Finlight Research - Market perspectives - Oct 2015

Market Perspectives

October 2015

Oct. 9th, 2015

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The dark side of the business cycle…

“The rule is, jam to-morrow and jam yesterday –

but never jam to-day.” When Alice objects, “It

must come sometimes to ‘jam to-day,’” the

Queen retorts, “No, it can’t. It’s jam every other

day: to-day isn’t any other day, you know.”

- Lewis Carroll's sequel to Alice in

Wonderland in Through the Looking Glass

*The Queen could be J. Yellen with her rate policy “jam”…

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Executive Summary: Global Asset Allocation

� Macro risks are rising… Deflation forces are gathering… But stock market celebration of weaker than expected economic data continues.

� We were proved dead wrong about Fed’s September rate hike. Seven years after the financial crisis, the absence of any Fed rate hike seems surreal.

� In September, global equities, commodities and high yield credit posted steep losses, while volatility jumped up

� The market has become aware of the slowdown in China, troubles in EMs, low commodity prices, sluggish economic data in DMs and high-yield debt issues. A slowdown in global economic growth seems underway,

inducing more dovish shift among G4 central banks

� DMs are clearly not insolated from EM turbulence. Channels of contagion from China and other EMs to DMs are numerous, but underestimated.

� At this stage, credit markets and small caps are raising yellow flags on the sustainability of the bullish trend in equities.

� We maintain our view that commodities will underperform, US$ will continueits rise, and volatility will remain high. Old-school as we are, we expect all thisCentral Banks money printing to ultimately end in tears

� We reiterate our view: A perfect storm is building… It combines historicallyovervalued stocks with stretched government bonds and corporate credits.Unlike previous storms (2000, 2008), investors would be left with almost

no place to hide

� We summarize our views as follows �


MACRO VIEW

� The Good

� US Initial jobless claims declined again(263K) with the 4-week average hitting a new low� Although a bit lower than expectations, the ISM services Index (at 56.9) remained in

expansionary territory

� The Bad

� September Employment report was fundamentally disappointing. Prior 2 months were also revised lower, and the labor participation rate was weaker.

� Chinese industrial profits declined by 8.8%, the lowest level on record. China’s flash manufacturing PMI remains in contractionary territory

� The Atlanta Fed shows 0.9% GDP growth in Q3� EPS cuts continue on earnings for 2015 and 2016� US manufacturing remained weak. At 50.2, the ISM survey reached its lowest level since May

2013.

� The Ugly

� Main systemic risk resides in China: The Chinese debt burden is extremely high and the credit cycle is probably starting to turn. We are probably in the early stages of a bursting credit bubble.

� The fixed-income / credit edifice is highly vulnerable to China’s need to liquidate Treasury reserves in order to maintain its currency peg, as capital outflows increase and market widely expects further devaluation in the USD-CNY



The Big Four Economic Indicators

� The current picture is characterized by relatively strong Employment and Income, a weak Industrial

Production and uncertain to weak Real Sales.

� The average of these indicators suggests that the economy is still trending sideways. But setting a new high still seems possible over the short term.


GS – Global Leading Indicator (GLI)

� The Sep. Final GLI came in at1.3%yoy. Its MoM momentum wasdown to 0.05%

� According to last estimates, GLIhas been in Slowdown phase sinceJune

� Only three of the ten underlyingcomponents of the GLI improved inSeptember. Most manufacturingsubcomponents, including theglobal PMI declined over themonth.

� We continue to think that the

acceleration we’ve been

witnessing since Jan. ‘15 is quite

modest for a typical expansion

phase


Global Growth

� Markit's PMI update for September shows that global economic growth dipped to a 9-month low

� “The latest PMI surveys point to a

waning trend in global economic

growth at the end of the third

quarter, as rates of expansion

softened in both the manufacturing

and service sectors” (David Hensley – JP Morgan)

Source: Soc Gen

� US manufacturing ISM is showing the same alarming picture


Global Growth

� JP Morgan’s Forecast Revision Index points to sinking GDP growth

expectations.

� Downward revisions to growth have been continuous since 14’ spring

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US Inflation

� Deflationary forces are intensifying…

� Despite the recent bounce, implied inflation remains well below its mid-year highs.

