An analysis of our April/ Mai 2020 Ideas and Forecast – The way forward:

Successful investing is about finding inefficiencies and errors in markets and waiting for them.

During the 2020 March-May (CoVid19 crisis), I have been writing different articles pointing out how to manage the situation on positioning investments conservatively.

It’s now time to review these ideas and opinions and think about the next six months to come.

So, let’s analyse what I was writing five months ago and see where I was right and where wrong and why.

COVID MARKET IMPLICATIONS

PREDICTION 1:

“Global inflation will not grow fast so that I can expect low rates for a specified period. Later, however, inflation may increase. For this reason, I prefer a short duration to a long one, and I think that inflation-linked bonds can also be attractive in the medium term (and certainly as an element of diversification).” USD could depreciate

This prediction of COVID market implications has been correct.

Both Germany and the USA (benchmark markets) have been experiencing a first time deflation.

The significant intervention of Central Banks will probably lead to a mid-term inflationary pressure with an increase of the long-term interest rates allowing for a reverse yield curve.

Inflation-linked bonds may, therefore, be an exciting alternative to traditional money market instruments. Timing will be crucial when the investor enters these vehicles. I believe beginning 2021 could be the right moment to assess inflationary pressures and decide whether to enter or not.

COVID MARKET IMPLICATIONS

PREDICTION 2:

“USD could depreciate significantly against both CHF and EUR and emerging currencies in particular RUB, MNX, and INR could benefit from a faster economic recovery in the medium term.”

This prediction has been correct for the USD. The USD has lost in value over the last four months, against CHF and EUR.

This prediction has not been correct for RUB, INR, and MXN. All these EMMA currencies have not yet recovered from their massive losses, and the impact of CoVid19 is still difficult to assess.

However, over the next six months, I still believe that all three currencies, because of different reasons, will appreciate against the EUR.

However, differently than before, the interest rate differential is not a cushion anymore. Therefore, one investor may wait before taking exposure towards these EMMA currencies since interest rates may be driven up by inflation in the medium term. So, if investing, stay on the short side of the yield curve.

COVID MARKET IMPLICATIONS

PREDICTION 3:

“CHF could strengthen significantly against both EUR and USD despite the SNB’s efforts to maintain a stable exchange rate at least against EUR.”

This prediction has been correct only against USD; against EUR, the CHF has lost value in the last months.

Over the next months, as soon as the dangerous game played by ECB and FED will become more evident, both currencies could continue to lose value against CHF.

Investors having CHF as their reference currency may, therefore, consider at least hedging their positions.

In commercial trade this may be even more important.

A last consideration for the Swiss economy is how much will the SNB be able to stretch its balance sheet to support the CHF?

COVID MARKET IMPLICATIONS

PREDICTION 4:

“Credit spreads from BBBs to junk bonds should first stabilize as a result of Quantitative Easing and then rise after that for at least 12 months. Attractive then an exposure on ultra-short-term funds with an average BBB rating maybe even with a little leverage.”

This COVID market implications prediction has been correct.

I have personally increased my exposure to the HY bond sector end of March 2020 (after the sharp march correction) and this investment idea has been an essential tool to improve (defend) performance in the IIQ 2020.

I, however, believe that this correction in yields is now over and that a second increase/spike in risk premiums will follow.

An incredible divergence is taking place between corporate bond spreads and the number of companies filing for bankruptcy. I therefore firmly believe that it’s only a matter of time until this will result in higher risk premiums and bankruptcies of fallen angels and HY bonds.

Ultra-short-term positions may only partially cover the risk of increasing spreads because, as we saw in March, an illiquidity spread may impact these ultra-short term bonds that, therefore, may have to be kept until expiration (or default).

COVID MARKET IMPLICATIONS

PREDICTION 5:

“Stocks globally are not yet suffering from the supply and demand crisis that social distancing will generate (not to mention the change in the propensity to consume that there will be with an unnecessary shift in spending). A gradual entry must be compensated for adequate opportunities. In my opinion, this will happen only when from current levels, the market will have discounted an additional 20 to 30%. An easy entry can be made with ETF but also on quality securities that will move only as a result of the beta. The most attractive sectors are those of infrastructure that will benefit from direct investment by governments to generate jobs and reduce unemployment (a New Deal 2.0 at Rooswelt globally). I also like cash-rich companies and companies able to create so much cash that they can now make price-based acquisitions and grow exogenously.”

