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INVESTMENT OUTLOOK JULI

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INVESTMENT OUTLOOK JULI Powered By Docstoc
					                    INVESTMENT OUTLOOK JULY 2008
                 AND A REVIEW OF THE SECOND QUARTER


          Words of wisdom:
          ‘An economist is a man who states the obvious in terms of the incomprehensible’.




                 CONTENTS
                 1.      Global highlights
                 2.      Global equities
                 3.      Hedge funds, private equity and infrastructure
                 4.      Global bonds
                 5.      Currencies
                 6.      Interest rates
                 7.      Commodities
                 8.      Property
                 9.      Model portfolio USD
                 10.     Model portfolio EUR
                 11.     This and that




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          Abstracts


          ►1.     Global highlights

          Could Goldman Sachs be right with their prediction that the financial crisis was closer to the end than
          the beginning? Further cuts in financial services do not point to a short, sharp correction but further
          uncertainty. So assuming the banking crisis is not concluded, what lies ahead? One prediction is that
          we are headed for a W-shaped recovery, with a short recession now, and another recession in
          2009/10. Whatever the outcome there are two positives: investors have already pulled out some
          USD100bn from equities and sovereign funds continue to be flushed with new cash.

          more…                                                                                              back


          ►2.     Global equities

          US equities fell 5.3%, but outperformed the Global Equity Index which declined 6.4% over
          the six month period. This is the first time in years US equities have outperformed, and this may
          signal rising optimism on an eventual US recovery. European stocks fell 8.9% and according to
          leading industrialists Europe will feel the effects of the credit-crunch in about four months time. The
          UK dropped 9.6% and Japan fell 0.7% which is the strongest performance in a global context
          over the last six months. Asia-Pacific ex Japan fell 13.7% which was the weakest regional
          performance. Emerging markets fell 8.5% with large corrections seen in India and China.
          more…                                                                                              back


          ►3.     Hedge funds, private equity and infrastructure

          The FT Hedge $ Index declined 6.55% over the last six months which is not radically different
          from the 6.4% fall seen in Global Equities. Hedge funds responded to uncertain markets by taking a
          cautious view and sitting on large cash balances. A generally poor performance in the first quarter
          resulted in a flood of redemptions leading some funds to suspend redemptions or restructure.
          more…                                                                                              back


          ►4.     Global bonds

          Government bonds had a weak quarter largely because of increased inflationary expectations.
          Yields were historically low at the end of the first quarter in response to volatile stock markets. In the
          US the 10 year Government bond yield moved from 3.54% at the end of March 2008 to
          4.22%. German Government 10 year yields moved from 3.93% to 4.60% with a similar
          pattern seen in the UK, Japan and Switzerland. The decline was less marked in corporate bonds
          as some measure of confidence returned to the sector following the bail-out of Bear Stearns in March
          2008.
          more…                                                                                              back


          ►5.     Currencies

          There is nothing like swimming against the tide, but we expect a sustained albeit gradual US dollar
          recovery in the next few quarters. A lot of bad news is already in the market and as expectations of a
          US recovery mount in 2009, the dollar is likely to stage a continued recovery. The recent decline in
          the pound has been most dramatically felt against the euro, where it hit a record low of over
          GBP0.80. The yen continues to act as a gage of investor sentiment. When confidence recovers the



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          yen suffers, and conversely when sentiment is cautious, the yen rallies. The Swiss franc follows a
          similar pattern. The Chinese renminbi pushed through RMB7.00 for the first time in April and has
          appreciated 20.0% against the US dollar since the peg was lifted.
          more…                                                                                       back


          ►6.     Interest rates

          There was a 25bp cut in US interest rates by the Federal Reserve in April to 2.0%, but not the
          50bp previously anticipated. Some commentators are talking about a rate increase to 2.5% by the
          autumn. The European Central Bank left European interest rates at 4.0%, hinting that an
          increase to 4.25% was possible in July 2008. As expected, the Bank of England cut UK interest
          rates by 25bp to 5.0% in April, but short-term expectations appear to point to an increase. This
          would be a devastating blow to an already weak UK economy. The recent increase in the two-year
          Japanese bond yield to almost 1.0%, against the prevailing interest rate of 0.5%, suggests
          Japanese interest rates may rise sooner than expected.
          more…                                                                                       back


          ►7.     Commodities

          Estimates of future oil prices keep moving higher. Speculators are seen as the primary cause but on
          the other hand the run-up in prices is believed to reflect long-term trends with increased global
          demand hitting static supply. Our assumption that a weakening global economy would depress prices
          has proved to be misjudged and accordingly we are raising our year-end target to USD110 against the
          present USD133.52. Gold seems to be moving in the opposite direction to the dollar: sharp
          movements down when the dollar rallies, and more modest rallies when the dollar depreciates. We
          maintain our year-end target of USD950 given the worsening inflationary environment. Food prices
          continue to be volatile with government interference playing an increasing role. One side effect of
          higher food prices has been increased land values.

          more…                                                                                       back


          ►8.     Property

          Just to put some perspective on the US mortgage market: 92.0% of home-owners are paying their
          mortgage on time and 2.0% are in foreclosure. That said there are no signs the US housing crisis is
          over. The UK private housing market is also showing severe signs of strain. Europe presents a very
          mixed picture with prices falling in Spain and Ireland, while Germany remains more or less
          unchanged.

          more…                                                                                       back


          ►9.     Model portfolio USD

          Balanced strategy and annual time weighted returns in USD
          more…                                                                                       back


          ►10. Model portfolio EUR

          Balanced strategy and annual time weighted returns in EUR
          more…                                                                                       back




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          ►11. This and that

          This quarter’s feature article, entitled ‘Riches to rags’ is on the changing fashion of economic
          models. It highlights possible changes to the ‘Anglo-Saxon’ model which is presently in a crisis.
          more…                                                                                                 back




          Articles


          ►1.      Global highlights

          Could Goldman Sachs be right with their prediction that the financial crisis was closer to the end than
          the beginning? Similar sentiments were expressed by Morgan Stanley. Did we see the low in March
          when Bear Stearns was rescued? Further job cuts in financial services do not point to a short, sharp
          correction but further uncertainty. After all Wall Street has learnt that there is little merit in dismissing
          staff, only to scramble for replacements six months later. Recent jitters from Lehman Brothers and the
          UK banking system highlight ongoing problems. So assuming the banking crisis is not concluded what
          lies ahead? One prediction is that we are headed for a W-shaped recovery, with a short recession
          now, and another recession in 2009/10. There is also the increasing threat of inflation, especially with
          oil and food maintaining their upward spiral. An unholy alliance of higher inflation and weakening
          economies raises the chance of stagflation; a threat we have highlighted in earlier reports. Whatever
          the outcome, there are two positives: investors pulled some USD100bn out of equity funds in the first
          quarter of 2008 with money funds enjoying record inflows. In addition sovereign funds are standing
          by to pick up bargains as and when they can. So there are massive funds to support a recovery in
          both equities and non-government bonds – the question remains when?
                                                                                                                back


