9 Rules of Research - NDR

NDR NiNe Rules Of ReseaRchApril 3, 2009

Ned Davis Research Group

Robert C. Schuster, CFA, CMT, Chief Operating Officer

Please see important disclosures at the end of this document.Ned Davis Research Group

1

current Positions, 2009 expectations

Stocks48%Cash

23%

Bonds29%

Global allocation:

u.s. allocation:

Stocks55%

Cash10%

Bonds35%

Cash (by 13%) » Stocks (by 7%) »Bonds (by 6%) »

Japan »Europe ex. U.K. »

Pacific ex. Japan »U.S. »

Stocks »Bonds »Cash »

Overweight/Bullish: underweight/Bearish:

Marketweight:

GlOBal sTOcK MaRKeT TReND

current:• Bottoming process. 2009: Advance into Q3. Potential 1200-1300 on S&P 500.

sTYle & MaRKeT caP

current:• Growth over Value.Neutral on small vs. large •2009: Likely to favor small.

Likely to overweight stocks, overweight emerging markets.

2009:

cOMMODiTies

Gold: • Bullish.2009: Secular uptrend.commodities: • Bottoming.2009: Secular uptrend.


2

NDR Broad calls for 2009 (as of right now)

2009 should be a year of mean reversion �from historical extremes

Stock rallying, and outperforming bonds »

Credit Spreads narrowing »

Volatility receding »

Emerging Markets outperforming with small caps »

Gold and commodities should strengthen »

secular Themes intact �

Bear Market in US Stocks »

Bull in Gold, Commodities, and Emerging Markets »


3

Rule #1: Don't fight the Tape

The Trend is Your friend

(S094)

Daily Data 3/29/2007 - 3/31/2009 (Log Scale)

1539.181553.08 1565.15

1515.96

1395.42

1426.63

1305.32

1005.75

934.70

1490.72

1406.70 1407.22

1310.50

1273.37

1214.91

848.92

752.44

805.22

676.53

S&P 500 Gain/Annum When:11/11/1929 - 3/31/2009

200-Day Moving Gain/ %Average: Annum of Time

Is Rising 7. 5 67. 3* Is Falling -0. 7 32. 7

Moving average directionbased on reversalsof 0.5% or greater.

3/31/2009

S&P 500 (Solid Line) = 797.87

200-Day MA (Dashed Line) = 1011.34

200-Day MA is Falling

678696714733753773793814836858881904928953978

100410301058108611141144117412051237127013041338137414101448148615261566

678696714733753773793814836858881904928953978

100410301058108611141144117412051237127013041338137414101448148615261566

A M J J A S O N D J2008

F M A M J J A S O N D J2009

F M

S&P 500 vs. 200-Day Moving Average


4

Rule #1: Don't fight the Tape

Go with Mo

Weekly Data 7/19/1968 - 3/27/2009 (Log Scale)

(S108)

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SProfitable Long Trades: 93%Gain/Annum: 10.4%Buy-Hold Gain/Annum: 5.2%Latest Signal 12/29/2006 = 1418.30S = Switch into Commercial PaperSignal Dates: 12/27/1968 - 3/27/2009

3/27/2009 = 815.94

Signals Generated When Rate of Change:Rises Above Lower Bracket = BuyFalls Below Upper Bracket = Sell

566985

105129159196242298367452557686845

1041128215791946

566985

105129159196242298367452557686845

1041128215791946

Equally Weighted 1700Stock Geometric Index

(Two-Week Front-Weighted Moving Average)Overbought

Oversold

-55-50-45-40-35-30-25-20-15-10

-505

1015202530354045505560

-55-50-45-40-35-30-25-20-15-10

-505

1015202530354045505560

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Standard & Poor's 500 Stock Index

Value Line Geometric Index 26-Week Rate of Change Source: Value Line

Bearish

momentum


5

Rule #2: Don't fight the fed

stay in harmony with interest Rates

Weekly Data 1/08/1965 - 3/27/2009 (Log Scale)

(S875A)

Value Line Gain/Annum When:

Gain/ %Baa Yield Momentum Is: Annum of Time* Above 6% -11. 6 24. 2

Between -3% and 6% -1. 3 43. 4-3% and Below 15. 8 32. 4

3/27/2009 = 199.8495663728293

106121138157178203231263299341388441502

495663728293

106121138157178203231263299341388441502

3/27/2009 = 11.4%

Bond Yields Rising

Yields Falling-16-12

-8-4048

12162024283236

-16-12

-8-4048

12162024283236

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Value Line Geometric Index

Moody's Baa Bond Yield (26-Week Change)

rates

that

matter


6

Rule #2: Don't fight the fed

Money Moves Markets - excess liquidity

Monthly Data 1/31/1960 - 2/28/2009 (Log Scale)

(S835)

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Profitable Long Trades: 90%Gain/Annum: 7.4%Buy-Hold Gain/Annum: 5.4%Latest Signal 10/31/2008 = 968.75S = Switch into Commercial Paper

Signals Generated When Liquidity Growth:Rises Above 0.4 = BuyFalls Below -5.6 = Sell

S&P 500 Gain/Annum When:(1/31/1960 - 2/28/2009)

Liquidity Growth Is: Gain/ %Annum of Time

* Above 0.4 10. 6 40. 2Between -5.6 and 0.4 6. 5 40. 6-5.6 and Below -6. 8 19. 238

48597493

115144180224280349436543678846

1056131716432051

3848597493

115144180224280349436543678846

1056131716432051

Year-to-Year Change

Bearish

BullishExcess Liquidity

Economic Growth Rates ExceedLiquidity Growth Rates

2/28/2009 = 27.4-18-15-12

-9-6-30369

121518212427

-18-15-12

-9-6-30369

121518212427

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005


M2 Money Supply minus Industrial Production x PPI Commodities

fuel for

stocks (and

eventually

inflation)


7

Rule #3: Beware of crowds at extremes

Psychology and liquidity link

(S423)


NDR Total Market Value Gain/Annum When:

Money Market Fund Assets/ Gain/ %NDR Total Market Value: Annum of Time* Above 10.80 9. 6 89. 4

10.80 and Below -12. 5 10. 6

NDR Total Market Value(Billions, Scale Right)2/28/2009 = 8289.3

17102.05 18082.49

1055.64

9715.02 9322.61

11571351157618392146250529233411398146455421632673838615

1005411733136921597818646

Total Money Market Fund Assets(Scale Left In Billions)

2/28/2009 = $3906

276.66

613.84

2382.00

196.81

570.10

1862.00

Source: Investment Company Institute

101123150183223272331404492599730889

1083132016081959238629073541

Money Market Fund Assets / NDR Total Market Value(Scale Right)

2/28/2009 = 47.1%

High Liquidity

Low Liquidity

7.48.59.8

11.212.814.716.919.322.225.429.133.438.343.9

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NDR Total Market Value vs Money Market Fund Assets / NDR Total Market Value

record


8


Relative Relationships Revert


(AA032)

2/28/2009 = 9.4

Ratio:S&P 500 Total Return Index /

Barclays Capital Long-Term Treasury Bond Total Return Index*

*Ibbotson data prior to 1973.0.20.30.40.50.60.81.11.41.92.53.34.35.77.6

10.013.117.322.930.2

0.20.30.40.50.60.81.11.41.92.53.34.35.77.6

10.013.117.322.930.2

S&P 500 Total Return (Y/Y) MinusLong-Term Gov't Bond Total Return (Y/Y)

Mean

3.0 Std Dev

2.0 Std Dev

1.0 Std Dev

-1.0 Std Dev

-2.0 Std Dev

-3.0 Std Dev

Scale = % Points

2/28/2009 = -52.1%

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Stock/Bond Relative Performance19

30

1935

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1995

2000

2005


9


Valuation = long-Term extremes in Psychology


(AA348_RSL)

Russell 1000 Growth Index

2/28/2009 = 215.4

Russell 1000 Growth Gain/Annum When:(11/30/1980 - 2/28/2009)

