bond ETF now that shorts long term bond prices. (Follows yield) • Best ETF= TBT or short (TLT) • When signs of inflation or rising interest rates arise, be prepared to switch to cash and hard assets • (Gold) – Going to 5,000 an ounce in next 5 yrs. • Foreign emerging market countries such as S. Korea or Brazil.

41. Total Summary • The market is out of whack and has been for a long time. Things can and will continue to go up until they no longer can. • Timing exactly when these things will happen is never easy and can’t be specifically predicted. • Knowing the macro picture will help you see the coming collapse and hopefully enable you to make money or at least not lose as much money from it!

42. What's the deal with Gold?

43. Gold Stats. • Gold used as currency for most of history. • U.S. officially on gold standard until 1971. • Price based on supply/demand, but more speculation. • Most gold ever mined still exists in accessible form, (174,000 short tons) and can be represented by a cube of 66ft. • Speculated price is set in futures market and is equal to one ounce of physical gold $1,573 (Apr.)

44. Why buy gold? • Hedge against economic, political, or social fiat currency crisis. • Gold, like all precious metals, may be used as a hedge against inflation, deflation or currency devaluation. • Global accommodative monetary policy (money printing) is at an all time high along with debts/deficits.

45. Gold all time chart

46. *Chart adjusted for Inflation

47. GLD vs. S&P 500 05’-today GLD 240% S&P 29%

48. GLD- Gold ETF • Just hit “cross of death”- Wait to see if key $150 support level holds.

49. So, uhhh… What's the deal with Gold right now?

50. Facts • Indices are reaching all time highs • Investors are still pouring money into riskier securities in search of higher yields • Gold is dropping quickly