Boston College Investment Club

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(No Transcript)
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Market Overview

• Macroeconomic trends from the summer
• 1. Central Banks worldwide tighten money supply
• 2. Hot housing market now weakening
• 3. Commodity markets explode but cool off
• 4. Roller coaster ride in the emerging markets
• 5. Broad stock indices and bond markets surge
• Emerging investment theme Flight to safety

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Central Banks Money Supply

• Ben Bernanke, Chairman of the US Federal Reserve
  paused interest rate increase campaign at 5¼
• Inflationary worries have ceased
• Data suggests economy has cooled off
• Goldilocks economy not too hot, not too cold
• European Central Bank is raising rates
• Currently at 3.0, expected to increase to 3¼
  this month
• Central Bank of Japan lifts rates
• From 0 to ¼
• First increase in 6 years
• Stronger economy and deflation fears under control

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Housing Market

• Increases in property value spur consumer
  spending and add to inflationary fears
• Low interest rates made mortgages cheep, but with
  a hike in rates, they have become more expensive
• Lead to a recent cooling in the housing market
• Housing stocks down considerably (TOL -50)
• Less discretionary income for consumers

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Commodity Market

• Gold hit record highs of 720 per troy oz. and is
  now trading at 598 per troy oz.
• Gold prices are correlated with Inflation

• Prices are Inversely correlated with equity
  market and used to hedge risks

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Commodity Market

• Crude oil has fallen to 62.91 / barrel after
  hitting an intraday record of 78.40 / barrel in
  July

• Reflects supply demand issues, geopolitical
  tension, and weather conditions
• Price of gasoline
• has fallen
• What industries will benefit?

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Commodity Market

• Natural Gas has been especially volatile
• Trading at 5.62 per MMbtu after hitting 8.545
  this summer
• Affects our portfolio (UPL)
• Price of United Petroleum is correlated with the
  price of Natural Gas
• 1-Year chart ?

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Emerging Markets

• Billions poured into the emerging markets,
  especially Asia and Latin America
• BRIC fund (Brazil, Russia, India, China)
• launched by Goldman Sachs, others followed
• Jim O'Neill, global economist at Goldman Sachs
  believes these 4 countries will eclipse all other
  economies by 2050
• Profit taking ensued this summer as risk appetite
  decreased within the investment community

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Emerging Markets

• Mexico has also displayed double digit growth in
  the last few years
• Affects our portfolio (FMX)
• FEMSA is directly correlated with strength of the
  Mexican economy
• Market correction during the summer but has since
  recovered

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Broad Indices

• Magic number 11722
• Dow Jones Industrial Average close to breaking
  its record set in January 2000
• Blue Chips are up 9 YTD and 8.8 since July
• SP 500 up 7 YTD
• NASDAQ up 2.4 YTD
• Good for out portfolio because we are overweight
  in Large Cap US Stocks

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Portfolio Overview

• Started with 5000 in 1983
• Since then we have grown into a 300,000
  investment fund
• Portfolio consists of 37 equity securities

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Portfolio Performance
Above Based on a market value / share
calculation Right Return Comparison
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Portfolio Performance
BCIC returns are calculated net of expenses,
SP 500 is not
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Forward Looking Strategy

• Investment Goals
• To break our previous all time high
• Produce risk adjusted returns that will beat a
  representative benchmark, namely the SP 500
• Create alpha
• Strategy
• Our approach will be to combine top down
  economic analysis with bottom up stock
  selection. The top down approach identifies
  countries, sectors and industries that may
  benefit from observed micro and macro trends.
• We will then look for individual companies with
  earnings growth potential that may not be
  recognized by the market at large using a bottom
  up stock selection process.
• Our portfolio will normally hold a core position
  of between 25 and 35 securities.