Decision Moose Global Financial News & Analysis

2017.08.18 through 2017.08.27

Moosecalls Executive Summary page 1 Weekly Market Table, Daily Recap page 2 Economy Fed & Inflation page 3 Commodities page 4 Gold page 5 US Dollar, Carry Trade page 6 US Treasury Bonds page 7 US Large-cap Stocks page 8 US Small-cap Stocks page 9 European Stocks page 10 Japanese Stocks page 11 Asia Pacific ex-Japan Stocks page 12 Latin American Stocks page 13 Moose-extras: Top 20, TSP page 14 Moospeak Editorial page 15

Moosecalls— week closing 08.18.2017

On August 11, 2017, Latin American Equities (ILF) replaced Asia Pacific ex-Japan (AXJL) as the model’s top choice @$33.03. See newsletter for more details. Always familiarize yourself with any investment program and the assets involved before committing to it. Read the FAQs and The Art of the Switch, and get a prospectus online from the fund provider. Executive Summary— Is The Next US Correction Underway? US small cap stocks (-1.1%) took the week’s biggest hit for a second consecutive week, and were joined to the downside by US large caps (-0.6%). Small caps broke below intermediate term support, and large caps broke down short term. Offshore equities had a better time of it, led by Latin America (+2.5%). Japan (+0.7%) and Asia Pacific ex-Japan (+0.3%) were also up, while Europe (0.0%) held its own. A stronger US Dollar (+0.4%) weighed on commodities (-1.2%), including gold (-0.4%) and oil (-0.2%). A new dose of domestic political uncertainty arose from White House disarray, pushing “safe haven” US Treasury bonds (+0.3%) higher once again this week-- even as North Korea backed off last week’s missile test threats. Latin America (ILF) remains in first place this week. It replaced Asia Pacific ex-Japan (AXJL) at #1 last week-- just in time to catch this week’s 2.5% gain. Thing is, the US stock market is showing signs of erosion. If that erosion continues, it will be difficult for global equities to maintain. For now, all offshore equity ETFs in the model are still within a percent or two of their 2017 highs. If the US corrects, however, our pessimism could become globally contagious. Last week's switch was more about the model splitting hairs than about strong momentum (or a lack thereof) among the leading offshore assets. This week, however, US large-cap stocks fell for a second straight week, dipping below their short-term (10-week) moving average. It is the first short-term weakness in three months, but SPY is still comfortably above intermediate term (40-week) support, and has been for 18-months. Small-cap stocks, on the other hand, began to fade when the effort to repeal Obamacare crashed and burned in the Senate three weeks ago. (Smaller companies have been most impacted by the health tax.) Their retreat picked up steam last week with Congress out of town and a new set of North Korean distractions taking the focus off tax reform and infrastructure development. This week, Korea backed off its threats to launch missiles at Guam, but White House musical chairs and general disarray sent small caps tumbling below their 200-day anyway. September is right around the corner-- traditionally the worst month of the year for equities. North Korea doesn’t appear to be the "black swan" that will set off the next stock crash, but it is back making threats this weekend. Meanwhile, the Trump White House saw the dissolution of two Presidential Councils this week, and yet another resignation, this time senior advisor, Steve Bannon. Rumors that Economic Advisor, Gary Cohn, might leave, also roiled the markets. US stocks have been bullish and hit new highs every month in the first half, even though the Fed began tightening in earnest last December. That won’t continue if tax cuts and infrastructure go down in flames like the Health Tax reform did, and Cohn is honchoing the tax cut legislation. Should the US market manage to hold together, a weak greenback will continue to favor Dollar investors in Dollar-denominated offshore equities like IEV, EWJ, ILF, and AXJL. The falling Dollar has slowed Q2 momentum in US equities relative to foreign equities. That currency-induced offshore advantage, however, could be about to fade as the Dollar approaches the bottom of a multi-year range. It’s been rate hikes that have hurt the Dollar. If the Fed decides to hold off on hiking rates for the rest of 2017, the Dollar might actually strengthen. For now, however offshore equities hold sway. It worth noting, however, that the European Central bank extended its easy money policy for another nine months last December, but now that the extension is nearing its close, European equities appear to be flattening out and losing momentum. Asia-Pacific has rebounded as US growth has picked up, particularly exporters like India, China, Singapore, Taiwan, and Korea. Asia-Pacific has

Weekly Close This Week's Signal End Date

08.18.2017 HOLD Latin America (ILF) 08.27.2017

been inching higher, but it too looks pricey. Japan is similarly bullish, but extended. Finally, Moose favorite Latin America had room to run and has. A weak dollar and a rebound in oil prices helped. It pushed through $33 to a new 2017 high two weeks ago, took the top spot in the model last week, and got a nice bump this week. Meanwhile, US T-bond prices bottomed around the December 2016 rate hike. Since then, bond prices have risen (and yields have fallen) after both subsequent rate hikes (March and June). In other words, both bond and currency traders are betting on a weaker US economy ahead, due to successive rounds of Fed tightening. The NY Fed puts the chance of a recession in the next 12 months at 10%. That is higher than last month, but still low enough that a 20%-plus bear market in US stocks is unlikely. Their plan to (a) stop rolling over all the debt they accumulated on their balance sheet from quantitative easing and (b) hike rates again in September could change that, but for now, a correction is the greater downside risk. I wouldn’t rule out a reprise of the 2016 summer correction, which began ahead of an expected September rate hike that didn’t happen. This time, however, futures put the chance of a September 2017 rate hike at 25%. An unexpected rate hike could be the catalyst. Meanwhile, our momentum model is comparable with diversified buy-and hold this year, but still lags over three years. Financial engineering favors buy-and-hold by pushing asset prices ever higher. Momentum works best when asset prices are occasionally allowed a bear market, and thus will continue to lag until the next one. Without a recession on the radar, that could be awhile. This week’s headlines: Commodity ($CRB) Index Rally Slows With Oil Bearish Dollar in Holding Pattern Safe Haven T-Bonds (EDV) Continue Their Advance Bullish US Large-Caps (SPY) Dip Below Short-term Trend US Small Caps (IWM) Plunge Below 200-day Europe (IEV) Testing Short-term Trend Bullish Japan (EWJ) Holds Trend As NoKo Missile Tests Delayed Asia-ex-Japan (AXJL) Stabilizes As NoKo Backs Off

Weekly Market Table-- thru 08.27.2017

RANK CI ASSET TS Trend 1 100% Latin American stocks (ILF) 97% very bullish 2 79% Pacific ex-JAPAN stocks (AXJL) 80% very bullish 3 67% European stocks (IEV) 71% bullish 4 63% US Long Treasuries (EDV) 62% bullish 5 54% Japanese stocks (EWJ) 75% very bullish 6 38% US large-cap stocks (SPY) 73% bullish 7 33% Gold (GLD) 88% very bullish 8 13% US small-cap stocks (IWM) 23% neutral 9 4% CASH -- --

