Broyhill (Q1-10 Strategy & Themes)

8/14/2019 Broyhill (Q1-10 Strategy & Themes)

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MacroStrategy


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First Quarter Investment & Strategy Conference Call

Conference Dial-In Number: (218) 339-3600

Participant Access Code: 722682#

Conference Playback Number: (218) 339-3699

Access Code: 722682#

Thursday, January 28th, 2010

The call w il l begin promptly at 11:00AM EST


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EconomicOutlook


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Economic data at home may surprise on the upside

Economic Outlook | 4


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Global growth driven by emerged markets



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But leading indicators likely to peak in early 2010

Source: ECRI Institute


-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

Weekly Leading IndexYear over Year % Change (Smoothed)


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Red Flags: inflation pressures heating up



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Red Flags: ddecline in global short rates is behind us

-150%

-100%

-50%

0%

50%

100%

150%

200%

250%Federal Funds Rate

Year over Year % Change (Smoothed)


Source: Federal Reserve Bank of St. Louis


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Red Flags: money growth slowing



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Red Flags: global growth engine is stalling

Source: StockCharts.com



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Secular risks have yet to retrench

Source: Decision Point



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Due to diminishing returns from debt-financing

Source: Ned Davis Research


Debt Range

Decade Change

in Debt

(Billions $)

Decade Change in

GDP (Billions $) Debt/ GDP GDP/Debt

1950 1960 337.6 248.0 1.36 0.73

1960 1970 752.1 491.3 1.53 0.65

1970 - 1980 2,785.2 1,654.9 1.69 0.59

1980 1990 8,562.8 2,922.3 2.93 0.34

1990 - 2000 12,550.0 4,026.0 3.12 0.32

2000 July 2009 27,403.6 4,543.5 6.03 0.17


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With negative implications for trend growth



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InvestmentImplications


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Yields likely to test the top of downtrend

Investment Implications | 15


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Strong economy strong equity markets



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Sentiment has moved from one extreme to the other



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Momentum is slowing



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Historical precedents are choppy



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Valuations not even in same ballpark as prior bulls


Source: Robert Shiller


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Along with any number . . .

Factor 1982 2010

Macroeconomics

Inflation - Trailing CPI 10% and falling -2% and rising

Household Debt to GDP 49% and rising 95% and falling

Personal Savings Rate 10% and rising 4% and rising

Tax Rates Highest Tax Bracket 69% and falling 35% and rising

Economic Regulation High and falling Low and rising

Global Trade Low and rising High and falling

Baby Boomer Ages Entering Peak Saving Years Entering Peak Spending Years

Interest Rates

Federal Funds Rate 18% and falling 0% and rising10 Year Treasury Bond Yield 15% and falling 3.9% and rising


Source: Katana Capital LLC


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BroyhillsBest


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Not all stocks are overvalued

Broyhills Best | 24

1.3%

0.5%

6.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

U.S. Equities (Large Cap) U.S. Equities (Small Cap) U.S. High Quality

AnnualRealReturnOver

7years

Projected Annual Real Return Over 7 years

6.5% Long-Term Historical

U.S. Equity Return

Source: GMO 7-Year Asset Class Return Forecasts


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Emerging markets likely to trade at a premium

Broyhills Best | 25


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Source: Damien Cleusix, Global Tactical Asset Allocation - Equities Q1 2010

2010 Sleeper? Japan trading at book value

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Gold is still cheap

Broyhills Best | 27


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Energy demand drivers point to higher oil prices

Source: EIA Annual Energy Outlook 2010

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SecularRisks


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No shortage of risks on the horizon

Government balance sheetsand sovereign debt

Policy mistakes andcomplacency

Higher interest rates andinflation

Consumer deleveraging and

deflation

Protectionism and populism

Secular Risks | 31


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Contact Information

Broyhill Asset Management

800 Golfview ParkPost Office Box 500Lenoir, NC 28645

Phone: 828 758 6100Fax: 828 758 8919

For more information please contact:

Mr. Christopher R. Pavese, [email protected]

Contact Information | 32


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Disclosures

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

This material has been prepared solely for the purposes of illustration and discussion. Broyhill Asset Management is the marketing namefor the investment management business conducted by Broyhill Asset Management, LLC. and its affiliates. Broyhill Asset Management, LLCis an SEC Registered Investment Advisor. Private investment vehicles are offered through Broyhill Wakin General Partners LLC, SuretyCapital Management LLC, and Broyhill Strategic Partners LLC, and are only offered by delivery of confidential offering memorandum andsubscription materials to eligible investors who meet certain statutory and/or regulatory criteria. Each General Partner is a separate legalentity and is affiliated with Broyhill Asset Management, LLC through common ownership and control.

Under no circumstances should the information contained herein be used or considered as an offer to sell, or solicitation of an offer to buyany security. Any security offering is subject to certain investor eligibility criteria as detailed in the applicable offering documents. The

information contained herein is confidential and may not be reproduced or circulated in whole or in part. The information is in summaryform for convenience of presentation, it is not complete and should not be relied upon as such.

Any information, data, statement, opinions, or projections made herein may contain certain forward looking statements, projections, andinformation that are based on the beliefs of Broyhill Asset Management as well as assumptions made by, and information currently availableto, Broyhill Asset Management. Such statements reflect the view of Broyhill Asset Management with respect to future events and are subjectto certain risks, uncertainties and assumptions (including, but not limited to, changes in general economic and business conditions, interestrate and securities market fluctuations, competition from within and without the investment industry, new products and services in theinvestment industry, changes in customer profiles, and changes in laws and regulations applicable to Broyhill Asset Management). Shouldone or more of these other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may varymaterially from those described herein.

All information, including performance information, has been prepared in good faith; there are no representations or warranty expresses orimplied, as to the accuracy or completeness, of the information, and nothing herein shall be relied upon as a promise or representation as tothe past or future performance. This material may include information that is based, in part or in full, on hypothetical assumptions, models,and/or other analysis (which may not necessarily be described herein), no representations or warranty is made as to the reasonableness ofany such assumptions, models, or analysis. The information set forth herein was gathered from various sources which are believed, but notguaranteed, to be reliable. Unless stated otherwise, any opinions expressed herein are current as of the date hereof and are subject to changeat any time. Accordingly, neither Broyhill Asset Management not its principals or affiliates make any representations as to the timeliness ofany information in this presentation.

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Broyhill (Q1-10 Strategy & Themes)