What, Me Worry?

As we contemplate the upcoming U.S. presidential election one of our chief investment related concerns is the potential for the election results to roil markets. Strangely, the equity markets trade as if the election results, be it a Clinton or Trump victory, are inconsequential for share prices. That stance is greatly at odds with what many of us think, as well as the palpable anxiety voiced by many traditional and social media outlets.
In prior articles, including our most recent “Mm Mm Good”, we discussed economic and market distortions caused by extraordinary central bank monetary policy. In this instance we focus on a behavioral distortion that is, also, partially a result of central bank policy, actions and words.
Bad News is Good News
The BREXIT vote in the United Kingdom was feared to have negative consequences for the financial markets if U.K. voters favored exiting the European Union (EU). As we now know, the “leave” votes won despite the vast majority of polls predicting a “stay” victory right up to the end. Following the surprising result, stock markets behaved as expected, with most markets around the world plummeting. Within days, however, markets snapped back, and after only a couple of weeks, many had not only fully recovered but some had actually risen above pre-vote levels.
This abnormal behavior is something that has become common place in the last few years. The market has coined this type of market reaction “bad news is good news”. From both a logical and a fundamental view it is senseless, unless one considers why the market thinks bad news is good news.
In 1998 Alan Greenspan and the Federal Reserve helped bail out Wall Street and the failing hedge fund Long Term Capital Management. From that day forward, central bankers around the world have pursued an increasingly proactive approach towards steering economic growth and, more recently, financial asset prices.
Over the last few years, actions and words aimed to halt downward trending markets, have become strikingly obvious. In July 2012, Mario Draghi, President of the European Central Bank (ECB), vowed to do “whatever it takes” to calm financial market fears that were hammering the Euro region. Shortly after uttering those famous words, European stock markets and most others around the world rallied significantly. On October 14, 2014, Fed Governor James Bullard suggested the Fed pause the tapering of Quantitative Easing (QE) in response to a 10% stock market decline and an affiliated drop in bond yields. Within two weeks of his comments, the stock market had more than erased its losses and was back to setting new all-time highs.
Bullard’s so called “stick save”, Draghi’s promise to do anything, and many other similar statements and actions from central bankers have not only reassured investors but they have bred a high level of investor complacency. On a daily basis, it is commonplace to witness market indifference or even strength on weak economic data. Most recently, on July 28, 2016, a much weaker than expected GDP release, which should have caused concern for investors, resulted in equity market gains.
Investors are electing to ignore fundamental news and data, which ultimately underpin equity valuations, on the presumption that the Fed and other central banks will “do whatever it takes” to prevent markets from correcting.
Election Complacency
As we approach the coming election, the U.S. stock markets are trading as if it were a typical lazy summer with not a care in the world. That is in direct contrast to the risks that many of us foresee with the coming election.
Realized volatility is a measure of the degree of variation of a series of historical prices. Implied volatility (VIX) is a forward looking measure of realized volatility, derived from call and put option pricing. Frequently, implied volatility increases when investors are concerned the market may be entering a risky period and it decreases when there is little to worry about. Realized and implied volatility help us quantify the level of market complacency or concern.
The graph below shows implied equity volatility from prior election year periods as of the end of each respective July leading to the election, as well as at the end of July 2016.
Implied Volatility Leading up to U.S. Elections

implied 1
Data Courtesy: Bloomberg

Note that current annualized implied volatility of 11.87% is well below any other level seen since at least the Bill Clinton-Bob Dole election of 1996. Additionally, when compared to the entire data set going back over twenty years, as shown below, the current index (red dotted line) is well below the average and 95% of all other observations. In other words the market is extremely confident there are no surprises looming and no cause for concern, election or not.
VIX 1994-Present

long term vix
Data Courtesy: Bloomberg
Implied volatility is not a perfect measure to assess market concerns directly related to the election, as it can also reflect concerns about other events as well. Accordingly, comparing current implied volatility to recent realized volatility provides a baseline from which to gauge the degree that implied volatility is elevated. One would assume that as uncertainty and risk increase as an election gets closer, implied volatility, or future volatility expectations, would trade higher than realized volatility. Prior to this coming election, the data clearly supports that logical theory as shown in the table below.


table 2

As of late July, in each of the last five elections, implied volatility was at least 20% higher than realized volatility. 2016 is an anomaly. Going into one of the more unpredictable elections, implied volatility is trading at a discount to realized volatility.
Can we assume the Fed will ensure the markets behave appropriately regardless of who wins the election? Answering this question is difficult. Recent history sides with those answering yes. That said, there is a risk that the 2016 election results upset markets, and when needed, Fed statements and/or actions will not have their desired effect. When that risk is considered alongside already troubling factors such as stagnating economic growth, declining earnings, high valuations and numerous geopolitical risks, investors may be well-served to question many bullish market forecasts and the popular blind faith assumption in Fed effectiveness.
The market, courtesy of complacent investors, is offering very cheap insurance for an event that has the potential to induce extreme volatility via VIX options and futures. Even if the next eleven weeks leading to the election prove to be uneventful, the VIX at current levels, as shown earlier, has been a prudent place to own protection. We recommend you consider this opportunity as a protective measure.

720 Global is an investment consultant, specializing in macroeconomic research, valuations, asset allocation, and risk management. Our objective is to provide professional investment managers with unique and relevant information that can be incorporated into their investment process to enhance performance and marketing. We assist our clients in differentiating themselves from the crowd with a focus on value, performance and a clear, lucid assessment of global market and economic dynamics.

720 Global research is available for re-branding and customization for distribution to your clients.

For more information about our services please contact us at 301.466.1204 or email info@720global.com

©720 Global 2016 All Rights Reserved

Posted in Uncategorized | Leave a comment

“Mm Mm Good” – But Very Expensive


No U.S. bond trader under the age of 56 has traded in a prolonged bear market. That striking fact is a function of steadily falling bond yields since 1981. Over this era, investors have been increasingly mesmerized into trusting that yields may never go materially higher. That belief seems stronger than ever in the U.S. as yields are dropping to levels not seen at any point in American history (since at least 1790). In the U.S., one can still find Treasury bonds with a positive yield but globally over $13 trillion of sovereign bonds have negative yields. The poster child for this insanity is a 50-year Swiss sovereign bond which yields negative .023%. Try to make sense of intentionally investing your money for 50 years with the guarantee of losing money.

