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Client Conference Call – June 25, 2009

“By any means necessary”
Mary Erdoes
Chief Executive Officer, Global Wealth Management

Michael Cembalest
Chief Investment Officer, Global Wealth Management

The following presentation was delivered by Michael Cembalest during a conference call held on June 25, 2009. It has been prepared for educational
purposes only, based upon information which we believe to be reliable. We accept no responsibility for any direct or consequential losses occurring
from its use. Nothing contained in this presentation should be construed as a solicitation for any product or service offered by J.P. Morgan or any of its
affiliates. The presentation is intended for use in conjunction with the conference call above. To access the replay of this call, please dial (800) 642-1687
or (706) 645-9291. Passcode: 13478228. The replay will be available beginning 4pm EST June 25. For the audio and presentation slides, go to:
http://jpmorganconferencecall.webex.com and click “View Event Recordings” in the upper right corner of your screen. The replay will be available
beginning at Noon pm EST June 26 until 4 pm EST July 7.

Investment products: Not FDIC insured • No bank guarantee • May lose value
CONFIDENTIAL

Please see important information at the end of this presentation.
A painful recession likely to come to an end later this year
ISM mfg & employment Motor vehicle miles driven Leading Indicators
Index level YoY % Change Index level
Manufacturing 10%
60 105
55
100
50
5%
45 95
e.g., “vendor
40 deliveries”
0%
90
35
Business employment
30 85

25 -5% 80
00 01 02 03 04 05 06 07 08 09 00 01 02 03 04 05 06 07 08 09 00 01 02 03 04 05 06 07 08 09

Jobless claims Small Business Optimism Architectural billings
Thousands Thousands Index level Index level
6900 -148,000 700 110 65

5900 600 60

100 55
4900 500
Initial 4wk moving avg. (RHS)
50

3900 400
45
90 40
2900 300 35
Continuing (LHS) 80 30
1900 200
00 02 04 06 08 00 02 04 06 08
03 04 05 07 08
Source: Bloomberg. Data as of 6/12/2009.
CONFIDENTIAL

Contra-indicators: wage and salary growth, real consumer
goods spending, industrial production
2
Amazing what $14 trillion can do

Public sector response to recessions: a new zip code
MONETARY STIMULUS Bubble size = Reduction in Fed Funds Rate, bps

(growth in monetary base)
Includes additional $1.1 trillion in treasury, agency and
1953-54
MBS purchases, an estimated $500 billion reduction
200% 1957-58
1960-61 from a contraction in Fed Credit Facilities, and OMB
1969-70 projections through FY 2010
1973-75
150% 1980-80
1981-82 Includes monetary expansion
1990-91 as of June 2009 and OMB
2001-01 projections for FY 2009
100% 2008-Current
2008-??

50%

0%

FISCAL STIMULUS
-50% (growth in U.S. Treasury debt/GDP ratio)
-6% -2% 2% 6% 10% 14% 18% 22% 26% 30%
Source: J.P. Morgan Securities Inc., Federal Reserve, OMB, BEA. Data as of 6/17/2009, with FY 2010 estimate.

* Add relaxation of accounting treatment for impaired assets
CONFIDENTIAL

* Excludes health care bill (initial CBO scoring $1 trillion+)
3
More aid/guarantees, or a giant fiscal drag, at the state level

State deficits: bigger drag than the 1970s
State and local government surplus / deficit, % of GDP

1.7%

1.2%

0.7%

0.2%

-0.3%

-0.8%
1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007
Source: Bureau of Economic Analysis. Data as of 3/31/2009.

Personal tax collections down 26%
YoY nominal % change, May 2008 to 2009
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
CONFIDENTIAL

Withholding Estimated Final Refunds Net PIT
Payments
Source: The Nelson A. Rockefeller Institute of Government. Data as of 5/31/2009.
4
Woodrow Wilson would be pleased:
Most coordinated global economic policy effort in history

Global government stimulus comparison
% GDP % change since Sept ‘07

Asset Guarantees &
Purchases Fiscal Stimulus Monetary Base
U.S. 107% 5.5% 119%
South Africa 10.0% 18%
Brazil 8.9% -10%
Australia 6.0% 35%
China 6.0% 9%
Taiwan 4.8% 18%
Japan 12% 4.7%
Russia 4.4% 22%
Korea 3.8%
Germany 18% 3.2%
Sweden 3.0% 177%
Hong Kong 6% 2.9% 75%
UK 55% 2.0% 29%
Spain 10% 1.1%
Finland 27% 1.0%
Switzerland 14% 0.1% 92%
CONFIDENTIAL

