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Wednesday, February 03, 2010 – my comments are in italics

• “Volcker Rules” – Dodd says that while he supports the recommendations of the former Fed chief, it
has complicated his efforts to write a regulatory overhaul bill; Dodd of Connecticut told former Federal
Reserve Chairman Paul Volcker and deputy Treasury Secretary Neal Wolin that the proposals were too
ambitious and could add to problems in getting an overall regulatory overhaul bill finished. Dodd said
the administration was “getting precariously close” to excessive ambition for the legislation. “I don’t
want to be in a position where we end up doing nothing because we tried to do too much,” NYT
• Greece - The European Commission today endorsed Greece’s deficit-reduction program (as was
widely expected) – Greek bonds rally on the news; "The positive reception from the part of the EU
reflects a recognition of the efforts the government is making," Deputy Finance Minister Philippos
Sachinidis told Reuters. Reuters

Yield on 5 Year Sovereign for Hellenic Republic Government Bond

When a bond rallies, the yield declines. This is a graph of the yield, so a rally in the bond means this yield
moves lower. As you can see from above, the yield has only come in a tad. It might be a bit premature
for Mr. Sachinidis to claim victory.

• Auto sales - US January LV SAAR slipped to 10.78MM vs. 11.25MM in December yet above
Bloomberg consensus/JPM of 10.5MM/10.2MM. The sequential drop in the Jan SAAR appears entirely
driven by retail (8.5MM in Jan from Dec’s 9.0MM), while fleet was sequentially flat. Factors such as the
Toyota recall, and poor weather could have impacted retail sales in January. comments on Toyota from
JPMorgan: Given the increasingly uncertain outlook for near-term earnings due to these recalls, we
think the stock will probably lose it traditional valuation premium. We therefore reaffirm our
Underweight rating (Kohei Takahashi)

Total US Auto Sales (Annualized and Seasonally Adjusted)

• Equities – cautious article from PIMCO’s M El-Erian on Bloomberg – “Judging from market
valuations, I sense quite a gap between consensus market expectations and key political and economic
realities, especially in the U.S… investors may well find that January’s global equity sell-off was just a
precursor to a disappointing year for several asset classes, including stocks” – to be fair, he has been
seeing this ‘gap’ for quite a while now. Eventually he will be correct. But the length of time a markets
can remain irrational is often measured in decades.