Ryan/CRB Indicator 105% neutrality

ST Interest Rate Equity Indicator -12% neutral

Volatility Index -26% slightly bullish

US Dollar Index -86% very bearish

Commodity inflation trend -55% bearish

Oil -49% slightly bearish

*CI is the "confidence index" measuring the model's overall confidence in the asset. It combines the relative strength (rank), the technical strength (TS), and the Fed Check. For more information, see the FAQs. Daily Recap— week closing 08.18.2017 Monday, Stocks Continue Rebound. US equities continued recouping losses suffered in last week’s sell-off amid heightened tensions between North Korea and the US. Europe and Asia also rebounded. Treasury yields moved higher on limited economic data and equity news. Crude oil lost ground, as did gold, while the US dollar was nearly flat. The S&P 500 Index was 25 points (+1.0%) higher at 2,466. Tuesday, Stocks Slip As CEOs Bail. Four CEOs quit Trump’s manufacturing council and US stocks ended slightly lower. Europe rose, as did Asia. Treasuries were flat to higher. Gold dropped as the dollar rose. The S&P 500 Index was 2 points (-0.1%) lower at 2,464. Wednesday, Stocks Pare Gains Following Fed Minutes. Better-than-expected retail earnings helped US stocks post solid early gains, but they evaporated in the wake of the Fed's afternoon release of its July FOMC minutes and reports that President Trump disbanded both of his business advisory groups. In other developments, housing starts and building permits both dropped, though weekly mortgage applications rose. Europe was higher, but closed before the afternoon’s US developments. Asia was mixed following a two-day rebound. Treasuries and gold were higher, while the US dollar and crude prices were lower. The S&P 500 Index added 4 points (+0.1%) to 2,468. Thursday, Stocks Lower on DC Woes. Pressure on equities developed early and accelerated into the close as DC dysfunction continues and Fed uncertainty remains. US stocks closed sharply lower with the tech earnings outlook in particular a focal point. Europe was also lower on monetary policy uncertainty, while Asia was mixed. Treasuries, gold, and crude oil prices rose, and the US dollar ticked to the upside. In other economic developments, weekly jobless claims, manufacturing and Leading Indicators were upbeat, but seemingly ignored. The S&P 500 Index dropped 38 points (-1.5%) to 2,430. Friday, DC Shuffle Pressures Equities. US stocks spent the day battling back from early reports that Steve Bannon, a key advisor to President Trump, had submitted his resignation. They recovered, but were unable to hold gains, finishing lower, though off the lows of the day. Treasuries were slightly lower, crude oil rallied, and the US dollar and gold ticked lower. Europe pared its losses, but Asia was mostly lower. In economic news, consumer sentiment hit its strongest level since January. The S&P 500 Index declined 4 points (-0.2%) to 2,426.

Economy, Fed & Inflation-- thru 08.27.2017 Global Economy, Current Perceptions— The IMF has downgraded its forecast for US economic growth this year, but kept its global growth outlook unchanged for 2017 at 3.5% and next year at 3.6%. In its July World Economic Outlook, the IMF cuts its US GDP forecast for 2017 to 2.1% from its previous outlook of 2.3%, and for 2018 to 2.1% from 2.5%, “primarily reflecting the assumption that fiscal policy will be less expansionary going forward than previously anticipated.” Slowdowns in the US and UK are expected to be offset by an improved outlook for growth in most of the euro zone and Japan; China is still seen growing by 6.7% in 2017 and 6.4% in 2018. With weakening commodity prices and capital outflows from emerging markets, downside risks to the global outlook are up, exacerbated by currency pressures and increasing financial market volatility. The Baltic Dry Index (1260), an international shipping measure and proxy for current global growth, rose this week after opening the year at 963. (It is still well below its 2010 peak (4640), retreating in 2014 and 2015, before rallying in 2016.) WTI oil price ($48.58)-- another proxy for world activity— fell this week. Oil is well off its 2011 peak ($113), though above its 2008 crisis lows ($37). Copper ($2.96), a proxy for global construction was up this week. 10Y US bond yields over the past 13 weeks are down, a negative bet on the US economy. On balance, then, this week’s indications on the global economy are neutral. US Economy, Current Perceptions— Overall: Mixed data week. The good: New weekly jobless claims (232K) lower than expected. August Michigan consumer sentiment (97.6) better than expected. August Empire Index (25.2) and homebuilders’ index (68) both solidly up. July retail sales (+0.6%) stronger than expected. The bad: August Philly Fed (18.9) down. July housing starts (1.16M) and building permits (1.22M) lower than expected. July industrial production (0.2%) weaker than forecast, capacity utilization (76.7%) unchanged. July leading indicators (+0.3%) weaker than June. June business inventories (+0.5%) grew more than expected. The ugly: June labor participation rate (62.9) and jobs-population ratio (60.2) were both up, but still within a percentage point of all time lows. The Fed, Current Perceptions: The Fed met in mid-June (06/14/2017) and raised the Fed Funds Rate (FFR) to the 1.00%-1.25% range. It met again in July (07/26/2017) and stood pat as expected. The Fed has indicated it plans another hike in September and/or December 2017, and will begin shrinking its balance sheet earlier than previously indicated. Longer term, Janet Yellen is promising a 3% FFR by 2019. June’s was the fourth rate hike since December 2015, when the Fed ended seven years of zero interest rate policy (ZIRP) with its first rate hike in more than a decade. (The second rate hike was December 2016.) The Fed Check at 105% suggests Fed neutrality is warranted. Commodities are bearish. The yield curve was basically flat this week, but is steepening longer term, as the median yield continues to fall. That puts our interest rate indicator in neutral. 3-month LIBOR yield @1.31% is up this week, while the 3 month T-bill at 0.99% is down. That puts the LIBOR/T-Bill spread at 32 basis points, below the midpoint (38 bpts) of its post-2008 range. A lower spread suggests a stronger, more confident banking system. Inflation, Current Perceptions— Consumer inflation cooling in June, along with recent core indicators. Fed's favorite inflation gauge (core PCE) remains within the 1-2% target range. Commodity prices and oil, meanwhile, are bearish, despite a weakening Dollar, implying waning global inflation pressure. July core CPI (+0.1%) cool. July CPI (+0.1%) cool. July core PPI (+0.0%) flat. July PPI (-0.1%) cool. July import prices (+0.1%) cool. July export prices (0.0%) flat. June 12-month PCE (+1.4%) and June 12-month core PCE (+1.5%) below 2% target. Q2 gross domestic product (+2.6%) lagged forecasts. Q2 unit labor costs (+0.6%) much cooler than forecast. Q2 GDP deflator (+1.2%) below target rate. Q2 employment cost index (+0.5%) up less than expected. Q2 productivity (0.9%) weak, still lags inflation rates. Q2 rental vacancy rate (+7.3%) up from Q1.

