Michael Drury - Monterrey 2016

0 Past Performance Is Not Necessarily Indicative Of Future Results.

McVEAN Trading & Investments, LLC

GLOBAL ECONOMIC OUTLOOK

February 1, 2016

Michael Drury

Chief Economist McVean Trading and Investments, LLC

Global Interdependence Center

Monterrey, Mexico

2015 GLOBAL GDP

$73.6 TRILLION (-3.6% Y/Y)


EUROPE

$17.5T

-10.9% NAFTA

$20T

+2.4%

Japan+South

Korea+Taiwan

$6.2T

-5.9%

Australia+Brazil+

Argentina+Russia+

OPEC

$7.9T

-17.7%

China

$11.5T

+8.0% Other

$10.5T

+0.8%

-4.1%

-9.7%

U.S. MAP


SUNBELT

U.S.; EUROPE; CHINA


SUBURBS RUST BELT SUNBELT

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Jan-49 Jan-55 Jan-61 Jan-67 Jan-73 Jan-79 Jan-85 Jan-91 Jan-97 Jan-03 Jan-09 Jan-15

Q3 2015

REAL GDP

CURRENT QTR % CHANGE FROM YEAR AGO


RTC

CRISIS

NASDAQ

BUBBLE

LEHMAN

REAL GDP

CURRENT QTR % CHANGE FROM YEAR AGO


NIKKEI

BUBBLE

ASIAN

CRISIS

LEHMAN

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Jan-49 Jan-55 Jan-61 Jan-67 Jan-73 Jan-79 Jan-85 Jan-91 Jan-97 Jan-03 Jan-09 Jan-15

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

Jan-60 Jan-64 Jan-68 Jan-72 Jan-76 Jan-80 Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12

Q3 2015

US TRADE BALANCE AS A % OF GDP



160

180

200

220

240

260

280

800

1000

1200

1400

1600

1800

2000

2200

1/1/2000 1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/2010 1/1/2012 1/1/2014

S&P HOME PRICE Dec-15

US Household Wealth

DOMESTIC CORPORATE PROFITS VS CAPITAL INVESTMENT

AS A % OF GDP


10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

4%

6%

8%

10%

12%

Mar-75 Mar-79 Mar-83 Mar-87 Mar-91 Mar-95 Mar-99 Mar-03 Mar-07 Mar-11 Mar-15

DOMESTIC CORPORATE PROFITS CAPITAL INVESTMENT Q3 15

POLICY LEVERS

• 1) Monetary Policy

• 2) Fiscal Policy

• 3) Regulation

• 4) Exchange Rates


MONETARY POLICY


0

2

4

6

8

10

12

14

16

18

20

1/1/1980 1/1/1984 1/1/1988 1/1/1992 1/1/1996 1/1/2000 1/1/2004 1/1/2008 1/1/2012

US OVERNIGHT RATE VS 10YR YIELD

Overnight Rate US 10YR Yield Dec 15

5 YR TREASURY YIELD CHANGE FROM 5 YEARS AGO


-6

-5

-4

-3

-2

-1

0

1

2

Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19

ACTUAL PROJECTION AT CURRENT RATE

FISCAL POLICY


-4%

-2%

0%

2%

4%

6%

8%

10%

Jan-78 Jan-82 Jan-86 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Jan-14

FEDERAL GOVERNMENT DEFICIT AS A % OF GDP

Q3 2015

REGULATION

• Exclusion of Utility Operations-Related Swaps with Utility Special Entities from De

Minimis Threshold for Swaps with Special Entities

• Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and

Relationships with, Hedge Funds and Private Equity Funds

• Derivatives Clearing Organizations and International Standards

• Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities

in a Portfolio Margining Account in a Commodity Broker Bankruptcy

• Swap Dealers and Major Swap Participants; Clerical or Ministerial Employees

• Clearing Exemption for Certain Swaps Entered Into by Cooperatives

• Harmonization of Compliance Obligations for Registered Investment Companies

Required To Register as Commodity Pool Operators

• Enhanced Risk Management Standards for Systemically Important Derivatives

Clearing Organizations

• Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap

Regulations

• Exemptive Order Regarding Compliance With Certain Swap Regulations

• Process for a Designated Contract Market or Swap Execution Facility To Make a Swap

Available to Trade, Swap Transaction Compliance and Implementation Schedule, and

Trade Execution Requirement Under the Commodity Exchange Act

• Core Principles and Other Requirements for Swap Execution Facilities

• Core Principles and Other Requirements for Swap Execution Facilities; Correction

• Procedures To Establish Appropriate Minimum Block Sizes for Large Notional Off-

Facility Swaps and Block Trades


Facility Swaps and Block Trades


Facility Swaps and Block Trades; Correction

• Reassignment of Commission Staff Responsibilities and Delegations of Authority

• Delegation of Authority To Disclose Confidential Information to a Contract Market,

