1. Future of USD 30 July 2014 War Room

2. HiddenLevers War Room Open Q + A Macro Coaching Archived webinars CE Credit Idea Generation Presentation deck Product Updates Scenario Updates

3. I.Market Update II.Future of USD Scenarios III.USD Economic Relationships IV.Reserve Currencies of the Future Future of USD

4. HiddenLevers MARKET UPDATE

5. Market Update Obama Checked Out QE Ends in October Q2 GDP – a perfect 4.0 sources: HiddenLevers, WSJ, CNBC, Real Clear Politics, Guardian, BloombergWSJCNBCReal Clear PoliticsGuardianBloomberg Russia Sanctions Piling Up

6. Macro Snapshot Is RUT a harbinger or just mean reversion and why is 2/10 spread narrowing?

7. FUTURE OF USD – SCENARIOS HiddenLevers

8. Benign Decline Europe currencies + gold increase modestly similar decline to 2002-07 market upswing slow + steady USD decline USD decline would match 2008 low USD index = 70 source: HiddenLevers USD decline + GDP growth would boost commodities USD = -13%

9. End of QE Strengthens Dollar growth scenario muted impact on commodities equities correction would further boost USD USD strength would match mid 2000s highs USD post-QE 2 has been volatile but up rising rates mean higher demand for USD source: HiddenLevers USD Index = 90 Europe currencies + gold suffer USD = + 11%

10. Reserve Currency No More drastic unwinding + viable options plausible trigger USA/China geopolitical tension plausible trigger debt default global power structure is changing sources: HiddenLevers USD Index = 55 USD decline would match early 2000s decline USD = -32%

11. Scenario: Future of USD Good benign decline Neutral/Bad end of QE strengthens USD Ugly reserve currency no more As the economy strengthens, the dollar might fall as it did in the 2002- 2007 period. Rising rates may drive investors to hold more USD securities, raising the dollar’s value and forcing commodities down. If US fiscal issues or other concerns cause foreign holders to dump USD, an inflation shock could derail the markets.

12. HiddenLevers USD ECONOMIC RELATIONSHIPS $

13. USD + Interest Rates sources: HiddenLevers Pre 2008 rising rates = rising USD Post 2008 inverted relationship Why? USD as safe haven for EU crisis 2014 another inflection point?

14. USD + Quantitative Easing sources: HiddenLevers, Financial SenseFinancial Sense QE 1QE 2QE3Taper QE 1 + 2 USD driven down QE 3 + Taper USD only gets stronger Note for your ignorant clients: increasing money supply has not killed the greenback

15. USD + Equities sources: HiddenLevers, Bespoke Investment GroupHiddenLeversBespoke Investment Group During flight-to-safety period starting in early 2008, USD + S&P had strong inverse correlation Rolling correlations show that this relationship flips over time, and turned positive with latest S&P leg starting late 2012 But a correction could quickly restore flight-to-safety dynamic

16. USD + Commodities/FX sources: HiddenLevers USD generally has a strong inverse relationship to oil and other commodities – traded in USD terms Euro/USD: perfectly inverse GBP inversion with USD strengthened since 2008 JPY non-correlated to USD

17. HiddenLevers RESERVE CURRENCIES OF THE FUTURE

18. USD = The Classic Reserve Currency source: US Treasury, IMF, Planet MoneyUS TreasuryIMFPlanet Money 1/3 of US Treasuries Held Abroad USD makes up 61% of Foreign Exchange Reserves Foreign banks hold 10x more USD + Treasuries than gold Foreign Held Assets Value (USD) US Treasuries Abroad 5.6 trillion US Cash in Foreign Exchange Reserves 3.8 trillion Gold Held in Foreign Reserves @ $1,300/ounce 0.97 trillion US 100$ Notes Held Abroad 0.64 trillion Currency Composition (%) of Foreign Exchange Reserves

19. BRICS Bank – announced July 2014 source: Forbes, IMF, Banker MagazineForbesIMFBanker Magazine IMF/World Bank BRICS Bank (NDB & CRA) Total Reserves (USD) 12 trillion150 billion BRICS Vote (%) 11.03 %100% USA Vote (%) 16.8%0% IMF type institution for EM, by EM 28% BRICS share of world GDP 19% USA share of world GDP Obvious response to IMF imbalances BRICS Bank currency TBD China contributing 50% of money global power structure changing

20. Reserve Currency of the Future – Yuan? sources: HiddenLevers, The Finanser, Banker Magazine, The ABCThe FinanserBanker Magazine,The ABC Yuan + USD travelling together past 12 months China bank profits accelerating as economy slows China’s banking system may be world’s largest by 2020 World’s Top 10 Banks 1994: 5/10 banks in Japan 2004: 10/10 banks in USA 2014: 5/10 banks in China bank profits surpassing pre-crisis peaks globally Japan bank capital now 50% of China only comparable bank profit recovery = USA

21. Future of USD – Recap USD resilient through changing times China banking might think present, not future Interest rates + USD back to direct relationship USD strong through equities rally

22. HiddenLevers Use Cases scenario Global Deflation scenario End of QE Future of USD macro theme Stronger USD data center Currencies scenario Future of USD

23. Portfolios – support for models of models Portfolios – portfolio can be in multiple households Faster servers – improved performance, especially report generation Coming Soon: - Lightning Fast Portfolio Entry – paste right into grid - Landscape redesign of HL Product Update