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2013MarketOutlook
YearoftheSnake
LiveWebcasthostedby:
JeffreyGundlach
ChiefExecutiveOfficer
January8,2013
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Announcements
WebcastNews
PhilipBarach January22,2013
LowDuration BuildingPortfolioHorizons
1:15pm
PDT/4:15
pm
EDT
EmergingMarkets
1:15pmPDT/4:15pmEDT
,TotalReturn&Core
1:15pmPDT/4:15pmEDT
ToReceivePresentationSlides:
Youcanemail
.
1
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TABIoo ess er cto t e ar et
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BofA/MerrillFixedIncomeIndexReturns
Grey=Year2011
Blue=Year2012
13.63%
4.50%
3.75%
HighYield(JOAO)
Convertibles(VOSO)
18.30%
.
7.51%
8.16%InternationalEmerging(IGOV)
3.28%
9.52%
5.60%InternationalDeveloped(NOGO)
orpora e
2.19%
2.59%
9.19%
.
Government(G0A0)
Mortgages(MOAO)
3DataSource:BofA/MerrillLynchIndicesthroughyearendDecember31,2011andDecember31,2012fortherespectiveyearsindicated.PleaseseetheAppendixforindexdefinitions.Aninvestmentcannotbemadedirectlyinanindex.
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BofA/MerrillFixedIncomeIndexReturns
1.33%
rey=
ear
Blue=Year2012
14.36%
19.70%
6.12%BBRatedHighYieldCredit(JOA1)
15.03%
8.12%
4.72%
BRatedHighYield(JOA2)
9.82%
11.98%
7.39%ARatedCredit(COA3)
3.97%9.11%AAARatedCredit(COA1)
InvestmentGrade=IndicesratedAAAtoBBB (shownabove)areconsideredtobeinvestmentgrade. AbondisconsideredinvestmentgradeifitscreditratingisBBB or
4
ig er yStan ar Poor sorBaa3 yMoo y s.T e ig ert erating,t emore i e y t e on istopay ac atpar 100cents ont e o ar.AAAisconsi ere t e ig est
qualityand thelowestdegreeofrisk.Theyareconsideredtobestableanddependable.
BelowInvestmentGrade=Alsoknownasjunkbond(shownabove)isasecurityratedbelowinvestmentgradehavingaratingofBBB orbelow.Thesebondsareseenas
havinghigherdefaultriskorotheradversecreditevents,buttypicallypayhigheryieldsthanbetterqualitybondsinorder to makethemattractive.Theyarelesslikelytopay
backatpar/$100centsonthedollar.
Source:BofA/MerrillLynchIndices asofyearendDecember31,2011andDecember31,2012fortheirrespectiveyearsindicated.
Aninvestmentcannotbemadedirectlyinanindex.
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MerrillInternationalFixedIncomeIndexReturnsAsofDecember31,2012
Latest1Year Bestperformer:Russia(GDRU)
WorstPerformer:Japan(G0Y0)
9.45%Japan(G0Y0)
7.53%
.
UnitedKingdom(G0L0)
11.90%
10.64%
France(G0F0)
Mexico(GDMX)
18.61%
12.23%
Russia(GDRU)
Brazil(GDBR)
DataSource:MerrillLynch
15% 10% 5% 0% 5% 10% 15% 20% 25%
5
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U.S.Bond,Currency,andCommodityPerformance
2012TotalReturn
18.91%20.00%
USBond,Currency,andCommodityPerformance1
(2012TotalReturn)
4.18% 4.23%
5.99%
9.66%10.00%
2.48%
0.51%
1.79%
3.37%
0.00%
11.31% 11.48%
20.00%
10.00%
25.43%22.99%
30.00%UST10yr UST30yr DXY EURUSD JPYUSD Copper Gold CrudeOil NatGas Wheat Corn CRBIndex VIX
2 3 4 4 4 4 44
Source:Bloomberg;DoubleLine
Notes:(1)
Returns
for
the
year
2012
ending
December
31,
2012
;(2)
Based
on
BofA
Merrill
Lynch
Current
10yr
UST
Index;(3)BasedonBofAMerrillLynchCurrent30yrUSTIndex;(4)BasedonS&PGSCISingleNameCommodity
ExcessReturnIndices
6
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GlobalEquityPerformance
2012PriceReturn
29.06%30.00%
GlobalEquityPerformance(2012PriceReturn)
Yen 11.31%
Euro 1.79%
DXY 0.51%
22.91% 22.94%
25.70%
25.00%
13.41%
15.91%14.63% 15.23%
.
13.46%15.00%
.
