fullermoney.com Our theme: Empowerment Through Knowledge Nordic Association of Electricity Traders 15 th anniversary of NAET in Paris David Fuller 14 th April 2011 Bubbles, Supercycles and the Next Three Big Energy Stories

fullermoney.com Our theme: Empowerment Through Knowledge The Art of Bubbleology What are the two really big bubbles today? Can you identify them?

fullermoney.com Our theme: Empowerment Through Knowledge September 1981 US 10-yr T-Bond Yield 28-year bull market over Secular bear market beginning Does it make sense to buy at these yields? Yield should at least over next ten years

fullermoney.com Our theme: Empowerment Through Knowledge 30-year T-Bond futures - (My Baby Steps tactic) Expecting a ranging downward bias, I short lightly on rallies and cover incrementally on declines

fullermoney.com Our theme: Empowerment Through Knowledge JPY/USD Yen bubble burst by multilateral intervention G-7 sells JPY

fullermoney.com Our theme: Empowerment Through Knowledge USD/JPY – From ¥360 to ¥76.25 on 17/03/11 – G-7 intervenes on the following day

fullermoney.com Our theme: Empowerment Through Knowledge Happiness in forex is having the central bank(s) and the trend on your side.

fullermoney.com Our theme: Empowerment Through Knowledge Previous multilateral interventions 1.Plaza Accord September 1984 (weaken USD) 2. Louvre Accord February 1987 (support USD) 3. April 1994 – August 1995 (support USD) 4. September 2000 (support EUR) 5. March 2011 (weaken JPY) Previous multilateral interventions have always been successful, if not immediately, over the medium term.

fullermoney.com Our theme: Empowerment Through Knowledge Using Baby Steps, I buy on easing and lighten on rallies, looking for ¥90 to ¥100

fullermoney.com Our theme: Empowerment Through Knowledge Same tactic applicable for EUR or any other currency against the yen

fullermoney.com Our theme: Empowerment Through Knowledge Supercycles Do you see any?

fullermoney.com Our theme: Empowerment Through Knowledge Continuous Commodity Index (Old CRB) An equal-weighted geometric average of commodity price levels relative to the base year average price Supercycle 1971 to 1980 Supercycle 2001 to 20??

fullermoney.com Our theme: Empowerment Through Knowledge Continuous Commodity Index (Old CRB) Semi-log scale

fullermoney.com Our theme: Empowerment Through Knowledge Which global economic trend do you think we will we see: 1.Depression? 2. Muddle through? 3. Supercycle?

fullermoney.com Our theme: Empowerment Through Knowledge Supercycle: “A period of historically high global growth, lasting a generation or more, driven by increasing trade, high rates of investment, urbanisation and technological innovation, characterised by the emergence of large, new economies, first seen in high catch-up growth rates across the emerging world. “Growth will be strong but not smooth – the business cycle exists.” Gerard Lyons, Chief Economist and Group Head of Global Research at Standard Chartered Bank 15 November 2010

fullermoney.com Our theme: Empowerment Through Knowledge “The first supercycle took place during the second half of the 19 th century, from 1870 until 1913, the eve of the First World War. At the time, the world economy witnessed a significant step-up in its rate of growth, rising 2.7% on average per annum in volume, or real terms. That was a full 1% higher than the average growth rate seen during the previous half-century. America was the big gainer, moving from the fourth largest to the largest economy.” Gerard Lyons, Standard Chartered Bank 15 November 2010

fullermoney.com Our theme: Empowerment Through Knowledge “The second supercycle was after the Second World War until the early 1970s. World growth averaged a huge 5% per annum, again real or inflation-adjusted terms. Japan and the Asian tigers saw the biggest gains over the time.” Gerard Lyons, Standard Chartered Bank 15 November 2010

fullermoney.com Our theme: Empowerment Through Knowledge Supercycle enablers: 1.( ) technologies emerging from the Industrial Revolution 2.( ) post WW2 reconstruction and emerging middle class in the west 3.( ??) near universal adoption of capitalism, globalisation, accelerated technological innovation, emerging middle classes from Asia to South America and Western Europe

fullermoney.com Our theme: Empowerment Through Knowledge The next three big energy stories – what are they?