As described in prior articles, when yields are lower than appropriate, capital gets mis-allocated. The result is economic distortions closely followed by hostile economic and financial consequences.  This article offers two examples intended to highlight market distortions resulting from abnormally low interest rates.

The Hunt for Yield

With “risk free” U.S. Treasury bonds and other relatively safe investment-grade bonds offering yields in the low single digits, “conservative” investors are struggling to find investments that provide decent credit quality and respectable returns. The result of this quest for yield has been a mad rush by investors into dividend yielding stocks.

The following two graphs highlight how those stocks with the highest dividend yields are clearly most in demand this year.  The first graph below plots the average, non-weighted, year-to-date returns for the stock of each S&P 500 company, categorized by their respective dividend yield ranges.







Year to Date Total Returns per Dividend Yield Ranges


 div yld 1
Data Courtesy: Bloomberg


The following scatter plot shows the S&P 500 by sector, highlighting how sectors with the highest dividend yields are also the best performing.

Dividend Yield and YTD Return by Sector


 div yld 2
Data Courtesy: Bloomberg


The data in both graphs strongly suggest that in 2016 equity investors have a strong preference for companies and sectors with higher dividend yields.

Campbell’s Soup

Campbell’s Soup (CPB) provides great insight into this phenomenon. CPB currently trades at a Price to Earnings ratio (P/E) of 23.  As shown in the graph below its P/E has spiked over the last two years and stands at a 50% premium to its average since the 2008 recession. Over the course of just the last 7 months, CPB’s stock price has risen 25% while earnings remain flat. As a result the dividend yield was reduced from a somewhat respectable 2.50% dividend to 2.00% currently.

Campbell’s Soup (CPB) Price to Earnings Ratio


 CPB pe 3
Data Courtesy: Bloomberg


Investor demand for CPB appears to be a function of investor appetite for yield. We deduce this because CPB is not a growth company. Since 1991 its annualized revenue growth has been 0.97%. In the last 5 and 10 years revenue growth has slowed to 0.63% and 0.82% respectively.

This concept of a no-growth soup company with soaring valuations is alarming. The price of CPB would have to drop 30% to return to its post-recession average P/E. If that were to occur, it would take 16 years’ worth of dividend payments to recoup the price loss, assuming dividends remain stable!

Utility Stocks

Utility stocks offer another poignant case study. These providers of electric, gas, sewage and water services are well known for higher relative dividends, low revenue growth and reduced price volatility. Year to date, the popular ETF representing utility stocks (XLU) has risen 20%, and in the process its dividend yield dropped from 3.70% to 3.00%.

Not only are current investors of utilities receiving a lower dividend yield, but they are paying an extremely high valuation in order to earn 3.00%.  Consider the graphs below showing the Price to Sales ratio and the Price to EBITDA ratio for the utility sector.

Price to Sales Ratio


 price to sales 4
Data Courtesy: Bloomberg


Price to EBITDA Ratio


 price to ebitda 5
Data Courtesy: Bloomberg


As the graphs show, the Utility index now trades at valuations that are at or near three standard deviations away from the average. Both readings dwarf any prior level since at least 1990. As is the case with CPB, these valuation anomalies are a function of investors demand for yield and not the potential growth of the underlying companies. In fact, revenue growth in the utility sector is worse than that of CPB. Revenue per share has declined in each of the  last eight quarters and is currently the lowest in over a decade.

The Bottom Line

The bottom line as shown through two examples, is that insatiable demand for stocks with above average dividends is forcing valuations to diverge significantly from historical norms. Investors buying the equity of these and many other companies with high dividend yields are seeking the perceived safety of dividends and reduced price volatility. However, in our opinion, what many of these investors will receive is low absolute dividends and more price risk. Beta driven strategies, and some so-called “smart beta” portfolios, may be in for a rude awakening if, as we suspect, many of these safe dividend stocks exhibit a larger draw down than their historical betas would predict.

The valuations of many companies providing higher dividend yields have changed drastically in a relatively short time period. This is not an imminent warning to sell but an alert to monitor valuations and not just dividend yields. The grab for yield could easily persist driving prices even higher, but do not lose sight of underlying valuations. At some point, as is true throughout the history of financial markets, regression to the mean will occur.


Negative and zero interest rate policies are creating significant distortions across the global economy and financial markets. The examples in this article are just two of many instances. For those who say that we should not worry about the current state of monetary policy, this article provides further evidence of the distortions these aggressive monetary actions create and makes the reader aware of the wealth destruction that will eventually occur as a result.





720 Global is an investment consultant, specializing in macroeconomic research, valuations, asset allocation, and risk management.  Our objective is to provide professional investment managers with unique and relevant information that can be incorporated into their investment process to enhance performance and marketing. We assist our clients in differentiating themselves from the crowd with a focus on value, performance and a clear, lucid assessment of global market and economic dynamics.


720 Global research is available for re-branding and customization for distribution to your clients.


For more information about our services please contact us at 301.466.1204 or email info@720global.com


©720 Global 2016 All Rights Reserved

Posted in Uncategorized | Leave a comment

Another Warning in the GDP Data


On Friday July 29th, 2016, the Bureau of Economic Analysis (BEA) released the second-quarter GDP figures and revisions for prior quarters. At a disappointing annualized growth rate of only 1.20%, second quarter GDP widely missed consensus expectations of 2.50% growth.  Coincidentally the current 1-year average growth rate has risen at the same 1.20% and that annualized growth rate has declined for five quarters in a row.

For the most part, the recent bout of stagnant GDP data has not caught the attention of the media or the markets. As consultants to those who manage wealth we believe this data is vitally important, regardless of what others may think. Accordingly, we provide some context around this data to help you better grasp its magnitude.

The graph below plots average 1-year GDP growth on a quarterly basis going back to 1948. The blue shaded areas represent periods deemed recessionary by the National Bureau of Economic Research (NBER), and the red dotted line facilitates the comparison of the current 1.20% reading versus those of the past.

1-Year Average GDP Growth


 gdp 1
Data Courtesy: St. Louis Federal Reserve (FRED)


Here are four important takeaways:

  • All recessions since 1948 started with an average growth rate greater than the current 1.20% rate.
  • There are only three instances where the 1-year growth rate was below the current level and recession did not occur. In the two most recent instances (2011/2012), weak growth was met with renewed rounds of extraordinary stimulus in the form of quantitative easing (QE).
  • Only 18% of all observations going back to 1948 are below the current 1.20% level.
  • Of that 18%, 94% occurred during or within a quarter of a recession.