This prediction has been wrong (partially) in particular:

•   I underestimated the effects on equity on the intervention of FED and ECB
•   I underestimated the FAANG effect.
•   I underestimated the impact of Robinhood investors
•   I underestimated the effect the three above facts may have on beta

However:

•   FAANG (+ Microsoft) make up 23% of the whole S&P index.
•   equity market recovery has not been homogenous in terms of single shares neither in terms of performance of global equity markets
•   Volatility in equity markets has decreased significantly also due to FED / ECB interventions
•   Markets are in greed mode

In my opinion, the risk-reward ratio was low into investing in equity during the crisis, and I now believe (for US markets) it’s even lower!

Again, let me quote Warren Buffet: “Price is what you pay. Value is what you get.”

In other words, don’t focus on short-term swings in Price, focus on the underlying value of your investment.

“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”

We are currently navigating in a very challenging and complex environment, and seeking value is a process that also requires patience and a medium-term view.

Companies are valued by their capacity to generate profits. We are currently in an environment in which profits are getting lower (dividend pay-out ratios as well), consumer spending lowering, and all significant macroeconomic variables are worse than one year ago (in some countries one decade ago). Therefore, why should equity markets be up compared to one year ago?

Let’s be patient, let’s select (go for alpha) and make’ 0s look for value avoiding the yawns.

COVID MARKET IMPLICATIONS

PREDICTION 6:

“Still, for the equity, I believe that some geographical areas of the world can benefit more from the future economic recovery and among these, in particular, ASIA/PACIFIC and ASIA ex-Japan.”

This COVID market implications prediction has been correct.

If you are not trying to time the market, these two markets are still the cheapest to be bought.

However, if you are keen to time the market and you believe a correction may be coming in the equity market as I think, then you should also sell these winning strikes and try to repurchase them cheaper once the revision has been rolled out.

COVID MARKET IMPLICATIONS

PREDICTION 7:

“As far as commodities are concerned, I prefer Silver to gold because COVID MARKET IMPLICATIONS  immediately after the crises, Silver generally outperformed gold. I find an indirect leveraged entry using call options without investing too much and possibly also benefiting from increased volatility.”

This prediction has been correct and both Gold and Silver have outperformed equity and also FAANG since march 2020 and this has been an essential tool to improve performance in the IIQ 2020.

I played this prediction with call options on Silver at the money speculating not only on price increase but also on volatility increase. It was a right and lucky choice.

I believe that there is still potential for a price increase in Silver and Gold. I think Silver still has better chances of growth due to its price reaction in turbulent times and the even above average gold/silver ratio that may bring Gold speculators to switch into Silver.

COVID MARKET IMPLICATIONS

PREDICTION 8:

“Finally, it could also be interesting for those who do not have a minimum of diversification in cryptocurrencies that can be a good hedge when the national currencies will devalue among them as always the BTC but also the BCH.”

This prediction has been correct and BTC has outperformed any asset class delivering triple digit growth! Integrating this new asset into portfolios increased diversification and let to great performances.

I played this prediction buying BTC but also during the last month switching into ETH to benefit from the DeFi speculation taking place.

It’s however a complex asset class for sophisticated investors capable of tolerating also high volatility and in some cases heavy losses.

So in general terms I have done a good analysis of financial markets in March/April with the important complaint of not having seen the FAANG appreciation.

But I was not alone; both Buffet and Dalio, which are amongst the best and most reputable investors world-wide, committed the same error.

Errare humanum est, (sed) perseverare diabolicum

Let’s keep up in the next months a lot of opportunities will arrive and I am more and more convinced that these challenging times will require the search for short term asymmetric investment ideas combined with a longer term defensive strategy searching for value and not speculation.

Disclaimer:

This is not a recommendation! Figures refer to the past and past performance is not a reliable indicator of future results. Seek independent financial advice! This text is distributed for information and educational purposes only. No consideration is given to the specific investment needs, objectives or tolerances of any of the recipients. In addition, the actual investment positions of the writer may, and often will, vary from his or her conclusions discussed here based on a number of factors, such as client investment restrictions, portfolio rebalancing and transaction costs, among others. Recipients should consult their advisors, including tax advisors, before making any investment decision. This report does not constitute an offer to sell or a solicitation of an offer to buy the securities or other instruments mentioned.

hare prices are down since the start of the year, but the recent rises have confused experts . . .

