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Total Return Equation

An Update on Global Capital Markets Ronald E. Copley , Phd, CFA O: 910-452-7147 E: Ron.Copley@gmail.com www.CopleyInvestmentManagement.com November 5, 2009. Total Return Equation. Total Return Components for International Investment: Yield--dividends and interest (income/begin price)

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Total Return Equation

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  1. An Update on Global Capital MarketsRonald E. Copley, Phd, CFAO: 910-452-7147E: Ron.Copley@gmail.comwww.CopleyInvestmentManagement.comNovember 5, 2009

  2. Total Return Equation Total Return Components for International Investment: • Yield--dividends and interest (income/begin price) • Growth—price appreciation (end price-begin price)/begin price • Currency Conversion—repatriation of foreign currency to US dollars Example t=0: Invest $1000 in a Euro-denominated investment (exchange 1USD:1€) T=1: Investment earns yield (5%) plus growth (10%) plus currency conversion (exchange 1USD:1/2€, or 1€:2USD) Total Return = 5% + 10% + 100% = 115%

  3. Foreign Country Returns

  4. UUP vs. GOLD

  5. U.S. Equity Performance

  6. Foreign Equity Performance

  7. Fixed Income Markets

  8. PCY vs. SHV (Exchange Traded Funds) PCY: Seeks investment results that correspond generally to the price and yield, before fees and expenses, of  the DB Emerging Market USD Liquid Balanced index. SHV:  Seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Barclays Capital U.S. Short Treasury Bond Index. 

  9. http://www.dailymarkets.com/stocks/2008/10/21/credit-default-swaps-%E2%80%93-a-disastrous-unwind/http://www.dailymarkets.com/stocks/2008/10/21/credit-default-swaps-%E2%80%93-a-disastrous-unwind/

  10. Size of the CDS Market

  11. http://www.inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asphttp://www.inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp

  12. CIM’s Selected Choices for Growth China: • Baidu, Inc (BIDU)—Search Engine • BYD CO LTD H SHS (BYDDF)—Electric Cars US: • Apple Inc (AAPL)—Computers • STEC, Inc (STEC)—Solid State Storage Latin America: • iShares S&P Latin America 40 Index (ILF) • T. Rowe Price Latin America Fund (PRLAX) Europe/Asia: • iShares MSCI EAFE Index (EFA) • iShares MSCI Emerging Markets Index (EEM)

  13. Conclusions • Global equity markets attractive especially non-dollar denominated investments in Asia; • Global bond markets still adjusting as spreads continue to narrow (long rates declining relative to short rates); • US dollar in a long-term decline, but will not crash; • Credit Default Swaps remain a potentially large problem; • Deflation is a short-term problem, inflation a long-term problem; • Gold is an excellent hedge against uncertainties.

  14. You can find a copy of this presentation and others at:www.CopleyInvestmentManagement.com/articlesThank you.

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