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September, 2013:

The September quant analysis resulted in an all-around reallocation to the defensive side due to uncertainty over when and how much the Fed will taper and worries over the US response to events in Syria. Bonds continue to shed value with the 10-year yield lurking towards 3%. PCM’s Global Tactical Index rotated to an inverse of the Dow Jones, inverse of 20 year US treasuries, long the Euro and long 1-3 year treasuries. The PCM US Industries Total Return Index  committed equally to the defensive healthcare and medical devices industries and short the Dow. The Alpha One Index continued the defensive theme, positioning long short-term US treasuries.

The PCM US Bond Index and PCM Absolute Bond Index  both continued a commitment to a spread between short long-term treasuries and long short-term treasuries.

Kudos to Provident! The PCM Absolute Bond Index composite ranked “Top Gun” status by Informa Investment Solutions for Q2 2013. Informa Investment Solutions is a database of portfolio managers allowing for the investment community and clients to evaluate portfolio managers and make informed investment decisions. For more information, visit www.imformais.com.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by Co-CIO’s Michael Chapman and Todd Wood

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission. Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"

Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives.  As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach.  Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass.  We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

August, 2013: Volatility on the Rise

The August reallocation saw global indexes continue to hold equities. The small cap Russell 2000 Index, represented in our models by ETF ticker IWM, was the strongest equity class. All indexes, with the exception of PCM US Bond Index, exited the TBF position, which is the short 20 year treasury bond. The Global Tactical Index favored France and the Netherlands along with broad based dividend payers and the industrials. As of the end of July, the PCM US Industries Total Return Index reached another all-time high.

PCM Absolute Bond Index is now long both international treasuries and international corporates. The street consensus still favors the probability that a start to a tapering of quantitative easing will begin in the Fall, so we all may want to tighten up our seat belts.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by Co-CIO’s Michael Chapman and Todd Wood

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission.  Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"

Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives.  As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach.  Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

Mid-July , 2013: Earnings Reverting to Historical Mean?

Our mid July reallocation resulted in a commitment to U.S. small, mid and large cap equities. More specifically, the financials and consumer discretionary were the sectors to which our Global Tactical Index rotated. Our quantitative models are also favoring oil and short U.S. treasuries. As earnings season gets in full swing, we continue to be concerned about the fundamentals of equities. Specifically, profit margins are very high compared to the long term mean and although the market itself is not trading at unreasonable multiples, a return to the mean in corporate profit margins could be a catalyst for a sharp sell off in equities. We are seeing a hint of mean reversion as this earnings season kicks off.

PCM Absolute Bond Index  is now spreading long high yield U.S. bonds against inverse (short) U.S. treasuries. The bond markets seemed to have stabilized from the May/June volatility as Bernanke assures the market that the printer is fired up as long as economic growth remains weak.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by Co-CIO’s Michael Chapman and Todd Wood

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission.  Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.


About "PCM Quant Coalescence"

Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives.  As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass.  We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind.  Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

Mid-August, 2013: Europe Sees Long Awaited Growth in GDP

The mid August reallocation saw global indexes continue to hold equities, however, there was a strong rotation by PCM’s Global Tactical Index from US equities into the European markets, specifically Austria, the Netherlands, France and Spain. This came on the heels of Europe reporting growth in GDP after a record 6-quarter long double dip recession. (see zerohedge.com article). In a further quantitative vote of confidence for the region, the Euro, represented in our models by ETF ticker FXE, was the main choice for the next two weeks in the Alpha One Index.

The PCM US Bond Index and  PCM Absolute Bond Index  both committed to the inverse 20 year treasury bond. Due in part to the multi-directional ability of these indexes, the PCM Absolute Bond Index composite  was ranked as achieving “Top Guns” status within the Informa Investment Solutions'  manager ranking database for 2Q 2013.

As of the end of July, the PCM US Industries Total Return Index reached another all-time high.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by Co-CIO’s Michael Chapman and Todd Wood

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission.Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"

Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach.Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass.We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

Mid-May, 2013: Bulls Continue to be Validated

As Federal Reserve watchers hint at the tapering of quantitative easing starting as early as this summer, U. S. treasuries have sold off enough in the first half of May to wipe out any gains seen since the beginning of the year. Conversely, others believe an increase in QE is on the horizon, as inflation data on Thursday showed pricing pressures had fallen to their lowest level in two years. Consequently, bonds are in a trading range; albeit a trading range that appears to be on the verge of increasing volatility. This price action was evidenced in our PCM Absolute Bond Index, as it has been whipsawed over the last two reallocations; that being early and mid-May. Specifically, this is evident in the mid-May allocation shift from long 20 year treasuries to short 20 year treasuries. Time will tell if this is our first hint at an end to the 30 year bull run in U. S. Treasuries.

On the equity side, there is a definite and continued movement from conservative U.S. equities to the more traditional sectors one would expect to see in a bull market. This started two weeks ago when we noted the strong early May movement into the consumer discretionary sector. We are now seeing our PCM Global Tactical validate this bullish price action by also moving into traditional bull market sectors, such as the industrials and financials. Our quantitative analysis was further supported by the same suggested reallocations for our U. S. Sector Index and our U. S. Industries Index, although those models reallocate at the beginning of each month. One last indicator of the continued commitment to an aggressive “risk off” environment was notable in the sharp selloff in utilities in the last two weeks after a strong run since the start of the year. For now, it appears the bulls continue to be validated.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by Co-CIO’s Michael Chapman and Todd Wood.

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission.  Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"

Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market evironment. Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass.   We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind.  Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

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