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What Is The Fed’s Plan And Will It Work?

The Big Picture Conference, New York City
October 10, 2012
Long-Term Interest Rates - 1900 to 2011
Bianco Research L.L.C.
An Arbor Research & Trading Affiliated Company
Independent · Objective · Original
———————————————————————————————————————————————————————————————————————
Bianco Research, L.L.C October 10, 2012 2
CFNAI vs ECRI
Comparing The Chicago Fed National Activity Index (CFNAI)
To The Economic Cycle Research Institute (ECRI) Growth Rate
Oct-11
-9.40
Oct-09, 26.70
Nov-08
-29.00
Jul-10
-10.50
Apr-11
7.38
Sept-12
2.70
May-10
0.31
Jan-09
-3.66
Aug-12
-0.47
-40
-30
-20
-10
0
10
20
30
J
a
n
-
0
7
J
u
l
-
0
7
J
a
n
-
0
8
J
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l
-
0
8
J
a
n
-
0
9
J
u
l
-
0
9
J
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n
-
1
0
J
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l
-
1
0
J
a
n
-
1
1
J
u
l
-
1
1
J
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-
1
2
J
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-
1
2
E
C
R
I

G
r
o
w
t
h

R
a
t
e

(
R
e
d

L
i
n
e
)
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
C
F
N
A
I

3
-
M
o
n
t
h

A
v
e
r
a
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e

(
B
l
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e

L
i
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e
)
Bianco Research, L.L.C October 10, 2012 3
Bloomberg Median Q3 2012 U.S. Real GDP Forecast
Bloomberg Median Q3 2012 U.S. Real GDP Forecast
11/18/2011, 2.3%
8/11/2011, 3.0%
1/12/2011, 2.9%
5/9/2012
2.5%
7/13/2012, 2.2%
8/10/2012, 1.8%
1.60%
1.80%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
1
1
/
1
0
/
2
0
1
0
1
2
/
2
0
/
2
0
1
0
1
/
2
9
/
2
0
1
1
3
/
1
0
/
2
0
1
1
4
/
1
9
/
2
0
1
1
5
/
2
9
/
2
0
1
1
7
/
8
/
2
0
1
1
8
/
1
7
/
2
0
1
1
9
/
2
6
/
2
0
1
1
1
1
/
5
/
2
0
1
1
1
2
/
1
5
/
2
0
1
1
1
/
2
4
/
2
0
1
2
3
/
4
/
2
0
1
2
4
/
1
3
/
2
0
1
2
5
/
2
3
/
2
0
1
2
7
/
2
/
2
0
1
2
8
/
1
1
/
2
0
1
2
9
/
2
0
/
2
0
1
2
1
0
/
3
0
/
2
0
1
2
U
.
S
.

R
e
a
l

G
D
P

F
o
r
e
c
a
s
t
1.60%
1.80%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
U
.
S
.

R
e
a
l

G
D
P

F
o
r
e
c
a
s
t
Bianco Research, L.L.C October 10, 2012 4
Bloomberg Median Q4 2012 U.S. Real GDP Forecast
Bloomberg Median Q4 2012 U.S. Real GDP Forecast
7/20/2012, 2.2%
9/22/2011, 2.5%
8/10/2012, 2.0%
1.80%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
1
2
/
2
0
/
2
0
1
0
1
/
2
9
/
2
0
1
1
3
/
1
0
/
2
0
1
1
4
/
1
9
/
2
0
1
1
5
/
2
9
/
2
0
1
1
7
/
8
/
2
0
1
1
8
/
1
7
/
2
0
1
1
9
/
2
6
/
2
0
1
1
1
1
/
5
/
2
0
1
1
1
2
/
1
5
/
2
0
1
1
1
/
2
4
/
2
0
1
2
3
/
4
/
2
0
1
2
4
/
1
3
/
2
0
1
2
5
/
2
3
/
2
0
1
2
7
/
2
/
2
0
1
2
8
/
1
1
/
2
0
1
2
9
/
2
0
/
2
0
1
2
1
0
/
3
0
/
2
0
1
2
U
.
S
.

R
e
a
l

G
D
P

F
o
r
e
c
a
s
t
1.80%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
U
.
S
.

