OUR FUTURE WORLD…..

GLOBAL OPPORTUNITIES

27 March 2014

Peter Leggett Managing Director

Arrow Wealth Managementwww.arrowwealth.com.au

AGENDA

• Global tensions & issues

• Recent happenings

• Things to know about

• Mega trends

• Current views

• Global changes

• Global opportunities

• New reality

• Recapping basic principles of investing

EXPECT

......... the unexpected

“Prediction is very difficult especially

if it is about the future Niels Bohr

GLOBAL TENSIONS

GEO POLITICAL WORLD

• Ukraine - “Black Swan” events

• Paris - Stockholm – Madrid – Istanbul – this is not Greece!

• Middle East – more to come

• China/Japan/India/US

• Get used to it!

• As much about resources (personal and economic)as it is about

“I don’t like you”

GLOBAL TENSIONS

• Bail outs in Europe

Spain and Slovenia - in trouble

Trouble on the streets

• Currency devaluations. Currency war again creeping back

• Minimal or zero interest rates – printing money – QE

• Russian recession

• China – slowing down, shadow banking/credit crunch

• The “age of entitlements” is gone! - Joe Hockey

ECONOMIC AND FINANCIAL

GLOBAL ISSUES

• Inflation - “the bull in the paddock”

• Commodities – Hard (Ind. & Prec.), Soft, Oil

• China

- Changing from property & infrastructure to domestic consumption,

personal services and technology

- The “decade of the Consumer”, away from the “decade of

Commodities”

- Shrinking (and expensive!) URBAN workforce has BIG implications

- “Lewis Turning Point” Rapidly aging population “looming demographic

changes are large, irreversible, and inevitable in the medium term” – (IMF Jan 2013)

- Labour shortage of 137M by 2030! (IMF)

ECONOMIC AND FINANCIAL

RECENT HAPPENINGS

• All time highs in US share market

• Energy Revolution – US Oil & Shale Gas revolution

• Currency fluctuations – Turkey, Brazil, US$,

• Gold & Silver and Oil prices

• Europe – healing is underway, inflation is weak and political

uncertainty remains

• Chinese “shadow banking” – some 2nd/3rd tier banks in trouble

• Australian business investing has “fallen off a cliff” (Schroders)

• Australian unemployment – highest in over 2 years & climbing

• Australian housing prices high driven by SMSF & Asian demand

THINGS TO KNOW ABOUT

• 2015 – US to become the world’s #1 Oil producing nation

• Japan’s population could halve by 2050….aging population

• European Unemployment – let’s hear some drastic numbers!

• Gold bubble has burst – biggest one day fall since Feb 1983 >14%

• US Housing starts – highest level since June 2008. YoY up 47%

• Chinese wages increase – 19%pa (2005-2010) - 3X Indonesia & Vietnam

• Asian real wages growth – 7%pa (2000-2008)

• Developed economies wages – 0.5% to 0.9% (2000-2008)

• US real wages growth – negative 2% (2005-2012)

FACTS, FIGURES, STATISTICS

THINGS TO KNOW ABOUT

• China - is our largest Export market – by a long way

• In 10 years it has increased by 860%

• Australia's largest export markets China 27% Japan 17%, South Korea 7%, India 6%

• 10 of our top 12 export markets are in Asia

• 50% of our total export to China are in just Iron Ore alone –RISK

• Impact on Australian jobs – moving from “exploration phase to

operation phase”

• Top 10 mining/resource projects – 11,770 jobs exploration to 3,050 in operation phase

FACTS, FIGURES, STATISTICS

WHY CHINA & ASIA?

GLOBAL PERSPECTIVES

• Broaden your investment horizons both globally and across

asset classes

• Understand the pace of change in technology, particularly mobile

TECHNOLOGY & DIGITAL

• “Software is eating the world” Marc Andreessen

• Google, Pinterest, Skype, Amazon, FB

• “Kickstarter” – see Pebble Watch $10.2m from 70k people. Obj. was $100k!

