1 JUNE 2015 Edition Restricted & Confidential Copyright 2015 Gordon T. Long All Rights Reserved general@GordonTLong.com

Monthly Market Analytics & Technical Analysis

JUNE 2015 Edition

FULL JUNE REPORT ALL SECTIONS

MATA- JUNE 2015

6/15/2015

2 JUNE 2015 Edition Restricted & Confidential Copyright 2015 Gordon T. Long All Rights Reserved general@GordonTLong.com

Monthly Market Analytics & Technical Analysis JUNE 2015

HIGHLIGHTS - WHAT YOU NEED TO KNOW ................................................................................................................................. 11 SUMMARY ANALYSIS ............................................................................................................................................................................................ 12

Valuation Summary ........................................................................................................................................................................................... 20 Era of Delusional Distortions & the Super Cycle Pivot b .................................................................................................................................... 23

Defining Chart #1 - "Delusional Distortion" Expectations & the Log-Periodic Cycle ......................................................................................... 25 Defining Chart #2 - Finding the Longer Term Super Cycle Pivot b ................................................................................................................ 26 Defining Chart #3 - The Big M and Super Cycle b ....................................................................................................................................... 28 Defining Chart #4 Intermediate Term Topping Process ................................................................................................................................. 29 The Bottom Line................................................................................................................................................................................................. 32

OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 35 JUNE 2015: Global Macro Drivers .......................................................................................................................................................................... 37

NEW-WEALTH .................................................................................................................................................................................................. 40 HARD ASSETS - Gold ................................................................................................................................................................................... 40 HARD ASSETS Silver ................................................................................................................................................................................. 42 HARD ASSETS - Commodities ..................................................................................................................................................................... 43

NEW-EXCHANGE ............................................................................................................................................................................................. 44 CURRENCIES - USD .................................................................................................................................................................................... 44 CURRENCIES - EURO .................................................................................................................................................................................. 45 CURRENCIES - YEN ..................................................................................................................................................................................... 47 CARRY TRADE - The : Cross .................................................................................................................................................................. 49 CARRY TRADE - The $: Cross .................................................................................................................................................................. 52

NEW-YIELD, CREDIT & SPREAD .................................................................................................................................................................... 53 NEW-EQUITIES - Global ................................................................................................................................................................................... 55 CHARTS OF NOTE ........................................................................................................................................................................................... 56

YIELD ............................................................................................................................................................................................................. 56 NEW-YIELD Bond Route Reduced Negative Nominal Eurozone Sovereign Debt by 1T ........................................................................ 56 NEW-YIELD Total Debt Securities Growth ................................................................................................................................................. 57 NEW-YIELD - Bond Market: Sprechen Sie Deutsch? ................................................................................................................................... 57 NEW-YIELD - Are Stocks & Bonds Due For A "Generational" 75% Crash? ................................................................................................ 59 NEW-YIELD - Smart Money Most Committed to Falling Rates Since The Last Peak in Long Bond Yields ................................................ 61

YIELD Violent bond moves signal tectonic shifts in global markets ....................................................................................................... 62 YIELD The great German government bond sell-off mystery ................................................................................................................ 65 YIELD Deja Vu All Over Again for the Long Bond? ................................................................................................................................ 67 YIELD The Smart Money Is Getting Long Treasury Bonds Again ......................................................................................................... 69 YIELD How Much Lower Can The 30-Year Treasury Yield Go? ............................................................................................................ 70 YIELD High Yield Bonds and Equities Still Haven't Converged and Corporate Yields At Historic Lows ............................................... 72 YIELD Fed versus ECB Rate Hike Expectations ..................................................................................................................................... 76 YIELD 10 Year UST versus German Bund Once in a Quarter Century Phenomenom ....................................................................... 77 YIELD First Time Ever, Central Banks Will Monetize More Than 100% Of Global Sovereign Debt ..................................................... 78 YIELD 10 Year Global Sovereign Yield Approaches 1%......................................................................................................................... 79 YIELD Likely Bounce in 10Y UST Yield Near Term ................................................................................................................................ 79 YIELD Take Away the Flows and Bad Things Begin to Happen to Yield ................................................................................................ 80 YIELD Take Away the Flows and Bad Things Begin to Happen to Yield Eurozone 10Y Bond Yields ................................................ 81 YIELD 10Y UST versus 10Y BUND ........................................................................................................................................................ 81 YIELD 1-2% YTD Drop in Global 10Y Bonds ......................................................................................................................................... 82 YIELD US stock market indices have become massively decoupled from the bond markets. .............................................................. 82 YIELD 10Y UST Disconnected from Fed Expectations Deutsche Bank ............................................................................................. 83 YIELD 10Y UST Disconnected from Fed Expectations Deutsche Bank ............................................................................................. 84

CREDIT .......................................................................................................................................................................................................... 85 CREDIT Financial Conditions Tighter Now Than At Any Point Since 2009 According To Chicago Fed ................................................ 85 CREDIT Global EM 5 Yr CDS ................................................................................................................................................................. 87 CREDIT Nothing Left to Buy In EM ......................................................................................................................................................... 89 CREDIT US Equities versus Credit ......................................................................................................................................................... 90 CREDIT Its Only About Flows Liquidity to Credit to Debt .................................................................................................................... 90 CREDIT Credit only becomes Debt through Collateral WHICH IS Created through Government Backing .......................................... 91 CREDIT US stock market indices have become massively decoupled from the Credit markets. ......................................................... 91

CURRENCIES ............................................................................................................................................................................................... 92 NEW-CURRENCIES First Break of Overhead Resistance on USDYEN Monthly in 17 Years ................................................................. 92 NEW-CURRENCIES The Yen Is At The Most Undervalued Level In Nearly 30 Years ............................................................................. 92 NEW-CURRENCIES Long-End Of US Yield Curve Suggests A Stronger Yen ......................................................................................... 94