          ►2.      Global equities


           Key Markets                         Stocks Included                 Total returns (USD) Year to June 2008

           FTSE* Global All-Cap                          7,957                                                 -6.4%
           FTSE USA All-Cap                              2,333                                                 -5.3%
           FTSE Developed Europe                           512                                                 -8.9%
           FTSE UK All-Cap                                 446                                                 -9.6%
           FTSE Japan Large Cap                            170                                                 -0.7%
           FTSE Asia Pacific Ex Japan                      859                                                -13.7%
           FTSE Emerging All-Cap                         1,817                                                 -8.5%
          * Financial times: FTSE Global Equity Index Series

          All returns are in US dollars unless stated otherwise. The figures refer back to the last six
          months from end December 2007 unless stated otherwise. Returns include dividends
          accrued so far this year.

          US equities fell 5.3%, but outperformed the Global Equity Index which declined 6.4% over
          the six month period. This is the first time in years US equities have outperformed, and this may
          signal rising optimism on an eventual US recovery. Nevertheless the signals emerging from the US
          economy continued to be mixed. On the positive side there were growing signs of optimism with 0.6%



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          GDP growth in the first quarter of 2008, when growth was expected to contract. Corporate earnings
          suggested the economy was performing better than anticipated, and employment data beat
          expectations. Coincidently the negatives: the USD400-USD500bn being pumped into the economy by
          the Federal Reserve, combined with the US government's USD100bn stimulus, may provide only
          temporary relief. Some commentators suggest this stimulus masks an increasing federal deficit, higher
          unemployment and consumer debt, and even higher food and gasoline prices. Consumer confidence
          hit its lowest reading since June 1980, when the US was facing its worst slowdown since the Great
          Depression. Taking this very mixed picture into account we decided to make an initial foray into US
          equities for our balanced and dynamic portfolios. We have held virtually nothing in US equities for a
          number of years. Further purchases are anticipated, and this also coincides with our more bullish view
          on the US dollar.

          European stocks fell 8.9%. Much to everyone’s surprise Germany saw stunning growth in the first
          three months of 2008, as did France. More recent figures paint a much more cautious picture with
          consumer demand declining and higher inflation taking its toll. According to leading industrialists
          Europe will feel the effects of the credit-crunch in about four months time. Wage demands, a strong
          exchange rate, and higher raw material costs could see low to negative growth in earnings for 2008,
          with a bottom expected by the fourth quarter of 2008. The IMF cut back its forecast of eurozone
          growth to 1.4% in 2008 and 1.2% in 2009 compared to a European Commission forecast of 1.7% and
          1.5%. There was vast divergence amongst the European countries with Spain suffering its weakest
          first quarter growth since 1993, which was a recession year.

          UK stocks dropped 9.6%. The IMF slashed its forecast of UK growth to 1.6% in both 2008 and
          2009. This is lower than the predicted rate for 2009 by the Bank of England and the UK government.
          It is sobering to think that the UK budget deficit could rise to 3.3% of gross domestic product in 2008
          and 2009, breaching the 3.0% limit set under the EU's stability and growth pact. This is an
          embarrassing fact for prime-minister Gordon Brown, who frequently criticised his European
          counterparts on economic management when he was chancellor.

          Japan fell 0.7% which is the strongest relative performance in a global context over the last six
          months. The Nikkei 225 Average rose 10.6% in April representing the largest monthly gain in 13
          years. Positives driving up the market included dividend increases and share buy-backs. This was in
          response to criticism that Japanese companies do not maximise shareholder value. The Japanese
          government is reviewing its guidelines on foreign take-overs and corporate tax in an attempt to
          attract foreign investment which stood at a modest 3.0% of gross domestic product in 2007. This
          compares to 44.6% in the UK and 13.5% in the US. Japanese corporate tax at 30.0% is amongst the
          highest in the OECD. There are also indications that foreign investors are returning, having sold a net
          USD15.3bn in the year ended March 31st 2008.This was the biggest outflow in 11 years. The jury is
          out on whether the market has really bottomed or whether this is a rally in a bear market. We
          continue to maintain our exposure as we believe sentiment remains too negative.

          Asia Pacific ex Japan fell 13.7% which was the weakest regional performance. Negatives driving
          the markets lower included rising inflation, higher interest rates and increasing fears of a global
          recession.

          Emerging markets fell 8.5%. Amongst the majors, large corrections were seen in India and China.
          Since its peak at over 20,000 in January 2008 the Indian BSE Sensex 30 has fallen some 25.0%. In
          addition the rupee has been weak. The Chinese Shanghai composite peaked at over 6,000 in October
          2007 and has retraced nearly half those gains. The announcement of a cut in stamp duty from 0.3%
          to 0.1% did little to help sentiment. This correction has hurt some 10m-20m Chinese investors,
          although some are still sitting on profits, after the threefold increase since the 2005 low. In India
          share ownership is also relatively small but the weak stock market has also had a negative impact on
          property prices.

          Turning to sectors, here are a few thoughts on banks. The figures refer to UK banks, but as the
          problems confronting the sector are global rather than regional in nature, parallels may be drawn for
          the sector as a whole. At a glance the ratings look cheap, dividends are attractive and the price to
          book ratio undemanding, so what are the risks? On a prospective price earnings ratio of 7.6 times
          banks look a bargain but beware, these are some of the challenges they face: before the last



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          recession they were trading on a forward-multiple of 5 to 6 times- there is virtually no visibility of
          earnings because the extent of their bad debts are in doubt-the cost of funding is squeezing margins-
          some debt markets have ceased to function- both the global economy and housing are heading south.
          Dividends look very high with a prospective yield of 8.0% but there is no guarantee this payouts will
          not be reduced. The price to book of 1.3 times again looks cheap but not compared to the last
          recession in the early 1990’s when they stood between 1.0 and 1.2. So even if the sector is cheap,
          which is far from clear, they may follow the pattern of the early 1980’s when banks underperformed
          the market for six years as they struggled to generate any meaningful earnings growth. The credit
          crisis has also done fundamental damage to the ‘originate’ and ‘distribute’ model that helped them
          achieve record profits. It is also likely to result in much tighter regulation from central banks. Our
          conclusion: banks are probably fine for clients seeking yield but any sustained out-performance is
          unlikely for the foreseeable future. This will also act as a drag on equity indices as financial stocks
          have a large weighting in most global equity markets.


