2017. Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and

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1 2017. Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Phoenix Capital Management Inc. All Rights Reserved. 1

2 Disclaimer: The information contained on this newsletter is for marketing purposes only. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice by Phoenix Capital Research or any of its affiliates, nor is it to be relied upon in making any investment or other decision. Neither the information nor any opinion expressed on this newsletter constitutes and offer to buy or sell any security or instrument or participate in any particular trading strategy. The information in the newsletter is not a complete description of the securities, markets or developments discussed. Information and opinions regarding individual securities do not mean that a security is recommended or suitable for a particular investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Opinions and estimates expressed on this newsletter constitute Phoenix Capital Research's judgment as of the date appearing on the opinion or estimate and are subject to change without notice. This information may not reflect events occurring after the date or time of publication. Phoenix Capital Research is not obligated to continue to offer information or opinions regarding any security, instrument or service. Information has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. Phoenix Capital Research and its officers, directors, employees, agents and/or affiliates may have executed, or may in the future execute, transactions in any of the securities or derivatives of any securities discussed on this newsletter. Past performance is not necessarily a guide to future performance and is no guarantee of future results. Securities products are not FDIC insured, are not guaranteed by any bank and involve investment risk, including possible loss of entire value. Phoenix Capital Research, OmniSans Publishing LLC and Graham Summers shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Phoenix Capital Research is not responsible for the content of other newsletters to which this one may be linked and reserves the right to remove such links. OmniSans Publishing LLC and the Phoenix Capital Research Logo are registered trademarks of Phoenix Capital Research. OmniSans Publishing LLC. PO BOX 2912, Alexandria, VA 22301

3 Donald Trump is now President of the United States of America. We are not stating that we are pro-trump or anti-trump. This is a simply statement of fact. And with that in mind, smart investors should be adopting new asset allocation strategies based on Trump s proposed policies. The fact is that the investment landscape has changed dramatically as a result of Trump winning the Presidency, and with the right investments, the next few years will produce tremendous gains for those who take action. Let s dive in. How to Profit From the Trump Trade As you no doubt are aware, Trump campaigned on numerous issues including trade, manufacturing, immigration, the US economy, debt levels, and more. However, in terms of economics, all of Trump s policies boil down to one central theme. A weaker US Dollar. Let s run through these one by one. Trump on Trade Imbalances Since first announcing his candidacy, right up until his inauguration speech, President Trump has repeatedly argued that the US is being taken advantage of by Japan, Mexico, China and others when it comes to trade. Below are just a few of his many quotes on the subject. NAFTA was the worst trade deal in history, and China's entrance into the World Trade Organization has enabled the greatest jobs theft in history. I m not angry at Japan. They send cars over by the million. We give them practically nothing. You talk about a trade unbalance. They re up here. We re down like below that stage. It s trade imbalance. Today, we import nearly $800 billion more in goods than we export. 3

Below is a chart of the trade-weighted $USD. Every move higher in this chart means that the $USD is moving higher relative to the currencies of its trading partners.

4 Below is a chart of the trade-weighted $USD. Every move higher in this chart means that the $USD is moving higher relative to the currencies of its trading partners. In this context, the US is losing on trade. To even remotely deliver on his promise to improve the US s trade positioning, Trump will need the $USD to be much lower. There is simply no way the US can compete on trade when its currency is so strong. A weak $USD will benefit US exports, promote US industry (by lowering costs) and boost profit margins. Trump will be aggressively pursuing all of these by pushing for a weaker $USD in the coming months and years. Trump on US Manufacturing Throughout his campaign and even in his inaugural speech, President Trump, repeatedly commented on the poor state of US manufacturing today. Below are just a few of his comments on the subject. Trade with China has killed over 29% of US manufacturing jobs in the US. 4

5 Manufacturing is now less than 9% of US GDP. The Rust Belt, heart of our country s factory sector, has been destroyed by our leaders. America has lost nearly one-third of its manufacturing jobs since even as the country has increased its population by 50 million people. Here again, the $USD will need to weaken if Trump is to deliver on his campaign promises in any meaningful way. The below chart shows US manufacturing output (blue line) against the trade weighted $USD (red line). Once again, you can see that as the trade weighted $USD spiked higher, US manufacturing output flat lined. For US manufacturing to make a comeback like Trump has promised throughout his campaigning, the $USD will also have to be much lower. This is the only way US manufacturing can become competitive with foreign markets where labor costs are so much lower. Again, Trump s manufacturing policies support a weak $USD. He will be aggressively pursuing this in the coming months and years. 5

