PMI: above 50 and rising*

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1 PMI: above 50 and rising* * A 1.5-point move is one standard deviation (SD). Oct 2008 to Apr 2013 May Jun Jul Aug Sep Average Higher and better than expected. Lower and below expectations n.a. Global PMI (JPM) n.a. US: ISM n.a. US: Chicago n.a. China (official) China (HSBC) n.a. Japan Eurozone Germany n.a. UK France n.a. Italy n.a. Switzerland n.a. Sweden n.a. Brazil n.a. Australia n.a. New Zealand n.a. South Africa n.a. Singapore n.a. South Korea Source: IR&M, Bloomberg. Notes: PMI stands for Purchasing Manager Index and is a diffusion index. A figure above 50 means the economy is expanding, below 50 means the economy is contracting. The global PMI is a composite by JPM. The average is equally weighted and excludes the JPM composite. SD stands for standard deviation September 2013

2 PMI services: above 50 and rising* * A 1.5-point move is one SD (standard deviation). All flash estimates higher and better than expected. Oct 2008 to Apr 2013 May Jun Jul Aug Sep Average n.a. Gl. Services PMI n.a. US: Non-Man n.a. China Eurozone Germany n.a. UK France n.a. Italy n.a. Sweden n.a. Australia n.a. Singapore Source: IR&M, Bloomberg. Notes: PMI is a diffusion index. A figure below 50 means economy is contracting. The Gl. Services PMI is a composite by JPM. The average is equally weighted and excludes the JPM composite. * Based on flash estimates from 23 April. Final estimates due 6 th May September 2013

3 Surprises: positive Note that surprises in G10, US and Eurozone are very positive when compared to the last 12 months and very negative in areas related to the materials sector in one form or another. Aug 2012 to Aug 2013 W34 W36 W37 W38 Last Average (regions) G United States Eurozone Asia Pacific Emerging Mar Latin America CEEMEA Japan China UK Canada Australia Switzerland Sweden Norway Source: IR&M, Citigroup, Bloomberg. Notes: Table is based on Citigroup Economic Surprise Indices which measure actual releases vs Bloomberg survey median. A positive reading suggests that economic releases beat consensus and vice versa. Average is for the first seven regions (the US here defined as a region). Table is based on weekly data. W stands for week. CEEMEA stands for Central & Eastern Europe, Middle East and Africa September 2013

4 12M forward Return on Equity Risk Management Research Q Gold and silver mining: cheap Gold and silver mining has peeked some investors interest due to extreme unfavourable recent performance and low valuations. It s probably one of the few sectors that moved from right to left in this matrix Cheap and attractive Lofty valuation but shooting the lights out S&P 500 Information Technology T elecom Materials Industrials 15 Energy 10 Gold and Silver mining (XAU) Financials Metals and Mining Utilities 5 Expensive 0 Just cheap and unattractive M forward Price/Book Ratio Current 09 Mar 2009 Source: IR&M, Bloomberg. Notes: Based on US sectors. A low P/B ratio is referred to as low valuation of the stock market. A high ROE is considered attractive for share holders. The arrow shows the path from a certain date to now for a subset of markets. Red/green arrows signal a market has become less/more attractive from a P/B perspective. The corners are labelled with very sophisticated quantitative analysis terminology September 2013

5 XAU: at book value XAU trades at book value after extreme negative performance. The unfavourable Pitroski and Altman scores derive mainly from high leverage, low liquidity and low operating efficiency measures. Brokers see upside though. But then they always do, don t they. Underlying Ctry Sector (GICS) Mcap USDbn Weight (% ) P/Ee Valuation Growth (%) Profitability (%) Performance (%) Scoring P/CFe P/Be DYe P/Ee (Y+1) P/CFe (Y+1) ROEe ProfMar est. TR (1Y) Volatility (1Y) PEG ratio Pitroski Score Altman Score Brok. rating 5=buy 1=sell Upside D.side XAU (30 stocks) % Freeport-Mcmoran Copper US Materials % Goldcorp Inc CA Materials % Barrick Gold Corp CA Materials % Newmont Mining Corp US Materials % Silver Wheaton Corp CA Materials > % Yamana Gold Inc CA Materials % Randgold Resources Ltd-Adr JE Materials > % Kinross Gold Corp CA Materials % Anglogold Ashanti-Spon Adr ZA Materials % Eldorado Gold Corp CA Materials > % Agnico Eagle Mines Ltd CA Materials % Gold Fields Ltd-Spons Adr ZA Materials % Royal Gold Inc US Materials > % New Gold Inc CA Materials n.a % Cia De Minas Buenaventur-Adr PE Materials > % Iamgold Corp CA Materials % Pan American Silver Corp CA Materials % Harmony Gold Mng-Spon Adr ZA Materials n.a n.a % First Majestic Silver Corp CA Materials n.a. n.a > % Coeur Mining Inc US Materials n.a n.a. n.a % Hecla Mining Co US Materials n.a % Aurico Gold Inc CA Materials > % Mcewen Mining Inc CA Materials n.a. n.a. n.a. n.a. n.a % Novagold Resources Inc CA Materials n.a. 44 n.a. n.a. n.a. -96 n.a. n.a % Seabridge Gold Inc CA Materials n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a > % Silver Standard Resources CA Materials n.a n.a % Allied Nevada Gold Corp US Materials n.a % Gold Resource Corp US Materials n.a. n.a. n.a. 240 n.a. n.a > % Tanzanian Royalty Exploratio CA Materials n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a > Banro Corporation CA Materials n.a. 0.0 n.a % Source: IR&M, Bloomberg. Notes: Table sorted by market cap. e = consensus estimates; CF = cash flow; 12M = forward looking by 12-months. TR = total return; PEG = P/E divided by growth. Pitroski Score. Altman Score September 2013

6 Yardeni Boom-Bust Barometer S&P 500 Risk Management Research Q Boom-bust barometer: new high The Yardeni Boom-Bust Barometer is a ratio comprised of two high frequency variables, raw commodities and initial claims. Note that the Yardeni Boom-Bust Barometer will fall when either raw commodities fall or initial claims rise Equity bear market** Yardeni Boom-Bust Barometer* (lhs) S&P 500 (rhs) Source: IR&M, Bloomberg. * CRB raw industrials spot price index divided by initial unemployment claims, four-week moving average. ** 10-week moving average below 40-week moving average September 2013

7 Potential banana skins We are now living in a command economy with the central banks being the central authority. From britannica.com Potential banana skin Remarks Sep 23rd ECB's Draghi to speak Sep 23rd Fed's Lockhart and Dudley to speak Sep 23rd SNB's Jordan to speak Sep 27th ECB's Draghi to speak Sep 27th Fed's Dudley to speak Oct 2nd Governing Council of the ECB Draghi to hold press conference Oct 9th FOMC meeting FOMC minutes released Oct 17th Governing Council of the ECB No press conference Oct 29-30th FOMC meeting No press conference Nov 7th Governing Council of the ECB Draghi to hold press conference Nov 20st FOMC meeting FOMC minutes released Nov 21st Governing Council of the ECB No press conference Dec 5th Governing Council of the ECB Draghi to hold press conference Dec 17-18th FOMC meeting Bernanke to hold press conference Dec 18th Governing Council of the ECB No press conference Dec 19th General Council of the ECB No press conference Source: IR&M, various sources, mainly Bloomberg and fxstreet.com command economy, economic system in which the means of production are publicly owned and economic activity is controlled by a central authority that assigns quantitative production goals and allots raw materials to productive enterprises. In such a system, determining the proportion of total product used for investment rather than consumption becomes a centrally made political decision September 2013

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