           Global Sectors                                                  Total returns (USD) Year to June 2008

           Industrial Metals                                                                              14.4%
           Oil Equipment & Services                                                                       10.5%
           Mining                                                                                          8.1%


           FTSE Global All-Cap                                                                           -6.4%

           General Financial                                                                             -17.5%
           Forestry & Paper                                                                              -16.1%
           Mobile Telecommunications/                                                                    -15.2%
           Banks

          Source: FTSE All-World Sector Indices
                                                                                                           back


          ►3.       Hedge funds, private equity and infrastructure

          Hedge funds

          The FT Hedge $ Index declined 6.55% over the last six months which is not radically different
          from the 6.4% fall seen in Global Equities. This index covers hedge funds run by 34 companies. The
          less up-to-date Credit Suisse/Tremont Hedge Fund Index appreciated 0.52% in the five
          months to end May 2008, with a trailing one-year return of 4.90%. Convertible arbitrage was the
          weakest performer down 5.22%, while managed futures was the strongest rising 9.60% over the five
          month period. This index currently consists of 481 funds out of a universe of 5,000 and excludes fund
          of funds, the most popular way to invest for private investors. The more representative All-Hedge
          Index which only includes investable hedge funds, i.e. those still open to new investors, fell 0.44%
          over the same period with a one-year trailing performance of 1.74%. Not a very exciting return given
          the potential risks and high levels of management fees involved.


           Index                                                           Total returns (USD) Year to June 2008

           FTSE Hedge 8 Strategies *                                                                     -6.55%
           Credit Suisse/Tremont Hedge Fund Index                                          0.52% to end May 2008
           Credit Suisse/Tremont INVESTABLE Index                                         -0.44% to end May 2008
          * FTSE Hedge Global Index: an investable index of 34 companies


          Hedge funds responded to uncertain markets by taking a cautious view and sitting on large cash
          balances. The trend towards deleveraging was in part forced on hedge funds because prime-brokers
          restricted their lending. This in turn limited the volume of their trades which is why so much pricing



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          remains in turmoil. A generally poor performance in the first quarter resulted in a flood of redemptions
          leading some funds to suspend redemptions or restructure. Only USD16.5bn in new capital was
          invested in the first quarter of 2008.

          A worrying piece of research based on 2,800 hedge funds with a 20.0% performance fee and 2.0%
          annual fee, showed that funds which were close to missing their performance fee, increased their risk
          profile. The research concentrated on funds that were within 95.0% of achieving their performance
          target. These exhibited a standard deviation, a measure of variability of returns, of 8.5%. These
          compared with a standard deviation of 4.9% for hedge funds that had already achieved their
          performance target, and an even lower risk profile for funds 10.0% away from their target. Not a very
          reassuring study for investors in hedge funds!

          Private equity

          The head of global institutional investments at Fidelity, the leading US investment house, made
          damning comments about private equity investment which he called 'a trick of financial
          engineering – and a clumsy one at that'. A bit harsh for an industry that has been around for decades,
          but it does contain an element of truth. Clearly the lack of readily available debt will continue to have
          a dramatic impact on the kind of deals that can be done and returns will be much lower. To date
          investors have not abandoned the sector despite the absence of 'mega-deals' that captured attention
          in 2007.
                                                                                                              back


          ►4.      Global bonds

          Global bonds

           Key Markets                                      Yield December 2007                    Yield June 2008

           US Government 10 years                                          4.07%                             4.22%
           German Government 10 years                                      4.32%                             4.60%
           Japanese Government 10 years                                    1.51%                             1.83%
           UK Government 10 years                                          4.61%                             5.14%
           Swiss Government 10 years                                       3.07%                             3.40%


          Global bond returns
          Total returns, year to June 2008 – local currency

           Key Markets                                              No. of Bonds                    Year change %

           US Treasuries                                                     139                             0.46%
           US Corporates                                                    1,978                           -1.11%
           EUR Eurozone Sov.                                                 242                            -0.76%
           EUR Corporates                                                   1,020                           -1.38%
           GBP Gilts                                                          27                            -2.80%
           GBP Corporates                                                    776                            -4.60%
           Global Inflation-Linked                                            90                             4.12%
          Source: iBoxx indices

          The six monthly performance figures from end December 2007 are quoted in local
          currency terms, and include interest accrued so far this year.

          Government bonds had a weak quarter largely because of increased inflationary expectations.
          Yields were also historically low at the end of the first quarter in response to volatile stock markets. In
          the US the 10 year Government bond yield moved from 3.54% at the end of March 2008 to
          4.22%. The overall US Treasury Index recorded a rise of 0.46% over the six month period



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          compared to an appreciation of 5.13% at the end of March 2008. German Government 10 year
          yields moved from 3.93% to 4.60% over the same period with the overall Eurozone
          Sovereign Index showing a six months decline of 0.76%. This compares to a gain of 3.93% at
          the end of March 2008. The pattern was similar in the UK where the 10 year yield rose from
          4.50% to 5.14%, Japan 1.28% to 1.83% and Switzerland 2.90% to 3.40%. The overall
          Gilt index moved from a gain of 1.41% at the end of March 2008 to a fall of 2.80%. The Gilt
          market continued to be overshadowed by the prospect of a massive increase in borrowings. Figures
          quoted amounted to around GBP72bn compared to GBP58.4bn in 2007. There is also the prospect of
          selling by foreign investors who hold around GBP166bn in Gilts as they respond to a worsening budget
          deficit. The dramatic shift in Japanese interest rate had a negative impact on a number of hedge
          funds. One ceased operating because of the massive loss it incurred. The Japanese government bond
          market (JGB’s), the world’s largest, may be nearing the end of its deflationary phase as the world in
          general faces higher inflation.

          The declines were less marked in corporate bonds as some measure of confidence returned to the
          sector following the bail-out of Bear Sterns in March 2008.The total return of US corporate bonds
          moved from 0.87% at the end of March 2008 to -1.11% at the end of June. Sterling corporate
          bonds, having staged an impressive recovery half way through the second quarter, ended -4.60%
          against -4.74% at the end of March 2008. Euro corporate bonds had returned 2.65% at the end of
          March 2008 but recorded a 1.38% loss towards the end of June.