Registered Futures Association or Self-Regulatory Organization

• Clearing Exemption for Swaps Between Certain Affiliated Entities


• DODD FRANK

EXCHANGE RATE


60

82

104

126

148

170

192

214

236

258

280

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1/1/1980 1/1/1984 1/1/1988 1/1/1992 1/1/1996 1/1/2000 1/1/2004 1/1/2008 1/1/2012

Dollar / Euro Cross vs Dollar / Yen

Dollar_Euro Dollar_Yen Dec 15

AGGREGATE HOURS WORKED VS AVERAGE HOURLY EARNINGS

THREE MO AVG % CHANGE FROM 3 MO AVG YEAR AGO


1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan-05 Jan-09 Jan-13

AGGREGATE HOURS WORKED AVERAGE HOURLY EARNINGS (right) Dec-15

RETAIL SALES EX GASOLINE VS DISPOSABLE INCOME

3 MONTH AVERAGE % CHANGE FROM 3 MONTH AVERAGE YEAR AGO


Nov-15

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%


RETAIL SALES EX GAS DISPOSABLE INCOME

TOTAL RETAIL SALES VS RETAIL SALES EX GASOLINE

3 MONTH AVERAGE % CHANGE FROM 3 MONTH AVERAGE YEAR AGO


Nov-15

-12.0%

-9.0%

-6.0%

-3.0%

0.0%

3.0%

6.0%

9.0%


RETAIL SALES EX GAS STATION SALES

US, EUROPE, JAPAN, CHINA PMI


-25

-10

5

20

35

50

65

80

30

35

40

45

50

55

60

65

1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015

CHINA Eurozone US JAPAN (RS)Dec-15

BALANCE SHEETS

MONTHLY


Dec-15

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Billio

ns o

f U

S$

US Europe Japan

EXCHANGE RATE


0.005

0.006

0.007

0.008

0.009

0.01

0.011

1/1/1986 1/1/1990 1/1/1994 1/1/1998 1/1/2002 1/1/2006 1/1/2010 1/1/2014

Yen / Euro Cross

Dec 15

U.S., EUROPE AND JAPAN GDP


-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15

US Europe JapanQ1 2015

SHANGHAI COMPOSITE STOCK MARKET


1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

Jan-16

CHINESE YUAN IN US$


0.12

0.125

0.13

0.135

0.14

0.145

0.15

0.155

0.16

0.165

0.17

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

Jan-15

CHINA NOMINAL GDP GROWTH IN US$

CURRENT QUARTER % CHANGE FROM YEAR AGO


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Q3 15

CORN VS COPPER


50

100

150

200

250

300

350

400

450

500

150

250

350

450

550

650

750

850


Corn CopperDec-15

WTI CRUDE OIL


20

40

60

80

100

120

140

160


Dec-15

-5.0

0.0

5.0

10.0

15.0

5.0

7.5

10.0

12.5

15.0

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

REAL GDP (LHS) GDP DEFLATOR (RHS)

CHINA GDP GROWTH

CURRENT QUARTER %CH FROM YEAR AGO


Q3 15

CHINESE NOMINAL GDP BY SECTOR

3 MONTH AVERAGE % CHANGE FROM YEAR AGO


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15

PRIMARY & SECONDARY TERTIARY Q3 2015

CHINA TOTAL AMOUNT OF SOCIAL FINANCING

12 MONTH AVERAGE


0

200

400

600

800

1000

1200

1400

1600

Nov 15

REAL ESTATE IN CHINA

Real Estate Investment in Eastern,

Central and Western Regions for January- August

Regions Investment Share

% of Investment in

Growth Rate Y/Y (%)

Residential Buildings Residential Buildings

National Total 100.0% 67.3% 1.3 0.7

Eastern 55.6% 67.0% 1.1 1.2

Central 21.6% 70.0% 1.8 1.3

Western 22.7% 65.4% 1.1 -1.2


Sales of Commercial Buildings in Eastern,

Central and Western Regions for January-November

Regions

Floor Space of Commercial Buildings Sold Sales of Commercial Buildings

Share of

Production

Growth Rate Y/Y (%)

Share of

Value Sold

Growth Rate Y/Y (%)

National Total 100.0% 7.4 100.0% 15.6

Eastern 46.6% 9.6 60.2% 21.1

Central 26.9% 7.3 20.1% 10.9

Western 26.3% 3.8 19.8% 5.5

CHINESE EXPORT VS IMPORTS

3 MO AVG %CH FROM 3 MO AVG YEAR AGO


-33.0%

-16.5%

0.0%

16.5%

33.0%

49.5%

66.0%


EXPORTS IMPORTSNov 15

CHINESE GLOBAL TRADE SURPLUS

BILLIONS OF US$ - 3 MONTH AVERAGE


-100.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0


Nov-15

Michael Drury - Monterrey 2016

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