R
e
a
l

G
D
P

F
o
r
e
c
a
s
t
Bianco Research, L.L.C October 10, 2012 5
Citigroup Surprise Index
Citigroup Economic Surprise Index
United States
10/8/2012
43.40
3/4/2011
8/25/2010
9/3/2009
5/28/2009
9/4/2008
12/5/2008
3/28/2008
8/15/2007
1/31/2007
5/12/2006
10/13/2006
2/28/2006
6/3/2011
9/28/2011
8/19/2011
12/2/2011
1/9/2012
11/14/2011
2/3/2012
7/20/2012
-150
-125
-100
-75
-50
-25
0
25
50
75
100
1
2
/
2
3
/
2
0
0
5
4
/
1
4
/
2
0
0
6
8
/
4
/
2
0
0
6
1
1
/
2
4
/
2
0
0
6
3
/
1
6
/
2
0
0
7
7
/
6
/
2
0
0
7
1
0
/
2
6
/
2
0
0
7
2
/
1
5
/
2
0
0
8
6
/
6
/
2
0
0
8
9
/
2
6
/
2
0
0
8
1
/
1
6
/
2
0
0
9
5
/
8
/
2
0
0
9
8
/
2
8
/
2
0
0
9
1
2
/
1
8
/
2
0
0
9
4
/
9
/
2
0
1
0
7
/
3
0
/
2
0
1
0
1
1
/
1
9
/
2
0
1
0
3
/
1
1
/
2
0
1
1
7
/
1
/
2
0
1
1
1
0
/
2
1
/
2
0
1
1
2
/
1
0
/
2
0
1
2
6
/
1
/
2
0
1
2
9
/
2
1
/
2
0
1
2
1
/
1
1
/
2
0
1
3
-150
-125
-100
-75
-50
-25
0
25
50
75
100
Bianco Research, L.L.C October 10, 2012 6
The Trend In Earnings
Bianco Research, L.L.C October 10, 2012 7
Guidance Trends
Company Guidance Trends
0
2
4
6
8
10
12
14
6
/
3
0
/
2
0
0
9
9
/
2
4
/
2
0
0
9
1
2
/
2
1
/
2
0
0
9
3
/
1
9
/
2
0
1
0
6
/
1
5
/
2
0
1
0
9
/
8
/
2
0
1
0
1
2
/
1
/
2
0
1
0
2
/
2
3
/
2
0
1
1
5
/
1
8
/
2
0
1
1
8
/
1
0
/
2
0
1
1
1
1
/
2
/
2
0
1
1
1
/
2
5
/
2
0
1
2
4
/
1
8
/
2
0
1
2
7
/
1
1
/
2
0
1
2
1
0
/
3
/
2
0
1
2
0
2
4
6
8
10
12
14
The Daily Number of Companies Offering Guidance (3-Month Average):
Red = UP Guidance (Guidance Greater Than Current Earnings Estimates)
Blue = DOWN Guidance (Guidance Less Than Current Earnings Estimates)
Black = NEUTRAL Guidance (Guidance Same As Current Earnings Estimates)
Bianco Research, L.L.C October 10, 2012 8
Guidance Index
3-Month Company Guidance Index
3/16/2012
6/6/2012
10/9/2000
6/5/2002
6/7/2004
2/13/2007
6/14/2006
7/22/2008
2/12/2009
11/8/2010
6/14/2011
1/4/2012
-0.45
-0.35
-0.25
-0.15
-0.05
0.05
0.15
0.25
0.35
6
/
2
1
/
2
0
0
0
1
2
/
1
1
/
2
0
0
0
6
/
5
/
2
0
0
1
1
1
/
2
3
/
2
0
0
1
5
/
2
0
/
2
0
0
2
1
1
/
7
/
2
0
0
2
5
/
2
/
2
0
0
3
1
0
/
2
2
/
2
0
0
3
4
/
1
9
/
2
0
0
4
1
0
/
7
/
2
0
0
4
3
/
3
1
/
2
0
0
5
9
/
2
1
/
2
0
0
5
3
/
1
6
/
2
0
0
6
9
/
8
/
2
0
0
6
3
/
6
/
2
0
0
7
8
/
2
4
/
2
0
0
7
2
/
1
9
/
2
0
0
8
8
/
8
/
2
0
0
8
1
/
3
0
/
2
0
0
9
7
/
2
3
/
2
0
0
9
1
/
1
4
/
2
0
1
0
7
/
7
/
2
0
1
0
1
2
/
2
3
/
2
0
1
0
6
/
9
/
2
0
1
1
1
1
/
2
4
/
2
0
1
1
5
/
1
0
/
2
0
1
2
1
0
/
2
5
/
2
0
1
2
-0.45
-0.35
-0.25
-0.15
-0.05
0.05
0.15
0.25
0.35
Company Guidance vs. Consensus Estimates
3-month average of:
(UP minus DOWN) + 1/2 NEUTRAL
Total Offering Guidance
Biggest Negative Since July 2009
Bianco Research, L.L.C October 10, 2012 9
Q3 2012 S&P 500 Earnings Expectations
Q3 2012 S&P 500 Earnings Expectations
Operating Earnings Estimates Year-Over-Year Change
10/5/2012
-1.70%
10/5/2012
-5.30%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1
2
/
2
1
/
2
0
1
1
1
/
3
/
2
0
1
2
1
/
2
0
/
2
0
1
2
2
/
1
0
/
2
0
1
2
3
/
2
/
2
0
1
2
3
/
2
3
/
2
0
1
2
4
/
1
3
/
2
0
1
2
5
/
4
/
2
0
1
2
5
/
2
5
/
2
0
1
2
6
/
1
5
/
2
0
1
2
7
/
6
/
2
0
1
2
7
/
2
7
/
2
0
1
2
8
/
1
7
/
2
0
1
2
9
/
7
/
2
0
1
2
9
/
2
8
/
2
0
1
2
1
0
/
1
9
/
2
0
1
2
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
All S&P 500
Companies
S&P 500 Less Financials
Bianco Research, L.L.C October 10, 2012 10
Q4 2012 S&P 500 Earnings Expectations
Q4 2012 S&P 500 Earnings Expectations
Operating Earnings Estimates Year-Over-Year Change
10/5/2012
10.20%
10/5/2012
6.70%
6%
8%
10%
12%
14%
16%
18%
20%
1
2
/
2
1
/
2
0
1
1
1
/
3
/
2
0
1
2
1
/
2
0
/
2
0
1
2
2
/
1
0
/
2
0
1
2
3
/
2
/
2
0
1
2
3
/
2
3
/
2
0
1
2
4
/
1
3
/
2
0
1
2
5
/
4
/
2
0
1
2
5
/
2
5
/
2
0
1
2
6
/
1
5
/
2
0
1
2
7
/
6
/
2
0
1
2
7
/
2
7
/
2
0
1
2
8
/
1
7
/
2
0
1
2
9
/
7
/
2
0
1
2
9
/
2
8
/
2
0
1
2
1
0
/
1
9
/
2
0
1
2
6%
8%
10%
12%
14%
16%
18%
20%
All S&P 500
Companies
S&P 500 Less Financials
Bianco Research, L.L.C October 10, 2012 11
Actual versus Forecasted Earnings
S&P 500 Operating Earnings
5/3/2013
118.91
1/30/2009, 112.79
20
30
40
50
60
70
80
90
100
110
120
2
/
1
/
1
9
9
1
1
/
1
7
/
1
9
9
2
1
2
/
3
1
/
1
9
9
2
1
2
/
1
7
/
1
9
9
3
1
2
/
2
/
1
9
9
4
1
1
/
1
7
/
1
9
9
5
1
1
/
1
/
1
9
9
6
1
0
/
1
7
/
1
9
9
7
1
0
/
2
/
1
9
9
8
9
/
1
7
/
1
9
9
9
9
/
1
/
2
0
0
0
8
/
1
7
/
2
0
0
1
8
/
2
/
2
0
0
2
7
/
1
8
/
2
0
0
3
7
/
2
/
2
0
0
4
6
/
1
7
/
2
0
0
5
6
/
2
/
2
0
0
6
5
/
1
8
/
2
0
0
7
5
/
2
/
2
0
0
8
4
/
1
7
/
2
0
0
9
3
/
1
2
/
2
0
1
0
2
/
2
5
/
2
0
1
1
2
/
1
0
/
2
0
1
2
1
/
2
5
/
2
0
1
3
1
/
1
0
/
2
0
1
4
E
a
r
n
i
n
g
s

P
e
r

S
h
a
r
e
20
30
40
50
60
70
80
90
100
110
120
E
a
r
n
i
n
g
s

P
e
r

S
h
a
r
e
Estimates For The Next Year
One Year Ago
Trailing 12-Month Operating Earnings
Bianco Research, L.L.C October 10, 2012 12
Earnings Forecast Error Rate
Error Rates
Current 12-Month Trailing Operating Earning versus Forward 12-month Forecast 12 Months Ago
10/5/2012
-11.71%
12/31/2010
6.36%
10/30/2009, -51.12%
5/19/2000
-0.90%
12/17/2004
8.39%
12/21/2001
-25.18%
1/8/1999
-13.35%
1/10/1997
-6.32%
5/19/1995
2.49%
4/10/1992
-19.91%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
2
/
1
/
1
9
9
1
1
/
1
7
/
1
9
9
2
1
2
/
3
1
/
1
9
9
2
1
2
/
1
7
/
1
9
9
3
1
2
/
2
/
1
9
9
4
1
1
/
1
7
/
1
9
9
5
1
1
/
1
/
1
9
9
6
1
0
/
1
7
/
1
9
9
7
1
0
/
2
/
1
9
9
8
9
/
1
7
/
1
9
9
9
9
/
1
/
2
0
0
0
8
/
1
7
/
2
0
0
1
8
/
2
/
2
0
0
2
7
/
1
8
/
2
0
0
3
7
/
2
/
2
0
0
4
6
/
1
7
/
2
0
0
5
6
/
2
/
2
0
0
6
5
/
1
8
/
2
0
0
7
5
/
2
/
2
0
0
8
4
/
1
7
/
2
0
0
9
3
/
1
2
/
2
0
1
0
2
/
2
5
/
2
0
1
1
2
/
1
0
/
2
0
1
2
1
/
2
5
/
2
0
1
3
1
/
1
0
/
2
0
1
4
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Estimates For The Next Year
One Year Ago
Bianco Research, L.L.C October 10, 2012 13
Q3 2012 S&P 500 Revenue Expectations
Q3 2012 S&P 500 Revenue Expectations
Sales Estimates Year-Over-Year Change
10/5/2012, -0.6
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
1
2
/
2
3
/
2
0
1
1
1
/
6
/
2
0
1
2
2
/
3
/
2
0
1
2
2
/
2
4
/
2
0
1
2
3
/
8
/
2
0
1
2
3
/
3
0
/
2
0
1
2
4
/
2
0
/
2
0
1
2
5
/
1
1
/
2
0
1
2
6
/
1
/
2
0
1
2
6
/
1
5
/
2
0
1
2
7
/
6
/
2
0
1
2
7
/
2
7
/
2
0
1
2
8
/
1
7
/
2
0
1
2
9
/
7
/
2
0
1
2
9
/
2
8
/
2
0
1
2
1
0
/
1
9
/
2
0
1
2
Y
e
a
r
-
O
v
e
r
-
Y
e
a
r