Stock Markets are Forward-looking

Successful investing is about finding inefficiencies and errors in markets and waiting for them to correct – and there could be one staring investors in the face right now.

There is a growing divide between how markets are performing and the economic data, which points to a recession of historic proportions.

A weak economy leads to less profit, an idea that should be dragging markets lower.

Yes, share prices are down since the start of the year, but the recent rises have confused experts. I am among the fund managers and economists that remain incredibly pessimistic.

Let’s try to analyse what seems so confusing quickly.

There are two ways to approach the question of why the stock market has seemed so impervious to the state of the real world.

1° Method

The first is to focus on technical reasons. The stock markets are forward-looking (so prices reflect what investors think will happen in the future, rather than right now), investors are overly optimistic of a coronavirus vaccine and exhibiting the flaws in the efficient markets theory. The stock market is pricing in a massive injection of free money from the FED, raising expectations of a soft buffer to take the edge off of the catastrophe.

In fact it’s hard to agree on this one…

2° Method

And the second (and more useful) way to understand the bizarrely healthy stock market: as the result of a political choice. This political choice is also a moral choice. It is a choice of whether to value fairness. Either the incentives of everyone in society are aligned, or they are not. In America, probably they are not. They are the opposite: the motives of Wall Street are opposed to the incentives of most of the people, whose existence is reduced to nothing more than labor income to be minimized as much as possible. We can think of this as a dam. That dam is protecting Wall Street from what is happening under the assumption that protecting the financial markets equals safeguard the people.

I believe the bull trap has reached unsustainable levels and that sooner or later, the dam will break washing away the ones thinking the FED (and the other Central Banks) can buy whatever it takes.

Signs are there and must be read, and the investor should be more patient than ever in taking risks in a moment in which stocks are more expensive than ever.

Leon Cooperman

The consequences of CoVid19 are there to be seen and measured and are there to be lived in our personal lives, and in our new attitudes and behavioral choices and corporate profits globally will be hammered down on average due to stricter regulations and higher taxes and lower risk propensity of the average consumer.

Leon Cooperman detailed at least 11 reasons why he is concerned about the long-term implications of the coronavirus outbreak and I can only agree with him:

• The unprecedented recent government stimulus and protections may have permanently increased the role government plays in the market, potentially increasing its regulatory oversight.
• The US is shifting to the left on the political spectrum, a trend that will likely result in higher taxes.
• Low-interest rates are a sign of an unhealthy economy, not a bullish stock market indicator.
• US debt is growing much faster than the economy, so a higher percentage of our national income will need to be devoted to debt servicing.
• US demand will likely be slow to recover, given Americans will need some form of vaccination and/or proof of immunity to gain access to sporting events, concerts, and other gatherings.
• Businesses will need to shoulder substantial compliance costs to ensure worker safety.
• Companies will need to issue a substantial amount of equity to replace lost capital.
• Stock buybacks, and the support they provided to EPS, are mostly over.
• US profit margins were at a historic high in January, and they have historically reverted to their long-term mean over time.
• Credit is cheaper than stocks, with high-yield bonds (excluding the energy sector) yielding 7.25% or about 14 times earnings.
• If Warren Buffett, the “greatest investor in my generation,” can’t find stocks to buy on the dip, “who am I to be bold?”

Investments: Oliver Camponovo suggests

I am not suggesting not to invest in stocks. I recommend and advise, however, to evaluate risks before return and single companies you like before indices.

I am currently amongst those not afraid of missing out because I know there will be much more to be taken very soon.

And by the way, have you realized that:
• many other indexes are at their lowest levels over the last 20 years?
• Asia equities are cheaper than the US ones?
• Europe equities are cheaper than the US ones?
• Silver has not increased in value since the Covid depression started?

