Mansfield 2020

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Mansfield 2020

• December 2008
• Jill Thomas Justin A Urquhart Stewart

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Succeeding in a Perfect Storm
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The Key Market Themes

• Perfect Storm
• Inflation
• End of Cycle
• Credit Seizure
• Geo Political Threats
• Pulling all the levers!
• How Low and How Long?
• Slowdown or Slump?

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A Politician Says.....

• The budget should be balanced, the Treasury
  should be refilled, public debt should be
  reduced

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Cicero 55BC
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A President says.....

• I believe that banking institutions are more
  dangerous to our liberties than standing armies

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Thomas Jefferson 1816
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Some things just dont seem to change!

• Be careful when you hear...
• Its different this time
• The end of boom and bust
• We are particularly well placed for a slow down
• Trust me I am an investment banker

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How did we get here?

• Consumer debt soars

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How did we get here?

• We stopped saving

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It Was So Right

• Rapid Growth
• Low Inflation
• Low Interest Rates
• Economic Stability
• Complacency
• Risk Taking

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• Greed Gave Way to Fear

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The End of an Era

• A Tale of Two Decades?
• Nice No Inflation Creating Earnings
• Vile Volatile Inflation Lower Earnings

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The Terracotta Army broken investment bankers

• Feet of clay
• Brains of mud
• Buried for centuries
• - under their sub prime

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Banking Coronary
Source Reuters
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Now What?

• Back to the Quakers

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Back to another School of Banking
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United States 2009

• The End of an Error
• Obanomics
• Housing value
• Tough Love Economic Policy
• Car Industry - Money but at a price
• Fed direct action
• Consumer quandary
• Encourage saving Consumer spending?
• New style Banks?
• Rusty legs!

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Euro-zone 2009

• Slowdown spreads
• Consumer confidence slowing
• Less Housing Dependency
• (not Spain and Ireland)
• Variable recession
• Pension work practices
• Future of Euro the PIGS - eurofudge
• Reforms
• Freezing medical costs
• ECB cutting rates at last

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United Kingdom 2009

• The Economy -
• The twin props
• Consumer 60 GDP
• Government expenditure
• But
• Sterling falls
• Browns Banks
• Bank plumbing
• Unemployment rising1.82m - 3m?
• signed off 2.7m
• Corporate Pain

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Japan 2009

• Another Prime Minister !
• Rates 0.3
• Weaker exports
• Stronger Yen
• 2nd largest FX reserves
• Slipping into Recession
• Domestic improvements but
• Consumer spending
• Property

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The Emerging Markets
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Emerging vs Submerging
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China

• 11 - 8 !
• Economic Package
• Ludicrous markets
• Interest rates down 6.66
• Social pressures
• Currency pressures
• Reserves over 1,800 billion (50m per hour)
• From de to in flation
• External Issues

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Russia

• The Bear behaving badly
• A new aggression
• Corporate attitudes BP Shell !
• Population
• Commodity dependence
• Emerging political confidence
• Governance!
• Banking risks

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India

• Financed by debt
• Young population
• Infrastructure
• External investment
• Opening up to external investment
• Currency control
• Pensions

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South East Asia

• US decoupling?
• China commodity demands
• Regional strength
• Rising Currencies Inflation
• The Rise of Consumer Power

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Emerging Markets Tremors

• Africa
• The search for lower costs
• Commodities
• Gulf states
• Oil focussed
• Illiquid

• Latin America
• Leftward lurch
• Commodity focus
• Eastern Europe
• EU effect
• Consumer growth

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The Investment Industry Forgetting the
Disciplines
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If you are planning to invest, dont. Invest in
planning.

• Division of disciplines
• Planning Your aims goals
• Asset allocation
• Fund/stock selection
• Process-Structure-Discipline Not fund picking!

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Market timing or time in the market?

• There were 3,914 trading days between 31 Mar 1993
  and 31 Mar 2008
• The annual return had you been fully invested in
  UK equities throughout this time was 8.49 pa
• If you missed the 20 best days the return was
  3.24 pa
• If you missed the 40 best days the return was -
  0.54 pa

Performance of FTSE All-Share Index over 5 years
Source Fidelity based on the performance of the
FTSE All-Share Index from 31/3/93 to 31/3/08.
Five year discrete performances. Source
Morningstar, 1.4.03 to 1.4.08, bid to bid, UK
basic rate tax.
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Forecast Risk and Return
Expected Return Risk

• 
  
• Private Equity (Listed) 17.4 51.2
• Emerging Markets Equity 16.6 23.5
• Commercial Property (Global REITS) 13.8 15.1
• Timber 13.5 20.8
• Private Equity (Unlisted) 13.1 20.1
• Japanese Equity 12.5 33.5
• US Equity 11.8 21.9
• Hedge Funds 11.7 12.1
• European Equity 11.5 22.4
• Commodities 10.9 17.4
• UK Equity 10.5 28.1
• Infrastructure 9.0 25.8
• Emerging Market Bonds 7.5 19.7
• Corporate Bonds 5.1 6.0
• Gilts 5.0 8.7
• Global Bonds 4.9 11.6
• Gold 4.3 15.0
• Cash 4.2 3.7

7IM / Ibbotson study
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Efficient Portfolios
7IM Improving the Efficient Frontier
7IM / Ibbotson study
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7IM Balanced so what should you do....
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The Vital Need for Planning
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So what do you do?

• Investing is 5 years
• Drip in new money
• Broad asset allocation
• Pool family assets
• Regular financial planning

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Successful Investment Strategies
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Co-ordinating for the Client
Investment
Mortgage Providers
Tax Wrappers
Cowens
Banks
Accountants
Insurance
Healthcare
Client
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Dysfunctional Family
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Family Balance Sheet
Liabilities
Assets
Net Balance
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2009

• Key Issues
• Global slowdown
• Credit confidence!
• Inflation vs growth
• The imbalances recycling (SWFs)
• weakness
• Global Trade
• Terror
• Royal Tank Regiment
• From Mud and Blood To Green Fields Beyond

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Succeeding in a Perfect Storm

• Thank You