C
h
a
n
g
e
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Y
e
a
r
-
O
v
e
r
-
Y
e
a
r

C
h
a
n
g
e
All S&P 500
Companies
S&P 500 Less
Financials
Bianco Research, L.L.C October 10, 2012 14
Q4 2012 S&P 500 Revenue Expectations
Q4 2012 S&P 500 Revenue Expectations
Sales Estimates Year-Over-Year Change
10/5/2012, 1.4%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
3
/
8
/
2
0
1
2
3
/
3
0
/
2
0
1
2
4
/
2
0
/
2
0
1
2
5
/
1
1
/
2
0
1
2
6
/
1
/
2
0
1
2
6
/
1
5
/
2
0
1
2
7
/
6
/
2
0
1
2
7
/
2
7
/
2
0
1
2
8
/
1
7
/
2
0
1
2
9
/
7
/
2
0
1
2
9
/
2
8
/
2
0
1
2
1
0
/
1
9
/
2
0
1
2
Y
e
a
r
-
O
v
e
r
-
Y
e
a
r

C
h
a
n
g
e
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Y
e
a
r
-
O
v
e
r
-
Y
e
a
r

C
h
a
n
g
e
All S&P 500
Companies
S&P 500 Less
Financials
Bianco Research, L.L.C October 10, 2012 15
Bernanke Explains The Wealth Effect
Bernanke told us in his speech August 31 in Jackson Hole:

After nearly four years of experience with large-scale asset purchases, a substantial body of empirical
work on their effects has emerged. Generally, this research finds that the Federal Reserve’s large-
scale purchases have significantly lowered long-term Treasury yields. For example, studies have
found that the $1.7 trillion in purchases of Treasury and agency securities under the first LSAP
program reduced the yield on 10-year Treasury securities by between 40 and 110 basis points. The
$600 billion in Treasury purchases under the second LSAP program has been credited with lowering
10-year yields by an additional 15 to 45 basis points.12 Three studies considering the cumulative
influence of all the Federal Reserve’s asset purchases, including those made under the MEP, found
total effects between 80 and 120 basis points on the 10-year Treasury yield.13 These effects are
economically meaningful.

LSAPs also appear to have boosted stock prices, presumably both by lowering discount rates and by
improving the economic outlook; it is probably not a coincidence that the sustained recovery in U.S.
equity prices began in March 2009, shortly after the FOMC’s decision to greatly expand securities
purchases. This effect is potentially important because stock values affect both consumption and
investment decisions.

While there is substantial evidence that the Federal Reserve’s asset purchases have lowered longer-
term yields and eased broader financial conditions, obtaining precise estimates of the effects of these
operations on the broader economy is inherently difficult, as the counterfactual–how the economy
would have performed in the absence of the Federal Reserve’s actions–cannot be directly observed. If
we are willing to take as a working assumption that the effects of easier financial conditions on the
economy are similar to those observed historically, then econometric models can be used to estimate
the effects of LSAPs on the economy. Model simulations conducted at the Federal Reserve generally
find that the securities purchase programs have provided significant help for the economy. For
example, a study using the Board’s FRB/US model of the economy found that, as of 2012, the first two
rounds of LSAPs may have raised the level of output by almost 3 percent and increased private payroll
employment by more than 2 million jobs, relative to what otherwise would have occurred.15
Bianco Research, L.L.C October 10, 2012 16
Bernanke Explains The Wealth Effect - 2
This is not the first time the Federal Reserve has laid out this argument. In a
November 4, 2010 Washington Post op-ed, the day after QE2 was approved, Ben
Bernanke defended their actions with the following passage:

Easier financial conditions will promote economic growth. For example,
lower mortgage rates will make housing more affordable and allow more
homeowners to refinance. Lower corporate bond rates will encourage
investment. And higher stock prices will boost consumer wealth and help
increase confidence, which can also spur spending. Increased spending will
lead to higher incomes and profits that, in a virtuous circle, will further
support economic expansion.

And in January 2011 Bernanke said:

Federal Reserve Board Chairman Ben Bernanke said Thursday that a
controversial $600 billion bond buying plan has contributed to a stronger
stock market. “Our policies have contributed to a stronger stock market just
as they did in March 2009 when we did the first iteration of this program,”
Bernanke said at a Federal Deposit Insurance Corp. forum on small
businesses. “A stronger economy helps small businesses more than larger
businesses. Interest rates are higher but that’s mostly because the news is
better. It has responded to a stronger economy and better expectations.”
Bianco Research, L.L.C October 10, 2012 17
Our View Of The Wealth Effect

• QE does produce lower interest rates, or at least the belief that rates are too low.
This then pushes investors out the risk curve which is why stocks have such an
immediate and positive reaction whenever QE is speculated.

• The Federal Reserve is playing politics in regards to the effect of QE on
commodity prices.

• There is no reason to believe the risk curve ends at low-rated stocks. How much
QE affects food and gasoline prices can be debated, but to argue there is no effect
at all, and will never be an effect under any scenario, merely because the Federal
Reserve does not want to answer for these higher prices, is just wrong.

• The argument that higher asset prices produce a wealth effect is only partially
correct. Two conditions must be met for a wealth effect to ensue. Net worth must
reach a new high and it must be perceived to be permanent. This is why housing
produced such a powerful wealth effect before 2006. Home prices always went up
and their gains were perceived to be permanent. Currently we have a retracement
of losses and a widespread distrust of financial markets. These conditions will not
produce any wealth effect and we believe they have not.
Bianco Research, L.L.C October 10, 2012 18
Flows Into Domestic Mutual Funds And ETFs
12-Month Net New Assets In Foreign Equity Mutual Funds and ETFs
& 12-Month Net New Assets In Domestic Equity Mutual Funds and ETFs
-150
-100
-50
0
50
100
150
200
250
8
/
3
1
/
2
0
0
1
8
/
3
1
/
2
0
0
2
8
/
3
1
/
2
0
0
3
8
/
3
1
/
2
0
0
4
8
/
3
1
/
2
0
0
5
8
/
3
1
/
2
0
0
6
8
/
3
1
/
2
0
0
7
8
/
3
1
/
2
0
0
8
8
/
3
1
/
2
0
0
9
8
/
3
1
/
2
0
1
0
8
/
3
1
/
2
0
1
1
8
/
3
1
/
2
0
1
2
B
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
-150
-100
-50
0
50
100
150
200
250
B
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
Bianco Research, L.L.C October 10, 2012 19
Weekly Equity Mutual Fund Flows
Rolling 4 Week Sum Of The Net New Cash Flow into Total Equity Mutual Funds
8/10/2011
-58.66
5/26/2010
-29.95 1/30/2008
-42.50
3/11/2009, -56.41
10/15/2008, -107.51
-125
-100
-75
-50
-25
0
25
50
b
i l l i o
n
s

