This document provides advice to individual investors on how to recover from the market crash of 2008 and position themselves to benefit from future opportunities. It discusses assessing the damage caused by the crash, overcoming emotional barriers to investing again, and identifying potential opportunities for growth. The key principles outlined include having a clear investment plan, diversifying investments, carefully selecting financial products, monitoring performance, and managing risk. Specific areas highlighted as having significant recovery potential include US, Chinese, and other global stock markets as well as commodities and distressed securities.

1. Investor
Recovery
Kit
Twelve months on. How individual
investors can recuperate and
thrive in current market conditions.
As we slo wly e me rg e fro m one o f th e wo rst
ma rket crash es in histo ry an d as th e dust slo wly
settles a round the econo mic, socia l a nd finan cia l
me ltdo wn, it is time to assess the da ma ge fo r o ne,
but also to pos ition ou rse lves to ma ke the most o f
the potential the bear market has created.
The ob jective o f th is b rief gu id e is to give you,
as an in dividu al in vestor, the motiva tion an d tools
to slap the bear and grab the bull by its horns.
Assessing the real damage 3
Emotional collateral 5
Opportunities 7
Basic principles and tools 9
Action plan 13
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2. Assessing the damage
2008 in numbers
Wealth vanished: US$30 trillion
Years of profits lost: 10
Asset classes negatively affected: 98%
Total expected banking write-downs: US$1.2trio
The year 2008 will go down in history as one of the worst years for
individual investors world wide. After several years of growth and often
greed, markets across the board came crashing with a speed and force
rarely seen before. Unless you have been stranded on a deserted Island, the
net wealth will have gone down anywhere between 20 and 50% in 2008.
Almost all asset types, classes and regions were affected in one of the
steepest and deepest market crash the world has ever experienced, raising
serious doubts about one of finance’s most anchored believes:
diversification.
World equities were amongst the worst hit asset class. The US market
was down 34% (S&P500), Europe 41% (FTSE Eurofirst 300) and Japan 40%
(Nikkei 225).
Bonds, which, along with Gold traditionally serve as an escape route
to safety when equities are hit, did not fair well either, with investment
grade bonds down 7%. US Treasuries were one of the only asset classes to
actuallymake money in 2008,up almost14% for the year.
On the commodities side, Brent Crude Oil shot up more than 60% in
the first half of the year to almost US$150 a barrel before diving to US$40
at the end of the year, a net 51% drop for 2008. Gold, which you would
expect to do well in times of uncertainties and high volatility, had a flat
year.
Real estate, which in 2007 had a grandiose decade across the board,
also lost ground in 2008, anywhere between 5 and 20% depending on the
country.
Hedge funds, which were sold on the basis that they “hedge” against
potential losses in other, more traditional asset classes like equities and
bonds, had their worst year on record with a 17% loss on average (Credit
Suisse/TremontHedge Fund Index).
Finally, currencies had a very mixed year, with high levels of volatility.
The two big net losers in the second half of the year against the US dollar,
were the Brazilian real (-46%) and the British pound (-38%).
There is much to be said about 2008 and the leading elements to it,
but nothing can be done about it. The only thing we can do as individual
investors is position ourselves now to profit from vacuum and opportunities
the crisis has created. But to do that, we first need to get over the current
psychological state of mind most investors find themselves. It takes courage
and determination to rise from the carnageand chargeagain.
3 4
-80% -60% -40% -20% 0% 20% 40% 60% 80%
Brent Crude Oil
European Equities
Japan Equities
US Equities
Wheat
Aluminium
Hedge Funds
Global Real Estate
Corporate Bonds
Gold
US Treasuries
Cocoa
Figure 1 - 2008 in numbers
Financial Times for: Brent Crude Oil, European Equities (FTSE Eurofirst 300), Japan Equities (Nikkei 225 Average), US equity (S&P500), Wheat, Aluminium, Gold
and cocoa. EPRA for Global Real Estate (EPRA/NAREIT Global Index). iShares for Corporate Investment Grade Bond (iBoxx $ Investment Grade Corporate Bond Fund).
Credit Suisse/Tremont Hedge Index for Hedge fund (Credit Suisse/Tremont Hedge Fund Index). Merrill Lunch for US Treasuries (US Treasury Master Index)
SOURCE
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3. Emotional collateral
Naturally, the fear of stock markets and investments in general is
high among the public at the moment. Facing significant potential losses,
most invertors are currently entrenched in their defensive position,
promising themselves never to become greedy again.
