....Laird Research - Economics

June 13, 2016

Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1

Indicators for US Economy . . . . . . . . . . . . . . . . . . . 2

Global Financial Markets . . . . . . . . . . . . . . . . . . . . 4

US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 9

US Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 11

Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 12

US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 13

US Employment Indicators . . . . . . . . . . . . . . . . . . . 14

US Business Activity Indicators . . . . . . . . . . . . . . . . 16

US Consumption Indicators . . . . . . . . . . . . . . . . . . 17

US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Global Housing . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Global Business Indicators . . . . . . . . . . . . . . . . . . . 22

Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 24

European Indicators . . . . . . . . . . . . . . . . . . . . . . . 26

Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 28

Global Climate Change . . . . . . . . . . . . . . . . . . . . . 29

Where we are now

The Laird Report presents a selection of economic data from aroundthe world to help figure where we are today. It was originally designedto be read on the train - 1 page per minute on my 30 minute morningcommute.

The US reported poor job numbers for May, adding only 38,000 – anumber far short of expectations. At the same time, the US continuesto see shrinking initial unemployment claims and the unemploymentrate is at multi-year lows.

Adding to this, corporate profit margins are declining from theirgenerational highs of the prior few years. I’ve seen a number of reportslinking lower job additions to falling profit margins – and this unholyunion is also seen as a predictor of an oncoming recession. It seemsreasonable that the decline in profitability would affect hiring, but thatprocess is clearly in its early stages as hiring conditions remain tight(i.e. businesses report its still hard to find good people).

One scary aspect is the degree to which US companies have loadedup on debt to drive earnings growth (on a per share basis) – this finan-

cial engineering is a different phenomenon than profit margin expansion.By loading up on debt to buy back shares (making the remaining sharesmore valuable), companies have also reduced their ability to withstandshocks to their own business. That is also a factor making companiesmore reticent to increase hiring as global growth slows.

Globally, we are seeing a cooling economy. In PMI reports, Japanand China report new orders are declining, while South Korea (a majorglobal trading economy) saw flat orders. Each of these economies hasbeen showing pressure for at least the past six months. One bright spotin the month has been Germany, which is reporting increases in neworders and production demand.

Formatting Notes The grey bars on the various charts are OECDrecession indicators for the respective countries.

Subscription Info For a FREE subscription to this monthly re-port, please visit sign up at our website: www.lairdresearch.com

Laird Research, June 13, 2016

Indicators for US Economy

Leading indicators are indicators that usually change before theeconomy as a whole changes. They are useful as short-term predictorsof the economy. Our list includes the Philly Fed’s Leading Index whichsummarizes multiple indicators; initial jobless claims and hours worked(both decrease quickly when demand for employee services drops and

vice versa); purchasing manager indicies; trucking indices showing de-mand for transport; new order and housing permit indicies and con-sumer sentiment (how consumers are feeling about their own financialsituation and the economy in general). Red dots are points where anew trend has started.

Leading Index for the US

Inde

x: E

st. 6

mon

th g

row

th

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−2

−1

01

23

median: 1.54Apr 2016: 1.46

Growth

Contraction

Initial Unemployment Claims

1000

's o

f Cla

ims

per

Wee

k

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

200

300

400

500

600

median: 348.25Jun 2016: 269.50

Manufacturing Ave. Weekly Hours Worked

Hou

rs w

orke

d pe

r W

eek

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

3940

4142

4344 median: 40.60

May 2016: 41.80

ISM Manfacturing − PMI

Inde

x: S

tead

y S

tate

= 5

0

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

3040

5060

70 median: 53.20May 2016: 51.30expanding economy

contracting economy

www.lairdresearch.com June 13, 2016 Page 2

Leading indicators are indicators that usually change before theeconomy as a whole changes. They are useful as short-term predictorsof the economy. Our list includes the Philly Fed’s Leading Index whichsummarizes multiple indicators; initial jobless claims and hours worked(both decrease quickly when demand for employee services drops and

vice versa); purchasing manager indicies; trucking indices showing de-mand for transport; new order and housing permit indicies and con-sumer sentiment (how consumers are feeling about their own financialsituation and the economy in general). Red dots are points where anew trend has started.

Durable Goods: Manufacturers New Orders

Bill

ions

of D

olla

rs

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

150

200

250

median: 185.56Apr 2016: 236.20

Index of Truck Tonnage

Inde

x

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

100

110

120

130

median: 113.00Mar 2016: 134.70

Capex (ex. Defense & Planes)

