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Climate Change – South African Conferences 2009
Climate changeIan LingFive stages of grief
Climate Change – South African Conferences 2009
Loads of grief
1. Equity markets have fallen sharply
Climate Change – South African Conferences 2009
World Equity Markets (USD)30 April 2008 to 30 April 2009
Index % change
USA S&P 500 -37.01%
UK FTSE 100 -48.11%
France CAC 40 -46.45%
Germany DAX -41.88%
Japan Nikkei 225 -32.84%
Hong Kong Hang Seng -39.40%
Asia ASX200 Index -48.05%
Climate Change – South African Conferences 2009
MSCI World
0
400
800
1200
1600M
ar-7
0
Mar
-73
Mar
-76
Mar
-79
Mar
-82
Mar
-85
Mar
-88
Mar
-91
Mar
-94
Mar
-97
Mar
-00
Mar
-03
Mar
-06
Mar
-09
Liquidity crunch
Climate Change – South African Conferences 2009
Loads of grief
1. Equity markets have fallen sharply
2. Property market collapse
3. Commodity prices collapse
4. Corporate bonds tank
5. Interest rates fall to zero
…….worries over another depression
… are we following Japan??
Climate Change – South African Conferences 2009
Nikkei IndexSince 1970
0
10000
20000
30000
40000
Jan-
70
Jan-
74
Jan-
78
Jan-
82
Jan-
86
Jan-
90
Jan-
94
Jan-
98
Jan-
02
Jan-
06
Climate Change – South African Conferences 2009
What can we expect?
Edwin Coppock– 1960’s
• Technique to determine long term investment opportunities
• Investors need time to mourn the death of a bull market
• 10-14 months according to Church Bishops
Look at the thoughts of two analysts who have assessed the link between grief and market behaviour
Climate Change – South African Conferences 2009
20062005200420032002200120001999
Australia's All Ordinaries Index
The Coppock Indicator
The indicator is trend-following, and based on monthly averages, so by itsnature it doesn't pick a market bottom, but rather shows when a rally hasbecome established.
Buy signal
Climate Change – South African Conferences 2009
The Coppock Indicator
1. Very close to a buy signal for the S&P
2. Interestingly almost exactly 9 months after Lehmans collapse and Fannie Mae and Freddie Mac rescue
Climate Change – South African Conferences 2009
What can we expect?
Elisabeth Kübler-Ross
• Developed a behavioural pattern of people suffering from terminal illness, and later to any form of catastrophic personal loss (job, income, freedom)… loss of capital!!
• Identified five stages of grief
Climate Change – South African Conferences 2009
Five stages of grief
Elisabeth Kübler-Ross
1. DENIAL
2. ANGER
3. BARGAINING
5. ACCEPTANCE
4. DEPRESSION
Climate Change – South African Conferences 2009
Kübler-Ross Model – 5 stages of grief
1. Denial - "This can't be happening, not to me."
2. Anger- “It's not fair!"; "Who is to blame?"
Climate Change – South African Conferences 2009
Goodwin defiant over pension as investors heckle RBS Board The independent 04 Apr 09
Goodwin defiant over pension as investors heckle RBS Board The independent 04 Apr 09
Protestors smash into RBS branchThe Financial Times 02 Apr 09
Protestors smash into RBS branchThe Financial Times 02 Apr 09
Fury at $2.5bn Lehman bonus- The Times 21 Sep 08
Fury at $2.5bn Lehman bonus- The Times 21 Sep 08
Eleven AIG executives quit despite bonuses up to $4.6 million
The Times – 17 Mar 2009
Eleven AIG executives quit despite bonuses up to $4.6 million
The Times – 17 Mar 2009
Merrill Lynch’s CEO spent over $1 million to redecorate his office—even as the firm faced a financial crisis.
Merrill Lynch’s CEO spent over $1 million to redecorate his office—even as the firm faced a financial crisis.
Former RBS chief's house attacked amid pay outrage
The Financial Times 26 Mar 09Former RBS chief's house attacked amid pay outrage
The Financial Times 26 Mar 09
The people v The banker: The payouts party is over
The independent 15 Feb 09 The people v The banker: The payouts party is over
The independent 15 Feb 09
AIG chief urges staff to return bonuses
AIG chief urges staff to return bonuses
Climate Change – South African Conferences 2009
Kübler-Ross Model – 5 stages of grief
1. Denial - "I feel fine."; "This can't be happening, not to me."
2. Anger- Why me? It's not fair!"; "How can this happen to me?"; "Who is to blame?"
3. Bargaining - “how can we sort this out?” – G20? G2?
Climate Change – South African Conferences 2009
Sorting it out – director/shareholder relationship
Pre 2009 – companies not run for the benefit of shareholdersrun for benefit of directors
• Options…Exactly that…not a long-term commitment
• Borrowing to buy back shares. Increased share price – make options more valuable Increased gearing
• Excessive pay – Oligarchic. Justify paying in comparison to peers.
• Shareholders passive – stock going up so no concern.
Climate Change – South African Conferences 2009
Post 2009 - Change of sentiment
• Companies will be run for the shareholders again (e.g. Japan)
• In some cases CEOs have to buy a number of shares determined in relation to their overall remuneration.
• Proposal for average wage to appear in report and accounts and the difference between the highest and lowest salaries and male and female wage differential.
• Shareholders becoming more activist
Sorting it out – director/shareholder relationship
Climate Change – South African Conferences 2009
Kübler-Ross Model – 5 stages of grief
1. Denial - "I feel fine."; "This can't be happening, not to me."
2. Anger- Why me? It's not fair!"; "How can this happen to me?"; "Who is to blame?"
3. Bargaining - “how can we sort this out?” – G20? G2?
4. Depression – “why bother with anything?"; What's the point in saving?“
5. Acceptance - "It's going to be okay."; "I’ve taken the pain and can start again”
Climate Change – South African Conferences 2009
CautionCertainty
Disbelief
Concern
Belief
FEAR FEAR
GREED
Ian Ling Fear and Greed Model – (patent pending!!)
Capitulation
Climate Change – South African Conferences 2009
MSCI World
0
400
800
1200
1600M
ar-7
0
Mar
-73
Mar
-76
Mar
-79
Mar
-82
Mar
-85
Mar
-88
Mar
-91
Mar
-94
Mar
-97
Mar
-00
Mar
-03
Mar
-06
Mar
-09
Trading range
GREEDGREED
FEAR FEAR
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