Ireland 218%
Source: Bloomberg, International Monetary Fund, UBS, Bridgewater Associates. 5
China and Germany: governments pedaling fast to offset declining exports
and foreign direct investment

Investment and loan growth surge in China
YoY % change YoY % change
30% 45%
Real fixed
investment (RHS) 35%
25%
25%
20%
15%
15% 5%
RMB loan growth (LHS)
10% -5%
1998 2000 2002 2004 2006 2009
Source: National Bureau of Statistics, The People’s Bank of China. Data as of
5/31/2009.

Global car sales rebound, with help
Index, 100 = 6/30/2007
Germany Euro Area
170
China Brazil
160
Abwrackprämie 150
India Japan

Cost: $3.5 bn + 140
130
120
110
100
90
80
70
CONFIDENTIAL

Jun-07 Nov-07 Apr-08 Aug-08 Jan-09 May-09
Source: J.P. Morgan Securities Inc. Data as of 5/31/2009.
6
Now what? A difference of opinion

Estimated impact on GDP of a permanent increase in government
spending
CONFIDENTIAL

Source: John F. Cogan, et al. “New Keynesian versus Old Keynesian Government Spending Multipliers”. February
2009.

7
Treasury financed 80% of 2009 needs without major disruption, but with
$180 bn from the Fed, and with 2010 needs starting in October

Treasuries and Agency yields
Percent
6.5%
30-yr FNMA Mortgage rate Mortgage refi
6.0% activity came
to a halt
5.5%

5.0%

4.5%

4.0%

3.5%

10-yr Treasury yield
3.0%

2.5%

2.0%
Jan-07 Apr-07 Jul-07 Oct-07 Feb-08 May-08 Aug-08 Dec-08 Mar-09 Jun-09

Source: Bloomberg. Data as of 6/24/2009.
CONFIDENTIAL

8
“By any means necessary”: reliance on earnings rather than capital to solve
banking system problems

Aggregate results: Supervisory Capital Assessment Program ($ billions)

$363 ($600)

$413

$315
$75
$240
$64

CURR PROJ LOSSES ACCT ADJ EQUITY CAPITAL EQUITY
EQUITY INCOME TO RAISE
1 Purchase accounting adjustment represents losses already taken on National City, Wachovia & Washington Mutual.
CONFIDENTIAL

9
Phoenix: an exaggerated metaphor for housing and the reason bank losses
are so high

Inventory and sales activity improving, but deflationary pressures remain
60,000 $360,000
Inventory Monthly Sales ASP (12-mo Rolling Average)

$340,000
50,000

$320,000

40,000
$300,000
Inventory levels
30,000 down 35% y/y !!! $280,000

$260,000
20,000
Sales are up
57% y/y !!! $240,000

10,000
$220,000

0 $200,000
CONFIDENTIAL

Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09
Source: Ashton Woods Homes, Arizona Regional Multiple Listing Service, Inc . Data as of 5/31/2009.

10
Residential housing: tracking the Fed’s adverse case, and worse
60+ day delinquencies by loan type Another foreclosure wave coming
% of remaining loan balance 60+ days delinquent 145,000 80%
including loans in foreclosure and REO
40% S 130,000
Subprime Notices of Default (LHS)
70%
115,000
30% Prime Jumbo O
100,000 60%
Alt-A
20% Option ARM A 85,000
50%
HELOC 70,000
10% H 40%
55,000 % of NODs moving to auction (RHS)
PJ 40,000 30%
0%
1999 2001 2003 2005 2007 2009 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09

Average balance of non-agency loans
Recovery values by loan type
entering foreclosure
Recovery values Average original balance, thousands
100% $280
$260
80%
$240
60% $220
PJ
$200
40% A
O $180
20% S $160 Watch out for a head-
H $140
fake on home prices
0%
$120
1999 2001 2003 2005 2007 2009 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09
CONFIDENTIAL

