Economic

1
Economic Capital Markets Presentation To
Vistage March 11, 2008

• Presented by
• Morris Segall, President
• SPG Trend Advisors

2
THE ECONOMY

• Its past subprime

3
Interest Rates, Mortgage Delinquencies and
Inflation,June 30, 2006

• Mortgage delinquencies are on the rise
• Consumer real disposable income is not keeping
  pace with inflation
• The wealth effect for consumers of appreciating
  housing is evaporating
• The Fed is running a race in monetary policy
  between existing inflationary pressures and an
  economic slowdown lead by the consumer.
• The current and secular balance of energy supply
  and demand has resulted in a new permanent stair
  step increase in the price of energy. I
  therefore believe the exclusion of energy prices
  to measure the economys core rate of
  inflation is no longer valid.

4
Gross Domestic Product2000Q1 through 2007Q4
Source Bureau of Economic Analysis
5
Contributions to GDP Growth by Component,
2007Q3-Q4
Source Bureau of Economic Analysis
6
Consumer Credit2005 Q4-2008 Jan
7
Contributions to Gross Investment Growth by
Component, 2007Q4 and 2007 Q3
Source Bureau of Economic Analysis
8
Corporate Profits (SAAR)2001Q1 through 2007Q3
Source BEA
9
Corporate Profits After Tax with IVA CCA
Adjustments2005 Q1-2007Q3
Billions
Source Bureau of Economic Analysis
10
Annual Average Changes in Non-Farm Productivity
Source Bureau of Labor Statistics
11
ISM Manufacturing Report on Business Jan
2006-Feb 2008
Source Institute for Supply Management
12
Manufacturers Durable Goods Orders
Shipments(excluding transportation)Book to Bill
Ratio
Source U.S. Census Bureau
13
Manufacturers Durable Goods Orders
Shipments(excluding transportation)Book to Bill
Ratio Dec.2007-Jan.2008
14
Philadelphia Federal Reserve Business Outlook
SurveyJanuary 2006- February 2008
Source Federal Reserve Bank of Philadelphia
15
Philly Fed Subsectors
Source Federal Reserve Bank of Philadelphia
16
New Home Sales Units Sold vs. Length on Market
Source U.S. Census Bureau
17
Average National New Home Sale PricesDecember
2005-January 2008
Source US Census Bureau
18
Existing Home SalesSeptember 2001-January 2008
19
Mortgage Bankers Association Delinquency Rates,
Subprime Mortgage Loans, 2005Q1 through 2007Q3
Source Economy.com
20
US Balance of Trade DeficitJanuary 2001-
November 2007
Sources Bureau of Economic Analysis
21
Import Price IndexJanuary 2005- January 2008
22
NYMEX Crude Oil Future Prices in U.S.
DollarsJanuary 1995 through March 7, 2008
Source Energy Information Administration
23
Value of the Dollar (Broad Dollar Index) January
1999 through March 2008
Source Federal Reserve Board
Broad Dollar Index a weighted average of the
foreign exchange value of the U.S. dollar
against the currencies of a broad group of major
U.S. trading partners.
24
Net Change in U.S. JobsJanuary 2000 through
February 2008
Source Bureau of Labor Statistics
25
Continuing Unemployment Claims Jan-06 to
2/23/2008
Source Department of Labor
26
National Nonfarm Employment by Industry Sector
GroupsFebruary 2007 v. February 2008 Absolute
Change
Source Economy.com, Bureau of Labor Statistics
27
National Nonfarm Employment by Industry Sector
GroupsNovember 2007 v. February 2008 Absolute
Change
28
Average Hourly Compensation2004-2007
Source Bureau of Labor Statistics
29
Source Bureau of Labor Statistics
30
Consumer Confidence and Consumer Sentiment Survey
Source Reuters and Polling Report
31
U.S. Personal Savings Rate 2002 through Jan. 2008
Source Bureau of Economic Analysis
32
The 2008 Election- The Race Continues

• Its about the economy and the middle class
• Voters are angry and want drastic change in the
  economic and political landscape
• They want to participate in economic growth and
  pass it on to their children. They want

33
What the people want

• Long term solutions to pollution and energy cost
  inflation
• Congress President working together toward
  tangible solutions (long short term) including
• cyclical economic recovery
• Long term entitlement program protection

34
The Prospects
Republicans
Democrats

Photos Yahoo.com
35
Capital Markets

• Wheres the love?

36
SP 500 v. MS EAFE, Russell 2000 NASDAQ
Composite Indices 2005-2008
37
Investment Returns as of March 8, 2008
Source Wall Street Journal, Barrons,
Kitco.com, Dow Jones and CASAM CISDM

• DJ Equity All REIT TR
• CASAM CISDM Fund of Funds Index as of Jan. 31
  2008

38
US Treasury Yield Curve as of March 6, 2008
Source Federal Reserve Board
39
Conclusions

• It is likely we are entering a recession in the
  first quarter of this year with economic weakness
  continuing through the first half if not nine
  months of 2008.
• Increased near term economic and market
  pressures include
• stubbornly high inflation in energy, food and
  basic services
• weakening corporate profits
• increased unemployment
• declining corporate capital and consumer spending

40
Conclusions continued

• Diminishing State and Local Government spending
• Reduced economic contribution from exports as
  overseas economic growth slows
• Continued credit pressures in residential housing
  and consumer lending spreading to commercial
  construction financing
• The Fed will continue to face a stagflationary
  economic environment extending its dilemma in
  monetary policy.

41
Conclusions continued

• However, a bottoming of the housing cycle and an
  abatement in bank credit losses in Q3/Q4 of this
  year could set the stage for a cyclical economic
  improvement and potentially a strong equity
  market rally late this year and into 2009.
  However election issues and continued secular
  problems facing this country may limit the equity
  market gains past next year.

42
Thank You

• You can always reach me at msegall_at_spgtrend.com
• Also, if you need us in a hurry, we are at
  410.522.7243
• Please contact us when you require economic and
  capital markets research policy analysis.
• Further information available at www.spgtrend.com