Bill

ions

of D

olla

rs

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

4050

6070

median: 58.15Apr 2016: 62.72

U. Michigan: Consumer Sentiment

Inde

x 19

66 Q

1 =

100

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

5060

7080

9010

011

0

median: 88.90May 2016: 94.70

www.lairdresearch.com June 13, 2016 Page 3

Global Financial Markets

Global Stock Market Returns

Country Index Name Close Date CurrentValue

WeeklyChange

MonthlyChange

3 monthChange

12month

Change

Corr toS&P500

Corr toTSX

North AmericaUSA S&P 500 Jun 10 2,096.1 -0.1% t 0.6% s 5.4% s -0.4% t 1.00 0.69USA NASDAQ Composite Jun 10 4,894.5 -1.0% t 1.8% s 5.0% s -3.6% t 0.93 0.57USA Wilshire 5000 Total Market Jun 10 21,688.8 -0.2% t 0.7% s 6.0% s -2.6% t 0.99 0.74Canada S&P TSX Jun 10 14,037.5 -1.3% t 1.9% s 4.9% s -5.7% t 0.69 1.00Europe and RussiaFrance CAC 40 Jun 10 4,306.7 -2.6% t -0.7% t -1.0% t -12.7% t 0.65 0.58Germany DAX Jun 10 9,834.6 -2.7% t -2.1% t 3.5% s -12.7% t 0.62 0.49United Kingdom FTSE Jun 10 6,115.8 -1.5% t -0.7% t 1.3% s -10.5% t 0.68 0.66Russia Market Vectors Russia ETF Jun 10 17.2 0.6% s 1.8% s 9.3% s -4.3% t 0.61 0.78AsiaTaiwan TSEC weighted index Jun 08 8,715.5 1.4% s 7.2% s 0.6% s -7.0% t 0.25 0.25China Shanghai Composite Index Jun 08 2,927.2 0.5% s 3.4% s 0.9% s -43.0% t 0.25 0.22Japan NIKKEI 225 Jun 10 16,601.4 -0.2% t 0.2% s -1.5% t -17.2% t 0.02 0.11Hong Kong Hang Seng Jun 10 21,042.6 0.5% s 4.0% s 5.3% s -21.2% t 0.24 0.28Korea Kospi Jun 10 2,017.6 1.6% s 1.8% s 2.5% s -1.6% t 0.17 0.24South Asia and AustrailiaIndia Bombay Stock Exchange Jun 10 26,635.8 -0.8% t 3.3% s 8.2% s -0.8% t 0.41 0.38Indonesia Jakarta Jun 10 4,848.1 -0.1% t 1.8% s 1.1% s -1.7% t -0.03 0.26Malaysia FTSE Bursa Malaysia KLCI Jun 10 1,641.2 0.3% s 0.3% s -2.9% t -5.4% t 0.26 0.34Australia All Ordinaries Jun 10 5,391.6 -0.0% t -0.2% t 3.5% s -1.7% t 0.10 0.28New Zealand NZX 50 Index Gross Jun 10 6,971.8 -0.7% t 0.9% s 7.1% s 20.1% s -0.06 0.07South AmericaBrasil IBOVESPA Jun 10 49,422.0 -2.4% t -6.9% t -0.3% t -8.3% t 0.48 0.58Argentina MERVAL Buenos Aires Jun 10 13,324.4 4.2% s -1.0% t 1.2% s 17.2% s 0.56 0.66Mexico Bolsa index Jun 10 45,177.5 -1.6% t -1.1% t 1.9% s 1.3% s 0.64 0.63MENA and AfricaEgypt Market Vectors Egypt ETF Jun 10 39.1 1.2% s 1.4% s 7.1% s -23.2% t 0.42 0.45(Gulf States) Market Vectors Gulf States ETF Jun 10 21.7 1.7% s -2.3% t 0.1% s -18.1% t 0.25 0.26South Africa iShares MSCI South Africa Index Jun 10 52.1 -3.8% t 3.8% s 6.9% s -16.3% t 0.70 0.77(Africa) Market Vectors Africa ETF Jun 10 20.3 -2.4% t 1.6% s 10.1% s -17.0% t 0.45 0.63CommoditiesUSD Spot Oil West Texas Int. Jun 06 $49.7 1.2% s 11.5% s 31.2% s -14.5% t 0.44 0.68USD Gold LME Spot Jun 10 $1,266.6 4.6% s 0.1% s 1.6% s 6.8% s -0.11 0.00

Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days.

www.lairdresearch.com June 13, 2016 Page 4

S&P 500 Composite Index

The S&P 500 Composite Index is widely regarded as the best singlegauge of the large cap U.S. equities market. A key figure is the valua-tion level of the S&P500 as measured by the Price/Earnings ratio. Wepresent two versions: (1) a 12-month trailing earnings version which

reflects current earnings but is skewed by short term variances and (2)a cyclically adjusted version which looks at the inflation adjusted earn-ings over a 10 year period (i.e. at least one business cycle). Forecastedearnings numbers are estimates provided by S&P.

S&P 500 Profit Margins and Overall Corporate Profit Margins (Trailing 12 months)

Per

cent

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

02468

101214

02468101214

Per

cent

Total Corporate Profits (% of GDP) − median: 6.2%, Q1/16: 9.2%Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.7%, Q1/16: 7.7%

S&P Quarterly Earnings (USD$ Inflation Adjusted to current prices)

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

−5.00 0.00 5.0010.0015.0020.0025.0030.0035.0040.00

−5.00 0.00 5.0010.0015.0020.0025.0030.0035.0040.00

Tech BubbleJapanese Asset Bubble

House BubbleAsian Financial Crisis

US Financial Crisis

Eurozone crisis

Oil Crisis I Oil Crisis II

Gulf WarSavings and Loans Crisis

High Inflation Period

Afganistan/Iraq WarVietnam War

Reported EarningsOperating Earnings

Trailing P/E Ratios for S&P500

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

0

10

20

30

40

50

0

10

20

30

40

50

Mul

tiple

Mul

tiple

12−month P/E ( median = 17.5, Jun = 23.4)10−year CAPE ( median = 19.6, Jun = 26.0)

www.lairdresearch.com June 13, 2016 Page 5

S&P 500 Composite Distributions

This is a view of the price performance of the S&P 500 index com-panies. The area of each box is proportional to the company’s marketcap, while the colour is determined by the percentage change in price

over the past month. In addition, companies are sorted according totheir industry group.

