Some of the finest financial minds in Bermuda gathered together on Thursday night at La Coquille for the Bermuda Society of Financial Analysts Annual Forecasting Dinner. Each year, traditionally, the BSFA polls their members (brave souls all) for forecasts on economic trends for the following fiscal year.

At the next year's dinner, the actual prior year end statistics are then compared against those same forecasts. Analysts have incredibly stressful positions, charged as they are with managing other people's money (and sometimes their own). Yet, the group that gathered last night was animated and cheerful. As well they should be; for as we shall see, they are very, very good at what they do.

Many BSFA members hold the CFA (Certified Financial Analyst) designation, as well as other licenses: Chartered Accountant, Certified Public Accountant, etc. Other members are pursuing CFA Charterholder designation - meaning that they are completing a three-year rigorous exams and investment management courses of study. Bermuda today has the enviable record of having the highest number per capita(population) of CFA's in the world; the highest number of CFA exam writers per capita, and even more amazing, the highest CFA exam pass rate per capita. Those of you aspiring to work in financial markets, remember this. Education, ethics, exam and experience are absolute perquisites; these attributes are the doorway of opportunity to a marvellous career.

I sat next to a fascinating and charming CFA who told me in flawless English that his current job included tracking esoteric interest rate swaps, a description of which could fill a book. At the age of 15 and - just before the former Soviet Union fell apart in 1991, his family emigrated from Russia to Canada. Even at that young age, he loved (he said with a smile) maths, such as advanced calculus and statistics. Overcoming a huge language barrier while acclimating to a new culture, he graduated university and completed the CFA courses in very short order - I reckon he is all of 25 years old. Russia's loss is our gain.

Susan Murray, CFA, Private Client Asset Management, Bank of Bermuda led off with the forecasting results' winners from the year end 2002. Members had to make educated projections as to performance of various components of global markets, such as sector dominance, insurance cycles, 10-year Treasury note and Federal Reserve Fund rate levels, S&P 500 and Nasdaq benchmarks, asset performance, global trends. The winners were - Joel Schaefer, CFA, Capital G Investments; Geoffrey Gardner, CFA, Orbis Investment Management; Peter Everson, Schroders (Bermuda); and Stephen Kicinski of ACE.

The keynote speakers and forecasters for 2003 came with impressive credentials. Dr. Dave Resler, Managing Director and Chief Economist, Nomura Securities International Inc. was acclaimed by the Wall Street Journal as the top economic forecaster for the year 2002. Mr. Everson, president, Schroders (Bermuda) Limited successfully forecast the major economic themes for the year 2002.

So what did the experts have to say about this year?

In succinct professional presentations from both speakers, we start with Dr. Resler, who sees some accelerated recovery with moderate growth in consumer spending, perhaps helped by some sort of a tax cut, an accommodative monetary policy, and a resilient economy that may pick up later in the year. Productivity still has strength, which will bolster profits and expand employment. The booming housing market and mortgage refinancing rates are likely to slow, as interest rates edge higher later in the year. While there may be tepid growth in business fixed investment, the war on terrorism and the threat of military action against Iraq has significantly increased US federal government spending. The US economy must accomplish the forecasted gradual climb in 2003 largely on its own as foreign economies remain weak with limited growth prospects.

Mr. Peter Everson's outlook for the US economy in 2003 forecasts real GDP growth at 2.6 percent; the Bush economic stimulus tax package likely to have only a modest effect; the correction continues in 2003 with corporations and households repairing their balance sheets; inflation is lower with recovery on the way; the Federal Reserve likely to stay on the sidelines; the US dollar continues to weaken.

Under global themes, there is only one - currency markets, as the dollar ebbs and flows against the yen and the Euro, with China playing a larger role. A weaker dollar will stimulate the US economy, but is not good news for Japan. Under points to ponder, it has never been a better time to be a consumer as everyone is cutting a deal. Yet, in order to increase profits, companies must at some point increase prices, reduce costs (including wages), reduce the cost of capital and expand sales.

Finally, the BSFA members have already been given their 2003 economic quiz. The preliminary leading responses are: small cap value will lead the way; interest rates will remain unchanged; energy will be the best performing sector and telecoms the worst; Russell 2000 and DJIA indexes will outperform, with the total US market outperforming on a global basis; the S&P index will generate a return of between zero and ten percent; the ten-year Treasury yield will finish at 4.5 percent to five percent; the dollar will sink against both the yen and the euro; junk bonds will top Treasuries, municipals and mortgage securities; gold and oil will be the top-performing commodities; and the best question, if you had $100,000 to invest on January 1, 2003 where would you put the money for a year.

The answer - a portfolio of 60 percent MSCI The World Index and 40 percent Salomon Brothers World Government Bond Index.

Note that these are forecasts only and not to be considered or construed as specific investment advice.

Martha Harris Myron CPA CFP is a Bermudian, a Certified Financial Planner (US licence) practitioner and vice president, personal financial services, Bank of Bermuda. She holds a NASD Series 7 licence and is a former US tax practitioner. Confidential Email can be directed to marthamyron@northrock.bm

The article expresses the opinion of the author alone, and not necessarily that of Bank of Bermuda. Under no circumstances is this advice to be taken as a recommendation to buy or sell investment products or as a promotion for financial plans.