Source: J.P. Morgan Securities Inc., LoanPerformance, Zelman & Associates, RealtyTrac. Data as of 5/31/2009.
Universe: All non-agency securitized loans. 11
Intense pressure on the U.S. consumer, which at 70% of U.S. GDP, is/was the
largest single driver of global activity

Long way back to equilibrium: household balance sheets in tough shape

15%

14% Consumer mortgage & non-mortgage interest
payments as a percent of disposable income

13%

12%

Includes
government
11%
transfers

10%
Mar-80 Mar-84 Mar-88 Mar-92 Mar-96 Mar-00 Mar-04 Mar-08

Source: Bureau of Economic Analysis. Data as of 3/31/2009.
CONFIDENTIAL

12
People can tell the difference between earned and unearned income
Retail sales, billions
$380

$360

$340

$320

$300

$280

$260
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Census Bureau. Data as of 5/31/2009.
“Income quality”: government transfer
payments as % of personal income
Percent
18%

16%

14%

12%

10%

8%
CONFIDENTIAL

6%
1960 1966 1972 1978 1984 1990 1996 2002 2008
Source: Bureau of Economic Analysis. Data as of 4/30/2009. 13
On commercial real estate

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CONFIDENTIAL

14
On commercial real estate
Forced sales Office fundamentals worsening Faster price declines vs 1990-91
down 50%-
60% from
6% 0%
peak prices
Office occupancy -5%
4%
1540 Bway
-10% 1989 Peak
2%
-15% 2008 Peak
0%
-20%
-2%
-25%
-4% Office employment
-30%
-6% -35%
JH Tower
-8% -40%
-10%
0 4 8 12 16 20 24 28
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Quarters from peak

New orders (sq ft) down 50% y/y % of loans in special servicing
70 Pine St.

WW Plaza
(no bid)
CONFIDENTIAL

Source: NCREIF, JPMorgan, Moody's, Zelman Associates. Data as of 4/30/2009.

15
Hotel California

Hotel net operating income during recessions
Change in NOI*

5%

2008
-5%

-15%

2009
-25%

-35%

-45%
2010

-55%
1937- 1944- 1948- 1953- 1957- 1960- 1969- 1973- 1980- 1990- 2000- 2008-
1938 1945 1949 1954 1958 1961 1970 1975 1982 1991 2003 2010

Note: *Before deductions for capital reserve, rent, interest, income taxes, amortization, and depreciation.
Source: PKF Hospitality Research.
CONFIDENTIAL

16
Portfolio speedometer

Portfolio Risk Speedometer
CONFIDENTIAL

17
The global stimulus machine is helping: after a seizure in Q4/Q1, orders are
picking up

JPMorgan Global Purchasing Managers’ Index: orders to inventory
Ratio, sa
1.3

1.2

1.1

1.0

0.9

0.8

0.7

0.6
1998 2000 2002 2004 2006 2008

Source: J.P. Morgan Securities Inc. Data as of 5/31/2009.
CONFIDENTIAL

18
Many businesses over-retrenched
Example: Japanese car sales and production

Japanese vehicle production and sales, YoY
Percent
30%

15%

0%

-15%

Vehicle Sales fell 30%
-30%

-45%
Vehicle Production fell 55%

-60%
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Source: Bloomberg. Data as 5/31/2009.
CONFIDENTIAL

19
Europe: conviction that stimulus is going to work
(even if it’s not working yet)

Euroland Business Surveys and Economic Sentiment

100

80
Economic Sentiment

60

40

20

0

-20

-40

-60

Survey on Current
-80
Economic Conditions
-100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Bloomberg. Data as of June 2009.
CONFIDENTIAL

20
Equity valuations have excised the last 15 years of over-enthusiasm

Synergies, globalization and productivity premiums unwound
Price-to-tangible book value, 1,500 largest stocks Replacement Cost Ratio, and Market Cap-to-GNP
2.0
7

6

1.5
5 Equity market
Replacement
cost ratio (RHS)
4 March 2009
1.0
3

2 Market Cap
0.5
to GNP (RHS)
Price-to-tangible May 2009
1 book value (LHS)
June 2009

0 0.0
1950 1957 1964 1972 1979 1986 1994 2001 2009

Source: Empirical Research Partners; Federal Reserve; DataStream; J.P. Morgan Securities Inc. Price-to-tangible book value
as of June 2009. Replacement cost ratio as of March 2009, and Market cap-to-GNP as of May 2009.
CONFIDENTIAL