Based on recent history, one might elect to maintain an aggressive stance towards equities and other risky assets in anticipation of another round of stimulus from the Federal Reserve. One should be reminded however, the primary difference between where we are today versus those two recent periods is that the Fed’s posture was not leaning toward interest rate hikes as they are now.

Though difficult in a world of poor returns, equity investors should remain defensive and highly concerned by the recent economic data.  As a reminder, re-consider the following table and excerpt from “Dear Prudence” published in April 2016.

The possibility of a recession while equity valuations are extreme is deeply troubling.  Since 1929, there have been 14 recessions. All but one, in 1945, coincided with a period of negative returns for stocks. Included in this data, as shown in the table below, are periods when stock valuations ranged from greatly undervalued to extremely overvalued.   –Data and Table Courtesy Doug Short

GDP and valuations


720 Global is not calling for an immediate equity market sell-off. In fact, the market may appreciate further, irrespective of weak economic data, declining earnings and historical precedent. That said, periods like today, characterized by extreme valuations and weak economic activity, have ultimately proved disastrous for investors. Those managing wealth for others should be cognizant of the implications present in today’s stagnating economy.


Posted in Uncategorized | Leave a comment

Kyōki (Insanity)

Pondering the state of the global economy can elicit manic-depressive-obsessive-compulsive emotions.  The volatility of global markets – equities, bonds, commodities, currencies, etc. – are challenging enough without consideration of Brexit, the U.S. Presidential election, radical Islamic terrorism and so on.  Yet no discussion of economic and market environments is complete without giving hefty consideration to what may be a major shift in the way economic policy is conducted in Japan.

The Japanese economy has been the poster child for economic malaise and bad fortune for so long that even the most radical policy responses no longer garner much attention. In fact, recent policy actions intended to weaken the Yen have resulted in significant appreciation of the yen against the currencies of Japan’s major trade partners, further crippling economic activity. The frustration of an appreciating currency coupled with deflation and zero economic growth has produced signs that what Japan has in store for the world falls squarely in to the category of “you ain’t seen nothin’ yet.”  Assuming new fiscal and monetary policies will be similar to those enacted in the past is a big risk that should be contemplated by investors.

The Last 25 Years

The Japanese economy has been fighting weak growth and deflationary forces for over 25 years.  Japan’s equity market and real estate bubbles burst in the first week of 1990, presaging deflation and stagnant economic growth ever since.  Despite countless monetary and fiscal efforts to combat these economic ailments, nothing seems to work.

Any economist worth his salt has multiple reasons for the depth and breadth of these issues but very few get to the heart of the problem.  The typical analysis suggests that weak growth in Japan is primarily being caused by weak demand.  Over the last 25 years, insufficient demand, or a lack of consumption, has been addressed by increasingly incentivizing the population and the government to consume more by taking on additional debt.  That incentive is produced via lower interest rates.  If demand really is the problem, however, then some version of these policies should have worked, but to date they have not.

If the real problem, however, is too much debt, which at 255% of Japan’s GDP seems a reasonable assumption to us, then the misdiagnosis and resulting ill-designed policy response leads to even slower growth, more persistent deflationary pressures and exacerbates the original problem.  The graphs below shows that economic activity is currently at levels last seen in 1993, yet the level of debt has risen 360% since 1996.  The charts provide evidence that Japan’s crippling level of debt is not helping the economy recover and in fact is creating massive headwinds.

Japan GDP 1990-2015


 gdp 1
Data Courtesy: World Bank


Japan Government Debt to GDP ratio


 debt gdp 2
Data Courtesy: Japan Ministry of Finance (MoF)


What is so confounding about this situation is that after 25 years, one would expect Japanese leadership to eventually recognize that they are following Einstein’s definition of insanity – doing the same thing over and over again and expecting different results.  Equally insane, leaders in the rest of the developed world are following Japan over the same economic cliff.

Throughout this period of economic stagnation and deflation, Japan has increasingly emphasized its desire to generate inflation. The ulterior motive behind such a strategy is hidden in plain sight. If the value of a currency, in this case the Yen, is eroded by rising inflation debtors are able to pay back that debt with Yen that is worth less than it used to be.  For example, if Japan were somehow able to generate 4% inflation for 5 years, the compounded effect of that inflation would serve to devalue the currency by roughly 22%.  Therefore, debtors (the Japanese government) could repay outstanding debt in five years at what is a 22% discount to its current value. Said more bluntly, they can essentially default on 22% of their debt.

What we know about Japan is that their debt load has long since surpassed the country’s ability to repay it in conventional terms. Given that it would allow them to erase some percentage of the value of the debt outstanding, their desperation to generate inflation should not be underestimated. One way or another, this is the reality Japan hopes to achieve.


Quantitative easing (QE) is one of the primary monetary policy approaches central banks have taken since the 2008 financial crisis.  With short term interest rates pegged at zero, and thus the traditional level of monetary policy at its effective limit, the U.S. Federal Reserve and many other central banks conjured new money from the printing presses and began buying sovereign debt and, in some cases mortgages, corporate bonds and even equities. This approach to increasing the money supply achieved central bank objectives of levitating stocks and other asset markets, in the hope that newly created “wealth” would trickle down.  The mission has yet to produce the promised “escape velocity” for economic growth or higher inflation. The wealthy, who own most of the world’s financial assets, have seen their wealth expand rapidly. However, for most of the working population, the outcome has been economic struggle, further widening of the wealth gap and a deepening sense of discontentment.

The Nuclear Option

In 2014, as the verdict on the efficacy of QE became increasingly clear, European and Japanese central bankers went back to the drawing board. They decided that if the wealth effect of boosting financial markets would not deliver the desired consumption to drive economic growth then surely negative interest rates would do the trick.  Unfortunately, the central bankers appear to have forgotten that there are both borrowers and lenders who are affected by the level of interest rates.  Not only have negative interest rates failed to advance economic growth, the strategy appears to have eroded public confidence in the institution of central banking and financially damaging the balance sheets of many banks.