Commodity ($CRB) Index Rally Slows With Oil Commodities, Perceptions thru 08.27.2017— Fed rate hikes and an increasing oversupply of crude pummeled the commodity Index (CRB) to start the year. It finally bounced in mid-June, led by a rally in oil, and worked higher into August. The CRB has slowed the last three weeks, as it approached medium-term resistance and is currently bearish. Commodity prices fell -1.2% this week, following last week's -0.6% loss. That leaves them down -4.1% for the quarter (13 weeks), and down -6.3% for the year (52 weeks). At 178, CRB is above its short-term (50-day) average at 176, but below its intermediate-term (200-day) average at 185. A strengthening US Dollar this week weighed on

commodity prices. Meanwhile, oil prices (USO) are currently slightly bearish. Crude prices fell -0.2% this week, following last week's -1.4% loss. That leaves them down -4.9% for the quarter (13 weeks), and down -12.1% for the year (52 weeks). At 10, USO is above its short-term (50-day) average at 10, but below its intermediate-term (200-day) average at 11. A strengthening US Dollar this week weighed on oil prices. Commodities, Assumptions: JUL 1— Commodities peaked in July 2014 and ended 2015 down 48%, completing a double bottom in early 2016 after the first Fed rate hike in ten years, The 18-month swoon was led by a collapse in oil prices, which dropped from WTI $113 in mid-2014, to $26 in early 2016, due to falling global demand, a stronger Dollar, and a spike in US energy supply from fracking. In 2016, oil prices began to recover, reaching $53 by year-end. Crude began to roll-over in March 2017, however, as the Fed raised rates a second time in three months. It proceeded to make lower lows and lower highs in the second quarter. The CRB has been tracking it. In the process, prices overcame Fed jawboning; Brexit; a stronger second half Dollar; OPEC’s on-again-off-again deals to cut supply; Trump’s surprise election; China closing 700 factories to cut smog; and two Fed rate hikes (12/14, 3/15). Current outlook: bearish. The bearish case: Slow growth and financial concerns in China, a stagnant Europe distracted by millions of refugees and Brexit, and a below trend US economy in 2017 curb demand for commodities. In addition, the US Fed is contracting its balance sheet, raising rates, and has committed to additional rate hikes in 2017. That removes the easy money floor under risk assets, reducing global liquidity, and demand for commodities. It also should strengthen the Dollar, which cheapens commodities. On the supply side: US fracking has cut the price of oil, a key driver of the CRB. The bull ish case: Most of the developed world still engaged in relatively accommodative monetary policy, and the global economy shows signs of improving. Emerging markets are still growing at 5-7%. The Fed sees an improving US economy and greater demand long term for commodities, and has gotten cautious about further rate hikes, weakening the Dollar. Europe’s debt, refugee and Brexit concerns are being managed, as the ECB will do anything and everything to avoid sovereign default.

Gold (GLD) Rall ies on DC Drama Gold Bull ion, Perceptions thru 08.27.2017-- Gold Bullion (GLD) is currently very bullish and ranks #7 in the model-- more attractive than cash. Gold's price slipped -0.4% this week, following last week's 2.6% gain. That leaves bullion up 2.4% for the quarter (13 weeks), but down -4.4% for the year (52 weeks). At 122, GLD is above its short-term (50-day) average at 119, and above its intermediate-term (200-day) average at 117. A strengthening US Dollar this week weighed on Dollar investors in gold. GLD rallied from 100 to 131 in early 2016, following the first Fed rate hike in December 2015. Without further hikes in 2016, it plunged to

107 by December when rate hikes resumed. GLD rallied after the next two (DEC’16, MAR’17) Fed rate hikes, thanks to a weaker Dollar. The Dollar continues to weaken but GLD has remained in a 10% range for most of 2017 (112-123). Appointment of a US special prosecutor to investigate Russian interference in the US election and ISIS terror attacks worldwide— amid Dollar weakness and a widely expected June rate hike-- pushed GLD to a new 2017 high (@123) in June, but it pulled back after the June Fed rate hike. It bounced in July— and by month’s end had broken through intermediate and short-term resistance. Last week, North Korean saber-rattling, pushed it back to the top of its range. With a 14-day RSI of 62, however GLD is overbought (70). Gold Bull ion, Assumptions: JUL 1— Gold peaked above $1900 an ounce in August 2011. It bottomed below $1050 (a six-year low) in December 2015, as the Fed hiked interest rates for the first time in ten years. In 2016, however, gold took off, reaching $1367 by mid-year, as the US economy and the Dollar softened and the Fed held off on tightening. Japan and Europe initiated negative interest rates; and Brexit threatened the financial stability of Europe. Subsequent worries over additional US rate hikes in the second half of 2016 caused the dollar to rally and gold to break down to 1125. In 2017, however Gold rallied after both of the early (DEC’16, MAR’17) Fed rate hikes, thanks to a weaker Dollar. It reached $1300 in June before pulling back on that month’s Fed rate hike. Current outlook: neutral The bull ish case: Gold’s upward trend of higher highs and higher lows remains in tact going into the second half of 2017. Negative interest rates last year put the cost of holding cash on a par with the costs of storing gold for the first time ever. Massive monetary stimulus and deficit spending in the US, Europe, and Japan over the past seven years have cheapened fiat currencies, increasing global inflation pressures. As the world economy begins to improve inflation will finally kick in. Easy money will not only stoke monetary-demand for gold but induce central banks to diversify their reserves with gold as well. The bearish case: Fed quantitative easing is over and rate hikes have begun, removing the easy money floor under all risk assets. In addition, the Fed is paring its balance sheet this year. The US economy is still the best of a sickly lot and the Dollar is expected to strengthen under the Trump administration’s expansive fiscal policies. Any deflationary debt or financial crisis could also strengthen the Dollar and US bonds and weaken the demand for gold. India-- once the world’s largest gold consumer-- has placed an import tax on the metal curbing demand. Meanwhile, China, now the largest buyer, has cut inflation and slowed economically.