Disclaimer:

This is not a recommendation! Figures refer to the past and past performance is not a reliable indicator of future results. Seek independent financial advice! This text is distributed for information and educational purposes only. No consideration is given to the specific investment needs, objectives or tolerances of any of the recipients. In addition, the actual investment positions of the writer may, and often will, vary from his or her conclusions discussed here based on a number of factors, such as client investment restrictions, portfolio rebalancing and transaction costs, among others. Recipients should consult their advisors, including tax advisors, before making any investment decision. This report does not

The impact of CoVID-19 on financial markets and economics will be much more substantial than the 2008 global financial crisis, we are heading towards the Great Depression 2.0

pubbicato: 11 aprile 2020

Oliver Camponovo

After 11 years of uninterrupted economic acceleration, for 2020, I expected everything but not CoVID-19. Many different factors, both endogenous to the global financial system and exogenous, foreshadowed a problematic 2020 marked by a recession.
CoVID-19 found in this vulnerable system an easy prey to replicate and take the system from the stars to the stables, from growth to depression 2.0.
CoVID-19 overlapped the following critical elements:

• Espencive Financial assets,
• The growing importance of algorithms and mathematical systems in the asset management industry,
• The lack of effectiveness of central banks with negative interest rates,
• The widening wealth gap between rich and poor and the associated social tensions,
• The 2020 US elections,
• The China/USA relationship; and
• The Iran/US crisis.

Source: Statista

The virus has spread very quickly, and to date, there are over 1.6 million confirmed cases. In the meantime, we have learned new behavioural patterns, including lockdown and social distancing as measures imposed by governments to reduce the R0 rate, and we have all become little Doctor Houses to protect our health and that of our families.

Source: Worldometer

Consumers – sardines – have radically changed habits, and the CoVID-19 pandemic has completely changed consumer behavioural patterns worldwide. Fear has taken over, and when people are afraid, they enter survival mode by minimizing consumption, shifting large expenditures and investments to an indefinite future date, and triggering a spiral of the collapse of the demand for goods and services. Lockdown forces companies to close and the collapse of the supply of products and services.
Forecasts on world GDP are falling daily, and what is simulated to date is still too optimistic. I predict a global decline in GDP of 10% year-on-year at the world level.

Source: Statista

A very significant figure of how intense this depression will be is the global volume of goods sold worldwide and world trade will decrease between 13% and 32% in 2020, as the COVID 19 pandemic will disrupt regular economic activity and life worldwide and different production cycles at all stages of the production and value-added chain.

Source: WTO

Production cycles and production chains have been interrupted and slowed down also due to the domino effect. The crisis started in China, which did not risk to supply its end customers as well as the global producers that use the different Chinese semi-finished products, and then came to Europe, which was already slowed down by the lack of Chinese components and so on in the United States and finally the emerging countries that will be the next to be overwhelmed by this first wave of CoVID-19.

Source: Haver Analytics

And in the light of the above, I believe that this will not be a recession but a depression and that it will have lasting effects for years to come. Moreover, this crisis, which is affecting businesses and employment throughout the world, will bring significant social and political changes and, eventually, social unrest.

The financial markets initially reacted at speed, never seen before in any of the other financial crises of the last 150 years. Everything, every financial asset from equities to bonds to traditionally defensive assets (gold, silver, and BTC) in this first phase of the financial crisis, has been penalized and has strongly lost value.

Source: WEF

In the face of these monstrous movements and the growing panic among financial operators and related political lobbies, central banks intervened massively (the FED first and the ECB later) with Quantitative Easing programs and interventions in the Repo market.

Source: Visualcapitalist

As also, immediately, the different governments intervened with significant fiscal stimulus financed with new public debt (as if the various nations were not already sufficiently indebted – without forgetting the growing risk of stagflation).

Source: Statista

Thanks to these essential interventions by Whatever it takes, both bonds (particularly high yield) and the stock market have momentarily recovered. For example, US equities recovered an average of 20% from the lows and spread on High Yield bonds recovered 300 bps from the 2020 highs.

Source: FRED

The risks of this financial cure are significant. Because once the real effects of the depression will be visible (with major defaults and worrying unemployment rates) new support from central banks will have to be exponentially higher than what has already been done (which is already monstrously much) with significant risks of stagflation (prolonged periods of inflation accompanied by unemployment) and the risk of currency devaluation (mainly USD).

The spread as a risk indicator makes us realize that at this moment, we are far from the High Yield spreads of 2008 (2’200 Bps vs. 800 bps today). In theory, therefore, in a less critical recession model than today’s, the spread was 2.5 times higher. It is true, however, that this situation also occurred in 18 months and not four weeks.

