JP Conklin 704-887-9880 office jp.conklin@pensfordfinancial.com www.pensfordfinancial.

com Leveling the Playing Field April 9, 2012 _______________________________________________________________________ I have never liked Tiger and I could never get fully behind Phil because he seems to shoot himself in the foot too often. But I officially have a new favorite golfer and I cant believe he goes by the name of Bubba. And judging by the applause, Im not his only fan - just the last to figure it out. The monthly average job gains over the last 6 months has been about 200k. President Obama has made it a point to hold a press conference 6 seconds after the data is released to remind us all how instrumental his administration has been in this positive trend. Is it any surprise, then, that the first disappointing release since last summer comes on a day the stock market is closed? Please. I may have been born at night, but it wasnt last night. Mr. President, we need to squeeze in one bad month of numbers, otherwise everyone is going to catch on. Stock markets are closed the first Friday in April, lets do it then! So, what happened? The economy added 120k jobs, which this time last year would have been a great result. But bond markets were disappointed and the 10 yr Treasury yield plummeted to 2.05%. Much of the concern stems from the thought that perhaps last months strength was due to warmer than usual weather and was really just an artificially high number. Private service hiring dropped from 204k last month to just 90k in March. The unemployment rate fell by 0.1%, to 8.2%; however, this drop is entirely due to a decline in the labor force participation rate. Had that number held steady from last month, the unemployment rate would have actually increased to 8.4%. The number of people who are actually employed dropped by 31,000, but the number of people looking for a job dropped by 164,000. As Disraeli once pointed out, there are three types of lies: Lies, damned lies, and statistics. You better believe Obama wants a 7-handle on the unemployment rate by November. Gallup has been conducting its own labor data for a few years now and while its numbers are correlated to the BLS, they also add commentary: "While the sharp drop in the U.S. unemployment rate during recent months is clearly good news, it raises some significant economic questions. Traditional economic analysis raises the question of why the unemployment rate is falling much more rapidly than can be justified by the modest pace of current economic growth. Answering this question is essential to determining the sustainability of the declining trend in unemployment.

Bernanke conceded this a few weeks ago, saying the better jobs numbers seem somewhat out of sync with the overall pace of economic expansion. Last week, he attempted to address this concern last week by suggesting that firms over-reacted to the financial crisis in 2009 and laid off more employees than necessary, and so they are forced to hire some now even though the overall health of the economy might not quite imply those hiring needs. My concern with this explanation is how long can that last? If companies are hiring just to get back to bare minimumlevels, that isnt a sustainable trend, its a temporary bump. I guess time will tell. Dont be surprised if eyes turn back to Europe in the coming weeks as Moodys finalizes it review of European banks. Check out the table below there is a LOT of credit reviews due in the next four weeks.
Timetable for Conclusion of Moody's Review
Banks Portuguese banks Italian banks Spanish banks Austrian banks German banks Luxembourg banks Belgian banks Dutch banks Norwegian banks Swedish banks Firms with global capital markets operations* French banks UK banks Danish banks Finnish banks Week of March 26 April 16 April 23 April 30 May 7 May 7 May 7 May 7 May 7 May 7 May 14 May 14 May 14 May 14 May 14

Source: Moody's, Morgan Stanley Research *15 banks with global capital markets operations remain on review post conclusion of Nomura and Macquarie

LIBOR Outlook Has Kentuckys title run been vacated yet?

Fixed Rate Outlook Operation Twist is coming to an end and last Tuesday the Fed minutes disappointed markets by seemingly suggesting no additional quantitative easing was on the horizon. The 10yr spiked to 2.29% before Fridays disappointing labor data brought them back down to 2.05%, a very large swing relative the last few months.

I still personally believe QE3 is coming. The data isnt improving, Europe is likely to worsen in the coming months as markets look more closely at Spain and Portgual, and of course we have elections. NY Fed President Brian Sack resigned last week and the joke around the street was that it got fired for allowing stocks to close in the red one day. The point being there is a tremendous amount of pressure to keep the economy from stalling out and Bernanke has a propensity for doing something rather than nothing, so we still think additional quantitative easing is coming this summer.

This Week A relatively quiet week for data, but take a second to look at how many Fed speeches are planned. I cant ever recall this many Fed speeches. Treasury auctions should help keep markets moving as well.

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ECONOMIC CALENDAR
Economic Data Day Tuesday Time 7:30AM 10:00AM Wednesday 7:00AM 8:30AM 8:30AM 2:00PM 2:00PM Thursday 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM Friday 8:30AM 8:30AM 8:30AM 8:30AM 9:55AM Report NFIB Small Business Optimism Wholesale Inventories MBA Mortgage Applications Import Price Index (MoM) Import Price Index (YoY) Fed's Beige Book Monthly Budget Statement Initial Jobless Claims Continuing Claims Trade Balance Producer Price Index (MoM) Producer Price Index (YoY) PPI Core (MoM) PPI Core (YoY) Consumer Price Index (MoM) Consumer Price Index (YoY) CPI Core (MoM) CPI Core (YoY) U. of Michigan Confidence -$203.0B 355k 3328k -$52.0B 0.3% 3.0% 0.2% 2.8% 0.3% 2.6% 0.2% 2.2% 76.5 357k 3338k -$52.6B 0.4% 3.3% 0.2% 3.0% 0.4% 2.9% 0.1% 2.2% 76.2 0.9% 3.5% Forecast 95.0 0.5% Previous 94.3 0.4% 4.8% 0.4% 5.5%

Speeches and Events Day Monday Tuesday Time 7:15PM 12:30PM 12:45PM 2:30PM Wednesday 7:30AM 9:30AM 10:30AM 2:00PM 5:00PM 5:30PM Thursday 7:15AM 9:00AM 9:00AM 10:00AM 10:00AM 11:00AM 12:30PM 1:00PM 2:35PM 3:30PM Friday 8:00AM 1:00PM Report Fed's Bernanke speaks on Financial Stability Fed's Fisher speaks on the Economy Fed's Lockhart gives Welcome Remarks at Markets Conference Fed's Kocherlakota speaks Fed's Lockhart discusses Economy Fed's George speaks at Minsky Conference Fed's Rosengren speaks on Monetary Funds at Georgia Conference Fed releases Beige Book Economic Survey Fed's Bullard delivers Opening Remarks Yellen speaks Fed's Dudley speaks on Economy ECB's Praet speaks at Minsky Conference Fed's Lockhart moderates Panel Discussion New York Fed's Cumming speaks on Panel Fed's Nellie Liang speaks on Panel Fed's Dudley speaks on Economy Fed's Plosser speaks on the Economic Outlook Fed's Kocherlakota speaks Fed's Dudley visits Medical Device Manufacturer Fed's Raskin speaks on Economy Fed's Dudley speaks on Economy Fed's Bernanke gives reflections on the Crisis in New York Los Angeles, CA Atlanta, GA New York, NY New York, NY Syracuse Washington, DC White Bear Lake, MN St. Louis, MO New York, NY Syracuse New York, NY Place Atlanta, GA Oklahoma Georgia Nicollet, MN

Treasury Auctions Day Tuesday Wednesday Thursday Time 1:00PM 1:00PM 1:00PM 3-year Treasury 10-year Treasury 30-year Treasury Report Size $32B $21B $13B