          There was also some recovery in junk-rated issuers following a very difficult March. Some 24.7% of
          junk bonds traded 1,000bp over safe government bonds in that month, the highest level since the
          gloomy days of November 2002. Yet default levels remained historically low and balance sheets
          looked relatively strong compared to previous periods when the economy has gone into recession.
          Globally Moody’s Investor Services expects the outlook to deteriorate by the year-end, but only back
          to the historical average of a 5.0% default rate.

          The Bank of England issued an interesting study on global sub-prime debt with an assessment of
          its value. Using fairly pessimistic assumptions they estimate that the total, with a face value of around
          USD900bn, has a fundamental value of 81.0% of par value. This compares to write-downs by various
          financial institutions of around 80.0% of par value. By contrast, market prices based on credit
          derivative indices suggests a value of 58.0%. The Bank of England has a strong record in analysing
          subprime debt so their assessment should be taken seriously. Could it be the market is being far too
          pessimistic? A recent survey suggests that the cost of the crisis since the beginning of last year is
          USD400bn and rising.

          Amongst emerging markets, Brazil was awarded investment grade status of triple B minus for the
          first time by Standard & Poor's, the rating agency. The country has benefited from the boom in
          commodities and this change in rating should both accelerate and increase investment in the country.
          The Brazilian Bovespa equity index recently rose to record levels.
                                                                                                            back


          ►5.     Currencies


           Key Rates                            December 2007                 June 2008                % change

           USD/EUR                                         1.47                     1.55                  -5.44%
           JPY/USD                                       113.12                   108.10                   4.44%
           CHF/USD                                        1.129                    1.044                   7.53%
           USD/GBP                                        1.993                    1.953                   2.01%


          There is nothing like swimming against the tide, but we expect a sustained albeit gradual US Dollar
          recovery in the next few quarters. A lot of bad news is already in the market and as expectations of a
          US recovery mount in 2009, the dollar is likely to stage a continued recovery. Over the second quarter
          the dollar moved from USD1.58 to USD1.55 against the Euro, an appreciation of 1.9%. We also



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          expect evidence of a eurozone slowdown to mount in the coming months, with the US dollar having
          already fallen some 60.0% against the single currency since 2001. In April the euro touched a record
          USD1.6018. The UK and Canada were the first to feel the impact of an improving US dollar, prompting
          a rebound against the pound which hit a 26 year low against the US dollar. US domestic investors
          may also play a role. From 2003 to 2007 US mutual funds increased their proportion in foreign assets
          from around 15.0% to 25.0%, and this trend seems to have come to a halt, as witnessed by the
          recent outperformance of US equities relative to their global peers.

          The recent decline in the British Pound has been most dramatically felt against the euro, where it hit
          a record of over GBP0.80.There are nevertheless signs that euro strength is not sustainable. Retail
          sales and activity data point to a weakening in domestic eurozone demand, while export growth is
          easing. Some commentators have even said the euro is dramatically overvalued.

          In the second quarter the Japanese Yen fell from JPY99.87 to JPY108.10 against the US dollar, a
          decline of 8.2%. The yen continues to act as a gage of investor sentiment. When confidence recovers
          the yen suffers, and conversely when sentiment is cautious, the yen rallies. The Swiss Franc follows
          a similar pattern having dropped from CHF0.99 to CHF1.044 against the US dollar over the second
          quarter. This is because both currencies provide a relatively cheap way of borrowing to fund more
          speculative investments.

          The Chinese renminbi pushed through RMB7.00 for the first time in April and has appreciated some
          20.0% against the US dollar since the peg was lifted. There are mixed views as to whether this
          appreciation will continue. On the plus side a stronger currency pushes down inflation which hit a
          multi-year high. It cuts the price of imports at a time when food prices are racing ahead. It also
          reduces China’s massive trade surplus. An obvious downside is that it makes exports more expensive
          as a time when US demand is declining. Export growth fell to 21.0% from 27.0% and further declines
          are anticipated.

          Amongst secondary currencies, the Singapore dollar hit a record high against the US dollar as their
          monetary authority tightened monetary policy. Further appreciation is anticipated to curb the cost of
          imported food and fuel. The Australian dollar is also expected to rise further having come close to
          breaching the 96.53c high reached in March 1984. The Slovak koruna hit a record high against the
          euro on reports that a draft proposal from the European Union would recommend eurozone entry in
          January 2009. The Brazilian real rallied after Standard & Poor's upgraded its credit rating to
          investment grade.

          Not all emerging market currencies have rallied relative to the dollar. The Turkish lira hit a low
          because of its large current account deficit and the Indian rupee dropped on concerns that a slowing
          global economy will result in declining capital inflows.
                                                                                                         back


          ►6.      Interest rates


           Key Rates              December 2007            Quoted Rates           June 2008      Quoted Rates
                                                          (3 mth LIBOR)                         (3 mth LIBOR)

           USA (Fed Funds)                  4.25%                 4.73%               2.00%            2.810%
           Euro (Repo)                      4.00%                 4.69%               4.00%             4.96%
           Japan (Overnight)                0.50%                 0.90%               0.50%             0.92%
           UK (Repo)                        5.50%                 6.02%               5.00%             5.95%

           Swiss (Target)           2.25% - 3.25%                 2.76%         2.25%-3.25%             2.92%


          There was a 25bp cut in US interest rates by the Federal Reserve in April to 2.0%, but not the
          50bp previously anticipated. This was because a degree of calm returned to financial markets. With
          inflation risks on the increase it now looks as if the April cut could be the last in this cycle. Some



9 of 18
           commentators are even talking about rate increases of up to 50bp in the autumn, bringing the interest
           rate up to 2.5%. Fed futures for January 2009 are nudging 2.86%. So what appears to be the
           thinking behind this change in interest rate expectations? Overall the Fed seems to be taking the view
           that the US economy will not grow much in the first half of the year and could even contract ‘slightly’
           as they say. Growth is then expected to pick-up in the second half of 2008 and return to trend in
           2009. On the inflation front the Fed must be concerned that US consumer prices rose 4.2% in the
           year to May largely because of surging energy costs. Yet core inflation at 2.3% seems to be less of a
           problem relative to the Federal Reserve’s comfort zone of 2.0%. This scenario of a recovering
           economy allows for a marginal increase in rates. The IMF disagrees by the way. They say the US will
           suffer a recession in 2008 and growth will remain below trend in 2009.

