G&F

• Hits the point that if you believe in normal US recovery and rate increases sooner
than later while at the same time BOJ will ease further to prevent deflation, then you
should be long Japan exporters since JPY will weaken vs. US$ and Japan equities are
relatively cheap at 1.1x P/B vs. US @ 1.8x P/B
o Doubts that US raises rates in 2010
o Doubts that consumer driven economy recovers at all
• Think any tightening in China will be superficial/incremental and not aggressive
• Mortgage modification is a failure with < 5% of mortgages under review since Mar-
09 modified (30k / 760k) and foreclosure rate up to 4.47% now

GBD
• Income disparity between rich/poor is escalating quickly
• Thins Obama will do something populist prior to 2010 elections like raising corporate
tax rate which is now ~17.5%
• Stock market gains from hereon should be moderate at best, but we could run near
term to 1250-1300 and then pullback to current levels
o 70% of current volumes driven by algorithmic trading
o If bonds strengthen and $ continues to bounce back, stocks will do badly
o Bears @ 3 year low of 15.6% which is a contrarian indicator
• US$ strength in 1H 2010 => S&P 500 could outperform EM
• Nikkei bear market coming to an end with JPY weakness

Qing Wang
• China PMI up 1.4 to 56.6
o New orders up to 61 & production @ 61.4 both up 1-2 points m/m
o Employment down for second m/m to 51.5 from 53.5 in Oct
o Raw material of computer equipment at critically low level with 0 inflation
o Thinks it will oscillate around 55 through 2010
• Prices paid up 3.3 to 66.7 implying inflationary pressures
o MS (QW)’s CIT tracker indicates that the CPI and PPI inflation prints in
December 2009 may have been 1.6% YoY (vs. 0.6% in November) and 1.9%
YoY (vs -2.1% in November), respectively
o Industrial inflation >> Ag & food inflation but fish, eggs and grain have made
big moves in last 5 weeks of Dec
• Only 3 industries < 50 (smelting & pressing of non-ferrous, chemical, plastic &
rubber, tobacco processing @ 44.5)
o Tobacco inventories still too high too

Realpoint tracker for Dec-09

• CRE delinquencies m/m accelerated to $37.9BN or 4.7% of outstanding (Of the
$5.4BN increase, $3.5BN from 1 deal – Extended Stay Hotel)
o 30-day delinquencies shot up in Nov-09 m/m from ~$7 BN -> $9BN, 90-day
flattening around $15BN
 o Multi-family loans topped retail as the worst property category with 6%
delinquency rate to $9BN
o Understated by special servicing of loans now up to $65.8BN or 8.2% of total
CMBS pool, with a $7.5BN increase in Nov-09 alone incl. Cooper Town/Stuv
Village of $3BN
• Retail @ 32%, MF @ 23%
• Think it goes to 50-60BN by mid-2010 which on ~$800BN unpaid CMBS pool =>
6.5-7.5% delinquency rate
• Baloon default risk @ maturing rising with inability to refi
o With 60%+ of special serviced & delinquent mortgages of the 2006 and 2007
vintage and typically 5 year terms => this becomes critical in 2011 and 12
• Retail & Hotel sectors should continue to suck in 2010
• If Cooper Town / Stuv village were to default, it could catalyze a load of other special
servicing defaults and color market perceptions around refi risk

CLSA
• Japan is their best bet for 1Q. Below are their ideas
We launched our CLSA model portfolio on 24 July 2009 with our report Reality shows. Our
portfolio since inception has gained 3.58%, outperforming the index by 3.97%. We recently
applied various changes to our model portfolio: We removed mostly domestic names like
Astellas (4503 JP - ¥3,480 - N-R), FamilyMart (8028 JP - ¥2,780 - BUY), Nitori (9843 JP -
¥6,940 - N-R), Yamada Denki (9831 JP - ¥6,320 - NR), Rakuten (4755 JQ - ¥71,100 - N-R),
Sumitomo Rubber (5110 JP - ¥806 - BUY) and JR West (9021 JP - ¥314,000 - O-PF), while
we added Hoya (7741 JP - ¥2,490 - BUY), Fujitsu (6702 JP - ¥601 - BUY), Toshiba (6502 JP
- ¥513 - BUY), Bridgestone (5108 JP - ¥1,637 - BUY), Asahi Breweries (2502 JP - ¥1,731 -
O-PF), Kyocera (6971 JP - ¥8,310 - BUY), JR East (9020 JP - ¥5,920 - BUY), Fast Retailing
(9983 JP - ¥17,760 - O-PF) and Asahi Glass (5201 JP - ¥885 - BUY).
• Morten Paulsen visited NE China and thinks that Chinese manufacturers are slowly
changing mindset towards automation esp. in auto -Fanuc, THK, Yaskawa and NSK
are well positioned there

Cleveland
• Heavy-duty truck outlook for 2010 negative – Sales up 8% vs. companies consensus
@ 20%+
• Airfreight capacity shortages – Only 46% saying air capacity available in Oct vs. 65-
70% in prior October and 90% and 81% in Jul-Aug