october, 2016 - legend financial advisors, inc.®2013 survey conducted by the federation of indian...

1THE GLOBAL INVESTMENT PULSE, October 2016

October, 2016

Mutual Fund Sell Downs, continued on page 4

MUTUAL FUND SELL DOWNS AND OTHER UNINTENDED CONSEQUENSES

FOR INVESTORSBy Louis P. Stanasolovich, CFP®, CCO, CEO and President of

Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.

What Is A Mutual Fund Sell Down?:

The general public, in addition to many advi-sors, do not know what a forced sell down of a

mutual fund is. A forced sell down by a mutual fund often times occurs when financial markets sell off. As a result, the mutual fund may have to liquidate underlying holdings in order to meet redemption requests. A classic example of a forced sell down was during the market downturn of the fall of 2007 through the spring of 2009. Many mutual funds were forced to sell securi-ties with underlying gains because of the panic in the markets at that time. While this is an extreme example, this can happen any time that a particular asset class is going through a rough patch. Examples include: 2000 to 2002, 1987, and 1972 to1974.

Potential Income Tax Problems:

One of the problems during a forced sell down is that a mutual fund could be liquidating securities with large capital gain positions because those positions are the most liquid. Assume that in 2007 and the very early part of 2008 that a large stock growth fund gained 40.0%. Often times, most of that gain won’t be taxed until at least the following year because the position would not be sold; therefore, the gain would stay as unrealized. During this time, the public was panicking and in order to meet redemptions for cash, the

THE LAST KNOWN GOLD DEPOSITBy Frank Holmes, CEO and Chief Investment Officer,

U.S. Global Investors

Gold is one of the rarest elements in the world, making up roughly 0.003 parts per million of the earth’s crust. (For some perspective, one part per million, when converted into time, is equivalent to one

minute in two years. Gold is even rarer than that.) If we took all the gold ever mined—all 186,000 tonnes, from the bul-lion at Fort Knox to India’s bridal jewelry to King Tut’s burial mask—and melted it down to a 20.5 meter-sided cube, it would fit snugly within the confines of an Olympic-size swimming pool.

Gold Deposit, continued on page 10

GOLD CONTINUES TO LOOK PROMISING

By James J. Holtzman, CFP®, CPA, Legend Financial Advisors, Inc.® and

EmergingWealth Investment Management, Inc.

Now that we are past the September Federal Reserve (Fed) Board meeting with no interest rate increase, gold may find itself in a better environment to move higher. Currently, real interest rates (after inflation) are negative (A nominal interest rate minus inflation)—this is a very bullish environment for gold. Inflation increased for the year ending September 30, 2016 to 1.5%. Current year Treasury

rates as of October 24, 2016 are 1.27%, resulting in a negative real yield of 0.23%. Full speed ahead for gold? Positive real interest rates, a condition we are not in, historically have been a drag on gold prices.

Source: Parts of this article were excerpted from “The War On Cash Is Still Good For Gold”, by Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors, (Advisor Alert, September 16, 2016), www.usfunds.com

COPYRIGHT 2016 U.S. GLOBAL INVESTORSREPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS

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2 THE GLOBAL INVESTMENT PULSE, October 2016

Editor Louis P. Stanasolovich, CFP® CCO, CEO and President

Legend Financial Advisors, Inc.® 5700 Corporate Drive, Suite 350 Pittsburgh, PA 15237-2829 [email protected]

Newsletter Production Manager Lori L. Albert [email protected]

Legend Financial Advisors, Inc.® 5700 Corporate Drive, Suite 350 Pittsburgh, PA 15237-2829

EmergingWealth Investment Management, Inc. 5700 Corporate Drive, Suite 360 Pittsburgh, PA 15237-2829

Postmaster: Send all address changes to: Legend Financial Advisors, Inc.® 5700 Corporate Drive, Suite 350 Pittsburgh, PA 15237-2829

Copyright 2016 by Legend Financial Advisors, Inc.® And EmergingWealth Investment Management, Inc. reproduction, photocopying or incorporation into any information-retrieval system for external or internal use is prohibited unless permission in each case for a specific article. the subscription fee entitles the subscriber to one original copy only.

Unauthorized copying is considered theft.

