2013.10.10 accuvest bpv-q4

4th Quarter
BPV
Accuvest Global Advisors
Investment Committee
Big Picture View
October 1, 2013

October 1, 2013
Accuvest Global Advisors 4th Quarter Big Picture View 2013 2
Emerging Markets
have not experienced
the same kind of
economic uptick seen
in Developed
Markets
Equity market
underperformance in
EM has been
accumulating since
2010 and is not solely
due to tapering talk
Stocks up, bonds
crushed is the easy
headline. But within
equity-land, there
have been highly
disparate returns
ECONOMIC OUTLOOK
One of the ongoing themes in 2013 is the overall somewhat disappointing economic
data for Emerging Markets (“EM”). While Developed Markets (“DM”) data have
been largely uninspiring, they have been unrevised and steady for most of this year.
Projections for EM countries, on the other hand, continue to get ratcheted lower,
reflecting the negative effect on business confidence arising from local market
developments and weaker domestic and foreign demand.
Indeed, one of the more interesting and impactful developments of the post-crisis
period is the underperformance of not only economic data, but market performance as
well. Underperformance by EM equities began in late 2010 and has run mostly
unabated to the present. The taper talk that began in May of this year brought focus
to EM deterioration, but most of the cumulative EM underperformance was logged
prior to the May shock, not as a result of it. These 2-1/2 years of steady, ongoing
underperformance is unusual for its duration and has occurred while Developed
Markets saw fairly robust recoveries. Pulling back the lens a bit further also brings
into focus that, within EM markets and economies, there has been highly varied
performance. BRIC countries, for instance, have been a significantly
underperforming subset of the overall EM universe. Each of those four markets has
their own issues and outlooks. It is becoming more and more apparent that country-
by-country analysis is necessary for a clear view on economic and market forecasts.
1 Month 3 Months 6 Months 1 Year
S&P 500 3.7% 5.3% 8.8% 19.5%
MSCI EAFE 8.1% 11.2% 11.0% 23.0%
MSCI Emerging Markets 9.5% 9.7% ‐0.4% 1.5%
All Country World Index 6.2% 8.2% 8.3% 17.9%
High Yield Bonds 1.2% 2.5% 0.4% 6.0%
Investment Grade Bonds 1.0% 0.5% ‐3.2% ‐3.3%
Lont Term Treasuries 0.4% ‐3.3% ‐8.9% ‐12.4%
Emerging Market Bonds 3.2% ‐0.4% ‐5.3% ‐6.5%
US Dollar Index ‐2.9% ‐4.9% ‐4.6% ‐1.4%
Euro vs. USD 2.7% 4.6% 5.8% 4.7%
Yen vs. USD 0.7% 3.2% ‐4.3% ‐20.1%
EM Currencies vs. USD 3.3% 0.9% ‐3.3% ‐2.4%
Gold ‐5.6% 5.9% ‐16.6% ‐26.2%
Silver ‐7.2% 12.3% ‐20.4% ‐37.4%
Crude Oil ‐2.9% 7.1% 8.6% 11.1%
Commodities ‐3.0% 1.9% ‐4.9% ‐9.5%
Tuesday, October 1, 2013

