MuhlenkampFund Multi-Cap Core

Muhlenkamp & Companys no-load mutual fund is designed for investors

of all types, with a minimum investment of $1,500.
Top Twenty Holdings
% of Net Industry %
Company Industry Assets of Portfolio
Alliance Data Systems Corporation IT Services 8.57 9.8
Delta Air Lines, Inc. Airlines 5.11 8.6
JPMorgan Chase & Company Banks 4.76 7.6
Oracle Corporation Software 4.12 6.9
State Street Corporation Capital Markets 3.97 5.9
American International Group, Inc. Insurance 3.60 6.7
Lincoln National Corporation Insurance 3.13 6.7
Halliburton Company Energy Equipment & Services 2.99 3.0
Citigroup, Inc. Banks 2.87 7.6
Sonic Automotive, Inc. Specialty Retail 2.85 4.5
DIRECTV Media 2.85 2.9
Microsoft Corporation Software 2.74 6.9
Rex Energy Corporation Oil, Gas & Consumable Fuels 2.69 6.1
Rush Enterprises, Inc. - Class A Trading Companies & Distributors 2.68 3.2
Berkshire Hathaway, Inc. - Class B Diversied Financial Services 2.66 2.7
Covidien plc Health Care Equipment & Supplies 2.66 2.7
Arris Group, Inc. Communications Equipment 2.61 3.1
Chicago Bridge & Iron Company N.V. Construction & Engineering 2.24 2.2
Allegiant Travel Company Airlines 2.18 8.6
Celgene Corporation Biotechnology 2.09 4.1
Fund holdings are subject to change and are not recommendations to buy or sell any security.
While the Fund is no-load, management fees and other expenses will apply.
Refer to the prospectus for further details.
Return on Equity (ROE) is a companys net income (earnings), divided by the owners equity
in the business (book value).
Year to One Past 3 Past 5 Past 10 Past 15 Since Inception
Date Year Years Years Years Years (11/01/88)
Return Before Taxes 4.78% 20.42% 13.37% 14.21% 4.13% 6.22% 10.27%

Return After Taxes on Distributions* 4.78% 19.54% 12.55% 13.71% 3.60% 5.76% 9.82%

Return After Taxes on Distributions
and Sales of Fund Shares* 2.70% 12.23% 10.56% 11.49% 3.40% 5.20% 9.10%

S&P 500 Total Return** 7.14% 24.61% 16.58% 18.83% 7.78% 4.35% 10.29%

Consumer Price Index*** 2.08% 2.13% 1.73% 2.15% 2.32% 2.42% 2.70%
Average Annual Return
Muhlenkamp Fund Returns as of June 30, 2014
Performance data quoted, before and after taxes, represents past performance and does not
guarantee future results. The investment return and principal value of an investment will uctuate
so that an investors shares, when redeemed, may be worth more or less than their original
cost. Current performance of the fund may be lower or higher than the performance quoted.
Performance data shown is current to the most recent quarter end.

* After-tax returns are calculated using the historical highest individual federal marginal income tax
rates and do not reect the impact of state and local taxes. Actual after-tax returns depend on your
situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant
to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRAs.
Please consult your tax adviser for advice concerning your particular situation and for any updates
to the tax law.
** The S&P 500 is a widely recognized, unmanaged index of common stock prices. The gures for the
S&P 500 reect all dividends reinvested but do not reect any deductions for fees, expenses,
or taxes. One cannot invest directly in an index.
*** Consumer Price Index As of May 2014 U.S. CPI Urban Consumers NSA (Non-Seasonally
Adjusted), Index
For the period ended 06/30/14
Investment Objective
We seek to maximize total return through
capital appreciation, and income from
dividends and interest, consistent with
reasonable risk.
Investment Strategy
We invest in undervalued assets wherever
they may be found. Typically, this results in
holding a portfolio of companies we believe
are materially undervalued by the market.
Bonds may be included in the portfolio if
they are a good investment.
Investment Process
We start with a bottom-up scan of domestic
companies, typically looking at most U.S.
companies at least four times per year. We
add to that an understanding of the sector
dynamics in which companies are operating,
an assessment of the business cycle, and a
review of macroeconomic conditions.
Our primary screening metric is return on
shareholder equity (ROE). We are looking
for companies with stable returns that can
be purchased cheaply, or for companies with
improving returns that have not yet been
recognized by the market.
We dont believe that a holding period of
forever is appropriate in all cases, but are
comfortable holding companies as long as
they continue to meet expectations.
Investment Risk
We dene investment risk as the probability
of losing purchasing power over long
periods of time, which is quite different from
Wall Streets denition of price volatility
in very short periods of time. Taxes,
ination, and spending will ALL impact the
purchasing power of your assets.
Fund Information
Style Multi-Cap Core
Inception Date 11/1988
Ticker Symbol MUHLX
CUSIP 56166Y438
Minimum Initial Investment $1,500.00

Sales Charge None

Expense Ratio 1.27%

Or $200 if the Automatic Investment Plan (AIP)
is chosen. Automatic Investment Plans do not
assure a prot and do not protect against a loss
in declining markets.

Although the Fund is no-load, investment

management fees and other expenses still apply.
Please refer to the prospectus for further details.
Fund Facts
Number of Equity Holdings

