1. Analytical View of the Financial Markets
JUNE 2015ISSUE 34
Galli‘s Newsletter
An old saying, I know, but unfortu-
nately it had proven right once
more. On the blue chip markets
there was in fact not much to gain
until the end of month. Except for
the German market (DAX) one was
at least able to nearly maintain the
performance level.
In Europe, investors are still unset-
tled, until now there is still no clear
solution for the Greek debt drama
in sight. This has hard hit especially
the DAX, despite a convincing Ger-
man economic output. As a result,
the Euro Stoxx index had to give
some ground. However, German
stocks YtD performance still looks
quite favorable (+ 15.8%).
In Switzerland, the market has not
yet come in full swing after the CHF
appreciation shock. Although the performance at the
end of May was still slightly positive, but because of the
fact that real GDP in QI 2015 fell by 0.8% (annualized)
the market once again messed up, so that the SPI on the
last trading day in May slumped (Continued page 2)
Sell in May and go away?
Steering rates without impact?
Topics in this is-
sue:
 Overall the stock mar-
ket performance was
not so bad but in the
industrial countries
we did not see any
advances again!
 The low money mar-
ket rates are challeng-
ing central banks as
well as monetary the-
orists.
 The changes going on
in the industrial sector
are impressive and
revolutionary. New
ways of servicing are
the innovation!
 Nothing is written in
stone yet but it looks
that we are coming
closer to the end of
ultra low interest
rates!
 The Swiss return to
flexible exchange
rates had a perma-
nent impact only with
regard to the EUR.
 Pauchard’s stock
hint: A look back
shows, that our rec-
ommendations ful-
filled our expectations
to a great extent.
GALLI‘S NEWSLETTER PAGE 1
Since mid-2012, money market
rates in the major industrial coun-
tries move sideways. The rates are
significantly below 1% and in
Switzerland even at -0.80%.
Changes in money market rates is
an important instrument of mone-
tary policy. However, if interest
rates move too long along the
zero line, their steering effect is
obviously fading out. The SNB
has therefore decided for negative
interest rates. Money should not
be hoarded or invested, but mon-
ey should flow into consumption.
And already appear new proposals
on how the money can be kept in
circulation. Cash, i.e. notes and
coins are to be completely eliminated. Instead, there are
only scriptural money, on which the state can take at any
time direct influence, because this can not be hoarded. No
positive prospects, but the realization probability is low!
International Money Market Rates
(3 Months) since 2012
-1.00
-0.50
0.00
0.50
1.00
01.01.2012 01.07.2013 01.01.2015
EUR CHF USD
YEN GBP
Blue Chips Markets since beginning of 2015
-15
-10
-5
0
5
10
15
20
25
30
01.01.2015 01.02.2015 01.03.2015 01.04.2015 01.05.2015
SPI
DAX
S&Pcomp
Nikkei
Nasdaq
FTSE 100
%-Changes since January 1, 2015

2. PAGE 2 GALLI‘S NEWSLETTER
significantly. The weak export performance (in par-
ticular in the pharmaceutical sector) in the first
three months of this year, fed fears that the negative
impact of the CHF appreciation might be stronger
than expected by various experts. To my view it is
still somewhat premature to make already a defini-
tive judgment, because compared to the same quar-
ter of last year GDP nevertheless grew by 1.1% and
that makes me somewhat more confident about the
future economic development. But it is not at all a
signal to relax! However, we know that in the past
the Swiss economy adjusted usually after some time
to the new exchange rate situation.
However, very disturbing are the economic signals
from the United States. Initially, after the first re-
lease we expected a slow GDP growth in the QI.
The final figures show now a real GDP decrease by
0.7% in QI. Obviously the hard winter 2014/15
had a stronger negative impact than expected.
But, now everything will turn to the better. This at
least is the optimism as it is spread by the Ms Yellen, the
boss of the Federal Reserve. The interest rates will certainly
not increase in the coming months!
In the emerging markets, China started to an unprecedent-
ed rally. The Shenzhen index has doubled since the begin-
ning of the year!
...Sell in May and go away?
Industrial sector in transition!
