THE BEAR & THE BULL

9/11/2016 SFANewsletterVolumeIII

UNIVERSITYOFSOUTHFLORIDA

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The Bear & The Bull S F A N E W S L E T T E R V O L U M E I I I

Table of Contents

UNUSUAL MARKETS – VINTAGE WINE ...................................... 1-2

JANET NICHOLS Q&A ...................................................................... 3-7

COMPANY SPOTLIGHT – NVIDIA A DIFFERENT BEAST ......... 8-9

STUDENT FINANCE ASSOCIATION................................................10

CREDITS ............................................................................................... 11

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Unusual Markets – Vintage Wine

Denys Klimyentyev Investor interest in alternative investments has skyrocketed in recent years, as affluent men and women with cash to spare look to move their wealth into anything ranging from private equity to 60’s Aston Martin models. This has created fascinating market conditions for rare commodities that were once (and arguably still are) exclusive only to the wealthiest of collectors, some of which have appreciated at unbelievable rates against the test of time. The demand for fine wine has existed for as long as human civilization. However, it wasn’t until the reign of Napoleon III of France that the good wines were separated from the truly great. He ordered the creation of a classification system where the four finest types of French wine (later expanded to five) were ordained Premier Cru, or “first growth”, essentially the rockstars of the wine world. Over 160 years later, little has changed, and the 1855 Classification still sets the bar for what is considered a quality product. For example, a single bottle of the renowned Chateau Margaux, considered Premier Grand Cru, retails at $790 USD on average. Almost every bottle put on the market is snapped up by collectors almost immediately. The so called “investment grade” wines are simply wines that have a high demand on a secondary market, coming predominantly from the Bordeaux region of France. There is no firm definition,

though the running definition seems to be wine that can appreciate in-bottle. Given the somewhat low volatility around fine wine prices, this isn’t an investment that’s ripe to make a quick profit from. Nor is it even widely considered a valid investment asset class, since the actual amount of investment grade wines totals less than 1% of the world’s total supply. These wines were historically sold at specific auctions, mostly to a market consisting of other enthusiasts.

So how does a 750ml bottle of 2000 Mouton Rothschild compare against more conventional securities? Ironically, wine markets are actually quite illiquid as far as investments go, in part because investment wines are rarely ever sold by the bottle except for the rarest of vintages. This is very much a niche market, totaling at approximately $4 Billion USD worldwide. The market demand for these vintages is driven by a wide variety of interwoven factors including scarcity, brand name, age, grape ripeness and (most importantly) connoisseur opinion. This makes it

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challenging to directly compare returns from wine investment to other types of securities. There are definitely opportunities in this market for the savvy investor to exploit. Had you bought a bottle of the aforementioned 2000 Mouton Rothschild at around the turn of the century, you would have seen it appreciate more than 300%. It is not uncommon for fine wines to hold their value even for decades, provided they are stored in specialized cellars under ideal conditions. More than ever, digital wine auctions are slowly replacing live ones. The London International Vintners Exchange (Liv-Ex) has become to wines what the New York Stock Exchange is to securities. The panel in charge of the exchange devised several indices for tracking the prices of a selection of investment wines, which is to date by far the most comprehensive attempt at standardizing the previously subjective valuations for rare vintages. On the Live-Ex website, wines can be bought, sold, and stored in large quantities, adding back liquidity to a market starved of ways to distribute the product. The fine wine market has even developed a basic futures option, where rights to buy wine En Primeur, or before the wine is bottled, are sold. Enthusiasts will sometimes buy certain vintages En Primeur because wines have a fairly predictable pricing pattern: They are often far cheaper before they are bottled and hit peak value right before they mature.

However, there are serious risks involved in wine investing, aside from wine spoiling in-bottle. Two identical bottles even from the same vineyard can vary significantly in quality. Wine fraud schemes, which can be as simple as relabeling a cheap wine, run rampant even in established Markets. Investors must research their product and do their due diligence to avoid falling prey to very convincing Ponzi and counterfeit Schemes, especially rookie investors with an undeveloped eye for quality. Interestingly, no one man is more powerful in this market than Robert Parker, a seasoned wine writer and critic who devised a simple ratings system based on a grade from 50 to 100. He is widely considered the world’s leading expert in vintages, largely because few critics can even afford to try the amount of fine vintages he has graded. A top rating from Parker can add as much as several thousand dollars to the valuation of a fine wine, the equivalent to a 5 star Morningstar Rating. Though fine wine will likely never replace more conventional investments in an investor’s portfolio, it’s not without its merits either. More investors than ever are starting to see the appeal an investment that can steadily hold its value and even significantly appreciate over a lengthy period of time, a rarity in today's markets. It seems likely that this newly digitalized market will thrive in volatile worldwide conditions as investors search far and wide for fresh ways to generate returns.