When enough investors (institutional and individuals) exit the
markets at the same time, what follows naturally is a systemic failure of all
investment vehicles, even those fairing well in stormy weather, as
investors cash in and hide from most asset classes, preferring the relative
safety of cash or gold. Hordes of panicking investors flee the markets
driving markets further down, driving more and more investors to panic
and exit at even lower valuations. But these times of correction are
natural and necessary, as they purge the excesses of the boom period.
5
Although we have certainly passed the emotional panic stage (see
figure 2) which struck the markets in October 2008, we are still very much
in the uncertainty and depression stage, where the pain is still too vivid for
most investors to dare coming back in a significant manner. Because pain
emotionally feels twice as bad and reward feels good, it will be a while
before individual investors start investing again. And when they do,
institutional investors will probably have absorbed most of the upside
already.The trick here is to move before and despite the masses.
Behavioural finance explains much of the sheep-like attitude of
individual investors throughout the market cycles, and you as an individual
investor should know the underlying principles of behavioural finance and
benefit from it. As Guru investor, billionaire and the world’s second
wealthiest person Warren Buffets puts it: “Be fearful when others and
greedy and greedy when others are fearful”.
The turning point (bottom) in equity markets came in March this
year, and equities have shown an amazing resistance to pessimism, albeit
from very low levels. The US index (S&P500) is up 26% so far this year,
while the UK index is up 34% and the Japanese Nikkei up 36%. China and
Russia areup 56 and 85% respectively.
But there are still plenty of reasons for private investors to be scared,
sitting usually on realised (or not) losses of between 20 and 50%.
Unemployment is high, economic data still fragile despite what
Government data want us to believe, all-mighty consumers are depressed,
staying home and not doing what they are supposed to do, consuming and
hence driving the economic machine forward. There is also a very high
chance that markets will experience a serious correction in the last quarter
of 2009, if not another crash.
So it will be some time before individual investors and the majority of
the cash world wide return confidently and in flood to financial markets. If
there is a double dip crash as expected, the emotional damage to individual
investors will be even greater, and that will be the time for you as a smart
investor to get back in. But for that, you need to get over your potential
losses,and start getting greedy again.
6
Figure 2 - Emotional stages of investors through market cycles
Period of maximum
financial risk
Period of maximum
financial Opportunity
Optimism
Excitement
Thrill
Euphoria
Anxiety
Denial
Desperation
Panic
Depression
Hope
Relief
Rational market
value
Optimism
Fear Panicsell-off
Euphoric
irrational
purchase
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4. Most markets and assets world wide may be between 20 and 50%
up from their March low, but they still have a long way to go, even just to
get back to their 2007 levels. In the history of financial markets in general,
they have always gone back to their previous high, and passed it, and
chances are that they will in the future.
With that in mind, and leaving aside time for now, why would
anyone not rush back to markets which have lost so much in the past two
years? Because most investors still feel the pain, and by the time they will
find the courage (and greed) to get back into it, most of the cake will have
been eaten by institutional investors and those individual ones smart and
courageous enough to go against the horde. So once in your life as an
individual investor, stand up and walk again the road of volatile asset
classes beforeeveryone else does.
Finding the courage to do it, you need to understand the potential
upside markets today have to offer, and wake up the greedy monster in
you. Let’s just look at a few examples. The US index S&P500 reached its
most recent bottom of 680 at the beginning of March. At the time of
writing (end of August 2009), it is at 1,000. That’s a 47% growth from its
low. If we believe that the index will at least get back to its previous all-
time high of 1,600 in October 2007, this means that there is still a
potential 60% growth from where we are right now, and that is just to get
backto where it previously was.
7
Of course the question time, and whether investing in US or other
markets is the right thing to do in the long run are fundamental elements,
but it just goes to show that there is serious potential upside looking
forward and almost anywhere you look (see “What’s Hot, What’s Not” list
on page 14).
If you look at slightly more volatile equity markets and turn to
emerging markets, the Chinese Hang Seng Index is up 78% since March this
year, but still needs to grow 56% just to get back to its October 2007 level.
And it is pretty clear to everyone that the Chinese market will go way above
its previous high.
Most equity markets, commodities, distressed securities, etc… offer
similar potential growth. Choosing which ones to go back in is of course
critical. The road ahead is full of uncertainties: inflation, bankruptcies, social
unrest, economic data and unemployment to name just a few. But one thing
is for sure: staying in cash will not get you out of your current situation.
8
Opportunities
“Be fearful when others are greedy and greedy
when others are fearful”.
