2015 Outlook The Rising Middle Class and Its

Economic Impact

John E. Mullins, CPA/PFS, CFP Brian J. Hayes

Greystone Financial Group, Inc. One Riverway Suite 1200

Houston, TX 77056 713-860-0202

U S Economy 2014

Growth rate 2.3% Consumer price index 1.7% Unemployment 5.8% Debt to GDP 106.2% Quantitative easing ends OIL Source: Economist and OECD Economic Outlook

Euro Area Economy 2014

Growth rate 0.8% Consumer price index 0.5% Unemployment rate 11.5% Debt to GDP 107.7% Financial solvency issues reappear ECB next step? Source: Economist

Japan Economy 2014

Growth rate 0.5% Consumer price index 2.7% Unemployment rate 3.5% Debt to GDP 229.6% Abenomics Fiscal Stimulus Monetary Easing Structural Reform Interest rates Source: Economist

China Economy 2014

Growth rate 7.3% Consumer price index 2.1% Unemployment rate 4.1% Debt to GDP 22.4% China is transitioning from Capital Formation To Consumer Economy Source: Economist

Geopolitical

• Russian aggression • ISIS-Syria-Iraq-Afghanistan • Iran • Israel and the Middle East • North Korea • China’s territorial disputes • Terrorism in general • Cuba • Saudi Arabia and OIL

2015 Growth Outlook

United States 3.0% EU Area 1.1% Britain 2.6% France 0.8% Germany 1.3% Italy 0.4% Greece 2.3% China 7.0% Japan 1.1% Source: Economist

United States 2015

• Slowing global growth affect GDP? • Wage growth rising • Labor productivity gains slow • Capital spending rising-Transportation-IT • Impact of rising interest rates • Reduced shale development • Stronger dollar • Political gridlock • Earnings growth 5% • M&A activity to remain stable Source: Ned Davis Research

United States

United States Budget 2015

Sources and Application of Revenue

Taxation $2.200Trillion Trust Fund Revenue 1.120 Borrowing .561 $3.880Trillion Mandatory Spending $2.560Trillion Discretionary 1.070 Interest on Debt .252 $3.880Trillion Source: OMB

Europe

• Monetary easing may expand • Rising nationalism could slow austerity • Greece may need bailout again • Italy may have bank failure • EU may go into deflation • Euro on par with dollar possible more likely 2016 • Declining euro will help exports • Monetary policy alone cannot correct EU

Source: Ned Davis Research

China

• Capital formation to consumer economy critical • Projected growth slowing 7.8% to 7.0% • Real estate values declining • Prior misallocation of resources • One child policy • Wage growth pressures • Xi government focused on economic growth • Renminbi may strengthen against dollar • China Bank tightened but easing probable

Developed Nations Overview

• Deeply in debt • Ageing population • Rising social costs • Rising regulatory hurdles • Geopolitical tensions • Energy dependent • Long term outlook questionable

What is Missing

Has to be bigger than the political class “The elixir of life”

Sustainable Growth

Prior Growth Periods

1946-1968, the United States was the only developed nation capable of producing goods. 1968-1982, entered a period described as Stagflation. A combination of a faltering economy and high inflation. 1982-2000, the personal computer and the internet changed the world. 2000-Present, financial meltdown, low labor participation, political divisiveness, doubling national debt, most volatile financial decade over past 18. Source: Jeremy Siegel

Future Growth

• A tipping point in Human History • Similar to the Renaissance Period • Global transition from subsistence level living • Rise in the Middle Class • 70-100 million people per year joining the middle cla • Asia Pacific region consumer spending $3 Trillion to • $30 Trillion by 2030 Source: World Bank, Brookings Institute, Oppenheimer, Basel minutes

Growth with Volatility

History gives us a guide. Rising middle class and education shifts attention from subsistence level living. Renaissance, Enlightenment Period ushered in a period of political and social unrest. Fast paced growth coupled with geo-political volatility.

Implications

• Basic consumer goods • Capital formation • Education • Health • “Rising tide lifts all boats” John Kennedy • Increased tension • Rising commodity prices

United States Will Benefit

• Global presence in dominant industries • Technical capability-Innovation • Distribution system • CAPITAL-Lifeblood of economy • Educational system • Positive birth rate • Energy-A game changer

Conclusion

• Tepid global growth • Euro parity with dollar • Capital flow to the United States • Rising wages • Interest rate hike • Legislation during lame duck period? • Bank failure in Italy? • Shocks during 2015 • Energy • Rise in the Global Middle Class

Thank You

Greystone Financial Group, Inc.

Houston Texas 713-860-0202 Troy Michigan 248-267-1270

www.greystonefg.com