What's New? Feddern Financial Consulting Group TODAY'S NEWS:

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1 Subject: Feddern Financial Consulting Group Newsletter What's New? Feddern Financial Consulting Group TODAY'S NEWS: Today's bull market is the fourth biggest since the 1929 crash after stocks have nearly tripled since the financial-crisis low set in early But more than any modern bull market, this one stands alone in that it's squarely out of step with economic growth. It's being driven higher by just a few wealthy participants and traders who have tacitly, perhaps even unknowingly, agreed to drive prices higher. The main reason for that is two-fold. First, low interest rates have made other investments unattractive. The 10-year U.S. Treasury is yielding only 2.58%. Inflation is running at an annual rate of 2%. That makes corporate bonds, certificates of deposit (which yield less than T-bills) and other fixed-income products largely a losing proposition. Those who have been buying bonds have been doing so for safety. Searching for value amid market highs. Second, the investing public isn't really buying stocks. I just read a study by the Pew Research Center, which was published in May, found stock ownership by households is shrinking, at 45%, down from more than 65% in Even with the Dow Jones Industrial Average DJIA +0.25% reaching the 17,000 milestone, investors are leaving stock mutual funds, not buying them. This series of circumstances is unique. Unlike central bankers' response to the Great Depression, the Federal Reserve has embraced Keynesian economics and flooded the economy with dollars on a scale never seen before. The Fed's balance sheet has more than quadrupled to $4.3 trillion since In short, stocks have become more attractive not because of a surging economy or strengthening corporate

2 profits, but because they are the last-place finishers in an ugly contest. That's a significant difference with boom markets of the past. For instance, between 1935 and 1937, the stock market lagged an economic recovery. U.S. gross domestic product rose 10.8% in 1934 and 8.9% in But stocks only took off in that last year, eventually logging a 132% increase until The next long-term bull market occurred from 1942 to 1946, when stocks jumped more than 150%. That isn't a good comparison, given the nation's involvement in World War II. But there were some robust years economically. And once again, the market moved along with the economy: at a 17.7% growth rate in 1941, followed by 18.9% in 1942, 17% in 1943 and 8% in Much of the growth was offset by inflation (9% in 1942), but at least investors had a reason. The first post-war bull market began in 1949 and lasted nearly seven years. Stocks rose more than two-fold as U.S. GDP grew at least 4.1% in each of those years, including an 8.7% growth rate in The Dow Jones Industrial Average finally passed its 1920s record high in Inflation was all over the map. Prices rose 8.7% in 1951, but increased at about 1% or lower between 1953 and The mid-1980s bull market saw stocks, as measured by the S&P 500 SPX +0.32%, double during a fiveyear period beginning in Like the current bull market, gains were made to seem bigger after the S&P 500 dropped to only in the summer of But again, there was economic growth that exceeded historical levels - between 3.5% and 7.3% during the rally - and inflation and unemployment fell during that time. Some describe the period from 1987 to 2002 as a bull market. Technically, it may be. It rose more than 500% during that span. But the real bull market of this era occurred between the start of 1995 until early Stocks in the S&P 500 rose 237% as GDP increased between 3.8% and 4.8% annually. Inflation was low, between 1.6% and 3%. Unemployment fell each year, starting at 5.6% and ending at 4%. In all of those periods, the market reflected strong economic trends: solid growth, high or strengthening employment and stable inflation. Only the latter is present today. The unemployment rate is improving, but it's still a relatively high 6.1%. The best GDP rate produced since the financial crisis was 2.8%. That was in 2012, before the current bull market took off. Perhaps, as some suggest, this is a new normal. If so, it represents a disconnect between economic reality and market valuation. More likely, it's a warped market distorted by the extraordinary measures used to create an economic lift. As market indexes touch new highs, you should ask yourself if you're taking part in a history-making rally, or a rally that is ignoring history. In this issue TODAY'S 401-k Asset Allocation Changes.

3 Does Volumn Really Matter? AAII/LUG's Group Info ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TODAY'S 401-k Asset Allocation Changes PLAN NAME BUY SELL LINK TO DETAILS and the Five Profiles FFCG-Ultimate: Anderson Law dxzlx Nationwide: Ahead HR Socially Responsible: OneAmerica: VISIT OUR WEBSITE FOR SPECIFIC ASSET ALLOCATION RECOMMENDATIONS We have added several new sets of indicators from NetSignal, VectorVest, and our 20- day MA of the S&P 500 which are used for the broad markets and give a general indicators of BUY or SELL. The following market signal changes were issued by NetSignal as of: US STOCKS - BUY ( ) June 5, 8:20pm CT - US Equity Bull Alert. - netsignal is issuing a US Equity Bull Alert this evening effective for Friday, June 6. The Fed has been all over the place with announcements regarding QE. What is clear is that the Fed will step in at any sign of a slowing economy. It is happening again with the new Fed Chairman continuing the same policy. With our current Alert which is three months old, we finished slightly behind buy and hold which was up 3.5%.

