Decision Moose Global Financial News & Analysis

2018.01.12 through 2018.01.21

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 01.12.2018

On November 10, 2017, Japan Equities (EWJ) @$59.08 replaced Cash as the model’s top choice. 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— Busting Out in 2018, week 2 Equities worldwide again surged in week two of 2018. Once again, only long US Treasuries (-1.2%) and the US Dollar (-1.0%) fell. Economic optimism continued to stoke the 14-month uninterrupted US rally that began with Donald Trump’s election. The surge has left many equity markets overbought this week including the US, Europe, Japan, Asia-Pacific, and Latin America, but any pullback likely will be seen as a buying opportunity. US large caps (+1.6%) and small caps (+2.2%) showed healthy gains, and foreign markets rallied as well. Japan (+2.3%) and Europe (+1.6%) were the strongest. Latin America (+0.6%) slowed after last week’s 5.6% burst, as did Asia-Pacific (+0.8%). The commodity index (+1.3%) resumed its rally, along with oil (+4.5%) and gold (+1.3%). #1 Overbought Japan on a New Year Roll-- EWJ put in a two-decade high in early November, then slowly drifted higher at year-end as positive Asian trade data and the prospect of easier money in China as well as in Japan outweighed North Korean nuclear and missile threats. EWJ remains in the momentum model’s #1 slot. After a muted year-end performance, it gapped to a new high to open 2018 and continued even higher this week. With a 14-day RSI of 84, EWJ is severely overbought (70). Macro-economically-- Japanese Q3 economic growth was revised higher to an annualized 2.5% rate in December. That is improved, but hardly a boom. A slightly bearish Yen was up (+1.9%) this week, but still a benefit to Japanese exports. The Japanese business cycle is still sketchy, and it is global money creation that has fueled the worldwide equity rally led by Japan at the moment. With the Fed and the ECB backing out of QE, the Bank of Japan is the easiest money central bank left. Moreover the US tax reform should make the US more globally competitive, strengthening the Dollar further. That should add to Yen weakness, which is good for Japan’s exports. Tighter monetary policy in Europe and in the US should reduce demand there, including demand for Japanese goods and services, but that could be offset by the fiscal stimulus of lower US corporate taxes. Closer to home, tax cut optimism has kept US stocks near the top of the ranking table. #2 US Large-Caps (SPY) Increasingly Overbought in 2018-- As 2018 opened, US equities have joined in a global stock rally that left several regional markets overbought, including the US, where Homebuilders, Consumer Discretionary, Materials, Tech, Financials, and Industrials are all strong. At 84, 14-day RSI is overbought (70). #3 US Small Caps (IWM) Make Another All-Time High-- Small-caps took off in mid-August and by September, corporate tax cut talk on the Hill had spiked investor optimism in small caps to severely overbought levels. That put IWM in a holding pattern through October. Enthusiasm resumed mid-November once the US tax package was fleshed out and modified to help smaller (pass-through) companies IWM began the year at a new closing high last week and pushed higher this week. (14-day RSI is now at 74— and overbought (70). #4 Asia-ex-Japan (AXJL) Continues to Soar in 2018— A weaker Dollar, and strong equity markets in China, India, and Australia in 2017 paced the Asia-Pacific ex-Japan to new highs each month from August through December. It overcame a Chinese regulatory crackdown on shadow banking, NoKo saber-rattling, and an IMF report on China’s financial risks to break out at year-end. This week, it surged to a second new high to open 2018. Its 14-day RSI, however, is at 77— and overbought (70). #5 Europe (IEV) Gaps to Overbought New Year High— IEV posted a new 2017 closing high in early October, at which point the ECB announced that it would follow the Fed and begin scaling back its QE

Weekly Close This Week's Signal End Date

01.12.2018 HOLD Japan Equities (EWJ) 01.21.2018

purchases by half in 2018. That put a cap on IEV until the US tax reform passed in late December promising global stimulus. It has made three successive weekly highs since then. The tighter ECB has also bolstered the Euro, making IEV more attractive than its hedged alternative (HEDJ). Austria (EWO) is still pacing the region, followed by Russia (RSX) and Italy (EWI). Sweden (EWD) and Spain (EWP) are still the laggards. With a 14-day RSI of 81, IEV is overbought (70). Dollar Gaps to New Multi-year Low— The Dollar has made lower lows and lower highs since November, however, as it became more apparent that the tax cut stimulus would induce three Fed rates cuts and additional balance sheet normalization in 2018. Last week’s December jobs report came in below forecast, reducing near term Fed rate hike concerns and slowing the Dollar’s descent. This week, however, the buck resumed its decline, gapping to a new multi-year low below 91 on the dollar index. With its 14-day RSI at 29, UUP is oversold (30). #6 Latin America (ILF) Stil l Higher in 2018-- In the wake of Mexico’s 2017 earthquake, ILF dropped about 18% before testing intermediate support and holding in December. Thanks to a weak dollar and a rebound in copper and oil prices, ILF then pushed higher through year-end and into 2018. Argentina, Chile, and Peru are strongest. Mexico is still weak. With a 14-day RSI of 71, ILF is overbought (70). #7 Overbought Gold (GLD) Nearer Four Month High— GLD put in a new 2017 high @128 in early September, but quickly retreated from that overbought level. It bottomed in early December, after ignoring NoKo saber-rattling and following oil and commodity prices lower on a strengthening dollar. Lately, however, the dollar has backed off and commodities, including gold are rallying. GLD broke above short and intermediate resistance last week, and continued higher this week, but it still has a ways to go to recover its September high. With a 14-day RSI of 76, GLD is currently overbought (70). #9 T-Bond (EDV) Prices Sink Again on More Wage Hike Promises— The tax bill created a stagflation concern-- that $4T repatriated from overseas may require the Fed to tighten in 2018 to combat inflation, before the economy has had a chance to take off. In the past two weeks, those wage inflation fears have been stoked as several corporations announced wage hikes and bonuses as a result of the tax cut. That has bonds down, despite a weak December jobs report last week. EDV’s current 14-day RSI of 46 makes it neither overbought (70) nor oversold (30). Given that the Fed has stopped rolling over all the bonds on its balance sheet as they mature, bond prices will be under light but steady pressure and yields will have an upward bias, further helping the Dollar. (The Fed will allow $10 billion to roll off its $4.5T balance sheet this quarter, increasing quarterly in $10 billion increments until the total hits $50 billion starting in October 2018. Commodities ($CRB) and Oil Continue Higher—A very bullish CRB Index set another new high this week as global optimism surges in the new year. Oil prices have led all the way. The global economy is still healthy. Risks of a pullback in global equities do exist due to investor complacency and rising domestic and geopolitical uncertainty. The Fed has been scaling back on easy money for awhile, and Europe’s ECB, which is a couple of years behind the Fed, will formally begin lessening QE purchases in January. Both will remain “flexible”, however, should conditions unexpectedly deteriorate. NY Fed: Recession Chances Remain Low-- The NY Fed puts the chance of a US recession by December 2018 at 11.45%. That is slightly higher than last month’s forecast, but low enough that a major bear market (down 20% plus) in US stocks is unlikely. The Fed plan to (a) gradually phase out debt roll-over on their balance sheet and (b) hike rates three times in 2018 could change that, but for now, a correction is the greater downside risk.

