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Global Interdependence Center Conference

Milan, Italy

David KotokChairman & Chief Investment Officer

Cumberland Advisors Inc.

February 21, 2005

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-10

-6

-2

2

6

10

Percent

Moody’s AAA Monthly Returns 1919-20056-13-2003 X

Bonds are No Longer Stable

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© Copyright 2004 Ned Davis Research, Inc. Further distribution prohibited without prior permission.  All Rights Reserved. NDR Disclaimer. For data vendor disclaimers refer to www.ndr.com/vendorinfo.

6/30/2004 Debt = $35.182 Trillion6/30/2004 GDP = $11.643 Trillion = 302.2%

Annual interpolated GDP (including estimates prior to 1929) used prior to 1946.

Domestic Nonfinancial Debt used prior to 1946. As of December, 1946

Domestic Nonfinancial Debt represented 99.4% of Total Credit Market Debt.

130

140

150

160

170

180

190

200

210

220

230

240

250

260

270

280

290

300

130

140

150

160

170

180

190

200

210

220

230

240

250

260

270

280

290

300

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Total Credit Market Debt as a % of GDP(quarterly data 12/31/1922 – 6/30/2004)

Record High Debt

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0

500

1000

1500

2000

2500

3000

3500

4000

4500

1985

Q1

1985

Q4

1986

Q3

1987

Q2

1988

Q1

1988

Q4

1989

Q3

1990

Q2

1991

Q1

1991

Q4

1992

Q3

1993

Q2

1994

Q1

1994

Q4

1995

Q3

1996

Q2

1997

Q1

1997

Q4

1998

Q3

1999

Q2

2000

Q1

2000

Q4

2001

Q3

2002

Q2

2003

Q1

2003

Q4

2004

Q3

OUTSTANDING STOCK OF TREASURYS(Bn. USD$)

LESS FOREIGN OFFICIAL & FEDHOLDINGS (Bn. USD$)

Source: BCA Research

Actual Balances are Growing

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15

20

25

30

35

40

45

50

OUTSTANDING STOCK OFTREASURYS (% OF GDP)

LESS FOREIGN OFFICIAL & FEDHOLDINGS (% OF GDP)

Source: BCA Research

Relative to GDP, Marketable Treasuries are Flat

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3%

4%

5%

6%

7%

8%

9%

1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003

Record High

Quarterly corporate after-tax profits with CCA and IVA adjustments in relation to Nominal GDP from 1947 to 2003. The capital consumption and inventory valuation adjustments convert depreciation and inventory withdrawals reported on an historical-cost basis to the replacement-cost measures used in the national income and product accounts. Data source: Bureau of Economic Analysis, (FRED) St. Louis Federal Reserve Bank and Cumberland Advisors, Inc.

Corporate Profits as a percent of Nominal GDP 1947 - 2005Corporate Profits Very High

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After-Tax Corporate Profit Growth

1959 - 2005 (YOY, %)

-30

-20

-10

0

10

20

30

40

50

60

70

1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003

Percent (%)

Quarterly corporate after-tax profits with CCA and IVA adjustments, year over year (%). Data source: Bureau of Economic Analysis, (FRED) St. Louis Federal Reserve Bank and Cumberland Advisors, Inc.

Seven Quarters Negative 2000.1-2001.3

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Corporate Profits and Stock Market

Capitalization as a percent of Nominal GDP

1981 - 2005

3%

4%

5%

6%

7%

8%

9%

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Percent (%)

20

45

70

95

120

145

170

Corporate Profits as a percent of Nominal GDPStock Market Total Capitalization as a Percent of GDP

Quarterly corporate after-tax profits w ith CCA and IVA adjustments in relation to Nominal GDP from 1981 to 2001. The capital consumption and inventory valuation adjustments convert depreciation and inventory w ithdraw als reported on an historical-cost basis to the replacement-cost measures used in the national income and product accounts. Data source: St. Louis Federal Reserve Bank, Ned Davis Research, Bureau of Economic Analysis and Cumberland Advisors Inc.

NASDAQBubble

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Source: World Bank Data 2003, MSCI, FRB., Cumberland Advisors, and Laffer Associates.

PPP

NOTE: World Total 51,766,267

GDP

NOTE: World Total 36,356,240

The World’s 10 Largest Stock Markets

Measured in U.S. dollars @ 01/31/05 exchange rates

1. United States 10,871,095

2. China 6,435,838

3. Japan 3,582,515

4. India 3,096,239

5. Germany 2,279,134

6. France 1,632,119

7. U.K. 1,606,853

8. Italy 1,559,321

9. Brazil 1,371,655

10. Russian Fed. 1,318,827

11. Canada 963,550

1. United States 10,881,609

2. Japan 4,326,444

3. Germany 2,400,655

4. U.K. 1,794,858

5. France 1,747,973

6. Italy 1,465,895

7. China 1,409,852

8. Spain 836,100

9. Canada 834,390

10. Mexico 626,080

11. Korea, Rep. 605,331

1. United States 52.72% 2. U.K. 11.24%

3. Japan 9.67%

4. France 4.20%

5. Germany 3.04%

6. Switzerland 3.00%

7. Canada 2.89%

8. Australia 2.31%

9. Netherlands 2.15%

10. Italy 1.91% Total: 93.12% Rest of the World 6.88% Total: 100%

Three Ways to View the World