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1 / 9 / 0 9$ 5 / 9 / 0 9$ 9 / 9 / 0 9$ 1 / 9 / 1 0$ 5 / 9 / 1 0$ 9 / 9 / 1 0$ 1 / 9 / 1 1$ 5 / 9 / 1 1$ 9 / 9 / 1 1$ 1 / 9 / 1 2$ 5 / 9 / 1 2$ 9 / 9 / 1 2$ 1 / 9 / 1 3$ 5 / 9 / 1 3$ 9 / 9 / 1 3$

Lumber'Prices'

Chart: RCS InvestmentsSource: Bloomberg

!(20.00)!!(15.00)!!(10.00)!!(5.00)!!!!!!!5.00!!!10.00!!!15.00!!!20.00!!100!120!140!160!180!200!220!

1 / 3 1 / 0 0! 1 / 3 1 / 0 1! 1 / 3 1 / 0 2! 1 / 3 1 / 0 3! 1 / 3 1 / 0 4! 1 / 3 1 / 0 5! 1 / 3 1 / 0 6! 1 / 3 1 / 0 7! 1 / 3 1 / 0 8! 1 / 3 1 / 0 9! 1 / 3 1 / 1 0! 1 / 3 1 / 1 1! 1 / 3 1 / 1 2! 1 / 3 1 / 1 3!

Case%Shiller+Index+(Composite+20)+

Index!YoY!Change!

Chart: RCS InvestmentsSource: Case-Shiller

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Weekly Bull/Bear Recap: Sept. 23-27, 2013

This objective report concisely summarizes important macroevents over the past week. It is not geared to push an agenda.Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation,conservatism, and endowment biases.BullIn the U.S.:

Ø

The American Chemistry Council announces that economicgrowth is set to continue until at least 2015 as per theorganization’s leading indicator, which hit its highest levelsince June 2008

i

.

Ø

Housing may have hit a bump, but that’s a far cry from arenewed downturn as the bears suggest. Momentumremains quite robust:

o

U.S. home prices as measured by the Case-SchillerIndex rise for their 14

th

consecutive month

ii

at theirfastest pace in 7 years on a YoY basis. Rising home values will help buoy consumer spending

iii

as a positive wealth effect dominates consumer psyche.

o

Furthermore, New Home Sales bounce back in August, rising 7.9% MoM (12.6% YoY)

iv

,suggesting that housing demand remains resilienteven in the face of higher interest rates.

o

Even better, what many think is the primaryheadwind for the housing market is alreadydissipating. Falling interest rates are having a positive effect on demand. Mortgage applications as per the Mortgage Banker’s Association increase for the second week in a row

v

.

o

Need more proof that the housing recovery hasstaying power? Check out lumber prices. Theuptrend continues.

Ø

Consumption is set to surprise to the upside in the monthsahead for the following reasons:

o

The 4-week average of jobless claims has fallen to levels last seen in June 2007 (pre-recession). Claimshave plummeted at a 27% annualized rate in the

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Disclaimer:Pleasefirstconsultyourfinancialadvisorforallimportantinvestmentrelateddecisions

2

!300.00!!!350.00!!!400.00!!!450.00!!!500.00!!!550.00!!!600.00!!!650.00!!!700.00!!

3 / 1 / 0 7! 7 / 1 / 0 7! 1 1 / 1 / 0 7! 3 / 1 / 0 8! 7 / 1 / 0 8! 1 1 / 1 / 0 8! 3 / 1 / 0 9! 7 / 1 / 0 9! 1 1 / 1 / 0 9! 3 / 1 / 1 0! 7 / 1 / 1 0! 1 1 / 1 / 1 0! 3 / 1 / 1 1! 7 / 1 / 1 1! 1 1 / 1 / 1 1! 3 / 1 / 1 2! 7 / 1 / 1 2! 1 1 / 1 / 1 2! 3 / 1 / 1 3! 7 / 1 / 1 3!

U.S.$Jobless$Claims$

Chart: RCS InvestmentsSource: Deparment of Labor

past 6 months. “The chances of a worker being fired today are almost as low as they have ever been.

vi

”This development is leading analysts to increase their estimates for payroll growth.

