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SDI 2008

Econ Updates

INDEX
INDEX.................................................................................................................................1
Confidence Low...................................................................................................................2
General Econ Low ..............................................................................................................4
General Econ Good- Avoid Recession.................................................................................5
General Econ Good- Avoid Recession.................................................................................6
General Econ Good- Avoid Recession.................................................................................7
US Key To Global- US Hurting Global Now......................................................................8
Investor Confidence Low.....................................................................................................9
Investor Confidence High..................................................................................................10
They Say Alt Causes Hurt Economy Now—....................................................................11
They Say: Housing Market................................................................................................12
Housing Market Failing.....................................................................................................13
No Fiscal Discipline ..........................................................................................................14
US Dollar Stable................................................................................................................15

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SDI 2008
Econ Updates

Confidence Low
Consumer Confidence Plummeting and Will Continue To Do So
LA Times, 7/25/08
(“Feeling more upbeat on the economy? Nobody believes you”,
http://latimesblogs.latimes.com/money_co/2008/07/wall-street-des.html)
Wall Street desperately wants American consumers to be feeling better. And they are this
month, according to the latest national consumer-confidence survey by Reuters and the
University of Michigan. But the survey's overseers are advising the rest of us to pretty
much ignore the upturn in confidence, saying it most likely is the proverbial "dead cat
bounce." In other words, there's no confidence in the confidence number. The
Reuters/UofM consumer sentiment index rose to 61.2 this month from the June reading
of 56.4, which was a 28-year low. The survey's index of consumer expectations also rose,
to 53.5 from 49.2 in June. "Even after the small July gain, the overall level of consumer
confidence is dismal and still points toward declines in the pace of spending in late 2008
and early 2009," said Richard Curtin, director of the survey.

Despite Small Gains In Confidence It will Continue to Decline


LA Times, 7/25/08
(“Feeling more upbeat on the economy? Nobody believes you”,
http://latimesblogs.latimes.com/money_co/2008/07/wall-street-des.html)
Although it's possible that the uptick indicates that consumers had "overestimated the
extent of the economic damage," don't bet on it, Curtin said. "It is more likely that the
gains reflect a 'dead-cat bounce,' a phenomena that has been repeatedly observed over the
past 50 years: Following a steep decline in confidence, a small gain is recorded before
confidence resumes its downward slide," he said. (ASPCA warning: Do not try this on
cats at home.)

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SDI 2008
Econ Updates
Consumer Confidence Improved- Stimulus Checks
Bloomberg, 7/25/08
(“U.S. Michigan Consumer Index Unexpectedly Increased (Update2)”,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aevmxehX2OUQ&refer=ho
me)
Confidence among U.S. consumers unexpectedly rose in July from the lowest level since
1980, a sign that tax rebates and a rally in the stock market may have improved
Americans' moods. The Reuters/University of Michigan final index of consumer
sentiment increased to 61.2 in July from 56.4 in June. The measure averaged 85.6 in 2007
and is up from a preliminary reading of 56.6 in early July. The tax rebates are putting
extra cash in Americans' pockets, helping their budgets overcome the drag from gasoline
at more than $4 a gallon, lower home values, fewer jobs and less access to credit.
Consumer spending may falter after the lift from the stimulus fades.

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SDI 2008
Econ Updates

General Econ Low


Overall Econ Low- Been Declining for a Year- Effecting Global Econ
Reuters, 7/25/08
(“GLOBAL ECONOMY-US consumers less glum, UK growth sputters”,
http://www.reuters.com/article/bondsNews/idUSN2534246520080725)
U.S. consumer sentiment rebounded from a 28-year low but new home sales extended
their three-year slide, cementing a weak outlook for growth that was mirrored overseas.
Britain's economy edged forward at its weakest pace in three years in the second quarter,
dashing hopes that the rest of the world economy would be able to withstand a U.S.
slowdown. The mood of American consumers did improve unexpectedly, but remained at
levels that in the past were consistent with recession. The Reuters/University of Michigan
Surveys of Consumers said on Friday its final July reading of its index of confidence rose
to 61.2 from 56.4 in June. "The data still indicate an ongoing downturn in spending that
will last well into 2009," the report said. The U.S. economy has been battered over the
past year by a crisis that began in the mortgage sector but then spread to banking,
infecting financial markets with a deep sense of mistrust that has curtailed lending in
various sectors.