CURRENCIES The Rate of Change of the US$ is Disruptive ................................................................................................................ 95 CURRENCIES US$ Parabolic Surge the 2

nd Biggest & Fastest Rally Ever - Extreme 11.9 Year High, ............................................. 96

CURRENCIES Inverse Pattern of USDX versus Gold ........................................................................................................................... 96 CURRENCIES Recent (more than 10% QoQ) slide in the euro is a two-standard deviation event ...................................................... 98 CURRENCIES EM Dollar Victims ........................................................................................................................................................... 98 CURRENCIES Dollar Bull May Have A Lot Longer To Run ................................................................................................................... 99

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CURRENCIES EM Currencies Just Fell to 15 Year Low ....................................................................................................................... 99 CURRENCIES Yen Breaks 25 Year Trend Support ............................................................................................................................. 100 CURRENCIES Euro Falls to Lowest Level since August 2012 ............................................................................................................ 100 CURRENCIES A Rout in Emerging Market Currencies Going On with a US Short Dollar Squeeze .................................................. 101 CURRENCIES Traded Weighted Euro versus $%/Euro ...................................................................................................................... 102

COMMODITIES ........................................................................................................................................................................................... 102 NEW-COMMODITIES How Saudi Arabia Sets the Global (Currency) Markets................................................................................... 102 NEW-COMMODITIES Dr. Copper Is Down, Not Out ........................................................................................................................... 105 COMMODITIES Are Commodities And EM Stocks Becoming Less Sensitive To The Dollar? ........................................................... 107 COMMODITIES Don't Waste Your Time On Commodity ETFs ........................................................................................................... 108 COMMODITIES Iron Ore Prices Tell the Real Story of Global Deflation ............................................................................................. 116 COMMODITIES Global Shipping Index has Crashed To Its Lowest Level Ever ................................................................................. 117 COMMODITIES Baltic Dry, WTI Crude and 30Y Treasury All Say the Same Thing S&P Only Disenter? ....................................... 118 COMMODITIES Our Real Dr Taking Hold .......................................................................................................................................... 119 COMMODITIES Commodities in Technical Danger Zone as Global Growth Slows .......................................................................... 121 COMMODITIES Copper at Critical Support Level. ............................................................................................................................... 121

INFLATION .................................................................................................................................................................................................. 123 INFLATION Inflation Expectations & Relative Performance................................................................................................................. 123 INFLATION US CPI 1958 2015 Annual Percentage Change ........................................................................................................ 124 INFLATION The Rise of Deflation ......................................................................................................................................................... 125 INFLATION World Inflation Falls To 59-Month Low ..................................................................................................................... 125

PRECIOUS METALS ................................................................................................................................................................................... 127 NEW-PRECIOUS METALS Gold demand in Asia hit by weak local currencies; Indian prices at discount ......................................... 127 PRECIOUS METALS Gold Tracked US Debt Until Recently Will Likely Re-Establish Long Term Pattern .................................. 128

RESEARCH OF NOTE .................................................................................................................................................................................... 129 NEW-DRIVER$ - Stocks And Bonds Remain At A Historically High Correlation........................................................................................ 129 DRIVER$ - The unseen downside of strength in the dollar - The speed of the move is disruptive ............................................................ 129 DRIVER$ - Trading the Parabolic Dollar ..................................................................................................................................................... 131 DRIVER$ - Charting The Winners And Losers Of The Latest Surge In The USD ...................................................................................... 135

RISK: Risk-On versus Risk-Off .............................................................................................................................................................................. 140 CHARTS OF NOTE ......................................................................................................................................................................................... 141

NEW-RISK The Correction Counter Rising Across Assets Classes ..................................................................................................... 141 NEW-RISK # of days Since a 2% Up or Down Move ............................................................................................................................... 141 NEW-RISK Margin Debt in Perspective ................................................................................................................................................... 142 NEW-RISK PE/VIX Market Emotion Indicator ........................................................................................................................................ 143 NEW-RISK Margin Debt Breaks Out- Hits New Record 50% Higher Than Last Bubble Peak ................................................................ 143 NEW-RISK DOW Industrial v Transports ................................................................................................................................................. 144 NEW-RISK ISE Index and ETF Call/Put Hits a 6 Year High .................................................................................................................... 145 NEW-RISK Value Line Composite Breaks Trend After a 26 Year Top ................................................................................................... 146 NEW-RISK ADX Suggests Big Move (Lower) Coming ............................................................................................................................ 147