In recent weeks, former Federal Reserve (Fed) chairman Ben Bernanke paid a visit to Tokyo and met with a variety of Japanese leaders including Bank of Japan chairman Haruhiko Kuroda. In those meetings, Bernanke supposedly offered counsel to the Japanese about how they might, once and for all, break the deflationary shackles that enslave their economy using “helicopter money” (the termed was coined by Milton Freidman and made popular in 2002 by Ben Bernanke).  What Bernanke proposes, is for Japan to effectively take one of the few remaining steps toward “all-in” or the economic policy equivalent of a “nuclear option”.

The Japanese government appears to be leading the charge in the next chapter of stranger than fiction economic policy through some form of “helicopter money”.  As opposed to the prior methods of QE, this new approach marries monetary policy with fiscal policy by putting printed currency into the hands of the Ministry of Finance (MOF or Japan’s Treasury department) for direct distribution through a fiscal policy program.  Such a program may be infrastructure spending or it may simply be a direct deposit into the bank accounts of public citizens.  Regardless of its use, the public debt would rise further.

According to the meeting notes shared with the media Bernanke recommended that the MoF issue “perpetual bonds”, or bonds which have no maturity date.  The Bank of Japan (BOJ or the Japan’s Central Bank) would essentially print Yen to buy the perpetual bonds and further expand their already bloated balance sheet. The new money for those bonds would go to the MoF for distribution in some form through a fiscal policy measure.  The BoJ receives the bonds, the MoF gets the newly printed money and the citizens of Japan would receive a stimulus package that will deliver inflation and a real economic recovery.  Sounds like a win-win, huh?

Temporarily, yes.  Economic activity will increase and inflation may rise.

Let us suppose that the decision is to distribute the newly printed currency from the sale of the perpetual bonds directly into the hands of the Japanese people.  Further let us suppose every dollar of that money is spent.  In such a circumstance, economic activity will pick up sharply.  However, eventually the money will run out, spending falters and economic stagnation and decline will resume.

At this point, Japan has the original accumulated debt plus the new debt created through perpetual bonds and an economy that did not respond organically to this new policy measure.  Naturally the familiar response from policymakers is likely to be “we just didn’t do enough”. It is then highly probable another round of helicopter money will be issued producing another short lived spurt of economic activity.  As with previous policy efforts, this pattern likely repeats over and over again.  Each time, however, the amount of money printed and perpetual bonds issued must be greater than the prior attempts. Otherwise, economic growth will not occur, it will, at best, only match that of the prior experience.

Eventually, due to the mountain of money going directly in to the economy, inflation will emerge.  However, the greater likelihood is not that inflation emerges, but that it actually explodes resulting in a complete annihilation of the currency and the Japanese economy.  In hypothetical terms as described here, the outcome would be devastating.  Unlike prior methods of QE which can be halted and even reversed, helicopter money demands ever increasing amounts to achieve the desired growth and inflation. Once started, it will be very difficult to stop as economic activity would stumble.

The following paragraph came from “Part Deux – Shorting the Federal Reserve”. In the article we described how the French resorted to a helicopter money to help jump start a stagnant economy.

“With each new issue came increased trade and a stronger economy. The problem was the activity wasn’t based on anything but new money. As such, it had very little staying power and the positive benefits quickly eroded. Businesses were handcuffed. They found it hard to make any decisions in fear the currency would continue to drop in value. Prices continued to rise. Speculation and hoarding were becoming the primary drivers of the economy. “Commerce was dead; betting took its place”. With higher prices, employees were laid off as merchants struggled to cover increasing costs”.  

The French money printing exercise ultimately led to economic ruin and was a leading factor fueling the French revolution.


Is it possible that Bernanke’s helicopter money approach could work and finally help Japan escape deflation in conjunction with a healthy, organically growing economy?  It has a probability that is certainly greater than zero, but given the continual misdiagnosis of the core problem, namely too much debt, that probability is not much above zero.  There is a far greater likelihood of a multitude of other undesirable unintended consequences.

Of all the developed countries, Japan is in the worst condition economically.  Most others, including the United States, are following the same path to insanity though.  Unlike Japan, other countries may have time to implement policy changes that will allow them to avoid Japan’s desperate circumstances.

To gain a more complete understanding of 720 Global’s economic thesis and the policy changes required, we recommend our prior articles “The Death of the Virtuous Cycle” and “The Fifteenth of August”.





720 Global is an investment consultant, specializing in macroeconomic research, valuations, asset allocation, and risk management.  Our objective is to provide professional investment managers with unique and relevant information that can be incorporated into their investment process to enhance performance and marketing. We assist our clients in differentiating themselves from the crowd with a focus on value, performance and a clear, lucid assessment of global market and economic dynamics.


720 Global research is available for re-branding and customization for distribution to your clients.


For more information about our services please contact us at 301.466.1204 or email info@720global.com


©720 Global 2016 All Rights Reserved

Posted in Uncategorized | Leave a comment

A Shot of Absolute – Fortifying a Traditional Investment Portfolio

In the seven years since the financial crisis, most asset prices have experienced significant appreciation, allowing for even the most inexperienced of investors to increase their wealth. As the saying goes, “a rising tide lifts all boats”. For investment managers, assessing the tide of financial momentum and making fitting allocation decisions are extremely important. Accordingly, we have warned on numerous occasions, most recently in “Dear Prudence” and “Price to Sales Ratio – Another Nail in the Coffin”, that valuations in the equity markets are extreme, economic growth is stagnating, and corporate earnings are declining. These warnings are not an emotional reaction to a “feeling” we have, they are a quantitative assessment based on analytical rigor and durable historical precedence. In simple terms, we believe the tide may be turning and considering new investment strategies would be wise.

In this article we highlight the benefits of an Absolute Return (AR) strategy and discuss how this alternative strategy can help protect a portfolio when traditional strategies offer poor expected returns. We also explain how investment managers can utilize an AR portfolio as part of a traditional stock/bond portfolio to limit risk and potential loses.

What is an Absolute Return Portfolio?

The primary goal of investing is to increase wealth or purchasing power.  Warren Buffet is quoted as saying “Rule number 1 of investing is never lose money.  Rule number 2 is never forget rule number 1.” The hidden message in these seemingly obvious statements is that building wealth depends much more on preventing large losses than it does on achieving large gains. If you need a reminder on the value of limiting your losses please read “Limiting Losses”.

While all investment strategies aim to make money, most investment managers employ different variations of a passive approach commonly known as a “relative return” or Modern Portfolio Theory (MPT) model.  Under this approach, managers diversify investments between asset classes and sub-classes (typically stocks and bonds) and then hope for the market to deliver positive returns. In the end, however, they get the return the market provides. The performance of a relative return manager is largely dependent upon the general direction of the market.

