eric franco - us economic and capital markets outlook
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TRANSCRIPT
This presentation is provided by AllianceBernstein L.P.
April 29, 2006
US Economic and Capital Markets Outlook
Eric FrancoSenior Portfolio Manager
Global Value Equities
NFSA 2006 Annual Seminar
AllianceBernsteinUS Economic and CMO
4.4%
3.7%
0.8%
1.6%
2.7%
4.2%
3.6%3.4%
1999 2000 2001 2002 2003 2004 2005 2006E
US GDP Growth
Source: Consensus Economics, Datastream, EIU, IFO Institute, IMF, MSCI, S&P, World Bank, and Bernstein
AllianceBernsteinUS Economic and CMO
US ISM Survey
US ISM Headline
35
45
55
65
75
91 93 95 97 99 01 03 05
Index
Headline
Source: Consensus Economics, Datastream, EIU, IFO Institute, IMF, MSCI, S&P, World Bank, and Bernstein
AllianceBernsteinUS Economic and CMO
US Employment Growth Solid
Change in Private Sector Employment thousands, 3 month moving average
(400)
(300)
(200)
(100)
0
100
200
300
400
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Source: Bloomberg
AllianceBernsteinUS Economic and CMO
Service Sector Employment
Source: Bureau of Labor Statistics and Haver Analytics
All Employees: Service Providing Industries
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
70 76 82 88 94 00 06
(Thousands)
AllianceBernsteinUS Economic and CMO
Office Vacancies Decreasing
Source: CB Richard Ellis and Haver Analytics
National Office Vacancy Rate: Metropolitan Area
7
9
11
13
15
17
19
21
23
86 87 89 90 92 93 95 96 98 99 01 02 04 05
AllianceBernsteinUS Economic and CMO
Nonresidential Construction
Source: Census Bureau and Haver Analytics
Private Construction: Nonresidential
120
140
160
180
200
220
240
260
280
300
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
($ Billions)
AllianceBernsteinUS Economic and CMO
Total Domestic Sprinklers Shipped 1980–2005
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
80 85 90 95 00 05
Source: National Fire Sprinkler Association
AllianceBernsteinUS Economic and CMO
As US Economic Growth Moderates, Other Regions Are Picking Up
3.2%3.6%
2.4%
5.9%
1.6%
3.4%
2.1%
3.4%
2.9%
6.1%
World US Japan Europe Emerging
2005 2006E
Real GDP Growth (%)
Through March 31, 2006Source: Consensus Economics, Datastream, EIU, IFO Institute, IMF, MSCI, S&P, World Bank and Bernstein
AllianceBernsteinUS Economic and CMO
IFO Business Climate Survey*
Through March 31, 2006*Pan-Germany, seasonally adjusted, 2000=100Source: Consensus Economics, Datastream, EIU, IFO Institute, IMF, MSCI, S&P, World Bank and Bernstein
80
90
100
110
91 94 97 00 03 06
Index
AllianceBernsteinUS Economic and CMO
Average
*Based on trailing 12-month ROE numbers from 1980 through March 2006Source: Factset, I/B/E/S, MSCI and Bernstein
Corporate Profitability Well Above Average Globally
Current
(%)
Highest
(5)
0
5
10
15
20
US EmergingMarkets
Europe Japan
Lowest
Return on Equity*Trailing 12-Month ROE: 1980–Mar 2006
AllianceBernsteinUS Economic and CMO
Interest Rates Remain Low
0
2
4
6
8
10
12
90 92 93 95 97 98 00 02 03 05
Per
cent
US
Euro Area
Japan
As of December 31, 2005*Interest rates are 10-year swap rates.Source: Bank of Japan, Bloomberg, Bureau of Labor Statistics (Department of Labor), Bureau of MIC (Japan), Consensus Economics, Eurostat and Bernstein