AAPL+6.2%

GOOG+3%

MSFT+1.7%

FB−1.6%

V+2.2%

ORCL−3.9%

INTC+5.6%

IBM+5.9%

CSCO+6.1%

MA

QCOM ACN

AVGO

TXN+7%

CRM

EMC

ADBE

PYPL

NFLX

ADP

CTSH

YHOO

HPE

FIS

EA

TEL

ADI

CA

MU

MSI

WFC−3.7%

JPM+0.078%

BAC−6.4%

C−6%

USB GS SPG

AXP−1.1%

AIG−2.8%

CB BLK MS

MET AMT BK

PNC PSA

SCHW

COF

MMC

TRV

PRU

CCI

ICE

AON AFL

BBT

PLD

HCN

SYF

ALL

EQR

STT

DFS

VTR

WY

BEN BXP

HIG

O

FITB

ESS

L

RF

IVZ

SLG XL

JNJ+3.8%

PFE+7.6%

MRK+2.7%

UNH+5.4%

BMYMDT+8%

AMGN−2.6%

GILD−5.1%

ABBV

AGN+10%

CELG−2%

LLY

TMO

ABT

BIIB−10%

ESRX

SYK

AET

MCK

BDX

ANTM

CI

BSX

HCA

ALXN

HUM

EW

ABC

A

PRGO

LH

CNC

AMZN+5%

HD−5.3%

DIS−6.7%

CMCSA MCD

NKE

SBUX−4%

LOW+2.9%

PCLN−2.8%

TWX−2.2%

FOX−4.1%

F

TJX

GM

CCL

YUM

UA

JCI

VFC

DG

ORLY

CBS

AZO

DLTR

ROST

OMC

LB

VIAB

RCL

ULTA

MHK

GPC

NWL

HOT

DHI

M

DRI

RL

WMT+5.3%

PG+2.8%

KO+2.2%

PM+2.8%

PEP

MO+4.8%

CVS

KHC WBA RAI

MDLZ+1.6%

COST+2.6%

CL

KMB

GIS KR

EL

STZ

K

TSN

TAPHRL

SJM

DPS

CLX

MJN

CHD

GE−2.8%

MMM

UPSHON

+1.8%

UTX BA

UNP

LMT+3.1%

DHR

GD FDX

RTN NOC

ITW

EMR

DAL

ETN

LUV

DE CSX

AAL

TYC

IR

PH

LLL

AYI

CTAS

XOM+0.95% CVX

−1.3%

SLB−1.1%

OXY−1.2%

COP

EOG

PSX

KMI HALAPC

PXD

VLO SE

APA BHI

MPC

DVN

CXO

NOV

NEE−79%

DUK+2.9%

SO

D

AEP

EXC

PCG

SRE

PPL EIX

ED PEG

XEL

WEC

ES

FENITE

DOW

DD

ECL

LYB

PX

APD

PPG

SHW

NEM

IP

NUE

FCX

AA

BLL

MOS

CF

T+3.1%

VZ+2.6%

Information Technology

Financials

Health Care

Consumer Discretionary

Consumer Staples Industrials

Energy Utilities

Materials

TelecommunicationsServices

<−25.0% −20.0% −15.0% −10.0% −5.0% 0.0% 5.0% 10.0% 15.0% 20.0% >25.0%

% Change in Price from May 2, 2016 to Jun 10, 2016

Average Median Median MedianSector Change P/Sales P/Book P/EInformation Technology 3.6% s 3.5 4.4 24.0Consumer Staples 2.4% s 2.6 6.1 28.4Telecommunications Services 2.2% s 1.6 1.8 14.0Health Care 2.1% s 3.5 3.8 27.2Materials 1.1% s 1.5 4.4 25.5

Average Median Median MedianSector Change P/Sales P/Book P/EIndustrials 0.2% s 1.6 3.8 20.5Energy -0.1% t 2.4 2.4 35.7Financials -1.4% t 3.0 1.7 17.2Consumer Discretionary -2.3% t 1.6 3.8 19.2Utilities -4.4% t 2.1 2.0 21.8

www.lairdresearch.com June 13, 2016 Page 6

US Equity Valuations

A key valuation metric is Tobin’s q: the ratio between the marketvalue of the entire US stock market versus US net assets at replacementcost (ie. what you pay versus what you get). Warren Buffet famouslyfollows stock market value as a percentage of GNP, which is highly(93%) correlated to Tobin’s q.

We can also take the reverse approach: assume the market hasvaluations correct, we can determine the required returns of future es-

timated earnings. These are quoted for both debt (using BAA ratedsecurities as a proxy) and equity premiums above the risk free rate (10year US Treasuries). These figures are alternate approaches to under-standing the current market sentiment - higher premiums indicate ademand for greater returns for the same price and show the level ofrisk-aversion in the market.

Tobin's q (Market Equity / Market Net Worth) and S&P500 Price/Sales

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

0.25

0.50

0.75

1.00

1.25

1.50

1.75

0.25

0.50

0.75

1.00

1.25

1.50

1.75

Buying assets at a discount

Paying up for growth

Tobin Q (median = 0.76, Mar = 0.97)S&P 500 Price/Sales (median = 1.35, Mar = 1.79)

Equity and Debt Risk Premiums: Spread vs. Risk Free Rate (10−year US Treasury)

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%Implied Equity Premium (median = 4.1%, Jun = 4.9%)Debt (BAA) Premium (median = 2.0%, Jun = 2.8%)

www.lairdresearch.com June 13, 2016 Page 7

US Mutual Fund Flows

Fund flows describe the net investments in equity and bond mutualfunds in the US market, as described in ICI’s “Trends in Mutual FundInvesting” report. Note however that this is only part of the story as

it does not include ETF fund flows - part of the changes are investorsentering or leaving the market, and part is investors shifting to ETF’sfrom mutual funds.

US Net New Investment Cash Flow to Mutual Funds

US

$ bi

llion

s (m

onth

ly)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

−40

−20

020

40

Domestic EquityWorld EquityTaxable BondsMunicipal Bonds

US Net New Investment Cash Flow to Mutual Funds

US

$ bi

llion

s (M

onth

ly)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

−60

−40

−20

020

4060

Flows to EquityFlows to BondsNet Market Flows

www.lairdresearch.com June 13, 2016 Page 8

US Key Interest Rates

Interest rates are often leading indicators of stress in the financialsystem. The yield curve show the time structure of interest rates ongovernment bonds - Usually the longer the time the loan is outstanding,the higher the rate charged. However if a recession is expected, thenthe fed cuts rates and this relationship is inverted - leading to negativespreads where short term rates are higher than long term rates.

Almost every recession in the past century has been preceeded by an

inversion - though not every inversion preceeds a recession (just mostof the time).

For corporate bonds, the key issue is the spread between bond rates(i.e. AAA vs BAA bonds) or between government loans (LIBOR vsFedfunds - the infamous “TED Spread”). Here a spike correlates to anaversion to risk, which is an indication that something bad is happen-ing.

US Treasury Yield Curves

For

war

d In

stan

tane

ous

Rat

es (

%)

15 16 17 18 19 20 21 22 23 24 25 26

0.0

0.5

1.0

1.5

2.0

2.5

0.0

0.5

1.0

1.5

2.0

2.5Jun 9, 2016 (Today)May 9, 2016 (1 mo ago)Mar 9, 2016 (3 mo ago)09 Jun 2015 (1 yr ago)

3 Month & 10 Yr Treasury Yields

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

0%

1%

2%

3%

4%

5%

6%

7%

0%

1%

2%

3%

4%

5%

6%

7%10 Yr Treasury3 Mo TreasurySpread

AAA vs. BAA Bond Spreads

4%

5%

6%

7%

8%

9%

4%

5%

6%

7%

8%

9%

Per

cent

AAABAA

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

median: 91.00Jun 2016: 105.00

0100200300

0100200300

Spr

ead

(bps

)

LIBOR vs. Fedfunds Rate

0%

1%

2%

3%

4%

5%

6%

7%

0%

1%

2%

3%

4%

5%

6%

7%

Per

cent

3 mos t−billLIBOR

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

median: 36.38Jun 2016: 42.22

0100200300

0100200300

Spr

ead

(bps

)

www.lairdresearch.com June 13, 2016 Page 9

US Inflation

Generally, the US Fed tries to anchor long run inflation expectationsto approximately 2%. Inflation can be measured with the ConsumerPrice Index (CPI) or the Personal Consumption Expenditures (PCE)index.

In both cases, it makes sense to exclude items that vary quickly likeFood and Energy to get a clearer picture of inflation (usually called

Core Inflation). The Fed seems to think PCI more accurately reflectsthe entire basket of goods and services that households purchase.

Finally, we can make a reasonable estimate of future inflation ex-pectations by comparing real return and normal bonds to construct animputed forward inflation expectation. The 5y5y chart shows expected5 year inflation rates at a point 5 years in the future. Neat trick that.