RESEARCH OF NOTE .................................................................................................................................................................................... 148 NEW-RISK When Paper Wealth Vanishes ............................................................................................................................................... 148 RISK Countdown to the stock-market Crash of 2016 is ticking louder .................................................................................................... 154 RISK Total Assets At The Fed At Six Month Lows ................................................................................................................................... 157 RISK Economic Releases Are "Missing" In The Two Largest Countries In The World ........................................................................... 160 RISK NYSE Margin Debt Charged To New All-Time Highs In March ...................................................................................................... 165 RISK The Step Down In Long-Term US Growth Rates Breaks Lower .................................................................................................... 167 RISK Are Asset Prices In The Midst Of A Change In Trend Or Simply A Counter-Trend Rally? ............................................................ 170 RISK Equity Performance Trends Have Completely Flip-Flopped In April .............................................................................................. 175 RISK Chinese Companies Keeping the Dream Alive with Leverage and Channel Stuffing .................................................................... 177 RISK Divergent Trends in Market Breadth ............................................................................................................................................... 177 RISK The Plunge in Policy Uncertainty .................................................................................................................................................... 185 RISK Unbelievably, Chinese Companies Massively Increased Leverage Ratios in 2014 to Highest Ever ............................................. 189 NEW-RISK Where Positive Economic Surprises Are (And Aren't) Happening ........................................................................................ 190 RISK Where Positive Economic Surprises Are (And Aren't) Happening ................................................................................................. 194 RISK Surge in European Equity Valuations ............................................................................................................................................. 198 RISK US Bond Update: High Yield Bonds and Equities Still Haven't Converged and Corporate Yields At Historic Lows ..................... 203 RISK Leadership Trends Among Developed World Sectors .................................................................................................................... 206 RISK Is the Fall in the EUR Overdone? ................................................................................................................................................... 209 RISK $20 Billion Jump In Margin Debt In February .................................................................................................................................. 212 RISK 1/4 Of All MSCI World Stocks Are Trading Above 30x PE and 4x BV ........................................................................................... 214 RISK Look to Asia for the Strongest Under the Surface Market Trends .................................................................................................. 215 RISK Country Allocation Matters .............................................................................................................................................................. 220 RISK European QE is a Sideshow, Investors Should Focus on the Real Breakout in Japan ................................................................. 222 RISK The Market Is Pricing In Two Rate Hikes In 2015 (And Four In 2016) ........................................................................................... 225 RISK Q: How Many Stocks Trade for Below Book Value? A: 12% .......................................................................................................... 226 RISK Beware the Ides of March? ............................................................................................................................................................. 227 RISK No Matter How You Slice It, Stocks Everywhere Are Just Downright Expensive, Especially in DM ............................................. 229 RISK The Strong USD Is Negatively Impacting US Trade ....................................................................................................................... 238 RISK The Dollar Is Breaking Out Again And What That Means For Stocks ............................................................................................ 241 RISK Where in the World is the Growth? EM Asia, and That's It! ............................................................................................................ 246 RISK Changes in EPS Estimates Have Been the Driver of Stock Prices Recently ................................................................................. 248 RISK Import And Export Prices Are Tumbling Downward Worldwide ..................................................................................................... 250 RISK Market Breadth Finally Confirms a New High in World Stocks ....................................................................................................... 256 RISK Most Companies In Most Countries Are Underperforming ............................................................................................................. 258 RISK CAPE Suggests Stocks Are Potentially Poised to Lose 50%-90% in the Next Two Years............................................................ 259

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RISK Just One Chart ................................................................................................................................................................................ 261 RISK Stockman: "The Bottom's Not In", Why This Market Is Dumber Than A Mule ............................................................................... 262 RISK China's Stock Bubble Leaves BNP Speechless: "What Happens Next Is An Unknown-Unknown" .............................................. 266 RISK Are We in A Biotech Bubble? You Decide ...................................................................................................................................... 269 RISK Margin and Record Stock Highs...................................................................................................................................................... 274 RISK 7 Signs That A Stock Market Peak Is Happening Right Now ......................................................................................................... 277 RISK Global Economies are headed for Recession ................................................................................................................................. 281 RISK The Last 3 Times This Happened, Stocks Rolled Over .................................................................................................................. 283 RISK The Biggest Risks To Stocks In 2015: A 10-Point Analysis............................................................................................................ 285 RISK 2015 Roadmap to Crisis .................................................................................................................................................................. 288

TECHNO-FUNDAMENTALS ................................................................................................................................................................................. 292 CHARTS OF NOTE ......................................................................................................................................................................................... 292