Warren Buffet
World’s second wealthiest person (Forbes, 2009 ranking)
For you to profit from the current situation in style and
control,you need a adhere to a few principles.
-100% -50% 0% 50% 100% 150% 200%
BrentCrude Oil
European Equities
Japan Equities
US Equities
Wheat
Aluminium
Hedge Funds
Global Real Estate
Corporate Bonds
Gold
US Treasuries
Cocoa
Figure 3- Potential upside
Percentage growth for individual prices to reach their previous three-year high, from their August 25th, 2009 level.
Financial Times for: Brent Crude Oil, European Equities (FTSE Eurofirst 300), Japan Equities (Nikkei 225 Average), US equity (S&P500), Wheat, Aluminium, Gold and Cocoa.
EPRA for Global Real Estate (EPRA/NAREIT Global Index). iShares for Corporate Investment Grade Bond (iBoxx $ Investment Grade Corporate Bond Fund).
Credit Suisse/Tremont Hedge Index for Hedge fund (Credit Suisse/Tremont Hedge Fund Index). Merrill Lunch for US Treasuries (US Treasury Master Index)
SOURCE
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5. There are a few principal rules a smart investor needs to keep in
mind, and although they have been tested to their extreme last year, they
do remain very valid.
Principle #1 - Plan
Every journey starts with, yes a single step as Lord Buddha rightly
says, but also with proper planning. This starts with having clear,
quantifiable and achievable goals for yourself and family. You need to
know where you want to be financially in 12 months, 5 years, 15 years
from now so you can allocate the appropriate resources and investment
vehicles.
If one of your objectives is to rebuild your cash position within the
next twelve months, set up a separate bank account in the main currency
of your expenses and leave it there. You may not make a fortune with
that, but at least it is (relatively) safe.
If you want to buy the property of your dreams in five years time,
now may be a good time to buy something small while property markets
are down and interests low.
If you are planning for your retirement in 15 years from now,
dedicate a portion of your monthly income and go crazy on equities and
commodities whilethey are cheap.
Whatever you do, do not invest without a plan. Not having a plan is
the best way not to achieve it (see figure5).
9
Principle #2 – Diversify
This is certainly one fundamental financial principle that has been
tested most in 2008, as even a good diversification was of little use. But the
underlying principle of spreading widely ones asset still remains valid,
although diversification needs to be brought to a different level.
While traditional and first-level diversification advocates a spread
between equity, bond and cash, you need to reach the nth level of
diversification, which includes investing in various currencies, alternative
investments and real assets.
A good nth-level diversification example is French Bordeaux First
Growth collection wines. What I like about this commodity is that the basics
are extremely attractive: on the supply side, the production is extremely
limited each year (usually only a few thousand cases), stock is constantly
depleting as it is being consumed and can never be replenished. On the
other hand, consumption of these wines increases as wealthy Chinese start
taking a liking to it. Finally, the intrinsic value of the wine increases over
time until it reaches its peak taste. If you had bought a case of Petrus in
2005 for €3,400, you could sell it today for a healthy €23,700, a 600%
profitin four years. 2008 is said to be even better…
10
Basic principles and
tools
“Look beyond what you see”.
Wise Monkey Rafiki
The Lion King
Figure4 - Relationship Between Risk, Reward and Time
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Reward
Long termShort term
Low
High
1
2
3
4
5
Cash
Governmentbonds
Fixed income bonds
Money markets
EM equities
Privateequities
Art
Fine wines
Commodities
Hedge funds
Futures
Derivatives
Global equities
Investmentproperties
Managedfunds
Foreignexchange
Emergingmarket (EM) bonds
Corporate bonds
Risk
Reward
Time

6. Sometimes the entry cost (time, knowledge and fees) prohibits
entering certain niche-markets directly with relatively small amounts, but
some vehicles like unit trusts and ETFs (Exchange Traded Funds) can give
you an easy and relatively cheap way in.
Principle #3 – Select carefully
There are literally thousands of financial products out there and the
financial world has made them complicated enough to justify the high fees
they impose on “sophisticated products”. The range of products would take
an entire book just to glance over it, but there are two very important
principles when choosing the right products for each of your financial goals:
(1) If you don’t understand it, don’t buy it (chances are that your
banker/adviser does not understand them either); (2) Find yourself
someone you can truly trust in helping you select the right vehicles, and
trust him. If he has the knowledge and your best interest at heart, you will
save a fortune in time and money. Just make sure he/she has a deep
understanding of your financial goals.
