18-05-18 M4 No13

With the rise in bond yields exercising minds and many murmuring that the recovery has run its course, we set out a framework explaining the key areas to watch to gauge the health of the economy and the likely course of asset prices

Transcript

1. ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 1 May 2018 www.cantillon-consulting.ch Insight & Support for the Managers of Wealth Money, Macro & Markets Monitor Money makes the World go round, makes the Money go round, makes the World go round... IN THIS ISSUE:- Volume II, Issue V Hard data, Soft data—Is there a difference? Higher orders—Higher importance Interest rates—The drivers and the driven Prices, P/Es & Performance EMs—Viva l’Espagna! Industrial Commodities—Still some upside? Oiling the wheels of a bond bear market Gold turns to dross Despite it all, no capitulation in equities, yet
2. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 2 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch As the diagram on the front page of this publication tries to illustrate, our approach to macro is one which is sensitive to the interplay of the monetary side of the economy with the real one; which tries to relate the ebb and flow of credit to cycles of capital formation (and of ultimately wasteful misdirection); and which never forgets that the story which we Rational-izing Actors afterwards tell ourselves about what we see happening is as formative of asset prices - and hence of both returns and policy responses – as are those events themselves. Money is of course, the ‘loose joint’ (Hayek) or the ‘fluttering veil’ (Leland Yeager) in the system, subject to a host of institutional changes, sentiment shifts, and policy intrusions. The past decade has seen one of the most remarkable experiments in monetary manipulation ever conducted, one which has, in some respects, confound- ed the mad professors who have been trying all this while to jolt the economic Creature back to life. The fact that the opportunity costs to holding one’s surplus in transactional form – especially when risk-adjusted for the effects of retail deposit insurance and seniority – have been shrunk to (and even, in some cases, through) zero has led to a grand confusion between transactional holdings – which the owner intends to spend in short order – and savings, which he does not. Even more astounding is the fact that the so-called ‘high- powered’ (or ‘outside’) money which the central banks pro- vide - and upon whose base the traditional exposition tells us the commercial banks should pyramid appreciable multi- ples of their own, ‘inside’ money - has, in several cases and for lengthy periods of time, been greater than the sum of all monies combined. The emergence of that negative multipli- er has inarguably muted some of the impact of QE and has thus nonplussed both the ‘Whatever it Takes’ crowd, as well as its inveterate foes among the inflation-phobic and the ranks of gold bugs. Be that as it may, money still matters and its ebbs and flows still exert their time-honoured influence upon our economic decision-making, even if these are demon- strably harder to distil out of the bulk data at present. Five years to Midnight -8.5 -3.0 2.5 8.0 13.5 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 Oct-53 Oct-61 Oct-69 Oct-77 Oct-85 Oct-93 Oct-01 Oct-09 Oct-17 Real M1 YOY v Rolling Residuals Revenues, t+10: Source - Census, FRB 1953-2008, 2016-18 Real Sales (lhs) Real M1 (rhs) QE craziness
3. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 3 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch Given the intense current focus on interest rates – and given, too, the ominous, background susurration that our present recovery is now inevitably senes- cent – we thought this might be an opportune time to try to illustrate the implications of these ideas in a largely pictorial essay. Where better to start than with the so-called ‘soft’ datum of the NAPM/ISM survey. Though only a diffusion index constructed from binary responses to the basic question, ‘are things better or worse than they were last month?’, its long-established reputation as a bellwether is, in our eyes, perfectly justi- fied. We have often argued that, when the questionnaire first pops up on the purchasing manager’s screen, the clue to how he responds is largely to be found in his job title. Essentially, we believe that his im- pression of how well the business is doing is based primarily on how much he is buying; a decision largely based in turn on how much the firm is sell- ing, or shortly expects to sell – i.e., on revenue flows both up and down the chain of production. Though the survey is a qualitative one – and hence not strictly amenable to arithmetical tinkering – if we look at the simple increment from one period to the next, we can discern a pretty good fit with ac- celerations and decelerations in the actual dollars and cents flowing through the respondent’s cash registers. y = 0.661x - 0.0249 R² = 0.6277 -40.0 -20.0 0.0 20.0 40.0 -35.0 -25.0 -15.0 -5.0 5.0 15.0 25.0 35.0 45.0 d2[Revenues] d[NAPM] NAPM YOY v 2nd difference Revenues, t+3, 1950-2018: Source - ISM, Census
4. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 4 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch It gets better. As Austrians, we do not subscribe the crass, toilet-flush hydraulics of ‘demand’-led macro, but insist that production necessarily precedes consumption, both temporal- ly and causatively. Not only does the mainstream approach put what we have called the ‘Keynesian cart before the Hayekian horse’, but it tends to submerge the greater part of economic activity, ice- berg-like, below the water line of ‘value-added’ – in other words, that a narrow focus on typical gauges of end-consumption like retail sales and even, in greater part, GDP itself, misses out a great deal of much more variable and mutually contingent economic activity, to the detriment of our better understanding of what is really afoot in the marketplace. Not to stretch the analogy too far, but the prevailing approach is akin to trying to assess a football team’s chances only by looking at what the strikers are doing, meanwhile ignoring not only what happens in the build-up from the back, but all the work being done off the pitch, both in the boot-room and the board-room, as well. Ironically, some eight decades after Simon Kuznetz shaped the way most people think about such matters, by organising the statistical data largely according to these end-use pre- cepts, the keepers of his flame at the BEA have belatedly been spurred by the signal failures of analysis which occurred either side of the GFC to devote some effort to tracking these wider flows, in the form of their (still incomplete) ‘Gross Output’ release. In practice what we do is look at revenue data and then try to disaggregate it somewhat so as to give us insights into what is happening in the far more variable, more highly discretionary sectors, more slowly amortizing, more capital-intensive and hence more interest rate-sensitive sectors of the economy – what we Austrians tend to refer to as the ‘higher orders’. One method we routinely employ is to look at sales, income, payroll costs, and employment patterns in the durable goods sector – and, more specifically, in the ‘core’ capital goods subset – in comparison to those underway in retail, which we therefore use as both a scaling factor to allow for price, as well as volume, changes and as a way of checking the proportionality of the two ends of the chain. When we do this, we get the gratifying result that the trace of the same, ‘soft data’ PMI numbers we considered above shows a good deal of similarity with the relative waxing and waning of higher-order versus lower-order goods sectors. In fine, the classically understood Boom and Bust are, to us, phe- nomena of over–committing to capital projects, to excessively ‘lengthening’ the productive structure, in our parlance. -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 -22.5 -17.5 -12.5 -7.5 -2.5 2.5 7.5 12.5 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16 US Durable & Capital Goods/Retail v Normalized NAPM , 3mmaYOY%: Source - Census, ISM DUR GDS CAP GDS NAPM (lhs) Expansion is NOT led by the High Street
5. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 5 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch What we can also see is that when the NAPM is high and rising, the poorer end of the credit spectrum tends to out-perform that with a better pedigree – illustrated here by the total returns of junk divided by those attainable on investment-grade credit. Furthermore, we can look at the change in those relative returns and just make out a possible signal of trouble ahead for our ‘lengthening’ – and consequently for overall economic performance – when the converse applies and junk starts to struggle. Though the co-movement may been plain enough to see, which is cause and which effect is a deal more difficult to determine since we have both to suggest a plausible, self- organising dynamic on the one hand, and to allow for official intervention (or the pre-emptive effect of market expectations thereof) on the other. In the classic, producer boom exposition, a period of artificially lowered (or unnaturally maintained) interest rates encourages too much deferred-amortization, long pay-off capital to be laid down, both stretching the structure ‘vertically’ as well as bloating it horizontally by encouraging too many cheaply-leveraged copy-cats to spring into being. Given that such falsely lowered rates have been imposed from without, rather than arrived at from within, it implies, at best, that no underlying change to people’s preference for making the savings has taken place – and at worst that such preferences have been shifted in a contrary direction. Though finance is, by definition, abundant, funding – in the sense of the availability of the real-world resources required not just for their own completion, but for the development of all the ancillary undertakings needed for the full realisation of their com- mercial value which are located further ‘downstream’ of them – is not, therefore. When our wise, Victorian forebears referred to the former as ‘fictitious capital’, they were indeed spot on. As what we call ‘plan incoherence’ spreads, the extra money in the system fuels a tug-of-war between the eager spenders on today’s goods and the would-be suppliers of tomorrow’s. Free cash flow starts to dwindle and credit-market participants – always the glass-half-empty guys on the trad- ing floor - begin to look at such strugglers’ obligations in a much harsher light than do their who-needs-a-glass-anyway counterparts on the equity desk. Credit spreads will now widen and – driven by our Malinvestors’ despera- tion to plug holes in the income statement, any way they can – pressure will mount at the shorter end of the curve, whether overtly or through the attempt to bilk suppliers and squeeze customers in their accounts receiva- ble and payable dealings. Of course, at this juncture, the tightness in the resource market will lead either to higher prices and wages or to a ballooning of the current account deficit, either or both of which may incite the central bank to try to bolt the stable door which it had deliberately left unlocked. Either way, this is the point where the piper finally gets paid, and where that pesky yield curve really starts to flatten malignly and even to invert. -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 Dec-83 Dec-86 Dec-89 Dec-92 Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16 NAPM Index, 3mma normalized: Source - ISM NAPM HYvIG Sean Corrigan www.cantillon-consulting.ch Let the good times roll!
6. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 6 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch Taking a step back from the theoretical, an examination of past trends shows us that when revenues in the US start to grow faster than around 5-6% per annum the pace of price increases tends to quicken (the second difference of the CPI index rises) and, accord- ingly, the Fed starts to push up the Funds rate - at least, it used to do so in pre-Lehman days. Since rising prices are the single biggest factor in setting bond yields (even if the residual ‘real’ yields themselves have been in secular decline, ever since Bill Gross was a boy), we can also see that a sustained burst of rising sales (and, recall, with them an increasing NAPM; durables' outstripping of retail con- sumables; salad days for junk bonds; a generally subdued VIX; and gold losing out relative to industrial commodities) - an upswing based on anything other than extra saving tends to sow the seeds of its own inevitable demise. Since the bond durations which result from those yields are themselves intimately related to the multiples attached to equity earnings, asset values there also begin to face a headwind which may or may not be sufficient to temper the effect on equity prices of the initial intensification of revenue growth (whether before or after we attempt to adjust for our money’s loss of value) which has brought all this about. Moreover, since – as this newsletter’s Ursprungsgeist, Richard Cantillon, famously pointed out three centuries ago – monetary inflation is a very uneven disease: once it takes hold, the widespread distortion and destabilization of relative prices by means of which it raises the average price levels of popular concern renders all entre- preneurial reckoning and accounting practice moot and so both magnifies the post hoc losses and deadens the ex ante appetite of the less wild-eyed commercial and industrial risk-takers, irrespective of whatever less favourable trends may now prevail in the capital markets. -22.5 -15.0 -7.5 0.0 7.5 15.0 Dec-92 Dec-97 Dec-02 Dec-07 Dec-12 Dec-17 -20.0 -10.0 0.0 10.0 20.0 30.0 US Durable & Capital Goods v Retail Revenues, HY v IG Returns (t-6), 3mmaYOY%: Source - Census HYvIG (lhs) DUR GDS CAP GDS A first cloud on the horizon from the credit markets?
7. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 7 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch To sum up, what we can both argue and partly discern in the data (all we can ever realistically hope to do in a world where ceteris is NEVER paribus) is that once extra money is in- jected more rapidly into the system, it starts to move more actively through people’s hands within a year of its arrival, boosting revenue growth beyond whatever have been the re- cent norms [Graph p2]. Such an acceleration finds its expression in the NAPM data [Graph p3] and is usually accompanied by a greater increase in ‘higher-order’ sectors in relation to what takes place in the nation’s shopping malls [Graph p4]. Under such benign conditions, credit spreads tend to compress, driving returns higher among the lower-ranked offerings [Graph p5]. Indeed, such is the coincidence that once that dynamic starts to weaken, much less reverse, it typically heralds an imminent end to the ‘lengthening’ – and, by implication, to the ongoing rise in the NAPM index [Graph p6]. If stresses mount sufficiently, the need to replace dwindling cash flow is wont to drive up short-term rates, irrespective of what the central bank may be doing, thus flattening and – in extremis – inverting the yield curve. Hayek called this ‘investment that raises the demand for capital’ [qv, Graph below]. Meanwhile, at least some of that surge in the movement of money will translate in to more quickly escalating prices such that, once sales start growing by something in excess of 5- 6%, the Fed is usually stung into action before more than a few months are out [Graphs p8]. Higher short term rates, more demand for longer-term capital, and rising prices (especially of