NEW-CHARTS 12 Mo MACD Sends Longer Term Signal....................................................................................................................... 292 NEW-CHARTS DOW Transports Diverge Significantly A DOW Theory Trigger Signal ....................................................................... 292 NEW-CHARTS NYSE AD Line Breaks at Previous Cyclical Stock Market Peaks .................................................................................. 293 NEW-CHARTS Equal-Weight S&P 500 Losing Relative Strength v Weighted Index .............................................................................. 294 NEW-CHARTS % of Unprofitable IPOs Surpass 2000 Dotcom Bubble .................................................................................................. 295 NEW-CHARTS Declining Corporate Profits v The Stock Market at its Highs .......................................................................................... 295 NEW-CHARTS US Macro-v-SPX Divergence.......................................................................................................................................... 296 NEW-CHARTS The Short Squeeze Game .............................................................................................................................................. 296 NEW-CHARTS The Short Squeeze Game-On No Volumes ................................................................................................................... 297 CHARTS US Macro Surprise Index Falls at Fastest Rate Ever! ........................................................................................................... 299 CHARTS US Macro Surprise Index Drop Since Bullards Fall 2014 QE4 Quote .................................................................................. 299 CHARTS Longer Term View of US Macro Surprise Index ....................................................................................................................... 300 CHARTS Classic Ending Diagonal ........................................................................................................................................................... 300 CHARTS Technical Pattern in Sentiment Suggests Trend Turn Approaching ........................................................................................ 301 CHARTS Margin Debt & Credit Balances ................................................................................................................................................ 301 CHARTS Wedges And Triangles: Big Move Ahead? 1-SPX ................................................................................................................ 302 CHARTS Wedges And Triangles: Big Move Ahead? 2- VIX ................................................................................................................. 302 CHARTS Wedges And Triangles: Big Move Ahead? 3- GOLD ............................................................................................................ 303 CHARTS Wedges And Triangles: Big Move Ahead? 4- US$ ............................................................................................................... 303 CHARTS DOW Transports versus WTI Crude ......................................................................................................................................... 304 CHARTS CAPE is at its 3rd highest reading going back to 1890. ........................................................................................................... 304 CHARTS Investors Intelligence Bearish Percent ..................................................................................................................................... 304 CHARTS Biotech versus S&P 500 Performance Since 1999 .................................................................................................................. 305 CHARTS US Macro Data versus Q1 15 GDP Expectations versus S&P 500 ........................................................................................ 305 CHARTS Shanghai Composite At Record Highs as Chinas Slowdown Accelerates ............................................................................. 307 CHARTS Margin Debt At Historical Levels but Showing Signs of Weakening ........................................................................................ 307 CHARTS Net Worth / GDP May Be Signaling Asset Bubble ................................................................................................................... 308 CHARTS Monthly Retail Sales v S&P 500 ............................................................................................................................................... 308 CHARTS Extreme divergence between retail-related stocks and what is actually happening at the retail sales level ........................... 309 CHARTS Momentum versus the S&P 500 index through the end of February ....................................................................................... 310 CHARTS Have the Central Bankers Lost Control? Japan & Swiss Actions Say, Yes! ............................................................................ 310 CHARTS US Dollar as compared to the annual percentage change in exports on a quarterly basis ..................................................... 311 CHARTS Bull Market In Stock Buybacks ................................................................................................................................................. 312 CHARTS "New" highs look much like the Old highs ................................................................................................................................ 312 CHARTS Only for the 4th time since 1995 have margin debt levels fallen below their 12-month moving average ................................ 313 CHARTS Only for the 4th time since 1995 have margin debt levels fallen below their 12-month moving average ................................ 314 CHARTS Have the Central Bankers Lost Control? Japan & Swiss Actions Say, Yes! ............................................................................ 316 CHARTS A Global Deflationary Shock Which May Be De-Stabilizing ..................................................................................................... 317 CHARTS Even the Bogus CPI is Falling No Pricing Power! ................................................................................................................. 318 CHARTS UST 10Y, World Exports & Copper all Suggest Mounting Global Deflationary Pressures ...................................................... 319 CHARTS Rising US Trade Deficit Says US Exporters Are Feeling Pinch ............................................................................................... 320 CHARTS Global Slowing is Real .............................................................................................................................................................. 321 CHARTS European Markets Are More Dependent on Fed B/S than ECBs B/S .................................................................................... 322 CHARTS Net New US Firms Plummets How do Markets Continue to Advance Against this? ............................................................ 323 CHARTS China Suggests Economic Growth is Steadily Slowing............................................................................................................ 324 CHARTS The Fed is Allowing the Monetary Base To Fall ....................................................................................................................... 325 CHARTS Has Everyone Been Chasing Yield in the Equity Markets? ..................................................................................................... 325 CHARTS German CPI Sending an Unmistakable Signal ........................................................................................................................ 326 CHARTS Record Profits Yet Historically Low Capital Asset Growth? ..................................................................................................... 327 CHARTS Cascading Global Deflation Signals ......................................................................................................................................... 328 CHARTS World GDP Growth Does Not Support Stock Expectations ..................................................................................................... 329 CHARTS S&P 500 versus Q4 US GDP Expectations .............................................................................................................................. 329 CHARTS WTI at 2009 Levels and Marginally Above 2008 Crisis Levels ................................................................................................ 329 CHARTS Credit Has Been Signaling a Clear Problem Ahead Since Early 2013 .................................................................................... 330 CHARTS Current Economic Cycle is Getting Old in the Tooth ............................................................................................................. 331 CHARTS Signs That Something Is Broken Somewhere Bonds, Oil versus Stocks ............................................................................. 331 CHARTS Economic Activity and CRB YoY Rapidly Diverging ................................................................................................................. 332 CHARTS Federal Reserve Assets versus Stock Prices........................................................................................................................... 332 CHARTS 8

th Hindenburg Omen Within 9 Days First Occurrence in 25 Years ...................................................................................... 333

OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 334 NEW-STUDY: CENTRAL BANK RISK .................................................................................................................................................................. 334

CHARTS OF NOTE ......................................................................................................................................................................................... 334 NEW- CB RISK 10Y Note Repo Rate is Negative! .................................................................................................................................. 334

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NEW- CB RISK The New Sub-Prime Game Business Development Companies ................................................................................ 335 NEW- CB RISK Shadow Banks Dominate Illiquid Govt Backed Mortgage Market ................................................................................. 335 NEW- CB RISK Drop in US Treasury Activity .......................................................................................................................................... 336 NEW- CB RISK Drop in HY & IG Trading Volumes ................................................................................................................................. 337 NEW- CB RISK Corporate Bond Concentration ....................................................................................................................................... 338 NEW- CB RISK Drop in Daily Treasury Volumes ..................................................................................................................................... 338

RESEARCH OF NOTE .................................................................................................................................................................................... 339 NEW- CB RISK Treasury volumes raise liquidity concerns ..................................................................................................................... 339 NEW- CB RISK Massive Shortage Of US Treasury Paper As 10 Year Plunges To -2.20% In Repo ..................................................... 342 NEW- CB RISK The $3 Trillion Traffic Jam .............................................................................................................................................. 343 NEW- CB RISK 400 Billion Reasons Why Ebbing Currency Reserves Threaten Bonds ........................................................................ 344 NEW- CB RISK The Central Banks Are Losing Control Of The Financial Markets ................................................................................. 346 NEW- CB RISK 400 Billion Reasons Why Ebbing Currency Reserves Threaten Bonds ........................................................................ 349 NEW- CB RISK Shadow Banks Grab Record US Loan Share ................................................................................................................ 354 NEW- CB RISK Shadow banks push for easing of loan caps .................................................................................................................. 357 NEW- CB RISK The more liquidity central banks add, the less there is in markets ................................................................................ 358

STUDY: LOOMING US MARKET LIQUIDITY PROBLEM .................................................................................................................................... 371 CHARTS OF NOTE ......................................................................................................................................................................................... 371

LIQUIDITY Q2 Net Government Borrowing Temporarily Keeping Liquidity Flowing ............................................................................... 371 LIQUIDITY Quarterly Distortions? ............................................................................................................................................................ 372 LIQUIDITY Quantitative Easing By Quarter ............................................................................................................................................. 372 LIQUIDITY Liquidity Determines The Direction of Asset Prices ............................................................................................................... 373 LIQUIDITY Richard Duncans Liquidity Gauge Projections Through 2020 ........................................................................................... 374