LOUIS P. STANASOLOVICH, CFP®, EDITOR

Louis P. Stanasolovich, CFP® is founder, CCO, CEO and President of Legend Financial Advisors, Inc.®

(Legend) and EmergingWealth Investment Management, Inc. Lou is one of only four advisors nationwide to be selected 12 consecutive times by Worth magazine as one of “The Top 100 Wealth Advisors” in the country. Lou has also been selected 12 times by Medical Economics magazine as one of “The 150 Best Financial Advisors for Doctors in America”, twice as one of “The 100 Great Financial Planners in America” by Mutual Funds magazine, five times by Dental Practice Report as one of “The Best Financial Advisors for Dentists In America” and once by Barron’s as one of “The Top 100 Independent Financial Advisors”. Lou was selected by Financial Planning magazine as part of their inaugural Influencer Awards for the Wealth Creator award recognizing the advisor who has made the most significant contributions to best practices for portfolio management. He has been named to Investment Advisor magazine’s “IA 25” list three times, ranking the 25 most influential people in and around the financial advisory profession as well as being named by Financial Planning magazine as one of the country’s “Movers & Shakers” recognizing the top individuals who have done the most to advance the financial advisory profession.

ABOUT LEGEND FINANCIAL ADVISORS, INC.®

ABOUT EMERGINGWEALTH INVESTMENT MANAGEMENT, INC.

Legend Financial Advisors, Inc.® (Legend) is a Non-Commission, Fee-Only Fiduciary Securities and Exchange registered investment advisory firm with its headquarters located in Pittsburgh, Pennsylvania. Legend provides a multitude of services, including Wealth Advisory Services, which incorporate Financial Planning and Investment Management strategies to affluent and wealthy individuals as well as business enti-ties, medical practices and non-profit organiza-tions. Legend analyzes each client’s financial

EmergingWealth Investment Manage-ment, Inc. (EmergingWealth), is the sister firm of Legend Financial Advisors, Inc.® (Legend) and is a Non-Commission, Fee-Only Securities and Exchange Commis-sion (SEC) registered investment advisory firm. EmergingWealth provides Investment

strengths and weaknesses, then recommend creative solutions for improvement. Addition-ally, Legend works closely with our client’s other professional advisors to achieve optimal results.

WHY LEGEND IS DIFFERENT?

1. Legend is compensated exclusively by client fees, known as a Non-Commission, Fee-Only, Fiduciary advisory firm. Unlike Legend, fee-based advisors and brokerage firmshave numerous conflicts of interest due to the fact that they receive commissions.

2. Members of Legend’s Financial Advisory Team have been selected by National Publica-tions such as Worth, Medical Economics and Barron’s more than 60 times as “The BestFinancial Advisors In America”.

3. Unlike most advisory firms and all brokerage houses, Legend and its advisors have cho-sen to be governed by the Fiduciary Standard of Law. Fiduciaries are required to work intheir clients’ best interests.

4. Legend designs dynamic, creative and personalized financial planning and investmentsolutions for its clients.

5. Legend emphasizes low-cost investments where possible that are allocated and tradedin a tax-efficient manner.

Management services to individuals as well as business entities, medical practices and non-profit organizations whose wealth is emerging. All investment portfolios are sub-advised by Legend. Both Legend and EmergingWealth share a common advisory team, Investment Committee and Fee Schedule.


THE THREE BIGGEST GOLD CONSUMING COUNTRIES

1. INDIA

2. CHINA

3. UNITED STATES

INDEXING ADDS MORE MARKET RISKBy Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc.

“The last time a record amount of money moved to passive (indexing) was in March 2000. Back then, only 10.0% of the stock market was passive. Today, it is close to 40.0%. These index strategies must buy regardless of valuations. This causes valuations to get to extremes. When things go over the cliff, they go down that much faster. That’s the big risk today.”

“Current valuations are at the second highest level in history.”

Quotes by Mark Yusko (Former UNC Endowment CIO and Founder, Morgan Creek Capital Management from the Morningstar Chicago ETF Conference via On My Radar.

Source: This article was excerpted from “Best Ideas”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Manage-ment Group, Inc., (On My Radar, Septem-ber 16, 2016), www.cmgwealth.com

COPYRIGHT 2016 CMG CAPITAL MANAGE-MENT GROUP, INC.

REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

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INDIAN GOLD JEWELRY SALES SET TO HIT A FOUR-YEAR HIGHBy Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors

Just as April showers bring May flowers, plentiful monsoon rains in India tend to drive up demand for gold jewelry among rural, income-flush farmers, who make up a third of the country’s consumption of the yellow metal.

A Longstanding History Of Driving The World Gold Market:

For millennia, gold has played a key role in Indian culture, valued not only for its beauty and durability but also as financial security. That’s no less true today. A 2013 survey conducted by the Federation of Indian Chambers of Commerce & In-dustry (FICCI) found that more than three quarters of Indians view the precious metal as a “safe investment.”

The same FICCI study also found that gold is a regular line item in most Indian households’ budgets, comparable to what they spend every year on medical ex-penses and clothing.

It should come as little surprise, then, that Indian households have the largest pri-vate gold holdings in the world. Standing at an estimated 23,000 tonnes and worth close to a whopping $1 trillion, the amount surpasses the combined official gold reserves of the United States, Germany, Italy, France, China and Russia.

Analysts: Gold Is Setting Up For A Big Comeback:

After logging its best first half of the year in 40 years, gold is now trading range-bound while we await the Federal Re-serve’s (Fed) decision to raise rates in December. Most, but certainly not all, of the recent economic data seems to be pointing in this direction, with initial jobless claims at a four-decade low, voluntarily quits at pre-recession levels and house-hold income finally on the rise.

It’s been especially brutal lately. With markets in China, the world’s largest con-sumer, closed in observance of Golden Week, the short sellers had free rein, driving the price down more than 3.0% on Tuesday, October 11, 2016 alone.

Despite the weakness, inflows into gold Exchange-Traded Funds (ETFs) con-tinued to pour in, as savvy investors recognize that real, or inflation-adjusted, U.S. Treasury yields are still in negative territory. The two-year U.S. Treasury yield is used here because it’s what many cur-rency traders look at.

Now some analysts see gold ready to turn again, perhaps prefacing a rally that could carry the metal to an all-time high. (The all time high price for gold bullion was $1,917.90 per ounce on August 22, 2011.)

In a note this week, UBS said that as long as the Fed doesn’t hike rates too quickly, gold should resume its upward momen-tum. An important item to remember is the bull market was triggered in December of 2015 after the Fed raised interest rates

for the first time in nearly a decade.

Historically, the months of September and October have been a good time to invest in gold. September is typically the month when traders start buying ahead of India’s festivals and wedding season. Gold is India’s biggest import item after crude oil.

Physical gold ETF holdings continue to rise in spite of the Fed rate hike outlook. Assets in gold-backed ETFs rose to 2,050.3 metric tons as of Thursday, Oc-tober 14, 2016, extending gains to reach their highest since 2013.

Source: Parts of this article were excerpt-ed from “Indian Gold Jewelry Sales Set To Hit A Four-Year High”, by Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors, (Advisor Alert, October 14, 2016), www.usfunds.com

COPYRIGHT 2016 U.S. GLOBAL INVESTORS

REPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS PULSE


portfolio manager was forced to liquidate securities that had large capital gains in order to obtain cash to meet redemp-tion requests. Therefore, some of those positions with large gains had to be sold. For that year then, the mutual fund had a realized capital gain (from a position that normally would not have been sold) that had to be distributed to the sharehold-ers, even though some of those remain-ing shareholders may have just recently invested in the fund. This, obviously, was a negative consequence for the remain-ing shareholders who stayed in the fund through the end of that year due to a

forced sell down. To make matters worse, a investors who had recently purchased the fund (later in the year) would have to sell their position to avoid the taxable distribution. This caused more sales and correspondingly more gains to be distrib-uted to the remaining shareholders who were holding on.

More Problems:

A forced sell down is not the only situation that can push an investor into trouble with regard to capital gain distributions. What if a fund already recognized capital gains

earlier in the year, but the fund’s returns are negative for the rest of the year? The fund, due to its income tax circumstances, may still have to pay out distributions that are taxable to the investor even though they had an economic loss.