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10

Eurozone Inflation

� Deflation fears in the Eurozone

returned in September. At 0.1%YoY (-0.2% in Germany), CPI datawas disappointing

� Most of this slide is due to fallingenergy prices. The core inflationremained stable around 1%, butwell below ECB target.



Financial Conditions

� Financial conditions have tightened significantly in recent months, specially after RMB devaluation.


Cross-asset Volatility

� As explained in one of our Research

Papers (Feb. ‘15), we think that

volatility has switched to a higher

regime.

� The gathering uncertainties about the Fed rate policy, the Chinese / global growth and the EM economies, are keeping implied volatilities at local highs.


EQUITY

� We think that the equity bull market is aging, and has only modest further gains from here, probably with high volatility. Despite the sharp rally, we cannot exclude a new test of recent lows is very likely…

� The market wild moves during August suggest that something big is indeed unfolding

� If the S&P500 was going to move higher (breaking the 2130 ceil), it probably would have done it

by now. Given the weakness in the transports, Russell 2000 and high yield (which trends often foreshadow stock market developments), we view the bias to the downside and think that the top is already in place (80% chance). The period since 2009 is a cyclical bull market inside a secular bear

market (Yes, you can lough!)

� With this summer steep selloff, the bullish trend has been definitely damaged, as the S&P500 breaks its trendline across the lows since Oct. ‘11 at around 2000

� Recent data shows more evidence of lower productivity, lower potential GDP growth and (later) higher inflation risk. � This is a bad scenario for stocks

� Profit margins are likely plateauing in the US market. US households are fully invested in stocks. Earnings expectations are vulnerable to fears about US/global economic growth.

� Whatever the Fed’s decision is, stocks would suffer. Normalizing rates would reduce the incentive to escape from cash, and drive near-term volatility higher. Keeping rates at zero would confirm fears about real growth and deflation risk.


EQUITY

� Stocks seem more vulnerable than ever to any external choc. The Federal Reserve has waited so long to raise rates, pushing valuations and profit margins higher than usual at the beginning of rate increase cycles.

� Bottom line :

� For months now, we’ve been asking our clients to incrementally "de-risk" their portfolios by focusing on higher quality / more defensive / more favorably priced companies.

� We remain UW equities as long the S&P500 stays below its trendline across the lows since Oct. ‘11 (2000-2050 area)

� We may revise our view back to Neutral if the S&P500 breaks above 2000-2050, and to OW after a clean break of the 2070-2130 range.

� Other markets (FX, credit, commos, volatility) suggest stocks are still the odd man out. The risk/reward remains in favor of waiting, rather than being fully invested, until there is more clarity

� We remain Neutral on Europe and Japan vs. US despite the policy divergence between the Fed and the ECB/BoJ. According to the 12 month forward P/E, Europe is trading at 15 year

highs, relative to the US. Weak demand from China is expected to continue to weigh on Japan's production

� We remain UW in US small caps vs large caps.

� We remain UW EMs vs DMs, as negative spillovers from China will likely have a stronger impact on other EMs


US Earnings

� For Q3 2015, 76 companies have issued negative EPS guidance and 32 companies have issued positive EPS guidance

� The 12-month forward P/E ratio for the S&P 500 now stands at 15.9, well above historical averages: 5-year (14.0), 10-year (14.1)

� FactSet's data shows a current forecast of a 5.5%

decline (YoY) for Q3-2015 earnings and a 3.3%

decline in revenues.

� The actual earnings decline for the quarter would be smaller, but we expect it to remain negative.

� If it’s the case, it will mark the first time the index has seen 2 consecutive quarters of year-over-year declines since Q2/Q3-2009.

� On June 30, the estimated earnings decline for Q3 2015 was -1.0%. If the Energy sector is excluded, the earnings growth rate for the S&P 500 would jump to 1.8%

� No earnings/revenue growth is projected before

Q1-2016


US Earnings

� Over the last decade, EPS growth has been swinging dramatically around its trend, which is supposed increase at a similar rate to GDP

� Despite the earnings recession we’re experiencing right now, analysts continue to project

2016 EPS well above the

historical trend-line

� They look too optimistic for us!


European Earnings

� European EPS estimates have been revised down each year since 2012


S&P500 – A Long-Term Perspective

� Despite the recent correction, equity markets continue to appear at lofty valuations, whatever

the valuation metric we use.