STUDY: INCREASING VOLATILITY IN THE BOND BUBBLE........................................................................................................................... 375 CHARTS OF NOTE ......................................................................................................................................................................................... 376

BOND BUBBLE Bund Rout-1 ................................................................................................................................................................... 376 BOND BUBBLE Bund Rout-2 ................................................................................................................................................................... 376 BOND BUBBLE US versus German 10 Year Government Yields ........................................................................................................... 377 BOND BUBBLE Price Decline in 30 Year Bunds in the Last Two Weeks ............................................................................................... 378 BOND BUBBLE US 10 Year Yield ............................................................................................................................................................ 378 BOND BUBBLE Euro 10 Year Yield ......................................................................................................................................................... 379 BOND BUBBLE Canada 10 Year Yield .................................................................................................................................................... 379 BOND BUBBLE UK 10 Year Yield ............................................................................................................................................................ 380 BOND BUBBLE Australian 10 Year Yield ................................................................................................................................................ 380 BOND BUBBLE Japanese 10 Year Yield ................................................................................................................................................. 381

RESEARCH OF NOTE .................................................................................................................................................................................... 382 BOND BUBBLE Violent bond moves signal tectonic shifts in global markets ......................................................................................... 382 BOND BUBBLE The great German government bond sell-off mystery ................................................................................................... 385 BOND BUBBLE Explaining German bond yields ..................................................................................................................................... 387 BOND BUBBLE Bund investors lose 25 years worth of yield in two weeks! ........................................................................................... 388 BOND BUBBLE Global Bond Rout - Bund Has Sharpest Weekly Selloff In History ............................................................................... 390 BOND BUBBLE Mohamed El-Erian warns of trouble as bond liquidity dries up ..................................................................................... 393 BOND BUBBLE Global Bond Rout Spreads to Japan as Three-Day Break Ends .................................................................................. 394 BOND BUBBLE European 10-Year Bond Yields Spike Higher; Contagion Already? Something Worse? ............................................. 395

STUDY: THE NEW RISK FREE PARANORMAL = LESS RISK! ..................................................................................................................... 399 CHARTS OF NOTE ......................................................................................................................................................................................... 399

PARANORMAL HY (Junk) Issuances Q2 and Q3 2014 ........................................................................................................................ 399 PARANORMAL Disconnect Between Flows and Price ............................................................................................................................ 399 PARANORMAL Flows from Equities to Bonds (But Which Bonds?) ....................................................................................................... 400

RESEARCH OF NOTE .................................................................................................................................................................................... 401 PARANORMAL In The New Paranormal, Junk Bonds Are A "Haven Asset" .......................................................................................... 401 SUPERCYCLE No Really, Who Is Buying? .............................................................................................................................................. 403

STUDY: BUYBACKS ............................................................................................................................................................................................. 405 CHARTS OF NOTE ......................................................................................................................................................................................... 405

NEW-BUYBACKS Buybacks Account for Substantial Share of Corporate Profits .................................................................................. 405 NEW-BUYBACKS Quarterly History of Buyback Announcments ............................................................................................................ 405 NEW-BUYBACKS Buybacks as a Percentage of Total Cash Use at the Highest Level Since 2007 ...................................................... 406 NEW-BUYBACKS Weekly Buybacks and Rolling 3 Month Sum ............................................................................................................. 406 NEW-BUYBACKS What Sustained Buybacks Look Like To Rating Agencies IBM Example .............................................................. 407 NEW-BUYBACKS Dollar Volume of Share Buybacks and Dividends at Record Levels ......................................................................... 407 NEW-BUYBACKS Buybacks & Dividends Hurdle $900B in 2014 ........................................................................................................... 407 NEW-BUYBACKS The Growth of Stock Buybacks .................................................................................................................................. 408 NEW-BUYBACKS Buybacks & Dividends as a Percentage of Operating Earnings ................................................................................ 408 NEW-BUYBACKS Executive Compensation Structure ............................................................................................................................ 409 BUYBACKS During 2014 virtually 100% of S&P 500s reported profits of $1T were disgorged as shareholder distributions ................ 410 BUYBACKS 2015 US Equity Flows Forecast ........................................................................................................................................... 410 BUYBACKS Announced Gross Share Buybacks ..................................................................................................................................... 411 BUYBACKS Global IPO /Secondary Offerings versus Announced Gross Share Buybacks ................................................................... 411 BUYBACKS Actual Net Share Buybacks ................................................................................................................................................. 412 BUYBACKS US IPOs-Actual Buybacks and LBO .................................................................................................................................... 412

RESEARCH OF NOTE .................................................................................................................................................................................... 413 NEW-BUYBACKSThe End of Buybacks? Goldman Warns Political Pressure On Share Repurchases Is Rising................................... 413 NEW-BUYBACKSCorporate Buybacks: Connecting the Dots to the F-Word........................................................................................... 415 NEW-BUYBACKS Capex Recovery Is Worst In History, BoAML Says .................................................................................................... 420 NEW-BUYBACKS Stock Buybacks Move to the "Terminal" Next Stage .................................................................................................. 423

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BUYBACKSOne Heckuva Bull Market ...................................................................................................................................................... 425 BUYBACKS - The US Equity Bubble Depends On Corporate Buybacks; Here's The Proof...................................................................... 426 BUYBACKS - Why Markets Are Manic - The Fed Is Addicted To the "Easy Button" ................................................................................. 431 BUYBACKS - When $140 Billion In Buybacks Isn't Enough... .................................................................................................................... 433 BUYBACKS - "Obsessive" Buybacks Could Be Big Mistake, "Serious" People Tell Unserious People .................................................... 433

SHORT TERM TECHNICAL ANALYSIS ......................................................................................... ERROR! BOOKMARK NOT DEFINED. SUPPORT & RESISTANCE ...................................................................................................................................... Error! Bookmark not defined.