Investors in passive strategies expect a market-based return with the hope for additional gains, otherwise known as alpha. The embedded assumption, whether the investor realizes it or not, is that the market will continue to rise indefinitely and at a rate greater than inflation. As we know, and were reminded of in 2000 and again in 2008, this is not always the case.  The 2000-2002 and 2007-2009 declines reduced the stock market value by over 50% in both instances. It can be difficult to build wealth with such a strategy in an environment like the last 15 years, as one’s net worth routinely gets impaired significantly.  While true that the stock market, as a long term investment, has generally delivered relatively good returns, there have been long stretches of time where this has not been the case. The graph below highlights such periods where the real, or inflation-adjusted, price of the S&P 500 stagnated.

Real S&P 500 Index  –  Average Annual Price and Trailing Highs

returns history 1

Data Courtesy Bloomberg and Robert Shiller http://www.econ.yale.edu/~shiller/data.htm
An alternative, action-based strategy to investment management is an AR strategy.  It is “action-based” because the returns of the portfolio are derived primarily from the actions of the investment manager. The manager is not beholden to a pre-determined, model-based asset allocation but rather is continually engaged in finding cheap securities to own or over-valued securities to sell. AR managers also tend to use a wider variety of asset classes than relative value managers. In short, an AR manager seeks to generate positive returns without regard for whether the market trend is bullish or bearish.

AR strategies typically seek return objectives based on a spread over the rate of inflation as opposed to passive strategies which base returns on historical assumptions that the market will return say 8%, just because “it always has”. AR managers use sound logic to arrive at a reasonable target that, if achieved, guarantees an increase of real wealth and therefore purchasing power.  Their objective truly is geared toward avoiding losses over some reasonable time-frame at all costs. For them, being down 25% when the market is down 50% is not success.

An example of an AR goal may be CPI + 3% for a retiree. At that rate, the retiree can potentially sustain their lifestyle without eroding their capital base.  An endowment with a 6% spending policy would aim for a target return of CPI + 6% on a similar premise.  Achieving or exceeding the targeted return, CPI, ensures that wealth and purchasing power are, at a minimum, sustained.  This approach also affords a clear and specific benchmark against which a manager may be held accountable.

AR strategies require more knowledge, skill and rigor than traditional passive strategies, which make them inherently more difficult to execute. This helps explain why so many investment managers choose to pursue market-dependent, passive strategies.  After all, who wants to be held accountable if, in bad years, they can simply throw their hands up and say “who knew the market would fall 50%?” Your clients deserve more.

Blending AR with a Traditional Asset Mix

Many investment managers do not have the flexibility or a mandate to enact a pure AR strategy. However, despite these limitations, many managers have the ability to employ an AR strategy within a traditional relative value portfolio. While we could certainly make a convincing argument that an AR strategy with a performance benchmark/objective tied to a client’s cost of living is more appropriate than a strategy and benchmarks tied to the equity market, we are aware of “how the business operates” and the reluctance for investment managers and their clients to change.

For managers and clientele benchmarked to market returns, an allocation to an AR strategy can be a valuable risk management tool, especially when equity and fixed income valuations are expensive and their expected returns are poor. In this vain we analyze expected future returns for the U.S. equity and fixed income markets to help assess the suitability of an allocation to AR. We then take a look at the last 16 years to show how different strategic allocations between traditional and AR strategies performed.

Expected U.S. Equity Returns- While there are many ways to forecast equity returns, we prefer a simple cash flow model. In 720 Global’s model, ten years of expected cash flows (purchase, dividends and sale) are generated based on numerous assumptions. The two most important assumptions are that the Price to Earnings ratio regresses to its historical average and that earnings and dividends grow 2% a year. With said expectations, our model currently calculates expected equity returns of 1.48% based on the last 12 months of earnings and 0.42% when we base returns on 10 year average earnings (CAPE10 – P/E ratio based on 10yr average earnings). The expected returns are stated in nominal terms and could easily turn out to be negative if inflation is the same or higher than it has averaged over the last 10 years.

We share the graph below to help affirm our model’s expectations. The scatter plot below matches the monthly CAPE10 ratio and the subsequent 10-year annualized returns (inflation adjusted and dividends included) since 1900.

CAPE 10 and Subsequent 10-year Annualized Returns

cape10 2

Data Courtesy: Shiller  http://www.econ.yale.edu/~shiller/data.htm
The slope of the red trend line moves from the upper left of the graph to the lower right as one would expect highlighting that cheaper valuations/lower CAPE10 readings tend to result in higher future returns and vice versa. Currently, at a CAPE10 of 26.30, the expected inflation adjusted annualized return for the S&P 500 over next 10 years is 2.20%, a far cry from the average, inflation-adjusted, annualized return of 6.10%.

Expected Fixed Income Returns- To predict future fixed income returns for the next ten years, we use the current yield on a 20-year Treasury bond, a ten year investment horizon and three equally weighted scenarios. The three scenarios are as follows:

1) Status quo – 20-yearTreasury bond yields stay static at 1.75%.

2) Bearish – Bond yields rise to 2.83% as forecasted by the forward curve. To calculate this number, solve for the expected yield as implied by the current rate of a 10-year bond, 10 years from now. This is also known as the 10-year forward rate or the 10×10. Keep in mind this scenario is very optimistic as bond yields could rise significantly higher, inflicting great losses on bond holders.

3) Bullish – Bond yields go to zero. While seemingly unfathomable, many sovereign bonds of lesser credit quality are trading at or below a zero yield to maturity, so we cannot rule out such a bullish scenario.

table bonds

*assumes 2% inflation

As shown in the table above, the most extreme, bullish scenario we can logically arrive at provides a respectable annualized, inflation adjusted yield of 2.55%. The average of the three scenarios delivers an inflation adjusted return of just .30%. If rates rise from today’s unprecedented low levels, inflation adjusted returns will most likely be negative.

Expected Returns for Traditional Stock/Bond Portfolios and AR Portfolios

Based on the meager expected returns calculated above, any combination of stocks and bonds, whether evenly distributed or heavily biased towards either asset class, could produce a total return of 2% or less, again adjusted for inflation over the next ten years. However, in the short term there is a distinct possibility of losses as markets tend to experience acute downside after trading at high valuations.