Weekly Market Table-- thru 01.21.2018

RANK CI ASSET TS Trend 1 100% Japanese stocks (EWJ) 97% very bullish 2 88% US large-cap stocks (SPY) 100% very bullish 3 75% US small-cap stocks (IWM) 98% very bullish 4 54% Pacific ex-JAPAN stocks (AXJL) 100% very bullish 5 46% European stocks (IEV) 94% very bullish 6 33% Latin American stocks (ILF) 75% very bullish 7 -- CASH -- -- 7 17% Gold (GLD) 74% bullish 9 13% US Long Treasuries (EDV) 17% neutral

Ryan/CRB Indicator 94% hike rates

ST Interest Rate Equity Indicator 7% neutral

Volatility Index -30% slightly bullish

US Dollar Index -85% very bearish

Commodity inflation trend 100% very bullish

Oil 100% very bullish

CI is the "confidence index" measuring the model's overall confidence in the asset. It combines the relative strength (rank), and technical strength (TS). For more information, see the FAQs. Daily Recap— week closing 01.12.2018 Monday, Markets Mixed. The Dow’s record run to start the New Year cooled a bit, but the Nasdaq and S&P500 marked fresh highs, ahead of a robust economic calendar and the unofficial start to Q4 earnings season. The US dollar was solidly higher, leaving Treasury yields and gold little changed, and crude oil prices with only modest gains. Europe was mixed, and Asia began the week higher. The S&P 500 Index gained 5 points (+0.2%) to 2,748. Tuesday, Bulls Running Again. After a brief breather Monday, the bulls resumed their rally. US equities markets hit fresh highs with industrials leading the way. Financials also posted solid gains amid continued steepening of the Treasury yield curve. The US dollar added to its recent string of gains, despite disappointing reads on small business optimism and job openings. Europe was higher as the euro and the pound came under pressure, Asia was mostly higher with Japan back in action. Crude oil prices rallied to multi-year highs on continued global economic optimism and the expectation of tighter supply. Gold was lower. The S&P 500 Index gained 4 points (+0.1%) to 2,751. Wednesday, First Dip of 2018. After a record-breaking six-session run to start the year, US equities finished lower for the first time in 2018. Treasury yields extended their move upward, aiding financials. The US dollar trimmed its recent gain, helping gold to gain ground, as well as crude oil prices, which also got a boost from bullish oil inventories. Europe and Asia were mixed. The S&P 500 Index shed 3 points (-0.1%) to 2,748. Thursday, Stocks Erase Previous Dip. US stocks gained solid ground after dipping Wednesday as the major indexes resumed their push to record highs. Europe and Asia were mixed ahead of earnings season. Treasury yields were mixed, and the US dollar was lower, while gold and crude oil prices were higher. In US economic news, producer price inflation and jobless claims reports missed forecasts. The S&P 500 Index rose 19 points (+0.7%) to 2,768. Friday, Session and Week End Strong. US stocks finished the trading day and week with solid gains. Equities continued to set record highs amid signs of healthy consumer spending and upbeat retail sales. Treasury yields on the shorter end of the curve added to their recent run, bolstered by a hotter-than-expected core consumer price inflation report. Europe gained ground and Asia was mostly higher on positive China data. The US dollar came under pressure, helping gold and crude oil trade higher. The S&P 500 Index rose 19 points (+0.7%) to 2,786

Economy, Fed & Inflation-- thru 01.21.2018 Global Economy, Current Perceptions— The IMF’s global growth outlook is 3.6% and 3.7% for 2017 and 2018 respectively. In its October World Economic Outlook, before the US tax cut, the IMF cut 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 were expected to be offset by an improved outlook for growth in most of the euro zone and Japan; China is still seen growing by 6.8% in 2017 and 6.5% in 2018. (Upward revisions to most of these projections are likely in April 2018.) The Baltic Dry Index (1279), an international shipping measure and proxy for current global growth, fell this week after opening 2017 at 963. (It is still well below its 2010 peak (4640), retreating in 2014 and 2015, before rallying in 2016 and 2017.) Meanwhile, WTI oil price ($64.30)-- another proxy for world activity— rose this week on increasing global demand. Oil is well off its 2011 peak ($113), though above its 2008 crisis lows ($37). Copper ($3.22), a proxy for global construction fell, however. 10Y US bond yields over the past 13 weeks are up, a positive bet on the US economy. On balance, then, this week’s indications on the global economy are neutral. US Economy, Current Perceptions— Overall: A mixed to weak data week. The good: November consumer credit ($28B) up from October. November job openings (5.9M) unchanged, but strong. The bad: Weekly jobless claims (261K) worse than expected. December retail sales (+0.4%) up less than expected. December NFIB small business indicator (104.9) down month-to-month. November business inventories (+0.4%) and wholesale inventories (+0.8%) both grew more than anticipated. The ugly: Not much. The Fed, Current Perceptions: The Fed last met in December (12/13/2017) and raised the Fed Funds Rate (FFR) to the 1.25%-1.50% range. Meetings in July, September and November left the rate unchanged. Indications are that three more 2018 rate hikes are coming, and that the Fed will continue rolling Treasuries and mortgage-backed bonds off its $4.5 trillion balance sheet. It is allowing $10 billion to roll off this quarter, increasing quarterly in $10 billion increments until the total hits $50 billion starting in October 2018. A new Fed chair, Jerome Powell, will replace Janet Yellen in February, but little change is expected. The Fed’s 2017 GDP growth estimate is 2.5% and its inflation estimate is 1.7%. Longer term, 2.5% GDP and 1.9% inflation are expected in 2018. Yellen now anticipates a median 2.1% FFR in 2018, and 2.75% in 2019. December’s was the fifth 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 94% suggests Fed tightening is warranted. Commodities are very bullish. The yield curve steepened this week. Intermediate term, the curve is getting flatter, while median yields are rising, leaving our interest rate signal for stocks neutral. 3-month LIBOR yield @1.70% is up this week, while the 3-month T-bill at 1.41% is up. That puts the LIBOR/T-Bill spread at 29 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— Inflation pressures per the CPI and PPI are rising, but still relatively tame. Commodity prices and oil, meanwhile, are bullish, assisted by a weakening Dollar, implying increasing global inflation pressure. The Fed’s favorite gauge Core PCE is below their 2% target. December core CPI (+0.3%) warm. December CPI (+0.1%) cool. (CPI up 2.1% in the past 12 months.) December core PPI (+0.1%) cool. December PPI (-0.1%) deflationary. (PPI up 2.6% in the past year.) December import prices (+0.1%) cool. December export prices (-0.1%) deflationary. November 12-mo. PCE (+1.8%) below target. November 12-mo. core PCE (+1.5%) below target. Q3 gross domestic product (+3.2%) stronger than forecasts. Q3 unit labor costs (-0.2%) fell unexpectedly. Q3 GDP deflator (+1.8%) below target rate. Q3 employment cost index (+0.7%) up in line Q3 productivity (+3.0%) beat forecasts.

