mrti 2012 v2
Transcript of mrti 2012 v2
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Financial Markets 2012
Scenarios and Asset Allocation
December 2011
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Global Growth - Where we begin 2012
12/31/2011 JC/Financial Markets 2012 v2.0 Page 2
US data have generally been better
over 2H 2011. NFP/Jobless rates andinitial jobless claims leading the way.Consumer Metrics showed the leadfor 2H-11 but is more flat for 1H-12.
Actual data and expectations havemoved into balance going into 2012
as actual data have managed tomatch the lovered expectations.
Germany continues to hold up well.
Asia data have disappointed relativeto expectations going into 2012 amidflooding in Thailand and the effect of
tighther monetary policy in China.India is flashing many warningsignals.
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Global Growth Scenarios 2012
12/31/2011 JC/Financial Markets 2012 v2.0 Page 3
Consensus
Upside
Surprise
Global
Recession Crisis 2.0
Global 3.5 4.3 2.0 0.3
US 2.2 3.0 0.5 -1.0
EU -0.2 1.0 -1.5 -3.0
China 8.4 9.0 7.0 5.0
0.0
1.0
2.0
3.0
4.0
5.0
Consensus Upside Surprise Global Recession Crisis 2.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Global US EU China
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Factors to Influence 2012 #1
• The future of the Euro and the EU-27
• Can US decouple and be the engine of world growth in 2012? – US Employment rate under 8% on election day?
– Housing to turn the corner in 2012?
• Central banks
– Draghi to show his real GS character
– CB takes QE into more risky assets
• Continued DM deleveraging
• Sovereign risk moving to US/UK/Japan
• China
– Transition to new political leadership to be orderly
– Succesful softlanding or?
• Effect of fiscal austerity - Keynes vs. Hayek
12/31/2011 JC/Financial Markets 2012 v2.0 Page 4
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Factors to Influence 2012 #2
• Elections
– Presidential election in France, Russia and US – Greek elections in April
• Geo-politics
– Attack on Iranian atomic facilities
– Arabic spring get out of control
– Pakistan breaks down
• Financial sector
– Facing realities on writedowns and capital need?
• Inflation
– Global liquidity/money supply vs global delveraging/global recession
– Commodities
12/31/2011 JC/Financial Markets 2012 v2.0 Page 5
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The Global Economic Challenge 2012
12/31/2011 JC/Financial Markets 2012 v2.0 Page 6
Euro SurvivalFight
Austerity
DM Deleveraging
CB “crowding out”
Global CBliquidity
Low expectations
US Growth?
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Scenarios for the future of Euro area
1. Stays together after ECB soon into 2012 begins QE with fixed level target
for sovereign interest rate levels2. Euro stays together after “meeting of Cardinals” and a week of bank
holliday
3. Greece leaves after election in April, but remaining countries stay
together
4. A number of weak countries leave
5. A number of strong countries leave
12/31/2011 JC/Financial Markets 2012 v2.0 Page 7
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Market Scenarios 2012
12/31/2011 JC/Financial Markets 2012 v2.0 Page 8
Consensus
Crisis 2.0**High Sov. Yields, but no
inflation
GlobalRecession
UpsideSurprise
High Bond Yields/Inflation
Low Bond Yields/Deflation
Recession StrongGrowth
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Market Scenarios 2012 – Asset Allocation
JC/Financial Markets 2012 v2.0 Page 912/31/2011
As set Cl as s ETF
Consens
us
Upside
Surprise
Global
Recession
Crisis
2.0 Bloomberg Code YtD E(S1) E(S2) E(S3) E(S4)
Vol.
