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

Que Sera, Sera Whatever Will Be, Will Be

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Que Sera, Sera Whatever Will Be, Will Be. St. Albert 2010 Business Breakfast February 23, 2010. Disclaimer. - PowerPoint PPT Presentation

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Page 1: Que  Sera, Sera Whatever Will Be, Will Be

Que Sera, SeraWhatever Will Be, Will

Be

St. Albert 2010 Business Breakfast

February 23, 2010

Page 2: Que  Sera, Sera Whatever Will Be, Will Be

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.

Disclaimer

Page 3: Que  Sera, Sera Whatever Will Be, Will Be

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.

Page 4: Que  Sera, Sera Whatever Will Be, Will Be

Spruce Meadows Round Table, Sept/08

Paul Volcker, Former Chairman, US Federal Reserve System:

This has been the most complicated financial crisis we have ever had.

It has moved from a banking problem to a global market problem.

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.

Page 5: Que  Sera, Sera Whatever Will Be, Will Be

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)

Page 6: Que  Sera, Sera Whatever Will Be, Will Be

To help understand the numbers . . .

$1 million in $100 bills . . .

Page 7: Que  Sera, Sera Whatever Will Be, Will Be

. . . $1 billion in $100 bills . . .

10 pallets

Page 8: Que  Sera, Sera Whatever Will Be, Will Be

. . . $1 trillion in $100 bills . . .

I’m still hereby the way

Page 9: Que  Sera, Sera Whatever Will Be, Will Be

6 Steps to Economic Recovery

1. Financial Rescue Plan Approval DONE ($700 billion)

2. Coordinated universal drop in interest rates DONE (0.5%)

3. Lower gasoline prices: Mid September oil was

$101US/$107CDN Target on Oil: $75US/$88CDN

DONE Down 20%

4. Federal Reserve begins buying assets mid-November, providing clarity to the markets:

(Commercial paper, sub-prime re-purchase, refinancing financial institutions)

LIBOR 5.00% to 2.15% (Bloomberg, 2008)

DONE

Lower LIBOR rates; lower US short-term & long-term rates

Global banks increasing mortgage and small business commitment

Focus shifting to Obama’s 100 day plan

5. Sustainability of US housing prices President Obama’s 100 Day Plan:

Household incentive plan for Main Street

Mortgage Plan Auto Rescue Package J obs, jobs, jobs

DONE Sustainability = Affordability

Housing affordability has never been higher in this generation

6. Inflation

2nd half of 2009

(wages, credits and rents are all deflating)

Page 10: Que  Sera, Sera Whatever Will Be, Will Be

-1

0

1

2

3

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9

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14

0

2

4

6

8

10

12

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24

26

28

30

1930 1940 1950 1960 1970 1980 1990 2000 2010

NBF Economy & Strategy (data via BEA)

Corporate Profits as a Share of GDP and Unemployment Rate

% of GDP %

U.R.(right)

Profits(left)

Page 11: Que  Sera, Sera Whatever Will Be, Will Be

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

Page 12: Que  Sera, Sera Whatever Will Be, Will Be

80

85

90

95

100

105

110

115

120

125

130

2007M01 2007M07 2008M01 2008M07 2009M01 2009M07

2007 = 100 EmergingAsia

Industrializedeconomies

World

NBF Economy & Strategy (data via CBP)

World: Asia Already Producing Above its Previous Peak

Level of Factory Output: Emerging Asia vs Industrialized Economies

Page 13: Que  Sera, Sera Whatever Will Be, Will Be

75

76

77

78

79

80

81

82

83

84

85

86

87

99 00 01 02 03 04 05 06 07 08 09 10

IEA

mbbd

Back to nearpeak demand

in 2010

Demand for Oil Rebounds

Page 14: Que  Sera, Sera Whatever Will Be, Will Be

100

120

140

160

180

200

220

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Index January 2000 = 100

S&P/Case-Shiller Composite 20 cities

Teranet-NationalBankComposite Index TM

Canada vs US: Existing Home Prices

Repeat Sales Methodology

Page 15: Que  Sera, Sera Whatever Will Be, Will Be

US Housing Starts (Annual Rate)

0

500

1,000

1,500

2,000

2,500

3,000

Jan

-59

Jan

-62

Jan

-65

Jan

-68

Jan

-71

Jan

-74

Jan

-77

Jan

-80

Jan

-83

Jan

-86

Jan

-89

Jan

-92

Jan

-95

Jan

-98

Jan

-01

Jan

-04

Jan

-07

(Thousands)

Source: Bureau of Census, US Commerce Department

Page 16: Que  Sera, Sera Whatever Will Be, Will Be

7) “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)

9 Steps to Economic Recovery

Page 17: Que  Sera, Sera Whatever Will Be, Will Be

8) “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

9 Steps to Economic Recovery

Page 18: Que  Sera, Sera Whatever Will Be, Will Be

9) “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

9 Steps to Economic Recovery

China will be investing in real assets, not paper.

Page 19: Que  Sera, Sera Whatever Will Be, Will Be

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%.

Page 20: Que  Sera, Sera Whatever Will Be, Will Be
Page 21: Que  Sera, Sera Whatever Will Be, Will Be

Phone 780.412.6644

Email [email protected]

Web www.anguswatt.com