Source: FRED

A friend of mine told me to start putting your seat belt on! What worries me the most is the fear and uncertainty symptom of a phenomenon such as lockdown and social distancing. Such a situation has never been experienced before except in case of war. The war, however, destroyed and forced the nations to invest in weapons, infrastructure, and military expenses; the lockdown instead disheartens and leaves an entire generation resting on the couch.
Investors are betting that the stock will remain volatile throughout the year, suggesting that many expect the long-term economic and public health impact of the pandemic caused by the new coronavirus will continue to remain uncertain in the markets despite the recent rally. The Cboe Volatility Index VIX (known as the Wall Street Fear Meter) was recently trading at 43.36 on Wednesday, from a high closing record of 82.69 on March 16 with the long-standing VIX that rose in March.

Source: Vix Central

Other indicators of fear also indicate an increase in uncertainty.

Source: World Uncertainty Index

This fear comes from below from the people who think they will remain, rightly without work and with galloping unemployment in the nations most affected in this phase of CoVID-19. Symptomatic is the situation in the USA. Peaks in new unemployed people like the ones experienced in the last weeks have never been experienced before. The worst has yet to come.

Source: The Block / FRED

With expected unemployment rates at 32.1% well above those recorded during the 1929 Grade Depression.

Source: CBNS

Until it is better understood when and how the COVID-19 public health crisis will be resolved, economists cannot even begin to predict the end of the current recession.
But there is every reason to predict that this recession will be much more profound and longer than that of 2008. With each passing day, the global financial crisis of 2008 looks more and more like a general test of today’s economic catastrophe. The short-term collapse of global production currently underway already seems to be able to compete with or overcome that of a possible recession in the last 150 years.
Even with the wide-ranging efforts of central banks and tax authorities to soften the blow, the financial markets of advanced economies have collapsed, and capital has been drained from emerging markets with great violence.
A deep economic recession and a financial crisis are inevitable. The key questions now are how severe the recession will be and how long it will last.
Until we know how quickly and deeply the public health challenge will be addressed, economists cannot predict the end of this crisis. At least as much as the scientific uncertainty about the coronavirus is the socio-economic risk of how people and politicians will behave in the coming weeks and months.
After all, the world is experiencing something similar and unique global lockdown. We know that human determination and creativity will prevail. But at what cost?
Currently, financial markets seem to be cautiously confident that the recovery will be rapid, perhaps starting in the fourth quarter of this year, and that the measures implemented by governments can quickly lead to a favourable situation, at least for the economy. Many commentators point to China’s experience as an encouraging messenger of what awaits the rest of the world.
I do not think this interpretation is correct. The occupation in China has had a decent recovery, but it is not yet clear when it will return to levels close to those before CoVID-19. Moreover, a second wave of CoVID-19 and, so, a possible second lockdown that would have devastating effects in terms of tolerance to deprivation on the part of the population (never before accustomed to suffering in G20 countries and never compared to other situations of deprivation) is not excluded.
Moreover, even if Chinese production fully recovers, who will buy these goods when the rest of the global economy is just beginning the lockdown phase already experienced in China?
As far as Italy (Europe) is concerned, returning to 50% of production capacity (of the previous state of normality) seems a distant dream with many unknowns and challenging problems on the road still to be solved.
All nations except China (and some other Asian countries) have failed miserably in containing the epidemic, and it will be tough to return to economic normality until a vaccine is widely available, which could be a year or more away.
For the time being, markets seem to be comforted by the massive stimulus programs, which were necessary to protect workers and prevent an even more violent market meltdown. Yet it is already clear that much more will have to be done and that these first stimuli will not be able to contain the medium-term damage that will cause so many companies to go bankrupt and unemployment to explode.
This situation unlike previous crises experienced in the last 80 years is not only a financial panic that could be cured by a massive injection of stimulus to government demand, today, unfortunately, but the situation is also much more complex and severe, the world is experiencing the most severe pandemic since the flu epidemic of 1918-20 combined with a series of additional financial elements like those that led to the Great Depression of 1929.
Until the health crisis is resolved, the economic situation will look unfortunate. And even after economic recovery, the damage to businesses and debt markets will have persistent effects, especially considering that global debt was already at record levels before the start of the crisis. Therefore, analysts’ estimates of corporate profits are still misguided by too much optimism and analysis models misguided by years of prosperity and no knowledge and possibility of modeling the new models to the consumption of frightened and impoverished citizens.
Governments and central banks have moving importantly in all areas of the financial sector in a way that seems almost Chinese in its entirety, and they have the firepower to do much more if necessary. The problem is that we are experiencing not only a shock of demand but also a massive shock of supply. Supporting demand can help flatten the contagion curve by assisting the people in staying home. Still, there is a limit to how much the economy can help if, for example, 30% of the workforce is in self-isolation for the next two years.
Moreover, for the financial markets, all the traps already present on the market before CoVID-19 are all still open with the addition of this new and absurd situation. I am thinking of the tensions between the United States and China, but also those between China and the United States as well as the internal problems within Europe which already in 2008 had failed miserably with the MES program and the non-issue of Coronabonds, which would have spread the credit risk throughout the European Union. The world will be even more complicated, and we must, unfortunately, still sail on sight.
Finally, I did not even mention the profound political uncertainty that can trigger a global depression. Given that the financial crisis of 2008 produced a profound political paralysis and fed a crop of anti-technocratic populist leaders, we can expect the turbulence of COVID-19 to lead to even more extreme upheavals. I remember that the end of the Great Depression coincided with the Second World War.

