! 8(-55-3") 9.::'")3).( '#()* +)*%,%, )- # .#/0%,1 2#34%,1 #/* 567,/#2)-8 396 9#- # *%%: 0/632%*$% 6; 89% $6(%,/<%/8 -:6/-6,%* %/8%,:,)-%-= >% 3#- 0)/* %/67$9 86 -%/* <% 89% ?6<<%/8 .%263 #/* 2%8 <% ,%:,)/8 )8= @2%#,241 A -8,6/$24 #$,%% 3)89 9)- ()%3 89#8 +#//)% #/* +,%**)% #,% # .%/%;)8 86 89% /#8)6/ #/* /68 %#-)24 ,%:2#?%#.2%= ;(< =->'('(*+ (':3(?+ ulck l toke o less oll-eocompossloq mocto vlew of tbloqs. lo o ootsbell, l belleve tbot o New ueol looovotloo, tbe flxeJ-tote self-omottlzloq mottqoqe looo (wblcb loltlolly beqoo wltb o 15-yeot teoot ooJ, beqlooloq lo 1948 wos locteoseJ to J0-yeots), btooqbt oboot stoblllty lo boosloq floooce. lt oll wotkeJ jost floe ootll tbe Jlsmootlloq of 8tettoo wooJs ooJ tbe loevltoble Jeteqolotloo of lotetest totes. Mote speclflcolly, lkMs become lmpetlleJ by lool volcket's ootl-loflotloo meJlcloe, wblcb cooseJ tbe tbtlfts to become losolveot. 1be ooly woy tbot J0-yeot lkMs coolJ be molotoloeJ, Jotloq ooJ oftet volcket's teoote ot tbe leJ, wos tbtooqb tbe C5s, wblcb, ootll tbe 1990s, wete tbe ooly bolooce sbeet leoJets wltb ootloowlJe footptlots. 1be C5s' oblllty to Jlvetslfy tlsks, wltb teqotJ to locotloo ooJ motket tlmloq, coolJ oot be motcbeJ, tbeo ot oow. 1bls btooJ Jlvetslflcotloo, plos ecooomles of scole, eoobleJ tbe C5s to effectlvely moooqe tbe lotetest tote tlsk oo tbelt bolooce sbeets tbtooqb lotetest tote Jetlvotlves. 5lmllotly, ooly tbe C5s coolJ lssoe mottqoqe bockeJ secotltles tbot ttoosfetteJ lotetest tote tlsk bot oot cteJlt tlsk. (All C5 M85 beoefltteJ ftom cotpotote qootootees.) 1be tlsk ptoflle of ptlvote lobel secotltles--stotlc pottfollos of some-vlotoqe looos lo llpolJotloo--coo oevet motcb tbe tlsk Jlvetslflcotloo of C5 mottqoqe secotltles. wbeoevet tbe ptlvote motket folleJ--os lt JlJ wltb tbe 5&l ctlses of tbe eotly 1980s ooJ eotly 1990s, ooJ lo tbe oftetmotb of tbe collopse of tbe ptlvote secotltles motket lo 2007 oowotJ--tbe C5s bove steppeJ lo to stooocb o motket collopse tbot woolJ bove beeo mocb wotse. 1be commoo ttop, tbot tbe C5s wete ooly soccessfol becoose of lmpllclt qovetomeot bockloq, ls belleJ by tbelt oomotcbeJ looo petfotmooce, ooJ, by tbelt cooslsteot ptofltoblllty. As o book ooolyst, yoo cettololy ooJetstooJ tbe Jlffeteoce betweeo o llpolJlty ctlsls ooJ losolveocy, wblcb ls boseJ oo o oombet of CAAl tlmloq Jlffeteoces. 1be C5s become "losolveot" becoose of tbe loss of JefetteJ tox ossets ooJ excesslvely pesslmlstlc looo loss ptovlsloos, wblcb wete botb tevetseJ lost yeot. uollke oll tbe otbet 2008 bolloots, tbe JtowJowos of qovetomeot fooJs wete oevet oeeJeJ to soppott Joy-to-Joy opetotloos ot ooy cotteot Jebt obllqotloos. Of cootse tbe qovetomeot's oofooJeJ commltmeot qove tbe C5s tbe oblllty to stoblllze tbe mottqoqe motkets wbeo oll otbet ployets boJ exlteJ. 8ot tbot qovetomeot bockstop beoefltteJ oll mottqoqe cteJltots, oot jost tbe C5s. 1be woy l see lt, tbe C5 bosloess moJel bos beeo oo exttootJlooty soccess. 1bete oevet woolJ bove beeo ooy kloJ of mottqoqe ctlsls lf oll leoJets lssoeJ lkMs ooJ followeJ tbe C5s cteJlt stooJotJs.
uovlJ
Monday, October 06, 2014 !" $%&'()*+ ,&-"-."