Commodities ($CRB) and Oil Continue Higher Commodities, Perceptions thru 01.21.2018— A very bullish CRB Index set another new high this week as global optimism surges in the new year. Oil prices have led all the way. Commodity prices rose 1.3% this week, following last week's 0.2% gain. That leaves them up 6.1% for the quarter (13 weeks), and up 0.8% for the year (52 weeks). At 196, CRB is above its short-term (50-day) average at 190, and above its intermediate-term (200-day) average at 183. A weaker US Dollar this week improved returns for dollar investors in commodities. Longer term, the weak dollar is a positive for commodities. Meanwhile, oil prices (USO) are also currently very bullish. Crude prices rose 4.5% this week,

following last week's 2.5% gain. That leaves them up 24.1% for the quarter (13 weeks), and up 12.8% for the year (52 weeks). At 13, USO is above its short-term (50-day) average at 12, and above its intermediate-term (200-day) average at 10. A strengthening US Dollar this week weighed on oil prices. Longer term, a weak dollar is helping oil. Commodities, Assumptions: JAN 1— Commodities last peaked in July 2014, ended 2015 down 48%, and completed 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 faded in the first half of 2017, after the Fed raised rates a second time in three months. It recovered in the second half, however, to finish at $62. The CRB has tracked oil throughout. As 2018 opens, the prospect of further global expansion is stoking demand for commodities and keeping the upward trend intact, despite the prospect of more Fed tightening. Current outlook: bull ish. The bull ish case: Despite the Fed and the ECB pulling back from quantitative easing and increasing interest rates, the developed world is still engaged in relatively accommodative monetary policy. The global economy shows signs of improving, boosted by a US economy expected to benefit from a huge corporate tax cut this year. Emerging markets are still growing at 5-7%. As a result, the Fed sees greater demand long term for commodities, and is aggressive about further rate hikes, which thus far have weakened the Dollar. In Europe, debt, refugee, and Brexit concerns are being managed, and growth is picking up. Optimism is up in Japan and Asia as well. The bearish case: Uneven growth and financial concerns in China, a stagnant Europe distracted by millions of refugees and Brexit, and a much tighter Fed in 2018 could all curb demand for commodities. Fed tightening removes the easy money floor under risk assets, reduces global liquidity, and demand for commodities. It could also eventually strengthen the Dollar and cheapen commodities should inflation fear cause the yield curve to stop flattening. On the supply side: OPEC is no longer in control. US fracking cut the price of oil, a key driver of the CRB.

#7 Overbought Gold (GLD) Nearer Four Month High Gold Bull ion, Perceptions thru 01.21.2018-- Gold Bullion (GLD) is currently very bullish and ranks #7 in the model-- less attractive than cash. Gold's price rose 1.3% this week, following last week's 1.4% gain. That leaves bullion up 2.5% for the quarter (13 weeks), and up 11.2% for the year (52 weeks). At 127, GLD is above its short-term (50-day) average at 122, and above its intermediate-term (200-day) average at 121. A weaker US Dollar this week improved returns for dollar investors in gold. Longer term, a weak dollar is helping GLD. GLD put in a new 2017 high @128 in early September, but quickly retreated from that overbought level.

It bottomed in early December, after ignoring NoKo saber-rattling and following oil and commodity prices lower on a strengthening dollar. Lately, however, the dollar has backed off and commodities, including gold are rallying. GLD broke above short and intermediate resistance last week, and continued higher this week, but it still has a ways to go to recover its September high. With a 14-day RSI of 76, GLD is currently overbought (70). Gold Bull ion, Assumptions: JAN 1— Gold peaked above $1900 an ounce in August 2011, and bottomed below $1050 (a six-year low) in December 2015, after 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, Gold remained in an 8% range for most of 2017 (1200-1300) until September, when it broke higher to test its 2016 high ($1367) and failed. It dropped to $1240, before the Trump tax cut passed and spiked gold to $1320 to end the year. Entering 2018, Fed tightening plans have the dollar weakening, while the new tax plan is slated to repatriate $4T in overseas corporate cash—both boosts for gold. Meanwhile, the fear trade comes in waves. ISIS terrorism, North Korean missiles, and the “Russian investigation”-- still remain, but in a diminished capacity of late. Current outlook: bull ish The bull ish case: Gold was headed up in 2017 until September when the apparent inability of the Republican Congress to pass Trump’s fiscal program, and the inevitability of a December Fed rate hike caused it to fall. The September-through-January period is traditionally gold’s strongest period, however, and that, along with subsequent passage of the tax-cut turned bullion around, and it is suddenly bullish going into 2018. 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. The T-bond/TIPs yield spread is already widening, indicating rising inflation fears. That is even before the US tax cut repatriates from $3-5T from overseas corporate coffers, potentially over-heating the economy and exacerbating inflation. The bearish case: Negative interest rates in 2016 put the cost of holding cash on a par with the costs of storing gold for the first time ever. Now, however, Fed quantitative easing is over. Rate hikes have begun, removing the easy money floor under all risk assets, and the Fed is paring its balance sheet. Moreover the ECB is scaling back its QE bond purchases in 2018. The US economy and the Dollar are expected to strengthen with Trump’s expansive tax reform. New investment will improve productivity and hold down inflation. Offshore financial crises in certain emerging regions are always possible, and would increase the demand for Dollars and US bonds, weakening 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 is slowing economically, while trying to deal with a shaky “shadow banking system”.