Of course, you can imagine more optimistic scenarios:
• With extensive testing, we could determine who is sick, who is healthy and who is already immune, and, therefore, able to return to work. Such knowledge would be invaluable. But, again, due to different levels of mismanagement and wrong priorities dating back many years, the United States, Europe, and all the G20 nations are short of adequate testing capabilities.
• Even without a vaccine, the economy could return to normal in a relatively short time if effective treatments could be implemented quickly. But without widespread testing and a clear sense of what “normalcy” will be in a couple of years, it will be difficult to convince companies to invest and hire, especially when tax increases are expected when it is all over.

These prospects are not rosy, which is why the initial movements of the economic indicators downwards are only a first movement of a more prominent valley that we have yet to make in its harshness and length.

On a practical level, my current forecasts are as follows:
• Global inflation will not grow fast so that I can expect low rates for a specified period. At a later date, however, inflation may increase. For this reason, I prefer a short duration to a long one, and I think that inflation-linked bonds can also be attractive in the medium term (and certainly as an element of diversification).
• USD could depreciate significantly against both CHF and EUR and emerging currencies in particular RUB, MNX and INR could benefit from a faster economic recovery in the medium term.
• CHF could strengthen significantly against both EUR and USD despite the SNB’s efforts to maintain a stable exchange rate at least against EUR.
• Credit spreads from BBBs to junk bonds should first stabilize as a result of Quantitative Easing and then rise after that for at least 12 months. Attractive then an exposure on ultra-short-term funds with an average BBB rating maybe even with a little leverage.
• Stocks globally are not yet suffering from the supply and demand crisis that social distancing will generate (not to mention the change in the propensity to consume that there will be with an unnecessary shift in spending). A gradual entry must be compensated for adequate opportunities. In my opinion, this will happen only when from current levels, the market will have discounted an additional 20 to 30% per finger. An easy entry can be made with ETF but also on quality securities that will move only as a result of the beta. The most attractive sectors are those of infrastructure that will benefit from direct investment by governments to generate jobs and reduce unemployment (a New Deal 2.0 at Rooswelt globally). I also like cash-rich companies and companies able to create so much cash that they can now make price-based acquisitions and grow exogenously.
• Still, for the equity, I believe that some geographical areas of the world can benefit more from the future economic recovery and among these, in particular, ASIA/PACIFIC and ASIA ex-Japan.
• As far as commodities are concerned, I prefer silver to gold because immediately after the crises, silver generally outperformed gold. I find an indirect leveraged entry using call options without investing too much and possibly also benefiting from increased volatility
• Finally it could also be interesting for those who do not have a minimum of diversification in cryptocurrencies that can be a good hedge when the national currencies will devalue among them as always the BTC but also the BCH.

Oliver Camponovo, CIIA
www.olivercamponovo.it

Disclaimer:
This is not a recommendation! Figures refer to the past and past performance is not a reliable indicator of future results. Seek independent financial advice! This text is distributed for information and educational purposes only. No consideration is given to the specific investment needs, objectives or tolerances of any of the recipients. In addition, the actual investment positions of the writer may, and often will, vary from his or her conclusions discussed here based on a number of factors, such as client investment restrictions, portfolio rebalancing and transaction costs, among others. Recipients should consult their advisors, including tax advisors, before making any investment decision. This report does not constitute an offer to sell or a solicitation of an offer to buy the securities or other instruments mentioned.