Bearish Dollar in Holding Pattern US Dollar Index, Perceptions thru 08.27.2017-- The US Dollar index is currently very bearish. The US Dollar rose 0.4% this week, following last week's -0.5% loss. That leaves it down -3.8% for the quarter (13 weeks), and down -1.2% for the year (52 weeks). At 93, USD is below its short-term (50-day) average at 95, and below its intermediate-term (200-day) average at 99. Despite briefly breaking out of a multi-year range (@103) to start 2017, the Dollar essentially has been weakening since the Fed’s December rate hike. The trend of lower lows and lower highs in the Dollar index since December continued through the March and June Fed rate hikes into

August. It weakened further as a US special prosecutor and do nothing Congress put Trump’s pro-growth agenda at risk. The falling Dollar has slowed Q2 momentum in US equities relative to foreign equities. That currency-induced offshore advantage, however, could be about to fade as the Dollar approaches the bottom of a multi-year range. It’s been rate hikes that have hurt the Dollar. If the Fed decides to hold off on hiking rates for the rest of 2017, the Dollar might actually strengthen. Currently it’s in a holding pattern. With 14-day RSI at 43, USD is no longer oversold (30). Dollar Assumptions: JUL1-- The Dollar Index has been in a 92-103 range since the end of 2014. Uneven US economic data; uncertainty over Fed timing; and volatile currency markets have all played a role in the greenback’s volatility. Trump’s victory in November set off a Dollar rally that only turned south after the Fed’s long-expected December rate hike (12/14) presaged further tightening in March and June. Carry-trade thru 08.27.2017 Non-Dollar investors who want to maximize their profits using the Moose should incorporate a "carry-trade" currency strategy into the decision, making it a two-step process. First, decide whether it's a good time to switch to US Dollars, and then use the Moose to identify the best place to put those Dollars. (Generally, if one's currency is weakening (Bearish) against the Dollar, non-Dollar investors in the Moose will outperform.) This table is intended to give non-Dollar investors an additional clue as to whether following the Moose might work for them. It may not be right every time-- as the currency markets can be volatile, and government intervention can make them even more so-- but more information is probably better than less. As for the major currencies, the Euro is very bullish and down -0.5% this week. The Yen is bullish and down -0.1%. The British Pound is bullish and down -1.1%. The Canadian Dollar is bullish and up 0.8%. The Aussie Dollar is bullish and up 0.5%. Currency vs. Dollar TS Trend Medium Term Implications for non-Dollar investors Euro (FXE) 86% very bullish Euro investors underperform the $ Moose Yen (FXY) 61% bullish Yen investors underperform the $ Moose Australian $ (FXA 74% bullish Aussie $ investors underperform the $ Moose GB Pound (FXB) 50% bullish Sterling investors underperform the $ Moose Canadian $ (FXC) 73% bullish Canadian $ investors underperform the $ Moose

Safe Haven T-Bonds (EDV) Continue Their Advance US Long Treasury Bonds, Perceptions thru 08.27.2017-- US Long-zeros 25y+ (EDV) are currently bullish and rank #4 in the model-- more attractive than cash. Long zero Treasuries rose 0.3% this week, following last week's 1.6% gain. That leaves them up 3.5% for the quarter (13 weeks), but down -13.8% for the year (52 weeks). At 120, EDV is above its short-term (50-day) average at 118, and above its intermediate-term (200-day) average at 114. A strengthening US Dollar this week made the carry trade in US equities more attractive. The 10-year Treasury bond yield slipped fractionally to 2.19% this week, from 2.19%-plus the week before. Longer term, the yield curve is steepening, a

bet on economic weakness. EDV finally put in a bottom (@106) with the first FOMC rate hike (12/14), and retested that bottom with the March (3/15) rate hike. Bond prices rallied after both meetings, however, peaking in April. After a 5% dip into May the advance resumed. The appointment of a US special prosecutor to investigate Russian interference in the US election, and bribery allegations against Brazil’s President propelled bonds higher. A poor May jobs report added to the rally, helping EDV to break through 200-day resistance in early June. After the FOMC’s June rate hike, EDV gapped up and hit a new year-to-date high, as the 10-year yield dropped to 2.14%. It corrected sharply after, slowing its overall upward trend after Janet Yellen’s dovish comments. Last week EDV enjoyed a flight-to-quality rally after North Korea threatened the US, Japan, and Guam. EDV’s current 14-day RSI of 60 makes it neither overbought (70) nor oversold (30). US Long Treasury Bonds, Assumptions: JUL 1— In 2016, long bonds (EDV) continued the upward move began in June 2015 (@$103). It peaked with negative interest rates abroad and Brexit in July (@$144), and then began to fade on end-of-year rate hike concerns. When the long-awaited 2016 rate hike came (12/14), bonds bottomed (@$106). Bonds began recovering in 2017, but again bottomed with the March Fed rate hike, before recovering and rallying through the June rate hike. Current outlook: Bull ish. The bull ish case for long Treasury bonds primarily rests on four assumptions: (1) US and global growth are anemic and inflation is not a problem. (2) Tighter Fed monetary policy in the face of anemic GDP and low inflation will exacerbate the lingering fiscal and regulatory drag created by the Obama administration, as Trump’s reforms are delayed in Congress. (3) Europe’s sovereign debt worries and weak economies have led to easier money out of the ECB and lower European bond yields. That, and Britain’s vote to exit the EU have led to a flight to quality in US Treasuries. (4) Japan’s constant effort to weaken the Yen also causes a flight into Dollars and US bonds. The bearish case: also rests on four assumptions. (1) China, the US Treasury’s largest customer, continues to sell US bonds in order to depreciate the Yuan (which is tied to the Dollar) and boost its exports. (2) The Fed underestimates the inflation danger created by worldwide central bank easing. (3) Massive US government expenditure in Obama's first seven years-- most of it financed by new debt-- has increased the supply of Treasury paper going to market. The Fed purchased much of it under QE and been rolling it over when it matures. This year they plan to gradually stop roll-overs and “normalize” their balance sheet. Less Fed demand will push yields higher, and prices lower. (4) Brexit is not a problem. The European Union’s debt situation has stabilized, and the ECB’s easy money policies will restore growth, lessening demand for US bonds.

Bull ish US Large-Caps (SPY) Dip Below Short-term Trend US Large-Cap Stocks, Perceptions thru 08.27.2017-- US large-cap stocks (SPY) are currently bullish and rank #6 in the model-- more attractive than cash. US large-caps fell -0.6% this week, following last week's -1.3% loss. That leaves them up 1.8% for the quarter (13 weeks), and up 11.1% for the year (52 weeks). At 243, SPY is below its short-term (50-day) average at 244. but above its intermediate-term (200-day) average at 235. A strengthening US Dollar this week made the carry trade in US equities more attractive. SPY rallied hard after the Trump win, making new highs each month from December through August. SPY