Dollar Gaps to New Multi-year Low US Dollar, Perceptions thru 01.21.2018-- The US Dollar index is currently very bearish. The US Dollar fell -1.0% this week, following last week's -0.3% loss. That leaves it down -1.9% for the quarter (13 weeks), and down -9.4% for the year (52 weeks). At 24, UUP is below its short-term (50-day) average at 24, and below its intermediate-term (200-day) average at 25. After hitting the bottom of a multiyear range in September 2017, the buck rallied into November on economic optimism and higher bond yields, as Congress advanced Trump’s tax cut plan. The Dollar has made lower lows and lower highs since, however, as it became more apparent

that the tax cut stimulus would induce three Fed rates cuts and additional balance sheet normalization in 2018. Last week’s December jobs report came in below forecast, reducing near term Fed rate hike concerns and slowing the Dollar’s descent. This week, however, the buck resumed its decline, gapping to a new multi-year low below 91 on the dollar index. 14-day RSI at 29, UUP is oversold (30). Dollar Assumptions: JAN 1-- The Dollar Index has been in a 91-103 range since the end of 2014. The Fed’s December 2016 rate hike found the Dollar at the top of that range, and a trend of lower highs, and lower lows continued throughout 2017 into September, when it plumbed the bottom (@92) of its multi-year range. Fed rate hikes (in December, March, June and December); a US special prosecutor; and a do-nothing Congress putting Trump’s pro-growth agenda at risk all contributed to the weaker Dollar. Uneven US economic data; uncertainty over Fed timing; and volatile currency markets have also played a role in the greenback’s volatility. Entering 2018, the Trump tax cuts are expected to lead corporations to repatriate $3T-5T in offshore cash, strengthening the US economy, but also increasing inflation pressure and the likelihood of additional Fed intervention. The US has a more restrictive monetary policy than either Japan or Europe. Its 2017 weakness has been due in large part to strength in the Euro, British Pound, Swiss Franc, and Japanese Yen, which should continue in early 2018. Current Outlook: Bearish Carry-trade thru 01.21.2018 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 up 1.2% this week. The Yen is neutral and up 1.9%. The British Pound is very bullish and up 1.2%. The Canadian Dollar is bullish and down -0.5%. The Aussie Dollar is bullish and up 0.5%. Currency vs. Dollar TS Trend Medium Term Implications for non-Dollar investors Euro (FXE) 93% very bullish Euro investors underperform the $ Moose Yen (FXY) -11% neutral Yen investors match the $ Moose Australian $ (FXA 58% bullish Aussie $ investors underperform the $ Moose GB Pound (FXB) 95% very bullish Sterling investors underperform the $ Moose Canadian $ (FXC) 72% bullish Canadian $ investors underperform the $ Moose

#9 T-Bond (EDV) Prices Sink Again on More Wage Hike Promises US Long Treasury Bonds, Perceptions thru 01.21.2018-- US Long-zeros 25y+ (EDV) are currently neutral and rank #9 in the model-- less attractive than cash. Long zero Treasuries fell -1.2% this week, following last week's -1.3% loss. That leaves them down -0.7% for the quarter (13 weeks), but up 5.0% for the year (52 weeks). At 118, EDV is below its short-term (50-day) average at 120, and below its intermediate-term (200-day) average at 118. A weaker US Dollar this week made the carry trade in US equities less attractive. The 10-year Treasury bond yield rose to 2.55% this week, from 2.48% the week before. Longer term, the yield curve is getting flatter, a bet on economic

weakness. It has been a very volatile four months in bonds. The promise of lower taxes (and a stronger than expected economy) pushed yields higher and bond prices lower into late October. Ultimately, however, the tax bill created a stagflation concern-- that $4T repatriated from overseas may require the Fed to tighten more in 2018 to combat wage inflation, before capital investment has had time to kick in and increase productivity. In the past two weeks, those wage inflation fears have been stoked by several corporations announcing wage hikes and bonuses as a result of the tax cut. That has bonds down, despite a weak December jobs report last week. EDV’s current 14-day RSI of 46 makes it neither overbought (70) nor oversold (30). US Long Treasury Bonds, Assumptions: JAN 1— EDV put in a bottom (@104) with the December 2016 FOMC rate hike, and retested that bottom with the March 2017 rate hike. Bond prices rallied after that, however, mounting a choppy advance in 2017 that peaked after the December Fed rate hike, right before the tax bill passed. Bonds occasionally got a flight-to-quality boost in 2017 from ISIS terror attacks worldwide, hurricanes, and the North Korean nuclear threat. On the domestic front, quarterly FOMC rate hikes-- despite job growth averaging less than 200K per month and low inflation— not to mention a US special prosecutor; a stalled Trump growth agenda in Congress; also helped bond prices. Current outlook: Bull ish. ` The bull ish case for long Treasury bonds primarily rests on four assumptions: (1) US and global growth remain anemic and inflation is not yet a problem. (2) The new tax plan will increase wage inflation before it enhances productivity and allows the economy to overcome the lingering fiscal and regulatory drag imposed over the last decade. Tighter Fed monetary policy in the face of anemic GDP increases the chance of further GDP weakness. (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. It is now using Trump “fair trade” demands to do more of the same. (2) Central banks are underestimating the inflation dangers associated with two years of worldwide monetary easing. Now that US corporations could repatriate 3-5 trillion in offshore cash, wage inflation will come home to roost. (3) The doubling of US government debt under President Obama increased the supply of Treasury paper going to market dramatically. The Fed purchased much of it under QE and been rolling it over when it matures. Now they have begun 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. The ECB’s easy money policies are being cut back, but ever so slowly, and will still restore growth, lessening demand for US bonds.