4 FOREIGN STOCKS- BUY ( ) June 20, 8:20pm CT - International equities were mixed. The UK was up.2% and the German DAX was down -.2%. Funds were down as ishares Msci International (EFA) fell -.2% and ishares Germany (EWG) fell -.2%. ishares Japan (EWJ) was up.1%. netsignal issued an International Fund Bull Alert effective for Tuesday, February 18. We are up 3.9% at this point in the Alert which is three and a half months old measured by ishares Msci Emerging Markets (EFA). EMERGING MARKETS - BUY ( ) June 5, 8:20pm CT - Emerging Market Bull Alert. The recent bear alert has failed to hold as the dollar has continued to fall. netsignal is issuing an Emerging Market Bull Alert this evening effective for Friday, June 6. Emerging markets have staged a quick reversal. While both the Shanghai and Hong Kong markets were flat with this Alert, emerging market funds denominated in dollars rose sharply as the dollar fell. With this Alert, we were behind buy and hold by -1.9% measured against the Hanseng. netsignal performance for specific emerging market countries has been mixed. For example, over the past two years since January 2012, netsignal has beat buy and hold with Brazilian ETF's but were slightly behind buy and hold with Chinese funds and ETF's GOLD - BUY ( ) Jun 19 7:30pm CDT - Gold Fund Bull Alert. - netsignal has issued a Gold Fund Bull Alert this evening, effective for Friday, June 20 close. Gold has quickly turned around with a 3.5% gain today. Deteriorating circumstances in Iraq has caused a move to safety. Our Bear Alert was short and gold rose 5.5% while we were in cash. Consider adding gold ETF's such as Spdr Gold Trust (GLD), ishares Gold (IAU) and Market Vectors Gold Miners (GDX) to your portfolios The following market signal changes were issued by VectorVest as of: Stock Market Call - BUY: ( ) The "Holy Grail" is in the market with 10 stocks as of the above date The following market signal changes were issued by our LONG/SHORT S&P 500 as of:

5 Market Call - Based on the 20-day moving average of the S&P Spyders: SSO/ULPIX are LONG the S&P x2 SDS/URPIX are SHORT the S&P x2 As of this strategy has been added to and is available for all participants in our FFCG "Ultimate 401-k" platform custodied at Lincoln Trust BUY: = 9.93% Bruce's Comment: Well, today was a "bounce-back" day, after a hard sell-off often you get a bounce back day. It will be interesting to see who is in controll... Bulls / Bears, the next few day will tell us Does Volume Really Matter?

6 In Wall Street circles, laments about limp stock-trading volumes are as common, and as banal, as complaints about the enervating summer heat. But the swelter of New York is about the same every year, and, as it turns out, trading volume isn't particularly punk right now. The relatively sluggish pace of share turnover that has accompanied the headline indexes' steady march to record heights has been generally presented as a point of underlying weakness or market dysfunction. The Wall Street Journal headline "Dow Rockets. Volumes Plummet" was a blunt, flawed summation of this conversation, showing an apparently incongruous slump in shares traded as the market has soared. Historically, a rally in a stock or an index has been viewed by technical analysts as being more valid, or "confirmed," if it comes on heavy share volume - the equivalent of a high-turnout election delivering a strong mandate to the top vote-getter. Yet volume has been weaker on up days than down days for the entirety of this bull market, now older than five years, so it's hard to place much weight on this old trading tenet. The very fact that volume has tended to lag when stocks are rising has been offered as an indictment of the integrity of the uptrend itself, evidence somehow that equities are being manipulated higher during lulls in investors' attention. There is a related concept tossed about that systematic trading algorithms falling somewhere under the heading of high frequency trading deter "real money" trading activity (thus reducing share volumes). Or, conversely, that the chilling effect of Michael Lewis's recently published anti-hft book "Flash Boys" has suppressed robot trading for now. Take your pick of one skeptical charge or the other, made by those who choose to look this gift bull in the mouth. The reality, though, is that volume isn't really falling. When measured in the only way that really makes sense - dollars - market activity has been holding firm at levels that comfortably exceed those of the prior bull market. Data furnished by Schaeffer's Investment Research reveal the dollar value of stocks traded, shown here as a 21-day average of the 500 most active stocks, has been steady around $100 billion a day for the past few years.

