01 29 15 mcniven gic presentation

A World of Change & the Allocation Conundrum Global Interdependence Center January 29, 2015

Michael D. McNiven, PhD Managing Director & Portfolio Manager Michael.McNiven@Cumber.com

ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

Presentation Outline 1. World Demographics and GDP (8 slides) 2. World Central Bank Policy (4 slides) 3. Investment Allocation Decisions (2 slides)

ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

1. Visualizing Global Population Density

Source: Map by valeriepieris on Reddit ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

3

World Population

Source: Population Reference Bureau 2014

ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

4

World & Country Demographics

Source: Population Reference 2014

ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

5

World Gross Domestic Product

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6

Comparing Population vs. GDP

Country

% World Population

% World GDP

4.4%

23.1%

China

18.84%

12.6%

Japan

1.75%

6.7%

India

17.91%

2.7%

Nigeria

2.45%

.7%

Pakistan

2.68%

.3%

Bangladesh

2.18%

.21%

United States

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7

Real GDP Growth Real GDP Growth (Percent per annum)

2013

2014

2015

2016

2017

2018

2019

World

3.3

3.3

3.5

4

4

4

4

Advanced Markets

1.4

1.8

2.3

2.4

2.4

2.3

Euro Area

-0.4

0.7

1.2

1.7

1.7

Japan

1.5

0.9

1.1

1.1

United States

2.2

2.2

3.1

Sweden

1.6

2.1

United Kingdom

1.7

Israel

2010-14

2015-16

2.3

3.9 1.8

3.8 2.4

1.6

1.6

0.6

1.4

1

1

1

1.6

1.1

3

2.7

2.7

2.7

2.2

3.1

2.5

3

2.6

2.3

2.2

2.8

2.8

3

2.6

2.5

2.5

2.5

2.5

1.6

2.6

3.2

2.5

3.3

3.7

4.2

4

3.8

3.7

3.5

Emerging Markets

5.2

4.6

5.1

5.7

5.8

6

6

6.1

5.4

China

7.7

7.4

7.2

7

6.8

6.4

6.3

8.5

7.1

India

5

5.3

6.3

6.5

6.9

6.9

6.9

6.4

6.4

Indonesia

5.8

5.2

5.8

6.0

6.2

6.0

6.0

6.0

5.9

Thailand

2.9

0.6

4.3

4.0

3.8

3.8

3.8

3.6

4.2

Philippines

7.2

6.3

6.5

6.0

6.0

6.0

6.0

6.3

6.2

Brazil

2.5

0

1

2.2

2.8

3

3.2

2.8

1.6

Mexico

1.1

2.4

3.5

4

3.8

3.8

3.8

3.3

3.8

Columbia

4.7

4.8

4.6

4.7

4.6

4.5

4.5

4.8

4.7

Turkey

4.1

2.8

3

4.4

4.6

4.5

4.5

5.4

3.7

Qatar

6.5

6.5

7

7.3

6.6

6.6

6.2

9.8

7.2

Sources: Historical – IMF; Projections – Cumberland Advisors

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8

The Middle Class: Size & Distribution 2009

2020

2030

Number of People (millions & global share)

Number of People (millions & global share)

Number of People (millions & global share)

North America

338

18%

333

10%

322

7%

Europe

664

36%

703

22%

680

14%

Central and South America

181

10%

251

8%

313

6%

Asia Pacific

525

28%

1,740

54%

3,228

66%

Sub-Saharan Africa

32

2%

57

2%

107

2%

Middle East and North Africa

105

6%

165

5%

234

5%

1,845

100%

3,249

100%

4,884

100%

World Source: Societe Generale

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9

Latin America: World’s Highest Rates of Inequality

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10

2. Central Bank Policy Monthly Central Bank Assets for US, Japan, and Euro Area June-06 to Dec-14 14000

Cumberland Advisors Estimate

12000

Estimate includes ECB $ Billions

10000

8000

6000

4000

2000

0

Federal Reserve

ECB

Bank of Japan

Source: Haver Analytics ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

11

Federal Reserve Maturity Structure: Assets Less than one year

One to 10 Yr

Over ten yr

$5.0

QE-3 $4.5

$4.0

$3.5

QE-2

$ Trillions

$3.0

QE-1 $2.5

$2.0

$1.5

$1.0

$0.5

$0.0

Source: Haver Analytics ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

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ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

1/1/2015

10/1/2014

7/1/2014

4/1/2014

1/1/2014

10/1/2013

7/1/2013

4/1/2013

1/1/2013

10/1/2012

7/1/2012

4/1/2012

1/1/2012

10/1/2011

7/1/2011

4/1/2011

1/1/2011

10/1/2010

7/1/2010

4/1/2010

1/1/2010

10/1/2009

7/1/2009

4/1/2009

1/1/2009

10/1/2008

7/1/2008

4/1/2008

1/1/2008

10/1/2007

7/1/2007

4/1/2007

1/1/2007

10/1/2006

7/1/2006

4/1/2006

1/1/2006

Estimated Duration of Federal Reserve Assets 7

6

5

4

3

2

1

Weekly Data

Source: Haver Analytics

13

Federal Deficit

Source: Haver Analytics and Congressional Budget Office ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

14

3. Investment Allocation Decisions

Source: Dorsey Wright & Associates ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.

15

Optimal Long-term Allocation Where does international & tactical management fit into an overall long-term allocation?

International %

Tactical %

Conservative

10

25

Moderate

20

35

Aggressive

30

50-100

Sample Equity Allocation

Tactical Allocation 25%

Sample Balanced Allocation Fixed Income 40%

US Equities 50%

International Equities 25%

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Tactical Allocation 15%

US Equities 30% International Equities 15%

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Disclosure All material presented is compiled from sources believed to be reliable.

However, accuracy cannot be guaranteed. Past performance is no guarantee of future results. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk.

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