P/B Ratio Gain/ %Dev. From Trend is: Annum of Time

Above 10% 1. 5 31. 9* Below 10% 7. 6 68. 1

3746587290

113141176221276345431539

3746587290

113141176221276345431539

Russell 1000 Growth Price/Book Value Ratio (Solid Line)

24-Month Average (Dashed Line)

2/28/2009 = 2.4 (actual)2/28/2009 = 3.8 (24-Month Average)2

3

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5

7

9

12

2

3

4

5

7

9

12

2/28/2009 = -36.4%Russell 1000 Growth P/B Deviation from Two-Year Average (%)

-40

-30

-20

-10

0

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-30

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-10

0

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Russell 1000 Growth Price/Book Value Ratio


10


General crowd Psychology impacts the Markets

(S1060A)


Oct 1968 Dec 1972

Sep 1987Feb 1989

Jun 1998Jan 2000

Dec 1974

May 1980Oct 1982

Jan 1991Feb 1992

Mar 2003

Oct 2007

DJIA Gain/Annum When:(2/28/1969 - 2/28/2009)

Consumer Gain/ %Confidence is: Annum of Time

Above 110 -0. 2 22. 1Between 66 and 110 6. 3 65. 1

* 66 and Below 9. 6 12. 9

2/28/2009 = 7062.9452557687848

10461290159219632422298836864547560969208536

10530129901602519769

452557687848

10461290159219632422298836864547560969208536

10530129901602519769

Extreme Optimism = Bearish for Stocks

Extreme Pessimism = Bullish for Stocks2030405060708090

100110120130140150

2030405060708090

100110120130140150

1970 1975 1980 1985 1990 1995 2000 2005

Dow Jones Industrial Average

Consumer Confidence (Conference Board) Source: The Conference Board


11

Rule #4 Rely on Objective indicators

indicators are not perfect but by being objective, it gives you consistency. use observable evidence not theoretical.


(DAVIS95)

3/31/2009 = 797.87

S&P 500 Gain/Annum When:

CBOE 3-Day Equity Gain/ %Put/Call Ratio is: Annum of Time

Above Upper Band 15. 7 26. 1* Between Bands 5. 0 55. 1

Below Lower Band -6. 3 18. 8

Analysis Dates = 3/20/1986 - 3/30/2009695726759793828865904945987

1031107811261176122912841342140214651531

695726759793828865904945987

1031107811261176122912841342140214651531

Extreme Pessimism -- Bullish

Extreme Optimism -- Bearish48525660646872768084889296

100104108

48525660646872768084889296

100104108

M J S N J2006

M M J S N J2007

M M J S N J2008

M M J S N J2009

M

Standard & Poor's 500 Index

CBOE Three-Day Equity Put/Call Ratio


12

Rule #5 Disciplined

(I 04000)


Model Equity Line3/31/1986 - 2/28/2009 GPA = 8.33%

Std. Dev. of 12-Month Returns = 9.336%

2/28/2009 = 626.7

Benchmark Equity Line (55/35/10 Stocks/Bonds/Cash)3/31/1986 - 2/28/2009 GPA = 6.36%

Std. Dev. of 12-Month Returns = 9.987%

2/28/2009 = 411.6112135162196236285343414499601725

112135162196236285343414499601725

Model Equity % (Min = 40%, Max = 70%)

2/28/2009 = 48.1%Dashed Lines = Benchmark Weights304050607080

304050607080

Model Bond % 2/28/2009 = 28.8%

102030405060

102030405060

Model Cash %2/28/2009 = 23.1%

51015202530354045

51015202530354045

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NDR Global Balanced Account Model (Equity Allocation Constrained)

anchors One's exposure to facts Not Gut Reactions

position

anchored in

objective

evidence


13

Rule #6: Remain flexible

adapt to changes in data, the environment, the markets.

