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Que Sera, Sera Whatever Will Be, Will Be

Que Sera, Sera Whatever Will Be, Will Be. St. Albert 2010 Business Breakfast February 23, 2010. Disclaimer.

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Que Sera, Sera Whatever Will Be, Will Be

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  1. Que Sera, SeraWhatever Will Be, Will Be St. Albert 2010 Business Breakfast February 23, 2010

  2. Disclaimer National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX). ** The securities or sectors mentioned herein are not suitable for all types of investors. Please consult your investment advisor to verify whether the securities or sectors suit your investor’s profile as well as to obtain complete information, including the main risk factors, regarding those securities or sectors. *** The information contained herein has been prepared by Angus Watt, an Investment Advisor with National Bank Financial; the opinions expressed do not necessarily reflect those of National Bank Financial. **** While opinions expressed are based on analysis and interpretation of historical data believed to be accurate the underlying data is not necessarily guaranteed as to accuracy.

  3. Messages over the Years • Dr. Allard: • Top 3 Principles when Investing in Real Estate. • True in business as well. • We are ‘addicted’ to oil. • ‘We are addicted to growth’. Rex Tillerson, Chairman and CEO, Exxon Mobile (Sept/07) • Can’t have economic growth … without credit growth.

  4. Spruce Meadows Round Table, Sept/08 Paul Volcker, Former Chairman, US Federal Reserve System: • This has been the most complicatedfinancial crisis we have ever had. • It has moved from a banking problem to a global marketproblem. • Bankers have structured ‘financially engineered’ loan portfolios without truly understanding the risks inherent in the products. • Excess compensation, lack of regulations, and lack of transparency contributed to this fiasco. • Canadian banks and the Canadian banking system are one of the very best in the world.

  5. US Fiscal Rescue(Past 18 months) • Bailout(s) – financial and auto industries • Cash for clunkers • Home buyers credit • Foreclosure – postponement • Fannie Mae & Freddie Mac • Quantitative easing (low mortgage rates)

  6. To help understand the numbers . . . $1 million in $100 bills . . .

  7. . . . $1 billion in $100 bills . . . 10 pallets

  8. . . . $1 trillion in $100 bills . . . I’m still hereby the way

  9. 6 Steps to Economic Recovery

  10. Corporate Profits as a Share of GDP and Unemployment Rate % % of GDP Profits(left) U.R.(right) NBF Economy & Strategy (data via BEA)

  11. Global Urbanization Accelerating Fidelity Investments, Source: Livestock’s Long Shadow: FAQ 2006 • World’s population is growing by @70 million people/year, becoming richer and more urbanized • 70% of the world’s population will be in urban centres by 2050

  12. World: Asia Already Producing Above its Previous Peak Level of Factory Output: Emerging Asia vs Industrialized Economies Emerging 2007 = 100 130 Asia 125 120 115 110 105 World 100 95 90 Industrialized 85 economies 80 2007M01 2007M07 2008M01 2008M07 2009M01 2009M07 NBF Economy & Strategy (data via CBP)

  13. Demand for Oil Rebounds mbbd Back to nearpeak demand in 2010 IEA

  14. Canada vs US: Existing Home Prices Repeat Sales Methodology 220 Index January 2000 = 100 Teranet-National Bank 200 TM Composite Index 180 160 140 S&P/Case - Shiller Composite 20 cities 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

  15. US Housing Starts (Annual Rate) Source: Bureau of Census, US Commerce Department

  16. 9 Steps to Economic Recovery • “Sugar high” 2nd Half of 2009 • Markets appear irrational and logic doesn’t seem to matter • Our ”sugar” is low interest rates • The US dollar continues to be under pressure • US inventories will rebuild after 6 months of declining • Investors will have no motivation to sell (governments committed to recovery)

  17. 9 Steps to Economic Recovery • “Hand-Off” to the US Consumer End of 2009 - Summer 2010 (US Consumers drive the ball down the field) • US Banks finally provide liquidity to both businesses and consumers • US Government stimulus packages have an impact on the economy • More mergers and acquisitions; the big get bigger • China is still growing at over 7% per year • Demand and high unemployment result in increased productivity • The Bank of Canada begins “Quantitative Easing” in an effort to lower the value of the Canadian dollar

  18. 9 Steps to Economic Recovery • “In the Red Zone” Government Forces Turnover 2nd Half of 2010 • All levels of Government need cash, there will be tax and fee increases as well as reductions to tax credits and deductions • The US consumer will be deleveraging and increasing their savings • Unemployment will be higher than expected • Real Estate prices will be softer, rents will decline • US Federal Debt levels will be a major concern • Re-regulation of central banks and financial institutions, as to who has the authority, power, and responsibility, both domestically and internationally • China will be investing in real assets, not paper.

  19. Canadian Mortgage Changes Mortgage Restructuring – effective April 19, 2010 • Must qualify for a 5 year, fixed rate mortgage, regardless of term or rate you prefer. • When purchasing an investment property, must have 20% down to qualify for CMHC insurance. • When re-financing home, may only take 90% of home value, lowered from 95%.

  20. Phone 780.412.6644 Email james_angus.watt@nbf.ca Web www.anguswatt.com

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