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SDI 2008
Econ Updates

General Econ Good- Avoid Recession


Econ Recovering- Avoiding Recession Now
The Press Enterprise, 7/25/08
(“Worry about economy eases”,
http://www.pe.com/business/local/stories/PE_Biz_S_economy26.3d65a81.html)
Orders for U.S. durable goods unexpectedly rose in June, and sales of new homes were
higher than forecast, easing concern that the economic slowdown will worsen. Factory
orders for goods made to last several years gained 0.8 percent and posted the first
consecutive monthly rise since July 2007, the Commerce Department said Friday.
New homes sold at an annualized pace of 530,000, exceeding the median forecast of
503,000. A private report showed consumer sentiment rose from a 28-year low.
Stocks rose and Treasuries fell after the reports indicated the economy accelerated in the
second quarter from the weakest pace of growth in five years. Economists had forecast
the slowdown would worsen by the end of the year as the effect of tax rebates fades and
job losses and rising prices force households to cut spending. "At the end of the day, we
are going to avoid a severe recession," said James O'Sullivan, a senior economist at UBS
Securities LLC in Stamford, Conn. The Reuters/University of Michigan final index of
consumer sentiment increased to 61.2 in July from 56.4 in June. The measure averaged
85.6 in 2007 and is up from a preliminary reading of 56.6 in early July. But some housing
analysts said they saw cause for optimism that the worst of the decline could be drawing
to a close, especially if a sweeping housing rescue package now pending in Congress can
slow a flood of foreclosures and spur sales to first-time homebuyers.

Exports Helping US Econ


Reuters, 7/25/08
(“GLOBAL ECONOMY-US consumers less glum, UK growth sputters”,
http://www.reuters.com/article/bondsNews/idUSN2534246520080725)
Moreover, the weak dollar helped boost durable goods orders 0.8 percent in June. A
proxy for business investment in that report also rose 1.4 percent, following a 0.4 percent
decline in the previous month. "Healthy demand for U.S. goods abroad has likely offset
the drag from tight credit and a weak domestic economy, sustaining business investment,"
said Ethan Harris, chief U.S. economist at Lehman Brothers.

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SDI 2008
Econ Updates

General Econ Good- Avoid Recession

US Econ Recovering
IB Times, 7/25/08
(“Dollar strengthen against the Japanese yen on better-than-expected U.S. economic data
- Jul 25”, http://www.ibtimes.com/articles/20080725/dollar-strengthen-against-the-
japanese-yen-on-better-than-expected-u-s-economic-data-jul-25.htm)
The U.S. greenback rose against the Japanese yen on Friday after release of unexpected
robust U.S. economic data which injected a dose of optimism about the U.S. economy.
This bolstered investors to shift back their assets to higher-yielding countries from Japan
and the dollar rebounded strongly from intra-day low of 106.58 (Europe) and ended
firmly to 107.85 at New York closing, near to a one month high of 107.99 set on
Thursday. The U.S. durable goods orders were up 0.8 percent in June, after a revised 0.1
percent gain in May and separate data showed sales of new homes in the United States
fell to a 530,000 annual pace last month, against market expectations for a drop to a
500,000 rate, while consumer sentiment, University of Michigan survey, recovered
unexpectedly in July (61.2) after falling in June (56.4) to the lowest level since the early
1980s. The stronger-than-expected U.S. economic data and continuing drop in oil prices
(last traded at $123.37 per barrel, its seven-week low) gave a boost for the U.S. dollar and
the single currency fell to as low as 1.5667 while British pound dropped to session low of
1.9870 before rebounding on carry trade demand versus the Japanese yen.

