HALF-TIME 2013HALF-TIME 2013

Tuesday, July 30th 2013 | 155 Bovet Rd, 1st Floor Conference Room, San Mateo, CA

Introduction

Pictures from my recent trip to Greece

Acropolis

Parliament

Greek Medical System

5 Euro for a visit at the county hospital which includes: blood test, EKG, X-ray and antibiotic

London

Words We Learned (or made up) in 2013

Tapering

What does this word mean?A) Taping two pieces of paper togetherB) Changing the width of your pantsC) The Federal Reserve is lowering the amount of

assets they buy

Words We Learned (or made up) in 2013

The Great Rotation

What does this phrase mean?A) The planets are realigningB) A Chicago Blackhawks hockey playC) Theory that there will be massive flows of money

out of bonds and into equities

Words We Learned (or made up) in 2013

Sequestration

What does this word mean?A) Method used to make orange juiceB) Ryan Seacrest is taking over your TVC) Large cuts in government spending

Words We Learned (or made up) in 2013

The Most Popular Word on Tabloid Covers in the Last Year?

A) ShockingB) WeddingC) Baby

Agenda

Where We’ve Been

Where We’ve Been

Where We’ve Been

2013 Performance (Through 6.30.2013)

S&P 500(Domestic

Stocks)

+12.6%

DJ Global ex US (Foreign Stocks)

-1.1%

10-year Treasury

Yield+2.49%

Gold-28.2%

Indices are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.

Experts Opinions

“The great bond bear market has begun” – Bill Miller

Legg Mason

From January 11, 2013 NY Times article

Experts Opinions

“I’m afraid there’s going to be ashes in our stockings this year, and that applies to all asset classes. Bonds are priced not just for perfection, but with close to 0 percent yields. The juice has been squeezed out of the orange.” – Bill Gross

Pimco

From January 11, 2013 NY Times article

Experts Opinions

“There are a lot of reasons to be optimistic, but cautiously so.”

– Karl Case Wellesley College

From January 11, 2013 NY Times article

Experts Opinions

A Couple 4th Graders

All-Time Highs

Stocks have rallied to fresh all-time highs in 2013 Best first half for stocks since 1999 Is the rally sustainable? Historically speaking,

unwise to sell at all-time highs

Average rally following all-time high is 28%

Based on the S&P 500 Index from 1928-2013

Government Austerity

Government spending cuts are a drag on economic growth

U.S. tax increases plus sequestration estimated to reduce GDP by nearly 2% in 2013

Consumers Remain Resilient

Despite higher taxes, consumers continue to spend more and gain confidence

Consumers confidence at five-year highs

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watchhttp://www.conference-board.org/data/consumerconfidence.cfm

Wage Growth Stubbornly Low

Even those fortunate to have jobs aren’t getting big raises

Wage growth has mostly remained below 2% since 2009

Meanwhile, consumers continue to deleverage U.S. consumer debt is $1.37 trillion below its 2008

peak

Where are the Jobs?

Job growth remains weak Job growth remains weak Unemployment rate stubbornly high Labor force participation has sunk to multi-year lows

Is Housing Back?

Housing bubble burst was a major contributor to previous recession

Finally starting to see signs a recovery is underway Home prices rising at double-digit pace New housing starts picking up

Bernanke Signals Exit

• Federal Reserve Chief Ben Bernanke surprised investors by signaling economy is healthy enough to slow QE later this year

• Based on improved forecasts, asset purchases will conclude sometime in 2014

Inflation? What Inflation?

Easy Federal Reserve policy hasn’t resulted in inflation

Two key measures, PCE and CPI, indicate the rise in U.S. consumer prices has been consistently below 2%

Interest Rates Increase

Investors preparing for shift in Fed policy have stampeded out of previously best performing asset classes

U.S. treasury yields have increased, while Gold has gone down

Where We Are

Rising stock and home prices creating “Wealth Effect”

U.S. is still a “Tale of Two Nations” Consumers gaining confidence despite

structural economic issues Corporations have lowered expectations Geopolitical tensions bubbling Stocks trading just below all-time highs

Not Many Invited to the Party

But… Those That Have Are Spending More

Automobile sales continue to strengthen

But… Those That Have Are Spending More

Record breaking art auctions in May

Corporations Lower the Bar

Expectations remain that earnings growth will accelerate in 2014

Geopolitical Tension

U.S. has decided to send weapons to aid Syrian rebels fighting the Assad regime

Russia isn’t pleased with this response Ex-CIA employee

Snowden situation has created more tension with both China and Russia

Where We May Be Going

Where We May Be Going

What to Watch

Fed Exit – Impact on Financial Markets China’s Economy Slowing European Economy Money Flows: Will We See Great Rotation? Geo-Political Risks

Fed Exit – Impact on Financial Markets

Federal Reserve believes economy is strengthening

If they’re right, will interest rates continue to rise? Can consumer spending hold up as borrowing

costs rise?

China’s Economy Slowing

European Economy

Money Flows: Great Rotation?

Some market experts predicted a “Great Rotation” will begin in 2013

Massive outflow of $ from bonds back into stocks Finally started to see some movement after

Bernanke signaled change in Fed policyBond mutual fund flows

http://www.businessinsider.com/el-erian-explains-the-great-rotation-2013-2http://www.valuewalk.com/2013/06/june-worst-month-bond-mutual-funds/

Geopolitical Risks

Should military conflict arise with another major economy, the effects could be severe

Tensions with China and Russia are higher than at any time in recent history

Remember to Laugh!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All

performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Investing is subject to risks including possible loss of principal. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. Bonds are

subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.

Leonidas Maheras is a LPL Financial Advisor with, and securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

Thank You For Your Continued Support!