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Janet Nichols Q&A: “You could be the smartest person in the world… but if you can’t market your services to the outside world it doesn't matter you’ll be doing that alone

in a room” Nicholas Silva

Janet Nichols is a CFP and currently a Managing Director of Investments at

Nichols Geegan King Family Wealth Advisors of Raymond James with more than $500 million in asset under management as of 5/1/2016 and over 35 years of experience in the financial service industry. NS: Nicholas Silva JN: Janet Nichols NS: Can you tell us a little about your background? JN: Well I’m a Tampa native, I grew up here in Tampa, my dad went into state government in Tallahassee and I moved up there when I was ten. I went to prep school in New England then went to Phillips Exeter Academy in New Hampshire. I graduated when I was sixteen and came home. Started working, started college but when I was eighteen I started to intern with my stepfather, who was a financial advisor at the time they were called stockbrokers and that was in 1981. That's the first time I learned anything about the stock market. It was interesting; we didn't have computers back then, we had these things called

Quotron, which you can get stock quotes on, sort of a teletype machine that had these keys on them that are specific to the stock market. I thought that was interesting, I wanted to learn all about the machine and what all these symbols meant. One thing led to another and I was working there full time that led me to having to take all my classes at night and that's how I got into the brokerage business.

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NS: What did you go to college for? JN: I went to USF I was in the college of business and was a marketing major. I became a marketing major because there was an idea that you had to be a finance major, economics major. My stepfather who was my mentor and business partner, he said we’re not going to crunch numbers, not going to be an analyst, you’re not going to be an investment banker you’re going to deal with human beings and emotions mostly what your going to try to do is influence people in certain ways. Ways that we thing are good for them, where trying to influence investment behaviour and marketing was about influencing behaviours. The toughest thing you will ever sell is an intangible, we don't sell appliances, cars, or technological we sell are selves and ideas that’s tough because you cant see it, touch it, feel it and there are a lot of competing people out there trying to sell the same set of intangibles. It sort of something you describe but can’t prove, you have to be in this job, you could be the smartest person in the world and know a lot about portfolio construction, but if you can’t market your services to the outside world it doesn't matter you’ll be doing that alone in a room. So he said take marketing and I did. I would probably suggest that now a days that people take psychology courses because the technical aspect of this job is easy, getting people to override emotion, and doing the right thing is the hard part. So we deal a lot with people’s psychology that deals with money, family, power, and relationships with between spouses. It took me seven years to finish college, however while I

was finishing college I was also getting all my licenses and my CFP (Certified Financial Planner). So by the time I turned twenty-five. I had finished college, all my securities licenses, insurances licenses, commodity licenses and I was a CFP. After all I had all my credentials I started working with some of the clients and eventually when I was twenty-nine they let me go into the training program which made me a full fledge advisor. NS: What would you say would be the best lesion you have learned? What it be the human aspect of the business? JN: The best lesson I’ve learned is that sometimes it’s really tempting some times to lie your way through something. Maybe you screwed something up and you could fix it with out telling a client or lie about what kind of returns people should expect. Because they figured that if the guy next door say you could get 7-8% and I tell you 9-10% and I’m pretty sure that's unlikely in the current environment I can get that person. We see advisors lie about there practices how much money they have under management, they lie about there compliance records. If you have good clients, they are mostly smart people. Most of them have made their own money and are not stupid; if you lie to them they are going to know. So don't ever be tempted to lie it will come back and bite you hard. When your young you may not be tempted to lie but not tell the whole truth and you have to. When your dealing with people’s money if you lose their confidence in your honesty, we can fix everything else but we can’t fix