o
f

d
o
l l a
r
s
-125
-100
-75
-50
-25
0
25
50
b
i l l i o
n
s

o
f

d
o
l l a
r
s
Rolling 4 Week Sum Of The Net New Cash Flow into Domestic Equity Mutual Funds
4/20/2011
2.12
8/10/2011
-47.68
5/13/2009, 11.10
9/15/2010
-17.93 5/26/2010
-23.62
10/14/2009
-15.79
7/23/2008
-21.06
1/30/2008
-33.30
3/11/2009, -39.23
10/15/2008, -70.04
2/22/2012
0.3
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
b
i l l i o
n
s

o
f

d
o
l l a
r
s
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
b
i l l i o
n
s

o
f

d
o
l l a
r
s
Rolling 4 Week Sum Of The Net New Cash Flow into World Equity Mutual Funds
8/10/2011
-10.98
2/6/2008
-9.46
6/2/2010
-6.87
3/11/2009, -17.19
10/15/2008, -37.47
-40
-30
-20
-10
0
10
20
30
b
i l l i o
n
s

o
f

d
o
l l a
r
s
-40
-30
-20
-10
0
10
20
30
b
i l l i o
n
s

o
f

d
o
l l a
r
s
Rolling 4 Week Sum Of The Net New Cash Flow into Hyrbid Mutual Funds
8/10/2011
-8.59
9/23/2009, 11.27
3/11/2009, -9.26
10/15/2008, -16.35
-20
-15
-10
-5
0
5
10
15
1
/
3
/
2
0
0
7
4
/
2
5
/
2
0
0
7
8
/
1
5
/
2
0
0
7
1
2
/
5
/
2
0
0
7
3
/
2
6
/
2
0
0
8
7
/
1
6
/
2
0
0
8
1
1
/
5
/
2
0
0
8
2
/
2
5
/
2
0
0
9
6
/
1
7
/
2
0
0
9
1
0
/
7
/
2
0
0
9
1
/
2
7
/
2
0
1
0
5
/
1
9
/
2
0
1
0
9
/
8
/
2
0
1
0
1
2
/
2
9
/
2
0
1
0
4
/
2
0
/
2
0
1
1
8
/
1
0
/
2
0
1
1
1
1
/
3
0
/
2
0
1
1
3
/
2
1
/
2
0
1
2
7
/
1
1
/
2
0
1
2
1
0
/
3
1
/
2
0
1
2
b
i l l i o
n
s

o
f

d
o
l l a
r
s
-20
-15
-10
-5
0
5
10
15
b
i l l i o
n
s

o
f

d
o
l l a
r
s
Bianco Research, L.L.C October 10, 2012 20
Who Believes In QE3?
• Richmond Federal Reserve (September 15) – Richmond Fed President Lacker Comments on FOMC Dissent
Further monetary stimulus now is unlikely to result in a discernible improvement in growth, but if it does, it’s also likely to
cause an unwanted increase in inflation.

• The Wall Street J ournal (September 17) – George P. Shultz, Michael J . Boskin, J ohn F. Cogan, Allan H. Meltzer and
J ohn B. Taylor: The Magnitude of the Mess We’re In
The Fed is adding to the uncertainty of current policy. Quantitative easing as a policy tool is very hard to manage. Traders
speculate whether and when the Fed will intervene next. The Fed can intervene without limit in any credit market—not only
mortgage-backed securities but also securities backed by automobile loans or student loans. This raises questions about why
an independent agency of government should have this power.

• Dallas Federal Reserve (September 19) – Richard W. Fisher: Comments to the Harvard Club of New York City on
Monetary Policy (With Reference to Tommy Tune, Nicole Parent, the FOMC, Velcro, Drunken Sailors and Congress)
The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really
knows what is holding back the economy.

• MarketBeat (WSJ Blog) (September 27) – Fed’s Plosser: ‘Monetary Policy Shouldn’t Be a Day Trader’
The hawk in the house isn’t pleased. Philly Fed President Charles Plosser, a veteran central-bank official who has publicly
opposed the Fed’s latest accommodative efforts, says many of his colleagues are too focused on how markets react in the
short-term to Fed stimulus, as opposed to taking longer, more pragmatic views.

• Bloomberg.com (October 1) – Volcker Says Fed Bond-Buying Has No Effect on Inflation
Paul Volcker, former chairman of the Federal Reserve, said the U.S. central bank’s latest bond-buying program isn’t creating
inflationary pressure. “It’s not going to have a profound effect on the economy and it’s not going to have any effect on inflation
in the short run,” Volcker said today at a forum sponsored by Bloomberg Link at the New York Athletic Club. “The basic
situation is not an inflationary situation.”

• CNBC (October 5) – Effect of J obs Report on 2012 Election
At the very end of this interview Austan Goolsbee and Ed Lazear were both asked about the effectiveness of QE3. Both
agreed it would not be very effective although Goolsbee did concede that the Fed was “doing what it had to do.”
Bianco Research, L.L.C October 10, 2012 21
The Fed Now Has A Formal Inflation Target
7/31/2012
1.65%
7/31/2012
1.30%
9/30/2011
2.87%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
1
/
3
1
/
2
0
0
7
9
/
3
0
/
2
0
0
7
5
/
3
1
/
2
0
0
8
1
/
3
1
/
2
0
0
9
9
/
3
0
/
2
0
0
9
5
/
3
1
/
2
0
1
0
1
/
3
1
/
2
0
1
1
9
/
3
0
/
2
0
1
1
5
/
3
1
/
2
0
1
2
1
/
3
1
/
2
0
1
3
A
n
n
u
a
l

r
a
t
e

o
f

c
h
a
n
g
e
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
A
n
n
u
a
l

r
a
t
e

o
f

c
h
a
n
g
e
The Fed Now Has A Formal Inflation Target
Fed's Target
Headline PCE
Core PCE
Bianco Research, L.L.C October 10, 2012 22
The Fed Adopts An Inflation Target
The Federal Reserve – J anaury 25, 2012 Press Release
The inflation rate over the longer run is primarily determined by
monetary policy, and hence the Committee has the ability to
specify a longer-run goal for inflation. The Committee judges that
inflation at the rate of 2 percent, as measured by the annual
change in the price index for personal consumption expenditures,
is most consistent over the longer run with the Federal Reserve’s
statutory mandate. Communicating this inflation goal clearly to the
public helps keep longer-term inflation expectations firmly
anchored, thereby fostering price stability and moderate long-term
interest rates and enhancing the Committee’s ability to promote
maximum employment in the face of significant economic
disturbances.
Bianco Research, L.L.C October 10, 2012 23
Why 2%, Why Not?
During the Q&A portion of Bernanke’s March 29 speech at George Washington University, a
student asked the following:

Q: You mentioned in your lecture the dangers of deflation from the Great Depression and more
recently in Japan. And one of the arguments for maintaining a target inflation rate above zero is to
provide a cushion against possibility of deflation. Yet in the last two recessions in the United States,
there’s been a pretty significant fear of deflation causing the Fed to keep monetary policy pretty–
very accommodative in the beginning of the last decade and even more so at this point. Do you
think that 2 percent is enough of a cushion to prevent deflation, and have you considered higher
inflation target rates? Thank you.