� The average (61% overvaluation) is off its local peak of 76% in May. But, we still see only a few quarters (during the dot.com bubble) with higher valuations

� Valuation alone is very rarely a timing tool for a major market top. Nevertheless, all these indicators

suggest a cautious long-term outlook and weak long-term return expectations


S&P500 – A Medium-Term Perspective

� We moved UW stocks on Aug 21st, and decided to stay so as long as the trendline across the lows since Oct. ‘11 is not broken to the upside.

� As said in our previous report, we interpreted the material break below the trendline across the lows since Oct. ’11 as a signal that the underlying trend was definitely damaged.

� 2048 is the next important level to watch on the topside. We would start

to get uncomfortable if the S&P500

goes above it and would move to Neutral again

� We still favor the completion of the downside movement and target the 1700-1730 area (base of 2009 uptrend)



� We‘ve finally got the 10%+ correction we’ve been waiting for � We still think that the risk is biased to the downside.



� We look at margin debt shrinkage as a sign that investors have lost confidence in the market

bullish trend.


EuroStoxx50 – A Medium-Term Perspective

� Unlike the S&P500, the Eurostoxx50, (like the DAX and the NIKKEI) has held above their 12’ uptrends

� Given the technical configuration, we

prefer to be Neutral on European

equities, but would consider moving

to UW on a break below the Nov. ‘12

uptrend around 3090


US Equities – Households Allocation

� US households equity allocation is at record highs

� Given the current environment, an abrupt correction should be expected over the medium-term. Equity allocation of

US households


EM Stocks

� EM vs DM underperformance started with the collapse in commodity prices and worries about the Fed tapering. It accelerated with RMB devaluation and worries about global growth.

� EMs are suffering from a number of

structural issues: dependence on commodities, falling productivity growth, missing structural reform, need for foreign capital to finance budget deficits… The future Fed tightening would only amplify these issues.

� For the moment, we keep away from EM

equities

� The heavy-hand reaction of Chinese authorities in August, coupled with the Fed inaction in September seem to have calmed down the market without providing any effective solution.


US Small vs Large Caps

� We like to watch small caps as a canary in the coal mine.

� Small caps have been underperforming large caps for 2 years in a row.

� The Aug. selloff in stocks has definitely damaged the Russell 2000 uptrend, and made the 50-dma cross down the 200-dma.

� The overall picture is alarming


S&P500 – A Short-Term Perspective

� Since Oct 5th , our prop. Short-Term trading model has been flat on the S&P500 (@1987.05).

� The model has been in drawdown since Aug 20th, as it was massively long when the sell-off occurred. It became almost flat at the close of Aug 26th (@1940.51) making up its losses partially.

� The model has boosted its return generation since Oct. ‘14, exhibiting a pattern similar to the one we’ve seen after Jun. ’07. Even the last drawdown is similar to that started on Jun 6, 2008

27

FIXED INCOME & CREDIT

� During the second half of September, rates fell in tandem with equity markets and commodity prices� The weakness in the jobs report sparked an additional rate decline.

� We were proved dead wrong about Fed’s September rate hike, the US labor market and inflation expectations. A Fed action by the end of the year still seems possible.

� The dovish rhetoric from the ECB tends to put more probability on a QE extension in either October or December. The odds for further stimulus by the BoJ have also increased.

� The recent decline in US nominal yields is largely due to a downward revision of inflation expectations and serious doubts about the health of the US economy.

� Nevertheless, inflationary signs should be watched closely as they will foreshadow a steepening decline in govies.

� We expect negative total returns on USTs. We still look for the bear market on USTs to resume.� We remain Neutral on USTs as far as the 10-year yield stays below 2.30. We wait for a material

break either above 2.35 or below 2.00 to change our positioning� Our ultimate target on 10y yields stands at 2.75 by H1-2016

� On German Bund, we remain Neutral. as long as the 10-year yield stays above the 0.45 – 0.50 area.� We will switch to UW again as the 10-year yield breaks above 0.80-0.90 or below 0.45


28


� We move from OW to Neutral HICP Inflation as we were proved wrong about HICP short-term perspectives.

� We continue to expect TIPS to underperform as energy prices continue to decline and Fed tightening risk tends to push real rates up in the absence of accelerating inflation.