fullermoney.com Our theme: Empowerment Through Knowledge 1. Shale gas 2. Shale oil 3. Nuclear renaissance (subject to governance)

fullermoney.com Our theme: Empowerment Through Knowledge Source: US Energy Information Association (EIA) April 2011

fullermoney.com Our theme: Empowerment Through Knowledge Regions currently known to have shale-gas reserves

fullermoney.com Our theme: Empowerment Through Knowledge “Study reports non-US global shale gas recoverable resources of 5,760 Tef; global shale gas boosts total recoverable natural gas resources by 40%.” EIA (US Energy Information Association) 6 April 2011 Note: This 40% estimate above is based on a very conservative recovery of only 20% to 30% of currently known reserves.

fullermoney.com Our theme: Empowerment Through Knowledge

fullermoney.com Our theme: Empowerment Through Knowledge The nuclear renaissance was finally underway, until…

fullermoney.com Our theme: Empowerment Through Knowledge Nuclear Godzilla Unleashed

fullermoney.com Our theme: Empowerment Through Knowledge The biggest nuclear risk - Most the reactors used today were built in the 1970s – 1980s. No wonder they leak!

fullermoney.com Our theme: Empowerment Through Knowledge Fuel for the Pebble Bed Reactor – meltdown free?

fullermoney.com Our theme: Empowerment Through Knowledge Pebble Bed Nuclear Reactor

fullermoney.com Our theme: Empowerment Through Knowledge

fullermoney.com Our theme: Empowerment Through Knowledge Pebble Reactor Nuclear Fuel

fullermoney.com Our theme: Empowerment Through Knowledge Where does their electricity come from?

fullermoney.com Our theme: Empowerment Through Knowledge Uranium (MBURNXRE)

fullermoney.com Our theme: Empowerment Through Knowledge Shall we look at some stock markets? The best ones will have already surpassed or at least equalled their highs.

fullermoney.com Our theme: Empowerment Through Knowledge Stock markets are currently caught within a tug of war. Commodities vs Liquidity Consequently ranging is occurring, albeit within a cyclical bull market.

fullermoney.com Our theme: Empowerment Through Knowledge Denmark

fullermoney.com Our theme: Empowerment Through Knowledge Finland

fullermoney.com Our theme: Empowerment Through Knowledge Fortum yield 4.25%

fullermoney.com Our theme: Empowerment Through Knowledge Norway

fullermoney.com Our theme: Empowerment Through Knowledge Sweden

fullermoney.com Our theme: Empowerment Through Knowledge David, SPX historic, semi-log here Box and label the valuation contraction cycles Secular valuation contraction 1967 to 1982 Secular valuation contraction 2000 to 2015? S&P 500 Index since 1953 Updated through 30 Sept 2010

fullermoney.com Our theme: Empowerment Through Knowledge S&P 500 important because of leash effect Susceptible to further mean reversion towards rising MA

fullermoney.com Our theme: Empowerment Through Knowledge S&P 500 ÷ Gold Bullion

fullermoney.com Our theme: Empowerment Through Knowledge NDX 100 above 2007 high, outperforming S&P 500 but still susceptible to MA mean reversion

fullermoney.com Our theme: Empowerment Through Knowledge German DAX susceptible to further ranging mean reversion

fullermoney.com Our theme: Empowerment Through Knowledge Fullermoney secular equity themes: Asian-led emerging (progressing) markets Central and South American-led resources markets Precious metals Industrial resources Supply inelasticity themes such as energy and water Global infrastructure development Information technology Western multinational leaders leveraged to global growth Dividend ‘aristocrats’

fullermoney.com Our theme: Empowerment Through Knowledge How many of you are bearish of China? List reasons:

fullermoney.com Our theme: Empowerment Through Knowledge Property bubble Ghost cities Desertification Aging population Inflation Authoritarian government Corruption Command Economy

fullermoney.com Our theme: Empowerment Through Knowledge Ancient civilization Huge population Work ethic Self-belief Education Command capitalism Huge foreign reserves Visionary planning

fullermoney.com Our theme: Empowerment Through Knowledge China Shanghai A-Shares Massive issuance of government held, previously unlisted shares to raise bank reserve ratios from Aug 2009 to Nov 2010 Now has medium-term upside breakout potential