paused three weeks ago after posting consecutive new highs in each of the previous four weeks. This week, it closed below its 50-day on White House disarray and monetary disagreements at the Fed. 14-day RSI is 38, neither overbought (70) nor oversold (30). US Large Cap Stocks, Assumptions: JUL 1— Dividend-producing US large cap stocks led both mid-caps and small-caps in 2014-15, but gave way to small caps in 2016. Large caps opened 2016 with a correction. Despite Fed tightening fears, however, they rallied, making new all time-highs in the third and fourth quarter, even as the Fed finally hiked rates (12/14). They have continued to rally in 2017. Fading after the March rate hike, SPY set new highs every month on the first half. Current Outlook: bull ish. The bull ish case: Fundamental and technical analysis don’t matter that much. The Fed is in charge and low interest rates are still putting a floor under risk. Japan’s massive monetary expansion has been renewed. Europe also remains accommodative in its monetary policy in the face of an improving economy. That, and concerns over the UK’s exit from the EU is redirecting investment capital out of the euro and into the US Dollar. With cash and bills still yielding a negative real return, large or dividend paying stocks are filling investors’ income needs. The bearish case: Republicans cannot agree on Trump’s stimulative fiscal proposals, and Democrats will not help them out. The US economy is still limping along below trend, Christmas sales disappointed, Q1 GDP was 1.4%, and stock valuations are pricey. The Fed has expressed its intention to raise interest rates three times in 2017, and normalize its balance sheet. Lastly, US fiscal and regulatory mismanagement have failed to provide economic stimulus for eight years. “Affordable” healthcare became the biggest tax in US history in 2014 and continues to weigh on the consumer, even as the healthcare system collapses. The Republicans are not up to the task of fixing everything before the wheels come off and recession hits.

US Small Caps (IWM) Plunge Below 200-day US Small-Cap Stocks, Perceptions thru 08.27.2017-- US small-cap stocks (IWM) are currently neutral and rank #8 in the model-- more attractive than cash. US small-caps fell -1.1% this week, following last week's -2.7% loss. That leaves them down -0.8% for the quarter (13 weeks), but up 9.7% for the year (52 weeks). At 135, IWM is below its short-term (50-day) average at 140, and below its intermediate-term (200-day) average at 137. A strengthening US Dollar this week made the carry trade in US equities more attractive. IWM rallied 20% in 20 days after the Trump win. It slowed down after the December rate hike, but managed

new highs in December, March, April, June, and in July after Fed chair Yellen hinted further tightening might be delayed. In Washington, June House legislation curbing Dodd-Frank’s regulatory stranglehold on small business helped IWM, but the Senate’s vote to retain Obamacare and recess without accomplishing anything of significance took small-caps down in August. They continued to fall last week as North Korea provided a new distraction to delay tax relief and infrastructure development, and this week on White House disarray and monetary disagreements at the Fed. (14-day RSI is now at 32, neither oversold nor overbought.) US Small Cap Stocks, Assumptions: JUL 1— Dividend-producing US large cap stocks led both mid-caps and small-caps in 2014-15, but gave way to small caps in 2016 after the Fed first hiked rates (12/15). Despite a January correction, and pre-election weakness, due to Fed tightening fears in 2016, small caps rallied, making new all time-highs in the third and fourth quarters after Trump’s election. They continued to rally in 2017 after the Fed resumed hiking rates (12/16). The ascent began to slow after the March rate hike, however, and ahead of the June hike. Current Outlook: bull ish. The bull ish case: Fundamental and technical analysis don’t matter that much. The Fed is in charge and low interest rates are still putting a floor under risk. Japan’s massive monetary expansion has been renewed. Europe also remains accommodative in its monetary policy in the face of an improving economy. That, and concerns over the UK’s exit from the EU is redirecting investment capital out of the euro and into the US Dollar. With cash and bills still yielding a negative real return, large or dividend paying stocks are filling investors’ income needs. The bearish case: Republicans cannot agree on Trump’s stimulative fiscal proposals, and Democrats will not help them out. The US economy is still limping along below trend, Christmas sales disappointed, Q1 GDP was 1.4%, and stock valuations are pricey. The Fed has expressed its intention to raise interest rates three times in 2017, and normalize its balance sheet. Lastly, US fiscal and regulatory mismanagement have failed to provide economic stimulus for eight years. “Affordable” healthcare became the biggest tax in US history in 2014 and continues to weigh on the consumer, even as the healthcare system collapses. The Republicans are not up to the task of fixing everything before the wheels come off and recession hits.

Europe (IEV) Testing Short-term Trend European Large-Cap Stocks, Perceptions thru 08.27.2017-- European equities (IEV) are currently bullish and rank #3 in the model-- more attractive than cash. European stocks were flat (0.0%) this week, following last week's -2.4% loss. That leaves them down -1.4% for the quarter (13 weeks), but up 13.8% for the year (52 weeks). At 45, IEV is below its short-term (50-day) average at 45, but above its intermediate-term (200-day) average at 42. A weaker Euro this week hurt returns for dollar investors in European stocks, but helped Europe's export prospects. After the European Central Bank (ECB) extended its asset purchase

program by nine months to start December, IEV broke out of its 2016 range on encouraging US and global economic data, making Q1 2017 European equities’ best quarter in two years. IEV took a breather in April, but rallied 10% to a 2017 high at ($45) by early June. It then muddled around for six weeks after the June Fed rate hike before setting another new high in August. As the ECB’s asset purchase extension winds down, IEV still hugs its 50-day quite near its all time high ($48). With a 14-day RSI of 44, it is neither overbought (69) nor oversold. European Large Cap Stocks, Assumptions: JUL 1-- European Union GDP grew a lethargic 1.6% in 2015, and an even weaker 1.5% in 2016. Europe (IEV) peaked @$48 in mid-2014. Slow global growth, a local refugee crisis and a European Central Bank perceived to be behind the curve kept IEV’s downward trend intact into 2016 when it bottomed-- and spent the rest of that year in a $34-$40 range. The European Central Bank (ECB) extended its asset purchase program by nine months to start December, setting off IEV’s latest rally. It broke out of its 2016 range to new highs on encouraging US and global economic data in January 2017. Q1 2017 was European equities’ best quarter in two years, sending IEV to new highs @42. The rally continued into Q2, hitting $45. Current Outlook: bull ish. The bull ish case: European politicians have gotten their act together, and the ECB, the IMF, the Fed, and the EU will flood Europe with more liquidity as necessary. Lower oil prices will help the continent’s consumers. A stronger Dollar under Trump and a cheaper Euro will help Europe’s exporters. Brexit is more onerous for Britain than the EU. Fears that France, Netherlands, Greece and Portugal could vote to follow Britain are overblown. The bearish case: EU economic growth is anemic. Flagging household and business confidence, deflation worries, and conflict with Russia now have been complicated by an influx of millions of refugees from Syria, Libya, and Albania. Now, the EU’s second strongest economy, Britain, is leaving the union, weakening both parties. Quantitative easing in the US that once quieted sovereign debt fears in Spain, Portugal, and Italy through the carry trade is basically over. US rates are headed up, removing the easy money floor under risk assets. That reduces global liquidity, and weakens banks and financials-- the predominant equity sector in Europe. Europe’s financial crisis is not over, then, just awaiting the bell to start the next round.