7.26%5.84%
7.40%
3.17%
.
5.00%
10.00%
0.00%
Source:Bloomberg;
DoubleLine
Returnsfortheyear2012endingDecember31,2012.
7
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NetWorthinHousingvs.EquitiesAsofDecember31,2010
Source:OrganizationforEconomicCooperationandDevelopment(OECD),GoldmanSachsEquityResearchThebestofFortnightThoughts,December13,
2012 8
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NetWorthinFinancialAssetsbyCountryAsofDecember31,2012
9Source:Organization
for
Economic
Cooperation
and
Development
(OECD),
Goldman
Sachs
Equity
Research
The
best
of
Fortnight
Thoughts,
December
13,
2012
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TABIIo a conomy
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EuropeanCrisis:SovereignBondYields
Source:JP
Morgan,
FactSet,
ECB
DataisasofDecember31,2012.11
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PIIGSGDPDecember31,1997EndingSeptember30,2012
12
Source:EuroStat
PIIGS=Portugal,Italy,Ireland,GreeceandSpain.
GDP=Refers
to
the
gross
Domestic
Product
or
market
value
of
all
final
goods
and
services
produced
within
acountry
in
agiven
period.
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EuroZoneUnemploymentDecember31,1998throughSeptember30,2012
13
Source:Eurostat
Eurozoneincludes27memberstates:Austria,Belgium,Bulgaria,Cyprus,CzechRepublic,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,
Ireland,Italy,
Latvia,
Lithuania,
Luxembourg,
Malta,
Netherlands,
Poland,
Portugal,
Romania,
Slovakia,
Slovenia,
Spain,
Sweden
and
the
United
Kingdom.
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EuroZoneUnemploymentJanuary31,1994throughOctober31,2012andDecember31,2013
14
Eurozoneincludes27memberstates:Austria,Belgium,Bulgaria,Cyprus,CzechRepublic,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,
Ireland,Italy,
Latvia,
Lithuania,
Luxembourg,
Malta,
Netherlands,
Poland,
Portugal,
Romania,
Slovakia,
Slovenia,
Spain,
Sweden
and
the
United
Kingdom.
Source:BiancoResearch
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WheretoBeBornIndex Rankingsasof1988
15Source:TheEconomistIntelligenceUnithttp://media.economist.com/sites/default/files/images/2012/11/blogs/graphicdetail/where_to_be_born_in_1988.jpg
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WheretoBeBornIndex Rankingsasof2013
16
http://www.economist.com/blogs/graphicdetail/2013/01/dailychart
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U.S.Surplus/DeficitAsAPercentageofGNP/GDPDecember31,1790throughDecember31,2011
Source:http://www.ritholtz.com/blog/wp
content/uploads/2012/12/surplus
deficit
gnp.png
GrossNationalProduct(GNP)orGrossDomesticProduct(GDP)=ReferstothegrossDomesticProductormarketvalueofallfinal goodsandservicesproduced
withinacountryinagivenperiod.
17
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JobLossesinLast11Recessions
Source:CalculatedRiskthroughOctober28,2012.18
http://www.calculatedriskblog.com/2013/01/decemberemploymentreport155000jobs.html
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CapitalGainsIncomeDecember31,1914throughDecember31,2010
Source:Bianco
Research,
LLC,
Week
of
January
2,
2013
19
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2013S&PRevenueEstimatesMarch3,2011throughJanuary1,2013
20Source:Bianco
Research,
LLC,
Week
of
January
2,
2013
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FiscalCliffQuote
StartingDowntheFiscalCliff
FavoriteQuote:Regrettably,itsdistinctlypossiblethatwe
ave esame ypeo uncer a n y as e ugus e
limitdebate]upuntilthe11th hour,59th minute.
JuddGregg,
Former
US
Senator
21
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FiscalCliff WhatWas/WasNotIncludedAsofJanuary1,2013
22Source:NYTimes http://www.nytimes.com/interactive/2013/01/01/us/themcconnellbidenplan.html?ref=politics
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ImpactoftheTaxDealAsofJanuary1,2013
HowthedealpassedbyCongressonTuesdayisestimatedtochangetaxesateachincomelevel,on
topoftheeffectsoftheexpiringpayrolltaxcutandnewtaxesfromthehealthcarelaw.