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that and you've lost them. Be honest even if it hurts even if it’s going to cost you money. NS: What has allowed you to last in the job so long? JN: About 80% of the people that make it through the training program and understand its very hard to get hired into this business there is a huge screening on the frontend and then its very hard to get through all those hoops to get started. Two years out after starting 80% of those people are gone. It is incredible you might start out with a 1000 decent candidate in the font door to end up with a small hand full of good advisors. I would say that people who can’t handle their own emotions you’re not going to be able to clam people down, you can’t be the emotional person. Even if you’re not sure what are happening, it’s like a boat captain you have to give them a sense of stability. People that are very emotion that go to extremes of fear and euphoria do not work out well in this business they will wear out at some point. Part of what keeps me in this business is I think what we do is very valuable we’ve helped families preserve wealth, keep them from making terrible mistakes, made sure they had the right insurance in place. We are here to help people, just like doctors help you from a health stand point. Second to health is money what helps me is I’ve gotten to understand how important the work we do is for people and for families. I’ve gotten to see people through the entire investment life cycle and how we’ve made a significant difference. Pride in

what you do helps you get through the rough times. NS: Would that be the most enjoyable part of your job? Helping people. JN: Yes, what I really like is pure financial planning, the stock market is this bucking bronco. A lot of times it is very irrational and you have no control over it. But if your talking to people about estate planning, tax planning, educational funding does are rules and we know what does rules are and we can exampling it to people and we can explain how they can use those rules to their advantage. Its not that I don't have to deal with the stock market I do but that's a lot more stressful then working with those things have structure. NS: You got into the business in 1981 the peak in interest rates what do you make of a world with in some place zero to even negative rates nowadays?

JN: This is a problem. Because people’s perception of bonds has been shamed by the past 35 years, which has been a declining interest rate environment.

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Which is good for bonds, very few people remember prior to 35 years ago as investors. People’s perception of bonds is that they are safe. They are going to give you this nice income; they are going to provide balance and security in your portfolio. The problem with that outlook is that right as we have all these baby boomers retiring thinking bonds are going to do this for me, we are right now at the riskiest point for bonds in my entire career. The interest rate and risk is at its highest and the returns that you are getting from bonds is at its lowest in 35 years. So you are taking the most risk for the lowest return. So a lot of people have been told, as you get older you need to increase your bond allocation, I think people are going to get hurt by that. This is a big issue; it’s something that we talk to people about. There’s this whole thing that you should have the inverse of your age. If you are 65, you should have 65% bonds and 35% stocks, that’s going to be an issue with these people. This is a problem and we are worried about it. Not for our clients, but there’s a lot of people out there not talking to smart financial advisors and think that this is safe thing to do. This will lower their portfolio with a 2 or 3% loss. They are not even going to keep up with inflation and taxes. They may go negative because of interest rates. From an investment standpoint that is probably the biggest thing that we are graveling with right now is kind of redefining the rule of thought of having people look at bonds differently. NS: What has surprised you the most in your job so far?

JN: Wow, a lot of things have surprised me. I have to think about that for a minute, I could think about a million things that have surprised me. I guess one of the things that surprises me is this perception of gender rules, you know you get all these people stating that women need to come on board to serve women clients, in the south I tend to see that men gravitate more towards women and women gravitating more towards men in certain areas, because they look at men as, they do those kinds of jobs. They are money people. I have not found that women necessarily gravitate more towards females, where men interestingly say I don’t want my portfolio guided by some other guy. They tend to look at women as being more conservative, they find that more attractive, taking less risks. So if you have asked me if in business women tend to gravitate towards women, I would have thought that, yes. That would make sense but that is not the case. What else surprises me, it surprises me that there are still people that are acting like old fashioned stock brokers ok. They still haven’t figured out that the only way we can add value to Vanguard or Schwab or T Rowe Price that will execute a trade for $7 is to do all those other things we do, all the planning things that we do. So it surprises me that those guys are still surviving, I don’t know how they are doing it, I don’t think that they have much longer in this industry, because people are just not going to pay for transactions, they don’t have to. I’ll give you one more thing I guess that surprises me. There is a feeling that the very wealthy have all the bases covered, and so we are dealing with big figure clients,

