1. Horace W. Brock, Ph.D. President Strategic Economic Decisions, Inc. WWW. SEDINC.com

2. Decreased Business Cycle Risk vs. Increased Financial Cycle Risk: A Resolution of this Paradox from First Principles

3. PERCENT DROP DURING 5 RECESSIONS OF KEY US MACRO VARIABLES

4. STANDARD DEVIATIONS – US GROWTH RATES Source: BEA, SED

5. STANDARD DEVIATIONS OF THE S&P 500 (Nominal) GROWTH RATES Source: Standard & Poor’s, BLS, SED

6. STANDARD DEVIATIONS – EUROPEAN UNION GROWTH RATES

7. STANDARD DEVIATIONS OF THE S & P 500 (Nominal) GROWTH RATES

8. THE CHANGING COMPOSITION OF EQUITY MARKET RISK

9. INCREASED ENDOGENOUS RISK IN GLOBAL EQUITY MARKETS Source: SED

10. Detailed Reasons for Greater Endogenous Risk (1950-2000) Increased “pricing-model uncertainty” Benchmarking of performance New information on market expectations (first call) New ability to “know” and to “react” to the news Collapse in cost of trading

11. Long-Term Endogenous Risk – Bull and Bear Market Regimes –

12. REAL RETURNS AND NET WORTH GROWTH – The Three Most Recent Regimes – REAL HOUSEHOLD NET WORTH REAL D-J IND. INDEX REAL BOND INDEX REAL HOUSEHOLD REAL ESTATE ASSETS

13. STOCK MARKET VERSUS BUSINESS CYCLES

14. EVOLUTION OF MARKET BELIEF STRUCTURES Source: SED

15. BEFOREAFTER