Bull ish Japan (EWJ) Holds Trend As NoKo Missile Tests Delayed Japanese Stocks, Perceptions thru 08.27.2017-- Japan's equities (EWJ) are currently very bullish and rank #5 in the model-- more attractive than cash. Japanese equities rose 0.7% this week, following last week's -1.9% loss. That leaves them up 2.6% for the quarter (13 weeks) and up 10.7% for the year (52 weeks). At 54, EWJ is above its short-term (50-day) average at 54, and above its intermediate-term (200-day) average at 52. A weaker Yen this week hurt returns for dollar investors in Japanese stocks, but helped Japan's export prospects. Abenomics put Japanese equities per EWJ into a long-term uptrend with aggressively expansive monetary

policies, but disappointing Japanese, US, and Chinese data and the resulting currency wars have made for a roller coaster ride. A bullish EWJ flirted with its April 2015 multi-year high (@$53) at the end of Q1 this year, but broke below 50-day support to start the second quarter. It rallied hard from mid-April, hitting another new high (@54.5) to start June, becoming severely overbought. After the BoJ stood pat at its June meeting, EWJ retraced, eventually breaking below short-term support to start the 3rd quarter. The roller coaster continues. Two weeks ago, EWJ gapped above its June high to $55+, last week it dropped to 50-day support on Korean threats to shoot missiles their way, and this week it continues to test that support. With a 14-day RSI of 52, EWJ is currently neither oversold (30) nor overbought (70). Japanese Stocks, Assumptions: JUL 1— Japan’s economy has struggled for years. As if anemic GDP growth in 2014 (0.0%), 2015 (+0.5%), and 2016 (+0.5%) were not enough, the forecast for 2017 (-0.1%) is even worse. Japan has tried infrastructure spending, quantitative and qualitative monetary easing, tax delays, regulatory reform and negative interest rates to get things going. Japanese equities, meanwhile, broke out of a long-term downtrend in late 2012 with the advent of “Abenomics”-- a three-part program of (1) regulatory reform, (2) fiscal stimulus, and (3) massive BoJ quantitative easing. The Nikkei posted a 26% gain in 2013, a choppy +2% performance in 2014, a volatile +8% gain in 2015, and a +7% improvement in 2016 after BoJ announced Japan's publicly held pension funds would double their equity holdings. EWJ scored an 18-month high in January 2017, as the US pulled out of the TPP, and is up 8% in the first half. The roller coaster ride continues. Current outlook: Bull ish The bull ish case: The BoJ’s massive quantitative easing program-- about 60-70 trillion yen per year in asset purchases-- has doubled the monetary base and will begin to work in time. In addition, the Japanese government has spent $200B in new stimulus spending to get the country going again. Lately, they are doubling the equity holdings in their pension funds. Elsewhere, the Europeans are now easing along with the Chinese, Australians, and Koreans. Falling oil prices help the energy importer, and once global growth returns, the weaker Yen will spur Japanese exports and revive its economy. The bearish case: The domestic Japanese economy is moribund due to an aging population, and a weak global economy. Chinese economic weakness and devaluation has set off an Asian currency war threatening Japan’s weak Yen policy. Abenomics has not worked. Conceptually, easy money and a weakening Yen is like pushing on a string— more likely to result in a carry trade than investment in Japan. Meanwhile, the prospect of additional Fed rate hikes also reduces global liquidity and weakens the floor under risk assets. Since the Fukishima nuclear crisis, nuclear power generation has been shut down, forcing Japan to import fossil fuels to make electricity.

Asia-ex-Japan (AXJL) Stabil izes As NoKo Backs Off Asia Pacific ex-Japan Stocks, Perceptions thru 08.27.2017-- Asia-Pacific ex-Japan equities (AXJL) are currently very bullish and rank #2 in the model-- more attractive than cash. Asian stocks ex-Japan rose 0.3% this week, following last week's -1.5% loss. That leaves them up 3.3% for the quarter (13 weeks), and up 9.3% for the year (52 weeks). At 67, AXJL is above its short-term (50-day) average at 67, and above its intermediate-term (200-day) average at 63. A strengthening US Dollar this week weighed on Dollar investors in Asia-Pacific. Asia Pacific-ex-Japan returned to #1 on 07/28, and edged to yet another new closing high in early August, the

third one in three weeks. It then gave the top slot up to Latin America two weeks later (8/11) as Korean saber-rattling rattled Asian investors. Recent dovish Fed comments, a weaker Dollar, and decent data out of China have helped the region’s stocks hold at #2. Its 14-day RSI is at 51— neither overbought (70) nor oversold (30). Asia Pacific ex-Japan Stocks, Assumptions: JUL 1— GDP growth in Emerging and Developing Asia grew 6.6% in 2015, but growth is projected to decline to 6.4% in 2016 and to 6.3% in 2017. China and India are expected to lead the Asian Tigers (ASEAN) higher. A multi-year uptrend in AXJL ended in April 2015 (@$73). AXJL then dropped like a stone until January 2016 (@$46). Asia was mixed to generally higher in 2016 gaining about 14%. It dropped with Trump’s election— a seeming death knell for the Trans-Pacific Partnership—but recovered. Asia Pacific ex-Japan stocks, entering 2017, were still almost 40% below their October 2007 high, but they have rallied 10% in the first half. The region’s equities are heavily weighted in financials and materials, and its fortunes are closely tied to those of China, directly, and Japan, indirectly. Current Outlook: Bull ish. The bull ish case: The Fed may have begun gradual rate hikes, but US monetary policy remains very accommodating. Even looser policies in Japan, China, and Europe should also improve global growth prospects. Europe has gotten the institutions in place to deal with its debt crisis. Japan’s beggar-thy-neighbor policies no longer soak up trade demand at the expense of its Asian neighbors, as the Yen has risen in 2016. Asian inflation pressures are under control allowing interest rates to recede in the region—further stimulating growth in 2016. Finally, the Dollar was at a 13-year high going into 2017. It was due to soften and has. A softening Dollar improves Dollar investors’ returns in Asia and raises commodity prices paid to Asian resource producers. The bearish case: Asia Pacific is an export region and while the US economy is thought to be picking up, the rest of the global economy is still slow, including China, Europe, and Japan. China’s equities are down 17% in 2016, and its financial system is fragile. India is down slightly. In addition, the US elimination of quantitative easing and removal of ZIRP removed the easy money floor under risk assets, reduced global liquidity, and weakened Asian financials. Rising rates and the possibility of a more stimulative government under Trump should eventually strengthen the Dollar. A strong Dollar increases Asian exports to the US in the longer term, but short-run, a rising Dollar erodes Dollar investors’ returns in Asia and reduces commodity prices paid to Asian resource producers. Geopolitical risks include Chinese militarization of the South China Sea and North Korea’s nuclear program.