Ten-Year Interest Rates*
AllianceBernsteinUS Economic and CMO
Energy Prices Pose A Risk
As of December 31, 2005*West Texas int. Cushing $/BBLSource: Datastream
Oil Prices*
0
10
20
30
40
50
60
70
86 89 92 95 98 01 04
($/BBL)
AllianceBernsteinUS Economic and CMO
Asia Driving Acceleration in Oil Demand Growth
Million Barrels per Day
Source: BP Statistical Review, International Energy Agency (IEA), and AllianceBernstein
All OtherDemand
New AsianDemand
93.2
84.3
76.9
3.6
5.3
3.7
3.7
2000 2005 2010E
AllianceBernsteinUS Economic and CMO
3.7
2.1
1.6
Sources of New SupplyMillion Barrels per Day
1999–2005
FSU
Former Soviet Union Largely Met Oil Demand Growth
All Other
OPEC
7.4
Source: BP Statistical Review, International Energy Agency (IEA), and AllianceBernstein
AllianceBernsteinUS Economic and CMO
7.8
8.2
8.6
9.0
9.4
9.8
Jan 03 Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05
Daily ProductionMil. Barrelsper Day
Source: Russian Energy Ministry
Dec 04 Jun 05
Pattern of Russian Oil Output Unsettling for Most of 2005
AllianceBernsteinUS Economic and CMO
All Other Sources of Oil Production Growth Have Stalled
30.4
35.638.2 38.2 38.7 38.8 38.9 38.6
1990 1995 2000 2001 2002 2003 2004 2005
Non-OPEC and Non-FSU Oil Production
Million Barrels per Day
Source: BP Statistical Review, IEA, OPEC, and AllianceBernstein
AllianceBernsteinUS Economic and CMO
OPEC Spare Capacity Has Declined Dramatically
Through December 31, 2005Source: Bloomberg, Department of Energy, IEA and AllianceBernstein estimates
Million Barrels per Day
0
1
2
3
4
5
6
98 99 00 01 02 03 04 05
AllianceBernsteinUS Economic and CMO
NetNewProduction
2005–2010EMillion Barrels per Day
Source: BP Statistical Review, IEA, and AllianceBernstein
New Source of Oil Supply Emerging
Europe
U.S.
NaturalGasLiquids
Caspian Sea
Canada
Brazil
Africa
5.20.9
1.6
1.5
1.9
0.8
0.5
1.0
AllianceBernsteinUS Economic and CMO
7.8
8.2
8.6
9.0
9.4
9.8
Jan 03 Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05
Russian Oil Production Has Turned Up Again
Daily ProductionMil. Barrelsper Day
Source: Russian Energy Ministry
AllianceBernsteinUS Economic and CMO
0
1
2
3
4
5
6
1998 2000 2002 2004 2006E 2008E 2010E
OPEC Spare Capacity to Turn Back Up
Source: Bloomberg, Department of Energy, IEA and AllianceBernstein estimates
Million Barrels per Day
AllianceBernsteinUS Economic and CMO
Transportation Fuels Drive Oil Demand
Share of Oil Consumption Growth
Source: Environmental Protection Agency and AllianceBernstein estimates
65%
9%
24%
3%1%
RoadTransport
AirTransport
Rail Transport
IndustrialProduction/
Process
Other
<
AllianceBernsteinUS Economic and CMO
Electric Power Far More Efficient than Mechanical Power
14%Energyto Wheels
0%
Loss toIdle
Loss toResistance
14%
Loss toDriveline
6%
Energyto Wheels
Loss toDriveline
6%
Loss toAtmosphere
63%
17%
Loss toIdle
80%
Electric Power6× More Efficient
Loss toAtmosphere
0%
EnergyInput 100%
100%
Excludes accessories which consume 2% of power inputSource: EPA and AllianceBernstein estimates
EnergyInput
AllianceBernsteinUS Economic and CMO
Accelerate with motor
Cruise with engine
Shut down at idle
Motor Generator
during deceleration
Sources of Hybrid Power Efficiency
Current Hybrid
High-energy density battery
