3 April 2020

Jim MellonReflections from a small island

Fastest 30% Drop in S&P 500 on Record19 Feb 202006 Feb 193409 Nov 193116 Sep 192925 Aug 198726 Jun 193124 Feb 193110 Apr 193004 Jan 200225 Oct 193909 Nov 193809 Oct 200710 Mar 193707 Nov 194029 Nov 196824 Mar 200011 Jan 1973

Days to Lose 30% of Value0 100 200 300 400

373369

361354

271250

145142

136126

6863

3831

242322

Sources: BofA Global Research

Italy

Norway

Australia

US

Denmark

Germany

UK

Spain

Percentage of GDP0% 5% 9% 14% 18%

Unprecedented Fiscal and Monetary StimulusCentral Bank Stimulus

• Cut rates by 15 bps to a historic low of 0.1%• Increased QE program by £200 billion to £645 billion.

• Fed cut funding rate to a target rate of 0.0% to 0.25%. • Reduced discount window rate by 50 bps to 0.25% • US swap lines were extended with major central banks and included• Expanded QE program by $700 billion ($500 billion in US Treasures,

$200 billion in mortgage-backed securities)• Expanded QE program by $700 billion ($500 billion in US Treasures,

$200 billion in mortgage-backed securities) additional countries in the program

• Raised level at which commercial banks are charged negative rates

• Cut its benchmark rate by 50 bps to 1%

• Cuts policy rate by 0.75% to 0.25%

• Reduced overnight lending rate to banks from 0.75% to 0.20%• Increased asset purchase program to SEK 300 billion this year

• C$500 million weekly mortgage-backed securities purchase programme

• Cut one-week repo rate by 100 bps to 9.75%

• Cut rates by 25 bps to an all-time low of 0.25%

• Cut rates by 25 bps from 1% to 0.75%

Fiscal Stimulus

US banks much better capitalized than ‘08/’09

European Creditworthiness in QuestionSp

read

ove

r 10

Year

Bun

ds

0.0%

1.3%

2.5%

3.8%

5.0%

3/25/2

0

3/23/2

0

3/19/2

0

3/17/2

0

3/13/2

0

3/11/2

03/9

/203/5

/203/3

/20

2/28/2

0

2/26/2

0

2/24/2

0

2/20/2

0

2/18/2

0

2/14/2

0

2/12/2

0

2/10/2

02/6

/202/4

/20

1/31/2

0

1/29/2

0

1/27/2

0

1/23/2

0

1/21/2

0

1/17/2

0

1/15/2

0

1/13/2

01/9

/201/7

/201/3

/201/1

/20

Greece Spain Italy Ireland Portugal France

Govt. Debt to GDP Ratios Rising with Stimulus

0%

100%

200%

300%

400%

China, People's Republic of Italy France United Kingdom Australia Denmark

DebtStimulus

• More dollars chasing limited supply of goods → inflation• Inflation erodes purchasing

power per dollar• Historic yield advantage of

currencies gone with NIRP and ZIRP• Gold and silver slammed in

hunt for liquidity

Gold and silver prices DO NOT YET reflect the massively inflationary monetary and fiscal stimulus about to kick in!

Gold / Silver Ratio - All Time HighsOun

ceso

fSilverReq

uiredtoBuyanOun

ceofG

old

0

30

60

90

120

3/24/2010/31/145/29/0912/31/037/31/98 2/26/93 9/30/87 4/30/8211/30/76

1450

1512.5

1575

1637.5

1700

3/25/20 3/18/20 3/11/20 3/4/20 2/26/20 2/19/20 2/12/20 2/5/20

-12.1%

11

13

15

17

19

3/25/20 3/18/20 3/11/20 3/4/20 2/26/20 2/19/20 2/12/20 2/5/20

-37.2%

$24.99 $20.38

Lab-grown leatherDairy proteins Cultivated beef

Disruption of traditional agriculture will free up 485m acres of land in the US alone.

“Disruption of the cow”

Name GICS Sector Cntry of Incorp Market Cap ($m) Dvd Yld (%) Forward PE 1M Tot Ret %

INTL CONSOLIDATED AIRLINE-DI Industrials ES 3,976 12.12 1.79 -57.56

DELTA AIR LINES INC Industrials US 18,915 1.35 4.70 -35.94

KRAFT HEINZ CO/THE Consumer Staples US 29,607 6.61 10.52 -0.19

ALIBABA GROUP HOLDING-SP ADR Consumer Discretionary KY 505,935 - 22.95 -9.33

LLOYDS BANKING GROUP PLC Financials GB 23,572 10.16 5.49 -33.33

RAVEN PROPERTY GROUP LTD Real Estate GG 132 14.07 #N/A N/A -40.00

HSBC HOLDINGS PLC Financials GB 93,202 8.97 9.05 -12.50

RSA INSURANCE GROUP PLC Financials GB 4,383 6.30 8.36 -15.79

PHOENIX GROUP HOLDINGS PLC Financials GB 4,417 7.74 11.46 -11.43

BAE SYSTEMS PLC Industrials GB 16,282 4.77 9.78 -16.54

ROYAL DUTCH SHELL PLC-A SHS Energy GB 100,995 11.59 9.35 -20.72

BP PLC Energy GB 63,584 10.77 10.46 -20.76

Scheduled Flight Capacity Change

-100%

-75%

-50%

-25%

0%

Air Antw

erp

Air Tran

sat

BA CityFly

er

Compas

s Airlin

esGoA

ir

Laud

amoti

on

Philippine

Airlines

Saudia

Tigera

ir Aus

tralia

Yemen

ia Airw

ays

Kenya

Airway

s

Air Fran

ce

South

African

Airway

s

Aegea

nDelt

a

JetBlue

Japan

Airlines

Pegas

us