30d
Eq. - S&P500 SPDR S&P 500 ETF TRUST 10% 15% 5% 0% SPY US Equity 1.9 5% 15% -10% -25% 23.9
Eq. - World ISHARES MSCI EAFE INDEX FUND 5% 0% 5% 0% EFA US Equity -12.2 5% 15% -10% -25% 31.1Eq. - EU DBX-TRACKERS EURO STXX 50 10% 15% 5% 0% XESX GY Equity -14.9 10% 20% -10% -25% 32.4
Eq. - Local OMX COPENHAGEN 20 INDEX 0% 0% 0% 0% KFX Index -13.6 5% 15% -10% -25% 19.2
Eq. P.E. POWERSHARES GLOBAL LISTED PR 5% 10% 0% 0% PSP Equity -21.0 10% 20% -10% -25% 33.6
Equity - Developed 30% 40% 15% 0%
Eq. - EM ISHARES MSCI EMERGING MKT IN 10% 10% 5% 0% EEM US Equity -18.8 15% 25% -15% -30% 36.7
Eq. - China MORGAN STANLEY CHINA A SHARE 5% 10% 5% 0% CAF US Equity -28.1 10% 25% -15% -30% 25.9
Equity - EM 15% 20% 10% 0%
FI - GE ISHARES EBREXX GVG 5.5-10.5 0% 0% 15% 0% RXP5EX GY Equity 11.6 -3% -10% 3% -5% 7.2
FI - US ISHARES BARCLAYS 7-10 YEAR 5% 0% 15% 30% IEF US Equity 15.6 -3% -10% 3% -5% 6.8
FI - EU DB X-TR IBX EUR SOV EZ 7-10 5% 0% 0% 0% X710 GY Equity 3.9 3% 6% -5% -10% 10.8FI - Inf.Link. ISHARES BARCLAYS TIPS BOND 0% 0% 10% 0% TIP US Equity 13.3 -3% -5% 0% -5% 6.0
Fixed Income - Gov 10% 0% 40% 30%
FI - IG ISHARES IBOXX INV GR CORP BD 5% 0% 5% 0% LQD US Equity 9.7 5% 10% 0% -10% 6.4
FI - HY ISHARES IBOXX H/Y CORP BOND 5% 15% 0% 0% HYG US Equity 6.8 8% 10% 0% -10% 13.1
FI - EM ISHARES JP MORGAN EM BOND FD 5% 0% 0% 0% EMB US Equity 7.6 2% 0% 0% -5% 6.6
Fixed Income - Credit 15% 15% 5% 0%
Real - Estate ISHARES DJ US REAL ESTATE 5% 10% 0% 0% IYR US Equity 5.5 5% 10% -5% -10% 26.2
Com. - Oil UNITED STATES OIL FUND LP 5% 5% 0% 0% USO US Equity -2.3 10% 20% -20% -35% 27.7
Com. - Agri. POWERSHARES DB AGRICULTURE F 5% 5% 0% 0% DBA US Equity -10.7 10% 15% -10% -10% 11.6
Com. - Broad POWERSHARES DB COMMODITY IND 0% 0% 0% 0% DBC US Equity -2.6 10% 15% -15% -20% 18.3Commodities - Ex. Gold 10% 10% 0% 0%
Com. - Gold SPDR GOLD TRUST 5% 5% 10% 10% GLD US Equity 9.6 10% 20% -10% -20% 23.6
Cash - EUR DB X-TR II EONIA 10% 0% 20% 60% XEON Gy Equity 0.7 1% 1% 0% 0% 0.0
EUR/USD 58% 65% 48% 40% 1.20 1.40 1.10 1.00
Total 100% 100% 100% 100% 6.8% 17.5% -3.1% -3.5%
YtD Return 2011 -3.89% -7.35% 3.39% 6.09% E(VoL) 13.1 18.9 6.7 3.2
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Asset Allocation Comments
1. Four portfolios and four market scenarios with
expected return per asset
2. Consensus market scenario assumes a gradualsolution of the EZ debt crisis leading to slightlyhigher rates and positive equity markets
3. The main difference between Global Recessionand Crisis 2.0 is that sovereign rates move upin Crisis 2.0, but are down/flat in Globalrecession
4. As usual currency moves will have big effecton portfolio performance.
5. Table 1 shows “expected” results for the 4
different portfolios in the four different marketscenarios
6. Table 2 is same as Table 1, but shown in Euro
7. Table 3 shows simulated Sharpe Ratioassuming zero risk free rate
12/31/2011 JC/Financial Markets 2012 v2.0 Page 10
Table 1: Alternativ Returns
Consen
sus
Upside
Surprise
Global
Recession
Crisis
2.0
Consensus 6.8% 13.2% -7.6% -17.8%
Upside Surprise 9.0% 17.5% -9.5% -21.8%
Global Recession 2.4% 4.2% -3.1% -11.3%
Crisis 2.0 0.4% -0.4% -0.1% -3.5%
Table 2: Alternativ Returns in EUR
Consen
sus
Upside
Surprise
Global
Recession
Crisis
2.0
EUR/USD 1.20 1.40 1.10 1.00
Consensus 11.0% 8.5% 1.0% -4.7%
Upside Surprise 13.7% 12.2% 0.3% -7.0%
Global Recession 7.1% -1.1% 6.7% -0.4%
Crisis 2.0 5.1% -5.7% 9.7% 5.6%
Table 3: Sharpe(0%RiskFree) Ratio
Consen
sus
Upside
Surprise
Global
Recession
Crisis
2.0Consensus 0.52 0.70 -1.13 -5.47
Upside Surprise 0.68 0.93 -1.41 -6.70
Global Recession 0.18 0.22 -0.46 -3.46
Crisis 2.0 0.03 -0.02 -0.01 -1.08
Market Scenarios