Still, it's not as far, but in many places people already
speaks of a new industrial revolution In the center
there are the digitization of manufacturing and pro-
duction processes. In Europe and especially in Swit-
zerland, the development is already well advanced
At the beginning of the 19th century the industrial
development was still in its infancy and initially was
able to prevail only in England. Both steam engines
and textile machinery started from the British Isles its
triumphal march through the world. In the early 20th
century it was the electrification and the discovery of
the combustion engine which gave a further boost to
the industrial development. Thanks to this industrial
development, many people became richer and more
urban.
The world has been changed again by the third thrust:
the invention and diffusion of the Internet. Today the
world is networked. This is also the start of the fourth
industrial revolution, for digitizing. No longer the pro-
duction of the machine is in the foreground, but the
service that is provided by the machine to humans.
The contribution to added value is no longer about
the composition of the machine, but the values pro-
duced from the interaction between humans and digi-
tal tools.
It is obvious that these forward-looking production
method can be realized particularly with a high capital in-
vestment. Only well-financed enterprises can venture into
these spheres. In Europe and particularly also in Switzer-
land there are such enterprises. Focusing on innovation,
quality and high productivity are essential for any company
in a competitive environment. In Switzerland, the elevators
Bauer Schindler recently won the MIT Sloan Leadership
Award 2015. Schindler was recognized for its innovative
digital business solutions in the service business.
Selected technology stocks
since the beginning of 2015
80
85
90
95
100
105
110
115
120
01.01.2015 01.03.2015 01.05.2015
Siemens Schindler
Google SPI
ABB
China unleashed!
-10
10
30
50
70
90
110
01.01.2015 01.02.2015 01.03.2015 01.04.2015 01.05.2015
MSCI World
S&P Comp.
Euro Stoxx
Shenzhen
MSCI Asia USD
%-Changes since
January 1, 2015

3. PAGE 3
Ms. Yellen, the head of the US Federal Reserve,
took herself position for future interest rate de-
velopments. She believes in a positive future eco-
nomic development and will therefore slightly
raise the money market rate again this year. So
she took speculation about an US economic slow-
down wind out of the sails. The announcement is
no decision yet, but if central bankers lean as
much out on a limb, they must have very good
arguments in their pocket!
The weak GDP growth in the first quarter gave
rise to doubts of a continuation of the slightly less
expansionary monetary policy of the Fed. While
the US Federal Reserve puts an eye on GDP
growth, the development of the labor market is
equally important, if not more important! And it
is clear, if the economy is not growing as fast as
originally expected, then the risk of less positive
developments in the labor market is high! Such a
scenario can not be ruled out and therefore prob-
ably Mrs. Yellen is still cautious in her comments!
Most interesting is the assessment of the future
development by the financial markets. If the local
actors believe that the demand and, consequently,
the interest on capital is to rise again in the coming
months, this will be reflected in the bond yields. Obvious-
ly the market is responding to significant changes on the
oil market. The oil price in the last two months rose from
around USD 45 per barrel to USD 60 today. Core infla-
tion, as measured by the adjusted CPI (excluding food
and energy), located in the US at 1.8%. This is too high
for the Fed, but the alarm limit is a maximum of 2%!
Therefore, the I expect the Fed is going to slightly in-
crease the money market rate toward the end of the year!
Do the US terminate the low interest rate period?
GALLI‘S NEWSLETTER
CHF Exchange Rate after January 15, 2015
Since the abolition of the CHF / EUR exchange rate
floor, the exchange rates after a short period of shock
have stabilized (end of January) again. However, the
level is significantly lower for some of the individual
currencies of our major trading partners. In the fixed-
rate period the average rate of the euro moved at CHF
1.22. Since the beginning of February the average rate
fluctuates around CHF 1:05. This corresponds to an
appreciation of the CHF against the EUR by approxi-
mately 14%. Tourism and the machinery industry are hit
the most hit by this appreciation. The CHF has appreci-
ated against the yen even stronger. The change in the
Swiss monetary policy has been reinforced by the expan-
sive monetary policy of the Bank of Japan. The initial
sharp depreciation of the USD was corrected quickly by
the market, so that today both the USD and the GBP
still are traded at about the same rate as before the Swiss
franc shock. What does the future hold? I do not expect
that the CHF significantly devalues in the coming
months. However, as long as economic growth in the
major exporting countries of Switzerland develop positively,
the CHF should not become stronger!