#2 US Large-Caps (SPY) Increasingly Overbought in 2018 US Large-Cap Stocks, Perceptions thru 01.21.2018-- US large-cap stocks (SPY) are currently very bullish and rank #2 in the model-- more attractive than cash. US large-caps rose 1.6% this week, following last week's 2.5% gain. That leaves them up 9.0% for the quarter (13 weeks), and up 22.4% for the year (52 weeks). At 278, SPY is above its short-term (50-day) average at 266, and above its intermediate-term (200-day) average at 251. A weaker US Dollar this week made the carry trade in US equities less attractive. Longer term, the weak dollar limits SPY. SPY has posted a new high every month since Trump’s election. The

S&P did pause in early August, dipping below its 50-day on White House disarray and monetary disagreements at the Fed, but it quickly recovered from mid-August on, as Congress and the President first promised and then delivered a massive corporate tax cut. As 2018 opened, US equities have joined in a global stock rally that left several regional markets overbought, including the US, where Homebuilders, Consumer Discretionary, Materials, Tech, Financials, and Industrials are all strong. At 84, 14-day RSI is overbought (70). US Large Cap Stocks, Assumptions: JAN 1— Dividend-producing US large cap stocks led both mid-caps and small-caps in 2014-15 and for most of 2016-17. In 2016, large caps were down in the three months prior to the election, foretelling a Trump victory. They then rallied on Trump’s election, consistently making new all time-highs without a 10% correction, even as the Fed finally began hiking rates (Dec’16, Mar’17, Jun’17, Dec’17) in earnest. From March 2017 on, SPY set new highs every month, ending 2017 20% higher. Passage of a major corporate tax cut before Christmas spiked investor enthusiasm at yearend and entering 2018. Current Outlook: bull ish. The bull ish case: Fundamental and technical analysis don’t matter that much. The Fed is in charge. Interest rates are rising but are still historically low and putting a floor under risk. It is also reducing it’s balance sheet by failing to roll-over every bond that matures, but ever so slowly. Japan’s massive monetary expansion is still underway. Europe is scaling back slightly, but still engaged in quantitative easing in the face of an improving economy. That keeps European bond yields down and along with Brexit, helps redirect investment capital out of the euro and into the US Dollar. With cash and bill yields still low relative to inflation, large dividend paying stocks remain an attractive income alternative. The bearish case: US fiscal and regulatory policy under Obama stunted economic growth for eight years. “Affordable” healthcare, the biggest tax in US history in 2014, and a nightmare for the consumer, continues in 2018, despite the latest tax reform. Economic weakness remains. The two-year rally in stocks is due to easy money out of the Fed and to investor elation that government inflicted pain may be over. Fact is, the Fed is now tightening and the tax bill is likely to overheat the economy, generate stagflation and cause the Fed to tighten even more. The US economy may be improving but not fast enough to justify current pricey stock valuations. The Fed has already expressed its intention to raise interest rates three times, and to begin normalizing its balance sheet now.

#3 US Small Caps (IWM) Make Another All-Time High US Small-Cap Stocks, Perceptions thru 01.21.2018-- US small-cap stocks (IWM) are currently very bullish and rank #3 in the model-- more attractive than cash. US small-caps rose 2.2% this week, following last week's 1.5% gain. That leaves them up 5.9% for the quarter (13 weeks), and up 16.1% for the year (52 weeks). At 158, IWM is above its short-term (50-day) average at 152, and above its intermediate-term (200-day) average at 144. A weaker US Dollar this week made the carry trade in US equities less attractive. Longer term, the weak dollar limits IWM. Small-caps took off in mid-August and by September, corporate tax cut

talk on the Hill had spiked investor optimism in small caps to severely overbought levels. That put IWM in a holding pattern through October. Enthusiasm resumed mid-November once the US tax package was fleshed out and modified to help smaller (pass-through) companies. IWM began the year at a new closing high last week, and pushed higher this week. (14-day RSI is now at 74— and overbought (70). US Small Cap Stocks, Assumptions: JAN 1—US large cap stocks led both mid-caps and small-caps in 2014-15 and for most of 2016-17. In 2016, After a January correction, and pre-election weakness due to Fed tightening fears in 2016, small caps rallied 20% in 20 days after the Trump win, making new all time-highs in the third and fourth quarters. They continued to rally in 2017 but were slowed by Fed rate hikes in March and June, and finally by the Senate’s vote to retain Obamacare and recess in August without accomplishing anything of significance. Small-caps then took off in mid-August and by September, corporate tax cut talk on the Hill had spiked investor optimism in small caps to severely overbought levels. That put IWM in a holding pattern through October. Enthusiasm resumed mid-November once the US tax package was fleshed out and modified to help smaller (pass-through) companies. The December Fed rate hike slowed small-caps progress, but did not reverse their upward trend heading into 2018. Outlook: Bull ish The bull ish case: Fundamental and technical analysis don’t matter that much. The Fed is in charge. Its interest rates are rising but are still historically low and putting a floor under risk. It is also reducing its balance sheet by not rolling over every bond that matures-- but ever so slowly. Japan’s massive monetary expansion is still underway. Europe is scaling back slightly, but still engaged in quantitative easing in the face of an improving economy. That keeps European bond yields down and along with Brexit, helps redirect investment capital out of the euro and into the US Dollar. The bearish case: US fiscal and regulatory policy under Obama stunted economic growth for eight years. “Affordable” healthcare, the biggest tax in US history in 2014, and a nightmare for the consumer, continues in 2018, despite the latest tax reform—in which big corporations got a better deal than smaller companies. Economic weakness remains. The two-year rally in stocks is due to easy money out of the Fed and to investor elation that government inflicted pain may be over. Fact is, the Fed is now tightening and the tax bill is likely to overheat the economy, generate stagflation and cause the Fed to tighten even more. Higher interest rates hurt small caps disproportionately more than large caps, and the Fed has already expressed its intention to raise interest rates three times, and to begin normalizing its balance sheet now. The US economy may be improving but not fast enough to justify current pricey stock valuations.