Principle #4 – Monitor your performance
You need to be able to know how your investments are doing at all
times, and that usually goes through online valuation systems. Not that you
want to waste your valuable time on checking your daily positions, but you
want to be able to have a quick look now and then to make sure your
overall portfolio is still in line with your objectives and is performing
according to your expectations. No one else is responsiblefor that buy you.
What has become increasingly difficult is to obtain a consolidated
view of ones wealth. People are now more mobile than ever, picking up
investments in various countries, currencies and investment houses. But
having a consolidated view all your assets, tangible and non-tangible, is the
onlyway to keep on track with your lifetime goals.
Basic principles and tools (cont.)
1211
Principle #5 – Manage your risk
Understanding what your potential overall downside risk is has
become critical in managing your wealth. Individual stock, structured notes,
properties, unit trusts, etc all have various levels of risk (institutional,
currency,geographical) which you need to understand and quantify.
When buying an individual share, your potential downside is 100%
for instance, i.e. losing everything, while buying a house would probably
have a 70% downside potential as the house would be insured. What you
need to understand is your worst-case scenario: the house burns down, all
the equities you own go bankrupt, you lose your job,… and allocate a
probability of failure to each of the individual events actually happening
(endemic risk). You then combine the probability of all events happening at
the same time (systemic risk), and if the probability for it to happen makes
you uncomfortable, adapt your portfolio (into lower risk assets) until you
are happy with your overall systemic risk level.
If you use all these tools consistently and rigorously, you should be in
a great position to make the best of the current opportunities without
undue risk. All you need now is a plan.
Figure5 – Wealth planning and management
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4. Wealth Plan
Performance
Risk
Control
Asset
allocation Monitoring
Goals
Cash
Flow
Assets
Liabilities
Values
1. Goal setting
Benefits
Costs
Suitability
2. Product selection
High
Low
3. Risk rating

7. Action plan
To build a solid and smart plan that will help you leverage on the
current situation and create substantial wealth for yourself and your
family, you need to go through the five steps of this report again:
Assess the damage to your wealth: how bad is it, is it recoverable?
Whatare the lessons learned?
Assess your emotional damage: get out of the fear mode, into the
greed one. Now is the best time to do so.
Identify opportunities: look at which asset classes have been most
hurt and what the future trends might look like. Start your search
with emerging market equities and commodities, where I see the
most mid-long term potential (see page across). Do not act like all
other sheep: scared. As a last resort, slap yourself on the face.
Apply the basic principles mentioned in this guide. Have a clear plan
for yourself and build the strategy around it. Not the other way
around.
Justtake the red pill and swallow it.
Conclusion
The year of 2008 will go down on record as one of the worst for
individual investors, but 2009 and 2010 will certainly go down as some of
the best. The best opportunities are available today, right inside the bear
market, but it takes vision to unravel them and courage to seize them. You
could save yourself 10 years of investment life necessary for you to reach
all your objectives.So get greedy and enjoy the ride! Davy Lassagne.
August 24th, 2009. For more information, please contact davy@e-lassagne.com.
For weekly market updates, please visit http://marketupdates.e-lassagne.com .
13 14
What’s Hot
What’s Not
Asset Reason why What you can buy
Commodities In general, I am very bullish on commodities. The
little inflation threat we experienced in the second
quarter of 2008 was just the tip of the iceberg. Too
little investment has gone into natural resources in
the past years, and consumption will boom again
with every dollar the Chinese and Indians add to
their average GDP/head.
JPMorgan Natural Resources,
Rogers International Commodity
Index, ETF (GSG).
Oil We have been consuming more oil than we produce
for decades and we know that current reserves will
only last us another 20 to 30 years. What then?
ETF (OIL).
Agriculture Increased world wide consumption, low investment
levels in production capacities for years and climate
change will push prices higher than most of us may
want to fear.
DWS Agribusiness, ETF (DBA or
MOO), fertiliser-producing
companies.
Water Water will be our next big, big problem. It is so
essential we cannot survive more than three days
without it, yet the developed world is wasting it and
the developing world polluting it. The new gold?
Individual shares of water recycling
companies, ETF (CGW), CAAM
Aqua Fund.
Commodity
producing
countries
For the same reasons as the above, countries like
Australia, Brazil, Russia, and their currencies will
enjoy sustained growth for the many years to come.
A combination of Latin American
fund (BlackRock), Russia (Fortis)
and Brazil (Fortis)
Private equity Entry fees, tickets and risks are high in this sector
but as the established companies struggle, new,
smarter and more adaptable entrepreneurs are
already building the conglomerates of the future.
