Economic OutlookNovember 2010

Recession Impact

Fewer Moving

Delay in Marriage

One Car

Office at Home

More Education

Why is the U.S.economic growth

so lackluster?

Sources of Economic Growth

Inventory Buildup

Employment Changes During Recession-Recoveries

Percent of Long-term Unemployed

Household Debt Is Still High

Housing

History of Home Prices

Housing Affordability Index

Home Prices

Mortgage Rate

Double-dip in Housing?

Seriously Delinquent Mortgages

DistressDistressed Home Sales

Homeowner Vacancy Rate

State & LocalGovernments

State and Local Government Payroll

State and Local Government Drag

Fiscal Stimulus

No Ammunition

Budget Deficits % of GDP

Tax Increase?

Current 2011

Top Income Tax Rate 35% 41%

Capital Gains Rate 15 20

Top Dividend Rate 15 39.6

Estate Tax 0 55

Quantitative Easing

Employment Changes During Recession-Recoveries

OOOOOOoooutpOutput Gap

Why QE?•Short Rate Zero

•Lower Bond Yields

•Weaker Dollar

Money to Emerg. Mkts Stocks and Bonds

Currency War?

Blue Chip Economic Forecasts

Double-dipYes/No ?

No Double-dip?•Tax Cuts

•QE2

•Low Base

Inflationor

Deflation

Major Inflation and Deflation

Lower Inflation Expectations

Why No DeflationInflation Expectations

Wage RigiditiesImport Prices

Monetary Policy

No DeflationInflation Eventually

Cost Push Excess Cap. Diminishes

TaxesFees

Election

Assessments of Government Economic Policy

University of Michigan

90 Days after Mid-term

(1922-2006)

8.5 percent

Mid-term Elections and S&P 500

Stocks and Election Cycle

(1871-2005)

First Second Third Fourth

3.0% -2.7% 10.1% 7.5%

Key IssuesTax & Budget

EnergyTrade

China CurrencyFinancial ReformHousing Finance

Health careImmigration

Compromise or Not?

Video Clip

Global Economy

Rebalancing Global Trade

Internal Rebalancing

•Domestic Demand

•Budgets

•Finance/Credit

External Rebalancing

•Deficit CountriesIncrease Exports

•Surplus CountriesIncrease Consumption

Government Debt % of GDP

Debt to GDPOver 90%: 1.7%

Vs.Below 30%: 3.5%

Over 100%

Stunt Growth

China’s Economy

Soft Landing in China?

8

8.5

9

9.5

10

10.5

11

2008 2009 2010 2011

China’s Economic Growth (% Change Year over Year)

Forecast

ChineseChinese Currency Undervalued

Ventura County

260,000

270,000

280,000

290,000

300,000

310,000

320,000

330,000

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Total, All Industries (jobs)

VC Employment

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Civilian Unemployment Rate (percent of labor force)

VC Unemployment Rate

-1

0

1

2

3

4

5

6

7

8

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Educational & Health Services job growth (year-on-year)

VC Education and Health Jobs

-10

-8

-6

-4

-2

0

2

4

6

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Other Services job growth (year-on-year)

VC Other Service Jobs

-10

-8

-6

-4

-2

0

2

4

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Retail Trade job growth (year-on-year)

VC Retail Trade jobs

-10

-8

-6

-4

-2

0

2

4

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Information job growth (year-on-year)

Information Jobs

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Financial Activities job growth (year-on-year)

VC Financial Jobs

-10

-8

-6

-4

-2

0

2

4

6

8

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ventura County

Leisure & Hospitality job growth (year-on-year)

VC Leisure-Hospitality Jobs

Demographics

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1/1/72 1/1/78 1/1/84 1/1/90 1/1/1996 1/1/2002 1/1/2008

Population Growth Year on Year

Ventura County

Percent Change

Lost Decade?

DrSohn.com

(not Dr.Sohn.com)

TIPS and 10-yr Treasury Yield Curves