29


� The Chinese turmoil and expectations of substantial IG supply have weighed on corporate spreads

� HG widening was likely due to heavy issuance, itself reflecting strong M&A and buyback activity

� September was another bad month for HY market. With the Chinese hard landing fears resurfacing, pressure resumed on commodity prices, pushing down credits in the Energy, Metals & Mining sectors, especially in US HY. Turmoil in emerging markets also weighed on HY.

� We feel more cautious about EUR HY despite the prospects of further easing by the ECB. Next QE should drive a rally in European credit over the near term, but long positioning is getting crowded and liquidity scarce

� We remain UW on corporate credit, due to valuation, to rising corporate leverage (specially in the US), to rising volatility, to position within the credit cycle and given the weak total return forecast

� We still prefer IG over HY on a risk-adjusted basis as we expect volatility on spreads to remain elevated and we believe IG corporates better positioned to absorb the impact of rising rates

� Within the credit pocket, we remain Neutral on USD vs. EUR HY spreads, but we prefer USD on a

total return basis, despite its higher beta to energy sector

� We still prefer US IG over Eurozone.IG, as we think that more attractive spread valuations and higher carry should fuel a stronger bid for US credit.


30


� Bottom line : UW Govies, Neutral US vs Eurozone Govies, remain long flatteners on the US yield curve and short duration in 2y USTs, UW credit, Neutral Eurozone vs US HY credit, UW Eurozone vs US IG credit, UW TIPS and Neutral HICP Inflation, UW High Yield vs High Grade, Neutral on EM corporates


31

US Govies – 10y UST

� Tactically, we remain Neutral on

10-year USTs, waiting for a cleanbreak either above 2.50 or below2.00 to change our positioning.

� For the moment, the downsidesupport at 1.97 was held.

� Despite the sluggish labor report,We think that the risk is still

biased to the upside on the 10y

yield.

� In order to confirm our bearishview, a clean move above 2.40-2.50 is required.

� Next level to watch: 2.25


32

US Implied Inflation

� Since the Fed decided notto raise its policy rate, USinflation expectationscontinued their slide ,getting closer to Eurozonelevels.

� And despite the recentbounce, implied inflationremains well below itsmid-year highs.


33

US Credit

� US IG & HY spreads have been wideningsince mid-2014.

� This move is partially due to Energy andMetals/Mining industries

� But even if commodities were excluded,

the HY spread stands above 600 bps,

implying a 8.5% default rate well above the

most pessimistic forecasts.


34

US Credit

� Bonds have not traded this wide to their CDS for a long time

� High grade (High yield) CDS-bond basis is currently at its widest levels since Nov. ’09 (since 2012) at-53bp (-110bp)

� It’s worth noting that CDS outperformance occurred despite the sharp selloff. This might be explainedby the important outflows from HY mutual funds


35

EXCHANGE RATES

� The dollar rally is not over. We reiterate our bullish view on USD over the medium-term and expect a

rival of the appreciation cycle of the '90s

� Historically, USD cycles have been persistent, lasting 5-6 years in the appreciation phase. We thus see further medium term USD gains against the major crosses (especially EUR and JPY) and expect a cyclical low in EUR/USD somewhere in 2016 (with the ECB tapering)

� September Fed’s inaction hasn’t damaged the uptrend on the US dollar.

� The line in the sand for the DXY index is provided by the lows of May and August (around 93.1-93.3). A clean break below would derail the strength phase.

� Our positioning on USD is driven by (almost) the same trading rules:� Tactically, we are now OW on EUR-USD, as it broke above our threshold of 1.12. We will move

back to Neutral if the spot goes below 1.12, and to UW if it breaks below 1.1130 with 1.08 as a target.

� Nevertheless, we remain bearish EUR over the medium-term.

� On USD-JPY, we remain Neutral for the moment, as the spot failed to hold a break above 124-125 resistance

� We remain short EM and Commodity FX


36

US Dollar

� Fundamentally, we remain

bullish on USD vs EUR and JPY.

� We think that the ECB and BoJ aremore likely to hit the QE buttonagain, than the Fed.

� The risk to our view is to see a

weaker US growth. Another USslowdown may push the DXY index5%-10% lower.


