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www.variantperception.com

VP MACRO THEMATICDEC 2014 P.

An insanely simpleguide to investmentDecember 2014

Contents

Simplicity and Occams razor.......... 3

The business cycle and the stock

market ............................................. 3

Avoiding fear and greed:

understanding stock market cycles .. 4

Best buying opportunities: Buying

when others are fearful .................. 10

Sector rotation: stocks to beat the

business cycle ............................... 12

Style rotation ................................. 18

Sector-style rotation ...................... 20

Combining portfolio rotation with our

tactical signals ............................... 21

Viability of sector rotation and the

reality of portfolio management ..... 24

VP quality portfolio ........................ 25

Final thoughts ................................ 26

Some investors only look at markets from a top-down perspective, whiothers focus intensely on individual stocks and are blindsided by majomarket downturns. Macro investors and bottom-up value investors aseparate tribes that rarely, if ever, speak. It doesnt need to be that way.

In this report, we bring together our top-down tools and integrate them wibottom-up stock selection to create portfolios that provide very attractive risreturn profiles. We provide a roadmap for investors to navigate the ups andowns of the market and choose stocks that will beat the major indices. Wtie together our macroeconomic signals to sector and stock selection, and w

show what kinds of stocks do best at different points of the economic cycle.

We have created tools that are robust, repeatable and as simple as possiblbut not simpler. We demonstrate how to use our leading economic indicatoand signals to invest, avoid large drawdowns and benefit from potent rallieoff market bottoms.

At Variant Perception, we try not to over-complicate. We have presentehere what we believe are the best tools to help one invest in the moprofitable, stable and consistent way. Steve Jobs abhorred complexity aninstead demanded that Apple products, no matter how technological

advanced, should be insanely simple to use. We hope this guide investment will be no different.

HIGHLIGHTS

> The stock market tends to rise and fall over time in line with theconomy. Generally, whenever the real economy has been doing poorlmarkets have declined, and when the economy has been improving, thmarket has done well.

THEMATIC

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