21
How optimistic are equity markets for 2009 and 2010? Not very

S&P earnings, actual vs. current constituents

$100
$88
$90 $83
$80 -15%
$68 $67
$70 +18%
$58
$60
$50
$50
$40
$30
2006 S&P 2007 S&P 2008 S&P 2009 2008 current 2010 estimate
earnings earnings earnings consensus constituents
earnings

Source: Standard & Poor’s, Compustat, First Call, Bloomberg.
CONFIDENTIAL

22
Probably the most consistent connection between any two market variables:
labor costs and profits

U.S. corporate profits YoY vs. Unit labor costs YoY
Nonfinancial Corporate Profits, YoY Unit Labor Costs (3Q lag, YoY), INVERTED
70% -9%

Corporate -7%
50% Profits (LHS)
-5%

-3%
30%
-1%

10% 1%

3%
-10%
5%

7%
-30%
Unit Labor Costs (RHS) 9%

-50% 11%
1948 1953 1959 1964 1970 1975 1981 1986 1992 1997 2003 2008

Source: Haver, BLS. Data as of 3/31/2009.
CONFIDENTIAL

23
Mattress money
Money market funds NYSE margin balances
Trillions Billions
$2.0 $400
Prime
$1.8
$1.6 $300

$1.4
$1.2 T-bills $200
$1.0
$0.8 $100
Jun-08 Sep-08 Nov-08 Jan-09 Apr-09 Jun-09 Jan-98 Oct-00 Jul-03 Apr-06 Jan-09
Source: Money Fund Analyzer, a service provided by iMoneyNet. Source: Bloomberg. Data as of 4/30/2009.

Undrawn private equity capital: $1 trillion
Billions
$ 500 $472
$45 Asia
$ 400
$165
$ 300 Europe
$196
$ 200 $262 U.S. $138
$ 100 $209

$0
CONFIDENTIAL

B uyo uts Real Estate Venture Other P E

Source: Preqin. Data as of January 2009.

24
Market inflection points, unemployment and recessions
S&P 500 Index (LHS) Unemployment Rate (RHS)

July 1953 – May 1954 August 1957 – April 1958 April 1960 – February 1961

180 7% 160 7.5% 140 7.5%
160 6% 140 6.5%
120 6.5%
140 5%
120 5.5%
120 4%
100 5.5%
100 4.5% October 1960
100 3% December 1957
August 1953
80 2% 80 3.5% 80 4.5%
-18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18

December 1969 – November 1970 November 1973 – March 1975 January 1980 – July 1980

150 6% 175 9.5% 145 8%

150 8.5% 125
130 5% 7%
7.5%
125 105
6.5% March 1980
110 4% 6%
100 85
June 1970 September 1974 5.5%
90 3% 75 4.5% 65 5%
-18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18

July 1981 – November 1982 July 1990 – March 1991 March 2001 – November 2001

170 11% 145 7.5% 145 6.0%
135 7.0% 135 5.5%
150 10% 125
125 6.5% 115 5.0%
130 9%
115 6.0% 105 4.5%
110 8% 95
105 5.5% 4.0%
July 1982 85
October 1990 September 2001
90 7% 95 5.0% 75 3.5%
-18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18
CONFIDENTIAL

-18 -14 -10 -6 -2 2 6 10 14 18

Source: Ibbotson. It is not possible to invest directly in an index.
Past performance is no guarantee of future results.

25
“Riding the Tiger”: investing during the biggest lab experiment in the history
of modern economics

• “Other People's Mistakes”

• “Credit”

• “Reflation investments”

• “Asia”
CONFIDENTIAL

26
Other people’s mistakes

• Secondary private equity
– The endowment implosion

• Distressed sellers of oil & gas properties
– “Probable” and “possible” reserves now selling for close to nothing

• Debtor-in-possession financing to bankrupt companies
– Pricing in the range of Libor + 8%-10%

• The pending collapse of $900 billion in commercial mortgage backed
securities market
– Our CMBS manager estimates that their portfolio has an effective cost
basis of 33% of the original price, and targets mid-teens returns
CONFIDENTIAL

