Collection of interesting charts helping put the financial and economic issues of the week into perspective.

1. March 12 2012
Charts That Count
"Risk Free Return" or "Return Free Risk" - Will Canada be the Only Investment Grade
G7 Issuer by 2040?
According to research by SocGen, by 2040 Canada will be the only G7 country with
investment grade sovereign debt. By as early as 2030 the US, France, Italy and Japan
will all lose investment grade status. To put this into perspective this means that in
less than 2 decades the debt of countries currently representing approximately 50% of
global GDP will be ineligible for investment by the smallest municipal pension fund.
Japan is actually expected to lose investment grade status in less than 10 years and
looking at the charts below this should not come as a surprise when it happens. BTW -
Japan by itself represents almost 10% of global GDP.
Clearly some profound changes are coming to the sovereign debt markets and most
importantly to the idea of the "risk free" rates of return that can be found there. As one
wag recently described it, sovereign debt no longer represents "risk free return" but
rather "return free risk".
US Budget Deficits - Sustainable?
Perhaps a picture truly is worth a thousand words. In this case think of the word
"unsustainable" over and over again.

2. If Greece is Bad What are the UK and Japan?
The chart below is the total debt as percent of GDP for the 10 largest mature
economies. Greece isn't even worth a honourable mention when placed
alongside the truly gargantuan debts of Japan and the UK - on a per capita or
absolute basis.

3. Is Even More Bad News Possible for Japan?
Sadly the answer appears to be yes. Deteriorating demographics with the
attendant upward pressure on government spending and a move to sustained
current account deficits - all in a low growth environment - have combined to
create the perfect storm for Japan's fiscal position - its bad and getting worse
rapidly.

4. Agcapita Farmland Fund III
Farmland increasingly is in the news as more investors come to appreciate the
superior qualities of the asset class - including low return volatility, diversification
benefits due to a limited correlation to public equities and good risk adjusted
returns. Agcapita Fund III is currently open and RRSP eligible.
• Residents in BC, Alberta, Saskatchewan or Manitoba - CLICK HERE to be
contacted with more info.
• Resident in Ontario and an Accredited Investor - CLICK HERE to be
contacted with more info.
The Ontario Securities Commission has a detailed definition of Accredited Investor
which can be found HERE. However in general Accredited Investor means:
• An individual who, alone or together with a spouse, owns financial assets
worth more than $1 million before taxes but net of related liabilities or
• An individual, who alone or together with a spouse, has net assets of at least
$5,000,000.
• An individual whose net income before taxes exceeded $200,000 in both of
the last two years and who expects to maintain at least the same level of
income this year; or
• An individual whose net income before taxes, combined with that of a
spouse, exceeded $300,000 in both of the last two years and who expects to
maintain at least the same level of income this year.
• An individual who currently is, or once was, a registered adviser or dealer,
other than a limited market dealer.
Some Quotable Quotes
Simply for entertainment value if nothing else, here is former Federal Reserve
Chairman Alan Greenspan describing the robust nature of the US housing market
and the safety of mortgage backed securities - all shortly before the largest
financial crisis in history driven by a collapse in US housing prices:
• "I believe that the general growth in large [financial] institutions have
occurred in the context of an underlying structure of markets in which many
of the larger risks are dramatically -- I should say, fully -- hedged."
• "Even though some down payments are borrowed, it would take a large,
and historically most unusual, fall in home prices to wipe out a significant
part of home equity. Many of those who purchased their residence more
than a year ago have equity buffers in their homes adequate to withstand
any price decline other than a very deep one."
• "The use of a growing array of derivatives and the related application of
more-sophisticated approaches to measuring and managing risk are key
factors underpinning the greater resilience of our largest financial

5. institutions .... Derivatives have permitted the unbundling of financial risks."
• "Improvements in lending practices driven by information technology have
enabled lenders to reach out to households with previously unrecognized
borrowing capacities."
• "Indeed, recent research within the Federal Reserve suggests that many
homeowners might have saved tens of thousands of dollars had they held
adjustable-rate mortgages rather than fixed-rate mortgages during the past
decade, though this would not have been the case, of course, had interest
rates trended sharply upward."
Regards
Agcapita
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