COPYRIGHT 2016 LEGEND FINANCIAL ADVISORS, INC.®

REPRINTED WITH PERMISSION OF LEG-END FINANCIAL ADVISORS, INC.®

Mutual Fund Sell Downs, continued from page 1

PULSE

Source: FactSet via 361 Capital, LLC, Weekly Research Briefing, October 3, 2016,www.361capital.com

REPRINTED WITH PERMISSION FROM 361 CAPITAL, LLC

As of: October 3, 2016COPYRIGHT 2016 361 CAPITAL, LLC

S&P 500 INFORMATION TECHNOLOGY:POSITIVE EARINGS PER SHARE (EPS) PREANNOUNCEMENTS (#)

As Technology earnings surprise to the upside, their stocks are following to make them the bestsector performers for the Third Quarter, 2016.

18

16

14

12

10

8

6

4

2

0Pos. EPS

Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q31616 12 7 3 9 6 6 2 9 9 8 3 6 9 12 12 10 13 15

Num

bero

fCom

pani

es


PULSE

LONG-TERM TREASURIES OFFER MORE POTENTIAL GAINS AT LOWER INTEREST RATES THAN AT HIGHER INTEREST RATES

By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.

Please note that when interest rates drop 1.0% from the low rate of 3.0%, the principal gain on bond investments or Exchange-Traded Funds [ETFs] is greater than if the yield drops from 6.0% to 5.0%. It is also important to keep in mind, the loss will be greater if interest rates rise. See the chart below.

Source: Parts of this article was excerpted from “The Best Looking Dude At The Dance”, by Stephen B. Blumenthal, Founder and CEO, CMG Capital Management Group, Inc., (On My Radar, August 12, 2016), www.cmgwealth.com

COPYRIGHT 2016 CMG CAPITAL MANAGEMENT GROUP, INC.

REPRINTED WITH PERMISSION OF CMG CAPITAL MANAGEMENT GROUP, INC.

Source: A. Gary Shilling & Company via CMG Capital Management Group, Inc.,On My Radar, August 12, 2016, www.cmgwealth.com

REPRINTED WITH PERMISSION FROM CMG CAPITAL MANAGEMENT GROUP, INC.

As of: August 12, 2016COPYRIGHT 2016 CMG CAPITAL MANAGEMENT GROUP, INC.

COUPON TREASURIES: RETURN ON ONE PERCENTAGE POINT DECLINE IN INTEREST

Yield 30 Years 25 Years 20 Years 15 Years 10 Years 5 Years

15.0%

14.0% 7.0% 6.9% 6.7% 6.2% 5.3% 3.5%

13.0% 7.5% 7.4% 7.1% 6.6% 5.5% 3.6%

12.0% 8.1% 7.9% 7.5% 6.9% 5.7% 3.7%

11.0% 8.7% 8.5% 8.1% 7.4% 6.0% 3.7%

10.0% 9.5% 9.2% 8.6% 7.8% 6.2% 3.8%

9.0% 10.3% 10.0% 9.2% 8.3% 6.5% 3.9%

8.0% 11.3% 10.9% 9.9% 8.8% 6.8% 4.0%

7.0% 12.5% 11.9% 10.7% 9.3% 7.1% 4.2%

6.0% 13.8% 13.0% 11.6% 10.0% 7.5% 4.3%

5.0% 15.4% 14.3% 12.6% 10.6% 7.8% 4.4%

4.0% 17.4% 15.9% 13.7% 11.4% 8.2% 4.5%

3.0% 19.6% 17.7% 15.0% 12.2% 8.6% 4.6%

2.0% 22.0% 19.8% 16.4% 13.1% 9.0% 4.7%

1.0% 24.6% 22.0% 17.9% 13.5% 9.1% 4.7%


DID YOU KNOW?MORE THAN A TRILLION A YEAR

The National Debt as of September 30, 2006 was $8.507 trillion. The National Debt today as of Thursday, September 29, 2016 was $19.533 trillion, more than doubling the total amount owed. Thus, the national debt has increased over $11 trillion over the last 10 fiscal years, i.e., fiscal years 2007-2016. The bulk of the in-crease was due to the financial crisis and its aftermath, most of which occurred during the years 2007 to 2012 (Source: U.S. Treasury Department).

