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Investment Security Group, Inc. Annual Investment Update September 29, 2010. Ranking of Countries by GDP Courtesy. IMF 2009. Get Global!. Overseas Markets generate 75% of the world’s gross domestic product 75% of publicly traded companies are listed on foreign exchanges - PowerPoint PPT Presentation
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Annual Investment Annual Investment Update Update
September 29, 2010September 29, 2010
Investment Security Group, Inc
Ranking of Countries by GDP Courtesy. IMF 2009
Rank Rank CountryCountry GDP GDP ($ trillions)($ trillions)
WORLDWORLD 69.869.8
11 U.S.U.S. 14.314.3
22 ChinaChina 8.88.8
33 JapanJapan 4.24.2
44 IndiaIndia 3.53.5
55 GermanyGermany 2.82.8
66 United KingdomUnited Kingdom 2.12.1
77 RussiaRussia 2.12.1
88 FranceFrance 2.12.1
99 BrazilBrazil 2.02.0
1010 ItalyItaly 1.71.7
Get Global! Overseas Markets generate 75% of the Overseas Markets generate 75% of the
world’s gross domestic productworld’s gross domestic product 75% of publicly traded companies are 75% of publicly traded companies are
listed on foreign exchanges listed on foreign exchanges 95% of world’s population is outside 95% of world’s population is outside
the USAthe USA Since 1965, global income, per capita Since 1965, global income, per capita
has risen ten-foldhas risen ten-fold
“The Good, the Bad and the Not-So-Ugly”
“The Good”Developed AsiaDeveloped Asia
Hong KongHong Kong
SingaporeSingapore
Emerging Emerging MarketsMarkets
BRIC’s Plus:BRIC’s Plus:
Chile Czech RepChile Czech Rep
Korea ColumbiaKorea Columbia
Hungary PhilippinesHungary Philippines
Mexico Poland Mexico Poland
Taiwan Peru Taiwan Peru
Turkey ThailandTurkey Thailand
Malaysia IndonesiaMalaysia Indonesia
South Africa South Africa
Frontier MarketsFrontier Markets
Kenya KuwaitKenya Kuwait
Tunisia JordanTunisia Jordan
Tobago LebanonTobago Lebanon
Argentina SerbiaArgentina Serbia
Pakistan CroatiaPakistan Croatia
Srilanka RomaniaSrilanka Romania
Vietnam UkraineVietnam Ukraine
“ The Good”
Improved Economic FundamentalsImproved Economic Fundamentals Less debt (34% vs. 85% for Dev Mkts)Less debt (34% vs. 85% for Dev Mkts)
“The Good” (Continued)
Improved Economic Fundamentals Improved Economic Fundamentals Less Debt (34% vs 85% for Dev Mkts)Less Debt (34% vs 85% for Dev Mkts) Large Foreign exchange reserves Large Foreign exchange reserves Effective Monetary PoliciesEffective Monetary Policies
(3.5% cpi vs. -.8%)(3.5% cpi vs. -.8%)
“The Good” (Continued)
Burgeoning Consumer DemandBurgeoning Consumer Demand Younger populationsYounger populations Rapidly increasing incomesRapidly increasing incomes Low household debtLow household debt
E. Asia:E. Asia: 30%30%E. Europe:E. Europe: 22%22%L.A.:L.A.: 11.7%11.7%USA:USA: 100%100%
Undervalued currenciesUndervalued currencies
“The Good”(Continued)
Higher economic growthHigher economic growth
“The Good”(Continued)
Deeper, more seasoned financial markets Deeper, more seasoned financial markets
“The Bad” (Developed Europe)
Troublesome Economic FundamentalsTroublesome Economic Fundamentals High Debt LevelsHigh Debt Levels Aging Populations Aging Populations Stifling welfare systemsStifling welfare systems Overvalued Currency?Overvalued Currency? Central bank “disconnect” with country-specific issuesCentral bank “disconnect” with country-specific issues
Will the Union Hold? Will the Union Hold?
“ The Not-So-Ugly”(USA)
Similar to Europe, but the 3 D’s are not as Similar to Europe, but the 3 D’s are not as extreme (debt, deficits, demographics)extreme (debt, deficits, demographics)
More responsive central bank policies More responsive central bank policies (better coordination between monetary and (better coordination between monetary and fiscal policy)fiscal policy)
Impressive Corporate Productivity/Profit Impressive Corporate Productivity/Profit Margins, healthy cash flow, balance sheets.Margins, healthy cash flow, balance sheets.
High Unemployment, soft housing, high High Unemployment, soft housing, high household debt, threat of heavier regulation.household debt, threat of heavier regulation.
In Summary
Emerging Markets:Emerging Markets:
Developed Europe/Japan:Developed Europe/Japan:
USA:USA:
TailwindsTailwinds
HeadwindsHeadwinds
Swirling WindsSwirling Winds
Investing Implications ?
Get in front of the tailwind! Get in front of the tailwind! Increase emerging market exposure…..but buy Increase emerging market exposure…..but buy
at the at the rightright price. price.
Look for diamonds in the rough.Look for diamonds in the rough. Think contrarian. Shop for bargains in developed Europe Think contrarian. Shop for bargains in developed Europe
and Japan.and Japan.
Don’t quit on the USA! Don’t quit on the USA!
“The US economy remains almost comatose…The current slump already ranks as the longest period of sustained weakness since the great depression…Once in-a-life dislocations…will take years to work out among them: the job drought, the debt hangover, the defense industry, industry contraction, the [banking] collapse, the real estate depression, the health care cost explosion and the runaway federal deficit.”
Time Magazine
September 1992September 1992
Stock Market Exposure(Moderate Approach)
TodayToday
US:US: 30%30%
Foreign:Foreign: 16%16%
46%46%
TomorrowTomorrow
Global Equity:Global Equity: 30%30%
Developed Mkts:Developed Mkts:10%10%
40%40%
Stock Market Exposure(Moderate Approach)
Overall Allocation
TodayToday
Stocks: 46%Stocks: 46%
Hybrid: 21%Hybrid: 21%
““Defense:” 33%Defense:” 33%
TomorrowTomorrow
Stocks:Stocks: 30% 30%
EMKTs:EMKTs: 10%10%
40%40%
Hybrid:Hybrid: 10% 10%
““Defense” 50%Defense” 50%
Stay Nimble
Flexible Allocations (Moderate Approach)
Risk OffRisk Off
Stocks 20%Stocks 20%
Hybrid 20%Hybrid 20%
Defense 60%Defense 60%
NeutralNeutral
Stocks 60%Stocks 60%
Defense 40%Defense 40%
Risk OnRisk On
Stocks 70%Stocks 70%
Defense 30%Defense 30%
Shore Up the Defense!
Economics for GeologistsBy Mike Dibala
Plate Tectonics
Earths surface made up of large platesEarths surface made up of large plates Plates in constant motionPlates in constant motion Move at different speeds, different Move at different speeds, different
directionsdirections Where two plates move against each other Where two plates move against each other
geologic “hot spots” exist resulting in geologic “hot spots” exist resulting in increased activity (earthquakes, volcanoes, increased activity (earthquakes, volcanoes, mountain building etc.)mountain building etc.)
Sound like the global economy?
What are some of the “hot What are some of the “hot spots”?spots”?
Some “Hot Spots”
East vs. West East vs. West
Old Financial Systems vs. New Old Financial Systems vs. New
Thank You!
Investment Security Group, Inc.Investment Security Group, Inc.
303-759-9808303-759-9808
www.investsg.comwww.investsg.com