MarketWatch - Constant Contact

March2017

MarketWatch

Conference Call Summary

Joe Terril, Featured Speaker

Struggling economies in Europe are experiencing recovery where many analysts anticipated turmoil. Great Britain and their decision to leave the European Union will ultimately be a positive for the world economy and has not had the negative impact which was predicted. Great Britain is experiencing economic growth near 2% as well as a drop in the unemployment rate. These encouraging trends should continue to aid in the recovery of global economies.

The U.S. economy continues to improve as well. Current employment statistics show reasonable gains in average hourly earnings and hours worked. The data supports improving consumer finances and the outlook remains positive. Retail sales results, however, have been inconsistent. Oil and gasoline prices are volatile. When energy prices are coupled with emerging online sales, traditional retail sales trends can become distorted. We do not subscribe to the belief the consumer is tapped-out.

by 10-year U.S. government bond, should increase to 3.5%. As interest rates climb further, bond values will continue to fall. All long-term fixed income assets should be avoided. Floating rate and short-term fixed income assets will allow investors to take advantage of rising interest rates.

Since the U.S. Presidential Election, equities have rallied in anticipation of business-friendly policies from the new administration. Lower corporate taxes, less regulations, increased manufacturing, and infrastructure projects are all expected. Current valuations are priced as if these new policies are a guarantee and any delay with implementation will be problematic.

Today, the Federal Reserve Bank (Fed) raised interest rates 25 basis points, or ? of 1%. The upward trend of interest rates is expected to continue. Our expectation for short-term rates will show a movement toward 1.5% to 2% and long-term rates, as measured

In addition to monitoring President Trump's growth policies, we are also closely watching the current interest rate environment. As rates continue to rise, bonds will once again become competitive investments with equities. When this occurs, equities will selloff. For this reason, individual security selection will be critical as 2017 progresses. Current areas of interest include airlines and retailers.

ClientQuestions

Joe, what do you think about Amazon as a long-term investment?

Response: With Amazon, most people see an online retailer. This part of the business is not profitable. We view Amazon as a cloud computing company as this is how they generate their cash flow. Management's desire to move into other business activities such as making movies, competing with Netflix, etc. does not make me overly excited about the direction of the company.

As a follow-up, what retailers do you see value in?

Response: Two companies that we are currently evaluating are Wal-Mart Stores, Inc. and Macy's Inc. Major retailers building their online presence will help create competition for Amazon. Improving this area of sales is vital to their success. Over the last ten years, Walmart has steadily repurchased its own stock. A large percentage of the outstanding stock is now retired. Macy's owns a large real estate portfolio which, by itself, may be worth the market capitalization of the company.

Joe, what is your opinion of International Business Machines Corp. (IBM)?

Response: They were initially behind the curve on cloud computing and coupled with an enormous amount of competition in the field does not make me bullish on IBM. I do not believe earnings will move much higher from their current levels. I view the company as fully valued.

Joe, you made some changes with financial stocks within portfolios, what are your current thoughts regarding banks?

Response: I have been a bull on the financials over the past five years. They are up 25% to 30% since early November. Recently, I sold some positions within portfolios to rebalance the allocations. Portfolios became overweight in bank stocks and reducing positions was necessary. They continue to generate strong and improving earnings that will allow distributions to shareholders to rise.

Joe, where do you see oil prices moving to? Can you explain your thoughts on Plains GP Holdings LP?

Response: We are bullish on oil prices. The industry needs to work-off the excess inventories. With increased worldwide demand, I anticipate the excess inventories will be worked-off by year-end. The Organization of the Petroleum Exporting Countries (OPEC) would prefer the price to stay in the $50 to $60 per barrel range. We agree with OPEC's assessment and are optimistic that it will be in the higher end of that range. Plains GP Holdings LP offers a 7% dividend and does not produce or manufacture oil. They serve as a transporter for oil producers in the strategically important Permian Basin. As the volumes transported increase, cash flows improve. We remain confident in the company especially with management continuously buying its own stock.

March2017

MarketWatch

Monthly conference calls with time for your questions about the state of the markets are just one of the many personalized services offered by Marine Bank's Investment Management Team. This MarketWatch update is a summary of our monthly call.

Our next monthly conference call will be: April 19th May 17th June 21st at 10:30 a.m.

To participate, dial

1.866.210.1669

When prompted, enter code

8558354#

Email your questions to Annette in advance: amcclure@

Marine Bank's Annette McClure

Executive Vice President Trust & Investment Management

amcclure@ 217.726.0661

Marine Bank's Doug Cantrall

Vice President Trust & Investment Management

dcantrall@ 217.547.1371

Investments are subject to risk, including possible loss of principal. Investments are not deposits of or guaranteed by Marine Bank, and are not insured by the FDIC.

John "Joe"Terril

President of Terril & Company, a St. Louis based, independent wealth management firm. Terril & Company has been overseeing retirement plans, IRAs and individual investment portfolios for over 37 years, an important keystone of Terril & Company's philosophy remains ensuring no conflicts of interest exist between the company and its clients.

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