Consumer Price Index

Per

cent

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

−1%

0%

1%

2%

3%

4%

5%

6%

−1%

0%

1%

2%

3%

4%

5%

6%

US Inflation Rate YoY% (Apr = 1.1%)US Inflation ex Food & Energy YoY% (Apr = 2.1%)

Personal Consumption Expenditures

Per

cent

(Ye

ar o

ver

Year

)

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−1

01

23

45

6

PCE Inflation Rate YoY% (Apr = 1.1%)PCE Core Inflation YoY% (Apr = 1.6%)

5−Year, 5−Year Forward Inflation Expectation Rate

Per

cent

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

−1

01

23

45

6

5 year forward Inflation ExpectationActual 5yr Inflation (CPI measure)Actual 5yr Inflation (PCE Measure)

www.lairdresearch.com June 13, 2016 Page 10

QE Taper Tracker

The US has been using the program of Quantitative Easing to pro-vide monetary stimulous to its economy. The Fed has engaged in aseries of programs (QE1, QE2 & QE3) designed to drive down longterm rates and improve liquidity though purchases of treasuries, mor-gage backed securites and other debt from banks.

The higher demand for long maturity securities would drive up theirprice, but as these securities have a fixed coupon, their yield would bedecreased (yield ≈ coupon / price) thus driving down long term rates.

In 2011-2012, “Operation Twist” attempted to reduce rates withoutincreasing liquidity. They went back to QE in 2013.

The Fed chairman suggested in June 2013 the economy was recover-ing enough that they could start slowing down purchases (“tapering”).The Fed backed off after a brief market panic. The Fed announced inDec 2013 that it was starting the taper, a decision partly driven byseeing key targets of inflation around 2% and unemployment being lessthan 6.5%. In Oct 2014, they announced the end of purchases.

QE Asset Purchases to Date (Treasury & Mortgage Backed Securities)

Trill

ions

0.00.51.01.52.02.5

0.00.51.01.52.02.5

QE1 QE2 Operation Twist QE3 TaperTreasuries

Mortgage Backed Securities

Total Monthly Asset Purchases (Treasury + Mortgage Backed Securities)

Bill

ions

−100−50

050

100150200

−100−50050100150200

Month to date Jun 08: $0.3

Inflation and Unemployment − Relative to Targets

Per

cent

02468

10

0246810

Target Unemployment 6.5%Target Inflation 2%

U.S. 10 Year and 3 Month Treasury Constant Maturity Yields

Per

cent

012345

012345

2008 2009 2010 2011 2012 2013 2014 2015

Short Term Rates:Once at zero, Fed moved to QE

Long Term Rates:Moving up in anticipation of Taper?

www.lairdresearch.com June 13, 2016 Page 11

Exchange Rates

10 Week Moving Average CAD Exchange Rates

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

0.62

0.71

0.81

0.90

1.00

1.09

US

A /

CA

D

0.55

0.61

0.66

0.72

0.77

0.82

Eur

o / C

AD

59.

16 7

4.71

90.

2610

5.81

121.

3613

6.91

Japa

n / C

AD

0.38

0.44

0.49

0.55

0.61

0.67

U.K

. / C

AD

0.59

1.10

1.60

2.11

2.61

3.12

Bra

zil /

CA

D

CAD Appreciating

CAD Depreciating

Change in F/X: May 2 2016 to Jun 3 2016(Trade Weighted Currency Index of USD Trading Partners)

−3.0%

−1.5%

1.5%

3.0%

Euro−0.8%

UK−1.4%

Japan−2.0%

South Korea 0.1%

China−1.1%

India−1.5%

Brazil−1.6%

Mexico 5.3%

Canada 0.7%

USA 2.5%

Country vs. Average

AppreciatingDepreciating

% Change over 3 months vs. Canada

<−10.0% −8.0% −6.0% −4.0% −2.0% 0.0% 2.0% 4.0% 6.0% 8.0% >10.0%

CAD depreciatingCAD appreciating

ARG 6.2%

AUS−5.4%

BRA 1.8%

CHN−4.7%

IND−3.5%

RUS 3.2%

USA−3.7%

EUR−2.8%

JPY1.7%

KRW0.0%

MXN−8.3%

ZAR−3.3%

www.lairdresearch.com June 13, 2016 Page 12

US Banking Indicators

The banking and finance industry is a key indicator of the healthof the US economy. It provides crucial liquidity to the economy in theform of credit, and the breakdown of that system is one of the exac-erbating factors of the 2008 recession. Key figures to track are the

Net Interest Margins which determine profitability (ie. the differencebetween what a bank pays to depositors versus what the bank is paidby creditors), along with levels of non-performing loans (i.e. loan lossreserves and actual deliquency rates).

US Banks Net Interest Margin

Per

cent

3.0

3.5

4.0

4.5

median: 3.932016 Q1: 3.02

Repos Outstanding with Fed. Reserve

Bill

ions

of D

olla

rs

020

040

060

0

median: 58.96Jun 2016: 285.04

Bank ROE − Assets between $300M−$1B

Per

cent

05

1015

median: 12.812016 Q1: 9.57

Consumer Credit Outstanding

% Y

early

Cha

nge

−5

05

1015

20

median: 7.51Apr 2016: 6.23

Total Business Loans%

Yea

rly C

hang

e

−20

010

20median: 8.64May 2016: 10.25

US Nonperforming Loans

Per

cent

12

34

5

median: 1.982016 Q1: 1.57

St. Louis Financial Stress Index

Inde

x

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

02

46

median: 0.094Jun 2016: −1.01

Commercial Paper Outstanding

Trill

ions

of D

olla

rs

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1.0

1.4

1.8

2.2

median: 1.32Jun 2016: 1.05

Residential Morgage Delinquency Rate

Per

cent

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

24

68

10

median: 2.342016 Q1: 4.84

www.lairdresearch.com June 13, 2016 Page 13

US Employment Indicators

Unemployment rates are considered the “single best indicator ofcurrent labour conditions” by the Fed. The pace of payroll growth ishighly correlated with a number of economic indicators.Payroll changesare another way to track the change in unemployment rate.

Unemployment only captures the percentage of people who are inthe labour market who don’t currently have a job - another measure

is what percentage of the whole population wants a job (employed ornot) - this is the Participation Rate.

The Beveridge Curve measures labour market efficiency by lookingat the relationship between job openings and the unemployment rate.The curve slopes downward reflecting that higher rates of unemploy-ment occur coincidentally with lower levels of job vacancies.

Unemployment Rate

Per

cent

79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

median: 6.10May 2016: 4.704

56789

1011

4567891011

Per

cent

4 5 6 7 8 9 10

2.0

2.5

3.0

3.5

4.0

Beveridge Curve (Unemployment vs. Job Openings)

Unemployment Rate (%)

Job

Ope

ning

s (%

tota

l Em

ploy

men

t)

Dec 2000 − Dec 2008Jan 2009 − Mar 2016Apr 2016

Participation Rate

Per

cent

of P

op.