Gann Analysis ...................................................................................................................................................... Error! Bookmark not defined. Boundary Conditions ........................................................................................................................................... Error! Bookmark not defined. Channels & Regressions ..................................................................................................................................... Error! Bookmark not defined. Fibonacci - Controlling Time Extensions ............................................................................................................. Error! Bookmark not defined. Fibonacci - Controlling Price Extensions ............................................................................................................. Error! Bookmark not defined. Elliott Wave .......................................................................................................................................................... Error! Bookmark not defined. The Bottom Line................................................................................................................................................... Error! Bookmark not defined.

BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ........................................................................................................................... 452 A GRAPHIC HIGHLIGHT ................................................................................................................................................................................ 452

NEW-SENTIMENT - Consumer, Investor & Trader ............................................................................................................................................... 454 NEW-Consumer Confidence - Conference Board .......................................................................................................................................... 454 NEW-Consumer Sentiment - Michigan ........................................................................................................................................................... 460 NEW-Consumer Comfort - Bloomberg ............................................................................................................................................................ 461 NEW-American Association of Independent Investors ................................................................................................................................... 462 NEW-Investors Intelligence ............................................................................................................................................................................. 462 NEW-National Association of Active Investment Managers (NAAIM) ............................................................................................................ 463 NEW-Small Business Optimism ...................................................................................................................................................................... 464 NEW-Percentage Stocks above 50 & 200 DMA ............................................................................................................................................. 466 NEW-Margin Levels ......................................................................................................................................................................................... 467 Real Margin Debt as % of GDP ....................................................................................................................................................................... 473 Margin Debt versus S&P 500 .......................................................................................................................................................................... 473 Mutual Fund Cash Levels v S&P 500 .............................................................................................................................................................. 474

NEW-OSCILLATORS & BREADTH: Indicators of Importance ............................................................................................................................ 476 NEW-NYSE Overbought / Oversold ................................................................................................................................................................ 476 NEW-OEX Open Interest (Puts/Calls) ............................................................................................................................................................. 477 NEW-TRIN ....................................................................................................................................................................................................... 478 NEW-McClellan Oscillator ............................................................................................................................................................................... 479

CHARTS OF NOTE ............................................................................................................................................................................................... 480 NEW-CHARTS Investors Intelligence Bulls & Bears ................................................................................................................................... 480 NEW-CHARTS A/D Line Diverging from Price, Suggesting Weakening Momentum .................................................................................. 480 NEW-CHARTS Smart Money OEX Open Interest Put/Call Ratio Now Off the Charts! ........................................................................... 481 NEW-CHARTS XXXXX ................................................................................................................................................................................ 481 CHARTS UMich Consumer Sentiment Tumbles Most In 16 Months ........................................................................................................... 481 CHARTS Consumer Comfort Plunges Most In 10 Months .......................................................................................................................... 482 CHARTS Only 16% Think Future Employment Opportunities Will Be Better .............................................................................................. 484 CHARTS Inequality Eventually Leads to Economic Adjustments Often Precipitously ............................................................................. 484 CHARTS - NFIB Small Business Sentiment ................................................................................................................................................... 485 CHARTS - Orange Book .................................................................................................................................................................................. 485 CHARTS Asset Allocation Global Equities ................................................................................................................................................ 486 CHARTS Asset Allocation Global Bonds .................................................................................................................................................. 486 CHARTS Active versus Passive Funds Allocation ....................................................................................................................................... 487 CHARTS Investors Intelligence Survey of % Bears ..................................................................................................................................... 487 CHARTS Sentiment at Post 2008 Crisis Highs ............................................................................................................................................ 488 CHARTS CNBC Viewership Steadily Falling ............................................................................................................................................... 489 CHARTS Investor Allocation Trends for Stocks, Bonds and Cash .............................................................................................................. 490 CHARTS Uptick in Feds Financial Stress Index Composite ....................................................................................................................... 491 CHARTS Fear Barometer Diverges with VIX, CDS IG Index ...................................................................................................................... 492 CHARTS Extreme Complacency Seen Near End of Cycles ........................................................................................................................ 492 CHARTS Complacency Seen In PE/VIX ....................................................................................................................................................... 493 CHARTS Post Crisis Sentiment Profile Shows a Clear Ending Pattern ...................................................................................................... 493 CHARTS Smart Money Flows ...................................................................................................................................................................... 494 CHARTS Fed Assets versus Bullish Sentiment ........................................................................................................................................... 494 CHARTS Macro Support Has Technically Broken Down ............................................................................................................................. 495 CHARTS US Surprise Index Setting Up for Downturn ................................................................................................................................. 495 CHARTS The Public No Longer Trusts the Market Feel it is Manipulated and Ineffectively Regulated ............................................... 496

RESEARCH OF NOTE .......................................................................................................................................................................................... 497 NEW-SENTIMENT: The "Smart Money" Has Never Been More Bearish ...................................................................................................... 497 NEW-SENTIMENT: US Economic Confidence Crashes Most Since July to Lowest Since December ......................................................... 499 NEW-SENTIMENT: We Are All Bulls Now ...................................................................................................................................................... 502 NEW-SENTIMENT: No More Greater Fools: Retail Traders Are "Pretty Fully Invested" In Stocks, TD CEO Says ...................................... 503 NEW-SENTIMENT: One Heckuva Bull Market but Momentum Weakening!.................................................................................................. 504 NEW-SENTIMENT: XXXX ............................................................................................................................................................................... 506 SENTIMENT: Small Business Confidence is a Major Problem in America .................................................................................................... 506 SENTIMENT: Americas Crisis of Trust ........................................................................................................................................................... 508 SENTIMENT: "Everything Is Awesome" American Consumers Are The Happiest In 11 Years ............................................................ 509 SENTIMENT: For CNBC, 2014 Was The Worst Year. Ever. ....................................................................................................................... 510 SENTIMENT: An Astounding Number Of Americans Aren't Investing A Cent ....................................................................................... 512