           The European Central Bank (ECB) left European interest rates at 4.0% despite inflation hitting
           3.6% in May, a 16 year high. This is because the ECB continued to believe higher inflation would be a
           temporary factor resulting from higher energy and food costs. Indeed inflation slipped to 3.3% in April
           having been 3.6% in March, and eurozone inflation was expected to fall back below the ECB’s target
           of 2.0% over the coming 18 months. This optimistic view on inflation has recently undergone a radical
           change with the ECB hinting that it could increase eurozone interest rates by 25bp to 4.25% in July
           2008. The recent rise in the German two year bond yield to 4.65% supports this assumption. This will
           create further weakness in the European Union with Spain and Italy heading for hard landings, while
           Germany’s formidable manufacturing machine is running out of steam. Foreign orders dropped 3.8%
           in April after a surprisingly strong first quarter.
           As expected, the Bank of England cut UK interest rates by 25bp to 5.0% in April, but despite
           worsening economic data, and clear evidence the credit crisis continued to spill into the real economy,
           further cuts are on hold. This is because recent consumer prices increased to 3.3% against the Bank
           of England's 2.0% target. The Bank of England also stated that inflation would remain above its 2.0%
           target until early 2010. Given that the yield on the two -year gilt now stands at 5.45%, short-term
           interest rate expectations appear to point to an increase rather than cut. This would be a devastating
           blow to an already weak UK economy. So far there have been three cuts since December 2007 when
           rates stood at 5.75%.

           Earlier this quarter the Japanese derivatives market factored in a 100.0% chance that the Bank of
           Japan would increase Japanese interest rates by early 2009. The recent increase in two-year
           Japanese bond yield to almost 1.0%, against the prevailing interest rate of 0.5%, suggests the move
           may come sooner than expected.

           We could also see interest rate rises in the Far-East and Pacific region. Australia’s inflation rate of
           4.2% is at its highest rate in 17 years and Singapore posted a 26-year high of 6.7%. In the
           Philippines inflation hit 8.3% and Indonesia saw consumer prices rise 9.0%. The Reserve Bank of
           Australia has already increased interest rates four times in seven months, and a further increase from
           the present 7.25% is possible, although recent reports showed falling consumer confidence and
           slower retail sales. Cuts are not anticipated until 2009 as inflation is expected to slow thanks to
           weakening domestic demand. In Hong Kong the underlying inflation rate is some 5.3%, but their
           currency peg to the US dollar limits their ability to rein in inflation, especially as a stronger renminbi
           increases the cost of imports from China. One of the countries suffering most is Vietnam, with prices
           soaring 21.4% in the last 12-months. Not popular in a country that suffered hyper-inflation in the late
           1980’s and early 1990’s and where basic food stuffs are becoming too expensive for the average
           factory worker on some USD50 per month. By way of contrast, New Zealand may cut interest rates
           from their present 8.25% following a surprise fall in employment.

           Inflation is also a problem in the Middle-East and India. It is forecast to rise to 12.0% in the UAE, up
           from 11.0% in 2007, largely because of rising import prices and rents. The local currency's peg to the
           US dollar has exacerbated the situation, not helped by annual wage increases of 15.0% to 25.0% over
           recent years. In India inflation has hit 7.33% in a country where most people live on USD2 a day and
           where the poorest spend almost half their income on food. This makes inflation a political time bomb
           in a country facing a general election in less than 12 months.


           Three-month interbank rates remained volatile. The three-month European interbank rate, Euro Libor
           was 4.96% towards the end of June, three-month sterling remained just under 6.0%, while three-
           month US dollars stood at 2.81%. This reflected a continued lack of confidence, and a feeling that



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           banks were set to make further write-downs. Earlier in the quarter the gap between the three-month
           dollar London interbank offered rate and the yield on the three-month Treasury bill hit its lowest level
           for nearly three months.
                                                                                                            back


           ►7.      Commodities



            Key Rates                     December 2007                     June 2008                  % Change

            S&P GSCI                               614.13                       842.41                     +37.17
            Oil WTI (USD/barrel)
                                                USD 97.14                   USD 133.52                     +37.45

            Gold Spot (USD/oz)                 USD 836.65                   USD 881.20                      +5.32


           Estimates of future oil prices keep moving higher. JP Morgan upgraded its target for West Texas
           Intermediate crude oil to USD90 for 2008 and USD85 for 2009. Barclays Capital raised its price for the
           second half of 2008 to USD126. Goldman Sachs pencilled in an even more dramatic USD200 a barrel
           in the next two years, and a USD141 target for the second half of 2008. Worryingly the same
           research team at Goldman predicted over USD100 a barrel three years ago when oil was trading at
           USD55. In June WTI hit a record high of close to USD140. Reasons for this massive increase remain
           unclear. On the one hand speculators are seen as the primary cause. Their activities have massively
           increased helped by the continued growth in futures, derivatives and exchange traded funds. On the
           other hand the run-up in prices is believed to reflect long-term trends with increased global demand
           hitting static supply. This is because strong economic growth has coincided with limited new
           investment in oil production. Specific problems have also included cuts in Nigeria, lower Russian
           output, and continued strong demand from emerging economies. China’s earthquake in Sichuan is
           said to have damaged 17 dams, cutting hydro-electric power and increasing the demand for oil
           imports. Broadly speaking all the reasons we have quoted for higher oil have some validity, although
           we believe speculators have probably pushed the price a good USD30 higher than it should be.
           Nevertheless our assumption that a weakening global economy would depress prices has proved to be
           misjudged. Accordingly we are raising our end year target to USD110 against the present price of
           USD133.52, with the usual +/- USD10.0 to cover geopolitical risk.

           Gold dropped to a four month low of USD845 on the back of a recovering US dollar. Gold seems to be
           moving in the opposite direction to the dollar: sharp movements down when the dollar rallies, and
           more modest rallies, when the dollar depreciates. Selling by exchange-traded funds also encouraged
           price weakness. USD850 is seen as an important support level against the present price of
           USD881.20. We maintain our year-end target of USD950 given the worsening inflationary
           environment.