October 1, 2013
Economic Growth in
developed economies
is forecasted to
improve in 2014
Consensus Forecasts - Real GDP (%Y/Y)
2012 (a) 2013 (f) 2014 (f)
Change in
2013
forecasts
from June
30, 2013
Global 2.2 2.0 2.9 -1.0
G10 1.5 1.1 2.0 -0.1
US 2.8 1.6 2.7 -0.2
Euro Area -0.6 -0.4 1.0 -1.1
Germany 0.7 0.5 1.8 1.0
France 0.0 0.1 0.9 0.2
Italy -2.4 -1.7 0.5 0.0
Spain -1.6 -1.4 0.6 0.3
UK 0.2 1.3 2.0 0.4
Japan 2.0 1.9 1.6 -0.2
Emerging (brics) 5.6 5.7 5.7 0.7
Asia 6.2 6.4 6.3 1.0
China 7.7 7.6 7.4 0.2
India 5.1 4.8 5.2 -0.6
South Korea 2.0 2.6 3.5 -0.3
Latin America 2.7 2.6 3.2 0.0
Brazil 0.9 2.4 2.5 0.1
Mexico 3.9 1.9 3.8 -0.6
EMEA 2.6 2.1 3.0 -0.4
Russia 3.4 2.0 2.9 -1.0
Turkey 2.2 3.6 4.0 -0.1
Poland 1.9 1.1 2.5 0.1
South Africa 2.6 2.2 2.9 -0.1
Source: Bloomberg
The “Equities” section of this BPV will delve greater into the details of performance,
outlook, and issues attendant to the highly contrasting country profiles. In the
broadest view of the global economy, however, it seems as though a generally better
outlook for activity in the US and Europe has emerged as a consequence of favorable
financial conditions which have resulted in stronger business confidence data. This is
in spite of the rise in bond yields since May. Some of the data is shown in charts
below. For instance, the US unemployment rate, which has fallen significantly, in
line with the historical average pace of decrease.

October 1, 2013
Higher interest rates
have the ability to
derail economic
improvement which
is why the Fed
delayed tapering
Investment and
Consumption
growing,
Government
spending declining
US Industrial
Production has
improved
Risks are well-known currently. Higher interest rates are a threat for the whole
economy and the Fed must walk a fine line as the likelihood for policy error is
potentially large. Tapering will eventually become a reality and the market has seen
a preview of the effects of just talking about it. Debt ceiling and government shut-
down debates in the US have the potential to negatively impact confidence and
economic activity as was seen in the Fall of 2011. Overall, however, the economy
seems to have entered a period where momentum can build and benefits can broaden
US GDP Components
Source: Accuvest Global Advisors
US Industrial Production YoY

October 1, 2013
US Manufacturing is
surging
US Earnings Growth
should follow the
expansion in US
Manufacturing
US ISM Purchasing Managers Index
S&P 500 Earnings Growth relative to ISM Manufacturing

October 1, 2013
US Personal
Consumption
appears to be
bottoming
Velocity of Money
remains in a long
term downtrend,
reducing inflationary
pressure
US Lending
continues to tighten
US Personal Consumption Expenditures YoY
Velocity of Money – M2
US Loans as a % of US Deposits

October 1, 2013
Capacity Utilization
is moderate, reducing
inflationary pressure
Home prices are
higher, improving
consumer confidence
and increasing
household wealth
Mortgage Rates have
spiked with fears of
“QE Tapering”
US Capacity Utilization as a % of Total US Capacity
Case Schiller 20 City Home Prices
30 Year Mortgage Rate

October 1, 2013
Employment data in
the US has improved
and is helping
consumer confidence
Personal Income
Growth appears to be
bottoming
Not huge retail sales
growth, but enough
to keep things
moving and
improving
Change in Non-Farm Payrolls
US Personal Income Growth YoY
US Retail Sales YoY Change