fullermoney.com Our theme: Empowerment Through Knowledge Hang Seng China Enterprise H-Shares (Medium-term breakout potential)

fullermoney.com Our theme: Empowerment Through Knowledge Hong Kong Hang Seng Index (Medium-term breakout potential)

fullermoney.com Our theme: Empowerment Through Knowledge India (a long-term Fullermoney favourite)

fullermoney.com Our theme: Empowerment Through Knowledge India Sensex Index (rocked by corruption and inflation but one of the best for the long term)

fullermoney.com Our theme: Empowerment Through Knowledge Indonesia – An ASEAN leader

fullermoney.com Our theme: Empowerment Through Knowledge Fiat Currencies The least bad in this environment: Those of Asia-led growth economies, resources exporters, financial currencies (CHF & SGD) Higher risk: Debtor currencies – USD, albeit somewhat oversold, GBP & EUR (unless it becomes DEM-lite) In the distant future: Chinese Renminbi will be the next global reserve currency but probably not before 2050

fullermoney.com Our theme: Empowerment Through Knowledge Asian Dollar Index

fullermoney.com Our theme: Empowerment Through Knowledge Latin American Dollar Index (not good in a recession)

fullermoney.com Our theme: Empowerment Through Knowledge Commodities Secular bull market, but volatile: ‘Supply inelasticity meets rising demand’ Gold has been remonetised in the eyes of investors Commodity price inflation – an opportunity and also the next big risk

fullermoney.com Our theme: Empowerment Through Knowledge Continuous Commodity Index (Old CRB) (currently overextended relative to MA)

fullermoney.com Our theme: Empowerment Through Knowledge Gold bullion (monthly) Secular bull markets usually end with a dramatic upward acceleration Sep ‘03 Sep ‘05 Sep ‘07 Sep ‘09 Sep ‘01 Updated through 1 October 2010 Note the 2-year cycles

fullermoney.com Our theme: Empowerment Through Knowledge Gold

fullermoney.com Our theme: Empowerment Through Knowledge Gold, (CPI Inflation-Adjusted)

fullermoney.com Our theme: Empowerment Through Knowledge Silver (currently overextended relative to MA)

fullermoney.com Our theme: Empowerment Through Knowledge Silver (CPI Inflation-Adjusted)

fullermoney.com Our theme: Empowerment Through Knowledge Crude Oil (Brent

fullermoney.com Our theme: Empowerment Through Knowledge Crude Oil (Brent) (overextended relative to MA)

fullermoney.com Our theme: Empowerment Through Knowledge Medium to longer-term risks Industrial commodity price inflation Food price inflation Progressing economy inflation (current) Regressing economy stagflation Higher interest rates Trade protectionism Commodity ‘wars’ High frequency trading (another WMD) Climate change

fullermoney.com Our theme: Empowerment Through Knowledge Current bull points Monetary policy is still accommodative Interest rates are low CPI inflation is low Progressing economies are healthy The West’s recovery is only 24 months old Household savings are rising Equity valuations are reasonable Corporate balance sheets are mostly strong* * ( Where leveraged to the global economy)

fullermoney.com Our theme: Empowerment Through Knowledge Fullermoney summary forecasts The Asian, resources and tech-led global stock market recovery will resume 2H 2011 This cyclical bull market should have at least another year to run, provided energy and food prices do not spike too high, prompting central banks to tighten more aggressively The 28-year bull market in US government bonds is over – yields are base building and will range higher over the medium to long term

fullermoney.com Our theme: Empowerment Through Knowledge Fullermoney summary forecasts Gold’s secular bull market has at least several more years before it is halted by higher rates The secular bull for industrial commodities will continue, punctuated by recessions Progressing Asian and resources economy stock markets will continue to lead US and European multinationals leveraged to the global economy will outperform Leading or promising sectors include: technology, Asian healthcare, mining, agriculture, global infrastructure, and dividend increasers

fullermoney.com Our theme: Empowerment Through Knowledge Climate Change

fullermoney.com Our theme: Empowerment Through Knowledge Thank you very much Fullermoney is a Global Strategy Service produced by David Fuller & Eoin Treacy We invite you to visit our site