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Important Smith Barney Disclosures

Important Smith Barney Disclosures.

norman-riggs
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Important Smith Barney Disclosures

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  1. Important Smith Barney Disclosures Although the statements of fact and data in this presentation have been obtained from, and are based upon, sources that the firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions included in this presentation constitute the firm’s judgment as of the date of this presentation and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results. The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. The data do not reflect the material differences between stocks, bonds, bills and inflation, such as fees (including sales and management fees), expenses or tax consequences. Common stocks generally provide an opportunity for more capital appreciation than fixed income investments but are also subject to greater market fluctuations. Corporate bonds, US Treasury bills and US government bonds fluctuate in value but, if held to maturity, offer a fixed rate of return and a fixed principal value. Government securities are guaranteed as to the timely payment of interest and provide a guaranteed return of principal. The principal value and interest on treasury securities are guaranteed by the US government if held to maturity. The Standard & Poor’s 500 Index is a market capitalization-weighted index of 500 widely held common stocks. Investors cannot directly invest in an index. Actual results may vary based on an investor’s investment objectives and portfolio holdings. Investors may need to seek guidance from their legal and/or tax advisor before investing. To the extent the investments discussed herein represent international securities, you should be aware that there may be additional risks associated with international investing involving foreign economic, political, monetary and/or legal factors. International investing may not be for everyone. Citigroup, Inc., its affiliates and its employees are not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the "promotion or marketing" of the transaction(s) or matters(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. (c) 2008 Citigroup Global Markets Inc. Smith Barney, Consulting Group and Investment Advisory Services are divisions of Citigroup Global Markets Inc. ("CGMI"). Securities are offered through CGMI. Member SIPC. CGMI and Citibank are affiliated companies under the common control of Citigroup Inc. Smith Barney is a service mark of CGMI and its affiliates and is used and registered throughout the world. Citi and Citi with Arc Design are trademarks and service marks of Citigroup Inc. and its affiliates, and are used and registered throughout the world. INVESTMENT PRODUCTS: NOT FDIC INSURED  NO BANK GUARANTEE  MAY LOSE VALUE

  2. Market Volatility and theLong-Term Investor The Elm Street Group at Smith Barney August 2008

  3. The Recent Correction Dow Jones Industrial Average: 10/9/07 to 1/22/08 -15.5% Source: Smith Barney

  4. 2002 2003 2004 2005 2006 2007 2008 The Correction in Medium-Term Focus Dow Jones Industrial Average: 10/9/02 to 1/22/08 15,000 14,000 13,000 +64% -15.5% 12,000 11,000 10,000 9,000 8,000 7,000 Source: Smith Barney

  5. 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 77 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 The Correction in Long-Term Focus Dow Jones Industrial Average: 12/31/77 to 1/22/08 -15.5% +1340% Source: Smith Barney

  6. Get the Point? 300 point swings in the Dow in percentage terms over time Feb. 5, 2008: 2.45% Source: Smith Barney

  7. 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 A Clearer Perspective Dow Jones Industrial Average on a Log Scale 2000 to 2002 Bear Market 1987 Crash 1973-74 Bear Market Source: Smith Barney

  8. Is the Market Getting Riskier? “Postponing an attractive purchase because of fear of what the general market might do will, over the years, prove very costly.” Philip A. Fisher

  9. Volatility Cycles Daily Moves in the S&P 500 Index of More Than 1% 30-Year Average: 57 Source: Smith Barney

  10. What About the Down Side? Monthly Returns on the S&P 500 December 1977 Through December 2007 Number of Monthly Returns Source: Smith Barney

  11. A Look at Some Other Popular Asset Classes • Treasury Bonds • Corporate Bonds • Treasury Bills • Other Cash Instruments

  12. And the Winner Is . . . Cumulative Return on an Invested Dollar: 1926 Through 2007 $15,092 $3,255 $77 $20 $12 Small Cap Large Cap LT Gov Bonds T-Bills Inflation Source: Smith Barney

  13. Rates of Return Annualized Returns: 1926 Through 2007 LT Gov Bonds Small Stocks Large Stocks Inflation T-Bills Source: Smith Barney

  14. Leader of the Pack Top Performing Asset Class 12/31/45 Through 12/31/07 Number of Periods Stocks LT Gov Bonds T Bills Source: Smith Barney

  15. Where Do We Go From Here? “An investor who has all the answers doesn't even understand the questions.” Sir John Templeton

  16. The Bear Facts Declines of 20% or More in the S&P 500: 1950 Through 2007 Decline (in months) Recovery (in months) Date Peak-to-Trough 2000-02 1990 1987 1980-82 1973-74 1968-70 1966 1962 1956-57 -49% -20% -34% -27% -48% -36% -22% -28% -22% 30.5 3 3 19 21 18 8 6 15 86 4 20 3 70 21 7 14 11 -31.8% 13.7 26.2 Average: Source: Smith Barney

  17. “The true objective for any long-term investor is maximum total real return after taxes.” Sir John Templeton The Real Story

  18. Decline (in months) Recovery (in months) Date Peak-to-Trough The Bear Facts II Declines of 20% or More in S&P 500: Total Return After Inflation -47% -30% -52% -35% -23% -20% 23 3 21 18 6 15 ? 20 123 29 10 32 2000-02 1987 1973-74 1968-70 1962 1946-48 Average: -34.5% 14.3 42.8 Source: Smith Barney

  19. The Case for Waiting Out the Storm Cumulative Growth of Three Portfolios Dec. 31, 1972 Through September 1984 $351,758 Investor #2 stays in stocks Investor #3 adds $25,000 $244,301 $100,000 $93,451 Investor #1 sells stocks, earns 5% return Source: Smith Barney Note: The above represents a hypothetical investment and does not reflect the deduction for investment-management fees or transaction costs. Actual results would be reduced by these costs.