Weekly Data 2/02/2007 - 3/27/2009

(DAVIS98)

2/23 -- T-Bill RatesStart to Decline from

High of 5.1%

Barclays High Yield Corporate Yield ( )Moody's Baa Bond Yield ( )90-Day T-Bill Rate ( ------ )

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F M

Junk Bonds, Baa Bonds, and T-Bill Rate

don't fight fed turned into don't fight market rates


14

Rule #7: Risk-averse

Being Right


(NED_2)

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Profitable Trades: 74%Gain/Annum: -3.1%Overall Gain: -80.1%Latest Signal 6/17/2008 = 1350.93

(Example of a Mean Reversion Indicator)

Signals Generated When Stochastic Crosses:Above 72 = SellBelow 33 = Buy28

36476078

101130169218282365472611790

1022132217102211

2836476078

101130169218282365472611790

1022132217102211

101520253035404550556065707580859095

101520253035404550556065707580859095

Standard & Poor's 500 Index

32-Period Stochastic (19-Period Moving Average)

1962

1967

1972

1977

1982

1987

1992

1997

2002

2007

Copyright 2009 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved..www.ndr.com/vendorinfo/. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

�

right but loses


15

Rule #7: Risk-averse

Making Money

not right as often, but makes money


(NED_1)

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Profitable Trades: 52%Gain/Annum: 5.8%Overall Gain: 1793.1%Latest Signal 12/21/2007 = 1484.46

(Example of a Trend Following Indicator)

Signals Generated When:50-Day MA Crosses Below 200-Day MA = Sell50-Day MA Crosses Above 200-Day MA = Buy29

38496381

104133171221284365469604776998

128416522124

2938496381

104133171221284365469604776998

128416522124

50-Day MA ( )3/31/2009 = 789.8

200-Day MA (------)3/31/2009 = 1011.3

45566883

101124151185226277338413505618755923

11281379

45566883

101124151185226277338413505618755923

11281379


50-Day vs 200-Day Moving Averages

1962

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2007


�


16

Rule #8: Money Management Matters

Be humble and flexible -- be able to turn emotions upside down and be open minded. 9let profits run and cut losses short. 9Think in terms of risk, including opportunity risk of missing a bull market. 9Buy the rumor, sell the news. 9

(S094)


1539.181553.08 1565.15

1515.96

1395.42

1426.63

1305.32

1005.75

934.70

1490.72

1406.70 1407.22

1310.50

1273.37

1214.91

848.92

752.44

805.22

676.53

S&P 500 Gain/Annum When:11/11/1929 - 3/31/2009

200-Day Moving Gain/ %Average: Annum of Time

Is Rising 7. 5 67. 3* Is Falling -0. 7 32. 7

Moving average directionbased on reversalsof 0.5% or greater.

3/31/2009

S&P 500 (Solid Line) = 797.87

200-Day MA (Dashed Line) = 1011.34

200-Day MA is Falling

678696714733753773793814836858881904928953978

100410301058108611141144117412051237127013041338137414101448148615261566

678696714733753773793814836858881904928953978

100410301058108611141144117412051237127013041338137414101448148615261566

A M J J A S O N D J2008


F M

S&P 500 vs. 200-Day Moving Average


17

Rule #9: Those who do not study history are condemned to repeat its mistakes.

(HOT200812171_C)

DJIA 11/13/1929 Bear Market Low159

182

209

240

276

316

363

159

182

209

240

276

316

363

O N D J1930


F M

DJIA 3/31/1938 Bear Market Low99

107

116

126

136

147

159

99

107

116

126

136

147

159

M A M J J A S O N D J1939

F M A M J J

Nikkei 225 8/18/1992 Bear Market Low14234

15085

15988

16945

17959

19034

20173

21381

14234

15085

15988

16945

17959

19034

20173

21381

J A S O N D J1993


F M


15389

16450

17583

18794

20089

21473

22953

14397

15389

16450

17583

18794

20089

21473

22953

J J A S O N D J1996



12798135281429915115159771688917852188711994721085

S O N D J1999


F M A M

Monster Rallies in Secular Bear Markets

48%

60%

51%

56%

62%

X

X

X

X

X

X

X

X

X

X

monster rallys

in secular bear

markets


18

Breaking Down stock Returns

1964

12%17%

37%32%

31%

19%

20%

32%

2007

Industry

Sector

Market

CompanySpecific

Original Studyby Benjamin King

Current Studyby Ned Davis Research

Sector &IndustryFactors

49%

51%

Breaking Down Stock returnS

Market &Company SpecificFactors

Market, Sector & Industry influences account for 2/3 of stock returns.Key PoInt:

Why Macro Market and sector analysis is so Vital


19

Post Waterfall Decline Performance

IF0818E_C

100.9102.4103.9105.5107.1108.7110.3112.0113.7115.4117.1118.9120.7122.5124.3126.2128.1130.0132.0

100.9102.4103.9105.5107.1108.7110.3112.0113.7115.4117.1118.9120.7122.5124.3126.2128.1130.0132.0Historical Cycle DJIA ( )

All cycles indexed to 100 at end of Waterfall Decline.

Wat

erfa

ll Dec

line

Bear

Mar

ket B

otto

m

Rece

ssio

n En

d

Earn

ings

Tro

ugh

DJIA Performance Around Waterfall Declines (1929-2002)

56596367717580859095

101107113

56596367717580859095

101107113Historical Cycle 10-Day Smoothing of NYSE Volume ( )

0-21-42-63 +21 +42 +63 +84 +105 +126 +147 +168 +189 +210 +231 +252<--Days After--><--Days Before-->


four Phases of Post Waterfall Declines

1 2 3 4


20

sector Performance in each Phase

s&P secTOR PeRfORMaNce DuRiNG VaRiOus MaRKeT Phases

s&P 500 sectorWaterfall To Bear Market

BottomBear Market Bottom To Recession

endRecession end To earnings Growth

Troughfollowing earnings Growth

Trough

Health Care Outperform Underperform Marketperform Marketperform

Consumer Staples Outperform Marketperform Underperform Marketperform

Energy Outperform Underperform Marketperform Underperform

Telecom Services Marketperform Underperform Underperform Marketperform

Utilities Marketperform Underperform Outperform Marketperform

Financials Underperform Marketperform Marketperform Outperform

Industrials Underperform Outperform Marketperform Marketperform

Consumer Discretionary Underperform Outperform Outperform Outperform

Materials Underperform Outperform Outperform Marketperform

Information Technology Underperform Outperform Underperform Marketperform

Waterfall to Bear Market Bottom Phase: 10/4/1974 - 12/6/1974, 10/19/1987 - 12/4/1987, 7/23/2002 - 10/9/2002. Bear Market Bottom to Recession End Phase: 12/6/1974 - 3/31/1975, 4/21/1980 - 7/31/1980, 8/12/1982 - 11/30/1982, 10/11/1990 - 3/31/1991, 9/21/2001 - 11/30/2001. Recession End to Earnings Growth Trough Phase: 3/31/1975 - 9/30/1975, 7/31/1980 - 3/31/1981, 11/30/1982 - 12/31/1982, 3/31/1991 - 12/31/1991, 11/30/2001 - 12/31/2001. Post Earnings Growth Trough Phase (63 day performance following these dates): 9/30/1975, 3/31/1981, 12/31/1982, 12/31/1991, 12/31/2001. Sector performance based on S&P/MSCI GICS sectors. NDR estimates prior to 9/11/1989. Price only. Outperform determined by either batting average of 80% or higher, or excess return of 200 bps or more. Underperform determined by either batting average of 20% or less, or excess return of -200 bps or less.

Ned Davis Research, Inc. NDH0808.8

1 2 3

2009 expected timeframe


21

Phase One: sector Performance

s&P secTOR PeRfORMaNce fROM WaTeRfall DecliNe TO BeaR MaRKeT BOTTOM (3 cases siNce 1974)

s&P 500 sectorMean

% GainMean

# of DaysBatting

average %

Health Care 11.7 44 100

Consumer Staples 7.3 44 100

Energy 5.0 44 100

Telecommunication Services 1.9 44 67

Utilities 0.3 44 67

Financials -2.5 44 33

Industrials -4.6 44 0

Consumer Discretionary -5.0 44 0

Materials -5.3 44 0

Information Technology -6.0 44 33

s&P 500 0.4

Waterfall to Bear Market Bottom Phase: 10/4/1974 - 12/6/1974, 10/19/1987 - 12/4/1987, 7/23/2002 - 10/9/2002. Recession only really occurred with the 1974 case. Days = trading days. Batting average = % of cases outperforming the S&P 500 (Cap-Weighted). Sector performance based on S&P/MSCI GICS sectors. NDR estimates prior to 9/11/1989. Price only.