27
CREDIT: capital gains prospects diminishing, as inflows swamp credit funds of
all kinds ($70 bn YTD in HG and HY)

Convertible bonds Leveraged loans
S&P LSTA Leveraged Loan Price index, level
100 ML convertible bond total return index, 105

95 6/1/2008=100
95
90
85 85
80
75
75
70
65
65
60 55
Jun-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

Investment grade bonds High yield
Spread to Treasury, bps JPMorgan Domestic High Yield spread, bps
600 2,000

550 1,800
500
1,600
450
400 1,400
350 Fair value has been 1,200
300 reached
1,000
250
200 800
150 600
Dec- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Dec- Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- Jun-
07 08 08 08 08 08 08 09 09 09 07 08 08 08 08 08 08 09 09 09
CONFIDENTIAL

Source: Bloomberg, J.P. Morgan Securities Inc. Data as of 6/24/2009. Note: Actual client experiences may vary.
Note: Green dots represent buying program.
28
Reflation investing: timing is everything

Peak to trough on oil prices
WTI spot price
Daily execution levels on structured oil notes
$150
$70

$130 $60

$50

$110
Sell $40
recommendation
$90
on energy $30
Nov-08 Dec-08 Mar-09 Apr-09

$70

$50
Purchase of oil
structures and ETFs
$30
Apr-08 Jul-08 Oct-08 Jan-09 Apr-09

Source: Bloomberg. Data as of 6/24/2009.
CONFIDENTIAL

Note: Actual client experiences may vary.

29
Asia: re-entering after cutting risk in November of 2007

MSCI Asia ex-Japan
Index level
700 Peak-to-Trough: -66%
Peak-to-Today: -45%
Trough-to-Today: +63%
600

500

400

300

200
Nov-06 May-07 Nov-07 May-08 Nov-08 May-09

Source: Bloomberg. Data as of 6/24/2009.
Past performance is no guarantee of future results. It is not possible to invest directly in an index.
CONFIDENTIAL

30
Asia: while valuation premiums have rarely been maintained above the U.S.,
times are changing

Asia valuations vs. U.S.
12 month forward PE Asia can afford
25
stimulus
MSCI U.S.
23 Undervalued
exchange rates
21
Increasing inter-
19
regional trade
Higher expected
17
profits growth
15 Banking systems in
better shape
13
No more balance of
11
payments overhang
due to development
9 of domestic capital
MSCI AC Far East ex-Japan markets
7
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Source: MSCI, FactSet. Data as of 5/31/2009.
Past performance is no guarantee of future results. It is not possible to invest directly in an index.
CONFIDENTIAL

31
The new normal

Balanced portfolio
• The aftershocks from this cycle will
take a long time to play out

• Set the speedometer below normal,
Cash & Core
but not at zero
fixed income
23% Equities and long – Fed committed to fighting deflation
biased first, inflation later
hedge funds
Absolute return 36%
hedge funds &
Private Equity
• Evaluating this cycle with a typical
15% “business cycle” lens ignores
Credit and generational changes in public sector
Commodities, credit hedge finances, household balance sheets,
FX & Inflation funds
12% 14% and the shift underway from a world
linked to U.S. consumption

The model portfolio can be implemented across brokerage or managed accounts depending on the unique objectives of each client and is serviced through distinct legal entities
CONFIDENTIAL

licensed for specific activities. Bank and trust services are provided by JPMorgan Chase Bank, N.A. Investment management services are provided by JPMorgan Chase Bank, N.A.,
and their affiliates. Brokerage and trading activities are provided by J.P. Morgan Securities Inc., Member FINRA, NYSE, and SIPC. Not all investments ideas referenced are suitable
for all investors.