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there are a decent number of those, there is this perception that surely they’ve got their accounting, surely they’ve got there estate planning in place, surely they understand because they are smart business people. They were small business people, entrepreneurs. A lot of them don’t. I’d say probably more than half. They might have $20mil with us, but they just haven’t gotten around to it, they don’t have powers of attorney in place. They haven’t thought about effective ways to give to charities, maybe they are not working with a very good CPA. Guess what surprised me is that I always had this impression that the very wealthy were well served, and what I found that a lot of these wealthy, are being barely served. That was a little shocking you know. I guess those are the 3 things that have surprised me. NS: You brought up philanthropy, what is the importance of giving back to the community once you become successful? JN: Some people don’t think it’s important. I think it’s very important, I think there is a lot of discussion about whether there really is such a thing as ultraism, if something makes us feel good then is it altruistic, maybe not, I like giving money, I like seeing what my money can do for other people. Some people are not wired that way. We have to figure out how our clients are wired. Most people who have been successful in this community consider that a responsibility, some have that philanthropic responsibility for a

religious standpoint, some folks just say hey, this community is where my wealth derives from, this is where I built my business, I have a responsibility to share some of that, it’s very individual defined. So we have clients who are very interested in philanthropy and some I don’t want to talk about that. You want to lay it out there on the table and see if they are interested in it, and if they are then you want to help them work thru that in the most effective way to make sure they are vetting the organizations properly, make sure that they are giving away in the most tax effective way, but the answer is, I think it’s important, but not everybody does. And you kind of get to know in the Tampa community who’s working in the community, it does not just have to be money. Are you willing to spend time? Are you willing to be on a mentoring program or serve with big brothers and big sisters and be on boards. I told my kids your responsibility is to support yourself eventually to support a family and ultimately to do something in your community. If you are not doing all those things you are not a fully rounded fully successful person in my view.

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A Different Beast

Roger Sentongo

NVIDIA is a high end Graphics Processing Unit (GPU) maker that commands an 80% market share of the segment. Historically, their products have been geared towards hardcore gamers and custom gaming PC makers, but the company is now gaining growth in new markets. The company has maintained steady growth in the gaming market, but most of the percentage growth in revenues over the past year has come from new markets, such as autonomous vehicles and virtual reality (VR) technology. Despite these developments, over 50% of its revenues still come from gaming as evidenced by Q2 2016 earnings of $687 million. Next we’ll look at the most striking segments.

AUTONOMOUS VEHICLES

The company, through its NVIDIA DRIVE solutions, has developed partnerships with automotive companies that want to implement visualization technologies for their autonomous products. The company’s GPUs provide a suitable processor technology for autonomous cars to visualize terrains and objects in their path, and this has led to an increase in revenues in the segment of $113 million dollars in Q2 2016, a 47% increase from the previous year. Notable companies using its GPUs currently include Tesla, BMW, Mercedes-Benz, Volvo, and Audi.

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DATACENTERS

The company launched its new NVIDIA Tesla P100 GPU data accelerator in Q1 2016 based off its Pascal architecture. These accelerators are a type of processor used by organizations of all kinds to increase the performance of their data collection and sorting efforts while lowering the cost. Organizations ranging from cancer research centers, to automotive companies have started installing the company’s accelerators. In addition, the company’s new accelerator leverages GPU technology to offer twice the performance of its closest competitor, Intel’s CPU based Xeon Phi 7120 data accelerator. This new growth segment provided $143 million in Q2 2016, a whooping 63% growth in revenue over the previous year.

VISUALIZATION

The company launched a new 3D rendering engine called Iray-Vr to enable the creation of photo-realistic 3D virtual worlds. This rendering engine is already compatible with all major 3D object creation software such as 3DS Max and AutoDesk Maya. This 3D software is mainly used in movie studios for CGI and by architectural firms for creating graphical impressions. In addition, the company recently launched its VRWorks APIs to enable game developers to fully utilize the company’s Virtual Reality compatible GPUs. These products have enabled the company to garner revenues of $189 million in Q2 2016, a 41% growth over the previous year. In conclusion, the company is reaping the benefits in both earnings and market cap, as it adapts both its products and its business model away from just high-end gaming. These changes will also enable the company to maintain its growth and stay relevant in the face of paradigm shifts in the technology sector.

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Finance News Analysts:

Jeremy Davis Nicholas Silva Roger Sentongo Dennis Klimyentyev Heriberto Ramos

B.S. Finance 2017 B.S. Finance & Economics 2016

B.S. Finance 2017 B.S. Finance 2017 B.S. Finance 2016

JeremyDavis2@mail.usf.edu Nsilva1@mail.usf.edu Rsentongo@mail.usf.edu Dklimyentyev@mail.usf.edu Heriberto1@mail.usf.edu (813) 495-1285 (772) 618-0412 (813) 340-8355 (813) 400-9976 (813) 260-0775 Please feel free to contact any of us with feedback or suggestions. If you are interested in becoming a writer for The Bear & The Bull, please contact Nicholas Silva or Jeremy Davis.