October 1, 2013
Tapering talk and the
government shut-
down in Washington
have impacted FX
markets
Those short-term
gyrations will
ultimately give way to
USD strength
broadly
The negative tone in
the EM FX market
has been reduced,
but headwinds
remain in certain
countries
After sharp
weakness, the Yen
has trended sideways
over the last four
months
The Fed’s decision to postpone tapering has certainly impacted the currency market
and continued volatility is likely in the short-term. In the medium-term, the eventual
move towards tapering should be viewed as USD bullish. Uncertainty regarding the
timeframe for tapering to begin is well-founded given the surprise by the Fed in
September. It will eventually happen and December is a reasonable timeframe for it
to begin.
Diverging growth trends and the relative monetary outlook point to eventual USD
strength against EUR and JPY, but also against other majors as well as many EM
currencies. The drag from spending cuts/sequestration will lessen into 2014. At the
same time, the wealth effects generated from higher financial assets and housing
prices should continue to bolster consumer spending in a meaningful way. On the
investment side, cleaner balance sheets and improved profitability in the corporate
sector will spur credit growth and investment. Euro Area conditions, in contrast, are
unlikely to buoy growth in a similar manner.
JPY will continue to weaken as consumption taxes are initiated making relative
growth rates tip noticeably in USD’s direction. Relative monetary policy also favors
USD; at least in the longer-term which could see JPY much lower.
EM currencies should start to move laterally on average. With tapering on hold,
there is as much as $250B more coming into the market from Fed asset purchases.
These inflows still may not offset the exodus of funds from EM. Policy makers will
have some breathing room, however, and can try to offset some of the headwinds
affecting decision making such as funding pressures, dwindling global and domestic
growth, inflationary pressures, declining reserves, and political instability. With
muted risk aversion and relatively attractive valuations, currencies that are benefiting
from Developed Market improvement and China stabilization can do best.
Japanese Yen

October 1, 2013
EUR has improved,
but will ultimately
give way to weaker
levels vs USD
The weaker Peso is
surprising given
strong fundamentals
in Mexico, but
indicative of how EM
currencies have been
hit generally
CHF continues
strong
Euro - EURUSD
Mexican Peso - USDMXN
Swiss Franc - USDCHF

October 1, 2013
Emerging Market
and Commodity
Currencies have
depreciated against
the US Dollar in
2013
EM equity market
underperformance is
due to exceptional
strength in the US
and shocking
underperformance by
BRIC markets
This differential has
been building since
2010 and is not just
an unfortunate point-
to-point
measurement issue
The methodology for creating the FX Forecast table below takes into account fair
value evaluations that do not fully account for momentum and other supply and
demand technicals that cause overshoots. The broad call for near-term FX moves is
for JPY to continue its weakening trend and for USD to gain ground against other
majors, notably EUR.
FX Returns vs. USD - YTD
EQUITIES
As mentioned in the opening, a deeper dive into Emerging Market equity
underperformance is necessary in order to have a clear view on likely paths going
forward. EM underperformance can be decomposed into 1) the exceptionally strong
performance of US equities, and 2) a particularly pronounced underperformance by
the BRIC countries. Remember that Brazil, Russia, India, and China comprise
around half of the EM equity market capitalization. EM markets other than the
BRICs have performed comparably to Developed Markets x-US. A closer look at
developments in the BRICs suggests that the underperformance was driven by
disappointing fundamentals, rather than positioning, sentiment, or other non-
fundamental drivers of asset prices. Those fundamentals are unlikely to return to the
levels that created the rapid growth in earnings, almost across the board in the EM
universe. EM equities may be a ‘buy’ at current levels, but analysis needs to have a
different investment thesis than expectations of strong growth which underpinned the
case for EM equities for an extended period.

October 1, 2013
EM has
underperformed DM
equities since 2010
Economic Data has
been weaker than
expected in
Emerging Markets
Between late 2010 and the current period, the total return on EM equities was about
two-thirds of the return on advanced markets, which amounts to over 10 percentage
points of underperformance per year.
Emerging Markets Relative Strength
Why EM has underperformed is not clear-cut. For instance, although EM GDP
growth has decelerated in the past years, advanced economies have underperformed
as well. Additionally, mutual fund and ETF fund flows were supportive of EM
equities over the underperformance period. Growth and flows would be two reasons
to expect EM returns to continue to outperform DM, but they haven’t in the past few
years.
Economic Surprise Index
Source: Accuvest, Citi

October 1, 2013
EM GDP has
decelerated but so
has growth in DM
There has been wide
dispersion in
Emerging Market
Retail Sales
Emerging vs Developed Economic Growth
Emerging Market Retail Sales