MR. BERNANKE: Well, that’s a — that’s a great question. And there’s been a lot of research on
it. It seems like the international consensus is pretty much around 2 percent. I mean, almost all
central banks that have a target either have a 2 percent target or a 1 (percent) to 3 percent target or
something like that. And there’s a trade-off here because on the one hand, you want to have it
above zero, as you say, in order to avoid or reduce deflation risk, but on the other hand, if inflation
is too high, it’s going to create problems for markets; it’s going to make the economy less
efficient. And so there’s a trade-off, you know, which — what level of inflation gives you at least
some reasonable buffer against deflation but is not so high that it makes markets work less well.

And so again, the international consensus has been around 2 percent. And that’s sort of where the
Fed has been informally for quite a while. So that’s what we announce, and that’s, you know — you
know, for foreseeable future, that’s where we plan to stay. But it’s obviously an issue that
researchers will continue to look at, trying to address exactly that trade-off that you’re referring to.
Bianco Research, L.L.C October 10, 2012 24
The Fed Cannot Waver From 2%
In an April 25 press conference following the FOMC meeting, Bernanke
was again questioned on the topic and answered with the following:

MR. BERNANKE: I guess the question is, does it make sense to actively seek a
higher inflation rate in order to achieve a slightly increased reduction — a
slightly increased pace of reduction in the unemployment rate? The view of the
committee is that that would be very reckless. We have — we, the Federal
Reserve, have spent 30 years building up credibility for low and stable inflation,
which has proved extremely valuable in that we’ve been able to take strong
accommodative actions in the last four or five years to support the economy
without leading to a(n) unanchoring of inflation expectations or a destabilization
of inflation. To risk that asset for what I think would be quite tentative and
perhaps doubtful gains on the real side would be a, I think, unwise thing to do.

Rather than use these questions as an opportunity for greater transparency and
understanding, Bernanke offers canned responses such as, “there’s been a lot
of research on it” or, “the international consensus is pretty much around 2
percent.” Had he more time to explain the Federal Reserve’s rationale,
Bernanke may have pointed to a mid-2008 research paper written by Roberto
Billi and George Kahn of the Kansas City Federal Reserve.
Bianco Research, L.L.C October 10, 2012 25
Now It’s Ok If Inflation Expectations Go Above 2%
In a September 13, 2012 press conference following the
FOMC meeting, Bernanke said:

Q: I'm sorry. I just need to follow up. Does this -- so you're
saying it does not include greater tolerance for inflation; that
you will -- you would reverse course if inflation were to be
above your target level, even given that statement?

MR. BERNANKE: Well, if inflation goes above target level, as
we talked about in our statement in January, we take a
balanced approach. We bring inflation back to the target over
time, but we do it in a way that takes into account the
deviations of both of our objectives, you know, from their
targets.

Bianco Research, L.L.C October 10, 2012 26
10-Year TIPS Breakeven Inflation Rate
10-Year TIPS Breakeven Inflation Rate
10/9/2012
2.563
9/14/2012
2.639
9/22/2011, 1.713
4/11/2011, 2.66
4/29/2010
2.431
9/10/2007
2.189
12/31/2008, 0.120
11/20/2008, 0.041
8/24/2010
1.512
1/11/2010, 2.465
6/10/2009
2.070
3/6/2009
0.846
7/4/2008
2.598
3/20/2012
2.434
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
9
/
2
9
/
2
0
0
6
1
/
7
/
2
0
0
7
4
/
1
7
/
2
0
0
7
7
/
2
6
/
2
0
0
7
1
1
/
3
/
2
0
0
7
2
/
1
1
/
2
0
0
8
5
/
2
1
/
2
0
0
8
8
/
2
9
/
2
0
0
8
1
2
/
7
/
2
0
0
8
3
/
1
7
/
2
0
0
9
6
/
2
5
/
2
0
0
9
1
0
/
3
/
2
0
0
9
1
/
1
1
/
2
0
1
0
4
/
2
1
/
2
0
1
0
7
/
3
0
/
2
0
1
0
1
1
/
7
/
2
0
1
0
2
/
1
5
/
2
0
1
1
5
/
2
6
/
2
0
1
1
9
/
3
/
2
0
1
1
1
2
/
1
2
/
2
0
1
1
3
/
2
1
/
2
0
1
2
6
/
2
9
/
2
0
1
2
1
0
/
7
/
2
0
1
2
1
/
1
5
/
2
0
1
3
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
TIPS Breakeven (Thick Line/Left Scale)
Yield of the 10-Year Treasury Note minus the
Yield of 10-Year TIPS Note
QE 1
QE 2
Operation
Twist