Given the potential for historically poor returns, we evaluate three sample portfolios to highlight why one might want to consider an AR strategy. The portfolio returns detailed in this analysis are modeled over the last fifteen years in their entirety and also segmented for each bullish and bearish cycle within the 15 year term. The three sample portfolios are detailed below:

1.     A simplified traditional portfolio which is invested 75% in the S&P 500 and 25% in 10-year U.S. Treasury bonds.

2.     A 100% AR portfolio which assumes a return of CPI +3%.

3.     A combination of the traditional and AR portfolios listed above with a 65% traditional allocation and 35% AR allocation.

The following graph plots each portfolio’s running total returns.

Portfolio Results

port returns 3

Data Courtesy: Bloomberg
The AR (CPI+3%) portfolio (green) was clearly the best performer over the entire period, followed by the hybrid portfolio (blue) and lastly the traditional portfolio (orange). Interestingly, the traditional portfolio outperformed the hybrid portfolio and the AR portfolio during the large majority of years (as shown in next table), however, the bear market losses of 2000-2002 and 2008-09 inflicted serious damage that was insurmountable.

Earlier, we noted that rotating between strategies based upon expected market returns is a reasonable approach for a traditional portfolio manager looking to fortify returns and limit drawdowns when expected returns are not favorable. The table below details annualized portfolio returns for the entire 15 year period as well as each bullish and bearish episode during this era. The best performing portfolio for each period is highlighted in green.

3 portfolios


As one would expect, the traditional portfolio clearly outperformed during the longer, bullish periods which comprised the majority of the 15 years. However, despite the long stretches of out-performance, the AR strategy and the hybrid strategy outperformed over the entire period.

As we wrote in “Limiting Losses” -Growing wealth through investing typically occurs over a long time horizon that includes many bullish and bearish market cycles. While making the most out of bull markets is important, it is equally important to avoid letting the inevitable bear markets reverse your progress.”


Taking a passive stance and assuming the next seven years will be the like the last seven years is a perilous bet. Historically, equity valuations at current levels have produced very disappointing future returns. Fixed income with incredibly low yields provide little income, limited upside and a lot of negative price risk. We recommend that those looking to outperform their competition and help their clients grow real wealth, even during what may likely be lean years, consider an allocation to AR.

We leave you with two statements. The first is from Ed Easterling from Crestmont Research. Ed has written volumes on the benefits of limiting losses and the costs investors pay for the volatility of their returns. The second paragraph came from our article entitled “Limiting Losses”.

A key value of the hedge fund style of investing—so called “absolute return” investing—is its focus on controlling downside losses and capturing a reasonable share of the upside. As the analysis and studies have shown, as downside risk is controlled, not only does it provide investors with a reduced risk profile and more comfortable ride, but also it requires much less of the market’s upside to deliver the same level of return.  –Ed Easterling

Ed Easterling – Crestmont Research   http://www.crestmontresearch.com/docs/Crestmont-Rowing-vs-Rollercoaster.pdf
As your clients’ fiduciary, it is imperative that you help them understand they will not beat their neighbors’ portfolio every day, quarter or year. However, by employing a loss management system, the gains to their wealth will likely be much more fruitful than their neighbors’ over time.

720 Global “Limiting Losses”


720 Global is an investment consultant, specializing in macroeconomic research, valuations, asset allocation, and risk management.  Our objective is to provide professional investment managers with unique and relevant information that can be incorporated into their investment process to enhance performance and marketing. We assist our clients in differentiating themselves from the crowd with a focus on value, performance and a clear, lucid assessment of global market and economic dynamics.


720 Global research is available for re-branding and customization for distribution to your clients.


For more information about our services please contact us at 301.466.1204 or email info@720global.com


©720 Global 2016 All Rights Reserved


Posted in Uncategorized | Leave a comment

Price to Sales Ratio – Another Nail in the Coffin?


720 Global has repeatedly warned that U.S. equity valuations are historically high and, of equal concern, not properly reflective of the nation’s weak economic growth potential. In this article we provide further support for that opinion by examining the ratio of equity prices to corporate revenue also known as the price to sales ratio (P/S). At its current record level, the P/S ratio leads us to one of two conclusions: 1) Investors are extremely optimistic about future economic and earnings growth or 2) Investors are once again caught up in the frenzy of an equity bubble and willing to invest at valuations well above the norm.

Either way, the sustainability or extension of the current P/S ratio to even higher levels would be remarkable. What follows here is an exercise in logic aimed at providing clarity on the topic.


Before showing you the current P/S ratio in relation to prior market environments, it is important to first consider two related concepts that frame the message the market is sending us.

Concept #1 – Investors should accept higher than normal valuation premiums when potential revenue growth is higher than normal and require lower than average premiums when potential revenue growth is lower than normal.

Consider someone who is evaluating the purchase of one of two dry cleaning stores (A and B). The two businesses are alike with similar sales, pricing, and locations. However, based on the buyers’ analysis, store A’s future revenue is limited to its historical 2% growth rate. Conversely, the potential buyer believes that store B, despite 2% growth in the past, has a few advantages that are underutilized which the buyer believes can potentially produce a revenue growth rate of 10%. If stores A and B are offered at the same price the buyer would most likely opt to purchase store B. It is also probable the buyer would be willing to pay a higher price for store B versus store A. Therefore highlighting that revenue growth potential is a key factor when deciding how much to pay for a business.

Purchasing a mutual fund, ETF or an equity security is essentially buying a claim on a potential future stream of earnings cash flows, just like the dry cleaning business from the prior example. The odds, therefore, of a rewarding investment are substantially increased when a company, or index for that matter, offering substantial market growth potential is purchased at a lower than average P/S ratio. Value investors actively seek such situations.

Logically one would correctly deduce that P/S ratios should tend to follow a similar directional path as expected revenues.


Concept #2 – Corporate earnings growth = economic growth

Corporate earnings growth rates and economic growth rates are nearly identical over long periods. While many investors may argue that corporate earnings growth varies from the level of domestic economic activity due to the globalization of the economy, productivity enhancements that lower expenses for corporations, interest rates and a host of other factors, history proves otherwise.

Since 1947, real GDP grew at an annualized rate of 6.43%. Over the same period, corporate earnings grew at a nearly identical annualized rate of 6.46%. Thus, expectations for future corporate earnings over the longer term should be on par with expected economic growth although short term differences can arise.