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SENTIMENT: US Households to Withdraw $430 Billion From Stocks In 2014 ........................................................................................ 517 SENTIMENT: Elliott Wave's View from the Top .......................................................................................................................................... 520

SITUATIONAL SUMMARY & ANALYSIS .................................................................................................................................................... 524

INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 528 UPDATED-AGGREGATED GLOBAL FINANCIAL RISK INDEX .......................................................................................................................... 528

NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 529 NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 529 NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 530 NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 530 NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 530 NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 531 NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 532 NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 532 MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 533 NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 533

AGGREGATED RISK LEVEL ................................................................................................................................................................................ 534 CHARTS OF NOTE ............................................................................................................................................................................................... 536

NEW-RISK: When these Two Charts Appear Simultaneously, Bad Things Normally Follow! ....................................................................... 536 NEW-RISK: Well That's Never Happened Before - Exhibit 1 US Macro versus S&P 500 .......................................................................... 536 NEW-RISK: Well That's Never Happened Before - Exhibit 2 Long- and Short-end of the Treasury yield curve so anti-correlated. .......... 537 NEW-RISK: Well That's Never Happened Before - Exhibit 3 Fed-Fueled, Mal-Investment Boom ............................................................. 538 NEW-RISK: Well That's Never Happened Before - Exhibit 4 Market breadth diverge from performance for such an extended period .... 539 NEW-RISK: Well That's Never Happened Before - Exhibit 5 More trades per second in stocks ................................................................ 541 NEW-RISK: Well That's Never Happened Before - Exhibit 6 The "Smart Money" Has Never Been More Bearish .................................... 542 NEW-RISK: Well That's Never Happened Before - Exhibit 7 Big decoupling in recent weeks between US equity flows and prices ......... 542 NEW-RISK: Well That's Never Happened Before - Exhibit 8 Cumulative 3 Mo net flows out of equities, is now the largest on record ..... 543 RISK: World Stocks versus World 2015 GDP Estimate.................................................................................................................................. 545 RISK: World Stocks versus World 2014 & 2015 GDP Estimates ................................................................................................................... 545 RISK: World Stocks versus 10Y UST Yield, WTI Crude 2015 GDP Estimates .............................................................................................. 546 RISK: Fat Tails Have Disproportionately Large Impact on Returns................................................................................................................ 547 RISK: Statistically We Are Due for a Drawdown ............................................................................................................................................. 548 RISK: The Buffett Indicator .............................................................................................................................................................................. 549 RISK: Speculation Has Taken Control of the Markets .................................................................................................................................... 550 RISK: MSCI versus World GDP Divergence - Unsustainable ........................................................................................................................ 550 RISK: High Yield Credit Risk At Elevated Levels ............................................................................................................................................ 550 RISK: Active Hindenburg Omen ...................................................................................................................................................................... 551 RISK: An Over-Levered Hedge Fund Index Ending ABC Consolidation Pattern ........................................................................................... 551

RESEARCH OF NOTE .......................................................................................................................................................................................... 553 NEW-RISK: Two Point Three Sigmas Above the Norm.................................................................................................................................. 553 NEW-RISK: No Really, Who is Buying? .......................................................................................................................................................... 560 NEW-RISK: Curious Sightings ........................................................................................................................................................................ 561 RISK: Even the BIS Is Shocked At How Broken Markets Have Become ....................................................................................................... 568 RISK: The Line between Rational Speculation and Market Collapse ............................................................................................................. 572 RISK: Global Economy Will Shrink By $2.3 Trillion In 2015 ........................................................................................................................... 577 RISK: Market Action Suggests Abrupt Slowing in Global Economic Activity.................................................................................................. 577 RISK: Warnings Signs Are Everywhere .......................................................................................................................................................... 581 RISK: Hindenburg Signals a Warning ............................................................................................................................................................. 582 RISK: Americans say they're too broke to invest ............................................................................................................................................ 584 RISK: The Biology of Risk ............................................................................................................................................................................... 588 RISK: More Signs Of Bullish Excess ............................................................................................................................................................... 592 RISK: Markets Have Left the "Complacency" Phase, Have Entered Full Blown "Mania" .............................................................................. 594 RISK: VIX Sends Message of Complacency ................................................................................................................................................... 595 RISK: CS Warns Volume & DeMark Raise "Topping Threat" In Stocks ......................................................................................................... 596 RISK: No One Will Ring the Bell at the Top .................................................................................................................................................... 600

Cassandra's - New Additions to the List ................................................................................................................................................................ 607 NEW-CASSANDRA: "Another Crisis Is Coming": Jamie Dimon Warns Of the Next Market Crash ............................................................... 608 NEW-CASSANDRA: Steen Jakobsen: Get Ready For The Biggest Margin Call In History .......................................................................... 609 NEW-CASSANDRA: Wynn Calls "Big" Recovery "Complete Dream" As Gaming Revenues Collapse ........................................................ 611 NEW-CASSANDRA: Stan Druckenmiller's "Horrific Sense" Of Deja Vu: "This Will End Very Badly" ............................................................ 613 NEW-CASSANDRA: Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble"... 618 NEW-CASSANDRA: Kyle Bass Warns "The Fed Is Backed Into A Corner... Equities Are My Biggest Liquidity Worry" .............................. 619 NEW-CASSANDRA: Paul Tudor Jones Warns "Disastrous Market Mania" Will End In "Revolution, Taxes, or War" ................................... 620 NEW-CASSANDRA: John Hussman - A Who's Who Of Awful Times To Invest ............................................................................................ 622 CASSANDRA: Carl Icahn - One Day You'll See A Break Like A Few Weeks Ago But The Market Won't Come Back ................................ 625 CASSANDRA: Sam Zell Warns Of Stock Market Correction On CNBC ........................................................................................................ 626 CASSANDRA: Billionaire Carl Icahn warns on US stock prices ..................................................................................................................... 626 CASSANDRA: Soros Bets $2 Billion on Stock Market Collapse .................................................................................................................... 627 CASSANDRA: Dont Ignore Janet Yellens Stock Market Warnings 07-21-14 Fiscal Times ......................................................................... 628 CASSANDRA: Doug Kass: We're Heading for a Bear Market So Plan Accordingly ...................................................................................... 631 CASSANDRA: Comstock Funds Weighs In .................................................................................................................................................... 633 CASSANDRA: Michael Lombardi Weighs In ................................................................................................................................................... 635 CASSANDRA: Ron Paul Portfolio, 'Craziest' we've ever seen? ..................................................................................................................... 637 CASSANDRA: John Mauldin Goes Negative .................................................................................................................................................. 638 CASSANDRA: Hayman Capital Dramatically Reduces Risk .......................................................................................................................... 646

