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GOT TO KNOW THE FACTS!!!

GOT TO KNOW THE FACTS!!!. BIGFOOT INVESTMENTS OPEN FORUM Apr 11th , 2013 WELCOME!. AGENDA WELCOME! ADMIN NOTES QUOTE OF THE DAY OPTIMISM GAUGE CHARTS OF INTEREST SO WHAT’S UP WITH: TRADING SYSTEMS A CLOSER LOOK AT: LUV DAVID’S CORNER SWAPS AND SPREADS LEE’S COMMENTS

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GOT TO KNOW THE FACTS!!!

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  1. GOT TO KNOW THE FACTS!!!

  2. BIGFOOT INVESTMENTS OPEN FORUM Apr 11th, 2013 WELCOME!

  3. AGENDA • WELCOME! • ADMIN NOTES • QUOTE OF THE DAY • OPTIMISM GAUGE • CHARTS OF INTEREST • SO WHAT’S UP WITH: TRADING SYSTEMS • A CLOSER LOOK AT: LUV • DAVID’S CORNER • SWAPS AND SPREADS • LEE’S COMMENTS • QUESTIONS/COMMENTS

  4. “NOTES” • IF YOU USE ANY OF OUR SLIDES, PLEASE REMEMBER TO • HAVE THEM APPROVED BY YOUR COMPLIANCE DEPARTMENT. • WE’LL UN-MUTE YOU ON OUR END SO YOU CAN ASK QUESTIONS. • PLEASE MUTE AUDIO FROM THE MENU ON YOUR SCREEN SO • WE DO NOT GET FEEDBACK. • THANK YOU!

  5. BigFoot Investments is now on Twitter, LinkedIn!

  6. BigFoot On LinkedIn! Don’t Forget To Join Our “Group”

  7. Notifying You! SMS Alert System

  8. QUOTE OF THE DAY: In investing – the winner is not the person with the most “hits”….. …it is the person with the fewest errors! Doug Short

  9. Optimism Gauge As of: 4/11/2013

  10. Measuring Our Economy Last Update: 4/11/2013

  11. Measuring Our Economy READING AS OF: 4/11/2013 Economic Optimism Index NOTES/COMMENTS CURRENT READING: 67.7% PRIOR READING: 67.7% BIAS: MILDLY BULLISH 9 OF 13 INDICATORS POSITIVE TREND - Neutral 45 65 35 75 25 85 67.7% 15 95 Current Reading Prior Reading POSITIVE AS OF: 8/17/2012

  12. Charts of Interest!

  13. Federal Reserve Slides

  14. LATEST DATA ( REPORTED APR 2013) COMPARED TO PREVIOUS Source: Federal Reserve Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.

  15. GDP FORECAST Source: Federal Reserve Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.

  16. UNEMPLOYMENT FORECAST Source: Federal Reserve Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.

  17. INFLATION FORECAST Source: Federal Reserve Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.

  18. FOMC PARTICIPANT ASSESSMENTS Source: Federal Reserve Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.

  19. Maybe Not All Bad! A CLOSER LOOK AT THE CURRENT EMPLOYMENT STATISTICS (CES) Current data Looking at the long-term! Source: BLS

  20. LOOKING AT THE “RAW” DATA Source: dShort

  21. S&P Inflation Adjusted! “EVEN” with 1997 Source: dShort

  22. How Low Can You Go? Source: FRED

  23. Gnawing Reality! Source: Calculated Risk

  24. Of Tulips and Bitcoins! Source: Business Insider

  25. If You Believe – Go Mining – Have Been$250 each! Aug 2012 = $10 Bitcoin Bounces Back After Crashing Nearly 60% - Closes at $200 (4/10/2013) Source: Business Insider

  26. Your “Wallet”! Your “Money”! Source: Business Insider

  27. AN ASSESSMENT • Virtual Currency has a BAD SOUND • First in win – last in lose • Not really that liquid • It will lose its “pure” purpose • Like Bearer Bonds – Once gone they’re gone • - Estimated 10% have been stolen • NO stable exchange rate • NO physical nexus • THE GOVERNMENT WILL BE WATCHING TULIPS ANYONE?

