Office: 404-651-3291 email: forecast@gsu robinson.gsu/efc

1. Economic and Investment Outlook Dr. Rajeev Dhawan Director ECONOMIC FORECASTING CENTER Presented at the Economic Outlook Conference Monroe, Louisiana March 31st, 2006 Office: 404-651-3291 email: forecast@gsu.edu http://www.robinson.gsu.edu/efc

2. It’s the economy, stupid! It’s housing, folks!

5. Bernanke’s Headaches Higher energy prices may pass through into the prices of non-energy goods and services….inflation expectations. Another factor bearing on the inflation outlook is that the economy now appears to be operating at a relatively high level of resource utilization…..with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately-- in the absence of countervailing monetary policy action--to further upward pressure on inflation. Source: Testimony of Chairman Ben Bernanke on February 15th, 2006

6. Breakdown of Consumer Prices

7. Two Gloomy Forecasts from George Soros and Bill Gross As the housing boom cools off, the savings rate is likely to rise, and that will lead to a shortfall in demand that I think will bring a global slowdown… I expect a slowdown in 2007, which will probably cast its shadow over the markets in 2006. …Yields have peaked in the bond market and will soon peak in Fed Funds producing an economic slowdown in 2006. If the Fed goes beyond 4.5% and inverts the yield curve, the possibility of recession will increase.

8. Thou Shalt Not Take The “R” Word in Vain

10. Breakdown of Retail Sales

11. EFC@GSU Forecastvs. Blue Chip Consensus GDP

12. U.S. Short-Term Forecast 200520062007 2008

13. Anonymous Ventor My girlfriend demanded that I take her to someplace expensive, so I took her to a gas station Source: AJC, April 21st, 2005

14. Hurricanes Katrina and Rita

16. Source: Rick McKee, Augusta Chronicle, The AJC, January 12, 2006

17. Anonymous Vent In January my electric bill was $180 and my gas bill was $338. I purchased electric space heaters and stopped using the gas heater. My electric bill was only $195 in February. ($/Thou. Cubic Feet) (Bil. Cubic Feet) Bye bye, gas! Source: AJC, February 19th, 2006

18. 2005 Jet Orders * Projections based on 10-Q filings

19. Source: Boeing.com; EFC Mapping

20. Ongoing Recovery Tech Bust Roaring 90s

22. and Losers in the Job Market Winners

23. Momentum Carries Over From 2004

24. Russian Crisis Aug’98 Hurricanes Sept’05 9-11 War in Iraq March’03

25. Trade Deficit vs. Fiscal Deficit

28. Anonymous Vent With as much Chinese-made merchandise as Wal-Mart sells, perhaps they should change their name to Great Wall Mart. Source: AJC, January 12th, 2006

29. Rajeev Dhawan’s View

30. High Trade Deficit Numbers Keep US Long Term Interest Rates Low!

31. Global Current Account Balances (Billions of U.S. Dollars) Source: Remarks by Governor Ben S. Bernanke, March 10, 2005

32. Global Savings Glut Is Showing up in T-Bond Holdings Source: FRB Flow of Funds Data

33. Trade and Holding of US Treasuries by Central Banks Japanese Bought $220+ Bil. worth of Treasuries to Keep their Currency from Appreciating * Period from July 1st’ 2004 to June 30th’ 2005 * All numbers are in billions of U.S. dollars Source: BEA (Trade) and US Treasury Department

34. Source: May 2005, Forecast of the Nation 10-Year Bond Rate and Trade Deficit 10-Year Bond Regression

35. 2004 US Balance in International Trade * Billions of Dollars Source: US Bureau of Economic Analysis

36. 2003 Total Vehicle Production & Sales ü ü Source: Ward’s World Motor Vehicle Data 2004

37. Source: Jim Borgman, The Atlanta Journal Constitution, Jan 27, 2006

38. GM’s Financials in the Eye of Wall Street How to fill the hole? Bankruptcy? Liability  43% Source: The Wall Street Journal, January 14th, 2006

39. END OF AN ERA DAWN OF A NEW DAY

40. Source: The Economist, October 29th, 2005

41. But Statistically One Can’t Prove That There is a Home Price Bubble!

42. Median = 4.97 Median = 7.74 Red Zone Safe Zone Source: EFC May 2005 Conference Presentation

43. Source: The 2005 National Association of Realtors, Profile of International Home Buyers in Florida

44. Source: The 2005 National Association of Realtors, Profile of International Home Buyers in Florida

45. FED’s Alan Greenspan CHAIRMAN’S CORRECT DIAGNOSIS To the American Bankers Association Annual Convention September 26th, 2005 These estimated LTVs are highest in states…, such as California and Massachusetts…most people buying a home in California are probably also selling a home in California and using at least part of their accumulated home equity capital gains as a down payment on their new house. Apparently, many households are foregoing some consumption to lower their new mortgage balances. These estimated LTVs are highest in states…, such as California and Massachusetts…most people buying a home in California are probably also selling a home in California and using at least part of their accumulated home equity capital gains as a down payment on their new house. Apparently, many households are foregoing some consumption to lower their new mortgage balances.

46. Source: The Economist, Jan 21, 2006

47. Source: BusinessWeek, January 23rd, 2006

48. Top 5 National Predictions 1. Enjoy 2006, Expect a Soft Landing in 2007 2. Housing Market Displays Orderly Moderation 3. Long-Term Rates Will Rise Mildly 4. Bet on Manufacturing of the RIGHT Type! 5. Oil Remains Above $50/Barrel for Next Few Years

49. The Usery Center for the Workplace at Georgia State University Special Thanks to the Center’sExecutiveSponsors Carl R. Zwerner Chair of Family Owned Businesses Morgan Keegan Sponsors