AverageIncome Average TaxChangein2013 Changein
BeforeTaxes Federal Payrolltaxincrease AfterTax
TaxBurden Impactof andnewhealthcare Income
Top0.1% $7,985,826 $2,720,367 +$322,528 +$121,382 +$443,910 8.4%
Top1% $1,671,536 $542,927 +$50,508 +$23,125 +$73,633 6.5%Top20% 244,576 63,256 + 2,483 + 3,091 + 5,574 3.1%
Fourth20% $84,355 $14,891 $2 +$1,149 +$1,147 1.7%
Middle20% $52,294 $7,457 +$0 +$679 +$679 1.5%
Second20% $30,031 $2,483 +$1 +$366 +$367 1.3%
Bottom20% $11,290 $99 +$0 +$120 +$120 1.1%
23Source:DoubleLine;NYTimes http://www.nytimes.com/interactive/2013/01/01/us/politics/impactofthetaxdeal.html?ref=politics
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TotalFederalRevenuesAsofJanuary1,2013
24http://www.ritholtz.com/blog/2013/01/detailsof
the
new
fiscal
deal/,
http://www.nytimes.com/interactive/2013/01/01/us/politics/impactofthetaxdeal.html
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EstimateofBudgetaryEffectsoftheAmerican
TaxpayerReliefActof2012As
of
January
1,
2013
100
100/Spending
200
ChangeinRevenu
($Bn)
400
dgetaryEffectsof
500
B
DirectSpendingChg
25
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source:CongressionalBudgetOffice(CBO)http://www.cbo.gov/sites/default/files/cbofiles/attachments/American%20Taxpayer%20Relief%20Act.pdf
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PossibleImpactofFiscalPolicyonGDPGrowthDecember31,2011throughDecember31,2013Estimates
EffectonGDPgrowthfromFederal,StateandLocalfiscalpolicy:
26Source:GoldmanSachsGlobalEconomics,CommoditiesandStrategyResearchPublishedJanuary2,2013
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ObligatoryDebtCeilingChartDecember10,2010throughJanuary4,2013
27Source:Bianco
Research,
LLC,
Week
of
January
2,
2013
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Q1/Q2GDPForecastsTrendingDown
28Source:Bianco
Research,
LLC,
Week
of
January
2,
2013
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WhatContributedtotheFiscalCliff?
29http://online.wsj.com/article/SB10001424127887324677204578185451218436548.html
Source:Wall
Street
journal
How
Big
Deficits
Became
the
Norm,
December
18,
2012
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U.S.DollarIndexSpotYearEnd2007throughJanuary8,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
DXY=DXY
is
the
US
Dollar
Index
(USDX)
indicates
the
general
value
of
the
US
dollar.
Average
exchange
rates
between
the
US
dollar
and
six
major
world
currencies.
Aninvestmentcannotbemadedirectlyinanindex.30
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GlobalCurrencySpotPriceRankingsFortheYear2012
Source:Bloomberg
Financial
Services,
DoubleLine
Capital
LP 31
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JapaneseIndexvs.S&P500Growthof$1December31,1979throughDecember31,2012
32Source:BloombergFinancialServices,DoubleLineCapitalLP
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JapaneseIndexvs.S&P500Growthof$1December31,1989throughDecember31,2012
33Source:BloombergFinancialServices,DoubleLineCapital LP
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12MonthUSD/JPYvs.5yearUSD/JPY
AsofJanuary8,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
Aninvestmentcannotbemadedirectlyinanindex.
34
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GoldSpotIndexYearEnd2007throughJanuary8,2013
Source:
Bloomberg
Financial
Services,
DoubleLine
Capital
LPAninvestmentcannotbemadedirectlyinanindex. 35
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CRBCommodityIndexYearEnd2007throughJanuary7,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
Note:The
TR/J
CRB
Commodity
Excess
Return
Index
is
an
arithmetic
average
of
commodity
futures
prices
with
monthly
rebalancing.
Aninvestmentcannotbemadedirectlyinanindex.36
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ShanghaiIndexYearEnd2007throughJanuary8,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
Note:The
Shanghai
Stock
Exchange
Composite
is
acapitalization
weighted
index
tracking
daily
price
performance
of
all
A
and
B
shares
listed
on
the
Shanghai
Stock
Exchange.ThisindexwasdevelopedDecember19,1990withabasevalueof100.
Aninvestmentcannotbemadedirectlyinanindex.
37
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EmergingMarketsETFvs.S&P500January9,2012throughJanuary8,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
SPY=S&P
500.
EEM
=Emerging
Markets
ETF.
Aninvestmentcannotbemadedirectlyinanindex. 38
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S&PIndexYearEnd2009throughJanuary8,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
Note:S&P
500
index
is
abasket
of
500
stocks
that
are
considered
to
be
widely
held.
It
is
weighted
by
market
value
and
its
performance
is
thought
to
be
representative
ofthestockmarketasawhole.