           Food prices continued to be volatile. Rice rose 50.0% in two weeks in April after the world’s second
           largest producer, Vietnam, extended its export ban until June 2008. Thai medium quality rice, a global
           benchmark, traded at USD850 a tonne in April but broke USD1,000 in May. Corn hit a record
           USD7.60 a bushel in June and Soya beans hit an all-time high of USD15.93 a bushel. Bad weather and
           flooding in the US were the primary cause. In addition the US bio-fuel industry is estimated to
           consume one third of domestic corn production in the 2008/09 season compared to 22.0% in the
           previous year. Not all prices are at record highs, wheat fell close to its lowest level in six months in
           May, with wheat production expected to reach record levels this year. Wheat had risen 181.0% in the
           36 months to February 2008.

           Government interference is playing an increasing role in food prices. On the one hand certain
           countries such as Thailand and Brazil have become massive food exporters. This has opened up new
           sources of food much like the cultivation of the Argentine pampas and North American prairies
           increased food production at the end of the 19th century. At the same time countries such as Egypt,
           where the population has more than doubled in the last 20 years, now import more than 50.0% of
           their stable food. Yet despite this widening rift between producers and consumers, only a small



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           proportion of total food production crosses national borders. Only about 6% of the world’s rice
           production is exported for example. As a result the imposition and removal of export bans can easily
           escalate into massive price rises and falls.


           One side effect of higher food prices has been increased land values. As a result UK farmland rose
           40.0% last year, Poland saw a 60.0% increase in three years, and in the Ukraine top quality farmland
           is forecast to double from the present USD3,500 per hectare. In the US prices are estimated to have
           increased 14.0% in 2007, while the net income of farmers was up some 31.0%. In Australia land
           prices have doubled in the last five years having been flat most of the 1990's. Even in France, where
           young local farmers have first refusal on any new land offered for sale, prices have risen 50.0% since
           2003. This surge in prices has attracted corporate buyers and pension funds, although liquidity is poor
           and these higher land prices will require improved productivity. Chinese companies, with the support
           of their government, are taking the initiative by buying land in Africa and South America. China, with
           21.0% of the world's population contains 40.0% of the world's farmers but just 9.0% of the world's
           arable land. Similar moves have seen Libya talking about growing wheat in the Ukraine, and Saudi
           Arabia investing in agricultural and livestock projects abroad.
                                                                                                            back


           ►8.       Property


            Sector                                         No. of Stocks    Total returns (USD) Year to June 2008

            Real Estate                                             136                                  -10.2%
            Financials                                              667                                   -14.4%
            FTSE Global                                           7,957                                    -6.4%
           Source: FTSE All-World Sector Indices


           Just to put some perspective on the US mortgage market: 92.0% of home-owners are paying their
           mortgages on time and 2.0% are in foreclosure. Sub-prime borrowers facing higher reset interest
           rates account for 6.0% of mortgages, but 40.0% of foreclosures. The hardest pressed home-owners
           are concentrated in key electoral states, and most are Afro-Americans. Not a great picture, but hardly
           a complete disaster. That said there are no signs the US housing crisis is over. The UK private
           housing market is also showing signs of severe strain with house-building shares collapsing. New
           mortgage approvals fell to their lowest level since records began in April, with the selection of
           mortgage deals available dropping from some 15,000 to 4,000. This has taken some GBP50-100bn
           capacity out of the GBP360bn mortgage market. The Halifax, one of the UK’S largest mortgage
           providers, reported a 6.0% fall in house prices in the three months to May, with some observers
           suggesting a 23.5% correction by May 2011. The IMF, who has been predicting a UK housing collapse
           for years, suggested prices are 30.0% overvalued. There are positives: the percentage of 100.0%
           mortgages stands at 5.0% unlike 1990 when 30.0% of first-time buyers had 100.0% mortgages. The
           government also recognises the problem, and hopes to ease low banking sector liquidity by allowing
           lenders to swap mortgage-backed securities for UK Treasury bills. It is also worth noting that house
           prices have, on average risen 170.0% over the last 10 years, so they are hardly correcting from
           depressed levels. Europe presents a very mixed picture with prices falling in Spain and Ireland, while
           Germany remains more or less unchanged. Germany housing never participated in the recent global
           property boom, so it is unlikely to correct. In France prices are expected to drop by around 3.0%, and
           because equity withdrawal was more or less non-existent, prices are less vulnerable.
                                                                                                            back




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           ►9.       Model portfolio USD

           Balanced strategy and annual time weighted returns in USD




                         last 5 years                          last 3 years                                  1 year

                           + 8.64 %                             + 10.25 %                                   + 4.93 %




                                                      Performance since 1 January 2005

             50
             40
             30
             20
             10
              0
             -10

                     Morgan Stanley Capital International USD (MXWO)     Citigroup USD Government Bond Index          Model Portfolio




                                   Asset Allocation                                        Currency Distribution


                   Liquidity                                                  USD
                     Bonds                                                    EUR
                   Equities
                                                                              GBP
                     Mining
                                                                              CHF
             Commodities
              Real Estate                                                     JPY

                               0      10       20      30        40                 0      20          40             60           80




                                                                                                                                back




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           ►10. Model portfolio EUR

           Balanced strategy and annual time weighted returns in EUR




                       last 5 years                          last 3 years                                1 year

                         + 5.11 %                             + 3.80 %                                  - 6.30 %




                                                     Performance since 1 January 2005

             50

             40

             30

             20

             10

              0

                    Morgan Stanley Capital International EUR (MXWO)      Citigroup EUR Government Bond Index       Model Portfolio




                                  Asset Allocation                                         Currency Distribution


                  Liquidity                                                 EUR
                    Bonds
                                                                             GBP
                  Equities
                                                                            CHF
                    Mining
                                                                             JPY
             Commodities
              Real Estate                                                   USD

                              0       10      20      30        40                 0        20         40           60           80




                                                                                                                             back




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           ►11. This and that

           Riches to rags?

           Fashion and finance make unusual bed-fellows. That is unless you believe the length of shirts
           determines the course of stock-markets in any given season. That is if you can find any skirts, with
           jeans the preferred fashion item away from the cat-walks of Paris and Milan. Nevertheless fashion
           does play a part in the economic landscape. That is because successive economic models are
           enthusiastically embraced (usually by the press), only to be dumped and ridiculed a few years later. In
           the 1980’s Japan’s economic model was seen as the ideal blue-print for all countries. Their
           collective and consensus driven management style appeared to create massive wealth; the grounds of
           the Imperial Palace in Tokyo commanded the same value as all of California (that was an urban
           myth), and great chunks of the US, including the Rockefeller Centre ended up in Japanese hands. So
           what happened? The world’s second largest economy saw its banking system virtually destroyed, its
           stock market moved from 40.0% of world capitalisation to 9.0% and even zero interest rates could
           not stimulate any sustained recovery. Similarly the German model was praised for its success and
           efficiency. It all seemed to work despite a strong currency, strong unions and an underdeveloped
           stock market, which even today is smaller than that of Canada’s. So what went wrong? Well
           unification would have been traumatic for any economy, but the overall result was massive taxation,
           anaemic growth, stagnant house prices and average wages that declined in real terms over many
           years. What then emerged was the ‘Anglo-Saxon’ model whose bedrock was a free market
           economy, minimal union interference and unfettered capitalism. Recent developments suggest this
           model is also looking fragile. So what are some of the underlying problems and possible solutions?

