Investment Insights
Capital Markets Outlook
1st Quarter 2010
It’s NOT the Economy Stupid

Stocks bottomed when things looked worst…
Now things look better?

The farther they fall, the more they bounce…
indiscriminate panic then risk taking

This ain’t no 1982…. The opposite?

It may be quite some time before the next secular Bull
market.

Fits with the long term 17 year cycles

Why should individuals invest differently?

Can’t find many people who think stocks go down this
year, much less challenge the lows

While technicals are not our first clue, the target from a
break of this formation is retracement of the ENTIRE rally

Déjà vu?

“Baby Boomers” are very afraid of taking another hit

Equity funds are out of powder unless inflows pick up

Bonds have record outperformance for 3 decades, and
where do individuals shovel their money ?

Buffet says the decision is easy to invest in equities over
bonds… Hard assets even better?

High yield … No more

Return forecasts are half of what they were
9-12 months ago

Like Gretzky, Jeremy Grantham is the great one when it
comes to skating to where markets are going

This is Michael Jordan good

Are signs of improvement in the economy what they
appear?

Lots of assets yet to be written down by banks

Lots of supply to work off before development comes back

Looks like we will start adding jobs

Not enough focus on jobs and small business

No lending equals No inflation…. Yet

Excessive debt stokes need for deflationary deleveraging

Countries in “The Ring of Fire” are most vulnerable

I guess some lessons are harder than others to learn

Handouts equal almost 1/5th of Personal Income ???

Why is government intervention bad?

The US Dollar is universally despised with only 3% of
investors bullish. If the $ rallies risk assets of all types
likely fall.

USD Carry Trade Unwinding?

Hard to find someone who hates King Midas

Focus growth or risk investments in the developing world

All the pieces are in place for the ascension of
the BRIC’s

Go where the growth is. Asian consumer story has many
chapters ahead

Is the emperor wearing clothes? Chanos thinks not

What if China and India consume 6-8 barrels per year of
oil per capita?

It looks like we will run out

Current Tactical Weightings by Tranche
Equity like (highly correlated to equity market direction)
– UNDERWEIGHT
Non-equity correlated – OVERWEIGHT
Real Assets (adjust to inflation/deflation) –
UNDERWEIGHT favoring deflation
Safety, liquidity, and income assets - OVERWEIGHT

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NOTES TO HYPOTHETICAL INFORMATION
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