Aninvestmentcannotbemadedirectlyinanindex.
39
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GlobalEquitiesvs.USJanuary4,2012throughJanuary3,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
ACWI
=
iShares
MSCI
ACWI
Index
fund
is
an
exchange
traded
fund
replicating
the
ACWI
US
Equity
index.
S&P
500
index
is
a
basket
of
500
stocks
that
are
considered
to
bewidelyheld.Itisweightedbymarketvalueanditsperformanceisthoughttoberepresentativeofthestockmarketasawhole.
Aninvestmentcannotbemadedirectlyinanindex.
40
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S&P500IndexandShanghaiIndexDecember31,2008throughJanuary4,2013
Source:BloombergFinancialServices,DoubleLineCapitalLP
S&P500indexisabasketof500stocksthatareconsideredtobewidelyheld.Itisweightedbymarketvalueanditsperformanceisthoughttoberepresentativeof
thestockmarketasawhole.
The
Shanghai
Stock
Exchange
Composite
is
a
capitalization
weighted
index
tracking
daily
price
performance
of
all
A
and
B
shares
listed
on
the
Shanghai
Stock
Exchange.ThisindexwasdevelopedDecember19,1990withabasevalueof100.
Aninvestmentcannotbemadedirectlyinanindex.
41
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10YearUSTreasuryYieldYearEnd2007throughJanuary8,2013
42Source:BloombergFinancialServices
Pleaseseetheappendixfordefinition.
I G d I d Yi ld
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InvestmentGradeIndexYieldsYearEnd2007throughJanuary8,2013
Source:BloombergFinancialServices,JPMorgan
JACIICYM=TheJPMorganInvestmentGradeCorporateIndex,YieldtoMaturity.Investmentgrademeansthatthesecurityisratedbyoneofthethreenationally
recognizedmajor
rating
agencies,
Moodys,
S&P
or
Fitch,
as
above
BBB. Please
see
slide
67
of
this
presentation
for
further
ratings
descriptions.
Aninvestmentcannotbemadedirectlyinanindex.
43
R l ti G th f M ill C t I d t
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RelativeGrowthofMerrillCorporateIndexto
MerrillTreasuryIndex
1.40
1.20
.
ate ry
04
,2013)
1.10
tive
Growth
R
1,
1985
Janua
1.00Re
l
(Decem
ber
3
0.80
.
Trend 1SigmaRelativetoTrend 2SigmasRelativetoTrend Corporate/Treasury
DataSource:MerrillLynch(C0A0;G0Q0);Monthlydatawithmostrecentobservationappended.
44
Hi h Yi ld I d Yi ld
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HighYieldIndexYieldsYearEnd1994throughJanuary7,2013
Source:BloombergFinancialServices,JPMorgan
PleaseseetheappendixfordefinitionofBofA/MerrillLynchHighYieldCashPayIndex(J0A0).
Aninvestment
cannot
be
made
directly
in
an
index.
45
l i h f ill i h i ld h d
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RelativeGrowthofMerrillHighYieldCashPayIndexto
Merrill15+YearTreasuriesIndex
1.20
1.30
1.10
e 04
,2013)
0.90
.
ive
GrowthRa
1985
Januar
0.70
0.80Relat
(December31
0.60 Trend 1SigmaRelativetoTrend 2Sigmas RelativetoTrend HighYield/15+yr Treasury
.
DataSource:MerrillLynch(J0A0;G0Q0);Monthlydatawithmostrecentobservationappended.
46
R l ti G th f M ill M t I d t
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RelativeGrowthofMerrillMortgageIndexto
MerrillTreasur Index
1.15
1.10
04,
201
3)
1.05
e
GrowthRat
19
85
Januar
1.00
Relati
December31,
0.95(
Trend 1SigmaRelativetoTrend 2SigmasRelativetoTrend Mortgage/Treasury
DataSource:MerrillLynch(M0A0;G0Q0);Monthlydatawithmostrecentobservationappended.
0.90
47
R l ti G th f M ill US M i i l I d t
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RelativeGrowthofMerrillUSMunicipalIndexto
Merrill1015YearTreasur Index
1.05
1.10
1.00
04
,2013)
0.90
0.95
ve
Growth
Rat
19
96
January
0.80
0.85Re
lati
(Decem
ber
31
,
0.75
Trend 1SigmaRelativetoTrend 2SigmasRelativetoTrend Municipal/1015yr Treasury
DataSource:MerrillLynch(U0A0;G7O2);Monthlydatawithmostrecentobservationappended.