October 1, 2013
Fund flows were
actually supportive of
EM over the
underperformance
period
Declining EM equity
P/E ratios has been
pronounced. This
derating is the main
cause of
underperformance
since 2010
Overly aggressive
initial valuations
does not seem to have
been the case
The outperformance
of the US equity
market is out of
proportion and
unlikely to be
repeated
Emerging Market Equities & Bonds
Valuations would also be a reasonable place to look for anomalies in recent
performance. Had EM equities been very aggressively priced relative to DM or other
asset classes in 2010, their subsequent underperformance would have had an easy
explanation. This does not seem to be the case. On a PE basis, EM were more
conservatively valued than DM in 2010. The massive underperformance since then
has been associated with a growing gap between EM and DM equities valuations.
The derating over those 2-1/2 years needs to be explained.
Emerging and Developed Market Valuation
One reason for the EM underperformance has been the outperformance by the US
market. That performance is out of proportion to its own historical norm and to the
magnitude of its economic recovery. Such outperformance is highly unlikely to be
seen in the years to come. The US market has been driven predominantly by a
double-digit surge in earnings that far exceeded earnings growth in other advanced
markets and in EM as a group.

October 1, 2013
In addition to a
strong US market,
BRIC markets have
done very poorly and
remember that BRIC
markets are half of
EM market cap
EM x-BRIC has done
as well as DM x-US.
So, in general terms,
US up big, BRIC
down big, all other
countries clustered in
the middle
EM
underperformance is
concentrated in the
BRICs
Equity Returns
The second driver of EM underperformance is the return on BRIC equities which
accounts for about half of the EM total market capitalization. Those countries have
been as weak as the US returns were strong. BRICs have seen an annual return of
negative 12.5%. Interestingly, EM equities excluding the four BRIC markets earned
roughly 4.5% during that time.
Emerging Market (ex-BRIC economies) Relative Performance

October 1, 2013
BRIC
underperformance is
due to weak earnings
growth and a big de-
rating of BRIC
equities
Getting the country
right has been a
significant issue,
almost to the point
where it may not
even make sense to
view EM as an asset
class at all
Performance varies
widely across EM
markets, but BRICs
are the weakest
performers
Investment
opportunities may
have arisen from this
tremendous
dispersion, but
unique developments
have created unique
markets requiring a
country-by-country
view
Total Returns
A key distinction between BRIC and other EM markets is that earnings fell sharply in
the BRICs but rose strongly in other EM markets. In the charts above, it can be noted
that there is not a point-to-point comparison that creates the underperformance.
Rather, it is an ongoing issue than has been consistently concentrated in the BRICs.
The message from this data is that equity market investing requires a close look at a
wide disparity of drivers across national markets. Even in the BRICs, the returns are
highly generalized. There are important differences in the fundamental drivers of
those four countries with important implications for the investment outlook. This
highlights the importance of getting the national market contexts right and raises the
question whether it even makes sense to view EM as an asset class at all.
Dispersion of Country Returns
With the underperformance as large as the recent period, it raises the question
whether an investment opportunity has been created. BRIC underperformance
specifically seems worthy of close analysis. Market developments and macro views
are different in each case and create unique implications for each market.

