The world according to Vestact

Q2 (2011) and beyond. The end of QE2, technology valuations, time to

get defensive?

What, me worry?

• The 2011 Tōhoku earthquake and tsunami after effects.• Middle East unrest ongoing• Chinese economy slowing• Federal Reserve ending current bond purchase program (QE2)• European debt issues unresolved• US debt issues finally being discussed, political deadlock• Global inflation concerns abated?

How bad was the Japanese quake?

Turns out, unless you lived there, not that bad (for investors across the globe).

Japanese PMI bounces back in May

Global PMI bounces back off the 2008 lows, but slowing here!

Middle East tensions still exist

• These pose risks to the oil price (inflation).• But Saudi Arabia (the elephant) has settled.• Iran remains the “unknown unknown”

(Rumsfeld).• Democracy is “good” for economic growth.• Who cares about Qaddafi?

This is funny!! Oil prices back in 1999

Oil prices YTD off their best levels

Chinese economy cooling

• Which means inflation is less of a concern....• Which is what we wanted.....• Growth closer to that “magic 8 %” Beijing

looking for• Commodity prices tracking sideways for last

few weeks.

Chinese PMI slowing..... but stable!

But inflation concerns gone for now

Chinese growth rate steady...15 year growth rate very consistent.

QE2 is not a big boat.....

• And is unlikely to have a big impact when the Fed bond buying program ends......

• Why? Because this has been telegraphed to markets.

• AND rates are likely to stay lower for longer.

Greece peaked in 300 BC

Greece has defaulted before.....

• 5 times since 1829!!!!• Spain has defaulted 13 times since 1476.• Germany and France 8 times.• And the UK NEVER!!• But the Euro will remain intact.• Because the EU can’t just let it go. It is akin to the

USA letting California go.• Stuck with the Greek tragedy......for better or for

worse.

US Debt problems...not new news

US Debt problems

• Closer to resolution, at least it is being debated, a year ago it was a non starter.

• Will not default.• Will find common ground.• Will be working through the process over

decades.

Developed world growth rates are likely to be less important in the coming years

What about inflation problems?

Keep calm and carry on