The graph below shows the running three-year annualized growth rate of U.S. real GDP since 1950.  While there have been significant ebbs and flows in the rate of growth over time, the trend as shown by the red dotted regression line is lower. The trend line forecasts average GDP growth for the next 10 years (green line) of 1.85%, a level that is historically recessionary.











Three-year Annualized Real GDP


 gdp trend 1
Data Courtesy: St. Louis Federal Reserve (FRED)


As we have shared before, the combination of negligible productivity growth, heavy debt loads, short-termism and demographic changes will continue to produce headwinds that extract a heavy price on economic growth in the years ahead.  Barring major changes in the way the economy is being managed or a globally transformative breakthrough, there is little reason to expect a more optimistic outcome. Given this expectation, the outlook for corporate earnings is equally dismal and likely to produce similar negligible growth rates.


The graphs below chart the S&P 500 (blue line/top graph) and the median S&P 500 P/S ratio (red line/ bottom graph) since 1964. As shown in the bottom graph, the P/S ratio is now 2.50 standard deviations from the median and well above the prior levels preceding the significant bear markets of 2000-2002 and 2007-2009.




S&P 500 and S&P 500 Median P/S Ratio


 p.s ratio graph 2
Graphs courtesy: Ned Davis Research


Based on the fact that the P/S ratio has been steadily rising and has eclipsed prior peaks, we are left to select from one of two conclusions as we mentioned previously:

  1. that investors are extremely optimistic about the potential for revenue growth, or
  2. investors are once again caught in the grasp of bubble mentality and willing to pay huge premiums to avoid missing out on further gains.

After further deliberation, however, there is a very plausible third possibility. Perhaps the lack of viable options for investors to generate acceptable returns, has them reluctantly ignoring the risks they must assume in those efforts.  If that is indeed the case, then one should also consider the possibility that the next correction will extract more than a pound of flesh in damage.

We remain confident that extravagant earnings and economic growth are not in the cards, and it is very likely monetary policy is fueling a new form of bubble logic. Invest with caution!






720 Global is an investment consultant, specializing in macroeconomic research, valuations, asset allocation, and risk management.  Our objective is to provide professional investment managers with unique and relevant information that can be incorporated into their investment process to enhance performance and marketing. We assist our clients in differentiating themselves from the crowd with a focus on value, performance and a clear, lucid assessment of global market and economic dynamics.


720 Global research is available for re-branding and customization for distribution to your clients.


For more information about our services please contact us at 301.466.1204 or email info@720global.com


©720 Global 2016 All Rights Reserved

Posted in Uncategorized | Leave a comment

The Fifteenth of August

The Fifteenth of August


Before reading this article we highly recommend reading “The Death of the Virtuous Cycle” to provide better context.
July 4th – June 6th – September 11th – August 15th


You likely associated the first three dates above with transformative events in U.S. history. August 15th, however, may have you scratching your head.

August 15, 1971 was the date that President Richard Nixon shocked the world when he closed the gold window, thus eliminating free convertibility of the U.S. dollar to gold. This infamous ‘new economic policy’, or “Nixon Shock”, thereby removed the requirement that the U.S. dollar be backed by gold reserves. From that fateful day forward, constraints were removed that previously hindered the Federal Reserve’s (Fed) ability to manage the U.S. money supply. Decades later, slowing economic growth, nonexistent wage growth, growing wealth disparity, deteriorating productivity growth and other economic ills lay in the wake of Nixon’s verdict.

The Transformation of the Federal Reserve and Alan Greenspan

With the stroke of President Nixon’s pen a new standard of economic policy was imposed upon the American people and with it came promises of increased economic growth, high levels of employment and general prosperity. What we know now, almost 50 years later, is that unshackling the U.S. monetary system from the discipline of a gold standard, allowed the Fed to play a leading role in replacing the Virtuous Cycle with an Un-Virtuous Cycle. Eliminating the risk of global redemption of U.S. dollars for gold also eliminated the discipline, the checks and balances, on deficit spending by the government and its citizens. As the debt accumulated, the requirement on the Fed to drive interest rates lower became mandatory to enable the economic system to service that debt.

In this new post-1971 era, the Fed approached monetary policy in a pre-emptive fashion with increasing aggression. In other words, the Fed, more often than not, forced interest rates below levels that would likely have been prevalent if determined by the free market. The strategy was to unnaturally mitigate even minor and healthy economic corrections and to encourage more public and private borrowing to drive consumption, indirectly discouraging savings. The purpose was to create more economic growth than there would otherwise have been.

This new and aggressive form of monetary policy is epitomized by the transformation of Federal Reserve Chairman Alan Greenspan. Greenspan came into office in 1987 as an Ayn Rand disciple, a vocal supporter of free-markets. Beginning with the October 19, 1987 “Black Monday” stock market crash, however, he began to fully appreciate his ability to control interest rates, the money supply and ultimately economic activity. He was able to stem the undesirable effects of various financial crises, and spur economic growth when he believed it to be warranted. Greenspan converted from a free market activist, preaching that markets should naturally set their own interest rates, to one promoting the Fed’s role in determining “appropriate” levels of interest rates and economic growth.

In 2006, after 18 years as Chairman of the Federal Reserve and nicknamed “The Maestro”, he retired and handed the baton to Ben Bernanke and Janet Yellen, both of whom have followed in his active and aggressive monetary policy ways.


The Fed’s powerful effect on interest rates made it cheaper for households and government to borrow and spend, and therefore debt was made more attractive to citizens and politicians. Personal consumption and government spending are the largest components of economic activity, accounting for approximately 70% and 20% of GDP respectively.

The following graph illustrates the degree to which interest rates across the maturity curve became progressively more appealing to borrowers over time. The graph below shows inflation-adjusted or “real” U.S. Treasury interest rates (yields) to provide a clear comparison of interest rates through various inflationary and economic periods. Since 2003, many of the data points in the graph are negative, creating an environment which outright penalizes savers and benefits borrowers.