45
Total Net Assets $492,133,737
Cash & Cash Equivalents 3.6%
Portfolio Turnover (2013) 26.21%

Audited
Quasar Distributors, LLC., Distributor 6/14
Mutual fund investing involves risk. Principal loss is possible. The Fund may invest in
smaller companies, which involve additional risks such as limited liquidity and greater
volatility. The Fund may also invest in foreign securities which involve greater volatility
and political, economic, and currency risks and differences in accounting methods.
Investments in debt securities typically decrease in value as interest rates rise.
This risk is greater for longer-term debt securities.
The Funds investment objectives, risks, charges, and expenses must be considered carefully
before investing. The prospectus contains this and other important information about the
investment company, and it may be obtained by calling (800) 860-3863, or visiting www.
muhlenkamp.com. Read it carefully before investing.
Portfolio Managers
Online Account Access
Ronald H. Muhlenkamp, Portfolio Manager, CFA, has been active in
professional investment management since 1968. He is a graduate of
both M.I.T. and the Harvard Business School.
Jeffrey P. Muhlenkamp, Investment Analyst and Co-Manager,
has been active in professional investment management since 2008.
He is a graduate of both the United States Military Academy
and Chapman University.
Copyright 2014 Muhlenkamp & Company, Inc. All Rights Reserved.
To enroll, visit our website at www.muhlenkamp.com and click on
Shareholder Account Access.
Once you have established a user ID and password, you can:
View your account history;
Purchase shares;*
Redeem shares; and
Enroll in e-delivery of your statements and tax forms.
If you need help gaining access, contact our Shareholder Services Team
at U.S. Bancorp at (800)860-3863 option 0 between the hours
of 8:00 a.m.7:00 p.m. CST, Monday through Friday.
* To purchase shares through online account access, your bank information must be on le at
U.S. Bancorp. If this information is not on le, please complete an Account Options form,
available on our website.
Muhlenkamp & Company serves individual and institutional investors
through our no-load mutual fund and separately managed accounts.
Investment Adviser
Muhlenkamp & Company, Inc.
5000 Stonewood Drive, Suite 300
Wexford, PA 15090-8395
(877)935-5520
info@muhlenkamp.com
www.muhlenkamp.com
Amended Transcript
MUHLENKAMP AND COMPANY, INC.
Conference Call; August 28, 2014; 4:15 p.m. ET
SPEAKERS
Ton !u"len#amp, $resident
%on !u"len#amp, &ounder and $ortfolio !anager
'eff !u"len#amp, (n)estment Analst and Co*!anager
PRESENTATION
Tony
+ood afternoon, e)erone,appreciate ou -oining us for our conference call. As usual, .e/re going to start 0 as#ing
%on to .al# t"roug" some of "is economic o0ser)ations, get a commentar on t"e mar#et, tal# a little 0it a0out some of
t"e companies .e o.n, and t"en ans.er t"e 1uestions t"at ou ma "a)e.
2it" t"at 0eing said, %on, please catc" us up on ."at/s "appened since t"e end of 'une, or ."en ou last pu0lis"ed some
ideas in t"e ne.sletter 3Muhlenkamp Memorandum; 41115.
Ron
(t/s more of t"e same, and prett muc" as it "as 0een for nearl a ear no.. T"e 6.7. econom continues slo. gro.t" at
a0out a 28 real; i.e. inflation is tic#ing 0et.een 1.58 and 28. (t/s interesting to us t"at at least for t"e last four ears,
coming into t"e ear, economists predicted gro.t" o)er 98 3real +ross :omestic $roduct ;+:$<5. = t"e middle of eac"
ear, t"e ad-usted t"eir e>pectation do.n to 28 3real +:$5. 7o .e continue to gro. 0elo. ."at t"e &ed is s"ooting for
and 0elo. ."at people .ere "oping.
2"at/s also interesting is t"at ."en ou loo# at corporate re)enues, e)en t"oug" t"e econom is gro.ing at a0out a 28
real 3.it" inflation at 1.58*285, corporate re)enues are gro.ing a0out 58 )ersus a ear ago, and earnings are close to
108 3as reported 0 companies5.
1
And ."ile it doesn/t get muc" press, t"e 2ils"ire 5000 3Total !ar#et (nde>5, ."en it .as 0egun 40 ears ago 31?@45,
comprised a0out 5,000 stoc#s. A0out 12 ears ago, ( 0elie)e it .as approac"ing A000; 3it pea#ed at @,5A2 on 'ul 91,
1??85. Currentl, t"at list of companies is more li#e 9,@00.
2
7o .e "a)e fe.er pu0lic companies t"an .e "ad a doBen
ears ago. 2e/)e said for t"e last four or fi)e ears t"at .e t"oug"t companies .ould 0e slo. to "ire, and fran#l, slo. to
form, and t"at appears to 0e part of ."at/s going on.
(n t"e meantime, Europe "as not sol)ed its pro0lems. (t loo#s li#e it/s "eaded 0ac# into recession. 'apan "ad printed
mone to "elp get t"eir mar#ets up a little 0it and gi)e t"eir econom a 0oost, 0ut it loo#s li#e t"at/s o)er. 'apan "as ne)er
reall reformed its econom to gi)e t"emsel)es long*term staing po.er or gro.t". C"ina is still tring to s"ift from an
in)estment*dri)en ;infrastructure< econom to.ard, not full, 0ut to.ard a 0it more of a consumer*dri)en econom.
Coo#ing for.ard, .e/re e>pecting slo. gro.t" in t"e 6.7., 0ut it/s li#e .al#ing t"roug" a minefield. T"ere are all #inds
of t"ings t"at "a)en/t 0een sol)ed in t"is countr in terms of getting corporate formations up, corporate "iring up, and
corporate capital e>penditures up.
2e pointed out in t"e last ne.sletter (Muhlenkamp Memorandum ; 4111< t"at a lot of people #no. t"at for t"e last fi)e
ears, most of t"e pu0lic,or, on a)erage, t"e pu0lic/s ta#e*"ome pa "as not gone up. As .e pointed out 3)ia t"e
emploment costs ta0le in t"e recent ne.sletter5, e)en t"oug" ta#e*"ome pa "asn/t gone up, t"e cost of emploment "as
1!u"len#amp D Compan Analst data t"roug" 7eptem0er 9, 2014 pro)ided 0 T"omson %euters.
22ils"ire 5000, started in 1?@4, is often referred to as t"e Total 7toc# !ar#et (nde> 0ecause it see#s to trac# t"e returns of
practicall all pu0licl traded, 6.7.*"ead1uartered stoc#s t"at trade on t"e ma-or e>c"anges.