October 1, 2013
The Chinese market
has de-rated
significantly.
Earnings growth has
stalled. Economy
seems to be
reconfigured for a
more balanced
trajectory going
forward
Earnings in Brazil
have collapsed.
Economic policies
have created
environment where
the rate of investment
is too low
Earnings in India
have grown, but PEs
have dropped as the
market participants
have run away from
policy reforms that
are not working
EM equity markets
lack common drivers,
perhaps making the
asset class an unwise
investment as a
whole
China prospects, for
instance, are not bad
given unchallenging
earnings expectations
Growth, on the other
hand, is what will
eventually drive
India
China, for instance, has seen the least disappointing returns amongst the BRICs
although the numbers are striking compared to DM. As the largest EM economy and
equity market, Chinese results are the most consequential. The economic backdrop
in China has been dominated by a) a deceleration to a slower rate of growth as
authorities engineer a transition to a more balanced development trajectory, and b)
anxiety that a sharp cyclical event may result from risks and tensions created by that
transition. The two points have created a substantial de-rating of Chinese markets.
The biggest issue going forward is a third point; earnings have barely budged in USD
or CNY terms, even with near double-digit rates of growth in GDP. The combination
of policy, development, and demographics has created a rapid increase in labor costs
that could continue. Corporate costs structures will be affected and earnings may not
grow as much as in the past.
Brazil, unfortunately, has been impacted negatively on a number of fronts. Weak
growth and a faltering economic strategy have undermined a seemingly promising
market outlook. Since 2010, Brazil’s equity market is down 16% p.a. and that is with
the PE relatively static. The market decline has been entirely attributable to a
collapse in earnings of listed shares which a weak BRL has compounded. Policies
have failed to create an environment conducive to high rates of investment and
economic growth. Policies have promoted domestic consumption and income
distribution with some positive social results, but the rate of investment is below 20%
of GDP which is too low to generate strong growth. This problem is more
longstanding than it will be in China. A weak economic outlook for growth and
doubts about policy framework creates a set of complications that are difficult to
evaluate.
India’s equity market performance has been closer to Brazil than China, but the
underlying story is different from both. The weak market performance is due
predominantly to a de-rating of Indian equities, rather than very weak growth in
corporate earnings. Looking through the recent currency shock, earnings are seen to
be growing in local currency terms. The public sector has been unable to make the
investments and enact the policy reforms required to sustain rapid growth and
investors have lost confidence as evidenced by the declining PE ratios.
EM equities do not seem to currently possess powerful enough common drivers to
create an asset class worthy of specific analysis and portfolio management; at least
not as it was in the past. Growth has been the common factor amongst EM markets,
but that is a less powerful driver currently. Each market must be viewed and
analyzed independently. Using the same BRIC countries, not only have they seen
different paths over since 2010, their outlooks are unique as well.
In China, earnings may stay somewhat stagnant even as GDP reaccelerates. Value is
a more plausible investment thesis than growth, and, for now, Chinese equities seem
interesting in that light. Unchallenging valuations and the cash the investments
distribute will be the theme, and not unabated growth.
India is the market where the traditional EM driver, growth, looks most relevant. The
key question is whether policy status quo is compatible with robust future growth and
whether that growth can filter through to corporate earnings. Tactical issues
regarding currency and bond levels are also more important here.

October 1, 2013
But, Brazil is a value
trap. An EM-only, or
BRIC-only analysis
would not pick this
up
Countries most
reliant on capital
flows, measured by
the current account
deficit, are where the
most intense
currency and interest
rate adjustments
have taken place
China, South Korea,
and Russia appear to
be least exposed to
the risk of increasing
US interest rates
The Brazilian market has proven to be a value trap. Equity investments have
appeared fairly valued since the 2002 election-related crisis. Fundamentals have
deteriorated and brought the market down with them; declining PEs and declining
earnings. Brazil should be viewed as a turnaround or restructuring candidate which is
a different proposition than other EM markets.
Current Account Impact on Currencies
Current Account Impact on Interest Rates
Source: Accuvest Global Advisors, Lyxor

October 1, 2013
Country Ranking Data – As of 9/30/2013
Source: Accuvest Global Advisors, MSCI

October 1, 2013
Range of Returns among Countries – 3rd
Quarter
QTD
Spain 25.7%
Italy 19.6%
Austria 18.9%
France 15.4%
Sweden 15.2%
Korea 14.9%
Netherlands 14.8%
Belgium 13.6%
Russia 13.6%
Germany 12.7%
China 12.2%
United Kingdom 12.0%
Australia 11.9%
Switzerland 9.5%
Norway 9.1%
Hong Kong 8.9%
Canada 8.8%
South Africa 8.8%
Brazil 8.4%
Japan 6.7%
Usa 5.6%
Singapore 4.6%
Taiwan 3.1%
Israel 2.2%
Mexico -1.7%
Malaysia -3.0%
Thailand -5.2%
India -5.3%
Chile -5.6%
Turkey -6.7%
Max 25.65%
Min (6.73%)
Range 8.29%
Average 8.19%
Stdev 8.19%