Latin America (ILF) Bumps Along High Latin American equities Perceptions thru 08.27.2017-- Latin American equities (ILF) are currently very bullish and rank #1 in the model-- more attractive than cash. Latin equities rose 2.5% this week, following last week's -0.9% loss. That leaves them up 11.3% for the quarter (13 weeks), and up 15.6% for the year (52 weeks). At 34, ILF is above its short-term (50-day) average at 32, and above its intermediate-term (200-day) average at 31, A strengthening US Dollar this week weighed on Dollar investors in Latin equities. ILF was range-bound (30-33) from late January until early May, when it broke out to the upside on stronger

oil and commodity prices. A week later, the President of Brazil was implicated in a bribery scandal, and the Bovespa dropped 15% in a day, sending ILF plummeting through 50-day resistance. It took a couple of months to recover, but it has, thanks to a weak dollar and a rebound in oil prices. This week, #1 ILF beat all assets in the model as it pushed toward $34. With a 14-day RSI of 64, ILF is neither oversold (30) nor overbought (70) and takes over the top slot in the model. Latin American Stocks, Assumptions: JUL 1-- Latin American GDP was down 0.1% in 2015, and down about 0.5% in 2016. Latin American equities were down 32% in 2015, bottomed in January 2016, and rallied to finish the year 31% higher— but going into 2017, they are still almost 55% below their May 2008 high. Slow growth in the advanced economies and in China, and falling commodity prices, including oil, kept the Latin 40 mired in a highly volatile downtrend from March 2011 to January 2016. Strengthening commodities and a weaker Dollar turned the region’s equities around in the first half, but a hawkish Fed’s second half rate hike and Trump’s victory stalled the advance. ILF was range-bound (30-33) from late January until early May 2017, when it broke out to the upside on stronger oil and commodity prices. A week later, the President of Brazil was implicated in a bribery scandal, and the Bovespa dropped 15% in a day, sending ILF down with it. Current outlook: Neutral The bull ish case: Latin American countries are generally rich in natural resources. They also have positive demographics with a younger population and a rising middle class. That tends to attract foreign capital inflows. The Dollar is at a 13-year high going into 2017, and is due to soften. A softening Dollar improves Dollar investors’ returns in Latin America and raises commodity prices paid to Asian resource producers. Low Fed interest rates in the US and China and negative rates in Japan and Europe increase capital inflows, promote growth, and lift commodity prices, improving profitability for Latin exporters. Meanwhile, slower global growth reduces Latin inflation pressures and allows interest rates to recede. Latin America was the most oversold of regions, and now that the bleeding has stopped, it still has a tremendous upside. The bearish case: The region has spent years mired in one of its “inept government” phases, which has increased both domestic and foreign capital outflows. Capitalism has been on the fade since 2011 in Latin America, and the equity markets have reflected that. Some nations in the region may be too far-gone to save, short of bankruptcy. Below trend growth in China, Europe, and the US adds to the problem by curbing demand for Latin exports. The Trump victory also bodes ill for Latin exports—products as well as immigrants. More importantly, the end of US quantitative easing and subsequent Fed rate hike removed the easy money floor under risk assets, reduced global liquidity, and weakened Latin financials.

Moosextras— Outside the Box: —Top 21 thru 08.27.2017 The following represents the top 10% of our diversified master list of 210 exchange-traded funds. ETFs are listed in order of most momentum at the close of the latest week. RSI is daily. Foreign (16), Tech (3), Basic Materials (2). NOTE: All overbought conditions relieved.

TICK NAME RSI COMMENTS PALL Palladium 67 Basic Materials GREK Equities: Greece 56 Foreign Equities EWO Equities: Austria 40 Foreign Equities EWI Equities: Italy 53 Foreign Equities EWW Equities: Mexico 56 Foreign Equities ILF Equities: Latin America 61 Foreign Equities EWN Equities: Netherlands 41 Foreign Equities GMF Emerging Asia Pacific 48 Foreign Equities KOL Coal 51 Basic Materials ECH Equities: Chile 63 Foreign Equities EEB Equities: BRIC 51 Foreign Equities INP Equities: India 41 Foreign Equities EEM Equities: Emerging Markets 48 Foreign Equities EWZ Equities: Brazil 61 Foreign Equities ITA Aerospace $ Defense 53 Tech & Telecom IXN Global Technology 49 Tech & Telecom IGV Software 44 Tech & Telecom FXI Equities: China 44 Foreign Equities EWP Equities: Spain 40 Foreign Equities FXS Currency: Krona 43 Foreign Equities EWK Equities: Belgium 40 Foreign Equities

* overbought, **oversold Outside the Box: —Thrift Savings Plan thru 08.27.2017 The Thrift Savings Plan, or TSP, is the government’s 401K-style retirement plan. Millions of federal employees are invested in it, including several life-long friends here in the capital region. The TSP does not provide all of the choices that the Moose does. Gold is notably absent, and foreign equities are all lumped into one choice, not broken out by region. As a result, TSP investors often have questions at switch time— especially when the Moose switches to a choice that TSP doesn’t offer. To clarify that situation, the following ranking table applying a Moose-like momentum model to the TSP has been added to the site. This week the 100% model holds the I Fund (International). (1st April switch). Note: TSP choices can be highly correlated. That means the model can jump around a lot, giving false signals. Since TSP limits account holders to two switches per calendar month, diversifying the portfolio to give it more stability is an option. This week the diversified model holds equal percentages of Large and Small-cap US Stocks, US bonds, Foreign Equities, and Cash. RANK FUND ASSET TYPE COMMENTS DIV% 1 I Fund International Equities Central Bank bullishness 20 2 C Fund Large-cap US Equities US Large-caps bullish 20 3 S Fund Small-cap US Equities US Small-caps bullish 20 4 F Fund Fixed Income US Bonds neutral 20 5 G Fund Short-term income Safe, but negative real return 20