gone up in t"e last ten ears or so; t"e num0ers .e ga)e are somet"ing li#e 258. 7o, depending on ."at ou loo# at, es,
emploee ta#e*"ome pa "asn/t gone up, 0ut t"e cost to t"e emploer "as.
2e/)e 0een saing for ears t"at regulations are slo.ing do.n ."at corporations are loo#ing to do, and, of course, "alf of
:odd*&ran# 3:oddE&ran# 2all 7treet %eform and Consumer $rotection Act, enacted in 'ul 20105 "asn/t 0een .ritten
et, so .e don/t #no. ."at/s going to "appen. 2e don/t #no. ."at t"e rules are, and .e don/t #no. "o. companies .ill
respond. 7o far, companies "a)e ta#en a .ait*and*see attitude.
Fne of t"e t"ings t"at "as surprised us is t"e degree to ."ic" interest rates,to some e>tent in t"is countr, 0ut more to t"e
point, in Europe,"a)e gone do.n. 2e/ll let 'eff tal# a0out t"at, as "e monitors t"at for us. =ut almost no one si> mont"s
ago e>pected ten*ear rates,t"e ten*ear Treasur is a 0enc"mar# rate in t"is countr, 0ut similar rates in Europe "a)e
also come do.n. And .e reall don/t "a)e an e>planation for it, do .e, 'effG
Jeff
Ho, t"at/s fair.
2"at .e said a ear ago .as t"at interest rates "ad approac"ed fair,."at t"e s"ould 0e 0ased on inflation. And, fran#l,
.it" t"e &ed tapering, .e e>pected t"em to go up, more li#el t"an not,and .e e>pected t"em to go up t"is ear. T"at
.as a consensus idea, and .e/)e all 0een surprised t"at t"e "a)e not. (n fact, t"e 6.7. ten*ear Treasur "as gone from
98 earl t"is ear to a0out 2.98 no..
E)en more surprising, +erman rates "a)e 0een 0elo. 18 for 1uite a ."ile and remain t"at .a. &renc" rates are at a0out
1.58. 7pain, ."ic" "ad a ten*ear rate of 58 a ear ago, is no. 0elo. t"e 6.7. at 2.28. 7o some )er interesting t"ings
are going on .it" interest rates, particularl in Europe. (t/s not clear if t"at/s 0ecause t"ere/s an e>pectation of slo.ing
European economies, or t"at t"e European Central =an# is going to start 0uing 0onds. 2e/re not 1uite sure ."at/s
"appening, 0ut it/s definitel an attention gra00er.
Tony
%on, ou said t"at t"e economists/ consensus "ad 0een "ig"er +:$ gro.t". 2" .as t"is soG
Ron
&i)e ears ago, people said t"at t"e deep recession means .e/ll "a)e a good snap0ac#. 2e ne)er got it.
&or t"e last four ears, coming into t"e ear,let/s sa in 7eptem0er of t"e prior ear,economists e>pected 98 gro.t".
After four ears running, it/s 0een more on t"e order of 28 3real +:$5.
Tony
2"at do t"e 0ase t"ese estimates onG An ideaG
Ron
2"at/s 0een done "istoricall, ( assume. ! point is it/s 0een on t"e lesser side of ."at t"e/)e 0een e>pecting and t"e
"a)en/t c"anged t"eir models.
( t"in# .e said last 1uarter t"at, t"is past spring, 'anet Iellen reported t"at t"e &ed .ould #eep doing ."at it/s doing.
2e/)e gotten some 1uestions on ."at "appens ."en t"e &ed finis"es .it" its tapering of 0uing Treasuries and
mortgages. (n fact, t"at .ill pro0a0l 0e done in a mont" or t.o,and .e t"in# t"at/s "ealt". 2e t"in# t"e &ed "as "ad
not onl a t"um0 on t"e scale,.e/)e said t"at t"e/)e "ad an arm on t"e scaleJ T"e/re "olding interest rates too lo.,
and 'anet Iellen sas t"e/re going to continue to do t"at.
9
2"at ( "eard "er sa .as,t"is isn/t "er .ords,K2e/re going
to #eep doing ."at .e/re doing 0ecause it is not .or#ing. Economic t"eor sas it s"ould .or#, 0ut it "asn/t.L %at"er
t"an saing ."at t"e/re missing, ."ic" "as 0een m rant, t"e/re saing, K2e still t"in# it/ll .or#, so .e/re going to
#eep interest rates lo..L &or si> ears running, t"e econom "as not done ."at t"e said it .ould do.
9The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels,
economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views
as normal in the longer run! &ederal %eser)e &F!C 7tatement; 'ul 90, 2014
2
T"e 36.7. Treasur5 set out .it" TA%$ 3Trou0led Asset %elief $rogram5, t"e emergenc funds 3in Fcto0er 20085. T"en,
t"e 3&ederal %eser)e5 "ad ME1, ME2, and ME9 3Muantatati)e Easing from Ho)em0er 2008 to present5, all of ."ic" .as
supposed to get t"e econom going and get "iring going. (t "asn/t. 6nemploment "as come do.n 0ecause people "a)e
dropped out of t"e .or#force. T"e num0er of people emploed reall "asn/t gone up a lot, and man of t"e ne. -o0s "a)e
0een 0elo. 90 "ours a .ee#, as opposed to ."at/s considered a normal .ee# of 40 "ours. (/m an old farmer, 40 "ours a
.ee# is a )acation.
7o t"e "a)e not accomplis"ed ."at t"e set out to do. And t"eir response toda is 3a#in to5, K=ut .e got t"e stoc# mar#et
up.L 2ell t"at isn/t ."at t"e set out to do. (f t"e "ad said fi)e ears ago, K2e don/t care a0out t"e econom, .e/ll let it
gro. slo.l, 0ut .e/re going to get t"e stoc# mar#et up,L t"e .ould "a)e 0een s"ot do.n politicall.
Tony
=een laug"ed out of t"e office. %ig"tG
Ron
E>actl.
Tony
7o t"e fact t"at it "asn/t .or#ed etN T"e "a)en/t said, K+ee, ma0e it .on/t.L (nstead, t"e/re saing, K(t -ust "asn/t
.or#ed yetL
Ron
3T"e/re saing5 K2e 0elie)e it .ill.L T"e/re still running on a t"eor ."ic" "asn/t 0een pro)en.
As ou #no., ( spent a fair amount of time studing recessions 0ac# in t"e O@0s. 2"at .e al.as loo# for is ."at c"anged
coming into t"e recession and ."at c"anged coming out. 2e 0elie)e t"e 0ig c"ange coming out of t"is recession is t"e
."ole premise 0e"ind Kt"e second great economic e>periment of m adult lifetime.L 3%efer to 'une 9 seminar arc"i)e at
....mu"len#amp.com.5
T"e first economic e>periment .as ."en %eagan and Polc#er c"anged t"e rules across t"e 1?80*82 period. Coming out of
t"e 2008 recession, in order to tr to "elp t"e emploee, .e/)e penaliBed t"e emploer. (n terms of 3emploer5 costs, (/m
tal#ing a0out t"e regulations, (/m tal#ing a0out "ealt"care. T"ese t"ings "a)e discouraged emploers from "iring. 2"en
ou penaliBe emploers, ou .ill get less emploment. T"at/s ."at is going on.
He)ert"eless, t"e/re going to continue to do t"is 0ecause t"e 0elie)e it "asn/t .or#ed et,( 0elie)e it "asn/t .or#ed.
2"at surprised usN (f ou go 0ac# and read our ne.sletters from /0? and /10, .e said t"at if .e get a slo. econom, .e
e>pect corporate profita0ilit mig"t not 0e a0le to maintain ."at/s 0een t"e a)erage since 22((: 198 return on e1uit
;%FE<. 32e said5 if .e "a)e a slo.*gro.t" econom, t"ere .ill 0e ample industrial capacitN(t/s going to 0e )er "ard