Rising oil prices perceived
on the money market!
1.50
1.70
1.90
2.10
2.30
2.50
2.70
2.90
3.10
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
1.1.13 1.10.13 1.7.14 1.4.15
Crude Oil-WTI
Cushing USD/BBL
US Gov. Bond
Yield 10Y
Again, the Free Float Regime for the CHF!
1.25
1.30
1.35
1.40
1.45
1.50
1.55
0.70
0.80
0.90
1.00
1.10
1.20
1.30
01.02.2015 01.03.2015 01.04.2015 01.05.2015
CHF per USD
CHF per 100 YEN
CHF per EUR
CHF per GBP (R.H. scale)
CHF per USD 2011.09-2015.01: 0.93 ab 02.2015: 0.95//CHF per GBP: 1.48; 1.45
CHF per EUR: 1.22; 1.05// CHF per 100 YEN: 1.01; 0.80

4. Dr. Alexander F. Galli
Dr. Galli Investment Research
c/o FundStreet Ltd.
Löwenstrasse 11
CH-8001 Zürich
Telefon: +41 (0)44 210 42 07
Mobile: +41 (0)79 416 00 82
E-Mail: agalli@galliresearch.ch
not only recovered strongly but also
outperformed the index significant-
ly. The strong position in the world
market as well as the innovative
solutions give Schindler a techno-
logical advantage that is difficult to
obtain. Novartis has indeed
From time to time one should stop and
look back! What is true for the hikers,
must be applied on the stock exchange,
too. Although the last five months gen-
erated an overall positive performance,
the price movements underwent a pro-
nounced ascent and descent.
After the release of the CHF / EUR
exchange rate by the Swiss National
Bank on 15 January, the index fell by
12%. Similarly sharp was the slump of
the individual titles. In the meantime, the
market has recovered. The SPI index
shot up again by 18% so that since the
beginning of the year there occurred a
slight index increase of about 4%.
Our recommended titles could not es-
cape the market activity. Let's take a look
at the stocks that we considered worth
buying since the beginning of the year.
EMS Chemie was able to recover signifi-
cantly, although since mid-January, but
has lost some performance relative to
the index. Rock steady, Schindler was
able to play to the gallery. The titles have
Where to Invest? A review of our recommendations
LOOKING FOR MY HOME PAGE
WWW.GALLIR ES EAR CH.CH
PAGE 4
Sources: Thomson Reuters Datastream
Analysis: Albert Pauchard, Limmatresearch, Zürich
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This newsletter reflects my personal views
and forecasts are made on the basis of
economic data accessible and my expertise.
It is a short information. The reader can
not infer a specific advice or counseling
from it.
GALLI‘S NEWSLETTER
emerged robust from the setback, but
has yet to compensate for underperfor-
mance. The same is true for G. Fisch-
er, although the company may well set
the scene in Asia. Lonza outperformed
the market significantly, finally, thanks
to its profitability!
Swiss Stock Market - Our recommendations
since the beginning of the Year!
80
85
90
95
100
105
110
115
120
01.01.2015 01.03.2015 01.05.2015
Novartis N EMS
Schindler Georg Fischer
Lonza N SPI
Performance of the SMI stocks since the
beginning of the year per end of May 2015
-20 -10 0 10 20 30 40
THE SWATCH GROUP 'B'
SGS 'N'
RICHEMONT N
GIVAUDAN 'N'
ZURICH INSURANCE GROUP
ABB LTD N
TRANSOCEAN (SWX)
CREDIT SUISSE GROUP N
GEBERIT 'R'
NESTLE 'R'
SWISS RE
ROCHE HOLDING
SMI
HOLCIM 'R'
SWISSCOM 'R'
NOVARTIS 'R'
ADECCO 'R'
JULIUS BAR GRUPPE
ACTELION
UBS GROUP
SYNGENTA
Performance in %