§

Here’s more, the Bureau of Labor Statisticsannounces in its preliminary annual benchmark revision that the economyactually created 345,000 more jobs thaninitially expected

vii

.

o

Personal Income growth is picking up as per theCommerce Department, hitting its highest YoY growth rate of the year at 3.71%

viii

.

o

Falling gas prices are beginning to act as a tailwind,falling to $3.42, their lowest level since January.

ix

o

Meanwhile, the Fed’s Flow of Funds reportindicates that household net-worth has hit an all- time high. Furthermore upward revisions to pastreports show that balance-sheets have recoveredmore than expected. “Net worth at a new high,financial assets at a new high, real estate valuesrecovering, debt declining: what's not to like?”

x

o

Finally, Lender Processing Services reports that the percentage of loans in foreclosure fell to a 4.5-year low

xi

.

Ø

Longer-term trends (such as production costs in Chinacontinuing to rise at a 15-20% clip) lead Harold Sirkin,senior partner at the Boston Consulting Group, to proclaim that the Manufacturing Renaissance in America will become a major theme in the years to come

xii

.In Europe:

Ø

European Central Bank (ECB) chief Mario Draghi pledgesmore Long Term Refinancing Operations

xiii

, indicating thatcontinued monetary stimulus will be applied to easeeconomic contraction. The first LTRO in late Dec. 2011 provoked a recovery from the flash crash; the S&P 500surged roughly 13% after the operation was implemented.

Ø

In Italy, consumer confidence surges to 101.1 from 98.5 inSeptember

xiv

and has now increased by 17% over the past 4months. Meanwhile that trend is emulated by ISTAT’ssister business confidence survey, which rose to 96.6 from93.4, its best reading in 2 years

xv

. The worse is clearly overfor Italy, a country the bears were particularly focused onin recent weeks.



Disclaimer:Pleasefirstconsultyourfinancialadvisorforallimportantinvestmentrelateddecisions

3

!3.00%!2.00%!1.00%0.00%1.00%2.00%3.00%

9 / 1 / 0 9% 1 1 / 1 / 0 9% 1 / 1 / 1 0% 3 / 1 / 1 0% 5 / 1 / 1 0% 7 / 1 / 1 0% 9 / 1 / 1 0% 1 1 / 1 / 1 0% 1 / 1 / 1 1% 3 / 1 / 1 1% 5 / 1 / 1 1% 7 / 1 / 1 1% 9 / 1 / 1 1% 1 1 / 1 / 1 1% 1 / 1 / 1 2% 3 / 1 / 1 2% 5 / 1 / 1 2% 7 / 1 / 1 2% 9 / 1 / 1 2% 1 1 / 1 / 1 2% 1 / 1 / 1 3% 3 / 1 / 1 3% 5 / 1 / 1 3% 7 / 1 / 1 3%

Core%Dur.%Gds%Orders%-%3M%Avg%

Chart: RCS InvestmentsSource: U.S. Department of Commerce

Ø

To begin the week, HSBC reported that China’smanufacturing sector remained in growth mode, rising to asix-month high and signaling that a rebound in the world’ssecond largest economy has been gaining steam

xvi

.Bear

Ø

Without notice it seems, the U.S. economy continues todisplay signs of weakening as uncertainty looms regardinga possible government shutdown as early as next week

xvii

– not to mention an increasing probability of a governmentdefault on Oct 17

th xviii

:

o

The slowdown in manufacturing persists. TheRichmond Fed’s manufacturing index prints 0 (astagnant reading) vs. expectations of 17; Markit’sPurchasing Manager Index (PMI) indicatorunderwhelms as well

xix

; Durable Goods Orders(both core and headline readings) disappoint

xx

.

o

The bulls postulate on how rising home prices will buoy consumer spending. Shouldn’t consumerconfidence rise as well? That’s not the case as per the Conference Board’s confidence index, whichhits a 4-month low

xxi

. This result is furtherconfirmed by a couple of other confidenceindicators, the Gallup Poll

xxii

and University of Michigan’s sentiment survey

xxiii

. Finally Wal-Mart,a bellwether for consumer spending sounds thealarm

xxiv

.

o

Taking a step back and analyzing the big picture, while job creation is occurring Julia Coronado,chief economist for North America at BNP Paribas, points out that the quality of these jobs isoverwhelmingly of the part-time variety.

o

Finally, Richard Koo, Chief Economist for NomuraResearch Institute and an authority on balance-