Presented by: H. Swint Friday, Ph.D., CFP.

I. PRIORITY 1: UNDERSTANDING THE RISK

NASDAQ Composite Index History

Japan Nikkei 225 Index

House-Price Indicators ( )

U.S. Housing Bubble

The Only Constant is Change! The Graham & Dodd P/E for the S&P 500

Measuring Risk  Probability of Loss

Distributions Give Probabilities of Loss

The Type of Distribution Impacts Risk

Modern Portfolio Theory

DAX Index

Portfolio Diversification

Expected Return and Risk

Beware Misleading Data

1 st Factor: Earnings Are King  P/E ratio measures price paid for $1 in earnings.

Dow and DAX P/E Ratios

2 nd Factor OIL: Life Blood of Global Economy Every product has substantial energy component to its cost Leverage effect:  Sale price: $20 $20  COGS: $15 $18 (20% increase)  Profits: $5 $2 (60% decrease)

3 RD Factor: Taxes Warren Buffett Quote: Simple Truth:  Soccer  Ball  Art  Paint  Creating Wealth  Money

Wealth Redistribution 1.Every player on team gets chance to shoot for the goal 2.Messi must wait his turn.  Not fair that he gets all the glory.

4 TH Factor: Housing 1. Barometer of Confidence2. Over Confidence

5 TH Factor : Fed Policies

THE RICH ARE RICHER

 The rich are getting richer. All is going to richest of the rich.

Why Are Richest of Rich Getting So Rich? 1.Their Investment Choices:  Business Ownership  Real Estate  Stocks and Bonds 2.They take risks other don’t

THANK YOU !