#5 Europe (IEV) Gaps to Overbought New Year High European Large-Cap Stocks, Perceptions thru 01.21.2018-- European equities (IEV) are currently very bullish and rank #5 in the model-- more attractive than cash. European stocks rose 1.6% this week, following last week's 2.9% gain. That leaves them up 4.3% for the quarter (13 weeks), and up 24.4% for the year (52 weeks). At 49, IEV is above its short-term (50-day) average at 47, and above its intermediate-term (200-day) average at 46. A strengthening Euro this week helped Dollar investors in European stocks, but hurt Europe's export prospects. Longer term, a weak dollar is helping IEV. IEV posted a new 2017 closing high

in early October, at which point the ECB announced that it would follow the Fed and begin scaling back its QE purchases by half in 2018. That put a cap on IEV until the US tax reform passed in late December promising global stimulus. It has made three successive weekly highs since then. The tighter ECB has also bolstered the Euro, making IEV more attractive than its hedged alternative (HEDJ). Austria (EWO) is still pacing the region, followed by Russia (RSX) and Italy (EWI). Sweden (EWD) and Spain (EWP) are still the laggards. With a 14-day RSI of 81, IEV is overbought (70). European Large Cap Stocks, Assumptions: JAN 1-- European Union GDP grew a lethargic 1.6% in 2015, an even weaker 1.5% in 2016, but improved to 2.1% in 2017. It is expected to slow (1.9%) in 2018 as the ECB begins to tighten and Britain begins to separate. Europe (IEV) last peaked in mid-2014 (@$48). 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. After the European Central Bank (ECB) extended its asset purchase program by nine months to start December 2016, IEV broke out of its range on encouraging US and global economic data, making Q1 2017 European equities’ best quarter in two years. IEV then gapped higher in April rallying to new 2017 highs in June, August, October, and December-- finally regaining its 2014 high to open 2018. 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. The US economy under Trump is strengthening and should help the Dollar. 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 have proven baseless. The bearish case: EU economic growth is anemic and expected to get weaker. Rising oil prices could hurt the continent’s consumers. Flagging household and business confidence, deflation worries, and difficult relations 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.

#1 Japan (EWJ) Again Overbought On New Year High Japanese Stocks, Perceptions thru 01.21.2018-- Japan's equities (EWJ) are currently very bullish and rank #1 in the model-- more attractive than cash. Japanese equities rose 2.3% this week, following last week's 3.5% gain. That leaves them up 10.6% for the quarter (13 weeks), and up 24.7% for the year (52 weeks). At 63, EWJ is above its short-term (50-day) average at 60, and above its intermediate-term (200-day) average at 56. A strengthening Yen this week helped Dollar investors in Japanese stocks, but hurt Japan's export prospects. Longer term, a weak dollar is helping EWJ. EWJ put in a two-decade high in

early November, then slowly drifted higher at year-end as positive Asian trade data and the prospect of easier money in China as well as in Japan outweighed North Korean nuclear and missile threats. EWJ remains in the momentum model’s #1 slot. After a muted year-end performance, it gapped to a new high to open 2018 and continues even higher this week. With a 14-day RSI of 84, EWJ is severely overbought (70). EWJ is slightly underperforming Japanese small caps (SCJ), and hedged Japanese equities (DXJ), but outperforming the Nikkei 400 (JPXN). With a 14-day RSI of 78, EWJ is overbought (70). Japanese Stocks, Assumptions: JAN 1— Japan’s economy has struggled for years. After no GDP growth (0.0%) in 2014, anemic growth followed in 2015 (+1.1%), 2016 (+1.0%), and is forecasted for 2017 (+1.5%). 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, a +7% improvement in 2016 and a 23% gain in 2017 after the BoJ announced Japan's publicly held pension funds would double their equity holdings. 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 continue to ease along with the Chinese, Australians, and Koreans. With global growth returning, 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. Rising oil prices going into 2018 hurt the energy importer.

#4 Asia-ex-Japan (AXJL) Continues to Soar in 2018 Asia Pacific ex-Japan Stocks, Perceptions thru 01.21.2018-- Asia-Pacific ex-Japan equities (AXJL) are currently very bullish and rank #4 in the model-- more attractive than cash. Asian stocks ex-Japan rose 0.8% this week, following last week's 2.6% gain. That leaves them up 5.2% for the quarter (13 weeks), and up 20.8% for the year (52 weeks). At 73, AXJL is above its short-term (50-day) average at 70, and above its intermediate-term (200-day) average at 67. A weaker US Dollar this week improved returns for dollar investors in Asia-Pacific. Longer term, a weak dollar is helping AXJL. A weaker Dollar, and strong equity

markets in China, India, and Australia in 2017 paced the Asia-Pacific ex-Japan to new highs each month from August through December. It overcame a Chinese regulatory crackdown on shadow banking, NoKo saber-rattling, and an IMF report on China’s financial risks to break out at year-end. This week, it surged to a second new high to open 2018. Its 14-day RSI, however, is at 77— and overbought (70). As an alternative, AAXJ continues to outperform AXJL and is worth considering. Overall, Vietnam (VNM), Thailand (THD), India (PIN, not IIF) and China (PGJ) are showing the most strength, while Indonesia (IF, EIDO) and Taiwan (EWT) are weakest, but still rate a hold. Asia Pacific ex-Japan Stocks, Assumptions: JAN 1— GDP growth in Emerging and Developing Asia grew 6.8% in 2015, and slipped to 6.5% in 2016. It is forecast to hold that rate in 2017 and through 2020. China and India are expected to lead the Asian Tigers (ASEAN) higher. 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. 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 entered 2017 almost 40% below their October 2007 high, but rallied 22% in 2017. Current Outlook: Bull ish. The bull ish case: The Fed may have begun gradual rate hikes, but US monetary policy remains very accommodating. Looser policies in Japan, China, and Europe should also continue to 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 strengthened then stabilized in 2017. Asian inflation pressures are under control allowing interest rates to recede in the region—further stimulating growth in 2017. Finally, the Dollar was at a 13-year high going into 2017. It was due to soften and did for most of the year. 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 picking up, along with the rest of the global economy, the Trump administration has threatened to curb trade relations with low-wage emerging nations in Asia and elsewhere. China’s equities are up 33% in 2017, arguably over-valued in that its financial system is fragile. India, meanwhile, is up over 40%. 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 may eventually strengthen the Dollar. A stronger 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 in the region include Chinese militarization of the South China Sea and North Korea’s nuclear program.

