EFTA Document EFTA01459071

20 November 2015 US Equity Insights 5% delineates healthy from unhealthy S&P EPS growth and supports an 18 PE Our 1 year target of 18x trailing S&P EPS uses a 5.5% real and 7.5% nominal CoE. EPS is retained, so real EPS g must = real CoE - div yld to justify PE = 1/real CoE. [Figure 40: S&P fair valuation & real CoE by sector CearaOwens 2.03 ri 1131 HIS 193 MS 319 la in 04 1117 1q 2)34 211 Cessiflapies 1)» 241 116 '14 155 Al 111% 14» 04 111 24 1111 11? 12tt 00 'ili SOS in% Al 121% 1.92 1% '112 24 1221 III FYsat 1241 141 213 '31% tit 142 111% 3113 5 /IN '9% 3121 145 Bat 1 ur nr 232 115% »2 4211 11? 1.31% !Mt 4% la II% I» HI me Cm 2321 95 145 AS I'S t/I 1 1204 zwr 'a 21S/ 'R 311 its Mans 11» "51 11% 192 IV 0 113% 1,151 1% • 01 21% 1062 In ritmem bombe 33» Iil 2213 134 US% .1% MS 115 3,112 5% 3111 'S% tei in 4% ter* SO Iil et '15 1“ 211 125 43 1% 43 22% 113 151 41% 1%rmn O3 121 DS 11% 135 1% A2 1.0% 03 1% 1'3 SS% 110 115 21% IS? 335 11% 335 1% )31 115 602 1% 42 15 1» 1I1 510 44 4 155, 1121% '0160 574 1W4 1 911 1922 310$13.4•04 »V 21 171 "31 '13% 1221 111$ 1504 1)1L 21% 21»0 177 Sower Oe" Sat APES [Figure 41: S&P Trailing PE vs implied equity risk premium 35 Overstated EPS from LOng•totel growth inflation distomens optimism 30 Return to normal 25 20 15 10 § § § OA r, a> Low offered ERP controb 89 tO Crash Recession Irrlplied ERP kris) meempar Train; PE Ohs) - Avg ERP 4% — • — Avg ERP 197582 . 3.5% • Avg OE 15.9 Scam. thursoN an SIP. AM Deutsche Bank Securities Inc. 12% 10% " 8% 0 :6% 4% 2% 0% J Page l CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0119286 CONFIDENTIAL SDNY_GM_00265470 EFTA01459071