industrial commodities) all serve to bump bond yields up, pushing returns and durations down. Whether through the act of inducing investors to apply higher discount factors to potential future earnings, or be- cause of the disruption to input and output costs to which all this might be giving rise, equity multiples will now tend to decline making the behaviour of stock prices themselves very much more moot [Graphs p9]. Historically, over the last three-decades of generally falling real and nominal yields, this back reaction has tended to be- come too large to bear once it drives 5-year Treasuries some 125bps above their trend and once that degree of elevation occurs inside a year [Graph p10] – the same sort of interval we can see (if somewhat weakly signalled in this case) in the retardative effect which the rise in bond yields eventually has on the very evolution that initially set it in train [Graph in- sert p10]. All in all, what we can now conclude is that even if we cannot know exactly when the alarm bell is set to ring, the clock is ticking inexorably down toward that hour of startled awakening, ladies and gentlemen. 0 20 40 60 80 100 120 -225 -150 -75 0 75 150 225 300 Dec-52 Dec-60 Dec-68 Dec-76 Dec-84 Dec-92 Dec-00 Dec-08 Dec-16 UST 10y v 2y: Source - FRED So far, a return to normality more than a plunge into recession
8. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 8 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch y = 0.2426x - 1.4492 R² = 0.4214 -7.5 -5.0 -2.5 0.0 2.5 5.0 7.5 10.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 Change in Fed Funds Revenues YOY% US Business Revenues, 3mmaYOY% v d[Fed funds], t+3, 1955-2010: Source - Census, FRED y = 0.216x - 1.298 R² = 0.303 -12.5 -7.5 -2.5 2.5 7.5 12.5 -22.5 -12.5 -2.5 7.5 17.5 27.5 d2CPI dREVENUES US Business revenues, 3mmaYOY% v d2[CPI]/YOY t+5, 1949-2018: Source - Census, BLS -12.5 -7.5 -2.5 2.5 7.5 12.5 -22.5 -12.5 -2.5 7.5 17.5 27.5 Dec-48 Dec-58 Dec-68 Dec-78 Dec-88 Dec-98 Dec-08 US Business revenues (3mmaYOY%) v d2[CPI]/YOY, t+5: Source - Census, BLS REVS YOY (lhs) d2[CPI] (rhs) R² = 0.9803 -1.75 -1.00 -0.25 0.50 1.25 2.00 -2.5 -1.3 0.0 1.3 2.5 Dec-81 Dec-84 Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14 Dec-17 US MFG & Trade Revenues (4.2% CAR) & Real Fed funds, detrended: Source - FRED, Census Std Residuals (lhs) Fed funds (scaled, rhs) ‘Speed limits’ & the consequences of exceeding them 
9. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 9 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch y = 77.70 x2 - 246.85 x + 200.52 R² = 0.55 0.00 4.00 8.00 12.00 16.00 1.20 1.25 1.30 1.35 1.40 1.45 1.50 1.55 1.60 ln UST5-yr Modified Duration v S&P500 Earnings Yield, 1960-2018: Source - FRED, S&P y = 0.7403x + 3.5755 R² = 0.6569 -0.50 1.50 3.50 5.50 7.50 9.50 11.50 13.50 -2.5 0.0 2.5 5.0 7.5 10.0 12.5 15.0 Earnings Yield CPI S&P500 Earnings Yield v CPIYOY 1957-2017: Source - Shiller, BLS y = -0.0194x + 1.5307 R² = 0.5193 1.20 1.25 1.30 1.35 1.40 1.45 1.50 1.55 1.60 -2.5 -0.2 2.1 4.4 6.7 9.0 11.3 13.6 Duration CPI 1954-2018 UST 5-yr ln Mod Duration v CPI 3mmaYOY%, t-9: Source - FRED Dec-56 Dec-61 Dec-66 Dec-71 Dec-76 Dec-81 Dec-86 Dec-91 Dec-96 Dec-01 Dec-06 Dec-11 Dec-16 -1.75 -0.15 1.45 3.05 4.65 6.25 0 10 20 30 40 50 60 70 80 90 S&P500 Real Earnings Yield: Source - Shiller, S&P A high correlation between EYLD & CPI, coupled with a stationary trend in Real EYLD per se, means CPI is THE key CPI is highly influential for bond pric- ing & that, in turn, for equity multiples
10. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 10 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch -5.75 -2.75 0.25 3.25 6.25 9.25 -2.50 -1.25 0.00 1.25 2.50 3.75 5.00 6.25 7.50 Apr-85 Apr-89 Apr-93 Apr-97 Apr-01 Apr-05 Apr-09 Apr-13 Apr-17 UST 5-years v Annual trend -25bps +/-90: Source - FRED Signal 125bps Sigmas (lhs) Series (rhs) y = -0.4556x - 0.0162 R² = 0.23 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 NAPM UST5-yr NAPM t+11 v UST5 1957-2018 Rolling 3-year Residuals: Source - ISM, FRED Starting to look dangerous...
11. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 11 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch 4.60 5.10 5.60 6.10 6.60 7.10 -3.50 -2.50 -1.50 -0.50 0.50 1.50 2.50 Dec-92 Dec-97 Dec-02 Dec-07 Dec-12 Dec-17 Barclays EM Bond TR v Trend CAR 10.1 +/-11.1% Residuals (lhs) YOY (lhs) ln SERIES (rhs) $3,005 -$21 $17,649 $15,716 $5,049 $4,446 $3,445 $2,045 $3,248 -$2,000 $2,000 $6,000 $10,000 $14,000 $18,000 NFCORP HOUSEHOLD GOVT Extra Debt 2008-17, blns: Source - BIS ADV CHINA OTHER EM $0 $45 $90 $135 $180 Brazil Turkey India Indonesia Czech Korea Poland Thailand Malaysia Cyprus Net Cross-Border Bank Liabilities, blns: Source - BIS $75 $125 $175 $225 $275 Mexico China Korea Turkey Singapore Argentina UAE Brazil Russia Indonesia International Debt Securities outstanding, bln: Source - BIS Though EM bonds now lie further be- low trend than at any time since the Tequila Crisis, to date this has been a wasting sickness (not least due to QE- lowered rates) rather than the classic 20-25% ‘sudden stop’ seizure of yore. They have however returned a bare 1.5% cumulative more than US IG since the start of 2013, and are also lagging junk. ‘Risk & Reward’ springs to mind, especially v-a-v those Spanish banks who lend EMs s-o-o-o much!
12. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 12 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch WHAT THE FIRM OFFERS The fruits of a lengthy exercise of full intellectual independence, trading in, commenting upon, and analysing markets, placed fully at your disposal to help enhance your investment process. Dedicated personal interaction, as well as written assessments, to enliven the debate and to mitigate risks by broadening the circle of opinion. Detailed macro/market research with the possibility of undertaking special commissions upon re- quest. Ideas and arguments to incorporate into your existing framework of client communication either as ‘white-labelled’ material or, if you wish, to present as the stand-alone opinion of one of your firm’s expert counsellors. Assistance with content for reporting, proposals, marketing, etc. Education and training. Public speaking to entertain and inform you and your invited guests. For more information and to discuss the specifics of what we can offer, please write to info[at]cantillon-consulting.ch
13. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 13 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch Copper’s December high represented a 50% retracement of the 2011/16 slump—a nat- ural point at which to consolidate. The Trump Era rally—not surprisingly one which has coincided with higher bond yields (upper left)—has left us building a pennant for- mation above the mid point of the whole ‘Supercycle’ distribution. If the trend/ channel line holds beneath, an upward break would project all the way to the overall profile’s upper value bond at around $4.12/lb -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 -60.0 -30.0 0.0 30.0 60.0 90.0 Mar-87 Mar-92 Mar-97 Mar-02 Mar-07 Mar-12 Mar-17 GSCI Base Metals, 3mmaYOY% v DELTA [UST5-yr] (t-2), Source - S&P, FRED GSCI Base Metals (rhs) UST5yr r2=0.40 (lhs) ‘Paging, Dr. Copper…’
14. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 14 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch If the break above 3.03% holds, look for a 3.34% target (mid of prior stock market-high, Fed Cy- cle range). Beyond that [shudder!], we raise our eyes to 3.80% & 3.95% Fib & post-crisis tops. Will the Fed take this as a cue to do more? Note, too, how oil drives the Fed’s flawed 5y5y marker—ugly!
15. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 15 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch 7.5 17.5 27.5 37.5 47.5 57.5 160,000 260,000 360,000 460,000 560,000 660,000 760,000 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 WTI Net Non-commercial positions: Source - CFTC Long as % OI (rhs) Net Non-Commercial (lhs) Last September’s $45/bbl low, via QI’s consolidation, argue for a WTI move to $79-80/bbl, the lower value bound of the pre-shale bust congestion area. At that level we find not only the fib of that slump, but also the trendline through the clear June ‘08 and June’14 highs. The market has actually reduced net longs almost to their lowest this year—ironically on Commercial buying, for once! Keep stops tight, but not time to bale, yet.
16. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 16 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch -3.5 -2.5 -1.5 -0.5 0.5 1.5 70 110 150 190 230 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15 Non-PM Commodities/Gold (t+3) v Detrended Log Nominal UST10 yields, 6mma: Source, WB-IMF, CRB, FRED, Cantillon CMDTY/AU (lhs) UST10 Nom (rhs) Breakdown to peak of 'Super-Cycle' GFC/QE discontinuity Gold has finally broken support to rest on the Trump Rally trendline. Half of that move—as well as the mid-point of the last 5-years’ range—lies between $1245/50, ergo the next target if weakness persists. Note that the last time UST yields were this far above trend, gold was barely half of today’s price relative to the other commodities. The metal needs another panic and fast!
17. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 17 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch -2.75 -1.75 -0.75 0.25 1.25 2.25 4.20 4.35 4.50 4.65 4.80 4.95 5.10 Dec-80 Dec-84 Dec-88 Dec-92 Dec-96 Dec-00 Dec-04 Dec-08 Dec-12 Dec-16 USD TWI v Majors vs Regression on Real UST10yrs [r2=0.58]: Source - FRED Divergence (rhs) Majors TWI (lhs) Arguably still rich to trend, at least the USD now has real yields moving in its favour. The bounce off the GFC crisis peak is also a good one for technicians but they will note, too, the major trendline lying not too far above.
18. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 18 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch Despite all the forgoing, those in the equity market have not yet entirely given up the ghost. Yes, if we fade here, it will mark a second successive, lower high, but the intervening lows are also rising. Caution would argue that the bond market must start to weigh at some point, but it would be equally foolish to fight the Herd if it instead manages to push us back up through that narrow 5% or so which separates us from the January highs and thus opens up the much higher profile targets one can then derive. SENTIMENTALS OFTEN OUTWEIGH FUNDAMENTALS! ǭśŖŖ
19. May 2018 ȚŘŖŗŞȱŠ—’••˜—ȱ˜—œž•’—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱŠ¢ȱŘŖŗŞȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ•ŽŠœŽȱœŽŽȱ‘Žȱ’œŒ•Š’–Ž›ȱŠȱ‘ŽȱŽ—ȱ˜ȱȱ‘’œȱ˜Œž–Ž—ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱPAGE 19 Money, Macro & Markets Monitor Insight & Support for the Managers of Wealth www.cantillon-consulting.ch ’œŒ•Š’–Ž› All content is intended to give general advice only. The investments and instruments mentioned therein are not necessarily suitable for every individual and you should use this information in conjunction with other advice and research to determine its suitability for your own circumstances and risk preferences. The value of all securities and investments, as well as the income derived from them, can fall as well as rise. Your investments may be subject to sudden, often substantial, declines in value which may not be recoverable; others may expire worthless after a specified period. You should not buy any of the securities or other investments mentioned with money you cannot afford to lose. In some cases there may be significant charges which may reduce the value of your investment. You run an extra risk of losing money when you buy shares in certain securities where there is a large difference or ‘spread’ between the buying price and the selling price, a circumstance which means that, should you sell them immediately, you may get back much less than you paid for them. In the case of investment trusts and certain other funds, these may use or propose to use the borrowing of money in order to increase the size of their exposures and/or invest in other securities with a similar strategy. As a result, movements in the price of the securities may be more volatile than the movements in the prices of those underlying investments. Some investments may involve a high degree of such borrowing (often referred to as ‘gearing’ or ‘leverage’) This means that a small movement in the price of the underlying asset may have a disproportionately large effect on that of your investment. Accordingly, a relatively small adverse movement in the price of the underlying asset can result in the loss of the entirety of your original investment. Changes in rates of ex- change may have an adverse effect on the value or price of the investment and you should be aware that additional dealing, transaction, and custody charges for certain instruments may result when these are not traded in your home currency. Some investments may not be quoted on a recognised investment exchange and, as a result, you may find them to be ‘illiquid’. You may not easily be able to trade your illiquid investments and, in certain circumstances, it may become difficult, if not impossible to sell the investment in a timely manner and/or at its indic- ative price. Investment in any of the assets mentioned may have tax consequences regarding which you should consult your tax adviser. All reasonable care has been taken to ensure that all statements of fact and opinion contained in the either written or spoken form are fair and accurate in all material respects. All data is from sources considered to be reliable but its accuracy cannot be guaranteed. Investors should seek appropriate professional advice if any points are unclear. Copyright ©2018 Cantillon Consulting S¥rl. Any disclosure, copy, reproduction by any means, distribution, or other action which relies on the contents of such materials, made without the prior written consent of Cantillon Consulting, is strictly prohibited and could lead to legal action.