Alpha Realized Today’s Financial Market Dynamics & Consequences for MBAs

1. Alpha Realized Today’s Financial Market Dynamics & Consequences for MBAs - Confidential Document, Property of Graduate Leverage, LLC, rev 033110

2. Agenda • Perspective on Today’s Market Conditions • Potential Changes in MBA Career Pathing • Implications for Management of Your Personal Finances

3. Perspective on Today’s Market Conditions

4. Coming Off A Credit Crisis . . .

5. Reasons for Great Contraction (Credit Crisis) • Subprime Mortgage Market: Poor underwriting standards • Lax Federal Reserve Interest Rate Policy: i.e. the “Greenspan Put” • SEC 2004 Rule Change: allowed budge bracket broker-dealers to increase leverage from 12-1 to 35-1 (three of five firms failed) • Unregulated Credit Default Swap Market • Rating Agencies: conflicting interests resulting in mispriced risk • Liquidity Issues: too many players borrowing short and lending long • Mark to Market Accounting • Fannie Mae & Freddie Mac • Political Issues: lobbyists wield too much influence • Too Much Leverage

6. Federal Debt $ Trillion $14.7 $5.1 2001 2010 All Debt Markets Experienced Unprecedented Growth Leverage Measures Source: US Treasury

7. Fed Re-Liquefied Fed Monetary Base

8. Equity Rebound

9. Commodity Rebound Jan, 2010 Jan, 2011 Silver Increased 88% in 2010

10. Surprised Stocks Still In Favor

11. Today’s Level Stock Potential Returns (Shiller) Prediction of Future Stock Returns

12. Stock Potential Returns (Tobin’s Q)

13. Consumer Leverage

14. Corporate Leverage

15. Government Debt

16. Government Debt

17. Unemployment Average Duration of Unemployment Source: Haver Analytics Structural Unemployment Poses Greatest Risk At Current Pace Of Hiring Full Employment Reached In 2017

18. Economic Prospects • Risks: • Lack of Deleveraging could cause another crisis (of greater proportions) • Structural unemployment headwinds • Impact of change in fiscal and monetary polices • Housing market supply overhang and transition from federal support • What’s Required To Restore Balance: • Structural issues in labor and capital must be addressed • Deleveraging of corporate, consumer and government • Shift to current account surplus • Restoration of market-based housing industry Risks Have Shifted From Alpha To Beta

19. Summary Perspective on Today’s Market Conditions • US in need of potentially painful rebalancing • Macro issues will continue to dominate risk management • Valuations indicate potential for future volatility if not factored properly

20. Potential Changes in MBA Career Pathing

21. MBA Career Prospects GDP Growth Emerging Economies 140 130 120 110 Advanced Economies 100 09 10 08 07 06 2005 Source: The Conference Board

22. MBA Career Prospects Pre-Credit Crisis Post-Credit Crisis Other Fortune 500 Tech / Media Consulting Financial Services

23. Financial Services Sector Source: Macroeconomic Advisors

24. World Economic Forum Report • US Still Showing Leadership: • Innovation • Access to Capital for Private Companies Source: World Economic Forum

25. Summary Changes in MBA Career Pathing • Shift to International Corporations and EM-Focused Businesses • Entrepreneurship Will Still Thrive and Display Favorable Risk/Reward • Innovative and High Growth Companies • Financing of Emerging Markets and Other High Growth Sectors

26. Implications for Management of Your Personal Finances

27. Primary Theme • Increased in Public and Private Leverage • Government will need to increase taxes • Slower growth in industrialized countries • Greater macro volatility • Need to manage debt with financial allocation framework

28. Looming Tax Increases • It Is Already Happening: • Jan 12, 2011: Illinois Lawmakers Pass 67% Income Tax Increase, Largest In History • 30 States Have Raised Taxes By more than 4% (Includes fees, excise taxes, etc.)

29. Changes in Student Debt Levels $84K $41k $30k 1996 2003 2010 Rapid Increase In Debt Levels * Based on data collected by GL internal student database

32. Salary $120k $70k $55k Debt Considerations Salaries and Debt Levels $150,000 Student Debt $100,000 $84k $84k $84k $50,000 Small Firm or Start-up Large Corporation or Financial Markets Non-Profit Career Path Determines Debt Management Strategy

33. Current MBA Career Path Breakdown Non-Profit Sector ~ 10% Large Corporation or Financial Markets ~ 55% Non-Profit Private Sector Federal Sector State or Local Municipality NGO Banking Consulting General Management Private Equity Hedge Fund Wealth Management Corporate Treasury Sales or Marketing Small Firm or Start-up ~ 45% Small or Medium Enterprise Venture-backed Business Start-up Sole Proprietorship Source: US News, Select School Reports