#6 Latin America (ILF) Sti l l Higher in 2018 Latin American equities Perceptions thru 01.21.2018-- Latin American equities (ILF) are currently very bullish and rank #6 in the model-- more attractive than cash. Latin equities rose 0.6% this week, following last week's 5.6% gain. That leaves them up 1.5% for the quarter (13 weeks), and up 24.3% for the year (52 weeks). At 36, ILF is above its short-term (50-day) average at 34, and above its intermediate-term (200-day) average at 33. A weaker US Dollar this week improved returns for dollar investors in Latin equities. Longer term, a weak dollar is helping ILF. In the wake of Mexico’s September 2017 earthquake, ILF dropped about

18% before testing intermediate support and holding in December. Thanks to a weak dollar and a rebound in copper and oil prices, ILF then pushed higher through year-end and into 2018. Argentina, Chile, and Peru are strongest. Mexico is still weak. With a 14-day RSI of 71, ILF is overbought (70). Latin American Stocks, Assumptions: JAN 1-- Latin American GDP was up 0.1% in 2015; down about 0.9% in 2016; and is thought to have grown by 1.2% in 2017. It is forecasted to grow 1.9% in 2018 and 2.4% in 2019. 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. Latin American equities fell 32% in 2015, bottomed in January 2016, and rallied to finish 2016 an impressive 31% higher. In 2017, it finished 28% higher, but it was hardly a smooth ride. In May, the President of Brazil was implicated in a bribery scandal, and the Bovespa dropped 15% in a day, sending ILF down with it. By late September ILF had recovered and was up 25% when an earthquake hit Mexico City and a hurricane hit Yucatan. The Bolsa fell 18% into year-end taking ILF lower as well. It rallied in December on US growth prospects from the tax cuts, however, and looks strong going into 2018. Current outlook: Bull ish 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. From 2011 to 2016, the region was mired in an “inept government” phase, in which socialism replaced capitalism. This led to increased outflows of both domestic and foreign capital, and the equity markets reflected that. Eventual political evolution coupled with easy US, European, and Asian monetary policy, improving global growth and rising commodity prices saved much of the region prior to bankruptcy. The Dollar was at a 13-year high going into 2017. It was due to soften and did throughout most of the year. 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, Latin inflation pressures are under control, allowing interest rates to recede. The bearish case: The Trump victory bodes ill for NAFTA and Latin exports—products as well as immigrants. Moreover, the Latin recovery is two years old. The reversal of US quantitative easing and subsequent Fed rate hikes have removed the easy money floor under risk assets, reduced global liquidity, and weakened Latin financials. As tighter money slows growth in China, Europe, and the US, it will curb demand for Latin exports.

Moosextras— Outside the Box: —Top 21 thru 01.21.2018 The following represents the top of our diversified master list of 225 exchange-traded funds. ETFs are listed in order of most momentum at the close of the latest week. RSI is daily. The sector breakdown is: Energy (7), Materials (6), Foreign (3), Technology (2) Construction (1), Transports (1), Financials (1) NOTE: Top stocks broadly overbought and due to correct. In the interest of full disclosure, any ETF in which the author has a position is so marked.

TICK NAME RSI COMMENTS POS REMX Rare Earth Strategic Metals 91* Materials BNO US Brent Oil 92* Energy XME Metals & Mining 78* Materials SLX Steel 88* Materials XES Oil & Gas Equipment 84* Energy PICK Global Metals & Mining 94* Materials USO US Oil 94* Energy ITB US Home Construction 71* Construction KOL Coal 97* Energy SCIN Equities: India Small Cap 94* Foreign Equities BOTZ Robotics 93* Technology CXSE Equities: China ex-State-Owned 85* Foreign Equities ARKK Innovation 70* Technology CRAK Oil Refiners 81* Energy TAN Solar 71* Energy COPX Copper Miners 86* Materials XOP Oil & Gas Exploration 77* Energy x IYT Transports 91* Transportation PALL Palladium 75* Materials IAI US Dealer Brokers 84* Financials x ECH Equities: Chile 88* Foreign Equities

* overbought, **oversold Outside the Box: —Thrift Savings Plan thru 01.21.2018 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 01.21.2018 ALLOCATIONS CASH EDV SPY IWM GLD IEV EWJ AXJL ILF Switch? 6040static 10% 30% 20% 15% 5% 5% 5% 5% 5% never 6040sma 10% 30% 20% 15% 5% 5% 5% 5% 5% 12/29 6040rs 10% 30% 20% 15% 5% 5% 5% 5% 5% 12/29 8020static 5% 15% 15% 15% 10% 10% 10% 10% 10% never 8020sma 5% 15% 15% 15% 10% 10% 10% 10% 10% 12/29 6040rs 5% 15% 15% 15% 10% 10% 10% 10% 10% 12/29 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 from the standard allocation is operative, the switch date is shown under “Switch?” The reduced allocation is listed in red, and the increased allocation is green. Performance of six alternative investment strategies are presented for free on the site. CUMULATIVE GAIN 1 Yr 3 Yr 5Yr 10Yr 15Yr 3Y Sharpe SPY 22% 38% 85% 110% 222% 3.18 6040static 14% 15% 32% 78% 224% 3.51 6040sma 10% 11% 30% 63% 135% 4.32 6040rs 11% 13% 35% 67% 150% 1.79 8020static 14% 16% 25% 57% 240% 2.73 8020sma 13% 16% 27% 62% 173% 3.87 8020rs 14% 18% 29% 62% 188% 3.84 Moose Weekly 14% -7% -3% 26% 294% -0.60 Strategic Observations: All Standard investment strategies continue to under-perform the S&P benchmark. Central bank easy money encourages “financial engineering” in which companies borrow at extremely low rates and buy back their own stock, pushing stock prices higher. A S&P with few corrections and no bear markets since 2009 is tough to beat. Aggressive diversified strategies are outperforming moderate ones. Low interest rates also force investors to accept more risk. That the 80-20 group beats the 60-40 group over 1-3 years but not over 5-10, however, suggests that when corrections do occur, aggressive strategies may take disproportionate losses. Momentum is lagging the S&P but has been comparable to diversified strategies in 2017. It is underperforming longer term, but outperforms over the very long term. The level of underperformance since 2009 has diminished, perhaps due to changes made in the Moose momentum model in the last five years. Diversified buy-and-hold strategies should outperform momentum until the next US 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 11%. 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. Author’s Choice: 60-40 Static. Static strategies require less attention, and over the past 3 years, performance numbers have been less volatile, i.e., they have been a more predictable strategy in a Fed-centric world.