  28. SO WHAT’S UP WITH: UNDERSTANDING A TRADING SYSTEM

  29. The price is falling! TRADING OR TRADING SYSTEM? TIME IS YOUR FRIEND….IMPULSE IS YOUR ENEMY Jack Bogle Source: AAII

  30. THE PRICE IS FALLING DISCUSSION TOPICS

  31. INVESTING TRUISMS 1 THE PRICE IS FALLING • TRUTH #1– AT SOME POINT A STOCK’S PRICE WILL FALL • TRUTH #2 – DO NOT OVERREACT TO PRICE FLUCTUATIONS • TRUTH #3– NEVER BECOME EMOTIONAL ABOUT A STOCK • TRUTH #4 – NEVER FALL IN LOVE WITH A COMPANY

  32. THE BASICS 2 THE PRICE IS FALLING • THE BASICS ARE ESSENTIAL • ENTRY PRICE IS NOT ALWAYS AN EXIT FACTOR • ONCE YOU BUY A STOCK – “STAND ON YOUR HEAD” • COMPANY FUNDAMENTALS MATTER • FUTURE PROSPECTS ARE CRITICAL • DECISIONS MUST BE NON-EMOTIONAL • RECURRING THEMES ARE IMPORTANT • MARKETS HAVE IMPACT • INDUSTRY MATTERS • FIRM-SPECIFICS WARRANT CONCERN PRICE PAID IS NOT A PRIME FACTOR IN SELLING REASONS TO SELL ARE REALLY THE SAME AS BUYING COMPANY FUNDAMENTALS NEED TO BE REVIEWED OFTEN ALWAYS CONSIDER THE NEXT STEP FOR A COMPANY REMEMBER THE “BUGGY WHIP” EMOTIONAL DECISIONS ARE USUALLLY WRONG COMPANIES FOLLOW PATTERNS KNOW THEM! MARKETS HAVE IMPACT BUT DON’T AFFECT ALL STOCKS EQUALLY – KNOW THE DYNAMICS INDUSTRY MATTERS – SOME SAY UP TO 50% OF A STOCK’S PRICE IS RELATED TO SECTOR FIRM-SPECIFICS ARE CRITICAL- THINK AIRLINES

  33. MARKET DYNAMICS 3 THE PRICE IS FALLING • TRADING ON MARKET WEAKNESS • BY ITSELF NEVER A REASON TO SELL • TAKE A LONGER-TERM PERSPECTIVE ON THE COMPANY • KNOW THE STOCK VERSUS THE MARKET • BE AWARE OF PRICE/VOLUME INCONSISTENCIES • EXTREME VOLATILITY IS USUALLY A NEGATIVE • HAVE AN EXIT STRATEGY

  34. STOCKDYNAMICS 3 THE PRICE IS FALLING • THE TECHNICALS • CAN NOT BE IGNORED • OFTEN MORE OF A “TRADE” THAN A “POSITION” • SHORTER HORIZONS • IF NOT A TRADER – DON’T OVERREACT • FUNDAMENTALS CAN “DRIVE” TECHNICALS • THEY CAN BE SUBJECTIVE • IN A SENSE THEY ARE LAGGING INDICATORS • WE ARE NOT TECHNICAL TRADERS

  35. INDUSTRY CONSIDERATIONS 4 THE PRICE IS FALLING • SECTOR/INDUSTRY FACTORS • STRUCTURAL CHANGES DO OCCUR • SECULAR PATTERNS CAN BE TOUGH • BE AWARE OF CYCLICAL TRENDS • REGULATORY CHANGES MEAN THINGS • INDUSTRY LIABILITY ISSUES GET EVERYBODY • COMPETITOR ANNOUNCEMENTS CAN MOVE STOCK PRICES • FRANCHISE DAMAGE IS HARD TO OVERCOME • PRICING POWER AFFECTS MARGINS