sort criteria

defensiveness

works

high beta

lags


22

Phase Two: sector Performance

s&P secTOR PeRfORMaNce fROM BeaR MaRKeT BOTTOM TO RecessiON eND (5 cases siNce 1974)

s&P 500 sectorMean

% GainMean

# of DaysBatting

average %

Consumer Discretionary 39.5 78 100

Information Technology 38.9 78 100

Industrials 31.2 78 100

Materials 29.6 78 80

Consumer Staples 25.8 78 60

Financials 32.2 78 40

Health Care 23.8 78 20

Telecommunication Services 12.3 78 20

Energy 12.4 78 0

Utilities 7.6 78 0

s&P 500 26.1

Bear Market Bottom to Recession End Phase: 12/6/1974 - 3/31/1975, 4/21/1980 - 7/31/1980, 8/12/1982 - 11/30/1982, 10/11/1990 - 3/31/1991, 9/21/2001 - 11/30/2001. Recession only really occurred with the 1974 case.Days = trading days. Batting average = % of cases outperforming the S&P 500 (Cap-Weighted).Sector performance based on S&P/MSCI GICS sectors. NDR estimates prior to 9/11/1989. Price only.


defensives

flip over

high beta

moves up

sort criteria

1.18

5-year beta

0.82


23

Phase Three: sector Performance

s&P secTOR PeRfORMaNce fROM RecessiON eND TO eaRNiNGs GROWTh TROuGh

(5 cases siNce 1974)

s&P 500 sectorMean

% GainMean

# of DaysBatting

average %Consumer Discretionary 7.0 106 80Materials 6.9 106 80Utilities 4.1 106 80Energy 6.4 106 60Financials 2.8 106 60Industrials 6.0 106 40Health Care 5.7 106 40Consumer Staples 3.8 106 20Telecommunication Services 1.0 106 20Information Technology -1.3 106 20s&P 500 5.2Recession End to Earnings Growth Trough Phase: 3/31/1975 - 9/30/1975, 7/31/1980 - 3/31/1981, 11/30/1982 - 12/31/1982, 3/31/1991 - 12/31/1991, 11/30/2001 - 12/31/2001. Days = trading days. Batting average = % of cases outperforming the S&P 500 (Cap-Weighted). Sector performance based on S&P/MSCI GICS sectors. NDR estimates prior to 9/11/1989. Price only.Ned Davis Research, Inc. NDH0808.6

sort

criteria


24

NDR Guess for first half of 2009

1sT half 2009 s&P 500 secTOR OuTlOOK (uPDaTe 2/6/2009)

s&P 500 sectorTotal

Performance score

Financials 30.00

Materials 22.50

Information Technology 22.00

Industrials 21.00

Consumer Discretionary 20.50

Energy 14.50

Telecommunication Services 14.00

Health Care 7.50

Utilities 7.00

Consumer Staples 6.00

High #s = best. Total Performance Score based on 2x ranking of Beta factor, 0.5x ranking of 44-day mean reversion factor,and 0.5x ranking of 1-year mean reversion factor.

Ned Davis Research, Inc. T_TNT0903.1

UPSIDE MEAN REVERSION POTENTIAL (EXPECTED

OUTPERFORMERS)

downSIDE MEAN REVERSION POTENTIAL (EXPECTED

underPERFORMERS)


25

NDR Nine Rules of Research

Don't fight the tape1.

Don't fight the fed2.

Beware of crowds at extremes3.

Rely on objective indicators4.

Disciplined5.

Remain flexible6.

Risk-averse7.

Money management matters8.

Those who do not study history are 9. condemned to repeat mistakes

Robert c. schuster, CFA, CMT, is the Chief Operating Officer. As Chief Operating Officer, Robert manages all operational departments, including the Research departments and Information Technology departments; in doing so Robert is responsible for the implementation of NDR strategy and allocation of resources. Robert is the chair of the Leadership Council, whose primary responsibility is to set the direction for NDR strategy.