U.S. Treasury Yields 1980-Present

ylds graph 1.PNG

Data Courtesy: Bloomberg
The next graph tells the same story but in a different light. It compares the Federal Funds rate (the Fed controlled interest rate that banks charge each other for overnight borrowing) to the growth rate of economic output (GDP). This comparison is based on a theory proposed by Knut Wicksell, a 19th century economist. In the Theory of Interest (1898) he proposes that there is an optimal interest rate. Any interest rate other than that rate would have negative consequences for long term economic growth. When rates are too high and above the optimal rate, the economy would languish. Conversely, lower than optimal rates lead to over-borrowing, capital misallocation and speculation eventually resulting in economic hardships. To calculate the optimal rate, Wicksell used market rates of interest as compared to GDP.


Federal Funds Rate less GDP
Fed funds less GDP 2
Data Courtesy: St. Louis Federal Reserve (FRED)
In order to gauge the direct influence the Fed exerted on interest rates within Wicksell’s framework we compare the Fed Funds rate to GDP.  Like the prior graph, notice the declining trend pointing to “easier” borrowing conditions. Additionally, note that since 2000 the spread between Fed Funds and GDP has largely been negative. As the spread declined, borrowers were further lead to speculation and misallocated capital, exactly what Wicksell theorized would occur with rates below the optimal level. The tech bubble, real-estate bubble and many other asset bubbles provide supporting evidence to his theory.

The Smoking Gun

The graphs above make a good case that the Fed has been overly-aggressive in their use of interest rate policy to increase the desire to borrow and ultimately drive consumption. We fortify this claim by comparing the Fed’s monetary policy actions to their congressionally set mandate to erase any doubt you may still have. The following is the 1977 amended Federal Reserve Act stating the monetary objectives of the Fed.  This is often referred to as the dual mandate.

“The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”
To paraphrase – the Fed should allow the money supply and debt outstanding to grow at a rate matching the potential economic growth rate in order to help achieve their mandated goals.

Since 1977, the year the mandate was issued, the annualized growth rate of credit and the monetary base increased at over twice the rate of the economy’s potential growth rate (productivity + population growth).  The two measures rose annually 42% and 65% respectively faster than actual economic growth.

Commensurate is not a word we would use to describe the relationships of those growth rates to that of the economy’s potential growth rate!

The Hangover

In a Virtuous Cycle, saving and investment lead to productivity gains, increased production growth and ultimately growing prosperity which then further perpetuates the cycle. In the Un-Virtuous Cycle, debt leads to consumption which leads to more debt and more consumption in a vicious self-fulfilling spiral.  In the Un-Virtuous Cycle, savings, investment and productivity are neglected. Declining productivity growth causes a decline in the potential economic growth rate, thus requiring ever-greater levels of debt to maintain current levels of economic growth. This debt trap also requires ever lower interest rates to allow the growing mountain of debt to be serviced.

With almost 50 years of history there is sufficient data to judge the effects of the Fed’s monetary policy experiment. The first graph below highlights the exponential growth in debt (black line) which coincided with the decline in the personal savings rate (orange) and the Fed Funds rate (green).


Total Credit Outstanding, Personal Savings Rate and Fed Funds
debt, funds and savings 3
Data Courtesy: St. Louis Federal Reserve (FRED) and Bloomberg
As the savings rate slowed, investment naturally followed suit and, as the Virtuous Cycle dictates, productivity growth declined. The graph below highlights the decline in the productivity growth rate. The dotted black line allows one to compare the productivity growth rate prior to the removal of the gold standard to the period afterwards. The 10-year average growth rate (green) also highlights the stark difference in productivity growth rates before and after the early 1970’s. Please note, the green line denotes a ten-year average growth rate. Recent readings over the prior two years and other measures of productivity are very close to zero.









Productivity Index and Growth Rate

productivity 4

Data Courtesy: San Francisco Federal Reserve
Over the long term, economic growth is largely a function of productivity growth. The graph below compares GDP to what it might have looked like had the productivity growth trend of pre-1971 continued.  Clearly, the unrealized productive output would have gone a long way toward keeping today’s debt levels manageable, incomes more balanced across the population and the standard of living rising for the country as a whole.

GDP – What Could Have Been

gdp what coulda been 5

Data Courtesy: San Francisco Federal Reserve and St. Louis Federal Reserve (FRED)
The graphs below show the secular trend in economic growth and the lack of real income growth over the last 20 years.

Secular U.S. Economic Growth

secular gdp 6

Data Courtesy: St. Louis Federal Reserve (FRED)
Real Median Average Income

income 7

Data Courtesy: St. Louis Federal Reserve (FRED)
A Feeble Rebuttal

Some may contend that debt was not only employed to satisfy immediate consumption needs but also used for investment purposes. While some debt was certainly allocated toward productive investment, the data clearly argues that a large majority of the debt was either used for consumptive purposes or was poorly invested in investments that were unsuccessful in increasing productivity. Had debt been employed successfully in productivity enhancing investments, GDP and productivity would have increased at a similar or greater pace than the rise in debt.  In the 1970’s $1.66 of new debt created $1.00 of economic growth. Since that time, debt has grown at three times the rate of economic activity and it now takes $4.47 of new debt to create the same $1.00 of economic growth.


August 15, 2016 will mark the 45th anniversary of President Nixon’s decision to close the gold window. U.S. citizens and the government are now beholden to the consequences of years of accumulated debt and weak productivity growth that have occurred since that day. Now, seven years after the end of the financial crisis and recession, these consequences are in plain sight. The Fed finds themselves crippled under an imprudent zero interest rate policy and unable to raise interest rates due fear of stoking another crisis.  Worse, other central banks, in a similar quest to keep prior debt serviceable and generate even more debt induced economic growth, have pushed beyond the realm of reality into negative interest rates. In fact, an astonishing $10 trillion worth of sovereign bonds now trade with a negative yield.

The evidence of these failed policies is apparent. However one must consider the basic facts and peer beyond the narrative being fed to the public by the central bankers, Wall Street, and politicians. There is nothing normal about any of this. It therefore goes without saying, but we will say it anyway – investment strategies based on historic norms should be carefully reconsidered.


720 Global is an investment consultant, specializing in macroeconomic research, valuations, asset allocation, and risk management.  Our objective is to provide professional investment managers with unique and relevant information that can be incorporated into their investment process to enhance performance and marketing. We assist our clients in differentiating themselves from the crowd with a focus on value, performance and a clear, lucid assessment of global market and economic dynamics.


720 Global research is available for re-branding and customization for distribution to your clients.


For more information about our services please contact us at 301.466.1204 or email info@720global.com


©720 Global 2016 All Rights Reserved


Posted in Uncategorized | Leave a comment