614 Landis Avenue, Vineland, NJ Global Business Alliance of New England’s 13 th Annual International Networking Evening & Business Forum Boston, MA, February 7, 2007 The Global Economic Outlook: Implications for International Business in the Year Ahead Bill Witherell VP, Chief Global Economist & Portfolio Manager Cumberland Advisors Contact in : New England (North Grafton, MA)

614 Landis Avenue, Vineland, NJ Chart 2 Outline Overview of global growth prospects Oil Trade US external account and its financing Bond markets Inflation Equity Markets Major Risks Looking before you leap

614 Landis Avenue, Vineland, NJ Chart 3 World Measured by Gross Domestic Product (GDP) Source: World Federation of Stock Exchanges, World Bank Data, and Cumberland Advisors. © Cumberland Advisors 1998 (Total $ trillion) 2005 (Total $ trillion)

614 Landis Avenue, Vineland, NJ Chart 4 World Measured by Purchasing Power Parity (PPP) Source: World Federation of Stock Exchanges, World Bank Data, and Cumberland Advisors. © Cumberland Advisors 1998 (Total $ trillion) 2005 (Total $ trillion)

614 Landis Avenue, Vineland, NJ Chart 5 An Exceptional Fifth Year of Global Growth Above 4% in ’07 GDP(%) e= estimated Sources: OECD, IMF, Cumberland Advisor estimates

614 Landis Avenue, Vineland, NJ Chart 6 Growth Rates are Converging Among the Large Advanced Economies GDP(%) e= estimated Sources: OECD, Cumberland Advisor estimates

614 Landis Avenue, Vineland, NJ Chart 7 Some Smaller European Economies Continuing to Outpace the Largest GDP (%) e= estimated Sources: OECD, Cumberland Advisor estimates

614 Landis Avenue, Vineland, NJ Chart 8 Asian Emerging Markets Lead Latin Americans GDP (%) e= estimated Sources: OECD, IMF, Cumberland Advisor estimates

614 Landis Avenue, Vineland, NJ Chart 9 World Primary Energy Demand by Fuel Source: International Energy Agency, World Energy Outlook 2006

614 Landis Avenue, Vineland, NJ Chart 10 Cumulative World Oil Supply by Region Source: International Energy Agency, World Energy Outlook 2006

614 Landis Avenue, Vineland, NJ Chart 11 U.S.Total Energy Production and Consumption Quadrillion BTU Source: U.S. Department of Energy, Annual Energy Outlook 2007

614 Landis Avenue, Vineland, NJ Chart 12 Crude Oil Price –US Dollars Per Barrel Simple average of three spot prices (APSP); Dated Brent, West Texas Intermediate, and the Dubai Fateh Source: IMF World Economic Outlook Database, September 2006 $ per Barrel

614 Landis Avenue, Vineland, NJ Chart 13 Crude Oil Price – Nymex Dollars per Barrel Source: Wall Street Journal

614 Landis Avenue, Vineland, NJ Chart 14 World Trade Volume - Annual % Change % % % Change Source: IMF World Economic Outlook Database, September 2006Source: IMF World Economic Outlook Database, September 2006 Source: IMF World Economic Outlook Database, September 2006

614 Landis Avenue, Vineland, NJ Chart 15 US Trade Deficit ($Billions) Source: Wall Street Journal

614 Landis Avenue, Vineland, NJ Chart 16 A Potential Increase In Trade Protectionism Threatens the Global Outlook Prospects for the Doha Trade Negotiations Possible U.S. Congress actions/ failures to act on extension of trade negotiating authority Proper use should be made of the WTO to enforce WTO obligations

614 Landis Avenue, Vineland, NJ Chart 17 U.S. Current Account Balance SAAR Billions of dollars Source:Federal Reserve Band of New York

614 Landis Avenue, Vineland, NJ Chart 18 Net Purchases of U.S. Long-Term Securities - $Billions Source: Federal Reserve Bank of New York

614 Landis Avenue, Vineland, NJ Chart 19 How Big is the Bond Market? Global Market of Bonds and Notes: Amounts Outstanding Jun 2006 (USD Bn.) Total Total 63,662 Source: BIS Quarterly Review, Dec 2006 and Cumberland Advisors. © Cumberland Advisors Other includes: Cayman Islands Hong Kong Canada Switzerland Australia Sweden Lebanon West Indies Philippines South Korea Taiwan Poland Russia Turkey Argentina Brazil Mexico More…

614 Landis Avenue, Vineland, NJ Chart 20 Source: BIS Quarterly Review, Dec and Cumberland Advisors. © Cumberland Advisors International Total 15,785 US 43.0% ROW 53.5% ROW 48.8% Domestic Total 47,877 Where are the Bonds? Global Market of Bonds and Notes: Amounts Outstanding Jun 2006 (USD Bn.) by Residence of Issuer Other includes: Cayman Islands Hong Kong Canada Switzerland Australia Sweden Lebanon West Indies Philippines South Korea Taiwan Poland Russia Turkey Argentina Brazil Mexico More…