Since joining the firm in 1989, Robert has held the positions of Managing Director of Custom Research Services (1995 - 2004), and Analyst for the Bond/Economic and Custom Research Services Departments (1989 -1995).

Robert graduated with honors from the University of Illinois with a Bachelor of Science in Finance. Robert has earned the Chartered Financial Analyst and Chartered Market Technician designations. He is also a member of the CFA Institute, CFA Tampa Bay, and the Market Technicians Association. His paper on “S&P Group Lead Time Analysis” was published in the Market Technicians Association Journal.

Robert c. schuster, cfa, cMTChief Operating Officer

Biographical Sketch

Ned Davis Research Group

Ned Davis Research (NDR) is an independent, institutional research company with global reach. Since 1980, NDR has provided institutional investors with unbiased, "one-stop" investment research. Over the years, NDR’s professional staff has developed a reputation for espousing a disciplined approach to in–depth financial analysis which is supported by the firm’s sophisticated analytic tools, commitment to data integrity, and unsurpassed customer support.

With more than 10 commentary publications, clients receive some of the broadest and most unbiased historical market perspectives on the Street. From asset allocation to sector and group work, individual stocks, economic, or quantitative research projects, NDR offers its clients unparalleled access to over 10,000 charts, reports, models and studies, many of which are illustrated by the firm’s hallmark-rich graphics.

NDR’s underlying database is one of the largest, most consistent and accurate in the industry since the firm dedicates an entire department to scouring and scrubbing data from over 175 different data vendors.

Using services from the Custom Research division, clients are able to work with analysts to design and build proprietary indicators, studies, models, custom screens, analytic testing, or various other sophisticated projects.

With clients in over 30 countries, NDR serves more than 5,000 users worldwide at investment firms, banks, insurance companies, mutual funds, hedge funds, pension and endowment funds, registered investment advisors, equity research departments, and other major financial institutions.

Ned Davis Research Group is comprised of Ned Davis Research, Inc. (NDR) a registered investment advisor located in Venice, Florida, and Davis, Mendel & Regenstein, Inc. (DMR), an NASD institutional brokerage firm, located in Atlanta, Georgia. DMR is the exclusive provider of NDR’s products and services. The two firms presently employ over 80 people ranging from market strategists, economists, quantitative and market analysts, and other market professionals.

NeD DaVis ReseaRch GROuP(800) 241-0621

2100 RiverEdge Parkway, Suite 750Atlanta, GA 30328

(770) 850-3838 Fax (770) 850-3830

[email protected]

The data and analysis contained herein are provided "as is" and without warranty of any kind, either expressed or implied. Ned Davis Research, Inc. (NDR), any NDR affi liates or employees, or any third party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any NDR publication. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before trading. NDR, accounts that NDR or its affi liated companies manage, or their respective shareholders, directors, offi cers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. NDR uses and has historically used various methods to evaluate investments which may, at times, produce contradictory recommendations with respect to the same securities. When evaluating the results of prior NDR recommendations or NDR performance rankings, one should also consider that NDR may modify the methods it uses to evaluate investment opportunities from time to time, that model results do not impute or show the compounded adverse eff ect of transaction costs or management fees or refl ect actual investment results, that other less successful recommendations made by NDR are not included with these model performance reports, that some model results do not refl ect actual historical recommendations, and that investment models are necessarily constructed with the benefi t of hindsight. For this and for many other reasons, the performance of NDR's past recommendations and model results are not a guarantee of future results. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fl uctuate and/or be adversely aff ected by exchange rates, interest rates or other factors. All of the views expressed in NDR research reports accurately refl ect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of any analyst compensation was, is, or will be, directly or indirectly, related to the specifi c recommendations or views expressed in a research report. For data vendor disclaimers refer to www.ndr.com/vendorinfo. Further distribution prohibited without prior permission. Copyright 2009 (c) Ned Davis Research, Inc. All rights reserved.

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9 Rules of Research - NDR