A good source can be your
local/national entrepreneurs clubs;
ETF (PSP).
Asia
infrastructure
As part of their economic support package, India and
China will invest a total of US641bio over the coming
years to boost their infrastructure.
Invesco Asia Infrastructure, ETF
(PXR).
Premium
Bordeaux
wines
Decreasing non-renewable stock, accelerating status
consumption. It’s got to be a winner.
Wine Growth Fund, individual
brokers with direct access to
négociants.
Asset Reason why What you can buy
US Treasuries The country’s deficit, economic climate, military bill
and vision of the world are simply not sustainable.
Short US Treasuries.
US dollar Same reasons as above. As the US slowly hands over
world dominance, so will its currency.
RMB.
Individual
shares
Still many more bankruptcies to come in the
industrial and banking world.
Short specific shares, but be
cautious, this is a dangerous game.
“I’m trying to free your mind, Neo. But I can only
show you the door. You’re the one that has to walk
through it”. Morpheus,The Matrix

8. Davy Lassagne has ten years of experience in
banking and finance of which eight as an independent
wealth manager based in Singapore. He is currently
servicing over 100 clients in 16 different countries with
Jigsaw Wealth Management.
About the author
1615
By their very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and risks exist that predictions, forecasts,
projections and other outcomes described or implied in forward-looking statements will not
be achieved. I caution you that a number of important factors could cause results to differ
materially from the plans, objectives, expectations, estimates and intentions expressed in
such forward-looking statements. These factors include (i) market and interest rate
fluctuations; (ii) the strength of the global economy in general; (iii) the effects of, and
changes in, fiscal, monetary, trade and tax policies, and currency fluctuations; (iv) political
and social developments, including war, civil unrest or terrorist activity; (v) the possibility of
foreign exchange controls, expropriation, nationalization or confiscation of assets; (vi) the
effects of changes in laws, regulations or accounting policies or practices.
Information and opinions presented in this Site have been obtained or derived from
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accuracy or completeness. Davy Lassagne maintains the right to delete or modify
information in this document without prior notice.
Davy Lassagne may have issued other reports that are inconsistent with, and reach
different conclusions from, the information presented in this document.
Risk Considerations
Past performance should not be taken as an indication or guarantee of future
performance, and no representation or warranty, express or implied, is made regarding
future performance. Investing entails risks, including possible loss of principal. The price of,
value of and income from securities or financial instruments can fall as well as rise. Certain
investments are subject to high volatility, and may experience sudden and large falls in their
value. Losses may equal or exceed your original investment. Foreign currency-denominated
securities and financial instruments are subject to fluctuations in exchange rates that may
have a positive or adverse effect on the value, price or income of such securities or financial
instruments. Some investments may not be readily realisable and it may be difficult to sell or
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information about the value, or risks, to which such an investment is exposed. There are also
special risk considerations associated with international and global investing (especially
emerging markets), small-company investing, single-industry funds or investment strategies,
single-country or regional funds or investment strategies, or other special, aggressive or
concentrated investment strategies, such as the use of leverage or derivatives. Investors in
securities effectively assume these risks.
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Davy is licensed by the Monetary Authority of Singapore to provide
independent financial advice to individuals. He specialises on servicing
successful executives by providing them with mid to long-term investment
strategies for their personal and/or their family’s financial planning. He
publishes a weekly market update on http://marketupdates.e-lassagne.com
and appears frequently in the press. He is also co-founder of real assets
investment house Avenue Group Pte Ltd.
Previously, Davy served as the country representative of French Bank
Natexis Banques Populaires and as the President of the French Chamber of
Commerce in Yangon, Myanmar. He also worked at the French Trade
Commission in Seoul as a consultant for the French Government to assist
French companies establish and expand their business in Korea. He holds an
MBA in Finance and Strategy from l’Ecole Superieure des Sciences
Economiques et Commerciales (ESSEC) in Paris.
Disclaimers and Cautionary Statement Regarding Forward-Looking
Information
All opinions and estimates expressed in this document constitute my judgment as of
publication and do not constitute general or specific investment legal, tax or accounting
advice of any kind. This site contains statements that constitute forward-looking statements.
In addition, in the future I, and others on my behalf, may make statements that constitute
forward-looking statements.
Words such as "believes", "anticipates", "expects", "intends" and "plans" and similar
expressions are intended to identify forward-looking statements but are not the exclusive
means of identifying such statements. I do not intend to update these forward-looking
statements except as may be required by applicable laws.