Transcript

GLENN HUTCHINS: In my business, one of my favorite things is I say, in God we trust. All others bring data. So one of the things you're going to see today is a lot of data. This here, there's nothing particularly important in any individual of these measures, but this is something one of the fellows on Wall Street puts out that he calls a Periodic Table of Worst Ever Economic Conditions. These are all the economic indicators around the world that have gotten to the lowest level on record for that indicator. I call this my "cry the beloved country" slide. The question is how in the world did we get in that set of economic conditions?

As an investor which is what I do in my day job, but also as someone who cares about our country, I've set out to study what happened because I think uniquely now you need a view of the future in order to make decisions on behalf of institutions whether they're public-policy institutions or investment institutions, and like understanding the Civil War requires that you go back to understand the Constitution, understanding where we got to today requires first I think an in-depth understanding of the recent history, and I for one found out a lot that I didn't really understand and I also found out how things fit together in ways that I didn't really comprehend. So that's what we're going to do today.

First we're going to talk about what the root causes of the problem were. As I see them, we started out with a massive amount of liquidity in the world which flowed into two places, one the U.S. residential real estate market creating a bubble of historic proportions; secondly, widespread leverage across our entire economy. That bubble began to burst when as we'll see American homeowners began to default on mortgages at levels never expected much less seen. It then turned into what I'll call the Panic of '08. I'll note for Strobe's benefit that the '08 is important since we're now in '09, so the panic is over -- this is an historical judgment, not an analysis of the current situation -- which turned what could have been a serious recession and an important correction which we'll talk about into the set of economic conditions, crisis-level conditions, that we saw earlier. We'll talk about what actions have been taken to date to address it, pose the question, Are we at the end of the beginning? Certainly not the beginning of the end, but the end of the beginning. And talk a little bit about prognoses.

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