DOUBLING THE U.S. GOVERNMENT’S SPENDING Fiscal year 2017 began October 1, 2016 and runs through September 30, 2017. The U.S. Government is projecting spending of $4.073 trillion for the fiscal year. Spending has increased from $1 trillion in fiscal year 1987 to $2 trillion in fiscal year 2002 to an expected $4 trillion in 2017. Please note the years mentioned increased spending, and doubling every 15 years. Projecting that pace out for another 15 years could mean another $8 trillion in spending by fiscal year 2031. It does make one wonder! (Source of data: Office Management and Budget).

JUST FIVE SURPLUS YEARSThe budget deficit for the United States in fiscal year 2016 (i.e., the 12 months that ended September 30, 2016) was $587 billion. The United States of America has run a budget deficit in 51 of the last 56 fiscal years, i.e., 1961 to 2016. The only surplus years were 1969, 1998, 1999, 2000 and 2001 (Source: Treasury Department).


“Do You Want A SecondOpinion?”

To see if your investment portfolio is builtto navigate the pitfalls and opportunities ahead,

call us today for a “Free Second Opinion”at (412) 635-9210.

www.legend-financial.com


BARCLAYS U.S. HIGH YIELD BOND MINUS TREASURY BOND YIELD

High Yield Bond Yields Decrease Again, But Still Attractive

20

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

15

10

5

Source: The Leuthold Group, LLC, Perception Express, October 7, 2016, http://leuth.us/bond-marketREPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

As of: October 7, 2016COPYRIGHT 2016 THE LEUTHOLD GROUP, LLC

Sep-16:4.99%

DifferentialMedian: 5.15

Source: The Leuthold Group, LLC, Perception Express, October 7, 2016, http://leuth.us/market-internalsREPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

As of: October 7, 2016

SMALL CAP TO LARGE CAP HISTORICAL PRICE TO EARNINGS (P/E) RATIOSmall Caps Valuations Cheaper Than Large Stocks By 6.0%

120

110

100

90

80

70

60

120

110

100

90

80

70

60

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016


2016 PERFORMANCE YEAR-TO-DATEJanuary 1, 2016 to September 30, 2016

(9 months)Year-to-DateTotal Return

Consumer Price Index (Inflation) 2.07%

90-Day Treasury Bills Index-Total Return 0.21%

Bloomberg Intermediate Term Corporate Bond Index 8.91%

Barclays Aggregate Bond Index-Total Return 5.80%

High Yield Corporate Bond Index – Total Return 15.61%

S&P Leveraged Loan Index – Total Return 7.72%

HFRX Global Hedge Fund Index 1.33%

S&P 500 Index (U.S. Stock Market) 7.84%

MSCI EAFE Index (Developed Foreign Equities) 2.20%

MSCI Emerging Market Index (Equities) 16.29%

Newedge CTA Index (Managed Futures) 0.95%

Dow Jones–UBS Commodity Index-Total Return (USD)** 8.63%

Dow Jones U.S. Real Estate Index-Total Return (USD)** 11.01%

Gold Bullion 23.87%

Compound and Total Returns include reinvested dividends. Newedge Index is equally-weighted.** USD = U.S. Dollar

Source: Bloomberg Investment Service COPYRIGHT 2016 LEGEND FINANCIAL ADVISORS, INC. ®

REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ®

As of: September 30, 2016


The yellow metal’s rarity, of course, is one of the main reasons why it’s so highly valued across the globe and, for most of recorded history, recognized and used as currency. Unlike fiat money, of which we can always print more, there’s only so much recoverable gold in the world. And despite the best efforts of alchemists, we can’t recreate its unique chemistry in a lab. The only way for us to acquire more is to dig.

But for how much longer?

Goldman Sachs analyst Eugene King took a stab at answering this question last year, estimating we have only “20 years of known mineable reserves of gold.”

The operative word here is “known.” If King’s projection turns out to be accurate, and the last “known” gold nugget is ex-humed from the earth in 2035, that won’t necessarily spell the end of gold mining. Exploration will surely continue as it al-ways has—though at a much higher cost.

(In fact, our insatiable pursuit of gold might one day soon take us to space, as President Barack Obama signed legisla-tion in November that permits commercial mineral extraction on asteroids and the moon. Many near-Earth asteroids are said to contain trillions of dollars’ worth

of precious metals and other minerals. However, that’s a discussion for another time.)