for companies to #eep t"eir prices up and, t"erefore, it/s going to 0e "ard for t"em to #eep t"eir profita0ilit up. 2e
speculated t"at a 198 %FE mig"t, in fact, fade to an 118 %FE.
T"e response to suc" fears "as 0een corporations "a)e 0een )er tig"t .it" t"eir spending and )er tig"t .it" t"eir "iring,
and %FEs "a)e actuall gone up to on t"e order of 148 or 158 from a norm of 198. An time ou e>pand for t"e future,
."et"er ou/re 0uilding plants or ou/re 0uilding .or#force capacit, people "iring people,t"ere are al.as costs
associated .it" t"at. 7o, s"ort term, 0 not doing t"ose t"ings, it actuall "elps our profita0ilit. T"at/s 0een a surprise to
us.
T"e mar#et "as 0een stronger t"an .e, or anone, .ould "a)e e>pected. (f ou "ad told people fi)e ears ago, K2e/ll
gro. at 28 for fi)e ears,L t"e/d "a)e said, KT"at/s going to "urt t"e stoc# mar#et.L 2ell, all t"e mone t"e &ed "as put
in to t"e econom "as "elped t"e stoc# mar#et,it/s "elped people .it" s"ort*term agendas. (t/s made it c"eap for "edge
funds to 0orro. and 0u stoc#s. (t/s made it c"eap for companies to 0orro. mone and 0u 30ac#5 t"eir o.n stoc#.
Tony
=ut t"e "a)en/t 0een 0orro.ing mone to 0uild plants or "ire people.
9
Ron
E>actl.
( #no. fol#s ."o/)e said t"at an0od ."o "as stoc#s s"ould lo)e t"e current administration 0ecause t"e stoc# mar#et is
up. 2ell, ."en ou get t"e stoc# mar#et up, 0ut don/t get t"e econom up, e)entuall ou call t"at a 0u00le. (t/s not
sustaina0le. Fur goal, and t"e &ed/s goal fi)e ears ago, .as to get t"e econom mo)ing again.
Tony
T"at "asn/t "appened.
Ron
Ho, it "asn/t "appened. T"e 3&ederal %eser)e5 "as said, K2e/re going to continue doing ."at .e/re doing 0ecause it
"asn/t .or#ed et.L ( t"in# t"e s"ould sa, K(t "asn/t .or#ed.L Ho one t"oug"t fi)e ears ago ."en t"e set out to do
t"is t"at it .ould ta#e t"is long,in fact, t"e assumed it .ould .or# 1uic#er. 7o, at some point, ou "a)e to concludeN
T"is is ."ere ( disagree .it" ."at t"e &ed/s doing. T"e fact t"at t"e &ed is no. ending its tapering, ( t"in# is "ealt". 2e
said si> mont"s ago t"at interest rates getting to 2.58 on t"e ten*ear Treasur .as "ealt" 0ecause it approac"ed normal
le)els and, fran#l, ga)e some a)aila0le income.
N Fne of t"e t"ings .e see is a ."ole lot of people ."o are tring to li)e off t"eir income are "a)ing trou0le finding t"e
income to li)e off of.
Tony
As ou/)e said, 0e.are of creati)e sources of ield.
Ron
Ies, 0e.are of creati)e sources of ield. 2all 7treet is tring to offer products t"at loo# li#e KieldL and t"e call Kield.L
(n some cases, it/s ield and in some cases, it/s not.
Hot onl are 7panis" 0onds dramaticall o)erpricedN %emem0er, 0an#s in a gi)en countr are encouraged to 0u t"e
0onds of t"at countr. =an#s in t"is countr are encouraged to 0u Treasuries 0ecause t"e don/t "a)e to "old as muc"
assets aside ."en t"e "old t"at #ind of de0t, to t"e e>tent t"at, if Europe is slo.ing do.n, t"ere/s a tendenc for rates to
come do.n an.a. T"ere/s also a great tendenc for t"e 0an#s to 0u so)ereign 0onds 3a de0t securit issued 0 a
national go)ernment .it"in a gi)en countr5 as opposed to corporate 0onds 0ecause t"e/re considered safer. 2"et"er
t"at/s dri)ing all of t"is, ( don/t #no.,0ut t"e lo.er interest rates t"at .e/re seeing on Treasuries and ot"er so)ereign
de0t are in concert .it" t"at.
2"at .e/re also seeing is t"e pu0lic 0uing -un# 0onds. T"ose ields are .a 0elo. ."at an statistical response s"ould
0e. (t/s funn ."en t"e &ed sas it can/t see a 0u00le 0ecause t"e &ed itself is causing t"e 0iggest 0u00le out t"ere, ."ic"
is a 0elo.*mar#et le)el on s"ort*term interest rates. (t/s also dragged do.n long*term interest rates.
Tony
7o ."ere/s t"e 0u00leG
Ron
+oing for.ard,in s"ort*term de0t. (nterest rates t"at s"ould 0e 28 or 98 are at less t"an 18.
Tony
7o e)en t"oug" people "a)e 0een getting decent returns in stoc#s, t"at doesn/t o0)iate t"eir loo#ing for income. T"e
.ant income, not necessaril returnsG
Ron
$eople m age .ere taug"t,if t"e .ere taug"t ant"ing it/s K:on/t touc" t"e principle, spend t"e income.L To get
spending mone, t"e/re loo#ing for income.
4
T"ere are a lot of companies t"at are going to !aster Cimited $artners"ips
4
-ust 0ecause ."at comes out of t"ose loo#s
li#e income,e)en if it ma not 0e, e)en if some of it ma 0e principle. $eople are stretc"ing for income; t"e/)e 0een
doing it for a couple ears.
%emem0er, most people don/t reall loo# for ne. in)estments until t"eir fi)e*ear C:, or ."ate)er, matures, 0ut 2all
7treet responds fairl 1uic#l to suc" c"anges. $eople respond slo.l 0ecause if t"e "ad a t"ree* or four* or fi)e*ear C:
fi)e ears ago, t"e didn/t go out and loo# to replace t"at until it matured. 7o t"is is a )er gradual process. 2"at .e/)e
seen for t"e last,particularl t"e last couple of ears, is people stretc"ing for ield. To us, t"at represents a minefield.
2e 3"o.e)er5 continue to find good companies, 0ut it/s 0een getting toug"er and toug"er to find some t"at are selling
c"eapl. E)er0od #no.s t"e litan of t"ings t"at are going on t"at could "it all of t"is, so .e/re cautiousl .al#ing
t"roug" t"e minefield. 2"en a minefield .ill "it, ( don/t #no..
Fur perception is, in t"e 6.7., some of t"e fears 0 t"e pu0lic are graduall dissipating, as t"e normall do. 2"en ou
are .arned a0out somet"ing and time goes on and it doesn/t "appen, t"e natural tendenc is for t"at fear to dissipate. (t/s
still in t"e 0ac#ground; .e/)e 0een "earing a0out it for t.o, t"ree, four ears, 0ut it "asn/t "appened et. !a0e it .on/t
"appen. 7ome ma call t"at complacenc; ( call it Kt"e fear is dissipating.L
Iear*to*date, t"e 7D$ 3500 (nde>5 is up a0out A8 or @8 3as of t"e most recent 1uarter*end, 'une 90, 2014, t"e 7D$ 500
(nde> .as up @.1985; .e/re running a little 0it 0e"ind it. (n response to a 1uestion recei)ed from a s"are"older, t"e last
t"ree or four ears .e/)e 0een running a 0it 0e"ind t"e 7D$ 0ecause .e/)e 0een fearful in t"ese minefields. 2e/)e 0een
more cautious t"an .e normall .ould 0e in an e>pansion of t"e econom. 2e "a)en/t 0een a0le to increase our
con)iction t"at it .ould 0e a strong reco)er, or t"at t"ere .ouldn/t 0e a minefield 0lo.ing up some."ere.
2e/)e 0een saing for fi)e ears t"at .e/re more concerned .it" companies/ 0alance s"eets t"an .e normall .ould 0e.