  20. $10,000 Stocks Treasury Bills Buying at the Top Cumulative Growth December 1961 Through December 2007 $2.74 million $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $502,716 Source: Smith BarneyNote: The above represents a hypothetical investment and does not reflect the deduction for investment management fees or transaction costs. Actual results would be reduced by these costs.

  21. Stocks Treasury Bills Buying at the Bottom Cumulative Growth December 1961 Through December 2007 $10,000 $3.68 million $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $469,367 Source: Smith BarneyNote: The above represents a hypothetical investment and does not reflect the deduction for investment management fees or transaction costs. Actual results would be reduced by these costs.

  22. What the Experts Say About Market Timing “I have never met a person who could forecast the market.” Warren Buffett “Don’t try to buy at the bottom and sell at the top. This can’t be done—except by liars.” Bernard Baruch “There is no basis for assuming the average investor can anticipate market movements more successfully than the general public, of which he is a part.” Benjamin Graham

  23. A famous Wall Street trader during the “Roaring ’20s,” Livermore lost his entire fortune in a failed effort to time the stock market. And the Losers . . . “It’s no trick at all to be right on the market.” Jesse Livermore

  24. Easy Boat to Miss Annualized Increase in the S&P 500: 1980 Through 2007 Net of Dividends Source: Smith Barney

  25. -20.5% -8.3% -6.9% -6.8% -6.8% -6.7% -6.6% -6.1% -5.8% -5.4% #1 Oct. 19, 1987 #2 Oct. 26, 1987 #3 Oct. 27, 1997 #4 Aug. 31, 1998 #5 Jan. 8, 1988 #6 May 28, 1962 #7 Sept. 26, 1955 #8 Oct. 13, 1989 #9 April 14, 2000 #10 June 26, 1950 +5.3% +2.4% +5.1% +3.9% +1.7% +4.7% +2.3% +2.8% +3.3% -1.1% +1.3% +12.3% +7.1% +1.7% +3.6% +3.2% -0.3% +4.1% +5.8% -2.6% +23.2% +23.6% +21.5% +37.9% +15.3% +26.1% +7.5% -4.8% -12.8% +17.6% On the Rebound 10 Worst Days for the S&P 500: 1950 Through 2007 Following Day Following Week Following Year Date Decline Average: -8.0% +3.0% +3.6% +15.5% Source: Smith Barney

  26. The Costs of Short-Term Investing Returns on a Buy-and-Hold Approach Versus a Market-Timing Strategy December 1977 Through December 2007 $3.87 million $1.71 million Buy and Hold Market Timing Source: Smith BarneyNote: The above represents a hypothetical investment and does not reflect the deduction for investment management fees or transaction costs. Actual results would be reduced by these costs.

  27. A Bad Time for Bad Timing • Bear markets can be points of maximum vulnerability to poor market-timing decisions. • Historically, net cash outflows by investors have marked major market bottoms.

  28. “The stock market is like a gambling casino where the odds are rigged in favor of the players.” Burton Malkiel A Winning Hand

  29. 2000 1990 1981 1977 1969 1962 1953 1946 2001 1940 1973 1939 1966 1934 1932 1957 1929 1941 -40% -50% -20% -30% 0% -10% +10% +20% -10% -20% -30% -40% +20% +30% 0% +10% +40% +50% +30% +40% +50% +60% The Odds Favor the Long-Term Investor Distribution of Returns on the S&P 500: 1926 Through 2007 2006 2004 Up Years: 59 (72%) Down Years: 23 (28%) 1993 1988 2003 1997 1986 1999 1995 2007 1979 1998 1991 2005 1994 1972 1996 1989 1983 1985 1992 1971 1968 1982 1980 1987 1984 1965 1976 1975 1964 1967 1955 1978 1970 1959 1963 1950 1960 1952 1961 1945 1956 1938 1949 1951 1958 2002 1943 1974 1948 1944 1936 1935 1954 1927 1933 1930 1926 1942 1928 1937 1947 1931 Source: Smith Barney

  30. More Hits Than Misses Probabilities of Various Annual Returns 1926 Through 2007: • Up 10% or more: about 3 in 5 • Up 20% or more: about 2 in 5 • Up 30% or more: about 1 in 5 • Down 10% or more: 1 in 8 • Down 20% or more: 1 in 16 • Down 30% or more: 1 in 40 Source: Smith Barney

  31. Time Pieces Positive and Negative Returns on the S&P 500: 1945 Through 2007 One-Year Periods Five-Year Periods Ten-Year Periods 48 53 5 53 14 Positive Returns Negative Returns Source: Smith Barney

  32. “Patience is a necessary ingredient of genius.” Benjamin Disraeli In a Nutshell: • Volatility is a fact of life in the stock market. • Over the long run, stocks have offered significantly higher returns than bonds or T-bills. • Market timing can be an expensive undertaking. • Historically, the odds have favored the bulls.

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