Economic Decline Wouldn’t Be As Bad Now


NYT, 7/27/08
(“It’s Bad, but Remember We’re Dodging the Worst”,
http://www.nytimes.com/2008/07/27/business/27every.html?em&ex=1217304000&en=2
c6c1f5053394f5d&ei=5087%0A)
There would probably not be a recession, said I. If there were, it would not be long or
deep. All that was required was for the Federal Reserve to stand by with oceans of
liquidity and assurances that it would not let anything big fail. Time has passed. The news
media are full of shrieking and wailing about the economy. But how bad is it, really? The
economy isn’t at its best. Oil prices are painfully high, foreclosures are really hurtfully
high, job growth in many areas is sluggish or worse, and a sector of the credit markets is
extremely weak. But over all, it’s not all that bad. According to the June 2008 economic
indicators from the White House Council of Economic Advisers, here is where we stood
at the end of June: There has not been one down year for the G.D.P. in this decade. There
has not been one down quarter, in inflation-adjusted terms, since 2001. It’s possible that
the G.D.P. will not show growth in the second quarter. So, by the old definition — two
straight downward quarters of G.D.P. — we cannot know if we have just entered a
recession. We’ll get to the new definition in a moment.

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SDI 2008
Econ Updates

General Econ Good- Avoid Recession

US Will Avoid Recession- Multiple Reasons


Bloomberg, 7/25/08
(“U.S. Economy: Orders Up, Home Sales Beat Forecasts”,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom
e)
Orders for U.S. durable goods unexpectedly rose in June, and sales of new homes were
higher than forecast, easing concern that the economic slowdown will worsen. Bookings
for goods made to last several years gained 0.8 percent and posted the first consecutive
monthly rise since July 2007, the Commerce Department said today in Washington. New
homes sold at an annualized pace of 530,000, exceeding the median forecast of 503,000
in a Bloomberg News survey. A private report showed consumer sentiment rose from a
28-year low. Stocks rose and Treasuries fell after the reports indicated the economy
accelerated in the second quarter from the weakest pace of growth in five years.
Economists had forecast that the slowdown would worsen by year-end as the impact of
tax rebates fades and as job losses and rising consumer prices force households to cut
spending. ``At the end of the day, we are going to avoid a severe recession,'' said James
O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut.

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SDI 2008
Econ Updates

US Key To Global- US Hurting Global Now


US Downturn Hurting Global Econ
Reuters, 7/25/08
(“GLOBAL ECONOMY-US consumers less glum, UK growth sputters”,
http://www.reuters.com/article/bondsNews/idUSN2534246520080725)
The latest news suggests the pain will not be limited to the United States. Germany's
closely watched Ifo survey of business sentiment hit a three-year-low in July.
In England, which has exhibited housing troubles of its own, the damage also had a broad
impact. Gross domestic product rose by 0.2 percent last quarter, bringing the annual rate
down to 1.6 percent from 2.3 percent in the first quarter.
Euro-zone loan growth, meanwhile, fell in June to its slowest pace since January 2006
after the economic downturn took a heavier-than-expected toll on bank lending, European
Central Bank data showed.

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SDI 2008
Econ Updates

Investor Confidence Low

Week Dollar Hurting Investor Confidence


CNN Money, 7/25/08
(“Dollar mixed as market mulls economy”,
http://money.cnn.com/2008/07/25/markets/dollar/?postversion=2008072513)
The dollar was mixed Friday as two days worth of housing market data showed continued
economic instability. The 15-nation euro bought $1.5697, up slightly from $1.5677 late in
the day on Thursday. The dollar traded at ¥107.89, up from ¥107.34. While most banks
reported second-quarter earnings that were not quite as weak as expected, there is still
concern about the strength of the financial sector. "There is still a lingering negative
sentiment regarding U.S. financials, and that is weighing heavily on investor confidence,"
said Gareth Sylvester, senior currency strategist at HIFX San Francisco. Analysts said
stock market moves also weighed on dollar sentiment. On Thursday, the Dow lost 283
points, or 2.4%, but then opened higher on Friday after news of surprise strength in June
durable goods orders. "The equity market is a barometer for the U.S. economy,"
explained Sylvester. "It is representative of the U.S. market psyche," he said, so when the
equity markets take a beating, that leads to weakness for the greenback.

