RUNNYMEDE CAPITAL MANAGEMENT, INC. P.O.

Box 359, Mendham, New J ersey 07945-0359

TEL: 973.267.6886 FAX: 973.267.5525 www.runnymede.com



2014 Positives and Negatives

Positives Negatives
1. Central banks remain highly accommodative 1. Fed tapering is tightening on the margin
2. Corporate profits at all-time highs 2. Geopolitical risks are rising
3. Equities more attractive than bonds 3. Asset bubbles are growing
4. Unemployment is declining 4. Mid-term elections will bring negative rhetoric
5. Commodity inflation hurts consumer spending

2
nd
Quarter Commentary
The second quarter was a good one for virtually all asset classes. Needless to say this is highly unusual.
Bonds, stocks and commodities all appreciated to higher levels. Fixed income markets continued to show
surprisingly positive returns, while equity markets bounced back from a weak first quarter. This strong
performance shrugged off all negative news. First quarter GDP in the US contracted almost 3% which
was the worst since 2009. While much of this was weather related, this lost growth is unlikely to be
completely re-captured over the rest of the year. This theme played out in most major economies. First
quarter numbers disappointed in Europe, J apan and China, relative to forecasts. Markets also ignored
rising geopolitical risks in Iraq and Ukraine. Despite all the negatives, investors bid up all financial assets,
buoyed by expectations that global monetary policy will stay easy for a very long time. With this
backdrop, we focused our investment research on Kerchunkerservice companies as well as dividend
paying stocks. With rates likely to stay low for at the short-to-intermediate term, high quality companies
that pay 2-3% dividends are often more attractive than fixed income securities.

ECB trying negative rates
In J une, the ECB made a historic move by lowering the rate at which it pays banks for their overnight
deposits on reserves to -0.1%. Because the rate is negative, banks now have to pay a small interest rate to
the ECB to keep their reserves safe at the ECB. This is a dangerous monetary experiment but the ECB is
increasingly worried about deflation in the Eurozone. The real issue is whether the demand for loans from
creditworthy borrowers is there. Will this force banks to take on more risky loans? ECB President Mario
Draghi has pledged additional support in potential asset purchases like the Fed if inflation doesnt pick up
soon.

J anet Yellen and the Fed will monitor the
European economy closely to see how negative
rates affects the EU economy. If it proves
effective, the Fed will likely use the same
strategy should the US economy show signs of
slowing. American banks have built up huge
reserves (chart on right) with the Fed which
amount to nearly $3 trillion. Dont be surprised if
the Fed tries negative rates in the coming months.





Q2 2014

RUNNYMEDE CAPITAL MANAGEMENT, INC. P.O. Box 359, Mendham, New J ersey 07945-0359
TEL: 973.267.6886 FAX: 973.267.5525 www.runnymede.com
Looking ahead
Central banks are expected to maintain their highly
accommodative monetary policy. This is the variable
which trumps everything else. While the Fed is tapering its
asset purchase program, the Fed balance sheet is still
expanding at close to 30% year over year. The Fed balance
sheet now totals over $4.3 trillion. Unprecedented easy
monetary policy from the Fed, ECB and BoJ will likely
drive financial assets higher. On the negative side, this will
create significant asset bubbles over time. Volatility has
been driven to new lows and investors have become
complacent to any negative economic data or geopolitical
risks. As long as central banks dont tighten, the party
marches on.

Since retiring as Fed Chair, Ben Bernanke has been sitting down with hedge fund managers and
businessmen for a fee of $250,000 per appearance. According to a recent Reuters article, one guest was
left wondering if rates will stay low for decades much like J apan. At least one guest left a New York
restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main
benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime.

The second half will probably be more challenging than the first half. Geopolitical risks are rising
especially in Iraq. This typically leads to higher oil prices which hurts US consumers and lowers US
growth rates. The Fed and ECB also want more inflation so commodities are expected to rise higher.
Because of these factors, we have shifted out of some consumer stocks and into oil service stocks like
Schlumberger. While mid-term elections will drive negative rhetoric from both sides of the aisle, we
believe that financial markets will be driven by printing press money which is likely to flow to the
speculative arenas of the financial markets.








Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of
risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the
investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.), or any non-investment
related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical
performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing
market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not
assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment
advice from Runnymede Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific
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2014 Runnymede Capital Management, Inc.

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Investment Team Members
Samson Wang ext. 108
Andrew Wang ext. 103
Christopher Wang ext. 107