Tonight’s Agenda

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2. Tonight’s Agenda • Investment Competition • Economic Data • Financials • Market speculation

3. New 1st Prize

4. Bloomberg App

5. 2nd & 3rd place prizes • Possible 4th & 5th place prizes

6. “Datapalooza”: most important week of the month for econ data

7. Last Week’s Economic Data: Positive

8. Employment Situation • 192,000 non-farm payrolls added in Feb • 220,000 private sector jobs added (good sign) • -30,000 gov’t jobs cut (also good sign) • Initial jobless claims fell to 368,000 last week • below 400,000 key level • Unemployment rate 8.9%

9. 1 week chart of S&P 500 • Oil v.s. Econ Data

10. Airtime: Fri. March. 4 2011 | 9:42 AM ET Market Buzz after jobs data

11. Word on the Street • Oil continues to dictate the market • However, economic data has been good • Economy gaining traction • Headlines will move markets in coming weeks due to lack of earnings and econ data • Saudi Arabia still markets biggest concern

12. Financials: The Engine of the Economy

13. Importance of Financial sector • Engine of the economy • Facilitate the process of economic development • Must have lending in order to have sustainable economic growth • Financials reflect the health of the economy

14. Airtime: Mon. Feb. 7 2011 | 5:16 PM ET Financials leading the way

15. Top U.S. Money Center Banks • BAC • JPM • C • WFC

16. Top U.S. Banks by Capital levels hold 39% of all U.S. customer deposits Total assets $2.4 Trillion $2.0 Trillion $1.9 Trillion $1.2 Trillion • BofA • JPM • Citi • Wells

17. Bank of America Merrill Lynch • U.S. largest retail bank, home lender, and investment bank • Acquired Merrill for $50 billion in ’09 • Good play on the U.S. consumer & housing market recovery • Exposure to Asia with Merrill Lynch

18. JP Morgan Chase • Largest U.S. bank by market capitalization • Bought Bear Sterns & Washington Mutual in ’08 • Strongest balance sheet, “Best in Breed” • Likely to be the first major bank to increase dividend

19. Citigroup • Largest international banking exposure • U.S. gov’t took a 36% stake in Citi worth $25 billion in ‘09 • Gov’t made Citi unwind billions in assets to get smaller • Citi returned back to private ownership in late ’10 • Good emerging market play

20. Wells Fargo • Large retail banking and home lending business • Small investment banking business compared BAC, JPM, and Citi • Bought Wachovia in ‘08 • Also good play on U.S. consumer & housing market • Low international exposure

21. Top U.S. investment banks • GS • MS • JEF

22. Major European Investment Banks • UBS • BCS • DB

23. Top Canadian Banks • RY • TD • BNS

24. Where have banks been? • At the center of the recent financial credit crisis & housing bubble • Balance sheets were distressed • Suffered hundreds of billions in losses • The financial markets were on the brink of collapse • Depression was immanent • Banks bailed out around the world • Lots of consolidation in the industry • Fed used monetary policy to help banks • Lowered bank barrowing interest rates to 0.25%

25. Headwinds for Financials • On going Legal issues • 5 years or more of it • Foreclosure issues • Robo signing • Financial Regulation • Changed business models

26. Airtime: Thurs. Jan. 13 2011 | 3:36 PM ET Banking Golden Age

27. Bove’s outlook on U.S. financials • In the beginning of a banking super cycle • Cash rich, balance sheets are strong again • Credit card delinquencies & mortgage foreclosures are down • Earnings power in “sharp up-trend” • Starting to lend more • Stocks trading below book value/cash value • Worst is behind them

28. More Positives for Financials

29. Greater Market Share Bank failures in U.S. Five years prior to 2008, only 11 banks failed Less banks = more market share for the remaining banks • 2008-25 • 2009-140 • 2010-157 • 2011-14 Total 2008-Feb 2011: 336

30. Gov’t winding down Fannie & Freddie • U.S. Treasury recently presented Congress with options for weaning the $11 trillion mortgage market from dependence on Gov’t • Reduce taxpayer exposure • Puts private investors on the hook

31. Bigger Players in the Housing Market • U.S. banks in strongest position to take over the housing market • When economy recovers, credit is needed, it will have to come from banks • They will earn a lot in this position • Banks have the capital and balance sheets to handle it

32. Upward Sloping Yield Curve

33. Historic Fed Funds Rate Chart1955-2009

34. Increasing Dividends • Last month, Federal Reserve told banks to stress test capital levels for new recession and 11% unemployment • Fed will start giving banks permission to increase dividends who pass stress test

35. Likely approvals for dividend increase (RBC Capital)

36. Financials in 2011 • Goldman Sachs: Large Cap commercial banks one of their “Top trades in 2011” • Re-introducing dividends will bring in new money, push financials higher (big pension & mutual funds) • Some expect financial sector to grow 24% in 2011 • Financials must perform well in 2011 for the market to go higher

37. Where is the Market Headed? • 6 months chart of S&P 500

38. Airtime: Thurs. March. 4 2011 | 10:27 AMET Is the Market Due for a Correction?

39. What’s the Trade? • Banks ready for another run? • Have commodities & tech topped out short-term?

40. Airtime: Fri. Feb. 25 2011 | 6:24 PM ET Gaddafi Cornered