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SDI 2008
Econ Updates

Investor Confidence High


Investor Confidence Increase- Oil Prices, Dollar Value
The Guardian, 7/25/08
Stocks gained in jittery trading on Friday as nagging worries about the credit crisis
shaded optimism over stronger economic data, taking much of the steam out of a U.S.
stock rally and spurring a renewed flight to save-haven debt.
The dollar rose against the yen after better-than-expected economic news and declining
oil prices bolstered investor confidence early in the session.

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SDI 2008
Econ Updates

They Say Alt Causes Hurt Economy Now—

Econ Stable Despite Multiple Problems


NYT, 7/27/08
(“It’s Bad, but Remember We’re Dodging the Worst”,
http://www.nytimes.com/2008/07/27/business/27every.html?em&ex=1217304000&en=2
c6c1f5053394f5d&ei=5087%0A)
The real question is, why are we not in worse shape, considering the blows from fuel
prices, the housing collapse, food prices and the credit crisis on Wall Street, such as it is?
(It’s confined mostly to lower-quality debt.)
As far as I can tell, there are several reasons. One is the immense size of government
expenditures. Federal outlays alone are roughly $3 trillion in a $14 trillion economy. If
you add in consumption expenditures by state and local governments, the number comes
in above $4 trillion. Second is the very large federal deficit, on the order of $400 billion.
This is highly stimulative, as was the federal stimulus package itself. Third is the truth
that the blows to the economy, while painful, are simply not enormous on a national
scale.

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SDI 2008
Econ Updates

They Say: Housing Market


Moderate Economic Growth Despite Housing Slump
Bloomberg, 7/25/08
(“U.S. Economy: Orders Up, Home Sales Beat Forecasts”,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom
e)
The Standard & Poor's 500 Stock Index gained 0.4 percent to close at 1,257.76 at 11:24
a.m. in New York. Benchmark 10-year note yields rose to 4.10 percent at 4:45 p.m. in
New York from 4 percent late yesterday. The rise in durable-goods orders compared with
the median forecast for a 0.3 percent drop in a Bloomberg News survey of 78 economists.
``It's consistent with modest economic growth,'' Mark Vitner, a senior economist at
Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Radio interview. ``It
does support the notion that GDP growth in the second quarter was pretty solid,'' he said,
referring to gross domestic product. Record exports, fueled by a weakening dollar and
economic expansions abroad, are helping U.S. factories withstand the housing slump and
slowing demand at home.

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SDI 2008
Econ Updates

Housing Market Failing


Housing Market Failing
Bloomberg, 7/25/08
(“U.S. Economy: Orders Up, Home Sales Beat Forecasts”,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom
e)
The supply of homes at the current sales rate fell to 10 months' worth from 10.4 months
in May. There were 426,000 homes for sale at the end of June at an annual pace, the
fewest since December 2004. The figure was down 5.3 percent from the prior month, the
biggest decline since November 1963. A report yesterday from the National Association
of Realtors showed existing home sales fell 2.6 percent to a 4.86 million annual rate, the
lowest level in a decade. The median home price dropped 6.1 percent from June of last
year. Concern over the ability of Fannie Mae and Freddie Mac, the largest U.S.
purchasers of mortgages, to survive the meltdown in subprime lending has heightened the
credit crisis and may push up mortgage rates and further curtail access to loans.
U.S. foreclosure filings more than doubled in the second quarter from a year earlier as
falling home prices left borrowers owing more on mortgages than their properties were
worth.