T"e s.ing end,."at got "urt t"e .orst in /08, /0?,.ere companies t"at "ad poor 0alance s"eets or "ad a lot of de0t.
A)is %ent A Car .as selling 0elo. a 0uc# a s"are; it/s no. Q50.00 per s"are. At t"e end of /08, it loo#ed li#e A)is
.ouldn/t 0e a0le to roll o)er t"eir loans on t"e automo0iles t"e "eld. Companies t"at flirted .it" 0an#ruptc "a)e come
0ac#. 2e .eren/t .illing to go t"at far out on a lim0.
2e t"in# prices, toda, are fair to full. (t/s getting toug" to find good companies at c"eap prices. 2e t"in# it/s 0een dri)en
partl 0 t"e &ed printing mone and, partl, 0 people not finding good alternati)es. 2"en ou get 28 on a 0ond, and
inflation is 28, t"at/s not a real return. $eople ."o t"oug"t t"e .ere going to get 58 or A8 on t"eir sa)ings are no.
getting 28 or less.
Tony
Ela0orate on ."at ou mean ."en ou sa prices are fair. 2"at is Kfair to fullLG
Ron
&air to full; t"e/re no longer c"eap.
Tony
E>pectations on returns going for.ard,t"e/re 0ased on profita0ilit and price, (Rm guessing. 7o ela0orate on t"at a little.
Ron
(f t"e econom gro.s at 28 or 98 and if inflation is 28 or less, t"en stoc#s are currentl priced to return a0out @8 or
88.
3Sere/s ."N5 (f t"e econom gro.s at 28 or 98 and inflation/s at 28, t"en interest rates on t"e long Treasur s"ould
0e on t"e order of 98 or 48. To attract people to stoc#s from 0onds s"ould re1uire a0out a 98 premium; "istoricall, itRs
0een a0out a 98 premium. 7o, if stoc#s do 3return5 @8 or 88, t"en fran#l, .e t"in# itRs .ort" 0eing in t"e game. T"e
4!aster Cimited $artners"ips ;!C$s< are uni1ue in)estments t"at com0ine t"e ta> 0enefits of a limited partners"ip ;C$<
.it" t"e li1uidit of common stoc#. An !C$ "as a partners"ip structure, 0ut issues in)estment units t"at trade on an
e>c"ange li#e common stoc#.
5
trou0le is t"ere are so man minefields out t"ere t"at a @8 or 88 a)erage for fi)e ears could 0e a couple of 208 plus
ears and a couple of 208 minus ears. And t"at ma#es people ner)ous.
Tony
7o, sa t"ese are a)eragesN
Ron
Ies. As ou #no., last ear .as a 958 3return5 ear 3for t"e !u"len#amp &und5. T"at too# t"e prospect of returns going
for.ard, letRs sa, from ?8 to @8.
Tony
%ig"t.
Ron
2e t"in# @8 is .ort" 0eing in t"e game.
Tony
And @8 is a fair return.
Ron
=ut t"at/s not a lot of cus"ion.
Tony
+ot ou. 2it" t"ose minefields t"at ouRre tal#ing a0outN As ou said, if t"e econom is gro.ing at 28 to 98, and if
inflation stas 0elo. 28... 2ell, if t"e donRt, t"e )aluation "as c"anged and our model "as to ad-ust.
Ron
%ig"t.
Tony
7o t"ose are t.o of t"e 0ig t"ings .e monitor and ." .e monitor t"ose t"ings as carefull as .e do.
Ron
T"e &ed/s target is 28 inflation. At 28, t"at means t"at ."ate)er ou "a)e in sa)ings .ill lose its )alue at t"e rate of 28
a ear.
(tRs one t"ing to ta> income at a gi)en rate. =ut ."en inflation ta>es our sa)ingsN 2e .ent t"roug" t"is in t"e O@0s. (f
people are curious, t"ere/s a c"apter in m 0oo# on t"e O@0s. T"ere .as a ."ole lot of learning a0out ."at "appens ."en
t"e )alue of our mone declines. (n t"e O@0s, of course, .e "ad a decade t"at a)eraged close to 88 to 108 inflation.
=ut at 28... Compounded o)er ten ears, t"atRs a 208 to 258 decrease in our sa)ings. 7o it eats into assets in .as t"at
ta>es on income do not.
Tony
%ule of @2, rig"tG
5
At 28 3inflation5, our moneRs cut in "alf in 9A ears.
Ron
5 K%ule of @2L is a met"od for estimating an in)estmentRs dou0ling time. T"e rule num0er ;e.g. @2< is di)ided 0 t"e return
percentage to o0tain t"e appro>imate num0er of ears re1uired for dou0ling.T"us, .it" an estimated 88 return, using t"e
%ule of @2, it s"ould ta#e appro>imatel ? ears for t"e amount to dou0le; @2T8.0 U ? ears. To determine t"e impact of
inflation on purc"asing po.er, di)ide @2 0 t"e inflation rate. T"us at 28 inflation, using t"e %ule of @2, it s"ould ta#e
appro>imatel 9A ears for t"e )alue to "al)e; @2T2.0 U9A ears.
A
%ig"t. (f ouRre a retiree and "a)e lo. income, 0ut ouRre reling on our sa)ings, a 28 0ite out of our sa)ings is a 0ig
deal.
Toda, .e "a)e people retiring at A5 and li)ing until 85 or ?0. (t isnRt li#e m grandfat"er ."o retired at A5 and died at @1.
A si>*ear period, ou could li)e .it" some of t"is. 2"en ouRre tring to get our assets to carr ou t"roug" 20 or 25
ears, t"atRs a ."ole different stor.
Tony
7o t"atRs one reason ." .e are still full in)ested,0ecause a @8 to 88 return is .ort" getting.
Ron
%ig"t. =ut .eRre .orried a0out t"e minefields.
Tony
2eRre loo#ing at t"e minefields and .e "a)e to recogniBe t"at conditions c"ange. (n t"is mar#et, ou/)e said itRs "ard to
find good companies as c"eap as it .as certainl a ear ago, after a 958 ear. Can ou .al# t"roug" some of t"e
companies t"at .e do o.n and ."at it is ou li#e a0out t"emG $articularl, let/s do t"is off t"e top 10 3"oldings5 -ust to
#eep t"e regulators "app; itRs pu0lic information.
Ron
T"e companies t"at are in t"e top 10 3"oldings5 are t"e ones t"at "a)e gone up nicel enoug". &or instance, :elta Air
Cines, (nc. "as mo)ed up t"is ear. ( t"in# 2arren =uffett "as said 3somet"ing li#e5 K7ince t"e 2rig"t =rot"ers, t"e airline
industr on a)erage, in total, "as ne)er made mone.L
A
Fnce in a ."ile, t"e ma#e a little 0it, 0ut t"en, t"e go sell more
stoc#. Airlines are actuall getting a little 0it of religion a0out not 0uing more planes and adding more routesN."ic"
means for t"e tra)eler t"at t"e planes are full, our #nees are up in our c"est, etc.
Tony
(tRs uncomforta0le, 0ut t"at ma#es profits.
Ron
=ut, remem0er, ."en ou and ( 0oo# a flig"t, t"e first t"ing .e sa is, K7"o. me t"e c"eapest flig"t.L 2ell, if .e onl
s"op t"e c"eapest flig"ts, airlines are doing e)ert"ing t"e can to 0e on t"at list of t"e c"eapest flig"ts, including
c"arging ou e>tra for 0aggage, or c"arging ou e>tra for a sand.ic", or ."ate)er it ma 0e. (f .e insist t"at t"e
compete .it" +re"ound =us lines, t"at is t"e c"eapest flig"t, t"en t"atRs ."at ou get. T"e net of it is, :elta "as done
.ell for us t"is ear.
=iotec", Tamm Heff 3(n)estment Analst5 "as done a nice -o0. (ncidentall, our ne>t seminarT.e0cast .ill feature t"e
.or# t"at TammRs done on 0iotec" 3Ho)em0er 12, 2014; 2:00 p.m. and @:00 p.m. ET5.
Tony
(n fact, .eRre going to spend some time in t"e ne>t t"ree mont"s featuring some of t"e .or# Tamm "as done on 0iotec"