October 1, 2013
The earnings yield
gap still points to
relative value in
stocks
On January 1 of this
year, the average
S&P forecast for
year-end was 1,531
and the highest
forecast was 1,615
Of course, strategists
have moved up their
targets now as the
market rallied, but
the move in stocks
this year was very
much unexpected
Recommended asset
allocations are varied
Earnings yield vs. Junk Bond yield
S&P 500 Year End Forecast Table
2013 Close 2013 EPS
Bank of America 1750 $109.00
Bank of Montreal 1800 $110.00
Barclays 1800 $108.00
Citigroup 1650 $109.50
Credit Suisse 1730 $107.70
Deutsche Bank 1750 $111.00
Goldman Sachs 1750 $108.00
HSBC 1680
JP Morgan 1775 $110.00
Morgan Stanley $105.50
Oppenheimer 1730 $109.00
Wells Fargo 1440 $105.00
Mean 1715 $108.76
Median 1750 $108.50
High 1800 $111.00
Low 1440 $105.00
Asset Allocation Table
Firm Stocks Bonds Cash Alts
Bank of America 68% 30% 2% 0%
HSBC 24% 59% 7% 5%
JPMorgan 60% 25% 15% 0%
UBS 47.6% 39% 3.2% 5%

October 1, 2013
A highly
accommodative
central bank and a
modestly growing
economy that shows
no signs of inflation
are the reasons why
rates probably only
trend slowly higher
in a stair-step fashion
Reducing rate risk
and taking more
credit risk is a way
bond portfolios can
still add value in the
rising-rate
environment
Interest Rate
forecasts are being
ratcheted higher with
the 10-yr expected to
end the year with a
yield of 2.85%
This is 65 basis
points higher than
the median forecast
at the beginning of
the year. The
magnitude of the
increase we have
seen in 2013 was
unexpected.
down massively. Neither the overly-strong economy or inflationary scare are base
cases currently, but they must be watched vigilantly. As noted in the table below, the
forecasts for year-end are still under 3% on the 10-year Treasury note and twelve
months later it is projected to be less than 50 basis points higher than that. This kind
of scenario, while not great for bonds, is certainly not terrible.
That outlook is the most reasonable and will drive strategy for the near term.
Exposure to credit should be rewarded. Extending out the curve somewhat (say, in
the 3-5 year range) should also be a winning strategy. With the yield curve steep and
a dramatic rise in rates unlikely in the medium-term, move out the curve to that
maturity range will create better returns than owning maturities that are very short,
continually reinvesting and hoping for higher rates to kick in.
Other strategies can minimize much of the interest rate risk of holding bonds. High
yield bond portfolios can be built with durations near 3 and yields high enough, that
rates would have to rise dramatically to not have positive returns when measured in
12-month holding periods. Of course, this brings into play risks associated with
credit, but with the improving economy continuing to improve corporate balance
sheets, metrics should improve. Floating rate senior loans are another way to
mitigate interest rate risk. Floaters in general do not provide much return with a
small margin over Libor, but once again, by accepting credit risk much higher returns
are possible.
10-Yr Treasury Yield Forecasts (77 forecasts)
Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Median Forecast 2.85 3.00 3.10 3.22 3.36
Average Forecast 2.84 2.96 3.10 3.24 3.36
High Forecast 3.76 3.93 4.21 4.36 4.52
Low Forecast 2.10 2.20 2.30 2.74 2.71
Change in Forecasts since January 2013
Q4 13 Q1 14
Median Forecast +0.65 +0.60
Average Forecast +0.67 +0.62
High Forecast +0.76 +0.68
Low Forecast +0.60 +0.54