32
CONFIDENTIAL Appendix

34
On the monetary base, money multipliers and the velocity of money

Tracking current monetary & fiscal policy vs. the 1970s
Percent
120
Monetary base
1970s
100 expansion 4x
Current
larger and
80
growing

60 Fiscal
expansion
Money
40 9x larger
Spare capacity multipliers not
2x larger picking up…
20
yet

0
Cumulative output gap Change in monetary Change in M2 Trough to peak public
base debt/GDP
Source: Federal Reserve, OMB, J.P. Morgan Securities Inc. For the 1970's: output gap, monetary base and M2 from Sep-74 to
Mar-78, Current: output gap and debt/GDP estimated through 2013.
CONFIDENTIAL

35
Escape from New York

ESCAPE FROM NEW YORK ESCAPE FROM NEW YORK, II
PERSONAL sales, property and income taxes per CORPORATE income taxes per capita
capita (state + local), in thousands
$500 New York
$5.5
New York $450
$5.0 NH
CT $400
$4.5
$350 DE
$4.0 MA MA
HI $300 WV NJ CA
$3.5 CA WY $250
$3.0 NJ
$200
$2.5 $150
$2.0 DE $100
$1.5 SPENDING per capita, in $50 SPENDING per capita, in
thousands thousands
$1.0 $0
$6 $7 $8 $9 $10 $11 $12 $13 $6 $7 $8 $9 $10 $11 $12 $13

Source: The Public Policy Institute of New York State, Inc. Data as of 2006.
CONFIDENTIAL

36
Rates and refi activity

As mortgage rates continue to rise, refinancing boom is sputtering
Weekly mortgage refi applications, SA Percent
8,000 6.5%

7,000
MBA Refinancing Index (LHS)

6,000 6.0%

5,000

4,000 5.5%

3,000

2,000 5.0%

1,000 30-Year Mortgage Rate (RHS)

0 4.5%
Oct-08 Dec-08 Feb-09 Apr-09 Jun-09

Source: Bloomberg. Data as of 6/19/2009.
CONFIDENTIAL

37
Rates of change will show huge improvements, but levels don’t
Japanese industrial production, MoM
Percent
5%

0%

-5%

-10%
1979 1984 1989 1994 1999 2004 2009
Source: Bloomberg. Data as of 4/30/2009.

Japanese industrial production, levels
Index, SA
110

100

90

80

70

60
CONFIDENTIAL

1979 1984 1989 1994 1999 2004 2009
Source: Bloomberg. Data as of 4/30/2009.

38
The term asset-backed securities market

Asset backed securities issuance volumes have essentially gone to zero
Total quarterly issuance, billions
$300
Manufactured Housing
Equipment
$250 Other
Non-U.S. Residential Mortgages
Student Loans
$200
Credit Cards
Autos
Commercial Real Estate
$150
Home Equity (Subprime)

$45bn
$100

$50

$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: J.P. Morgan Securities Inc. Data as of 6/22/2009.
CONFIDENTIAL

39
Labor market conditions are extremely weak

U.S. average weekly hours worked
Hours
39 Share of people who have run out of
state unemployment insurance, SA

38

37

36

35

34

33
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009

Source: Bloomberg, J.P. Morgan. Data as of 5/31/2009.
CONFIDENTIAL

40
A barometer of diversification adds to the debate as well

The correlation of equities around the world has reached a new record

Source: International Strategy & Investment.
CONFIDENTIAL

41
Currencies

Long dollar-short euro exposure
Dollars per euro
$1.60

$1.55

$1.50 Purchased USD
hedges and long
$1.45 USD structures

$1.40

$1.35

$1.30
Exit 2
$1.25 $ Appreciating
Exit 1
$1.20
Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09
Source: Bloomberg. Data as of 6/24/2009.
Note: Actual client experiences may vary.
CONFIDENTIAL

42
Important information

IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not J.P. Morgan Securities Inc. may act as a market maker in markets relevant to
provide tax advice. Accordingly, any discussion of U.S. tax matters structured products or option products and may engage in hedging or other
contained herein (including any attachments) is not intended or written operations in such markets relevant to its structured products or options
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Insurance Corporation (FDIC), the Federal Reserve Board, or any other
marketing or recommendation by anyone unaffiliated with JPMorgan
governmental agency.
Chase & Co. of any of the matters addressed herein or for the purpose of
avoiding U.S. tax-related penalties. In discussion of options and other strategies, results and risks are based solely on
hypothetical examples cited; actual results and risks will vary depending on specific
Each recipient of this presentation, and each agent thereof, may disclose to any circumstances. Investors are urged to consider carefully whether option or option-
person, without limitation, the U.S. income and franchise tax treatment and tax related products in general, as well as the products or strategies discussed herein
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as the materials relate to a U.S. income or franchise tax strategy provided to such of the “Characteristics and Risks of Standardized Options” booklet, please contact
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