in t"e ne.sletter and at t"e seminar. 7o, itRs somet"ing for people to loo# for.ard to.
Ron
Salli0urton "as done good t"ings for us. Salli0urton is in t"e oil and gas ser)ice industr.
2"atRs "urt us latel, 0ecause t"e price of natural gas is declining againNT"ereRs an a.ful lot of gas out t"ere. Fur direct
in)estments in natural gas "a)e 0een "urting us latel. Salli0urton ser)ices t"e industr and .e t"in# is some."at more
geared to t"e )olume; remem0er, if price goes do.n, )olume often goes up. 2"at .eR)e 0een tring to do is ta#e
6The worst sort of business is one that grows rapidly, re"uires significant capital to engender the growth, and then earns
little or no money Think airlines #ere a durable competitive advantage has proven elusive ever since the days of the
$right %rothers &ndeed, if a farsighted capitalist had been present at 'itty #awk, he would have done his successors a
huge favor by shooting (rville down! 2arren =uffett, annual letter to =er#s"ire Sat"a.a s"are"olders, &e0ruar 2008.
@
ad)antage of t"e )olume. T"atRs .or#ed in Salli0urton; it "as not .or#ed, for instance, in %e> Energ or 2estport.
2estport is dependent on con)ersions for truc#s.
Tony
2estport does t"e con)ersions. %ig"tG
Ron
T"e do t"e truc# con)ersions from diesel to natural gas.
Tony
So. "as t"at 0een proceedingG Sas it slo.ed do.nG
Ron
(tRs slo.er t"an .e "ad "oped. &ran#l, itRs slo.er t"an .e "ad e>pected. T"e ot"er part of it is as t"e price of gas comes
do.n, it ma#es t"at argument stronger. 7o .e still t"in# t"atN
Tony
SasnRt %e> Energ recentl ac1uired land, or .as t"at someone elseG
Ron
%e> recentl 0oug"t land from 7"ell t"at nearl dou0led, nearl tripled, t"eir acreage in 2estern $ennsl)ania and
flo.ing o)er into F"io. !ar#2est, ."ic" does %e>/s processing, -ust announced t"at, in t"e ne>t t.o ears, t"e .ill
dou0le t"eir processing capacit. 2e t"in# t"at .or#s prett good.
Tony
Again, on )olume.
Ron
Fn )olume. 2eRre 0etting on t"e )olume. 7ome people t"in# it/s 0etting on price. 2eRre 0etting on price staing lo.. Fur
estimate on 3natural gas5 price going for.ardN &or t"e last se)eral ears, it "as 0een Q4.00T!!=T6 ;million =ritis"
T"ermal 6nits< ."en ot"er people .ere saing QA.00T!!=T6. 2eRre stic#ing .it" Q4.00T!!=T6.
Tony
(Rll ma#e anot"er commercial. ( donRt #no. if e)er0od on t"is call "as recei)ed or read a cop, 0ut .eR)e .ritten "alf*a*
doBen different articles on ."at .e see going on .it" natural gas and compiled t"em into a 0oo#let t"atRs a)aila0le. (tRs
a)aila0le on our .e0site, or .e can send ou an attac"ment as an email, or ( could send ou a "ard cop. 'ust gi)e us a
call, drop us a line, and .e .ill get a cop of it to ou. ( t"in# .e did a decent -o0.
T"ereRs also a 0oo#, )racking* +merica,s +lternative -nergy .evolution 0 'o"n +ra)esN. 2"ile .e donRt agree .it"
e)ert"ing "e "as to sa, .e donRt disagree .it" it all, eit"er. SeRs got some interesting ideas ou mig"t 0e interested in. (
get not"ing for t"at little endorsement 0 t"e .a.
Ron
%egarding 0an#ingNT.o ears ago, ."en !ario :rag"i 3$resident of t"e European Central =an#5 said it .ould do
."ate)er is necessar to support t"e European 0an#s, .e said t"at .e t"in# t"at remo)es some of t"e pressure from t"e
international 0an#s t"at are 0ased in t"e 6nited 7tates 0ecause .e .ere .orried a0out t"eir C: e>posure. At t"at time, .e
0oug"t more of Citigroup and '.$. !organ; t"e are no. in t"e top 10. Catel, t"eir stoc#s "a)enRt done a ."ole lot.
T"eR)e done nicel for us since .eR)e 0oug"t t"em, 0ut, latel, t"e "a)enRt done a ."ole lot.
+oing for.ard, itRs almost certain t"at 0an#ing .ill not 0e as profita0le as it .as, letRs sa, in t"e O?0s. 2all 7treet "asnRt
1uite et figured out ."at t"eir for.ard*loo#ing profita0ilit .ill 0e. IouR)e pro0a0l noticed t"at after as#ing t"e 0an#s
to a0sor0 t"eir 0an#rupt 0ret"ren fi)e ears ago, .e no. sue t"em and c"arge t"em 0illions of dollars in penalties for
t"ings t"at,
8
Tony
&or "a)ing done ."at .e as#ed.
Ron
&or "a)ing done ."at t"e go)ernment as#ed t"em to do.
Tony
(Rm remem0ering 2008, 200?NT"e fears .ere rampant. T"e consensus .as European 0an#s are going to fold li#e
dominoes. 2"at ouRre saing is t"at "as not "appened. =ut, ouRre saing Europe "asn/t sol)ed its pro0lems, eit"er.
Ron
Correct.
Tony
2ere t"e fears o)er0lo.nG Fr "a)e .e simplN Iou made an argument at t"e time t"at if t"e can #ic# t"e can do.n t"e
road, it ma in fact 0ecome less of an issue as time goes on. (s t"at "appeningG
Ron
2ell, in fact, in 2011, t"e ields on so)ereign 0onds of $ortugal .ere on t"e order of 148 or 158. T"e are no. 98.
Tony
+ood Cord.
Ron
E>actl. Ho, Europe "asn/t sol)ed its pro0lems.
2"atRs interesting is our &ederal %eser)e "as spent Q2 trillion or so 0uing up Treasuries. :rag"i "as not et spent a euro
and et t"eir interest rates "a)e come do.n,
Tony
7u0stantiall.
Ron
!ore t"an ours. (Rm not sure t"at if ( .ere a mem0er of t"e &ed ( .ould sa, K2e did it rig"t,L 0ecause Europe managed to
do it .it"out e)er spending a dime7o t"ere are some t"ings out t"ere t"at not onl donRt conform to con)entional t"eorN
( "a)enRt found a good t"eor t"e do conform toNT"e closest ma 0e, .ell, 2ic#sell, 0ut t"atRs anot"er point.
@
=ut, t"e
point is t"ese interest rates "a)e come do.n 0ut, t"e "a)e not sol)ed t"e pro0lems. ( donRt t"in# anone, e)en t"e
Europeans, are saing,
Tony
N2e/re out of t"e .oods.
@KF)er a centur ago Vnut 2ic#sell, a 7.edis" economist, dre. t"e distinction 0et.een t"e financial rate of interest t"at
0orro.ers actuall pa and t"e natural rate of interest t"at .as determined 0 t"e return on capital. (f t"e financial rate is
0elo. t"e natural rate, 0usinesses can reap unlimited profits 0 0orro.ing as muc" as t"e can and ploug"ing it into "ig"*
returning pro-ects. E)entuall, t"oug", all t"at additional spending pus"es up prices, mone and credit, and e)entuall,
financial interest rates.
T"e natural interest rate is often assumed to 0e constant. N =ut, according to 2ic#sell, t"e natural rate is Kne)er "ig" or
lo. in itself, 0ut onl in relation to t"e profit ."ic" people can ma#e .it" t"e mone in t"eir "ands, and t"is, of course,
)aries. (n good times, ."en trade is 0ris#, t"e rate of profit is "ig", and, ."at is of great conse1uence, is generall