PLEASE SEE I MPORTANT DI SCLOSURE AND ANALYST CERTI FI CATI ON LOCATED I N THE APPENDI X OF THI S REPORT. "#$% B
Financial Analyst Institutional Sales
Richard X. Bove Vice President Equity Research bover@raffcap.com 813.388.2900
Joseph Bove Vice President Institutional Sales: bovej@raffcap.com 646.572.3378
Appendix: Analyst Certification and Other Important Disclosures
Analyst Certification
I, Richard X. Bove, certify that with respect to each security or issuer that I covered in this report; (1) all of the views expressed accurately reflect my personal views about those securities or issuers; and (2) no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report.
Regulatory Disclosures
Analyst Stock Ratings Definitions Rafferty Capital Markets (RCM) ratings, effective January 2, 2013, are defined as follows:
Buy A stock that at initiation displays projected Price-to-Book ratio less than 100% and projected Earnings Direction greater than zero. The rating may be maintained following initiation as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the rating to fall outside of the above parameters. Hold A stock that at initiation displays projected Price-to-Book ratio less than 100% and projected Earnings Direction less than zero; projected Price-to-Book ratio between 100% and 200% and projected Earnings direction less than 10%; or projected Price-to-Book ratio greater than 200% and projected Earnings Direction greater than 10%. Sell A stock that at initiation displays Projected Price-to-Book ratio greater than 100% and projected Earnings Direction less than zero. The rating may be maintained following initiation as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the rating to fall outside of the above parameters. Suspended - Covered stocks in which the rating has been suspended due to a number of unresolved issues that must be clarified before a rating can be re-applied to them.
Distribution of Ratings RCM must disclose in each research report the percentage of all securities rated by the member to which the member would assign a "buy", "neutral" or "sell" rating. The said ratings are updated on a quarterly basis. Below is the distribution of RCMs research recommendations as of the date of this report:
Negative A 10% expected decline in S & P 500. Neutral The S & P is expected to trade within 10% bounds up or down. Positive A 10% expected rise in the S & P 500.
Valuation and Risks
The primary risks to achieving our target price include general market fluctuations, unexpected shifts in economic activities, and/or unexpected reversals in company fortunes.
Monday, October 06, 2014 !" $%&'()*+ ,&-"-."
PLEASE SEE I MPORTANT DI SCLOSURE AND ANALYST CERTI FI CATI ON LOCATED I N THE APPENDI X OF THI S REPORT. "#$% C Additional Information is Available upon Request to Barbara Martens at Rafferty Capital Markets, LLC, 1010 Franklin Avenue, Garden City, NY 11530 or 516.535.3800 Other Disclosures
Rafferty Capital Markets ("RCM") is an institutional brokerage firm that does not engage in investment banking. RCM and its affiliates, including its principals, may own securities of the companies which are subject of this report but do not own 1% or more of any class of common equity securities of any subject company.
The information and opinions presented in this report are provided for informational purposes only and are not to be used or considered as an offer or solicitation of an offer to buy or sell securities or other financial instruments. RCM has not taken any steps to ensure that the securities referred to in this report are suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about any such investment.
Information and opinions presented in this report have been obtained or derived from sources believed by RCM to be reliable, but RCM makes no representation as to their accuracy, timeliness or completeness. RCM accepts no liability for loss arising from the use of the information presented in this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.
Information and opinions contained in this report reflect a judgment at its original date of publication by RCM and are subject to change without notice. RCM may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and RCM is under no obligation to insure that such other reports are brought to the attention of any recipient of this report.
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject RCM to any registration or licensing requirement within such jurisdiction. All material presented in this report is the property of RCM and is under copyright to RCM. This report may not be reproduced, distributed or published by any person for any purpose without the prior express written consent of RCM.