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

com Leveling the Playing Field February 13, 2012 _______________________________________________________________________ Feels like Ive been gone for a lot longer than a week. The last time you heard from me, I was incorrectly predicting the outcome of the Super Bowl. On Monday, I was surfing Craigs List for.interest rate articles.and stumbled across this Personal Ad under the Missed Connections section: Feb 5 Indianapolis 30 (Lucas Oil Stadium) I was wide open in the seam and you threw it a little behind me. If I wasnt just 59 or had hands the size of Gronks, I would have caught it. You probably arent even the type to look on here, but Id really like to apologize to your wife in person Rates experiences one of their more volatile weeks in recent memory on the back of mixed domestic data and continued concerns over an imminent Greek default. The 10yr Treasury yield got as low as 1.91% and as high as 2.04% before closing Friday at 1.97%. Sunday night, Greece passed the latest austerity plan that should open the gates for Bailout 2.0, which has been increased in size from 130 billion to 210 billion. Greek leadership will pinkie-promise to achieve certain goals, never intending to live up to those promises. We say that because, well, thats exactly what theyve done over the last two years. Merkel agrees with us and said that Greece has far from kept its pledges. Not surprisingly, the moral hazard this bailout creates led to Ireland also asking for concessions if Greece is going to get them. Keep in mind, Ireland was not downgraded by S&P last month because of the bold measures it had taken to right the fiscal ship. But whats the point if your neighbor is going to get a bailout without any austerity measures? The S&P downgraded 34 of 37 banks and said we anticipate persistently weak profitability for Italian banks in the next few years. Before we point and snicker, the S&Ps Chambers said the US faces another downgrade if no budget plan is put into place. The Fed decided to make housing struggles a key topic last week, with four different speeches discussing the drag housing is creating on the economy. Bernanke himself said current lending practices are limiting or preventing lending even to creditworthy households and that the housing weakness could cost up to 2.5% of GDP.

In purely coincidental timing, Obama announced a $26B foreclosure deal with five leading residential lenders. Seriously. And were to believe the Fed isnt political? If you believe that, I want to sell you a swap and convince you why you dont need an advisor. $17B of that $26B is principal forgiveness, which represents 2.5% of the $700B in underwater mortgages. It should help about 1mm homeowners in this situation, but another 10mm will not qualify. LIBOR Outlook WAY less exciting than watching Gronkowski dance his face off on a shredded ankles just hours after losing the Super Bowl. Fixed Rate Outlook Entirely driven by Europe this week. Confidence in avoiding a meltdown should lead to a risk-on mentality and push long term rates higher. This Week Tremendous amount of data this week. Retail and auto sales should provide insight into overall consumer spending trends, which implies GDP trends. FOMC Minutes from the most recent meeting will be released Wednesday and should provide guidance on the Feds balance sheet. Some people are blaming Tyler Zeller for Carolinas stunning loss Wednesday against Duke, but not me. Zellers future in the NBA is bleak at best, so he took the opportunity to shave some points and cash in huge now. I cant blame him since hell never play in the NBA. If it provides for him and his family for decades to come, then more power to him.

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ECONOMIC CALENDAR
Economic Data Day Monday Tuesday 7:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 10:00AM Wednesday 7:00AM 8:30AM 9:15AM 9:15AM 10:00AM 2:00PM Thursday 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 10:00AM 10:00AM 10:00AM Friday 8:30AM 8:30AM 8:30AM 8:30AM 10:00AM NFIB Small Business Optimism Import Price Index (MoM) Import Price Index (YoY) Advance Retail Sales Retail Sales less Autos Retail Sales ex Auto & Gas Business Inventories MBA Mortgage Applications Empire Manufacturing Industrial Production Capacity Utilization NAHB Housing Market Index Minutes of FOMC Meeting Initial Jobless Claims Continuing Claims Producer Price Index (MoM) Producer Price Index (YoY) PPI Core (MoM) PPI Core (YoY) Housing Starts (MoM) Building Permits (MoM) Mortgage Delinquencies MBA Mortgage Foreclosures Philadelphia Fed. Consumer Price Index (MoM) Consumer Price Index (YoY) CPI Core (MoM) CPI Core (YoY) Leading Indicators 8.5 0.3% 2.8% 0.2% 2.2% 0.4% 1.5% 1.3% 0.1% 0.4% 358k 3515k -0.1% 4.8% 0.3% 3.0% -4.1% -0.1% 7.99% 4.43% 7.3 0.0% 3.0% 0.1% 2.2% 0.4% 14.50 0.8% 78.7% 26 0.3% 0.7% 0.5% 0.3% 93.8 -0.1% 8.5% 0.1% -0.2% 0.0% 0.3% 7.5% 13.48 0.4% 78.1% 25 Time Report Forecast Previous

Speeches and Events Day Monday Tuesday Time 9:45PM 8:45AM 5:40PM Wednesday 12:15PM 2:00PM Fed's Williams speaks Fed's Plosser speaks on Economy Fed's Lockhart speaks on Economic Outlook Fed's Fisher speaks Fed Releases Minutes from January FOMC Meeting Report Place Claremont, CA Newark, DE Sarasota, FL San Marcos, TX

Treasury Auctions Day Closing Issues Size