In all likelihood, there will be a surge in mergers and acquisitions. As long as they have reliable output, mid-cap compa-nies could be gobbled up by the Barricks and Newmonts of the world.

Another consequence of recovering the last known nugget? The gold price could spike dramatically to levels only imag-ined, but there’s really no way of knowing how high gold could go.

Did Gold Production Peak In 2015?:

What is known is that global gold output has been contracting since 2013. Last year might have been the tipping point, however, in line with Goldcorp CEO Chuck Jeannes’ prediction that peak gold production was within spitting distance.

“There are just not that many new mines being found and developed,” he told the Wall Street Journal in 2014, adding that this was “very positive” for the gold price going forward.

This year, second-quarter mine supply was approximately two percent less than the same period in 2015, according to

preliminary estimates made by Thomson Reuters GFMS. Some analysts now expect global production to fall approxi-mately three percent in 2016, after seven straight years of growth.

What’s more, few new projects and expansions are expected to come online this year, writes Thomson Reuters, “and those in the near-term pipeline are gener-ally fairly modest in scale, hence our view that global mine supply is set to begin a multiyear downtrend in 2016.”

Indeed, if one looks at projects that opened in just the last two or three years, we see that they’re of lower grade, mean-ing they don’t produce nearly as much as older, easy-to-mine gold deposits. (See chart “New Mines Are Making Small Con-tributions” below.)

The truth of the matter is, when it comes to discovering new gold deposits, the low-hanging fruit has likely already been picked. Gone are the days when some-one could stumble upon an exposed hunk of gold at the bottom of a riverbed, as James Marshall did in 1848, setting off the California Gold Rush. Every year, the pursuit of gold becomes increasingly more challenging—not to mention more expensive—requiring ever more sophis-ticated tools and technology, including

Gold Deposit, continued from page 1

NEW MINES ARE MAKING SMALL CONTRIBUTIONSTO GLOBAL GOLD PRODUCTION

3,400

3,200

3,000

2,800

2,600

2,400

2,200

2,000

2009 2010 2011 2012 2013 2014 2015 2016

2014

20152016

2013

20122011

2010Pre-2010

As of: August 5, 2016COPYRIGHT 2016 U.S. GLOBAL INVESTORS

Source: Metals Focus, GFMS, Thomas Reuters, WGC via U.S. Global Advisor AlertAugust 5, 2016, www.usfunds.com.

REPRINTED WITH PERMISSION FROM U.S. GLOBAL INVESTORS

In Tonnes




3D seismic imaging, direction drilling and airborne gravimetry. (A satisfactory “gold fracking” method, however, seems un-likely to become reality any time soon.)

Compounding the issue is the fact that the number of years between discovery of a new major deposit and production is widening, due to the increase in feasibil-ity assessments, compliance, licenses and more—and that’s all before nugget one can be extracted. The average lead time for gold mines worldwide is close to 20 years, though it can sometimes be more, depending on the jurisdiction. This highlights the need for worldwide policy reform to remove many of the barriers that obstruct responsible mining. (See chart “Number Of Years Between Mine Deposit Discovery To Production Is Growing” below.)

Knowing which developmental stage of a mine’s lifecycle a project currently is in is extremely important, as this has a strong influence on stock performance. Investing, like life, is all about managing expectations. See chart “The Lifecycle of a Mine” on the top of page 12.)

Few New Mines As Companies Delever-age:

What all of this means is we’ll probably continue to see fewer and fewer major discoveries, or those that yield more than a million ounces. As can be seen below, new gold discoveries peaked in 1995. Exploration spending peaked nearly 20 years later when the price per ounce aver-aged $1,600.00. See chart“Where Have All the Gold Discoveries Gone” on the bottom of page 12.)

With gold now trading at approximately $1,275.00 an ounce, up more than 20.0% for the year, many investors expect pro-ducers to begin lifting spending on explo-ration and production (or dividends).

Instead, most companies are in cost-cutting mode, using this opportunity to pay down debt and liquidate assets. Ac-cording to Reuters, North American gold producers have managed to lower their debt levels 30.0% since late 2014.