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Return Assumptions
JC/Financial Markets 2012 v2.0 Page 1112/31/2011
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Consensus Upside Surprise Global Rece ssion Crisis 2.0
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Realised 2011 Returns (ex. Dividends)
JC/Financial Markets 2012 v2.0 Page 1212/31/2011
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
03/01/2011 28/02/2011 25/04/2011 20/06/2011 15/08/2011 10/10/2011 05/12/2011
Price Appriciation 03-01-2011 to 30-12-2011, DKK
Consensus Upside Surprise Global Recession
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Some 2012 Options Possibilities
JC/Financial Markets 2012 v2.0 Page 1312/31/2011
Asset Symbol Expiry Strike Bid Size Bid Price Ask Price Ask Size Avg Close ImplVol Delta OptPr ice PVDi v Ga mma Vega Theta UndPr ic e
FX EUR 201206 P 1.15 10 0.0129 0.0136 25 1.02% 0.0134 18.7% -0.15 0.0134 0 N/A 0.0020 -0.0001 1.298
FX EUR 201206 C 1.45 30 0.0071 0.0077 25 0.57% 0.0072 13.9% 0 .12 0.0072 0 N/A 0.0018 -8E-05 1.298
Equity ES 201206 P 950 213 16.00 16.50 390 1.30% 15.90 35.4% -0.10 16.00 0 0.0006 N/A -0.1596 1,250.75
Equity ES 201206 C 1400 380 16.75 17.50 310 1.37% 17.50 18.7% 0 .21 17.50 0 0.0018 N/A -0.1349 1,250.75
Equity ES 201212 P 850 370 25.50 27.00 520 2.12% 26.00 35.8% -0.11 26.00 0 0.0004 N/A -0.1121 1,241.00
Equity ES 201212 C 1500 440 17.25 18.75 245 1.45% 18.60 18.3% 0 .17 18.60 0 0.0011 N/A -0.0785 1,241.00
Equity ESTX50 201206 P 1700 0 -1 .00 -1 .00 0 -0.04% 44.70 40.2% -0.13 4 3.00 8 8.4 403 0.000 3 N/A -0.3635 2,316.55
Equity ESTX50 201206 C 2600 0 -1 .00 -1 .00 0 -0.04% 35.30 24.6% 0 .21 4 0.80 8 8.4 403 0.000 8 N/A -0.3321 2,316.55
Equity EEM 201206 P 30 67 1.09 1.12 894 2.90% 1.11 42.6% -0.16 1.10 0 0.0227 0.0647 -0.008 38.08
Equity EEM 201206 C 45 789 0.73 0.76 184 1.96% 0.75 26.5% 0 .21 0.74 0 0.0418 0.0747 -0.006 38.08
FI TLT 201206 P 110 174 2.80 2.91 915 2.35% 2.96 23.2% -0.24 2.91 0 0.0164 0.2552 -0.0172 121.25
FI TLT 201206 C 135 101.63 1.68
458 1.36% 1.5717.6% 0 .21
1.63 0 0.0199 0.2393 -0.0129 121.25
FI HYG 201206 P 80 372 1.05 1.45 485 1.40% 1.25 19.8% -0.18 1.25 0 0.0219 0.1611 -0.0092 89.49
FI HYG 201206 C 90 340 1.10 1.45 544 1.42% 1.15 6.4% 0 .48 1.45 0 0.1035 0.2406 -0.0054 89.49
Com CL 201212 P 60 1 1.60 1.68 5 1.66% 1.62 43.5% -0.08 1.62 0 0.0036 0.1363 -0.009 98.50
Com CL 201212 C 150 12 1.25 1.61 12 1.45% 1.23 32.2% 0 .11 1.35 0 0.0062 0.1745 -0.0085 98.50
Com DBA 201207 P 25 117 0.35 0.55 616 1.56% 0.45 21.9% -0.16 0.45 0 0.0532 0.0542 -0.0028 28.83
Com DBA 201207 C 33 1338 0.45 0.55 1 1.73% 0.50 21.1% 0 .22 0.55 0 0.0666 0.0653 -0.0035 28.83
Com GC 201206 P 1300 10 16.60 18.80 10 1.13% 20.50 28.5% -0.12 18.80 0 0.0007 N/A -0.1997 1572.80
Com GC 201206 C 1850 25 16.60 26.50 25 1.37% 18.70 24.1% 0 .16 18.70 0 0.0010 N/A -0.2005 1572.80
Com GC 201212 P 1200 1 27.00 33.00 1 1.90% 35.70 29.5% -0.13 33.00 0 0.0005 N/A -0.1423 1579.40Com GC 201212 C 2000 5 45.40 49.80 5 3.01% 43.60 27.2% 0 .22 45.40 0 0.0007 N/A -0.1803 1579.40
Stock AAPL 201207 P 325 102 12.05 12.25 110 3.00% 12.03 37.8% -0.17 12.20 0 0.0023 0.7888 -0.0718 405.39
Stock AAPL 201207 C 475 84 14.35 14.65 11 3.58% 14.17 30.3% 0 .28 14.35 0 0.0037 N/A -0.0794 405.39
Stock BNP 201206 P 20 50 1.40 1.61 50 4.96% 1.50 70.9% -0.15 1.5 0 2 .09 069 0.016 1 0.0484 -0.0101 30.35
Stock BNP 201206 C 40 50 1.00 1.14 100 3.53% 1.03 50.0% 0 .21 1.0 3 2 .09 069 0.028 7 0.0620 -0.0093 30.35
Equity ESTX50 201206 P 1700 0 40.60 43.00 0 1.80% 44.70 40.2% -0.13 43 .00 88.4 403 0 .000 3 N/A -0.3635 2,316.55
Equity ESTX50 201206 C 2600 0 40.90 43.40 0 1.82% 35.30 24.6% 0 .21 40 .80 88.4 403 0 .000 8 N/A -0.3321 2,316.55