Financial Services : Past, Present and Future- The Good The Bad and the Ugly

Andrew Fisher – February 2011

Agenda – Financial Services and beyond

• Where have we come from?

• Where are we now?

• Where are we going?

“It was the best of times – it was the worst of times”Charles Dickens

Fear and Greed

Great crashes of our time

• South Sea Bubble

• Wall Street 1

• Black Monday

• Y2k

• Dotcom Boom

• 9/11• Credit Crunch

• Wall Street 2

- MP’s expenses- Gov’t debt- Hurricane- Non-event- Madness- Globalisation- Consumer debt- The movie

Famous Rogues, Rascals and Economists

• George III and Coutts• JP Morgan and the Titanic• Keynes and Corn• Maxwell and the Mirror• Nick Leeson and Barings• Black, Scholes and LTCM• Morgan Stanley and St Petersburg• Madoff and the Gullible• Britain’s got Talent – Piers Morgan?

Capitalism Rules OK ?

• Shenzen vs Hanoi • Dinner for 20

• Barbarians vs the Beatles • All you need is leverage

• Trespassers vs Debtors• In God we Trust

Diversification doesn’t work?

• Commodities - Gold/Oil

• Free money – Interest rates

• Zero percent returns? - FTSE

Gold Index

Oil price ($)

UK interest rates

FTSE 100 (TR)

Winners of the Future

• Pink Floyd and

...Another BRIC in the Wall!

% GDP($) breakdown from UK, US, China, India, Russia and Brazil: 2000 and 2009

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%2000

Brazil Russia India China US UK0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

2009

Brazil Russia India China US UK

Real Annual GDP Growth Rates: 2000 and 2009

Macro Demographic Trends

• We are getting older (including you!)

• We don’t like it – Facebook

• We aren’t prepared for it – Pension deficit

• It’s going to get hotter

Future Trends

• More commodity rises• Inflation/Deflation/Stagflation• Double dip – who cares? “The budget should be balanced, the Treasury should be

refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest we become bankrupt. People must again learn to work, instead of living on public assistance.”Cicero to the Romans (55 B.C.)

A nightmare scenario

• Food shortages – Tunisia, Egypt, Saudi?• Extreme climate change - humiliation leading to

anger• Global conflict – “Dire straits”

– Malacca– Hormuz

The Straits of Malacca

The Cunning plan

Strait of Hormuz

How deep is the hole?

• US federal debt – $8 trillion • UK government debt - £1 trillion

“When national debts have once accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue if it has even been brought about at all, has always been brought about by a bankruptcy; sometimes by an avowed one but always by a real one, though frequently by a pretended payment.”

Adam Smith (the Wealth Nations 1776)

It’s all Relative

• Beads for Manhattan• 1987 Crash vs BP• The New Rouble• How Big is a Trillion• Why do we never learn?

.... the width of two horse’s backsides

“The thing that excites me the most is the theory of relativity and compound interest”

Einstein

On the Bright Side

• Anti-virals emerge

• Stem cells accelerate

• Energy is renewed

• Peace breaks out

Wheat - prices to 10/11/10

What does this have to do with us?

And the price of a loaf of bread……..

- 9 February 2011: USD 853.75

“Civilization exists by geological consent,subject to change without notice.”

Thank you

Questions