2009 q1 presentation1
DESCRIPTION
TRANSCRIPT
The Year in ReviewWhat happened and where are we going?
Presenters:
Patrick Collins, CFP®, EA- Principal
Joshua Itzoe, CFP®, AIF®- Principal
Major Market Indices
Asset Class Index 1yr 3yr 5yr
Foreign Developed Mkt Bonds Citigroup WGBI ex-US 10.1 9.5 6.0
US Bonds Lehman US Aggregate Bond 5.2 5.5 4.6
Cash 3 month T-bill 2.1 4.1 3.4
TIPS Lehman Treasury TIPS -2.4 3.1 4.1
Emerging Mkt Bonds Citigroup ESBI -10.9 1.5 5.4
High Yield Bonds iBoxx High Yield -23.9 -5.1 -0.8
Commodities DJ-AIG Commodity -35.6 -8.6 0.2
US Stocks Russell 3000 -37.3 -8.6 -2.0
REITs DJ Wilshire REIT -39.2 -12.0 0.7
Foreign Developed Mkt Stocks
MSCI EAFE -43.4 -7.4 1.7
Emerging Mkt Stocks MSCI EM -54.5 -7.1 5.1Performance Data as of 12/31/2008
Major Financial & Political EventsFinancial Meltdown Accelerates Recession
Bernie Madoff Ponzi Scheme
Oil Price & Stock Market Volatility
Monumental Presidential Election
Free Market Capitalism is Tested
Continued Housing Freefall
Destruction of Investment Banking Model
Continued War on Terror
What We Learned from 2008
1. Don’t try to pick investment strategies that are dependent on an individual for success
2. The media gets it wrong most of the time
3. Diversification still works
4. The market is not always rational
5. Minimize unpredictable outcomes
Economic & Investment Themes for 2009
1. Economic Stimulus- how big and will it work?
2. Fighting Deflation- the Fed’s printing press
3. Unemployment- trailing indicator
4. Equity and debt valuations look attractive
5. Real Estate woes continue
6. Regulation is coming
Economic Stimulus
Fighting Deflation
Unemployment
Equity Valuations
Historical P/E Ratio of S&P 500 (1881-2008)
0.00
10.00
20.00
30.00
40.00
50.00
60.00
1881
1887
1893
1899
1905
1911
1917
1923
1929
1935
1941
1947
1953
1959
1965
1971
1977
1983
1989
1995
2001
2007
Year
Nor
mal
ized
P/E
Rat
io
Data from Robert Shiller: Irrational Exuberance
Equity Valuations
Data from Robert Shiller: Irrational Exuberance
Future returns at Various P/E ratiosS&P 500 from 1881-2008
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Future 1 y r Future 5 y r Future 10 y r Future 30 y r
Future Time Periods
Aver
age
Annu
al R
etur
n If P/E under 10
If P/E betw een 10 and 15
If P/E betw een 15 and 20
If P/E betw een 20 and 25
If P/E betw een 25 and 30
If P/E ov er 30
Debt Valuations
Yield Spread Between 10 Yr US Treasury and BAA Debt
0.001.002.003.004.005.006.007.00
Jan-
73
Jan-
75
Jan-
77
Jan-
79
Jan-
81
Jan-
83
Jan-
85
Jan-
87
Jan-
89
Jan-
91
Jan-
93
Jan-
95
Jan-
97
Jan-
99
Jan-
01
Jan-
03
Jan-
05
Jan-
07
Year
Yiel
d Sp
read
(%)
Debt Valuations
Future Returns at Varioius Yield Spread Intervals (1973-2008)
10 Year Treasury vs. BAA rated bonds
0.00%
5.00%
10.00%
15.00%
1 Yr 5 Yr 10 Yr
Future Time Period
Annu
alize
d Re
turn
s
Greater than 3%
Between 2% and 3%
Between 1% and 2%
Real Home Price Index TrendCase Shiller Data (1890-2008)
0
50
100
150
200
250
1890
1904
1918
1932
1946
1960
1974
1988
2002
Year
Rea
l Hom
e Pr
ice
Inde
x
Real HomePrice Index
Trendline
Housing Woes Persist
Regulation is Coming
"In today's regulatory environment, it's virtually impossible to violate rules...it's impossible for a violation to go undetected, and certainly not for a considerable period of time."
—Bernard Madoff, Oct. 27, 2007.
Questions
Thank you for attending! The recording of this conference will posted on our website shortly.
www.greenspringwealth.com