Manufacturing and Housing Continuing to Fail


Bloomberg, 7/25/08
(“U.S. Economy: Orders Up, Home Sales Beat Forecasts”,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRTRfhXyxEVc&refer=hom
e)
Pulte Homes Inc., the third-largest U.S. homebuilder, this week reported a second-quarter
loss of $158.4 million.
``We see no immediate signs of this housing downturn relenting,'' Pulte Chief Executive
Officer Richard Dugas said yesterday on a conference call with analysts.
The gains in today's durable-goods report reflected increasing demand for machinery,
metals, autos and defense gear.
The figures countered regional reports, which indicated manufacturing was weakening.
The Federal Reserve said on July 23 that manufacturing declined in ``many'' of its 12
districts in June and July. The Fed also said the economy ``slowed somewhat'' and that all
of its bank districts reported ``elevated or increasing'' price pressures.
``Manufacturers in several districts anticipated further factory weakness in the near
future,'' the central bank said in its regional economic survey, known as the Beige Book
for the color of its cover. ``While most districts expected stable capital spending heading
forward, a few noted manufacturers' plans to reevaluate based on current economic
conditions.''

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SDI 2008
Econ Updates

No Fiscal Discipline
No Fiscal Discipline Now
Tony Phyrillas 7/23/08
(Taxpayer group: No fiscal discipline in Congress, Newstex, Nexis)
Spending other people's money continues to be the favorite activity of members of
Congress, according to a new study by the National Taxpayers Union Foundation.For
every single bill introduced to save money, the House of Representatives introduced 22
bills to spend more money and the Senate introduced 30 bills to increase spending,
according to the NTUF.The study compared spending under the 109th Congress to the
Nancy Pelosi/Harry Reid-led 110th Congress.The number of House spending bills
(1,078) rose by over one-third since the last Congress, while Senate spending bills grew
by nearly 25 percent (to 745), according to the study.These people are addicted to
spending your money. They have to be stopped. You can't go wrong by voting out an
incumbent, especially the hypocritical Democrats who fooled you into voting for them in
2006.Follow the link below for more highlights from the study.

No fiscal discipline now


John Stephen 7/27/08
(“Congress fails on energy front”
http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080727/OPINION/807270
356&sfad=1)
Extending the tax credits would mean that individuals and businesses would keep $19
billion more of their money, instead of sending it to Washington. Under the House rules,
that money "loss" would have to be offset by new taxes or spending cuts. Now, no
Congress in their right mind would hike taxes in an election year, so that means that to
keep these incentives for renewable energy in place, Washington would have to do what
the rest of America is doing to meet the rising costs of energy prices — roll up our
sleeves and make tough decisions on spending. A good place to start finding savings is
the $20 billion in wasteful earmark spending stuffed into the last Omnibus spending bill.
However, instead of trying to help ease the energy crisis we are facing today, the House
would rather spend $212,000 for fruit fly research in France and nearly $2 million for
Rep. Charlie Rangel's monument to himself in New York than to support renewable
energy incentives.
The message that the House is sending is unmistakable. No new domestic oil or gas, and
no more renewable energy either. Americans will just have to get used to high energy
prices, because Washington will do nothing to increase supply, and the need for Congress
to waste more taxpayer dollars is greater than finding energy solutions.
Forget about Congress helping Americans cut their energy bills or helping businesses cut
costs by seeking sound renewable energy alternatives. The folks in Washington have got
spending to do. That's why it's time for change in Congress right now.

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SDI 2008
Econ Updates

US Dollar Stable
Dollar Stabilizing
Daily FX, 7/27/08
(“Can Dollar Rally Continue?”,
http://www.dailyfx.com/story/strategy_pieces/trade_or_fade/Can_Dollar_Rally_Continue
__1217192251506.html)
“Is the worst behind us?” we asked last week. “If crude continues to drip lower, “ we
concluded ,”it could provide yet another reason for a dollar counter trend rally.” With oil
falling below $125/bbl by end of trade Friday, the massive sigh of relief from dollar bulls
could be heard around the world. As a result, the greenback picked up more than 100
points on the euro by end of the week although the US economic data was mixed at best.
Housing continued to be a problem as Existing Homes plunged -2.6% versus -0.1%
projected and LEI data printed negative for 7th out of the past 9 months. However by
Friday US economic data actually proved supportive with U of M survey jumping back to
the 60 level and Durable Goods registering a surprise increase 0.8% versus forecasts of a
-0.3% decline. Furthermore as we noted in our Friday note, ”with markets already so
preconditioned to bad economic news from the U.S., the greenback may not weaken
much further unless the data shows substantial deterioration from the prior month."

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