Is The “New Normal” Finally Over

November 12, 2014

Anderson Square, 4th FloorP.O. Box 10324George Town, Grand CaymanKY1-1003345-949-3022scott.elphinstone@fivecontinents.ky

What is the “New Normal”

• The “New Normal” was a term coined by investment manager Bill Gross.

• It describes a world where economic growth is significantly lower due to the response by both individuals and governments from the aftermath of the credit boom of the early 2000’s

• He felt that growth would be low for the foreseeable future due to a combination of deleveraging, de-globalization and increasing regulation.

There was a lot of debt

The Crisis Explained

The Response - Fed Funds Rate

The Response - Fed Money Printing

The Aftermath – World GDP

The Aftermath – US GDP

The Aftermath - Cayman GDP

2007 2008 2009 2010 2011 2012 2013-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

Annual Percent Change in Cayman GDP

Change in GDP

Source ESO.ky

The Aftermath - Cayman GDP

2006 2007 2008 2009 2010 2011 2012 20132250

2300

2350

2400

2450

2500

2550

2600

2650

2700

Cayman GDP (constant dollars

CI$ millions)

GDP

Source ESO.ky

“Rollout” Policy

Uncertainty of tenure

High cost to employers

Technology

Policies of other Countries

Is it Over?

The regulatory blizzard is showing no signs of slowingTax regulation

FATCAUK FATCAOECD Automatic exchange of tax information

Financial Services Regulation

Dodd FrankBasel IIIStress TestsAIFMD

Local Regulation

Directors RegulationBeneficial Ownership Registry?Immigration Reform?

The cost of regulation is like taxation

Is it Over?– China GDP

Is it Over? – European GDP

Is it Over? - US Household Debt

Is it Over? - US Unemployment rate

Is it Over? WTI OIL Price

Is it Over?- Income Disparity

Is it Over?- Income Disparity

Is it Over? – Asset Inflation

Conclusion

The “New Normal” is with us for a few more years

Deleveraging still ongoing in our major trading partner

Regulatory burden increasing and is an attempt to limit global competition in financial services

Concentration of wealth gains in the top 1% is creating asset inflation not economic growth

Implications for Marketing

Targeted and Cheap!