[starlinggroup]

Approximately 30 trillion US dollars in global wealth evaporated during 2008. GCC investors were not excluded from the fray. The prevailing sentiment of the past decade was that the region’s oil resources would keep the GCC economies on an unperturbed expansion. Ultimately what has happened, the plunging economies have led to an abrupt drop in demand. The subsequent commodity price fall was exacerbated by speculators (hedge funds) clamoring for the doors. The oil and other industrial commodity producers will take time to adjust to the reality. That means adjusting revenue expectations, rationalizing head count and justifying exploration projects based on unsustainable price assumptions.

Similarly, investors are righting the directions of their personal ships. They are de-levering and taking shelter in defensive sectors like health care, infrastructure and food. Without a doubt, a critical factor to the market turnaround will be corporate and investor confidence in the global economies. With millions joining the unemployment ranks, the magnitude of bailouts increasing and the proliferation of recession globally – all the world needs is a pandemic to bring what little momentum was building to a grinding halt Assuming that fear is controlled and the ramifications of the swine flu outbreak are manageable, there are three main themes investors might should embrace as they build their investment strategy:

1)De-lever: with credit card rates above 20%, reducing debt is the best guaranteed return available

2)Choose defensive sectors: healthcare, basic consumer goods (food, hygiene, entertainment) and infrastructure (given government spending plans) will provide solid though not sexy cash flows and returns to investors

3)Don’t try to time the turnaround – dollar cost average your way back into the market. There may be some volatility, but 3-4 years from now, you’ll have a cost basis that will be the envy of your bowling team.

Good strategies, discipline and patience can safeguard assets and enable you to accumulate wealth. When everyone is afraid to invest is when you want to be building your foundation in the market.

David E Simpson is a Director Investment at Starling Group