Bianco Research, L.L.C October 10, 2012 27
5-Year Forward/5-Year Inflation Breakeven Rates
5-Year Forward/5-Year Inflation Breakeven Rates
10/8/2012
3.03
9/22/2011
1.99
11/9/2009, 2.89
1/23/2008
2.77
8/24/2010, 1.92
11/1/2010
3.08
5/3/2010, 3.08
12/31/2008, 0.41
11/20/2008, 0.71
10/8/2008, 1.68
5/1/2006
2.83
6/30/2005
2.34
5/20/2004, 3.34
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1
/
2
0
/
2
0
0
4
6
/
1
0
/
2
0
0
4
1
0
/
2
8
/
2
0
0
4
3
/
1
7
/
2
0
0
5
8
/
5
/
2
0
0
5
1
2
/
2
3
/
2
0
0
5
5
/
1
2
/
2
0
0
6
9
/
2
9
/
2
0
0
6
2
/
1
9
/
2
0
0
7
7
/
9
/
2
0
0
7
1
1
/
2
6
/
2
0
0
7
4
/
1
4
/
2
0
0
8
9
/
1
/
2
0
0
8
1
/
1
9
/
2
0
0
9
6
/
8
/
2
0
0
9
1
0
/
2
6
/
2
0
0
9
3
/
1
8
/
2
0
1
0
8
/
6
/
2
0
1
0
1
2
/
2
4
/
2
0
1
0
5
/
1
3
/
2
0
1
1
1
0
/
3
/
2
0
1
1
2
/
2
0
/
2
0
1
2
7
/
9
/
2
0
1
2
1
1
/
2
6
/
2
0
1
2
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Bianco Research, L.L.C October 10, 2012 28
Central Bank Balance Sheets
Central Bank Balance Sheets
(China, ECB, U.S. and Japan)
8/31/2012, 1.91
8/31/2012, 3.88
8/31/2012
2.81
6/30/2012
4.50
0
1
2
3
4
5
1
/
3
1
/
2
0
0
2
1
/
3
1
/
2
0
0
3
1
/
3
1
/
2
0
0
4
1
/
3
1
/
2
0
0
5
1
/
3
1
/
2
0
0
6
1
/
3
1
/
2
0
0
7
1
/
3
1
/
2
0
0
8
1
/
3
1
/
2
0
0
9
1
/
3
1
/
2
0
1
0
1
/
3
1
/
2
0
1
1
1
/
3
1
/
2
0
1
2
1
/
3
1
/
2
0
1
3
T
r
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
0
1
2
3
4
5
T
r
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
PBoC - Chinese Central Bank Balance
Sheet (Converted To Dollars)
The ECB Balance Sheet
(Converted to Dollars)
BoJ Balance Sheet
(Converted To Dollars)
The Federal Reserve
Balance Sheet
Bianco Research, L.L.C October 10, 2012 29
The Biggest Six Central Bank Balance Sheets
The Biggest Six Central Bank Balance Sheets
(U.S., U.K, ECB, Japan, China, and Switzerland)
11/30/2010, 10.87
2/28/2009, 8.95
8/31/2008, 7.23
12/31/2008, 10.12
5/31/2006
4.99
7/31/2012
13.54
4
5
6
7
8
9
10
11
12
13
14
15
5
/
3
1
/
2
0
0
6
1
1
/
3
0
/
2
0
0
6
5
/
3
1
/
2
0
0
7
1
1
/
3
0
/
2
0
0
7
5
/
3
1
/
2
0
0
8
1
1
/
3
0
/
2
0
0
8
5
/
3
1
/
2
0
0
9
1
1
/
3
0
/
2
0
0
9
5
/
3
1
/
2
0
1
0
1
1
/
3
0
/
2
0
1
0
5
/
3
1
/
2
0
1
1
1
1
/
3
0
/
2
0
1
1
5
/
3
1
/
2
0
1
2
1
1
/
3
0
/
2
0
1
2
T
r
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
4
5
6
7
8
9
10
11
12
13
14
15
T
r
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
Bianco Research, L.L.C October 10, 2012 30
6 Central Bank Balance Sheets As A % Of World Market Cap
The Size Of The Six Central Bank Balance Sheets
As A Percent Of World Market Capitalization
7/31/2012
28.17%
7/31/2011
23.45%
11/30/2011, 29.91%
6/30/2010
24.80%
9/30/2011, 29.23%
4/30/2010
22.01%
4/30/2011
21.55%
1/31/2009, 33.28%
8/31/2008, 15.14%
5/31/2006
11.39%
6/30/2007
9.53%
5%
10%
15%
20%
25%
30%
35%
5
/
3
1
/
2
0
0
6
1
1
/
3
0
/
2
0
0
6
5
/
3
1
/
2
0
0
7
1
1
/
3
0
/
2
0
0
7
5
/
3
1
/
2
0
0
8
1
1
/
3
0
/
2
0
0
8
5
/
3
1
/
2
0
0
9
1
1
/
3
0
/
2
0
0
9
5
/
3
1
/
2
0
1
0
1
1
/
3
0
/
2
0
1
0
5
/
3
1
/
2
0
1
1
1
1
/
3
0
/
2
0
1
1
5
/
3
1
/
2
0
1
2
1
1
/
3
0
/
2
0
1
2
B
a
l
a
n
c
e

S
h
e
e
t
s

/

W
o
r
l
d

M
a
r
k
e
t

C
a
p
5%
10%
15%
20%
25%
30%
35%
B
a
l
a
n
c
e

S
h
e
e
t
s

/

W
o
r
l
d

M
a
r
k
e
t

C
a
p
Bianco Research, L.L.C October 10, 2012 31
Gratuitous Commercial For Bianco Research
An Offer For Conference Attendees
Between Now and October 31 you can view our research at
www.biancoresearch.com
Go To “Log-In Using Invitation Code” on our Home Page
Invitation Code = TBP2012 (case sensitive)
Enjoy
Bianco Research, L.L.C October 10, 2012 32
Europe: The Cycle Continues
Bloomberg.com – (September 12, 2012) pain Says No ‘Urgency’ to Seek Bailout as ECB
Eases Yields
Prime Minister Mariano Rajoy told Parliament it’s not clear if Spain needs help as the European
Central Bank’s crisis plan has cut borrowing costs. There’s no “urgency” because the ECB’s move
put the Treasury in a more “comfortable” position, Deputy Economy Minister Fernando Jimenez
Latorre said. “The important thing is that when whatever assistance that is needed is requested,
that it should be well received in the markets,” Jimenez Latorre told reporters in Madrid
today.Spanish 10-year bond yields have fallen about 80 basis points since ECB President Mario
Draghi said on Sept. 6 the bank could buy cash-strapped nations’ debt if they seek help from the
region’s government-run rescue mechanism first..”

Comment

This story, particularly the highlighted passage above, is a perfect example of what we wrote
about last month:

This highlights the all too familiar pattern of the European crisis. When markets slump and
things look bad, European leaders will promise anything/everything to stop the decline, no
matter how politically distasteful it might be. Markets then rally on the hope that Europe has
turned the corner. However, these rallies embolden European leaders to not follow through
on the politically difficult promises made at the depth of the crisis. The markets then fall
again on this disappointment until another crisis emerges forcing European leaders to
promise something else that will last only until the markets rally once again.