Speaking to Mining.com, Newmont Mining CEO Gary Goldberg said his company, the second-largest gold producer in the world, is one of the few that’s currently building new mines—specifically the Me-rian project in Suriname and Long Canyon in Nevada. Because of the lack of new mines being built, he sees supply falling

NUMBER OF YEARS BETWEEN DEPOSIT DISCOVERYTO PRODUCTION IS GROWING

35

30

25

20

15

10

5

0

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

*20

17*

2018

*20

19*

*Projected


Source: SNL Metals & Mining via U.S. Global Investors, Advisor Alert,August 5, 2016, www.usfunds.com





THE LIFECYCLE OF A MINE$10.00

$8.00

$4.00

$6.00

$2.00

$0.00Discovery Speculation

1-2 YearsDevelopment Investment Analysis

2-3 YearsProduction Revaluation

2-3 Years

Entry

Higher Risk

ConfirmedDeposit

Becomes Tier 3Company

Reality Sets In

Lower Risk

ProductionDecision

Start UpBecomes Tier 2

Company


Source: U.S. Global Research via U.S. Global Investors, Advisor Alert,August 5, 2016, www.usfunds.com


Shar

ePr

ice

WHERE HAVE ALL THE GOLD DISCOVERIES GONE?

18

20

16

14

12

10

8

6

1990 1995 2000 2005 2010 2015


Source: Palisade Research, SNL via U.S. Global Investors, Advisor Alert,August 5, 2016, www.usfunds.com


4

2

0

Major Gold Discoveries(Left Axis)

Exploration Spendingin Billions (Right Axis)

$7.00

$6.00

$5.00

$4.00

$3.00

$2.00

$1.00

$0.00




7.0% between now and 2021.

Demand for the yellow metal, on the other hand, should remain strong during this period, helping to support prices even more.

Massive Inflows Into Gold Funds:

See chart “Daily Percent Change Following Positive Jobs Report” to the top right

In the interim, gold continues to find support from global monetary policy and low to negative government bond yields. The Bank of England recently cut interest rates as part of a stimulus package, which both weakened the Brit-ish pound 1.5% and gave the yellow metal a jolt.

These gains were erased, however, following a better-than-expected U.S. jobs report, which sparked a rally in Treasuries. This contributes to the narrative that gold and government debt are inversely related, a key component of the Fear Trade.

When priced in the local currencies of the U.S., Canada, South Africa or Australia—four of the largest gold-producing countries—bullion is up, which has boosted miners’ prof-its. Gold stocks, as measured by the New York Stock Exchange (NYSE) Arca Gold Miners Index, have appreci-ated 128.92% in the last 12 months ending August 5, 2016. (See chart “Gold Priced in Local Currencies” below.)

For the first half of 2016, inflows into commodities have been the strongest since 2009. Gold and other precious metals account for about 60.0% of the new money, which has pushed commodity assets under management above

DAILY PERCENT CHANGE FOLLOWINGPOSITIVE JOBS REPORT

U.S. Dollar 0.44%

2-Year Treasury Yield 11.69%



Gold 1.68%As of: August 5, 2016COPYRIGHT 2016 U.S. GLOBALINVESTORS

Source: U.S. Global Investors, Advisor Alert,August 5, 2016, www.usfunds.com

REPRINTED WITH PERMISSION FROM U.S.GLOBAL INVESTORS

$235 billion. Barclays believes 2016 could be the best year on re-cord for gold-related Exchange-Trade Funds (ETFs) and other funds, with many big-name hedge fund managers, from Stan Druckenmiller to Paul Singer to Bill Gross, singing the praises of the yellow metal.

Source: This article was excerpted from “The Last Known Gold Depos-it”, by Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors, (Advisor Alert, August 5, 2016), www.usfunds.com


REPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS

GOLD PRICED IN LOCAL CURRENCIES

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

SEP-2015 NOV- 2015 JAN-2016 MAR-2016 MAY-2016 JUL-2016

U.S. DollarCanadian Dollar

Aussie DollarSouth African Rand


Source: Bloomberg via U.S. Global Investors, Advisor Alert,August 5, 2016, www.usfunds.com


Past performance does not guarantee future results.

PULSE


HOORAH! – NO STATE INCOME TAXBy Diane M. Pearson, CFP®, PPCTM, CDFATM, Legend Financial Advisors, Inc.® and EmergingWealth Investment Management, Inc.