0.70
48
Relative Growth of Merrill Emerging Market Index to
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RelativeGrowthofMerrillEmergingMarketIndexto
MerrillTreasur Index
3.50
2.50
.
04,
201
3)
2.00
e
GrowthRat
19
91
January
1.00
.
Relati
December31,
0.50
(
Trend 1SigmaRelativetoTrend 2SigmasRelativetoTrend EmergingMarket/Treasury
DataSource:MerrillLynch(IGOV;G0Q0);Monthlydatawithmostrecentobservationappended.
0.00
49
Age of Farmers US
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AgeofFarmers,US
50Source:USDepartmentofAgriculture(USDA),GoldmanSachsThebestofFortnightThoughts,December13,2012
Corn Bushel Yield
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CornBushelYield
51Source:
Bianco
Research
Corn Stocks Use Ratio
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CornStocksUseRatio
52Source:BloombergFinancialServices
7/30/2019 gundlach prez 2013
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TABIIIHousingandMBSMarketTrends
Homeownership Rate
7/30/2019 gundlach prez 2013
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HomeownershipRate
54Source:BloombergFinancialServicesHomeownership
affordability
measured
quarterly
and
subject
to
aone
month
lag.
Aninvestmentcannotbemadedirectlyinanindex.
54
Mortgage Refinancing Index
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MortgageRefinancingIndex
Source:BloombergFinancialServices
MortgageRefinancingIndexasmeasuredbythe MortgageBankersAssociation.Reflectsthenumberofapplicationsforrefinance.Notallapplicationsareaccepted.
Aninvestment
cannot
be
made
directly
in
an
index.
5555
30Year U.S. Mortgage Rates
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30 YearU.S.MortgageRates
Source:BloombergFinancialServices,Bankrate.com
ILM3NAVG=The
Overnight
National
Average
of
the
U.S.
30
year
Treasury
interest
rate.
They
help
consumers
see
the
movement
of rates
day
to
day.
Subject
to
one
daylag.
5656
HomePriceIndexLevelsandYearOverYearChange
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g
Source:BloombergFinancialServices,CaseShiller
57
57
S&P/CaseShillerHomePriceIndexiscomprisedofpricechangeswithinthefollowingsubsetof20metropolitanmarkets:10City IndexBoston,Chicago,Denver,LasVegas,Los
Angeles,Miami,NewYork,SanDiego,SanFranciscoandWashingtonDC.Inadditiontothe10CityIndexitincludes:Atlanta,Charlotte,Cleveland,Dallas,Detroit,Minneapolis,
Phoenix,Portland,Seattle,andTampa.
CoreLogicNationalHousingPriceIndex(HPI)=CoreLogicisaleadingproviderofinformationandanalytics.Thisindexcovers 6,208zipcodes,572statisticalareasand1,027
countieslocatedinall50statesandDistrictofColumbia.Itisanationalaverage.
Aninvestment
cannot
be
made
directly
in
an
index.
HomePricesinMajorUSMetropolitanAreas
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58
ABXAAA071Index
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60/72
Source:BloombergFinancialServices,DoubleLineCapitalLP
TheABX071AAAIndexisabasketofhomeequity.Constitutedfromreferenceobligationsissuedby20issuersofresidentialmortgagebackedsecurities.
Aninvestment
cannot
be
made
directly
in
an
index.
59
NonAgencyRMBS60++DelinquencyRate
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January31,2005through November30,2012
50%
60%
40.0%
40%
uencies
vember2012
24.1%
20%
30%
0++SeriousDelin
ry
2005throughN
Prime
AltA
11.3%
10%
Janua
Subprime
0%
SeriousDelinquenciesisdefinedbymortgagesthatare60++delinquencyratesdefinedasloans60 or90dayslateinmortgagepayments,oralreadyinforeclosureorREOstatus.
PrimedefinedasFICO>725andLTV725andLTV>=75
Subprime
defined
as
FICO
725andLTV725andLTV>=75
SubprimedefinedasFICO
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January31,2005throughNovember30,2012
71.9%80%
90%
Prime
AltA
58.5%
60%
70%
mber201
2
Subprime
47.4%40%
50%
LossSeverity
0
05throughNove
10%
20%January
0%
62
SeriousDelinquenciesisdefinedbymortgagesthatare60++delinquencyratesdefinedasloans60 or90dayslateinmortgagepayments,oralreadyinforeclosureorREOstatus.
PrimedefinedasFICO>725andLTV725andLTV>=75
Subprime
defined
as
FICO
725andLTV725andLTV>=75
Subprime
defined
as
FICO