Opinion— week closing 01.12.2018 The following is the second installment detailing but a small part of the life and times of two friends, Reginald Bunkmaster, Democrat, and TP Worthy, Republican. Much A-Doo-Doo About Nothing It was the second Saturday night of the New Year. On top of a 30% gain in 2017, Thomas Paine Worthy was elated by the great start to his SEP-IRA in 2018-- up 5% in nine days. He had decided to stop in at the Trump International Hotel bar on Pennsylvania Avenue for a celebratory martini. After all, it was Trump who’d made his SEP-IRA great again. It was fitting and proper that TP give something back. Tee martoonis later, it was much, much later. An even happier TP Worthy was standing in the hotel doorway, searching the street for his imminent Uber, when suddenly, he was blinded! An intense light forced him to shield his eyes. He looked down and momentarily panicked. There was a white-hot alien symbol burning through his overcoat and into his $1000 Brooks Brothers suit! “Laser Death-Ray Attack!” TP shouted, attempting to alert security, as he clumsily dove behind one of the giant columns that frame the hotel’s east portico. Ever since reading about Roswell, New Mexico at age ten, TP had expected this moment. The Republican was not typically a conspiracy theorist, mind you, but he had secretly fantasized about being kidnapped by aliens (and going voluntarily) when Obama was President. But that was then and this was now. No way he would let an intergalactic invasion ruin the next seven years, just when the country was turning around. Security was nowhere. TP decided they were probably cowering in the shadows like he was. Suddenly, the Uber appeared at the corner. The lasers were still blasting away at the hotel, but doing little noticeable damage. TP knew he had to make a break for it and took off, ducking and weaving to get to the waiting car. At the end, he did one of those shoulder rolls he’d seen in numerous Tom Cruise movies (spraining his neck); jumped to his feet (spraining his knee); lunged at the car door handle (spraining his wrist); yanked open the door, and dove into the back seat (hitting his head on the opposite door armrest)… all the while yelling, “GO! GO! GO!” to the driver. It was an impressive exit— probably one of the most impressive exits of a five-star luxury hotel ever. But the driver just sat there. He had no idea that there was an alien attack underway. From Pennsylvania Avenue he couldn’t see the hotel entrance that well, as it is tucked away on the side of the building behind some security barriers. Meanwhile, if this strange, rumpled desperado was skipping out on a hotel or bar bill—and he was certainly acting that way— the driver had no desire to be arrested as the wheelman for a felon. He had never been inside the hotel himself, but he knew by reputation that anything more than a night or two with meals could constitute grand larceny. But no one came out of the hotel waving a bill, so maybe it was okay to go. “Mr. Bunkmaster?” The driver inquired. TP was on the floor of the backseat, keeping his head down. “Huh? Bunkmaster? No, I’m TP Worthy. How do you know Bunkmaster?” “I’m Sayeed. Mr. Bunkmaster called for an Uber.” “So did I,” TP protested, digging into his overcoat for his phone. (It was no easy task with a sprained wrist and knee, scrunched up in a ball on the floor of a Prius.) He finally found the phone, and it claimed his Uber was still two minutes away. “You’re not Mariah?” TP asked. “Sayeed. Do I look like a Mariah?” the driver replied, forcing TP to peek over the top of the seat and see that Sayeed sported a turban and a full-length beard. “Guess not,” TP admitted. “but we have to get out of here.”

Before he could explain that the world was coming to an end, however, there was a tap on the driver’s side window, and TP heard a familiar voice. “Sayeed? I’m Bunkmaster. Let’s get going.” With that, Reginald Bunkmaster climbed into the back seat of the car, but was appalled to find himself kicking a frighteningly large dark lump on the floor. He instinctively hurled himself backwards out of the car and onto the pavement. “What the hell?” “I’m sorry, sir,” Sayeed apologized. “This man is in the wrong Uber and is trying to highjack your ride.” “Reggie! Take me with you!” TP pleaded from the floorboards. “It’s me, TP Worthy. I can’t let them take me alive!” There were police sirens in the distance now, and while Reggie thought TP was being a tad overly dramatic, he decided that it was probably a good thing for him to scoot as well. “It’s okay, Sayeed. I know this guy, and he can ride with us”, Reggie said, “Let’s go.” On the way up to Bethesda, TP’s gratitude was so effusive that Reggie soon began to wonder what he’d gotten himself into. References about his saving TP’s life, and TP being indebted for all time made Reggie a little nervous. Truth be told, he did have effusive and occasionally hysterical friends, but they were Democrats. TP was normally more boring and taciturn. “So… what brought you downtown tonight?” Reggie queried, “I thought the meter maids ran you out in 2002.” “They did,” TP admitted. (The $50 dollar parking ticket on his birthday, when lunch went a minute past the two-hour limit, had been the last straw.) “But now I just hire a car. No fuss, no bother. I was downtown to see my financial guy, and stopped by the hotel afterward for a drink. Let’s just say I had a very good week… until I stopped drinking. “Enough about me, though”, TP continued, “I can’t believe my luck running into you down here. Knowing the way you feel about Trump, I never expected to see you near any of his properties.” “I was down for my artist friend’s slide show”, Reggie said, “He live streamed it on the internet, and it will be all over you-tube and Sunday talk tomorrow, but I wanted to see it in person. Quite an event! I thought that’s why you were there too.” “Slide show?” TP asked, as it suddenly dawned on him that the city hadn’t been under attack since they left the hotel. “Here, let me show you”, Reggie said, pulling out his cell phone and flipping through his rather extensive photo album. “I was a ways off, but I had to be to get the full effect,” he said proudly as he pulled up a picture of the hotel entrance with “This Place is a Shit-Hole” boldly projected above the doorway in white light along with little white symbols sprinkled around the facade. “It’s guerrilla art protesting Trump calling Haiti a shit-hole country,” Reggie clarified, “Isn’t it great?” TP grabbed Reggie’s phone and immediately recognized the alien symbol that he’d seen burning through his overcoat. “Those are poop emojis,” Reggie explained, sensing quite correctly that TP was an emoji illiterate. “Trump is such a racist for saying what he did. Haiti is a lovely place.” TP expanded the photo and looked more closely. There was a man in the shadows of the portico with a poop emoji covering his face and another poop emoji reflected on his chest, and he knew. He stared at it-- at once relieved, embarrassed, and angry—relieved that he was unidentifiable (and also that the world was not ending); embarrassed by his own crazy assumptions; and angry that a friend would be part of such a prank. Maybe it was the martinis, but TP just had to ask. “Reggie, you once said you’d leave the country if Trump won. So what happened? All the first class seats to Haiti taken this year?” --To be continued