There are only seven states without an income tax. The seven states are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

Source: Parts of this article were excerpted from “11 Reasons Why Everyone Wants To Move To Texas”, by Frank Holmes, CEO and Chief Investment Officer, U.S. Global Inves-tors, (Advisor Alert, August 26, 2016), www.usfunds.com


REPRINTED WITH PERMISSION OF U.S. GLOBAL INVESTORS

PULSE

Source: The Leuthold Group, LLC, Perception Express, October 7, 2016,http://leuth.us/bond-market

REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC

As of: October 7, 2016COPYRIGHT 2016 THE LEUTHOLD GROUP, LLC

Note: The Risk Aversion Index combines ten market-based measures including various credit and swap spreads,implied volatility, currency movements, commodity prices and relative returns among various high- and low-riskassets.

MONTHLY RISK AVERSION INDEX (RAI)RISK INDEX INCREASED EVER SO SLIGHTLY

ALTHOUGH STILL IN “EXTREME LOWER RISK” RANGE

4

3

2

1

0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

4

3

2

1

0


LEGEND FINANCIAL ADVISORS, INC.® &EMERGINGWEALTH INVESTMENT MANAGEMENT, INC.’S

INVESTMENT MANAGEMENT SERVICES

Legend Financial Advisors, Inc.® (Legend) and EmergingWealth Investment Management, Inc. (EmergingWealth) offer Personalized Investment Management Services to individuals and institutions. Investment portfolios are developed to match the client’s return and risk requirements, which are determined by the clients’ completion of a Risk Comfort Zone Questionnaire, with the guidance of a Legend Wealth Advisor or EmergingWealth Advisor, respectively. Each type of investment portfolio is managed to achieve the short, intermediate and long-term investment objectives of the client, as may be applicable.

INVESTMENT PROCESS

Investment Portfolios:

Unlike most financial advisory firms that offer one style of investment or portfolio type, we offer a wide array of investment portfolios that usually fit with the large majority of client needs. If necessary, we will create customized solutions as well. For the types of investment portfolios, please see our Investment Portfolios, Potential Return and Risk Spectrum Chart on the next page. For a detailed description of our portfolios, please contact Louis P. Stanasolovich, CFP®, founder, CCO, CEO and President of both firms for a confidential discussion at (412) 635-9210 or e-mail us at [email protected].

Investment Research:

Our Investment Committee performs extensive research to identify opportunities, mitigate risks and structure investment portfolios. Emphasis is placed on developing portfolios that maximize the potential return relative to the amount of risk taken.

In-depth due diligence including face-to-face interviews in many instances with portfolio managers for open-end mutual funds is performed on each investment we select for a portfolio. Factors (both from a qualitative and quantitative standpoint) that we conduct a thorough analysis of each investment include, but is not limited to, liquidity (including the primary investment and/or the underlying investments, if utilizing pass through vehicles such as open-end mutual funds or exchange-traded products), income taxation, all related costs, return potential, drawdown potential (historical declines from peak-to-trough), volatility and management issues (Anything having to do with the management team of a stock, open-end mutual fund or an exchange-traded product.).

All portfolios for EmergingWealth are subadvised by Legend.

Client Education:

Education is very important to us. We are dedicated to educating each client about the different investment portfolio types and how they relate to market volatility, time horizons, and investment returns. It is our goal to ensure that the client understands and agrees with our investment philosophy. Furthermore, we assist each client in selecting a risk tolerance level with which they are comfortable. Ultimately, an investment portfolio is designed to meet the client’s objectives.

PERFORMANCE REPORTING

Many investment firms only offer monthly brokerage statements, which provide minimal information; typically only account and investment balances. We, on the other hand, provide detailed quarterly reports that outline performance, income and management fees (among other items) in a simple, easy-to-read report. In addition, each performance report is sent with an extensive index page that illustrates the investment environment during the reporting period.

FEES

To find out more about the fees for either Legend or EmergingWealth’s Investment Management services, please contact Louis P. Stanasolovich, CFP®, founder, CCO, CEO and President of both firms for a confidential discussion at (412) 635-9210 or e-mail us at [email protected].

october, 2016 - legend financial advisors, inc.®2013 survey conducted by the federation of indian...

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