Bianco Research, L.L.C October 10, 2012 33
Spain 10-Year Yields
Spain 10-Year Yields
8/3/2012
7.44%
7/25/2012, 7.75%
6/18/2012, 7.29%
6/17/2010
4.99%
11/17/2011, 6.78%
11/30/2010, 5.67%
8/2/2011, 6.46%
9/10/2012
5.55%
10/12/2010, 3.95%
8/18/2011, 4.90%
3/2/2012
4.85%
4/5/2010, 3.81%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
1
2
/
3
1
/
0
9
0
2
/
1
1
/
1
0
0
3
/
2
5
/
1
0
0
5
/
0
6
/
1
0
0
6
/
1
7
/
1
0
0
7
/
2
9
/
1
0
0
9
/
0
9
/
1
0
1
0
/
2
1
/
1
0
1
2
/
0
2
/
1
0
0
1
/
1
3
/
1
1
0
2
/
2
4
/
1
1
0
4
/
0
7
/
1
1
0
5
/
1
9
/
1
1
0
6
/
3
0
/
1
1
0
8
/
1
1
/
1
1
0
9
/
2
2
/
1
1
1
1
/
0
3
/
1
1
1
2
/
1
5
/
1
1
0
1
/
2
6
/
1
2
0
3
/
0
8
/
1
2
0
4
/
1
9
/
1
2
0
5
/
3
1
/
1
2
0
7
/
1
2
/
1
2
0
8
/
2
3
/
1
2
1
0
/
0
4
/
1
2
1
1
/
1
5
/
1
2
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
SMP
LTRO
OMT
Bianco Research, L.L.C October 10, 2012 34
Italy 10-Year Yields
Italy 10-Year Yields
7/25/2012
6.71%
11/9/2011, 7.48%
7/12/2011
6.02%
3/10/2011
5.02%
11/30/2010
4.80%
5/7/2010
4.36%
8/5/2011
6.40%
3/9/2012
4.68%
12/7/2011
5.76%
10/12/2010
3.71%
8/18/2011
4.87%
9/20/2012
4.99%
1/9/2012
7.16%
2/2/2011
4.54%
5/16/2011
4.59%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
1
2
/
3
1
/
0
9
0
2
/
1
1
/
1
0
0
3
/
2
5
/
1
0
0
5
/
0
6
/
1
0
0
6
/
1
7
/
1
0
0
7
/
2
9
/
1
0
0
9
/
0
9
/
1
0
1
0
/
2
1
/
1
0
1
2
/
0
2
/
1
0
0
1
/
1
3
/
1
1
0
2
/
2
4
/
1
1
0
4
/
0
7
/
1
1
0
5
/
1
9
/
1
1
0
6
/
3
0
/
1
1
0
8
/
1
1
/
1
1
0
9
/
2
2
/
1
1
1
1
/
0
3
/
1
1
1
2
/
1
5
/
1
1
0
1
/
2
6
/
1
2
0
3
/
0
8
/
1
2
0
4
/
1
9
/
1
2
0
5
/
3
1
/
1
2
0
7
/
1
2
/
1
2
0
8
/
2
3
/
1
2
1
0
/
0
4
/
1
2
1
1
/
1
5
/
1
2
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Bianco Research, L.L.C October 10, 2012 35
Ireland 9-Year Yields
Ireland 9-Year Yields
5/16/2012
7.72%
11/28/2011
9.74%
7/18/2011, 14.12%
9/20/2012, 4.97%
9/29/2011
7.58%
8/6/2010, 4.89%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
1
2
/
3
1
/
0
9
0
1
/
2
8
/
1
0
0
2
/
2
5
/
1
0
0
3
/
2
5
/
1
0
0
4
/
2
2
/
1
0
0
5
/
2
0
/
1
0
0
6
/
1
7
/
1
0
0
7
/
1
5
/
1
0
0
8
/
1
2
/
1
0
0
9
/
0
9
/
1
0
1
0
/
0
7
/
1
0
1
1
/
0
4
/
1
0
1
2
/
0
2
/
1
0
1
2
/
3
0
/
1
0
0
1
/
2
7
/
1
1
0
2
/
2
4
/
1
1
0
3
/
2
4
/
1
1
0
4
/
2
1
/
1
1
0
5
/
1
9
/
1
1
0
6
/
1
6
/
1
1
0
7
/
1
4
/
1
1
0
8
/
1
1
/
1
1
0
9
/
0
8
/
1
1
1
0
/
0
6
/
1
1
1
1
/
0
3
/
1
1
1
2
/
0
1
/
1
1
1
2
/
2
9
/
1
1
0
1
/
2
6
/
1
2
0
2
/
2
3
/
1
2
0
3
/
2
2
/
1
2
0
4
/
1
9
/
1
2
0
5
/
1
7
/
1
2
0
6
/
1
4
/
1
2
0
7
/
1
2
/
1
2
0
8
/
0
9
/
1
2
0
9
/
0
6
/
1
2
1
0
/
0
4
/
1
2
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
Bianco Research, L.L.C October 10, 2012 36
Tax Cuts
Bianco Research, L.L.C October 10, 2012 37
The Debt Ceiling
The Debt Ceiling
16.3940
10/9/2012
16.1230
y = 0.0051x + 13.707
R
2
= 0.9836
$13.50
$14.00
$14.50
$15.00
$15.50
$16.00
$16.50
1
2
/
1
0
/
2
0
1
0
3
/
4
/
2
0
1
1
5
/
2
7
/
2
0
1
1
8
/
1
9
/
2
0
1
1
1
1
/
1
1
/
2
0
1
1
2
/
3
/
2
0
1
2
4
/
2
7
/
2
0
1
2
7
/
2
0
/
2
0
1
2
1
0
/
1
2
/
2
0
1
2
1
/
4
/
2
0
1
3
T
r
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
$13.50
$14.00
$14.50
$15.00
$15.50
$16.00
$16.50
T
r
i
l
l
i
o
n
s

o
f

D
o
l
l
a
r
s
Blue = Debt Subject To Debt Ceiling Limit
Red = Debt Ceiling Limit
Administration intentionally slowing
debt sales to avoid hitting the limit as
long as possible
Bianco Research, L.L.C October 10, 2012 38
Obama To Be Re-Elected President In 2012
Barack Obama To Be Re-Elected President In 2012
Intrade.com Betting
9-Oct-12
63.8
3-Oct-12, 74
30-Sep-12, 78.7
9-Sep-12
57.6
30-Aug-12
55.7
22-Jul-12
59.5
8-Jan-12, 50.2
19-Jun-12
52.4
16-Apr-12
61.40
12-Mar-12, 61.4
9-Feb-12, 60.7
23-Jan-12, 55.9
12-Nov-11
52.3
2-May-11
69.9
16-Oct-11
46.5
6-Jun-12, 52.3
44
48
52
56
60
64
68
72
76
80
1
2
/
3
1
/
2
0
1
0
2
/
9
/
2
0
1
1
3
/
2
1
/
2
0
1
1
4
/
3
0
/
2
0
1
1
6
/
1
0
/
2
0
1
1
7
/
2
0
/
2
0
1
1
8
/
3
0
/
2
0
1
1
1
0
/
9
/
2
0
1
1
1
1
/
1
8
/
2
0
1
1
1
2
/
2
8
/
2
0
1
1
2
/
6
/
2
0
1
2
3
/
1
7
/
2
0
1
2
4
/
2
6
/
2
0
1
2
6
/
5
/
2
0
1
2
7
/
1
5
/
2
0
1
2
8
/
2
4
/
2
0
1
2
1
0
/
3
/
2
0
1
2
C
h
a
n
c
e

