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12. YVe quickly reacted to the market fea�^ and sold Corporate and CMBS
securities and purchased treasury and government guaranteed mortgage
backed securities.
13. Now let me address ou� Lon�er Term outlook for asset allocation — for this
discussion the next three years.
14. Our outlook is for the economy to improve at a moderate pace — There will be
more starts and stops along the way, however, the unemployment rate will
continue to be stubbornly high. Companies are not adding jobs at a pace that
will reduce the unemployment rate significantly.
1 S. US Financial Institutions will continue to improve as they shNed bad debt from
their books. This pictu��e could provide fo�° some robust returns as the
economy moves fo��ward.
16. The wild card will continue to be the �1.3 Trillion deficit — and the effects on
treasury yields.
Revenue — Expense
Treasuries will always be the Fear Trade — own them when there is Fear — sell them
when there are periods of tranquility.
Given this scenario we ��ill reduce our over wei�ht in Treasuries and increase our
exposure to Corporate and CMBS Secu��ities.
So let's recap — we sta�^ted the year with high yielding securities and now we
are dealing with lower yielding securities — because of the fiscal debacle
created by the G�eek debt c�isis.
Since the beginning of July calm has retu�ned to the mai°ket.
The stock mai�ket has recovered some of the loss ground.
You� equit�port olio is u� 11 % ve�°sus the Benchmark S% since the
be innin�of Julv.
This suppo�ts ou� positive view of a continued st�ong stock ma�k �ally.
On Friday July 23 — ove� 90 foreign banks went through a stress test to
ident� which European Banks were in t�ouble — results revealed that only a
hand full were in g�eat shape. The markets inte�preted that news positively
and continued to move upward.