October 1, 2013
Interest Rates are
increasing…
But have reached
their long term trend
The US Yield Curve
is steepening, short
term interest rates
remain low
10 Year Treasury Yield
10 Year Treasury Yield - Long Term Trend
2 Year - 10 Year Treasury Yield Spread (Steepness)

October 1, 2013
US Yield Curve has
steepened further
over the last three
months
Investment Grade
credit spreads have
widened
Yield Curve Shifts
3‐Mo 2‐Yr 5‐Yr 10‐Yr 30‐Yr
12/31/2008 0.08 0.77 1.55 2.21 2.68
12/31/2010 0.13 0.60 2.01 3.30 4.34
12/31/2012 0.04 0.25 0.72 1.76 2.95
6/30/2013 0.03 0.36 1.40 2.49 3.50
9/30/2013 0.01 0.32 1.38 2.61 3.69
BBB Corporate Bond Spreads

October 1, 2013
High yield spreads
can perhaps stay
tight if the economy
stays on track,
allowing credit
metrics to continue
improving
Emerging Market
Sovereign Bond
spreads have
widened, and are
approaching
resistance
Rotation from Bonds
to Equities still in the
early stages
High Yield Bonds - Spread to Worst
Emerging Market Bond Spreads
U.S. Fund Flows

October 1, 2013
Strategy
 The breakdown in US Treasury bonds has been dramatic. While tactical
opportunities for trading could be present given the historic rise in rates, a
more moderate strategy is warranted.
 Investment grade exposure in the 2-5 year range will be built to take
advantage, at least modestly, of the steep yield curve at a time when rates
may move sideways for an extended period. Still, negative impacts will be
avoided if rates were to rise significantly again.
 Greater exposures to lower quality credit are being built to fill some of the
gray area between stocks and bonds. Risk associated with an improving
economy and favorable credit metrics of corporate bond issuers is preferable
to taking straight-up interest rate risk. High yield and floating rate loans will
do fine if rates tick up gradually.
Allocations
Bonds (35%)
Core
Overweight Neutral Underweight
Mid‐term Credit Short‐term Credit Mid‐term Treasuries


                                      Satellite
Overweight
High Yield Bonds
Floating Rate Senior Bank Loans
Global Bonds

October 1, 2013
Exposure to
Duration and Credit
has increased
moderately over the
last 3 months
Alternative strategies
can be helpful given
the economic
panorama
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Credit Risk
Duration Risk
Accuvest Bond Model
AGA Bond ‐ October AGA Bond ‐ July Benchmark
ALTERNATIVES
The post-crisis backdrop of moderate global growth, mild inflation, and high liquidity
will likely continue to prevail over the next few quarters. This investing backdrop
and the ongoing process of monetary normalization are powerful drivers of
performance, and should present opportunities for alternative strategies to generate
alpha.
Cumulative Returns
‐20%
‐10%
0%
10%
20%
30%
40%
50%
60%
Alternative Strategies Global Equities Aggregate Bonds Long Term Treasuries
1 Year 3 year 5 year

October 1, 2013
Higher oil prices are
a possibility, but
other commodities
are likely to be under
some pressure
Commodities remain
in a well-established
5 year downtrend
Global manufacturing may be showing signs of improvement and Chinese business
confidence is getting stronger, but the global growth outlook is not yet good enough
to prompt a sustained pick-up in commodity prices. Growth-sensitive commodities
such as base metals may get a short-term price lift, but fundamentals are just not firm
enough to sustain a rally. Upside risks in oil are high, despite an easing in the Syrian
situation and prospect of a thaw in US relations with Iran.
Commodities trailing equities
Broad Commodities

October 1, 2013
Best/Worst Commodities YTD
Oil Prices (WTI)