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

6364

6566

67

median: 66.00May 2016: 62.60

Total Nonfarm Payroll Change

Mon

thly

Cha

nge

(000

s)

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−50

00

500

median: 167May 2016: 38

www.lairdresearch.com June 13, 2016 Page 14

There are a number of other ways to measure the health of employ-ment. The U6 Rate includes people who are part time that want afull-time job - they are employed but under-utilitized. Temporary helpdemand is another indicator of labour market tightness or slack.

The large chart shows changes in private industry employment lev-els over the past year, versus how well those job segments typically pay.Lots of hiring in low paying jobs at the expense of higher paying jobsis generally bad, though perhaps not unsurprising in a recovery.

Median Duration of Unemployment

Wee

ks

510

1520

25 median: 8.70May 2016: 10.70

(U6) Unemployed + PT + Marginally Attached

Per

cent

810

1214

16

median: 9.80May 2016: 9.70

4−week moving average of Initial Claims

Jan

1995

= 1

00

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

5010

015

020

0

median: 107.07Jun 2016: 82.86

Unemployed over 27 weeks

Mill

ions

of P

erso

ns

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

01

23

45

67

median: 0.81May 2016: 1.89

Services: Temp Help

Mill

ions

of P

erso

ns

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1.5

2.0

2.5

3.0

median: 2.27May 2016: 2.88

−200 0 200 400 600

15

20

25

30

35

40

Annual Change in Employment Levels (000s of Workers)

Ave

rage

wag

es (

$/ho

ur)

Private Industry Employment Change (May 2015 − May 2016)

ConstructionDurable Goods

Education

Financial Activities

Health Services

Information

Leisure and Hospitality

Manufacturing

Mining and Logging

Nondurable GoodsOther Services

Professional &Business Services

Retail Trade

Transportation

Utilities

Wholesale Trade

Circle size relative to total employees in industry

www.lairdresearch.com June 13, 2016 Page 15

US Business Activity Indicators

Business activity is split between manufacturing activity and non-manufacturing activity. We are focusing on forward looking business

indicators like new order and inventory levels to give a sense of thecurrent business environment.

Manufacturing: Real Output

YoY

Per

cent

Cha

nge

−10

010

20

median: 8.19Jan 2016: 2.96

ISM Manufacturing − PMI

3040

5060

70

May 2016: 51.30

manufac. expanding

manufac. contracting

ISM Manufacturing: New Orders Index

3040

5060

7080 May 2016: 55.70

Increase in new orders

Decrease in new orders

Non−Manufac. New Orders: Capital Goods

Bill

ions

of D

olla

rs

4050

6070

median: 58.15Apr 2016: 62.72

Average Weekly Hours: Manufacturing

3940

4142

43

median: 41.20May 2016: 41.80

Industrial Production: Manufacturing

YoY

Per

cent

Cha

nge

−15

−5

05

10

median: 3.00Apr 2016: 0.54

Inventory to Sales Ratio

Rat

io

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1.1

1.2

1.3

1.4

1.5

1.6

median: 1.37Mar 2016: 1.41

Chicago Fed: Sales, Orders & Inventory

Inde

x

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−0.

50.

00.

5 Apr 2016: 0.00Above ave growth

Below ave growth

ISM Non−Manufacturing Bus. Activity Index

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

3545

5565

May 2016: 55.10

Growth

Contraction

www.lairdresearch.com June 13, 2016 Page 16

US Consumption Indicators

Variations in consumer activity are a leading indicator of thestrength of the economy. We track consumer sentiment (their expec-

tations about the future), consumer loan activity (indicator of newpurchase activity), and new orders and sales of consumer goods.

U. Michigan: Consumer Sentiment

Inde

x 19

66 Q

1 =

100

5060

7080

9011

0

median: 88.90May 2016: 94.70

Consumer Loans (All banks)

YoY

% C

hang

e

−10

010

2030

40

median: 7.53May 2016: 7.65

AccountingChange

Deliquency Rate on Consumer Loans

Per

cent

age

2.0

3.0

4.0

median: 3.45Jan 2016: 1.99

New Orders: Durable Consumer Goods

YoY

% C

hang

e

−20

020

median: 4.54Apr 2016: 1.10

New Orders: Non−durable Consumer Goods

YoY

% C

hang

e

−20

010

20

median: 3.87Apr 2016: −7.47

Personal Consumption & Housing Index

Inde

x

−0.

40.

00.

20.

4

median: 0.02Apr 2016: −0.07above ave growth

below ave growth

Light Cars and Trucks Sales

Mill

ions

of U

nits

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1012

1416

1820

22

median: 14.85May 2016: 17.37

Personal Saving Rate

Per

cent

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

24

68

10

median: 5.50Apr 2016: 5.40

Retail Food and Service Sales

YoY

% C

hang

e (R

eal)

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−10

−5

05

median: 2.46Apr 2016: 1.83

www.lairdresearch.com June 13, 2016 Page 17

US Housing

Housing construction is only about 5-8% of the US economy, how-ever a house is typically the largest asset owned by a household. Sincepersonal consumption is about 70% of the US economy and house val-ues directly impact household wealth, housing is an important indicatorin the health of the overall economy. In particular, housing investment

was an important driver of the economy getting out of the last fewrecessions (though not this one so far). Here we track housing pricesand especially indicators which show the current state of the housingmarket.

15 20 25 30 35

150

200

250

300

Personal Income vs. Housing Prices (Inflation adjusted values)

New

Hom

e P

rice

(000

's)

Disposable Income Per Capita (000's)

April 2016

r2 : 89.5%Range: Jan 1959 − Apr 2016Blue dots > +5% change in next yearRed dots < −5% change in next year

New Housing Units Permits Authorized

Mill

ions

of U

nits

0.5

1.0

1.5

2.0

2.5

median: 1.34Apr 2016: 1.13

New Home Median Sale Price

Sal

e P

rice

$000

's

100

200

300

Apr 2016: 321.10

Homeowner's Equity Level

Per

cent

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

4050

6070

80 median: 66.50Jan 2016: 57.80

New Homes: Median Months on the Market

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

46

810

1214 median: 4.90

Apr 2016: 4.30

US Monthly Supply of Homes

Mon

ths

Sup

ply

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

46

810

12 median: 5.80Apr 2016: 4.70

www.lairdresearch.com June 13, 2016 Page 18

US Housing - FHFA Quarterly Index

The Federal Housing Finance Agency provides a quarterly surveyon house prices, based on sales prices and appraisal data. This gener-ates a housing index for 355 municipal areas in the US from 1979 topresent. We have provided an alternative view of this data looking atthe change in prices from the peak in the 2007 time frame.

The goal is to provide a sense of where the housing markets are

weak versus strong.The colours represent gain or losses since the startof the housing crisis (defined as the maximum price between 2007-2009for each city). The circled dots are the cities in the survey, while thebackground colours are interpolated from these points using a loesssmoother.