34. Liquidity Management • Subsidy & Loan Forgiveness • Financial Allocation Debt Implications Corporation or Financial Markets Small Firm or Start-up Non-Profit Sector

35. New Program Details Small Firm or Start-up Non-Profit Sector New Federal Programs (March, 2010) • Income Based Repayment: • Limits monthly payment to 15% of discretionary income • Loan Forgiveness: • Outstanding debt forgiven after 10 years for public service • Outstanding debt forgiven after ~20 years for private sector

36. Total Debt Payments of $54,234 Total Debt Payments of $118,601 = Standard $988 Debt Forgiven ($97k) = IBR $498 Liquidity & Loan Forgiveness Non-Profit Sector Monthly Payment Loan Repayment $1,500 $1,000 $500 1st 5th 10th Repayments Years Total Debt Burden Reduced By More Than 50%

37. = Standard $988 Lower Loan Payment & Subsidies Over 4 Year = IBR Liquidity & Loan Subsidies Small Firm or Start-up Monthly Payment $1,500 Loan Repayment $1,000 $500 1st 5th 10th Repayments Years Liquidity Relief & $5,000 In Loan Subsidies

38. Liquidity & Financial Allocation Corporation or Financial Markets Small Firm or Start-up Monthly Payment Utilize Deferment or Forbearance Increase in Liquidity of $24,000 $1,000 $500 1st 5th 10th 15th 20th Repayments Years Excess Liquidity For Start-up Equity Or Home Down Payment

39. A/T Returns PLUS Loan 8.1% Average PLUS Return S&P 500 7.4% Average S&P Return (A/T) Financial Allocation Corporation or Financial Markets 15% 7.5% 0% 1940 1960 1987 2001 Sources: Yale Econ/Robert Shiller, Standard & Poor’s, Federal Reserve, Bloomberg Today’s PLUS Loan Has Outperformed S&P Over Past 70 Years

40. Financial Allocation Corporation or Financial Markets Pre-Tax Returns PLUS Loan 20% 12.2% Pre-Tax PLUS Return S&P 500 10% 11.1% Pre-Tax S&P Return AAA Munis 0% 1940 1960 1987 2001 Sources: Yale Econ/Robert Shiller, Standard & Poor’s, Federal Reserve, Bloomberg PLUS Loan Has Sharpe Ratio Greater Than Any Potential Investment On Efficient Market Frontier

41. Financial Allocation Where would PLUS Loan plot?

42. In Good Company Now Legendary Hedge Fund Investor John Paulson’s Favorite “Asset” Class? Fixed Income Liabilities

43. 3a) Consol Low Rate Loans 10/15/2011 4a) Enter Targeted12/10/2011 3b) Consol Low Rate Loans 8/15/2011 4b) Enter IBR10/1/2011 2) File Taxes Minimizing AGI 3/20/2011 3c) Consol Low Rate Loans 5/1/2011 4b) Enter PSLF7/11/2011 Required Action Items Corporation or Financial Markets Small Firm or Start-up Non-Profit Sector Today Grace End Date Graduation Large Firm 1) Complete High Rate Consol 2/15/2011 Small Firm Non-Profit * To maximize IBR Subsidy borrower should establish credit or deductions prior to year end

44. $2.2m Retain Financial Advisor $1.2m $600k $100k Intermediary Period $200k $300k New Financial Issues Corporation or Financial Markets Small Firm or Start-up Non-Profit Sector Professional Development Period (10-15yrs) Positive Net worth Finish MBA Program Start Undergrad Negative Net worth Asset Accumulation Period (25yrs) Historical Approach To Financial Management Neglects Liquidity, Debt & Proper Financial Allocation

45. Review Personalized Assessment Execute Debt Management Objectives • Overview • We have compiled and analyzed your personal debt portfolio in order to determine the optimal debt management strategy. The tasks outlined below include each step required to minimize your cost of debt. • Below your task list you will also find a detailing of the savings as well as your loan portfolio for your records. • Required Tasks To Achieve Plan Objective: • November 15, 2010:Consolidate all low rate loans as initial in-school application • February 15, 2011: Complete Add-on Consolidation application form to include all low rate loans occurred in spring disbursement • March 1, 2011: Verify in-school deferment status on all consolidated loans to prevent payment and ensure subsidy • March 20, 2010: Complete tax filing process according to specific filing status: i) • Non-Exempt: File using deductions for AGI to maximize subsidy and minimize Fill out Card 1 3 2 Contact Info: ccatrina@gladvisor.com Cell: 949.943.9954 Complete Process Yourself Retain GL Advisor to Carry Out Process Please Initiate Process By Feb 15th To Ensure Completion Support Process Personal Info Card within 1 week