1

DECEMBER 5, 2008

WEATHERING VOLATILE TIMES

BRETT HAMMONDCHIEF INVESTMENT STRATEGIST

2

NEW HOME CONSTRUCTION SLOWS IN RESPONSE

US PRIVATELY OWNED RESIDENTIAL HOUSING STARTS (IN THOUSANDS)

500

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Global Insight

3

PRICE/EARNINGS RATIOS HAVE FALLEN SHARPLY

P/E RATIOS WELL BELOW 20-YEAR HISTORICAL NORMS

U.S. STOCKS

WORLD STOCKS ex-U.S.

4

STOCK MARKETS ARE MORE VOLATILE

IMPLIED VOLATITLITY OF S&P 500 COMPOSITE PRICE INDEX

Note: Month end values extracted from daily data by TIAA-CREF Source: Data Stream, CBOE

0

10

20

30

40

50

60

70

80

90

2002 2003 2004 2005 2006 2007 2008

5

LONG-TERM CORPORATE BOND SPREADS HAVE JUMPED

MOODY’S AAA RATED CORPORATE BONDS OVER 10-YEAR TREASURY NOTES

50

100

150

200

250

300

2002 2003 2004 2005 2006 2007 2008

Note: In Basis Points, Month end values extracted from daily data by TIAA-CREF Source: Data Stream, FRB

6

AND SHORT-TERM SPREADS LIKEWISE

7

U.S. ANNUAL GDP GROWTH, 1930–2007

Sources: U.S. Bureau of Economic Analysis; TIAA-CREF

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

1930 1933 1936 1939 1942 1945 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2009

An

nu

al %

Ch

ang

e

EARLY YEARS OF THE GREAT DEPRESSION 1930–1933

2008 ESTIMATE: 1.3%

2009 OUTLOOK: -2% to -4%

8

EARNINGS GROWTH DECLINES FOR MOST WORKERS

Growth in U.S. earnings for nearly all workers has lagged productivity growth and has also aggravated income inequality in recent years. Recessions tend to reduce incomes for nearly all workers for somewhere between three and seven years.

Growth in mean real total money earnings, by educational group, 2000 through 2007.

GROUP EMPLOYMENT SHARE EARNINGS GROWTH

Some HS 9.1% -3.2%

HS Graduate 28.9% -0.2

Some College 27.9% -3.5%

College Graduate 22.0% -4.5%

Masters 8.8% -4.4%

Ph.D. 1.5% -0.8%

MBA, JD, MD 1.8% +5.9%

Survey of Consumer Finance, United States Federal Reserve

9

Income inequality in the United States today has risen to levels not seen since the late 1920s.

Share of U.S. gross personal income accounted for by top 1% of earners (incomes above $382,600 in 2006—from IRS filings).

– 8.2% in 1980– 22.9% in 2006

“Real compensation tends to parallel real productivity, and we have seen that for generations, but not now. It has veered off course for reasons I am not clear about.”

–Alan Greenspan

INCOME INEQUALITY INTENSIFIES

10

FINANCIAL CRISIS ORIGINS: YEARS IN THE MAKING

End of structural and geographic restrictions on financial services

Globalization of financial markets

Rise of risk management

Excess demand for financial assets

Rising asset prices, particularly housing

11

FINANCIAL CRISIS EMERGES

Residential market troubles appear and multiply

Mortgage defaults: the 3% problem

Credit markets come to a standstill

Economy begins to crumble

Corporate profit picture remains gloomy

Major repricing of risk around the globe

12

COLLEGE AND UNIVERSITY ENDOWMENTS

13

WHITHER COLLEGE AND UNIVERSITY ENDOWMENTS?

Equal and Dollar-Weighted Average Rates of Return for College and Unversity Endowments (1974 -- 2007)

-20%

-10%

0%

10%

20%

30%

40%

50%

Equal-weighted Average Return Dollar-weighted Average Return

?

14

COLLEG AND UNIVERSITY ENDOWMENT ASSET ALLOCATION

0%

10%

20%

30%

40%

50%

60%

70%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Fixed Income Equities Real EstateCash Other Alternatives

Source: 1992-2007 NACUBO Endowment Surveys

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IMPORTANT INFORMATION

There are costs associated with annuities, including surrender fees, early withdrawal penalties and mortality risk expenses. Also, depending on the financial company you choose, the availability of specific types of annuities and annuity features may vary by state. So always read the prospectus before investing.

For a more complete discussion of these and other risks, please consult the prospectus.

You should consider the investment objectives, risks, charges and expenses carefully before investing. Please visit tiaa-cref.org for a current prospectus that contains this and other information. Please read the prospectus carefully before investing. This material must be preceded or accompanied by the prospectus for the TIAA Real Estate Account.

This material has been prepared by and represents the views of Brett Hammond, and does not reflect the views of any TIAA-CREF affiliate. These views may change in response to changing economic and market conditions. Any projections included in this material are for market sectors or asset classes only, and do not reflect the experience of any product or service offered by TIAA-CREF. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service.

Diversification and rebalancing are techniques to help reduce risk. There is no guarantee that these techniques will protect against a loss of income.

TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.

TIAA-CREF personnel, through the investment management area, provide investment advice and portfolio management services through the following entities: Teachers Advisors, Inc.; TIAA-CREF Investment Management, LLC; and Teachers Insurance and Annuity Association. TIAA-CREF Asset Management is a division of Teachers Advisors, Inc. Annuity products issued by TIAA (Teachers Insurance and Annuity Association), New York, NY.

©2008 Teachers Insurance and Annuity Association-College Retirement Equities Fund, New York, NY 10017C43042 (0158)