Change from 2007 Peak − Q1 2016

−50%

−40%

−30%

−20%

−10%

0%

10%

20%

30%

40%

50%

Today's Home Prices

Percentage Change from 2007−2009 Peak

Fre

quen

cy

−75% −50% −25% 0% 25% 50% 75%

Year over Year Change − Q1 2016

−10%

−8%

−6%

−4%

−2%

0%

2%

4%

6%

8%

10%

YoY Change in this quarter

YoY Percent Change

Fre

quen

cy

−15% −10% −5% 0% 5% 10% 15%

www.lairdresearch.com June 13, 2016 Page 19

Global Housing

The Bank for International Settlements has begun collecting globalhousing indicies, which are useful for showing what has been happeningwith global house prices. Note that these are not all the same data set -

each country measures housing prices in slightly different ways, so theyare only broadly comparable. Black lines are the data series, blue barson the right axis show the year over year percent change.

Brazil − Metro All Dwellings

Q1

2011

= 1

00

6080

100

140 Jan 2016: 134.69

Chile − All Dwellings

Jun 2015: 127.92

Peru (Lima) − All Dwellings

Dec 2015: 193.62

−40

020

40

Mexico − All Dwellings

Q1

2011

= 1

00

6080

100

140 Dec 2015: 126.60

China (Beijing) − All Dwellings

Dec 2015: 131.55

Hong Kong − Residential Prices

Feb 2016: 165.55

−40

020

40

Indonesia − Major Cities housing

Q1

2011

= 1

00

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

6080

100

140 Dec 2015: 135.71

India − Major Cities housing

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Dec 2015: 207.97

Singapore − All Dwellings

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Mar 2016: 98.81

−40

020

40

www.lairdresearch.com June 13, 2016 Page 20

Philippines (Manila) − FlatsQ

1 20

11 =

100

6080

120

Dec 2015: 146.25

Japan − All Dwellings

Jan 2016: 107.10

Australia − All Dwellings

Dec 2015: 127.17

−40

020

40

New Zealand − All Dwellings Big Cities

Q1

2011

= 1

00

6080

120

Dec 2015: 150.39

Turkey − All Dwellings

Feb 2016: 195.53

South Africa − Residential

Mar 2016: 119.91

−40

020

40

Israel − All Dwellings

Q1

2011

= 1

00

6080

120

Jan 2016: 134.86

Korea − All Dwellings

Mar 2016: 113.99

Russia − All Dwellings (Urban)

Dec 2015: 121.92

−40

020

40

Euro zone − All Dwellings

Q1

2011

= 1

00

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

6080

120

Dec 2015: 99.49

Canada − New Houses

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Feb 2016: 109.79

US − New Single Family Houses

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Mar 2016: 125.61

−40

020

40

www.lairdresearch.com June 13, 2016 Page 21

Global Business Indicators

Global Manufacturing PMI Reports

The Purchasing Managers’ Index (PMI) is an indicator reflectingpurchasing managers’ acquisition of goods and services. An index read-ing of 50.0 means that business conditions are unchanged, a numberover 50.0 indicates an improvement while anything below 50.0 suggests

a decline. The further away from 50.0 the index is, the stronger thechange over the month. The chart at the bottom shows a moving av-erage of a number of PMI’s, along with standard deviation bands toshow a global average.

Global M−PMI − May 2016

<40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 >60.0

Steady ExpandingContracting

Eurozone51.5

Global PMI50.0

TWN48.5MEX

53.6

KOR50.1

JPN47.7

VNM52.7

IDN50.6

ZAF50.2

AUS51.0

BRA41.6

CAN52.1

CHN49.2

IND50.7

RUS49.6

SAU54.8

USA50.7

Global M−PMI Monthly Change

<−5.0 −4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 >5.0

PMI Change ImprovingDeteriorating

Eurozone−0.2

Global PMI−0.1

TWN−1.2MEX

1.2

KOR0.1

JPN−0.5

VNM0.4

IDN−0.3

ZAF2.3

AUS−2.4

BRA−1.0

CAN−0.1

CHN−0.2

IND 0.2

RUS 1.6

SAU 0.6

USA−0.1

Purchase Managers Index (Manufacturing) − China, Japan, USA, Canada, France, Germany, Italy, UK, Australia

04 05 06 07 08 09 10 11 12 13 14 15 16

3040

5060

70

3040

5060

70

Business Conditions Contracting

Business Conditions Expanding

www.lairdresearch.com June 13, 2016 Page 22

Global Manufacturing PMI Chart

This is an alternate view of the global PMI reports. Here, we lookat all the various PMI data series in a single chart and watch theirevolution over time.

Red numbers indicate contraction (as estimated by PMI) whilegreen numbers indicate expansion.

May

14

Jun

14

Jul 1

4

Aug

14

Sep

14

Oct

14

Nov

14

Dec

14

Jan

15

Feb

15

Mar

15

Apr

15

May

15

Jun

15

Jul 1

5

Aug

15

Sep

15

Oct

15

Nov

15

Dec

15

Jan

16

Feb

16

Mar

16

Apr

16

May

16

Australia

India

Indonesia

Viet Nam

Taiwan

China

Korea

Japan

South Africa

Saudi Arabia

Turkey

Russia

United Kingdom

Greece

Germany

France

Italy

Czech Republic

Spain

Poland

Ireland

Netherlands

Eurozone

Brazil

Mexico

Canada

United States

Global PMI 52.2 52.6 52.4 52.6 52.2 52.2 51.8 51.6 51.7 52.0 51.7 51.0 51.2 51.0 51.0 50.7 50.7 51.3 51.2 50.7 50.9 50.0 50.6 50.1 50.0

56.4 57.3 55.8 57.9 57.5 55.9 54.8 53.9 53.9 55.1 55.7 54.1 54.0 53.6 53.8 53.0 53.1 54.1 52.8 51.2 52.4 51.3 51.5 50.8 50.7

52.2 53.5 54.3 54.8 53.5 55.3 55.3 53.9 51.0 48.7 48.9 49.0 49.8 51.3 50.8 49.4 48.6 48.0 48.6 47.5 49.3 49.4 51.5 52.2 52.1

51.9 51.8 51.5 52.1 52.6 53.3 54.3 55.3 56.6 54.4 53.8 53.8 53.3 52.0 52.9 52.4 52.1 53.0 53.0 52.4 52.2 53.1 53.2 52.4 53.6

48.8 48.7 49.1 50.2 49.3 49.1 48.7 50.2 50.7 49.6 46.2 46.0 45.9 46.5 47.2 45.8 47.0 44.1 43.8 45.6 47.4 44.5 46.0 42.6 41.6