e>pected to remain "ig"; in periods of depression it is lo., and e>pected to remain lo..L 7ource: The -conomist;
Fcto0er 25, 2019.
?
Ron
N2e/)e sol)ed t"e pro0lems.
Jeff
T"e c"allenge .it" t"e European 0an#s remains t"e assets t"e "a)e on t"eir 0alance s"eets. 7o, to t"e e>tent t"at 7panis"
0an#s "old 7panis" mortgages and 7panis" so)ereign de0tNT"ere .ere pro0lems .it" t"e 7panis" "ousing mar#et t"at
"a)e since 1uieted do.n 1uite a 0it, and t"e 7panis" go)ernment "ad t"e a0ilit to roll o)er its de0ts successfullN t"e
same .it" $ortugal; t"e same .it" (tal. Honet"eless, if it 0ecomes difficult for t"ose go)ernments to roll o)er t"eir de0t
0ecause t"eRre not paing it do.n, t"en ou .ill call 0ac# into 1uestion t"e )alue of t"e assets sitting on t"ose 0an#s/
0alance s"eets.
Tony
(n t"e meantime, of course, all t"at so)ereign de0t is no.,instead of "a)ing to pa for it, t"e cost of de0t ser)ice "as
0een cut "ugel.
Ron
T"is "as 0een great for go)ernment.
Tony
%ig"t.
Ron
=ut it "asnRt done a t"ing for people.
Tony
2ell, letRs segue t"at to ."at is going on .it" =urger Ving. 2"at do t"e call t"isG (n)ersionG
Ron
(n)ersion.
Tony
CetRs tal# a0out t"at in terms of,
Ron
T"e 6nited 7tates sas t"at if ou are a 6.7.*0ased compan doing 0usiness in, letRs sa, Canada, ."ate)er ou earn in
Canada, of course, ou must pa Canadian ta>es on. (f ou 0ring t"e mone 0ac# to t"e 6nited 7tates, ou t"en "a)e to
pa t"e difference 0et.een Canadian ta> rates and our ta> rates. 7o, letRs sa ou, as an indi)idual, too# a summer -o0 in
Canada and paid Canadian ta>esN
Tony
Fn t"e incomeN
Ron
Fn t"e income. And ."en ou came "ome t"e said, K= t"e .a, Canadian ta>es are 208; ours are 958, so ou o.e us
t"e difference.L
Tony
2ell, (/m not "app a0out t"at.
Ron
2eRre t"e onl countr t"at does t"at.
10
Tony
F#a.
Ron
(f ou are a s"are"older of =urger Ving, or ou "a)e it in our pension plan, ou mig"t "a)e a little different perspecti)e
t"an t"e politicians do. 3T"e politicians5 sa, KIou/re not paing our fair s"are. 2e "a)e different ta> rules t"an
e)er0od else, and .e e>pect ou to pa our ta> rules.L
All (Rm saing is, if ou #eep s1ueeBing t"e emploer, sooner or laterN
Tony
+o 0ac# to me going to Canada and .or#ing as an American citiBen. ( .or# in Canada and pa t"eir ta>es, come 0ac#
"ome, t"en, ( "a)e to pa ta>es in America. =ut, if ( decided to 0ecome a Canadian citiBen and .or# in CanadaN
Ron
T"en, ou pa Canadian ta>es. (ncidentall, if ou t"en get a summer -o0 in t"e 6.7. and pa 6.7. ta>es, and t"en ta#e
."ate)erRs left 0ac# to Canada, Canada sas, fine, ou paid ta>es on t"at.
Tony
F#a, so ."at =urger Ving in Canada is essentiall tring to do is to 0ecome a Canadian citiBenG
Ron
T"at is ."at dri)es some in)ersions. =ut, t"e point is .e "a)e different ta> rules t"an an0od else, and .e get upset
."en people loo# to ta#e ad)antage of t"e differences. (tRs funn "o. t"e people ."o collect ta>es t"in# itRs ne)er enoug".
Tony
And, as ou pointed out, if ouRre a retiree or if ouR)e got a pension plan and ou "old =urger Ving, ."at ou .ant t"at
compan to do is to ma>imiBe t"eir profita0ilit; cut t"eir e>penses ."ere t"e can; continue to sell t"eir good or ser)ice;
and gro. t"eir 0usiness. T"atRs economic.
Ron
Ies.
T"e point isN(f ou add up t"e assets of American pension plans and compare t"em to t"e )alue of American pu0licl
o.ned companies, pension plans could o.n a0out "alf. 2e did t"is in a ne.sletter not too long ago 3$orker/s Capitalism
Triumphs; Muhlenkamp Memorandum 4 ?8; April 20115, 0ut e)er ear pension in)estment magaBines reports t"ese
num0ers.
( donRt #no. an0od ."o .ants a pension plan to in)est in unprofita0le companies. !an of t"e same people ."o sa,
KCompanies donRt pa enoug" ta>es,L ."en ou as# t"em ."et"er t"e .ant t"ose companies in t"eir pension plans, t"e
start t"in#ing a0out it a little 0it differentl. T"e long and s"ort of it is, ."en ou s1ueeBe t"e emploers, ou .ill get less
emploment. (f ou ta> t"e profit out of 0usiness, ou .ill get less 0usiness and, t"en, t"e ."ole econom s"uts do.n.
Tony
%ig"t,and t"ose are economic realities.
Ron
Ies. $eople t"in# ( tal# politics. ( donRt care a0out politics. ( care a0out economics 0ecause (R)e got #ids and grand#ids.
Tony
$eople "a)e a tendenc to t"in# t"at t"ese underling principles are some"o. muta0le; to me, itRs li#e gra)it. Iou can
eit"er understand it and use it, or not understand it, and def it. =ut gra)it .ill do ."at gra)it .ill do.
11
Ron
2"ere ( .ent to sc"ool, .e .ere taug"t gra)it is a t"eor. (tRs "olding up prett good. (tRs prett close to a la., 0ut itRs
still a t"eor.
T"e "eadlines are ."at .eR)e 0een tal#ing a0outN7"ould .e open it up for 1uestionsG
Tony
( t"in# so.
Moderator
All rig"t. ;Fperator instructions.< Fur first 1uestion comes from 2il0ert 3=ill5 &erguson.
Tony
Sello, =ill.
Bill Ferguson
IouR)e tal#ed a lot a0out t"e mar#et in general and t"e performance of t"e econom. (s t"ere ant"ing t"at ou can tell us
a0out t"e relati)e performance of t"e )arious industries in mar#et sectors, 0ot" retrospecti)e and prospecti)eG
Ron
( canRt tell ou muc" t"at/s prospecti)e.
%etrospecti)e, if ou "ad mone in utilities t"is ear, ou "a)enRt made muc" mone. As .e indicated, airlines "a)e done
.ell; 0iotec" "as done .ell. Tec"nolog itself, 0ig tec"N2eR)e made good mone on Fracle; .e/)e made good mone
on !icrosoft,."at .e used to t"in# as t"e 0ig "ea)ies. (f ouR)e 0een in consumer staples, ouR)e done poorl. &or t"e
most part, energ "as not done t"at muc".
Tony
2"at do ou mean 0 consumer staplesG
Ron
&ood, clot"ing.
Tony
$roctor and +am0le. :etergent, soap.
Ron
T"ere/s also consumer dura0les, ."ic" is "ousing and autos. Autos "a)e done .ell. 2eR)e made good mone on auto
dealers. T"e auto manufacturers "a)enRt done a ."ole lot, 0ut autos and "ousing are cclical; ou 0u t"em ."en ouRre
feeling good. (n contrast, e)erda staples, t"ings li#e utilities, electricit, gasoline, clot"ing, foodNt"ose are staples.
T"e donRt )ar )er muc", and t"e "a)e not done all t"at .ell. 2e "a)e not 0een "ea) in t"ose.
Fne of t"e t"ings 3sectors5 .e donRt o.nN2e did some .or# and didnRt 1uite get t"ere .as on t"e c"emical industr. T"e
c"emical industr is 0enefiting from lo. natural gas prices ."ic" are an input. (tRs a ra. material for t"e c"emical