37

EUR-USD

� We expect further divergence of monetary policies between the Fed and ECB

� Rate differentials continues to point to a weaker EUR/USD. We maintain our target of 1.0-1.05over 6-12 months


38

USD-JPY

� USD-JPY is consolidating below125, and above its 55 wma of119.06 and its lows since Dec.‘14 (115.6)

� We remain neutral as far as

USD-JPY in this range (115-125). Below, we move UW.Above, we switch to OW.

� The next level to watch is thetrendline across the lows sinceSep. ’12 (~116.7)


39

COMMODITY

� The picture remains bearish in commos. After the sharp technical reversal in we’ve seen at theend of August, commodities have been mildly positive (+1.2% for the GSCI) over September, with abig dispersion within the commodity complex : +7.2 for Agris, +2.9% fro precious metals, +1.8% forindustrial metals, -0.1% for energy.

� Commodity weaknesses (supply glut in oil, slowing growth in China, precious metals loosing theirluster as a safe heaven…) are likely to continue.

� The expected Fed rate hike would put more pressure on the asset class as higher interest rates put ahigher cost on holding commodities

� The next leg up in the US$ will put more pressure on commodity prices

� We remain neutral-to-bearish across all complexes in the near term. To mid-2016, returnforecasts are negative for commodities as a whole.

� We still think that it is still too early to get in the “reflation trade” of a weaker dollar and highercommodity prices

� We remain UW commodities. We continue, however, to like owning the GSCI index, and think

that commodities hold value as cross-asset portfolio diversifiers and as an inflation hedge.


40

COMMODITY

Bottom Line :

� Base Metals: Base metals don’t appear to be stabilizing yet. The main reasons (growth disappointmentsin China and broader EM) behind the bear trend we’ve seen since 2011 are still alive… We remain

Neutral on base metals given the current weaker demand environment.� On the MT, we do not like holding Copper (even if it could go higher over the ST), nor iron ore,

as it appears highly overvalued relative to the dollar, the global growth and the Chinese demand.We see more weakness with 20% expected downside in iron ore and 10% in copper

� There remains ample excess capacity in the industrial metals world. Producers should cut existingproduction and future projects before we can expect a sustainable reversal in prices.

� We expect base metals to trade lower for longer in order to match supply with demand.

� Agriculture: GSCI Agri posted +7.2% in September. We remain Neutral because of excess supply.

Perfect growing conditions in the US resulted in the biggest corn/soybean crop yields and harvests inmany years� However, we see a limited downside to grain prices from here when upside seems very interesting

� Energy: We remain of the view that the oil market is oversupplied, still think it is too early to expect

major upside for the price and that the risks remain substantially skewed to the downside. The pricewar between the lower-cost producers (Saudi Arabia), and the higher-cost producers (shale) should lastfor a while.� After a long period of UW positioning, we switched to Neutral when the spot dropped below

42. We will move to UW again if the WTI goes above 56.5 and to OW if the it breaks above 63


41

COMMODITY

� Precious Metals: Despite the recent rebound, we think that Gold (like Silver) are still due for a final leg down (over a 6month horizon)…

� We change nothing to our view on precious metals. The stimulus provided by the ECB & BoJ isalready factored in gold prices. Precious metals are vulnerable to higher US real yields,

stronger dollar and weaker gold flows to Asia

� We remain OW gold. The impulsive rebound we’ve seen in August is probably the signature of abase formation around 1080 (to be checked), and the beginning of a corrective rally

� We will significantly increase our OW if the spot breaks above the 1150-1160 area (target 1210 andhigher)

� A clean break below 1120 would open the door for testing recent lows again. Below 1110, we moveNeutral and wait for 1060 to go OW progressively

� We are OW (accumulate) on Silver since the spot broke below the 14.70 resistance

� We may increase our OW if the Silver breaks above 16.7-17 or below 13.5


42

Commos vs Other Asset Classes

� Since 2011, we’ve beenexperiencing a completedivergence between the weak

trend of commodities (driven bya price disinflation) and the

upward continuous move of

equities / bonds (reflectingfinancial asset inflation)

� This phenomenon has been thecombined result of quantitativeeasing (forcing investors toescape from cash to other riskyassets) and a lower-than-potentialgrowth (weighing on inflation andpushing bond yields lower)

� The divergence should arrive to

an end the day investors stop

celebrating weaker than

expected economic data


43

Crude – Tech. Perspective

� The market seems to have met aninterim low point at around 42

� Tactically, we’ve decided since

August to move to OW

� We will move to UW again if theWTI goes above 56.5 and to OW ifthe it breaks above 63

� Over the medium term we thinkthere is still potential for a last leglower.