Outside the Box: — Alternative Strategies thru 08.27.2017 ALLOCATIONS CASH EDV SPY IWM GLD IEV EWJ AXJL ILF Switch? Growth 60-40 Static 10% 30% 20% 15% 5% 5% 5% 5% 5% Never 60-40/40w.ma Dynamic 25% 30% 20% 0% 5% 5% 5% 5% 5% 08/18 60-40/26w.rs Dynamic 10% 30% 20% 15% 5% 5% 5% 5% 5% no Agg. Growth 80-20 Static 5% 15% 15% 15% 10% 10% 10% 10% 10% Never 80-20/40w.ma Dynamic 20% 15% 15% 0% 10% 10% 10% 10% 10% 08/18 80-20/26w.rs Dynamic 5% 15% 15% 15% 10% 10% 10% 10% 10% no Six basic (and highly simplified) alternative strategies are monitored in addition to the momentum model on this site—three growth strategies and three aggressive growth strategies. The growth strategies are based on a 60-40 risk-asset-to-income-asset ratio. The aggressive growth strategies are based on an 80-20 ratio. The growth and aggressive growth strategies each include one static, and two dynamic models. Static models have a fixed asset allocation (60-40 or 80-20) that does not change. Dynamic models alter the basic allocation by adding a technical indicator into the mix. The indicators used here are the 40-week (200-day) moving average, and 26-week relative strength. If the weekly closing price of an individual ETF becomes bearish per its technical indicator, the dynamic model reduces its allocation to zero, and adds that allocation to cash. If a switch occurs this week (“yes” under Switch?), the reduced allocation is listed in red, and the increased allocation is green. CUMULATIVE GAIN 1 Yr 3 Yr 5Yr 10Yr 15Yr 3Y Sharpe SPY 11% 22% 72% 64% 164% 1.80 6040static 2% 11% 24% 65% 201% 2.10 6040sma 2% 9% 20% 59% 127% 3.47 6040rs 1% 11% 30% 65% 138% 1.88 8020static 5% 7% 22% 46% 214% 1.01 8020sma 4% 7% 20% 55% 161% 2.54 8020rs 5% 10% 23% 57% 170% 2.25 Momentum 3% -12% -6% 28% 277% -1.11 Observations: Basic investment strategies continue to under-perform the S&P benchmark. Central banks continue to pump trillions into markets, facilitating “financial engineering” in which companies borrow at extremely low rates and buy back their own stock, pushing the stock price higher. The result: a market bogey with few corrections and no bear markets since 2009 is tough to beat. Aggressive portfolio strategies are currently outperforming moderate ones, inducing investors to accept more risk in 2017. That the 80-20 group lags the 60-40 group over three years without having suffered a bear market, however, suggests that when corrections do occur, aggressive strategies may take disproportionate losses. Momentum is comparable to other growth strategies in the past year. It is underperforming longer term, but outperforms over the very long term. The level of underperformance appears to be diminishing, perhaps due to changes made in the Moose momentum model in the last five years. Static strategies require less attention, however, and over the past year, performance numbers have been less volatile, i.e., they have been a more predictable strategy. Diversified strategies wil l generally outperform targeted strategies until the next bear market. The two circumstances that would lead to a bear market are (1) a US recession, or (2) a significant exogenous development that threatens the integrity of the global financial system. The Fed currently puts the chance of recession in the next twelve months at 10%. Exogenous developments are tougher to predict, but truly significant ones are historically few. At the moment, there is nothing on the horizon that would appear to qualify.

Opinion— week closing 08.18.2017 The CEO’s Doth Protest Too Much-- In the aftermath of the tragic Charlottesville, VA race riot last weekend, several CEOs resigned from the President’s Advisory Council on Manufacturing. Initially, the CEOs of Merck, Intel, and Under Armor, all citing President Trump’s slowness in blaming one side (and only one side) for what happened, quit the Council, ostensibly for “moral” reasons. And if you believe that, they have some high margin drugs, semiconductors, and athletic wear to sell you. The press on the subject, even the business press, seems to have totally accepted the CEOs’ moral claims for leaving. The discussion has been almost entirely focused on whether letting one’s personal morality, politics, and/or racial motivation dictate corporate policy is the right thing for these CEO’s to do or not. That morality has anything to do with these decisions may be compelling to the average TV viewer, but it’s a stunningly ignorant view of the way corporations do business inside the beltway. Shocking as it may seem, morality is rarely, if ever, the overwhelming determinant in corporate decision-making, nor is race. Presidential Advisory Councils are good resume material. I was on President Reagan’s Economic Advisory Council back in the day. Sounds impressive, right? About twenty of us met periodically for a couple of years. Although it was the President’s Council, Reagan never attended. We didn’t even meet in the White House or OEOB, but in singularly unimpressive excess GSA space. As I recall, we eventually came up with a list of recommendations and sent them forward to someone, somewhere. I have no idea if they were acted upon— but somehow I doubt it. I’ll never know, because I didn’t even bother to keep a copy of the final work product. Corporate CEO’s don’t need more resume value or even extra work. For the corporation, however, Presidential Advisory Councils can be good for the brand… until they aren’t. Being invited to the table is a high-profile honor. Being seen as having input is better than being on the outside. And looking like an All American team player sells widgets. Moreover CEO’s get to go to the White House and meet with the President. Pretty cool. It is also said that if you aren’t seated at the table, you’re probably on the menu. Problem nowadays is (as anyone who’s seen “The Apprentice” knows) one can be seated at Donald Trump’s table and on the menu too. When one’s patron, who demands total loyalty, but offers none in return, is sprinkling seasoning on one’s shoulder, it’s probably a good time to leave. Don’t hang around waiting for the carving knives. Trump’s manufacturing council sought to find ways to create manufacturing jobs in the US—and to bring jobs back from abroad. It is no coincidence, then that the CEOs of Under Armor, Merck, and Intel were first to bail on the council. Virtually all of Under Armor’s clothing and shoes are produced in Asia and Latin America. The one manufacturing operation they have in the US is financially miniscule— a Maryland operation that customizes products for teams and celebrity athletes. As for Intel, it proudly notes that 80% of the world’s semiconductors are produced at Intel Vietnam. (For those who haven’t been paying attention, yes, after 50,000 American dead, Vietnam is still a communist dictatorship.) Finally, there’s Merck-- with “136 factories worldwide” and constantly accused of pricing its drugs far higher in the US than elsewhere. No secret: folks who don’t like Trump see him as a bully. The more charitable say he isn’t afraid to call someone out if he thinks it’s deserved. Either way, it’s clear he isn’t beyond using something like a high-profile advisory council to forcibly induce CEOs to bring jobs home or lower prices for Americans. And who better to excoriate in the court of public opinion than three companies that rely heavily on the US consumer, make big bucks, and manufacture next to nothing in the US. CEO’s do not rise to the level of their own incompetence by being stupid. These three obviously got it-- ride with this President and it’s only a matter of time before the wheels come off. With the lug nuts coming loose, Charlottesville provided the African American head of Merck with a convenient out, and he took it. He skirted a public and potentially damaging disagreement with Trump over long-standing and highly profitable business practices that he, his board, and their shareholders are certainly loathe to change. Merck’s lead gave the other (white guy) CEOs the racial cover they needed to bolt before their brands took an embarrassing hit as well. By mid-week, seven CEOs had ducked for the exits on two Presidential councils, forcing Trump to shut down both groups-- proving the old DC adage: He who would drain the swamp invariably loses all his alligator friends.