o
f

B
e
i
n
g

R
e
-
E
l
e
c
t
e
d
44
48
52
56
60
64
68
72
76
80
C
h
a
n
c
e

o
f

B
e
i
n
g

R
e
-
E
l
e
c
t
e
d
Osama Bin Laden is
pronounced dead
Bianco Research, L.L.C October 10, 2012 39
Election 2012 Trial Heat: Obama vs Romney
Election 2012 Trial Heat: Obama vs. Romney
Gallup Organization
40.0%
42.0%
44.0%
46.0%
48.0%
50.0%
52.0%
4
/
1
5
/
2
0
1
2
4
/
2
0
/
2
0
1
2
4
/
2
6
/
2
0
1
2
5
/
1
/
2
0
1
2
5
/
7
/
2
0
1
2
5
/
1
2
/
2
0
1
2
5
/
1
7
/
2
0
1
2
5
/
2
2
/
2
0
1
2
5
/
2
7
/
2
0
1
2
6
/
2
/
2
0
1
2
6
/
7
/
2
0
1
2
6
/
1
2
/
2
0
1
2
6
/
1
7
/
2
0
1
2
6
/
2
2
/
2
0
1
2
6
/
2
7
/
2
0
1
2
7
/
2
/
2
0
1
2
7
/
8
/
2
0
1
2
7
/
1
3
/
2
0
1
2
7
/
1
8
/
2
0
1
2
7
/
2
3
/
2
0
1
2
7
/
2
9
/
2
0
1
2
8
/
3
/
2
0
1
2
8
/
8
/
2
0
1
2
8
/
1
3
/
2
0
1
2
8
/
1
8
/
2
0
1
2
8
/
2
3
/
2
0
1
2
8
/
2
8
/
2
0
1
2
9
/
2
/
2
0
1
2
9
/
7
/
2
0
1
2
9
/
1
2
/
2
0
1
2
9
/
1
7
/
2
0
1
2
9
/
2
2
/
2
0
1
2
9
/
2
7
/
2
0
1
2
1
0
/
2
/
2
0
1
2
1
0
/
7
/
2
0
1
2
40.0%
42.0%
44.0%
46.0%
48.0%
50.0%
52.0%
These are the results when registered voters are asked: "Suppose the presidential election were held
today. If Barack Obama were the Democratic Party's candidate and Mitt Romney were the Republican
Party's candidate, who would you vote for Barack Obama, the Democrat or Mitt Romney, the
Republican?" Those who are undecided are further asked if they lean more toward Obama or Romney
and their leanings are incorporated into the results. Each five-day rolling average is based on
telephone interviews with approximately 2,200 registered voters; Margin of error is ±3 percentage
points.
Romney
Obama
Bianco Research, L.L.C October 10, 2012 40
Obama’s Approval Ratings
Obama's Approval Ratings
Gallup Poll
6/21/2012
51%
5/1/2012, 51%
10/20/2011
38%
5/2/2009, 68%
6/9/2010, 44%
1/24/2009, 69%
8/17/2010, 41%
5/13/2010
52%
10/23/10
41%
1/21/11
51%
34%
38%
42%
46%
50%
54%
58%
62%
66%
70%
1
/
2
3
/
2
0
0
9
3
/
2
5
/
2
0
0
9
5
/
2
5
/
2
0
0
9
7
/
2
7
/
2
0
0
9
9
/
2
7
/
2
0
0
9
1
1
/
2
6
/
2
0
0
9
2
/
2
/
2
0
1
0
4
/
3
/
2
0
1
0
6
/
5
/
2
0
1
0
8
/
6
/
2
0
1
0
1
0
/
5
/
2
0
1
0
1
2
/
9
/
2
0
1
0
2
/
1
6
/
2
0
1
1
4
/
1
8
/
2
0
1
1
6
/
1
9
/
2
0
1
1
8
/
1
9
/
2
0
1
1
1
0
/
2
0
/
2
0
1
1
1
2
/
2
0
/
2
0
1
1
2
/
2
5
/
2
0
1
2
4
/
2
5
/
2
0
1
2
6
/
2
4
/
2
0
1
2
8
/
2
5
/
2
0
1
2
1
0
/
2
4
/
2
0
1
2
34%
38%
42%
46%
50%
54%
58%
62%
66%
70%
Bin Laden
Bounce
Last (Oct 5 to Oct 7)
Approval = 51%
Disapproval = 44%
Convention
Bounce
Bianco Research, L.L.C October 10, 2012 41
The Pattern Of Winners
Comparing Obama's Odds of Re-Election To Previous Winners' Odds
Intrade.com Betting
30-Jul-11
50.0
16-Sep, 48.7
45
50
55
60
65
70
75
80
85
90
6
-
D
e
c
1
8
-
D
e
c
3
0
-
D
e
c
1
1
-
J
a
n
2
3
-
J
a
n
4
-
F
e
b
1
6
-
F
e
b
2
8
-
F
e
b
1
2
-
M
a
r
2
4
-
M
a
r
5
-
A
p
r
1
7
-
A
p
r
2
9
-
A
p
r
1
1
-
M
a
y
2
4
-
M
a
y
5
-
J
u
n
1
7
-
J
u
n
2
9
-
J
u
n
1
1
-
J
u
l
2
3
-
J
u
l
4
-
A
u
g
1
7
-
A
u
g
2
9
-
A
u
g
1
0
-
S
e
p
2
2
-
S
e
p
4
-
O
c
t
1
6
-
O
c
t
2
8
-
O
c
t
9
-
N
o
v
C
h
a
n
c
e

o
f

B
e
i
n
g

R
e
-
E
l
e
c
t
e
d
45
50
55
60
65
70
75
80
85
90
C
h
a
n
c
e

o
f

B
e
i
n
g

R
e
-
E
l
e
c
t
e
d
Odds of George Bush being
re-elected in 2004
Odds of the Democratic nominee
winning the election in 2008
Odds of Barack Obama
being re-elected in 2012
Bianco Research, L.L.C October 10, 2012 42
The Republicans Control The House After 2012 Elections
The Republicans Control The House After 2012 Elections
Intrade.com Betting
9/29/2012, 71.2
10/7/2012
89
8/29/2012, 92.1
45
50
55
60
65
70
75
80
85
90
95
1
2
/
3
1
/
2
0
1
0
1
/
2
0
/
2
0
1
1
2
/
9
/
2
0
1
1
3
/
1
/
2
0
1
1
3
/
2
1
/
2
0
1
1
4
/
1
0
/
2
0
1
1
4
/
3
0
/
2
0
1
1
5
/
2
1
/
2
0
1
1
6
/
1
0
/
2
0
1
1
6
/
3
0
/
2
0
1
1
7
/
2
0
/
2
0
1
1
8
/
1
0
/
2
0
1
1
8
/
3
0
/
2
0
1
1
9
/
1
9
/
2
0
1
1
1
0
/
9
/
2
0
1
1
1
0
/
2
9
/
2
0
1
1
1
1
/
1
8
/
2
0
1
1
1
2
/
8
/
2
0
1
1
1
2
/
2
8
/
2
0
1
1
1
/
1
7
/
2
0
1
2
2
/
6
/
2
0
1
2
2
/
2
6
/
2
0
1
2
3
/
1
7
/
2
0
1
2
4
/
6
/
2
0
1
2
4
/
2
6
/
2
0
1
2
5
/
1
6
/
2
0
1
2
6
/
5
/
2
0
1
2
6
/
2
5
/
2
0
1
2
7
/
1
5
/
2
0
1
2
8
/
4
/
2
0
1
2
8
/
2
4
/
2
0
1
2
9
/
1
3
/
2
0
1
2
1
0
/
3
/
2
0
1
2
45
50
55
60
65
70
75
80
85
90
95
Bianco Research, L.L.C October 10, 2012 43
Who Will Control The Senate?
Who Will Control The Senate?
Intrade.com Betting
10/1/2012
66.9
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
1
2
/
3
1
/
2
0
1
0
1
/
2
0
/
2
0
1
1
2
/
9
/
2
0
1
1
3
/
1
/
2
0
1
1
3
/
2
1
/
2
0
1
1
4
/
1
0
/
2
0
1
1
4
/
3
0
/
2
0
1
1
5
/
2
1
/
2
0
1
1
6
/
1
0
/
2
0
1
1
6
/
3
0
/
2
0
1
1
7
/
2
0
/
2
0
1
1
8
/
1
0
/
2
0
1
1
8
/
3
0
/
2
0
1
1
9
/
1
9
/
2
0
1
1
1
0
/
9
/
2
0
1
1
1
0
/
2
9
/
2
0
1
1
1
1
/
1
8
/
2
0
1
1
1
2
/
8
/
2
0
1
1
1
2
/
2
8
/
2
0
1
1
1
/
1
7
/
2
0
1
2
2
/
6
/
2
0
1
2
2
/
2
6
/
2
0
1
2
3
/
1
7
/
2
0
1
2
4
/
6
/
2
0
1
2
4
/
2
6
/
2
0
1
2
5
/
1
6
/
2
0
1
2
6
/
5
/
2
0
1
2
6
/
2
5
/
2
0
1
2
7
/
1
5
/
2
0
1
2
8
/
4
/
2
0
1
2
8
/
2
4
/
2
0
1
2
9
/
1
3
/
2
0
1
2
1
0
/
3
/
2
0
1
2
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
Democrats
Republicans
Neither Party will contol The Senate
Contact Page
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