• 81% of users of Top 10 sites are ex USA

• 8% YoY users growth – driven by EM’s

• Smart Phone/Tablet vs. Desktop

• World Population - 7.13B, Internet Users – 2.4B (34% only)

OPPORTUNITIES –

THINGS ARE CHANGINGMicrosoft

“We are no longer a software company but a devices and services company that

develops its own “end to end” experiences for consumers” Steve Ballmer (CFO)

• “Onshoring” is a good example of how companies in developed economies are

keeping themselves relevant by adapting to competitive shifts and tapping into the

potential that technological innovation, automation, changes to energy markets (shale

gas revolution) and superior branding can offer. eg: USA: Apple, GE, Google,

Caterpillar UK: GlaxoSmithKline

• “87% of economic growth is driven by technical change over time”

• This includes invention, innovation, final use of new products

• “Creative destruction” – old products and firms replaced by new eg: Music

• Going Robotic rather than cheaper labour – automation set to boom

What is Google doing?

Some winners – Siemens, GE, Mitsubishi Electric, BASF, Dassault Systems

CURRENT VIEWS

Global macro conditions are favourable for equities. Central

banks are STILL printing a significant amount of money, this

is being invested in risk assets

In Australia we believe that the following will support equity

prices for at least the shorter term: But be very careful L/T!• Low interest rates

• Lowish unemployment

• Relatively stable residential property prices

There remains the risk of a global shock that could derail this

view. “Black Swan events”

Investors with a low risk tolerance should look at protection

strategies if capital preservation is important

t.

CURRENT VIEWS - AUSTRALIA

Australian economy is undergoing radical change

Believe that the following will support the economy for a while• Consumption story – 2/3rds of our GDP

• Population Growth – one of fastest in the world. 4x OECD in next 12 years

• Interest rates cuts - have and will spur on spending

• Income from mining sector to hold up ok - low cost producer

We would be hampered IF the world economy experienced

another economic shock – eg debt crisis in Europe or “Black Swan” event

The recent lower currency will help miners, tourism & other

exporters but work against imports

t.

GLOBAL OPPORTUNITIES

AWM - THEMES & TRENDS

NEW REALITY GLOBAL ECONOMY

• Growth will largely be driven by EM’s & consumption story

• Major Economies will remain subdued for some time

longer – possibly US the exception?

• Solid investment returns in the “NR” will come from

companies not postcodes

• Identify Industries & companies within that will benefit

from trends & themes and DE & EM growth regardless of

location

• Watch for the US Large Company Balance Sheet affect

NEW REALITY GLOBAL ECONOMY

• Economic Trends – the world is rapidly changing

• Energy

• Health concerns

• Environmental challenges – global warming

• Global food issues

• New technologies

• Infrastructure development

• Identifying and understanding these challenges provide

investment opportunities

• Simply following trends can be dangerous

• Identify industries & companies to benefit, not just the trend

itself

RECAP

- Invest for the future, not the past

- Diversification does work

- Past way of investing will not work in

the future – be very clear about that!

- Look for income and total returns

- Global opportunities everywhere

you look

- Global trends and themes

COMPLEXITY

Simple to understand ...hard to define

“Advice is delivered to clients who are not where they

want to be financially, and are not too sure

what they need to do to get there”

Financial Freedom is the objective ...

Peace of Mind the outcome

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ADVICE & SERVICE

HELPING YOU …..

align your financial choices with your most important goals and

deeply held values

GIVING YOU …..

a level of confidence that no matter what happens in the

markets, the economy or world, you will achieve your goals

TAKING CARE …..

of your investments so you can enjoy life without fear or worry

YOUR FINANCIAL FREEDOM …..

…Peace of Mind

DISCLAIMER

This information has been prepared without taking into account your particular

financial situation. Before making an investment decision based on this

advice, you should assess your own position, and if appropriate, seek the

assistance of any of our financial advisers. This presentation does not contain

and is not to be taken as containing any securities advice or securities

recommendation. Furthermore, it is not intended that it be relied on by

recipients for the purpose of making investment decisions. Arrow Wealth

Management does not give any warranty as to the accuracy, reliability or

completeness of information which is contained in this presentation. Except

in so far as liability under any statute cannot be excluded, Arrow Wealth

Management and its directors, employees and consultants do not accept any

liability for any error or omission in this presentation or for any resulting loss

or damage suffered by the recipient or any other person.

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