industr. 7ome of t"ose "a)e done prett .ell. T"atRs a0out t"e 0est ( can tell ou, =ill.
Tony
2"at ( "ear ou saing, %on, is t"at t"e mar#ets are not a "omogeneous entit. (t depends on t"e companies ou o.n and
t"e industries t"eRre in. (s t"at fairG
Ron
2ell, it ne)er is "omogeneous. &ran#l, t"is ear, itRs 0een a little 0it more "omogeneous t"an normal 0ecause of t"e
minefields. T"e mar#ets "a)e 0een dri)en more 0 t"e 0ig t"ings, li#e ."at t"e &edRs doing and ."at national trade is
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doing,and, fran#l, less t"an normal, in terms of t"e mi> among industries. Ho. t"at t"ings are 0ac# to 0eing full
priced o)er t"e last fi)e ears, nearl e)ert"ing is caug"t up. &or some, it too# longer t"an ot"ers.
Tony
7o from a prospecti)e angle, do ou see more di)ergence going for.ardG
Ron
(f .e "a)e an success going for.ard, itRs going to 0e .it" stoc# pic#ing, as opposed to 0eing in or out of t"e mar#et. Ff
course, in R08 and R0?, t"e ."ole #e .as to 0e out t"e mar#et, ."ic" .e .erenRt. T"e ."ole #e in R0?, R10, R11, R12, and
R19, .as to 0e in t"e mar#et,t"at is, catc" up. 7o from "ere, in m opinion, itRs going to 0e a0out stoc# pic#ing.
Tony
And ."at goes "and*in*"and .it" t"at is )olatilit.
Ron
Polatilit .ill most li#el pic# up, es.
Tony
=ill, does an of t"at "elpG
Bill Ferguson
T"at gi)es me some idea. T"an#s.
Ron
(tRs less clear*cut t"an it normall is, =ill.
Moderator
;Fperator instructions.< Fur ne>t 1uestion comes from T"omas Eiff.
Tony
Tom, "ello. +o a"ead please.
Tom Eiff
7ir, ."at is our ta#e on a compan li#e CFH7FC t"at "as a footprint 0ot" of natural gas and coalG
Ron
2e t"in# CFH7FC .ill do -ust fine. ( "a)e trou0le paing t"e current 3stoc#5 price. T"eRre a good operator in 0ot" coal
and gas. Coal, m guess is, .ill 0e used less in t"is countr, 0ut t"eRll 0e s"ipping more to C"ina. 2e "ad a 0it of a field
trip t.o .ee#s ago, and .e t"in# t"e .ill 0e a good participant in natural gas. &ran#l, (Rm finding some ot"er
companies t"at ( li#e t"at ( t"in# are c"eaper t"an CFH7FC facing t"e same prospects.
CFH7FC is a good compan, 0ut it is not selling at a c"eap price.
Tom Eiff
T"an# ou )er muc".
Ron
( donRt li#e paing retail.
Moderator
At t"is time .e "a)e no 1uestions .aiting.
Tony
%on, do ou .ant to sa an final .ords to .rap upG
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Ron
(tRs going to remain interesting going for.ard. 2e do t"in# t"at if .e do enoug" researc", turn o)er enoug" roc#s, no.
and t"en, .e find companies .ort" o.ning. 2e "ad great success t"is ear 0uing Sanes Sosier, ."ic" if ouRd as#ed
me a ear ago ( .ould "a)e said pro0a0l not, 0ut it cropped up. (t loo#s li#e Sanes is doing good stuff. 2e t"in# suc"
companies are out t"ere.
To ma#e decent mone going for.ard, itRs going to 0e on indi)idual companies. T"e reason ( refer to minefields is, if
some of t"ese t"ings "it, it o)er."elms all of t"e econom and t"e mar#ets in t"e s"ort term. T"ere are a ."ole lot of
people plaing t"is mar#et .it" a fairl s"ort*time "oriBon.
Moderator
( apologiBe for t"e interruption. =efore ou end, t"ere/s one more 1uestion if ouRd li#e to ta#e it.
Ron
2eRll ta#e it.
Moderator
All rig"t. T"is 1uestion comes from Alan $ost.
Alan Post
T"e 1uestion ( "a)e "as to do .it" t"e apparent impro)ement in t"e econom. T"e unemploment rate is inc"ing do.n
and, also, corporations are starting to in)est. ( 0elie)e t"at t"e lagging effect is due to t"e fact t"at our manufacturing "as
0ecome more efficient and it needs fe.er .or#ers. 7o t"e econom "as to sort itself out 0 training .or#ers to 0e in more
efficient -o0s. Can ou comment on t"atG
Ron
( .ould agree .it" t"at, e>cept t"atRs a normal, ongoing part of t"e ."ole process. 2"at .e ne)er got coming out of t"is
recession .as ."at .e normall t"in# of as a Ksnap 0ac#.L T.o percent gro.t" is certainl 0etter t"an Bero, 0ut t"is
countr s"ould "a)e snapped 0ac# 1uic#er t"an it "as. (t too# us se)en ears to get 0ac# to ."ere .e .ere se)en ears
ago. ( guess (Rm seeing ."at s"ould "a)e 0een, and t"at ma#es me a little less ent"used a0out ."at "as 0een.
(/)e spent a lot of time studing recessions, 0ot" t"e declines and t"e come0ac#s. Hormall, t"ereRs a come0ac# to a trend
line t"at ou .ere on 0efore; t"is time, .e didnRt do t"at.
2it" t"e lo. price of natural gas, ( t"in#, .eRre in t"e process of cutting t"e cost of energ in t"is countr in "alf in t"e
current decade. Iou pro0a0l all #no. t"at Sarr !oser "eads up KT"e %es"oring (nitiati)e,L
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."ic" is dedicated to
0ringing manufacturing 0ac# to t"e 6.7. (Rm on a panel ne>t mont" .it" someone from t"e c"emical industr. 2e are no.
0uilding c"emical plants in t"is countr for t"e first time in 15 ears. =et.een ."atRs going on in energ and ."atRs going
on in 0iotec", .e t"in# .eRre in great s"ape relati)e to t"e rest of t"e .orld. =ut, .eRre also "andicapping oursel)es 0
ma#ing it toug" for companies to do 0usiness.
( 0elie)e .eRll come out of t"is in good s"ape, 0ut itRs going to 0e a longer, slo.er, toug"er process t"an it s"ouldR)e 0een.
(n t"e meantime, t"ere are a lot of peopleNA0out t.o*t"irds of t"e reason t"at unemplomentRs do.n is 0ecause people
are dropping out of t"e .or#force. (f ou loo# at t"e num0er emploed as opposed to t"e num0er unemploed, itRs a lot
less ros loo#ing. Fur percentage of adults emploed "as fallen from A@8 to A98, t"e lo.est itRs 0een since t"e late
1?@0s.
Tony
And .it" t"at, t"an# ou, Alan.
8&ounded 0 Sarr !oser in 2010, KT"e %es"oring (nitiati)e,L is an industr*led effort to 0ring manufacturing -o0s 0ac#
to t"e 6nited 7tates. T"e (nitiati)e .or#s .it" 6.7. manufacturers to "elp t"em recogniBe t"eir profit potential, as .ell as
t"e critical role t"e pla in strengt"ening t"e econom 0 utiliBing local sourcing and production.
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An0od, if .e didnRt ans.er a 1uestion, or if .e raised more 1uestions t"an .e addressed, please gi)e us a call. 2eRd 0e
"app to tal# .it" ou and get into it in greater detail. %on, t"an# ou. 'eff, ( appreciate our comments. T"an#s again,
e)er0od.
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