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2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2.

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Presentation on theme: "2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2."— Presentation transcript:

1 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 1 When fear rules …

2 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 2 Reality check … it’s bad, but don’t get crazy Misery Index = GDP gap + inflation (percentage points) Sources: US Department of Commerce; NBER Macroeconomic Database

3 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 3 Three storms …

4 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 4 First things first, find the common thread … Real GDP in selected regions (percent change from four quarters earlier) Source: JPMorgan Chase & Co.

5 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 5 (1) Petroleum convulsion …

6 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 6 The future’s energy hungry … the future, not the now Global oil demand (millions of barrels daily) Petroleum, WTI (dollars per barrel) Source: American Petroleum Institute

7 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 7 Energy … once a headwind, now a tailwind … for many Contribution to real GDP growth (contribution to percent change from four quarters earlier) Sources: US Department of Commerce; JPMorgan Chase &Co.

8 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 8 (2) The housing debacle

9 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 9 Ground Zero … inflated valuations are history Nominal income per household and house prices (ratio to 1970 Q1 level) Sources: Standard & Poor’s; US Department of Commerce

10 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 10 Here too, a headwind is slowly dying down Contribution of new home building to real GDP growth (percentage points over the past four quarters) Source: US Department of Commerce

11 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 11 (3) Fear … easy to inflame, hard to tame

12 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 12 All the things that did this … Market value of all publicly traded stocks (Wilshire 5000 index) Source: Dow Jones

13 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 13 … turned the lights out last fall US real GDP (percent change from four quarters earlier) Source: NBER recession bars; US Department of Commerce; various academic sources

14 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 14 In defense of policy activism …

15 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 15 Three principles … 1. A stitch in time saves nine 2. The cost of an underemployed economy— the “opportunity cost”—mounts rapidly … currently running $1 trillion annually and counting 3. Lost global opportunities amplify the costs

16 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 16 Three historical examples … 1. The 1930s 2. The Japanese response in the 1990s 3. The US response in the 2000s

17 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 17 The absolute budget numbers … yes, horrific US fiscal budget (balance over the most recent 12 months, billions of dollars) Sources: NBER; US Department of Commerce; Congressional Budget Office

18 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 18 Relative budget numbers … big but less scary US fiscal budget (balance over the most recent 12 months, % of GDP) Sources: NBER; Congressional Budget Office; JPMorgan Chase & Co.

19 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 19 Bold is justified, when you can say “inflation, R.I.P.” …

20 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 20 Articles of surrender conclude a long Fed battle … 10-year inflation expectations (percent) Sources: Bloomberg; Federal Reserve Board

21 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 21 … and price competition will be stiff for a while Unemployment rate (percent of the labor force) Sources: NBER recession bars; US Department of Labor

22 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 22 Investors get it 10-year inflation expectations (percent) Sources: Bloomberg; Federal Reserve Board

23 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 23 … but fear begets opportunity

24 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 24 The future exists … when we stumble, we always rebound … US GDP gap (actual less potential real GDP as a percent of potential real GDP) Source: NBER; US Department of Commerce

25 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 25 … it’s why level heads say be brave when others fear Value (ratio of Wilshire 5000 to after-tax GDP profits) Wilshire 5000, profits (ratio to 1952 Q1 level) Sources: US Department of Commerce; Dow Jones

26 2 0 0 9 H E A L T H C A R E F O R E C A S T C O N F E R E N C E, U N I V E R S I T Y O F C A L I F O R N I A, I R V I N E, C A, F E B R U A R Y 1 9, 2 0 0 9 Jim Glassman, jglassman@jpmorgan.com, 212-270-0778 26 Analysts’ Compensation: The research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors and overall firm revenues. The firm’s overall revenues include revenues from its investment banking and fixed income business units. Principal Trading: JPMorgan and/or its affiliates normally make a market and trade as principal in the securities discussed in this report. Legal Entities: JPMorgan is the marketing name for JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide. J.P. Morgan Securities Inc. is a member of NYSE and SIPC. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. J.P. Morgan Futures Inc. is a member of the NFA. J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority. JPMorgan Chase Bank, Singapore branch is regulated by the Monetary Authority of Singapore. J.P. Morgan Securities Asia Private Limited is regulated by the MAS and the Financial Services Agency in Japan. J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS License No: 238188) (JPMSAL) is a licensed securities dealer General: Information has been obtained from sources believed to be reliable but JPMorgan does not warrant its completeness or accuracy except with respect to any disclosures relative to JPMSI and/or its affiliates and the analyst’s involvement with the issuer. Opinions and estimates constitute our judgment as at the date of this material and are subject to change without notice. Past performance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. JPMorgan and/or its affiliates and employees may act as placement agent, advisor or lender with respect to securities or issuers referenced in this report. Clients should contact analysts at and execute transactions through a JPMorgan entity in their home jurisdiction unless governing law permits otherwise. This report should not be distributed to others or replicated in any form without prior consent of JPMorgan. U.K. and European Economic Area (EEA): Investment research issued by JPMSL has been prepared in accordance with JPMSL’s Policies for Managing Conflicts of Interest in Connection with Investment Research. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (all such persons being referred to as “relevant persons”). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to “wholesale clients” only. JPMSAL does not issue or distribute this material to “retail clients.” The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms “wholesale client” and “retail client” have the meanings given to them in section 761G of the Corporations Act 2001. Korea : This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul branch. Copyright 2009 JPMorgan Chase & Co. All rights reserved. Additional information available upon request.


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