Climate Change – South African Conferences 2009 Climate change Ian Ling Five stages of grief

Climate Change – South African Conferences 2009 Loads of grief 1.Equity markets have fallen sharply

Climate Change – South African Conferences 2009 World Equity Markets (USD) 30 April 2008 to 30 April 2009 Index% change USAS&P % UKFTSE % FranceCAC % GermanyDAX-41.88% JapanNikkei % Hong KongHang Seng-39.40% AsiaASX200 Index-48.05%

Climate Change – South African Conferences 2009 MSCI World Mar-70 Mar-73Mar-76Mar-79 Mar-82 Mar-85Mar-88Mar-91 Mar-94 Mar-97Mar-00 Mar-03 Mar-06 Mar-09 Liquidity crunch

Climate Change – South African Conferences 2009 Loads of grief 1.Equity markets have fallen sharply 2.Property market collapse 3.Commodity prices collapse 4.Corporate bonds tank 5.Interest rates fall to zero …….worries over another depression … are we following Japan??

Climate Change – South African Conferences 2009 Nikkei Index Since Jan-70 Jan-74 Jan-78 Jan-82 Jan-86 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06

Climate Change – South African Conferences 2009 What can we expect? Edwin Coppock – 1960’s Technique to determine long term investment opportunities Investors need time to mourn the death of a bull market months according to Church Bishops Look at the thoughts of two analysts who have assessed the link between grief and market behaviour

Climate Change – South African Conferences Australia's All Ordinaries Index The Coppock Indicator The indicator is trend-following, and based on monthly averages, so by its nature it doesn't pick a market bottom, but rather shows when a rally has become established. Buy signal

Climate Change – South African Conferences 2009 The Coppock Indicator 1.Very close to a buy signal for the S&P 2.Interestingly almost exactly 9 months after Lehmans collapse and Fannie Mae and Freddie Mac rescue

Climate Change – South African Conferences 2009 What can we expect? Elisabeth Kübler-Ross Developed a behavioural pattern of people suffering from terminal illness, and later to any form of catastrophic personal loss (job, income, freedom) … loss of capital!! Identified five stages of grief

Climate Change – South African Conferences 2009 Five stages of grief Elisabeth Kübler-Ross 1. DENIAL 2. ANGER 3. BARGAINING 5. ACCEPTANCE 4. DEPRESSION

Climate Change – South African Conferences 2009 Kübler-Ross Model – 5 stages of grief 1.Denial - "This can't be happening, not to me." 2.Anger- “It's not fair!"; "Who is to blame?"

Climate Change – South African Conferences 2009 Goodwin defiant over pension as investors heckle RBS Board The independent 04 Apr 09 Goodwin defiant over pension as investors heckle RBS Board The independent 04 Apr 09 Protestors smash into RBS branch The Financial Times 02 Apr 09 Protestors smash into RBS branch The Financial Times 02 Apr 09 Fury at $2.5bn Lehman bonus - The Times 21 Sep 08 Fury at $2.5bn Lehman bonus - The Times 21 Sep 08 Eleven AIG executives quit despite bonuses up to $4.6 million The Times – 17 Mar 2009 Eleven AIG executives quit despite bonuses up to $4.6 million The Times – 17 Mar 2009 Merrill Lynch’s CEO spent over $1 million to redecorate his office—even as the firm faced a financial crisis. Former RBS chief's house attacked amid pay outrage The Financial Times 26 Mar 09 Former RBS chief's house attacked amid pay outrage The Financial Times 26 Mar 09 The people v The banker: The payouts party is over The independent 15 Feb 09 The people v The banker: The payouts party is over The independent 15 Feb 09 AIG chief urges staff to return bonuses

Climate Change – South African Conferences 2009 Kübler-Ross Model – 5 stages of grief 1.Denial - "I feel fine."; "This can't be happening, not to me." 2.Anger- Why me? It's not fair!"; "How can this happen to me?"; "Who is to blame?" 3.Bargaining - “how can we sort this out?” – G20? G2?

Climate Change – South African Conferences 2009 Sorting it out – director/shareholder relationship Pre 2009 – companies not run for the benefit of shareholders run for benefit of directors Options…Exactly that…not a long-term commitment Borrowing to buy back shares.  Increased share price – make options more valuable  Increased gearing Excessive pay – Oligarchic. Justify paying in comparison to peers. Shareholders passive – stock going up so no concern.

Climate Change – South African Conferences 2009 Post Change of sentiment Companies will be run for the shareholders again (e.g. Japan) In some cases CEOs have to buy a number of shares determined in relation to their overall remuneration. Proposal for average wage to appear in report and accounts and the difference between the highest and lowest salaries and male and female wage differential. Shareholders becoming more activist Sorting it out – director/shareholder relationship

Climate Change – South African Conferences 2009 Kübler-Ross Model – 5 stages of grief 1.Denial - "I feel fine."; "This can't be happening, not to me." 2.Anger- Why me? It's not fair!"; "How can this happen to me?"; "Who is to blame?" 3.Bargaining - “how can we sort this out?” – G20? G2? 4.Depression – “why bother with anything?"; What's the point in saving?“ 5.Acceptance - "It's going to be okay."; "I’ve taken the pain and can start again”

Climate Change – South African Conferences 2009 Caution Certainty Disbelief Concern Belief FEAR GREED Ian Ling Fear and Greed Model – (patent pending!!) Capitulation

Climate Change – South African Conferences 2009 MSCI World Mar-70 Mar-73Mar-76Mar-79 Mar-82 Mar-85Mar-88Mar-91 Mar-94 Mar-97Mar-00 Mar-03 Mar-06 Mar-09 Trading range GREED FEAR

DISCLAIMER Ashburton (Jersey) Limited is referred to in this context as ‘Ashburton’. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this document, and should be satisfied in doing so that there is no breach of local legislation or regulation. The information is intended solely for use by Ashburton clients or prospective clients, and should not be reproduced or distributed except via original recipients acting as professional intermediaries. This document is not for distribution in the United States. Prospective investors should inform themselves and if need be take appropriate advice regarding applicable legal, taxation and exchange control regulations in countries of their citizenship, residence or domicile which may be relevant to the acquisition, holding, transfer, redemption or disposal of any investments herein solicited. Any opinions expressed herein are those at the date this material is issued. Data, models and other statistics are sourced from our own records, unless otherwise stated. Ashburton believes that the information contained is from reliable sources, but we do not guarantee the relevance, accuracy or completeness thereof. We caution that the value of investments and the income derived, may fluctuate and it is possible that an investor may incur losses, including a loss of the principal invested. Past performance is not generally indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Ashburton (Jersey) Limited (Company Registration No ) is a member of the FirstRand Group, is regulated by the Jersey Financial Services Commission and has its registered office at 17 Hilary Street, St Helier, Jersey JE4 8SJ. Ashburton (Jersey) Limited is registered as a Foreign Investment Services Provider in South Africa in accordance with Section 8 of the Financial Advisory & Intermediary Services Act 2002.