7 . Dollar Volume For a quantitatively adept crowd, investment professionals are oddly uncritical in the way they go on tabulating trading activity the way it's always been done - by number of shares traded. This is a relic of the inkwell-and-onion-paper days of a century ago. Trading was originally counted in shares because that's how transactions were processed and paid for. In the era of fixed commissions, investors paid a set amount per 100 shares. While many trades are still priced per share, institutions often pay a percentage of value traded, and retail investors pay a set commission for any size order. Dollar volume is a better gauge of how much stock is changing hands on a daily basis. This measure has held up better than share volume because the average price of a share across the entire market is at a record high today. Stock splits, once routine, have fallen from favor (the recent splits by Apple Inc. [AAPL] and Mastercard Inc. [MA] notwithstanding), which has lifted the nominal price of the typical stock. Granted, that dollar-volume chart doesn't present a picture of a particularly robust trading environment either. As the equity market has climbed in value, even steady dollar volumes mean a smaller share of overall stock-market capitalization is in motion on a given day. There are a handful of plausible, largely innocuous explanations for this. Some of them are detailed in this Marketwatch slideshow, which nonetheless incorrectly characterizes volume as "crumbling." The long-term surge in stock futures and options activity is the most persuasive concrete factor noted there. The rise of passive index-tracking exchange-traded funds as the preferred stock-ownership vehicle is also rightly fingered as a trend keeping volumes muted. Active fund managers have fewer dollars with which to swap in and out of favored names, and retail investors have not re-entered the stock-flipping game in large

8 numbers. One point not cited there: There are simply fewer stocks to be traded than there used to be. Companies themselves have been vacuuming up their own shares in recent years, purchasing more than $1 trillion worth over the past couple of years. The number of stocks on U.S. exchanges has dropped from a peak of more than 8,800 on major exchanges in the late 1990s to fewer than 5,000 today, thanks to smaller firms being taken private and regulatory deterrents to being a small-cap public company. The comprehensive Wilshire 5000 index - whose name dates from the 1970s and is based on an approximate tally for the investable stock universe - today contains just 3,688 stocks. Finally, there is the likelihood that ever-higher volumes in the late 2000s were an aberration, the combination of electronic high-frequency trading strategies proliferating just as the financial crisis was driving an historic eruption of volatility and climactic liquidation of stocks. Volume tends to follow share-price volatility - not the other way around - so the past couple of years' muted market movements have restrained trading opportunities and turnover. So those vocally pining for higher share turnover will probably get it in the next correction - perhaps sooner and for a different reason than they were hoping. AAII Group Info ============================ AAII will Meet on THURSDAY at 6:00 PM at the AUDUBON CC The Audubon Country Club is conveniently located off Preston Highway, approximately one mile South of Eastern Parkway in Audubon Park on the left. After entering Audubon Park, take the first right and go all of the way to the end and you will be at the entrance to the Club. Parking is very convenient. Since this meeting is sponsored by the Louisville Chapter of the American Association of Individual Investors, you are always asked to preregister by to attend this program, in order for the country club to provide appropriate seating arrangements. Also, indicate if you plan to have dinner. Please confirm your attendance by to Otto@fedderngroup.com There is a charge for attending the meeting of $10 to help defray some of our expenses And this is not a "prospecting seminar" conducted by a financial services firm selling financial products, and your addresses will remain private and protected. You are also certainly invited to participate in the buffet which is an additional $15 (which makes the total $25 for the meeting AND the dinner.) JUL 17, PM Agenda:

9 S&P LONG/SHORT - Bruce Richards A New Dividend Portfolio from the Highest Yielding Stocks in the DOW How to Cash-in On the Natural Gas Revolution A NEW Portfolio of REITS A diversified Portfolio of GOLD and Gold Miners A New portfolio of REITS 19 Stock and Bond Indicators to Help You Determine "Where We Are" The "Holy Grail" Stock Portfolio Using VectorVest Rules - UPDATED Developing a new Watchlist for Fun and Profit by NEXT Christmas You don't need to be a member of AAII to attend this meeting DINNER: $25 MEETING ONLY: $10 Reservations Requested and Appreciated =================================================================== Louisville Users Group (LUGS) Info ============================ The next LUGS Will Meet on SATURDAY - JUL 19-10:00 AM FREE - No Reservations needed JUL 19, :00 AM AGENDA: How to mitigate the Downside risk in your portfolio while participating in the Upside o S&P LONG/SHORT - Bruce Richards o A New Dividend Portfolio from the Highest Yielding Stocks in the DOW o A NEW Portfolio of REITS o A NEW Portfolio of GOLD ETFs and MINERS. o 19 Stock and Bond Indicators to Help You Determine "Where We Are" o The "Holy Grail" Stock Portfolio Using VectorVest Rules - UPDATED

10 o Developing a new Watchlist for Fun and Profit by NEXT Christmas MY Conference Room Coffee and rolls provided FEDDERN FINANCIAL CONSULTING GROUP 603 North Shore Drive - Suite 102 Jeffersonville, IN (502) Office (502) Otto Cell otto@fedderngroup.com Quick Links... Visit our Website Otto G. Feddern Feddern Financial Consulting Group 603 North Shore Drive Suite 102 Jeffersonville, IN (502) Office (502) Cell otto@fedderngroup.com Forward This was sent to otto@fedderngroup.com by otto@fedderngroup.com Update Profile/ Address Rapid removal with SafeUnsubscribe Privacy Policy. Feddern Financial Consulting Group 603 north shore drive suite 102 jeffersonville IN 47130