52.2 51.8 51.8 50.7 50.3 50.6 50.1 50.6 51.0 51.0 52.2 52.0 52.2 52.5 52.4 52.3 52.0 52.3 52.8 53.2 52.3 51.2 51.6 51.7 51.5

53.6 52.3 53.5 51.7 52.2 53.0 54.6 53.6 54.1 52.2 52.5 54.0 55.5 56.2 56.0 53.9 53.0 53.7 53.5 53.4 52.4 51.7 53.6 52.6 52.7

55.0 55.3 55.4 57.3 55.7 56.6 56.2 56.9 55.1 57.5 56.8 55.8 57.1 54.6 56.7 53.6 53.8 53.6 53.3 54.2 54.3 52.9 54.9 52.6 51.5

50.8 50.3 49.4 49.0 49.5 51.2 53.2 52.8 55.2 55.1 54.8 54.0 52.4 54.3 54.5 51.1 50.9 52.2 52.1 52.1 50.9 52.8 53.8 51.0 52.1

52.9 54.6 53.9 52.8 52.6 52.6 54.7 53.8 54.7 54.2 54.3 54.2 55.8 54.5 53.6 53.2 51.7 51.3 53.1 53.0 55.4 54.1 53.4 53.5 51.8

57.3 54.7 56.5 54.3 55.6 54.4 55.6 53.3 56.1 55.6 56.1 54.7 55.5 56.9 57.5 56.6 55.5 54.0 54.2 55.6 56.9 55.5 54.3 53.6 53.3

53.2 52.6 51.9 49.8 50.7 49.0 49.0 48.4 49.9 51.9 53.3 53.8 54.8 54.1 55.3 53.8 52.7 54.1 54.9 55.6 53.2 52.2 53.5 53.9 52.4

49.6 48.2 47.8 46.9 48.8 48.5 48.4 47.5 49.2 47.6 48.8 48.0 49.4 50.7 49.6 48.3 50.6 50.6 50.6 51.4 50.0 50.2 49.6 48.0 48.4

52.3 52.0 52.4 51.4 49.9 51.4 49.5 51.2 50.9 51.1 52.8 52.1 51.1 51.9 51.8 53.3 52.3 52.1 52.9 53.2 52.3 50.5 50.7 51.8 52.1

51.0 49.4 48.7 50.1 48.4 48.8 49.1 49.4 48.3 48.4 48.9 46.5 48.0 46.9 30.2 39.1 43.3 47.3 48.1 50.2 50.0 48.4 49.0 49.7 48.4

57.0 57.5 55.4 52.5 51.6 53.2 53.5 52.5 53.1 54.1 54.4 51.9 52.0 51.4 51.9 51.6 51.8 55.5 52.7 51.9 52.9 50.8 50.7 49.2 50.1

48.9 49.1 51.0 51.0 50.4 50.3 51.7 48.9 47.6 49.7 48.1 48.9 47.6 48.7 48.3 47.9 49.1 50.2 50.1 48.7 49.8 49.3 48.3 48.0 49.6

50.1 48.8 48.5 50.3 50.4 51.5 52.2 51.4 49.8 49.6 48.0 48.5 50.2 49.0 50.1 49.3 48.0 49.5 50.9 52.2 50.9 50.3 49.2 48.9 49.4

57.0 59.2 60.1 60.7 61.8 59.1 57.6 57.9 57.8 58.5 60.1 58.3 57.0 56.1 57.5 58.7 56.5 55.7 56.3 54.4 53.9 54.4 54.5 54.2 54.8

44.3 46.6 45.9 49.0 50.7 52.7 50.5 50.2 49.8 50.0 51.6 51.5 50.1 49.2 48.9 49.3 47.9 47.5 49.6 49.1 49.6 49.1 47.0 47.9 50.2

49.9 51.5 50.5 52.5 51.7 52.4 52.0 52.0 52.2 51.6 50.3 49.9 50.9 50.1 51.2 51.7 51.0 52.4 52.6 52.6 52.3 50.1 49.1 48.2 47.7

49.5 48.4 49.3 50.3 48.8 48.7 49.0 49.9 51.1 51.1 49.2 48.8 47.8 46.1 47.6 47.9 49.2 49.1 49.1 50.7 49.5 48.7 49.5 50.0 50.1

49.4 50.7 51.7 50.2 50.2 50.4 50.0 49.6 49.7 50.7 49.6 48.9 49.2 49.4 47.8 47.3 47.2 48.3 48.6 48.2 48.4 48.0 49.7 49.4 49.2

52.4 54.0 55.8 56.1 53.3 52.0 51.4 50.0 51.7 52.1 51.0 49.2 49.3 46.3 47.1 46.1 46.9 47.8 49.5 51.7 50.6 49.4 51.1 49.7 48.5

52.5 52.3 51.7 50.3 51.7 51.0 52.1 52.7 51.5 51.7 50.7 53.5 54.8 52.2 52.6 51.3 49.5 50.1 49.4 51.3 51.5 50.3 50.7 52.3 52.7

52.4 52.7 52.7 49.5 50.7 49.2 48.0 47.6 48.5 47.5 46.4 46.7 47.1 47.8 47.3 48.4 47.4 47.8 46.9 47.8 48.9 48.7 50.6 50.9 50.6

51.4 51.5 53.0 52.4 51.0 51.6 53.3 54.5 52.9 51.2 52.1 51.3 52.6 51.3 52.7 52.3 51.2 50.7 50.3 49.1 51.1 51.1 52.4 50.5 50.7

49.2 48.9 50.7 47.3 46.5 49.4 50.1 46.9 49.0 45.4 46.3 48.0 52.3 44.2 50.4 51.7 52.1 50.2 52.5 51.9 51.5 53.5 58.1 53.4 51.0

www.lairdresearch.com June 13, 2016 Page 23

Canadian Indicators

Retail Trade (SA)

YoY

Per

cent

Cha

nge

−5

05

10

median: 4.65Mar 2016: 3.17

Total Manufacturing Sales Growth

YoY

Per

cent

Gro

wth

−20

−10

010

20

median: 3.77Mar 2016: −1.62

Manufacturing New Orders Growth

YoY

Per

cent

Gro

wth

−30

−10

010

2030

median: 4.07Mar 2016: −6.66

1yr vs. 10yr Canada Bond Yields

Yie

ld (

Per

cent

)

02

46

810

median: 5.65May 2016: 1.38

10 yr bond1 yr bond

Manufacturing PMI

4850

5254

May 2016: 52.10

Sales and New Orders (SA)

YoY

Per

cent

Cha

nge

−20

−10

010

20

SalesNew Orders (smoothed)

Tbill Yield Spread (10 yr − 3mo)

Spr

ead

(Per

cent

)

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−1

01

23

4

median: 1.30May 2016: 0.85

Inflation (total and core)