614 Landis Avenue, Vineland, NJ Chart 21 U.S. Dollars per One Euro

614 Landis Avenue, Vineland, NJ Chart 22 Japanese Yen per One U.S. Dollar

614 Landis Avenue, Vineland, NJ Chart 23 U.S. Dollars per One British Pound

614 Landis Avenue, Vineland, NJ Chart 24 World Consumer Prices – Annual % Change % Change Source: IMF World Economic Outlook Database, September 2006

614 Landis Avenue, Vineland, NJ Chart 25 U.S. Consumer Price Index Excluding Food and Energy Percent Change over one year ago level Source: Federal Reserve Bank of New York

614 Landis Avenue, Vineland, NJ Chart 26 World’s Real Interest Rates: Benchmark inflation–indexed government bonds Source: BIS Quarterly Review Bloomberg and Cumberland Advisors. © Cumberland Advisors

614 Landis Avenue, Vineland, NJ Chart 27 World’s Nominal Benchmark Bond Yields Source: BIS Quarterly Review Bloomberg and Cumberland Advisors. © Cumberland Advisors

614 Landis Avenue, Vineland, NJ Chart 28 World’s Market-Derived Inflation Forecast: Nominal Benchmark Yield minus Inflation-Indexed Yield Source: BIS Quarterly Review Bloomberg and Cumberland Advisors. © Cumberland Advisors

614 Landis Avenue, Vineland, NJ Chart 29 World Measured by Stock Market Capitalization Source: World Federation of Stock Exchanges, World Bank Data, and Cumberland Advisors. © Cumberland Advisors 1998 (Total $ trillion) 2005 (Total $ trillion)

614 Landis Avenue, Vineland, NJ Chart 30 Look What Happened in 2006 Stock Market Capitalization Source: World Federation of Stock Exchanges, World Bank Data, and Cumberland Advisors. © Cumberland Advisors 2005 (Total $ trillion) Sept. 30, 2006 (Total $ trillion)

614 Landis Avenue, Vineland, NJ Chart 31 Share of World Stock Market Value: Selected Mature Countries Source: World Federation of Stock Exchanges and Cumberland Advisors. © Cumberland Advisors 1998 (Total $ trillion) US 43.0% ROW 53.5% US 40.4% ROW 48.8% Sept 30, 2006 (Total $ trillion)

614 Landis Avenue, Vineland, NJ Chart 32 Share of World Stock Market Value: Selected Emerging Countries Source: World Federation of Stock Exchanges and Cumberland Advisors. © Cumberland Advisors 1998 (Total $ trillion) US 43.0% ROW 53.5% US 40.4% ROW 48.8% Sept 30, 2006 (Total $ trillion) China India Indonesia Iran Israel Korea Malaysia Philippines Sri Lanka Taiwan Thailand Turkey Singapore South Africa Mauritius Egypt Poland Hungary Slovenia Argentina Brazil Chile Colombia Peru Mexico 6% 17%

614 Landis Avenue, Vineland, NJ Chart 33 Global Stocks (MSCI Indices) – Last 3 Years Source: MSCIBarra Emerging Markets Advanced Markets (Ex US) US Emerging Markets Advanced (ex US) US

614 Landis Avenue, Vineland, NJ Chart 34 Global Stock Markets Continued To Outperform US Market in 2006 Percent Source: MSCIBarra MSCI indices – USA, EAFE+CANADA, EEM

614 Landis Avenue, Vineland, NJ Chart 35 In sum, it looks like another year of the “Goldilocks Economy” “ Not too hot and not too cold” But do not forget the “Three Bears” [ Financial Risks, Geopolitical Risks and Natural Disaster Risks]

614 Landis Avenue, Vineland, NJ Chart 36 Financial Risks A Recent Warning from the Financial Stability Forum “Participants …… noted the current benign global financial conditions. ……. At the same time, markets are characterised by a very low level of risk premia, especially in credit markets. While this reflects healthy fundamentals and innovation in the management of risk exposures, participants expressed concern that market pricing may not currently incorporate the full range of potential risks. Financial market participants need to take account in their risk analysis and pricing of the full implications of a possible reversal of the current benign conditions, including less liquid markets. “* * Source: Financial Stability Forum Press Release: Second FSF European Regional Meeting (Stockholm, January 2007)

614 Landis Avenue, Vineland, NJ Chart 37 Global Bond Risk Premiums have declined to low levels: JPMorgan Emerging Market Bond Index over US Benchmark Yields Source: JP Morgan and Cumberland Advisors. © Cumberland Advisors Daily Spreads of JPMorgan's Emerging Market Bond Index (EMBI)+ Sovereign over US Benchmark Bond Yields. Data through 11/23/06. Basis Points LTCM 9/11 Argentina default Priced for perfection?

