2008 Global Financial and Credit Crisis - cause and outcome

1. The Perfect Storm The PFP Group Wealth Management Team November 2008

2. And the scariest Halloween costume for this year goes to...

6. $ Mortgage CDO (Collateralized debt obligations) Originating/Sponsoring Bank Mortgage $ AIG $$$$$ %%%%% %+ % CDS %% CDS $ $$ %+ %- CDS %%% %+ AAA CCC % CDS Bank #1 Bank #3 Hedge Fund Collateral

8. Crude Oil Dow Jones Financial Index Hedge funds’ activities exaggerate volatility

13. Historical interest rates, economy and stock market valuation relationship Calculated based upon earnings yield and S&P 500 levels each year. The raw data for this table was obtained from Bloomberg (and from S&P)

14. Historical interest rates, economy and stock market valuation relationship Calculated based upon earnings yield and S&P 500 levels each year. The raw data for this table was obtained from Bloomberg (and from S&P)

16. S&P 500 Index (-17% over 10 years) MS Commodity Index (+270% over 10 years)

18. The Cycle of Market Emotions Source: Westcore Funds/Denver Investment Advisers LLC, 1998 Point of maximum financial opportunity Optimism Excitement Thrill Euphoria Anxiety Denial Fear Desperation Panic Capitulation Despondency Depression Hope Relief Optimism Point of maximum financial risk “ Wow, I feel great about this investment.” “ Maybe the markets just aren’t for me.” “ Temporary setback. I’m a long-term investor.”

19. Patience will be rewarded Source: 10-years ended December 31, 2006. By staying invested you will not miss the best days

25. Fixed Income Example Note: Tax rate is for highest marginal tax bracket