YoY

Per

cent

Cha

nge

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−1

01

23

4

median: 1.87Apr 2016: 1.66

TotalCore

Inventory to Sales Ratio (SA)

Rat

io

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1.3

1.4

1.5

1.6

median: 1.35Mar 2016: 1.43

www.lairdresearch.com June 13, 2016 Page 24

6.6 6.8 7.0 7.2 7.4 7.6

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

Beveridge Curve (Mar 2011 − Feb 2016)

as.numeric(can.bev$ui.rate)

as.n

umer

ic(c

an.b

ev$v

acan

cies

) Mar 2011 − Dec 2012Jan 2013 − Jan 2016Feb 2016

Unemployment Rate

Job

Vac

ancy

rat

e (I

ndus

tria

l)

Ownership/Rental Price Ratio

Rat

io o

f Acc

omod

atio

n O

wne

rshi

p/R

ent R

atio

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

9010

011

012

013

014

015

0

CalgaryMontrealVancouverToronto

Note: Using prices relative to 2002 as base year

Ownership relatively moreexpensive vs 2002

Rent relatively more expensive vs 2002

Unemployment Rate (SA)

Per

cent

34

56

78

910

Canada 6.9%Alberta 7.8%Ontario 6.6%

Debt Service Ratios (SA)

Per

cent

02

46

810

Total Debt: 6.2%Mortgage: 3.1%Consumer Debt: 6.3%

Housing Starts and Building Permits (smoothed)

YoY

Per

cent

Cha

nge

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−40

−20

020

40

PermitsStarts

www.lairdresearch.com June 13, 2016 Page 25

European Indicators

Unemployment Rates

Per

cent

age

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

05

1015

2025

30

FR

DEGB

IT

GR

ES

EU

Business Employment Expectations

Inde

x

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−40

−20

010

Industrial Orderbook Levels

Inde

x

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−60

−40

−20

020

Country EmploymentExpect.

Unempl.(%)

Bond Yields(%)

RetailTurnover

ManufacturingTurnover

Inflation(YoY %)

IndustryOrderbook

PMI

Series Dates May 2016 Apr 2016 May 2016 Apr 2016 Apr 2016 Apr 2016 May 2016 May 2016� France -6.8 s 9.9 t 0.51 u 111.7 s 105.2 t -0.1 u -11.2 t 48.4 s� Germany -2.3 s 4.2 u 0.13 u NA 114.9 s -0.3 t -10.0 s 52.1 s� United Kingdom -1.2 s 4.9 t 1.43 t 113.9 s NA 0.3 t -7.2 s 50.1 s� Italy -2.5 t 11.7 s 1.53 s 99.8 t NA -0.4 t -14.0 s 52.4 t� Greece -7.4 t 24.2 t 7.64 t NA NA -0.4 s -24.1 s 48.4 t� Spain 3.1 t 20.1 t 1.57 s NA NA -1.2 t -5.4 t 51.8 t� Eurozone (EU28) -2.0 s 8.7 t 1.18 t 107.7 t 109.0 t -0.2 t -12.0 s NA

www.lairdresearch.com June 13, 2016 Page 26

Government Bond YieldsLo

ng T

erm

Yie

lds

%

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

02

46

810

Economic Sentiment

Inde

x

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

6070

8090

110

130

Consumer Confidence

Inde

x

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−10

0−

60−

200

20Inflation (Harmonized Prices)

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

median: 1.90Apr 2016: −0.20

−1

0

1

2

3

4

5

6

7

Harmonized Inflation: Mar 2016

AUT 0.6%

BGR−2.5%

DEU−0.3%

ESP−1.2%

FIN 0.3%

FRA−0.1%

GBR 0.3%

GRC−0.4%

HRV−0.9%

HUN 0.3%

IRL−0.2%

ISL 0.4%

ITA−0.4%

NOR 3.5%

POL−0.5%

ROU−2.6%

SWE 1.0%

<−1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% >7.0%

YoY % Change in Prices

PMI: May 2016

<40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0>60.0

Steady ExpandingContracting

BRA41.6

CAN52.1

DEU52.1

ESP51.8

FRA48.4

GBR50.1

GRC48.4

IRL51.5

ITA52.4

MEX53.6

POL52.1

SAU54.8

TUR49.4

USA50.7

RUS49.6

PMI Change: Apr − May

<−5.0−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 >5.0

PMI Change ImprovingDeteriorating

CAN−0.1

DEU 0.3

ESP−1.7

FRA 0.4

GBR 0.9

GRC−1.3

IRL−1.1

ITA−1.5

POL 1.1

TUR 0.5

USA−0.1

RUS1.6

www.lairdresearch.com June 13, 2016 Page 27

Chinese Indicators

Tracking the Chinese economy is a tricky. As reported in the Fi-nancial Times, Premier Li Keqiang confided to US officials in 2007 thatgross domestic product was “man made” and “for reference only”. In-stead, he suggested that it was much more useful to focus on three alter-native indicators: electricity consumption, rail cargo volumes and bank

lending (still tracking down that last one). We also include the PMI- which is an official version put out by the Chinese government anddiffers slightly from an HSBC version. Finally we include the ShanghaiComposite Index as a measure of stock performance.

Manufacturing PMI

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

4045

5055

60

May 2016: 49.20

Shanghai Composite Index

Inde

x V

alue

(M

onth

ly H

igh/

Low

)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

010

0030

0050

00

Jun 2016: 2927.16

Electricity Generated

100

Mill

ion

KW

H (

log

scal

e)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1000

2000

3000

5000

Apr 2016: 4444.00

Electricity GeneratedLong Term TrendShort Term Average

Consumer Confidence Index

Inde

x

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

9810

010

210

410

610

811

0

median: 103.85Apr 2016: 101.00

Exports

YoY

Per

cent

Cha

nge

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

−20

020

4060

80

median: 18.20May 2016: −4.10

Retail Sales Growth

YoY

Per

cent

Cha

nge

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1015

20

median: 12.90Apr 2016: 10.10

www.lairdresearch.com June 13, 2016 Page 28

Global Climate Change

Temperature and precipitation data are taken from the US NationalClimatic Data Center and presented as the average monthly anomalyfrom the previous 6 months. Anomalies are defined as the difference

from the average value over the period from 1971-2000 for the tem-perature map and over the 20th century for the global temparaturechart.

Average Temperature Anomalies from Nov 2015 - Apr 2016

<−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 >4.0Anomalies in Celcius WarmerCooler Anomalies in Celcius

−4 −2 0 2 4

Historic Global Temperature Deviations

Deg

rees

Cel

cius

Dev

iatio

ns

−0.

50.

00.

51.

0

Apr 2016: 1.10

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

www.lairdresearch.com June 13, 2016 Page 29