  36. FIRM-SPECIFIC ISSUES 5 THE PRICE IS FALLING • THINGS GO WRONG • EXTRAORDINARY EVENTS • Natural Disasters • Product Recalls • Product Liability • EARNINGS REPORTS • Don’t “Bet” on earnings • Don’t Overreact – Listen/Read • Bad Earnings Take a Quarter to Recover • MANAGEMENT ISSUES • AUDITOR CHANGES • BUY OR BUY/OUT • PRICE CAN’T GO UP ANY FURTHER!? • PRICE MOVING DOWN

  37. THE PRICE IS FALLING • CONCLUSIONS • BIGGEST PROBLEM FACING INVESTORS: EMOTION • SCREEN MONTHLY CAN CATCH LAGGARDS • STOCK PICKING GETS MORE CRITICAL AS MARKETS MOVE UP • TO BE SUCCESSFUL TRADING PLATFORMS MUST: • Be quantifiable • Avoid interpretation • Be consistent/repeatable • Test expectancy • Specify exact entry/exit points • Have a reasonable level of complexity • Be explainable • Have disciplined users • STAY RATIONALE

  38. A CLOSER LOOK AT: LUV

  39. Enters Portfolio

  40. Southwest Airlines Co. (LUV) Southwest Airlines Co. operates passenger airlines that provide scheduled air transportation services in the United States. As of December 31, 2012, the company operated 694 aircraft, including 606 Boeing 737 aircraft and 88 Boeing 717 aircraft. It served 97 destinations in 41 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 6 near-international countries, including Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, and Bermuda. It also sells frequent flyer points and/or credits and related services to business partners participating in the Rapid Rewards frequent flyer program, including car rental agencies, hotels, restaurants, and retail locations. The company was founded in 1967 and is headquartered in Dallas, Texas. Source: FinViz.com, April 2013

  41. Southwest Airlines Co. (LUV) POSITIVES:Preying on weaker competitors, Southwest has used the downturn to expand service offerings to Minneapolis-St. Paul, New York LaGuardia, and Boston Logan airports. If successful, these new markets will provide ample growth opportunities going forward. Possible concerns:Airlines for America estimates that the tax percentage on airfare has tripled to roughly 20% of the price of a ticket today, up from 7% in 1972. Analysts don't expect the amount of taxation to decrease going forward, especially as the government contemplates ways to pay for increased security measures, so Southwest and the industry likely will receive a smaller share of future ticket proceeds. Source: Morningstar, April 2013

  42. ENTERS PORTFOLIO 4/1/2013 Buy 4/1/2013 $13.29

  43. Trade Data

  44. April 2013 Stock Picks Industry: Airlines As of March 28, 2013 - Subject to change.

  45. Dow Transports Looking for stability

  46. Dow Airline Index All airlines are not created equal

  47. FINVIZ SUMMARY

  48. VALUE LINE

  49. VALUE LINE

  50. DEUTSCHE BANK Deutsche Bank upgraded Southwest Airlines Company from Hold to Buy and raised the price target from $11.00 to $15.00. Deutsche Bank noted, "We are raising our rating on Southwest shares from Hold to Buy as we now believe the company is well-positioned to meaningfully improve its pretax ROIC. We think the company has turned the corner on its AirTran acquisition and should start to enjoy the fruits of various revenue (e.g. AirTran code sharing) and cost initiatives (e.g. growth of 737-800 inductions). Accompanying the P&L improvement, we think there will be further debt pay-down and share buybacks. For the twelve months ended 9/30/12, Southwest's pretax ROIC was 7%." RETURN ON INVESTED INCOME All Capital Invested: Long-Term Debt; Common Stock; and Preferred Stock

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