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CASSANDRA: Byron Wien Warns "Oblivious Markets" Of 20% Correction ................................................................................................... 647 CASSANDRA: Harry Dent Warns Stocks to Sink More than 60% by End of 2014 ........................................................................................ 647 CASSANDRA: Stanley Druckenmiller: "When You Get This Kind Of Rigging, It Will End Badly".................................................................. 648 CASSANDRA: Mohamed El-Erian: "Prices Are Artificially High - Its Time to Take Profits" .......................................................................... 649 CASSANDRA: Felix Zulauf: World Headed Toward 1987 Style Market Collapse .......................................................................................... 650 CASSANDRA: Doug Kass: 'I'm Getting The Summer Of 1987 Feeling' In The Market Right Now ............................................................... 650

CORRELATION & COMPLACENCY A PROBLEM .............................................................................................................................................. 652 EVENT RISK A PROBLEM .................................................................................................................................................................................... 655

Q2 EARNINGS & THE R WORD .............................................................................................................................................................. 655 POLITICAL-ECONOMIC TENSIONS .......................................................................................................................................................... 655 CENTRAL BANK POLICY MISCUES.......................................................................................................................................................... 655 ASIAN ECONOMIC SLOWDOWN SPILLAGE ............................................................................................................................................ 655 PETRO$ CRISIS BREWING IN BRIICS...................................................................................................................................................... 655

LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 656 HIGHLIGHTS ......................................................................................................................................................................................................... 656

ASSET & LIABILITY OWNERSHIP ................................................................................................................................................................. 656 PANIC TOTAL RETURN DISTRIBUTION SINCE 1974 ................................................................................................................................. 656 PANIC CHASE FOR YIELD ............................................................................................................................................................................ 657 REAL S&P MARKET CAP / REAL GDP ......................................................................................................................................................... 657 UNSUSTAINABLE GAP BETWEEN PROFITS AND INCOME ...................................................................................................................... 658 ADJUSTED CORPORATE PROFITS FROM DOMESTIC OPERATIONS .................................................................................................... 658 TRAILING 10Y 12 MONTH NET MARGINS ................................................................................................................................................... 659 INVESTMENT CLASS PERFORMANCE ....................................................................................................................................................... 660 NEW-VALUATION SUMMARY ....................................................................................................................................................................... 661

VALUATION: Alternative Methodologies ............................................................................................................................................................... 666 NEW-FOUR SET CONSOLIDATED MARKET VALUATION INDICATORS .................................................................................................. 666 NEW-Crestmont from the Arithmetic ............................................................................................................................................................... 671 NEW-Cyclical PE 10 Ratio............................................................................................................................................................................... 673 NEW-Q Ratio ................................................................................................................................................................................................... 679 NEW-S&P Composite Regression-to-the-Trend ............................................................................................................................................. 684 NEW-Reference Methodologies Analysis ....................................................................................................................................................... 686 CHARTS OF NOTE ......................................................................................................................................................................................... 691

NEW-VALUATIONS Forward 12-Month P/E Ratio 10 Years ................................................................................................................ 691 NEW-VALUATIONS Forward 12-Month EPS versus Change in Price 10 Years ................................................................................. 691 NEW-VALUATIONS Net Margin Growth .................................................................................................................................................. 692 NEW-VALUATIONS 10 Year Trailing 12 Mo Net Margin Growth Historically High .............................................................................. 692 NEW-VALUATIONS XXXX ....................................................................................................................................................................... 693 VALUATIONS Record Profits Yet Historically Low Capital Asset Growth ............................................................................................... 694 VALUATIONS Historical Ranking of PE Values ....................................................................................................................................... 695 VALUATIONS Median Price/Cash Flow Multiple for US Stocks .............................................................................................................. 696 VALUATIONS Median Price/Earnings Multiple for US Stocks ................................................................................................................. 697 VALUATIONS Median Price to Book Multiple for US Stocks ................................................................................................................... 698 VALUATIONS Price/Book; Price/Cash flow; Price/Sales ......................................................................................................................... 699 VALUATIONS Global Equities Reported PE, PE before XO & Fwd PE ............................................................................................... 700

STUDY: EARNINGS 2015 Forecasts ................................................................................................................................................................. 701 CHARTS OF NOTE ......................................................................................................................................................................................... 701

NEW-2015 EARNINGS Consumer Staples and Discretionary are sending a Pretty Clear Message ..................................................... 701 2015 EARNINGS Consensus Long-Term Growth versus Forward PE ................................................................................................... 702 2015 EARNINGS Consensus Analysts Estimates 1979-1995 ............................................................................................................. 703 2015 EARNINGS Consensus Analysts Estimates 1995-2014 ............................................................................................................. 703 2015 EARNINGS CY 2015 Earnings Growth ........................................................................................................................................... 704 2015 EARNINGS CY 2015 Revenue Growth ........................................................................................................................................... 705 2015 EARNINGS Q1 Forward 12 Mo EPS versus Change in Price ..................................................................................................... 706 2015