614 Landis Avenue, Vineland, NJ Chart 38 Emerging Market Credit Default Swaps also are low: Brazil 5 year CDS Source: Bloomberg

614 Landis Avenue, Vineland, NJ Chart 39 Geopolitical Risks Iraq and Afghanistan Iran The Middle East North Korea International Terrorism

614 Landis Avenue, Vineland, NJ Chart 40 Natural Disaster Risks Hurricanes, Typhoons Earthquakes, Tsunamis Epidemics, Pandemics*. *Note The risk of a Bird Flu Pandemic has not decreased. Rather, it appears to have increased. The virus has been mutating as scientists expected. The result is a developing version which is more resistant to known medical treatments like Tami flu. The virus seems as deadly as ever in the recent third world cases of human infection (Indonesia, Nigeria). Third world countries have minimal protective arrangements. The global professional epidemiologic community fears the mass of complacency that has developed worldwide.

614 Landis Avenue, Vineland, NJ Chart 41 World Bank’s Ranking of the Ease of Doing Business World Bank’s Ranking of the Ease of Doing Business Top 15 of 175 countries Economy Economy Ease of Doing Business Rank Ease of Doing Business Rank Singapore 1Singapore New Zealand 2New Zealand United StatesUnited States3 CanadaCanada 4 Hong Kong, ChinaHong Kong, China 5 United KingdomUnited Kingdom 6 DenmarkDenmark 7 AustraliaAustralia 8 NorwayNorway 9 IrelandIreland 10 JapanJapan 11 IcelandIceland 12 Sweden13Sweden FinlandFinland 14 SwitzerlandSwitzerland 15 Source: World Bank at

614 Landis Avenue, Vineland, NJ Chart 42 Example of “Doing Business” Details: France, which ranked 35 th overall Employing Workers (France 2006) The difficulties that employers face in hiring and firing workers are shown below. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The Rigidity of Employment Index is an average of the three indices. IndicatorFranceOECD Difficulty of Hiring Index Rigidity of Hours Index Difficulty of Firing Index Rigidity of Employment Index Nonwage labor cost (% of salary) Firing costs (weeks of wages) Similar information available: Starting a Business, Dealing with Licenses, Registering Property, Getting Credit, Protecting Investors, Paying Taxes, Trading Across Borders, Enforcing Contracts, and Closing a Business. Source: World Bank at

614 Landis Avenue, Vineland, NJ Chart 43 Thank You! Sign up to receive our free market commentaries at

614 Landis Avenue, Vineland, NJ Chart 44 About Cumberland Advisors Cumberland Advisors supervises approximately $850 million in separate account assets for individuals, institutions, retirement plans, government entities, and cash management portfolios. Cumberland manages portfolios for clients in 39 states, the District of Columbia, and in countries outside the U.S. Cumberland Advisors is an SEC registered investment adviser. Munis, Taxables, ETFs Cumberland’s portfolio management efforts emphasize long lasting relationships and continuous dialogue among clients, their consultants, tax advisors, accountants, estate planners and their assigned portfolio management contact at Cumberland. Cumberland offers several different investment portfolio management styles. Our investment strategy is described in detail on our web site. Fixed Income All of our fixed-income offerings are total return strategies, but can take the client’s current income needs into consideration. Our fixed income styles are Tax- Free Municipal Bonds, Taxable Bonds, and Short Term Investment Program. Stocks Cumberland uses Exchange-Traded Funds to manage global equities. Exchange- Traded Funds (ETFs) are securities that mimic the price performance and dividend yield of an index, or a basket, of securities. Cumberland uses ETFs as building blocks in crafting a portfolio, investing in attractive equity sectors, industries, market capitalization strata, styles and regions. Our equity portfolios are U.S. Exchange- Traded Funds (ETF) Equity, International Exchange-Traded Funds (ETF) Equity, Emerging Markets Exchange Traded Funds, and Global Multi-Asset Class Exchange Traded Funds. Balanced Accounts Cumberland can blend the strategies presented above to create a balanced mix of stocks and bonds. For further information about Cumberland Advisors, please visit our website at Seated (L to R): Maribel Echevarria, VP of Trading; Terri Pantalione, VP of Compliance; Daisy Lopez, VP of Operations. Standing (L to R): David Kotok, Chairman and Chief Investment Officer; John Mousseau, CFA, VP and Portfolio Manager; Matthew Forester, VP and Portfolio Manager; Bill Witherell, VP and Chief Global Economist; Sam Santiago, VP of Information Technology; Peter Demirali, VP and Portfolio Manager. Donna Sooy, VP of New Accounts, not pictured.