6 Trump on Currency Manipulation A final economic point for Trump has been that of currency manipulation. Throughout his Presidential campaign, Trump made a point of singling out other nations who he considers to be currency manipulators. Below are just a few of his comments regarding this topic. Look at what China is doing to our country... They are devaluing their currency and we have nobody in our government to fight them... They are using our country as a piggy bank to rebuild China, and many other countries are doing the same thing. Japan has cut the Yen they ve cut the currency so low. What Trump is referring to here is the process through which other countries aggressively devalue their currencies against the $USD. You see, when foreign countries devalue their currencies against the $USD, they are effectively pushing the $USD higher. This reduces US competitiveness and is extremely damaging to US corporate profits. I ll explain Nearly half of US corporate sales come from abroad. So when a foreign Government (say Japan) devalues its currency (the Yen) against the $USD, the currency move crushes any corporate profits US firms generate from that country. In the above example revenues (which are denominated in Yen) would fall in relative value while costs (which are denominated in $USD) rise. This means a collapse in profits. See for yourself In the last few years as the $USD erupted higher (black line) corporate profits for the S&P 500 (blue line) fell sharply. 6

7 If the Trump administration chooses to label China or Japan (or any other country for that matter) currency manipulators, it will be actively seeking for them to stop devaluing their currencies against the $USD. The point here is that once again Trump s policies will be pushing for a weaker $USD. In conclusion, while Trump s various economic policies diverge in terms of specifics, ALL of them ultimately boil down the one key theme: A weaker $USD. With that in mind, smart investors should be allocating capital towards investments that will profit from this. Below are three areas worthy of your consideration. Investment Strategy #1: Long Precious Metals. First and foremost, a weak $USD will boost precious metals. Already Gold and Silver have taken note that a weaker $USD is coming. 7

8 Here s Gold: Here s Silver: 8

9 This is just the beginning. As Trump s policies push for a lower $USD, both Gold and Silver will be moving sharply higher. You can get exposure to this sector by buying either Gold and Silver bullion or by using a Gold or Silver-related Exchange Traded Funds (ETFs). If you decide to buy actual bullion, only buy from a well-reputed dealer. And never store your Gold or Silver with someone else; ALWAYS store it yourself. If you opt to buy an ETF instead of actual bullion, I d suggest looking at the Gold ETF (GLD) and the Silver ETF (SLV). These ETFs track the prices of the underlying precious metals. I would steer clear of using UltraLong ETFs (ETFs that are meant to return 2X or 3X Gold s or Silver s performances) as these investments rarely produce the desired returns and usually underperform. Investment Strategy #2: Long Commodities. A weak $USD will also benefit commodities. Commodities are the basic items used in the manufacturing and production of goods and services. These include everything from Oil to Soybeans, Copper, Rice, and the like. Historically, commodities have an inverse relationship with the $USD. So when the $USD strengthens, Commodities fall and vice versa. The below chart plots the commodity index (black line) against an inverted $USD (so when the $USD strengthens, the blue line falls). As you can see, when the $USD strengthened from 2011 onwards (the blue line fell), commodities (black line) prices fell hard. 9

10 As the $USD now begins to weaken as a result of Trump s policies, commodities will soar. In terms of playing this, there are a couple solid ETFs that track commodity prices. Of the lot, the best is the Powershares Commodity ETF (DBC). DBC tracks a broad commodity index for all commodities. As such you get exposure to Oil, Gold, Copper, Sugar and more. This way you are well diversified to profit from the rise in commodity prices. Once again, I would steer clear of using UltraLong ETFs to play this trend. Investment Strategy #3: Long Emerging Markets. A final area to consider as part of our weaker $USD theme are Emerging markets. I realize this sounds counterintuitive. Based on consensus thinking, a weak $USD will benefit the US which exports to Emerging Markets; not the Emerging Markets themselves. The reality is that a strong $USD hurts many emerging market economies for two big reasons: 10

11 1) Many of these countries issue their debts in $USD, NOT their own currencies. So when the $USD rises, their debts become more expensive to service (they are servicing them in their local currencies which are losing value against the $USD). 2) Many of these countries rely heavily on commodities for economic growth. When the $USD rises, pushing commodity prices lower, these countries make LESS money. Put simply, when the $USD weakens, these countries will make more money AND have an easier time servicing their debts. This is a win/ win for emerging markets. In terms of playing this trend, the best, broadest ETF to consider is the Emerging Markets ETF (EEM). However, there are also ETFs for individual emerging markets. Some of the better ones are: The China ETF (FXI) The India ETF (INDA) The South Africa ETF (EZA) The Brazil ETF (EWZ) The Peru ETF (EPU) This concludes this report. We cannot provide very specific recommendations or when to buy any of these because everyone s individual situation is different. However, the above strategies will go a long ways to helping you prepare for the Trump Trade and a weaker $USD. Good Investing, Graham Summers Chief Market Strategist Phoenix Capital Research Ps. If you re looking for active investment recommendations with real-time buy and sell trade alerts, I strongly urge you to consider a trial subscription to our Private Wealth Advisory newsletter. Private Wealth Advisory is a weekly investment advisory service that uses ETF and stocks to trade the markets. Our trade success rate is 86%, meaning we make money on more than eight 11

12 out of every ten trade recommendations. And thanks to careful risk measures, we ve outperformed the S&P 500, as well as the average hedge fund, by double digits in the last two years. To find out more about Private Wealth Advisory and how it can help you successfully use the markets to generate real wealth, visit us at: 12

Weekly Market Update

1 Weekly Market Update 3-23-17 2017 Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter