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Green Book October 2014

Time For Defense - Major Trend Index Now Negative

Latest MTI calculation deteriorated to Negative (based on data for the week ended October 3rd). We expect further significant losses in the stock market near term and have cut net equity exposure in Core and Global asset allocation portfolios to 40%.

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Major Trend

MTI Turns NEGATIVE In Early October

Latest MTI calculation deteriorated to Negative (based on data for the week ended October 3rd). We expect further significant losses in the stock market near term and have cut net equity exposure in Core and Global asset allocation portfolios to 40%.

Stock Market

“Averages” Conceal Plight Of The Average Stock

September’s small S&P 500 loss of less than 2% disguised a significant breakdown in the “average stock.” In fact, the S&P 500 has been tougher to beat than at any time since the Tech Bubble.

Macro Monitor

Interest Rates & Currencies: It’s Complicated

The recent sudden strength in the dollar is mostly attributable to the divergent central bank policies. This supports a bullish dollar outlook over the medium term.

Of Special Interest

Are We Floating In Another Share Buyback Bubble?

Share repurchase activity among U.S. corporations is garnering a lot of negative attention as aggregate dollars spent on share buybacks are nearing the all-time highs last seen leading up to the financial crisis. We take a closer look at the recent activity to see if we are in for a repeat.

Stock Market

Small Cap Leverage—A Concern?

With the Fed mulling over a rate increase, investors may have already started to avoid companies with excess leverage. Unfortunately, Small Caps, on average, are in this camp.

Market Internals

Small/Mid/Large Cap - Small Caps Experience Worst Monthly Return Since May 2012

In September, the Russell 2000 index lost 6% and is down 4.4% YTD. Large Caps widened their YTD performance lead (S&P 500 +8.3%). Small Cap Premium slides to 15%.

Stock Market

Quality Stock Rankings: High Quality Fared Better In Q3

During a tumultuous Q3, High Quality stocks proved to be resilient, losing only 2.0% compared to Low Quality stocks’ 7.5% loss in Q3. Low Quality stocks’ prior momentum seems to have broken down, especially in September when they slid by 7.1% for the month.

Table of Contents

Stock Market

Of Special Interest

Macro Monitor

Equity Strategies

Quant

Market Internals

Portfolios

Major Trend

Fund Flow Trends

Estimating the Downside

At Random

Appendix

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