44

Gold – Tech. Perspective

� We change nothing to ourestablished strategy on gold.

� From our Sep. report “We are

OW gold. The impulsive reboundwe’ve seen in August is probablythe signature of a base formationaround 1080, and the beginning ofa corrective rally”

� We will significantly increase ourOW if the spot breaks above the1150-1160 area (target 1210 andhigher)

� A clean break below 1110 wouldopen the door for testing recentlows again. Below 1110, we moveNeutral and wait for 1060 to goOW progressively


45

Gold – Spec. Positions

� As of Sep 29th, and according to the latest Commitment of Traders (source: CFTC), specs haveincreased their net longs on gold for the second week.

� September weak US employment report has made an eminent US monetary tightening lessprobable, weighing on US dollar and real rates. This is a more supportive environment for

precious metals � more inflows in Gold ETF holdings + more short-covering

� We expect this supportive environment to be short-lived as the Fed tightening should occur atsome point this year…


46

ALTERNATIVE STRATEGIES

� The HFRI Fund Weighted Composite Index fell (for the fourth consecutive month) 1.1% in

September. Nevertheless, the FWC index outperformed the S&P 500.� The decline was led by equity (specially the health care sector) and credit-sensitive Event Driven

strategies (-2.5%), and Equity Hedge strategies (-1.7%)� Best performers were low-beta strategies : Macro (+0.4%) led by quantitative CTA strategies (+1.4%),

Market-Neutral Equity (+1.1%), Volatility RVA (+2.4% MoM).

� Long-term CTAs gained from long fixed income exposure, and short exposure to commodities and equities.

� We stick to our preference for risk diversifiers (pure alpha generation strategies) over return enhancers. Our strategy has been clearly rewarding during the last months including September. CTAs, Global Macro and Market-Neutral Equity funds successfully navigated this challenging period.

� We believe that diversifying portfolios with an increased allocation to alternatives is particularly attractive at this stage of the cycle.

� We are not changing our recommendations on alternatives which we consider to be suited to current market conditions. We maintain our OW positioning on:� Equity Market Neutrals both for their “intelligent” beta and their alpha contribution. � CTA’s and Global Macro as a diversifier and tail hedge. These strategies should outperform as

FX and commodity current trends are likely to persist.� Vol. Arb strategy and prefer funds that trade volatility globally (all assets / all regions). This is our

way to take advantage from the higher volatility regime.


Bottom Line : Global Asset Allocation

� Macro risks are rising… Deflation forces are gathering… But stock market celebration of weaker than expected economic data continues.

� We were proved dead wrong about Fed’s September rate hike. Seven years after the financial crisis, the absence of any Fed rate hike seems surreal.

� In September, global equities, commodities and high yield credit posted steep losses, while volatility jumped up

� The market has become aware of the slowdown in China, troubles in EMs, low commodity prices, sluggish economic data in DMs and high-yield debt issues. A slowdown in global economic growth seems underway,

inducing more dovish shift among G4 central banks

� DMs are clearly not insolated from EM turbulence. Channels of contagion from China and other EMs to DMs are numerous, but underestimated.

� At this stage, credit markets and small caps are raising yellow flags on the sustainability of the bullish trend in equities.

� We maintain our view that commodities will underperform, US$ will continueits rise, and volatility will remain high. Old-school as we are, we expect all thisCentral Banks money printing to ultimately end in tears

� We reiterate our view: A perfect storm is building… It combines historicallyovervalued stocks with stretched government bonds and corporate credits.Unlike previous storms (2000, 2008), investors would be left with almost

no place to hide

� We summarize our views as follows �


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Disclaimer


This writing is for informational purposes only and does not constitute an

offer to sell, a solicitation to buy, or a recommendation regarding any

securities transaction, or as an offer to provide advisory or other services

by FinLight Research in any jurisdiction in which such offer, solicitation,

purchase or sale would be unlawful under the securities laws of such

jurisdiction. The information contained in this writing should not be

construed as financial or investment advice on any subject matter.

FinLight Research expressly disclaims all liability in respect to actions

taken based on any or all of the information on this writing.

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Finlight Research - Market perspectives - Oct 2015