           The rich become richer

           In the US, average after-tax income for the bottom fifth of households was USD15,300 in 2005. For
           the middle earners it was USD50,200 and for the top 1.0%, just over USD1 million. The gap between
           this various groups has moved in very different directions from 1979 to 2005. Pre-tax income for the
           bottom group grew by 1.3% per annum, while middle incomes grew by less than 1.0%. Those at the
           top saw a 200.0% increase from 1979, with a post-tax increase of 228.0%. Put another way the top
           1.0% went from earning 23 times to 70 times the wages of the bottom fifth of households. Relative to
           middle-income families the rich 1.0% went from 8 to 21 times. The problem: US income distribution
           has favoured the top 1.0% over the last 25 years. Is this sustainable? Not in our opinion.

           Why the rich got richer

           Tax has widened the disparity in favour of the rich. This was not always the case. Wealth and income
           distribution were much more evenly matched in the early 1960’s under the Kennedy administration.
           To find a similar disparity to today’s figures we have to travel back to the First World War, when the
           economic scene was dominated by industrial barons in oil, transport and banking. This widening post-
           tax distribution reached its zenith under President George W. Bush, but it follows an ongoing pattern
           initiated by President Reagan and continued by the Democrats. The reforms of G. Bush enabled the
           top 1.0% to secure around three-quarters of income-growth in the period 2002-2006 according to
           figures from the University of California at Berkeley. Admittedly there have been other factors: semi-
           skilled jobs have moved to low-cost countries, illegal immigration into the US made unskilled labour
           even cheaper, unions lost their power base as whole factories were relocated elsewhere. Technology
           also replaced jobs at most levels, and increased the demand for a more skilled and educated work-
           force. On the other hand board rooms prospered from generous stock-options and this led to a
           spiralling in salaries, as companies sought the most successful executives. This does raise the obvious
           question of why this increasing gap has not angered the lower paid. The simple answer seems to be
           that lower and middle-income families have both run down their savings and increased debt. This lies
           at the crux of the economic crisis we now face. Higher house prices appeared to create a never-
           ending source of new finance, especially with banks offering generous terms for re-mortgaging.
           Clearly this has all changed with the recent banking crisis and the decline in house prices. Weaker
           stock-markets have also not helped with so many US pensions tied to Wall Street. Workers now see
           their cost of living rising even faster than their wages with the banks unable to supercharge economic
           growth. They see higher food, fuel and medical charges which can only be met by cutting living
           standards. What must be especially galling for them is to see so many of the architects of these



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           problems, such as Chuck Prince of Citigroup and Stan O’Neal of Merrill Lynch, walking away with
           massive severance deals.

           Is this just a US development?

           Clearly the US is the most extreme example when it comes to income distribution, but what is the
           pattern in other English speaking nations? The ten years of UK labour government have not seen a
           significant increase in the tax-burden for high earners. This has increasingly fallen on middle-earners
           and even the low paid, who have seen the removal of a 10.0% tax band to be replaced by a 20.0%
           tax. In Australia the income distribution has widened to where it was more than 50 years ago.
           Canada, with its more egalitarian ethos, resisted the trend of its larger US neighbour, but the threat of
           migration to the US by Canadian professionals eventually led to wider salary differentials. In Germany
           the chancellor Angela Merkel initially embraced free-market forces. She has now threatened business
           with the imposition of minimum wages in several sectors, if they opt out of collective deals. In part
           this is in response to revelations that leading business executives having been salting their assets in
           accounts in Liechtenstein to evade German tax. There has also been ongoing hostility to the
           increasing influence of foreign-owned private equity funds. In France President Sarkozy seemed to sell
           himself as an ambassador of the free market concept in a country where the unions always emerged
           victorious. Big business has not served him well with the scandal at SocGen and alleged insider
           dealing at EADS, the Franco-German aerospace company. Sarkozy’s proposal of a tax on stock-options
           may point to a less business friendly attitude.

           The wind of change.

           When Warren Buffet, the world’s richest man, talked about the uneven distribution of income some
           people laughed, but most listened. According to Forbes magazine he expressed these views at a
           fundraising event for Mrs Clinton in December 2007. She in turn attacked oil, drug and healthcare
           insurance companies in her failed attempt to gain the Democratic nomination. She also opposed the
           renewal of Mr Bush’s tax cuts for the rich. Barack Obama went one step further, and called for the
           lifting of the limit on income taxed for social security. The general tone of the campaign pointed to an
           old-style Democratic tax-and-spend ethos. Even in Japan, where wage differentials are but less
           marked, the Liberal Democratic government faced severe criticism on the issue of pay in the July 2007
           election.


           Some possible consequences of a revised ‘Anglo-Saxon model’:

               1) The business model of having commercial and investment banking under one roof is likely to
                  be revisited. In layman’s terms commercial banks represent the steady Volvo in the garage
                  and investment banks are the sports car. Both are cars, but with very different profiles and
                  characteristics. Commercial banks have increasingly replaced the thin margins from
                  commercial lending by trading (some would say gambling), on markets. These functions are
                  the responsibility of their investment bankers who can utilize the commercial bank’s balance
                  sheet as leverage and make bigger and more adventurous bets. Certainly from an objective
                  point of view it is difficult to see who has benefited from the synergy of commercial and
                  investment banking, other than the select few who have collected massive bonuses. Stock
                  holders including pension funds have been burnt with the massive declines in bank shares,
                  employees have turned from advisers to salesman and customers view banks with suspicion
                  and frustration.

