PIMCO Canada Corp. 120 Adelaide Street, Suite 1901 – Toronto

22 Pages·2010·0.66 MB·English

PIMCO Canada Corp.
120 Adelaide Street, Suite 1901 –Toronto, ON M5H 1T1
Agenda
The New Normal in Implications for
The New Normal
Canada? Canadian Investors
Secular Implications:
Potentially Lower and
More Volatile Returns
1
2010 Secular Forum: Process and Speakers
Topics Speakers
Annual The Aftermath of the Dr. Kenneth Rogoff
3–5 Year Financial Crisis Harvard University
Forecasting
Dr. Ian Goldin
Secular Megatrends
University of Oxford
Firm-Wide Debate
and Discussion
The Political Greg Ip
Economy of Austerity The Economist
Forms Key Investment
Dr. Arminio Fraga
Themes and Firm’s Trends and Issues in
Former President of the
Strategic Direction Global Finance
Central Bank of Brazil
2
Revisiting the New Normal of 2009
Summary of 2009 Conclusions: A paradigm shift for the global
economy and capital markets that will occur over multiple years
The Pre-Crisis Normal The New Normal
Financial Innovation (Leverage) De-Leveraging
De-Regulation Re-Regulation
Global Trade De-Globalization
Refer to Appendix for additional outlook information. 3
Key Secular Themes: Driving Without a Spare
2010 Summary: The world is on a multi-year journey to an unstable
destination, through unfamiliar territory, on an uneven road, having
already used its spare tire(s)
Continued Extended periods Politicians
emergence of of increased trump
key developing sovereign risk economists
economies
And submergence Serial balance sheet Expect policy
of others contamination mistakes
Secular implication: Potentially Lower and more volatile returns
As of June 30, 2010
Refer to Appendix for additional outlook information.
4
Developed Countries vs. Strong Emerging Economies
Industrial Production Levels
EM20*, China, U.S., and Canada
160
Emerging Asia

0
0 150 Emerging Europe
1
Latin America
= 140
China
7
130
0 U.S.

n
120 Canada
a
J

: 110
x
e
d 100
n
I
90
P
I
80
Jan-07 Jun-07 Nov-07 May-08 Oct-08 Apr-09 Sep-09 Mar-10
Source: HaverAnalytics, PIMCO
As of March 31, 2010
* EM20 are the 20 largest EM countries excluding China 5
Serial Balance Sheet Contamination in Debt Dynamics
Industrialized countries are expanding their indebtedness at an unprecedented pace
Gross Government Debt
150
2007 2009 2010e 2014e
125
)
%
(

P 100
D
G

f
o
75

e
g
a
t
n 50
e
c
r
e
P 25
0
G20 Emerging G20 Canada Germany U.K. U.S.
Markets Industrialized
Source: IMF
As of May 31, 2010 6
Policy Mistakes: Europe as Current Case Study?
Cost of 5 Year Credit Default Swap
1200
Greece
Portugal
1000
s
t Spain
n
oi 800
P United Kingdom

s
i Germany
s 600
a
B
United States
400
200
0
Sep-09 Nov-09 Dec-09 Feb-10 Mar-10 Apr-10 Jun-10
Source: Bloomberg, as of 6/30/10 7
Post-Crisis Portfolio Solutions
The New Normal in Implications for
The New Normal
Canada? Canadian Investors
Canada:
Should Be a Relative
Winner in The New
Normal
Potentially:
Strong Canadian Dollar
Low Real Interest Rate
More Volatility
Refer to Appendix for additional outlook information. 8
Canada is Likely the G7 Winner in the New Normal:
Cleanest Dirty Shirt
Financial and
Natural Resources
Economic Linkages
Fuelling Growth
“Old Normal” Analytical Emerging
Economies Battleground Economies
Potentially:
(cid:131) More volatility
(cid:131) Strong Canadian dollar
(cid:131) Low real interest rates
Refer to Appendix for additional outlook information. 9