Access electric power grid off peak
Extend electric-mode range
from 2 miles to 30 miles
Shift 2/3 of miles driven
to electricity
Plug-In Hybrid
+
Source: AllianceBernstein estimates
AllianceBernsteinUS Economic and CMO
6,200
4,700
1,850
AverageVehicle
CurrentHybrids
Plug-InHybrids
Energy Consumed per Mile*(BTUs)
*Energy consumed within the vehicleSource: AllianceBernstein estimates
Fuel Efficiency of Hybrids Has Potential to Be Transformational
Miles per Gallon 20 26 ~80
AllianceBernsteinUS Economic and CMO
0
10
20
30
79 82 85 88 91 94 97 00 03 06
Rat
io (
×)
Average
Through March 31, 2006Source: S&P and Bernstein
Price/Forward Earnings
0
3
6
9
12
15
60 66 72 78 84 90 96 02
Rat
io (
×)
Price/Cash Flow
0
1
2
3
60 66 72 78 84 90 96 02
Rat
io (
×)
Price/Sales
0
1
2
3
4
5
60 66 72 78 84 90 96 02
Rat
io (
×)
Price/Book
US Equities Remain Reasonably Priced
S&P 500
06 06
06
AllianceBernsteinUS Economic and CMO
8.6×
11.2×
MSCI EAFE S&P 500
Current valuations do not guarantee future results.As of June 30, 2005The unmanaged Standard & Poor’s (S&P) 500 Stock Index includes 500 US stocks and is a common measure of the performance of the overall US stock marketThe unmanaged MSCI EAFE® Index (Europe, Australasia, Far East) is a free float-adjusted market-capitalization index that is designed to measure developed-marketequity performance, excluding the US and CanadaSource: MSCI and Standard & Poor's
Price/BookPrice/Cash Flow
2.1×
2.8×
MSCI EAFE S&P 500
Foreign Stocks Are Attractively Priced Today
AllianceBernsteinUS Economic and CMO
(×)
0.5
0.6
0.7
0.8
0.9
1.0
1.1
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Average
Europe Closing Valuation Gap with US
Price/Cash Flow Relative to US
Data smoothed on a trailing three-month basis; through March 31, 2006Source: MSCI, Worldscope, and Bernstein
AllianceBernsteinUS Economic and CMO
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Average
(×)Price/Cash Flow Relative to US
Data smoothed on a trailing three-month basis; through March 31, 2006Source: MSCI, Worldscope, and Bernstein
Japan Closing Valuation Gap with US
AllianceBernsteinUS Economic and CMO
Currency Moves Often Large and Sustained
U.S. Dollar vs. Major CurrenciesU.S. Dollar vs. Major Currencies
Historical analysis does not guarantee future results.US trade-weighted index through March 31, 2005Source: Datastream and IMF
40
60
80
100
120
140
160
180
80 83 86 89 92 95 98 01 05
Index
(44)%
(28)%
+56%
+40%
AllianceBernsteinUS Economic and CMO
U.S. Current Account Deficit Largest Financial Imbalance in the World
U.S. Current Account as % of GDP(4 Quarter Moving Average)
Through March 31, 2005Source: Bureau of Economic Analysis, US Department of Commerce and Bernstein
(%)
(7)
(6)
(5)
(4)
(3)
(2)
(1)
0
1
2
70 76 82 87 93 99 05
Surplus
Deficit
AllianceBernsteinUS Economic and CMO
US Runs a Deficit in Every Product Category With Every Region
By Product By Region
Through November 2004*Includes Venezuela and Indonesia.Source: Department of Commerce
2004 US Trade Deficit Composition
Capital Goods 2%Miscellaneous 2%
Agricultural Goods 1%
Pacific Rim44%
North America
17%
Latin America
6%
Other5%
Western Europe
17%
OPEC*11%
Consumer Goods
41%
Petroleum25%
Autos22%
Industrial Supplies
7%