               2) Tighter money, both now and going forward will mean that private equity and hedge funds
                  will have to revisit their business models. A large proportion of profits from hedge funds came
                  from buying relatively boring investments and then pumping them with lots of borrowed
                  money. This ‘alchemy’ could easily turn a dollar profit into a ten dollar gain while utilizing
                  exactly the same investment. Ready access to plentiful and cheap cash also fuelled the private
                  equity sector where the deals just kept getting bigger and even the largest quoted companies




16 of 18
               could be privatised. This has all changed and private equity is going back to what it does best,
               revamping tired and usually medium sized companies.

           3) Housing markets, particularly in the US, UK, Spain, Australia, New Zealand and Ireland could
              be in for an even rougher ride. This could also spill over to the second homes market spread
              over sunny destinations all over the globe. All these markets profited from the ready
              availability of cash and declining interest rates. The sub-prime crisis in the US is concentrated
              on the urban Afro-American population with no credit history and it opened up an Aladdin’s
              cave of shopping opportunities. They were lured in by nominal rates of interest that exploded
              into usurious rates over time. Their only option was to walk away from their home. Spain
              became a haven for the black money where property provided the best way of laundering
              funds. This has resulted in thousands of empty properties because Spain has built more
              apartments in recent years than the whole of Europe combined. A glance at average price
              growth for prime residential property in the 12 months to December 2007 points to potential
              areas of distress:

               Cap Ferrat (France) +50%, London +29%, Singapore +31%, New York +25%, Monaco
               +25% and Hong Kong +21%.
               Source: Knight Frank

           4) An immediate consequence of all this will be the shrinkage in financial services both in terms
              of employees and tax revenue. This will have an immediate effect on financial service centres
              such as New York, London, Hong Kong and Zurich. Most US states are already experiencing
              declining receipts. Some are falling back on reserves while other will increase local taxes or
              cut services. Banks such as Citigroup are expected to cut 25,000 jobs out of a workforce of
              370,000 and UBS has signalled 5,500 job cuts by mid-2008 with many more announcements
              to come.

           5) Tighter regulation of the banks is inevitable. The rescue of Bear Stearns, largely thanks to the
              Federal Reserve, means that central banks are now actively involved in the restructuring of
              the financial system. As this requires tax-payers money their actions become accountable to
              the public in a much more visible way.

               At the core of this problem is a banking system that can take large risks to potentially
               generate large profits and bonuses. Simultaneously should these trades turn sour, these
               banks cannot be allowed to fail, because of the damage that would inflict on the economy.
               Clearly this is an untenable state of affairs and speaks volumes about the short-termism of
               senior bankers. Unlike the past, when controls could be imposed on selected areas of the
               financial markets, any new checks and balances will have to be far more wide-ranging. This is
               because the financial world is heavily interconnected both globally and in terms of the type of
               business they do. In the case of the US for example the Federal Reserve is no longer able to
               draw a line between big commercial banks such as Citigroup which are required to hold a
               certain amount of capital against unforeseen losses, and brokers such as Bear Stearns, who
               are able to operate with much less capital. So-called unregulated banking is a massive
               business and is estimated to account for close to 40.0% of overall banking activities. The
               growth in the derivatives market is probably the single most important reason these various
               financial organisations are so interdependent; it is estimated to be worth USD62,200bn. For
               the moment the US Treasury has not laid down new regulations but they have provided a
               blue print. If this is implemented the Fed would acquire huge powers of intervention.
               Unregulated institutions such as hedge funds would have to provide a detailed breakdown of
               their investments possibly forcing the business off-shore. Other changes may include new
               liquidity and capital ratios because of the massive growth in securitisation i.e. the process of
               taking a loan, repacking it, and selling it on. These tougher capital requirements could extend
               to all financial institutions and include new rules on off-balance sheet activities. All this would
               have to be approved by Congress. These developments are being monitored in Europe where
               the ECB continues to be alarmed by lack of market data and a similar stance is taken by the



17 of 18
                   Bank of England, keen to avoid another Northern Rock disaster. In the US new rules would
                   also mean all the different regulators will have to be consolidated. There are over 100
                   authorities keeping an eye on various financial institutions and some of these dates back to
                   the US civil war! What is far from encouraging is that the last consolidation of two US
                   regulators took 10 years to achieve. It is also clear that any changes will have to be global
                   otherwise business will simply flow to the most lightly supervised jurisdiction. The introduction
                   of the onerous post-Enron Sarbanes-Oxley Act swept business away from the US to London
                   and Hong Kong, so a similar move would be counter-productive. So expect no speedy
                   solutions to this herculean task, but one thing is clear: much leaner pickings for all financial
                   institutions over time.
                   It is worth noting that the man who is increasingly been seen as the architect of the present
                   crisis, Alan Greenspan, the former head of the Federal Reserve, advocates a no change policy.
                   He maintains that free competitive markets are the unrivalled way to organise economies. We
                   have tried regulation ranging from heavy to central planning. None meaningfully worked. Do
                   we wish to retest the evidence?’ Who knows, he may be right.

               6) Lawyers will be happy. The huge write-off from sub-prime and related problems should keep
                  them in business for years to come. New York City and State have already brought action
                  against Countrywide, the mortgage lender. The ratings agencies are potentially vulnerable
                  having provided triple-A ratings on what now appears to be largely worthless paper. The
                  ratings agencies are paid for their services by the sellers of debt, not the buyers of securities.
                  This raises an immediate conflict of interests.

           So in summary are we likely to see dramatic changes? We think tighter regulation in a
           global economy is likely to be futile. Bureaucrats move at a snail’s pace while financial
           innovation is almost immediate. Greenspan may be right, tighter regulation has often
           proved to be counter-productive. It has also driven business elsewhere. Nevertheless
           there will be changes. We think banks will be forced to change their business models with
           a much clearer distinction between basic commercial banks dealing directly with people’s
           savings, and those who are largely traders. The present situation which allows banks to
           gamble their balance sheets, while underwritten by governments via the tax payer is
           hardly fair. It is difficult to see how the massive disparity in wages and wealth will
           change. We suspect higher wages in emerging economies may strengthen the case for
           workers in developed economies in years to come, but their bargaining power looks even
           weaker at present. So is the ‘Anglo-Saxon ‘model dead? No, only bruised and battered.


                                                                                                             back




           The SAMI Asset Management investment outlook is a quarterly publication. Kindly note that although
           every care has been taken with its preparation and compiling, SAMI AG cannot be held responsible for
           the information the publication contains. Please consult your professional advisor prior to following
           any recommendations given.

           SAMI AG is an independent asset manager. For more information consult our website www.sami.ch
           We are a member of the Swiss Association of Asset Managers (SAAM). For more information consult
           www.vsv-asg.ch




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