October 1, 2013
Gold decline
continues with hardly
even a modest
correction seen
Directional, Equity-
focused Alternative
Strategies have
outperformed in 2013
Gold Prices
Alternative Strategies
Year to date, the Lyxor Hedge Fund Index, a portfolio of alternative strategies, has
returned approximately 3.0% with low volatility (5%) and modest correlations to
stocks (0.80) and bonds (-0.12). Directional strategies with a focus on equities
remain a strategic core exposure given our positive view on the asset class. With
rates entering a bottoming process, investments in fixed income strategies present a
less attractive risk-return profile.
Alternative Strategy Returns - Year-to-Date
10.4%
7.4%
5.5%
4.7%
3.6% 3.4%
0.4%
‐0.9%
‐4.1%
‐6.0%
‐8%
‐6%
‐4%
‐2%
0%
2%
4%
6%
8%
10%
12%
Source: Accuvest Global Advisors, Hedgefundresearch.com, Lyxor

October 1, 2013
SECULAR THEMES
Correlations amongst risk assets will drift lower
Gradual weakening trend in USD
Energy Revolution creates investment opportunities
Global economic growth will run below trend
Chinese turn to consumerism and urbanization
Correlations amongst risk assets will drift lower
Maintain commitment to broad diversification of portfolios through multiple asset classes
Prefer top-down country-by-country approach in building equity exposures
Alternative assets have place in portfolio if lower cost, transparent, and liquid
Gradual weakening trend in USD
Non-USD exposure via international equities
Tactical exposures to emerging market currencies
Satellite exposures to resource equities
Energy Revolution creates investment opportunities
Gas-on-gas arbitrage expands margins and market share
Gas-on-oil arbitrage see U.S. truck fleets and shipping switching
Tactical exposures to emerging market currencies
Global economic growth will run below trend
Rates will stay lower
Inflation will stay in the background
Trending risk markets will be elusive
Chinese turn to consumerism and urbanization
Consumption and services create sustained income and weal effects
Better social services generate marginal demand for healthcare, financials, IT, transportation, etc.
Currently less
applicable
Current focus
warranted
Cyclical Status ‐ Sept 2013
Secular Themes

October 1, 2013
General Disclosures
The material provided in this report is for informational use only and should not be seen as an offer to sell or as a solicitation of an offer to
purchase any security or to subscribe to any investment or advisory service. This information was obtained from the disclosed sources and is
believed to be reliable. The information is subject to change without notice. Accuvest Global Advisors does not guarantee the accuracy or
completeness of the information nor make any warranties with regard to the results that may be obtained from its use.
Debt and equity investments associated with certain foreign countries may involve increased volatility and risk due to, among others, political
risk, sovereign risk, economic quality, liquidity risk. Differences in the extent of these risks vary from country to country, among investment
instruments, and over time. Investing in non-U.S. securities, including ADRs, may entail certain risks. The securities of non-U.S. issuers may not
be registered with, nor subject to the reporting requirements of the U.S. Securities and Exchange Commission (SEC). There may be limited
information available on foreign securities. Foreign companies are generally not subject to uniform audit and reporting standards, practices and
requirements comparable to those of U.S. Securities. Some foreign companies may be less liquid and their prices more volatile than securities of
comparable U.S. companies. In addition, exchange rate movements may have an adverse effect on the value of an investment in a foreign stock
and its corresponding dividend payment for U.S. investors. Past performance is not indicative of future results. You should not assume that any
future performance of any security or country referred to in this Report will be profitable or equal to any corresponding performance levels that
might be provided. Investment risks are borne solely by the investor and not by AGA.
Where included in this report, MSCI sourced information is the exclusive property of AGA. Without prior written permission of MSCI, this
information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create any financial products, including
any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its
affiliates and any third party involved in, or related to, computing or compiling the information hereby disclaim all warranties of originality,
accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the
foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have
any liability for any damages of any kind.
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2013.10.10 accuvest bpv-q4

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2013.10.10 accuvest bpv-q4