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Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.

Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com

The Dow surfaced with a gain of 0.1% after a choppy trading session, while the S&P 500 and Nasdaq Morning Markets Briefing
each lost 0.3%. The energy sector weighed on the market as oil dropped below $77 a barrel after an
unexpected jump in U.S. crude supplies. Gold fell more than $5 to $1,234 an ounce. New home sales
Market Commentary: June 24th, 2010
collapsed to a record low in May, falling 33% from April’s annual pace of 504K sales to an annualized
300K, which is the lowest rate since at least 1963. Economists had expected a much higher rate of A snapshot of the markets through the
430K. Given the huge drop in sales, it’s no surprise the supply of homes for sale surged to 8.5 months lens of ConvergEx.
from 5.8 months in April. As expected, the Fed left policy rates unchanged near zero and retained the
“extended period” language in the minutes from its latest FOMC meeting.

Nikki Sixx and Barbara Bush – NYT Best Sellers as Economic Indicators

Summary: In our seemingly never-ending search for new economic indicators, today we look at what Americans like to read at major turning points in the equity markets.
With the help of archived copies of The New York Times nonfiction bestsellers list, we looked at 12 (six highs and six lows) turning points in the S&P 500 from 1973 to the
present day. The most telling category is inspirational/self help books, which grow much more popular at market lows. There are three books currently on the list that fit
that bill, equal to the average number at previous market bottoms. A bullish sign if you are inclined to look for them, but a bit worrisome for us given the market’s run
from the March 2009 lows. In the same vein, books on politics and public policy seem to grow more popular at slack points in the market, and the current list has two
such offerings, in line with prior market lows. As a more general point, if you want to want to make big as a nonfiction writer, better stick to history and biography. Over
any economic cycle since the 1970s, that’s what sells. Who says Americans aren’t interested in the past?

What do Nobel Prize winner Aleksandr Solzhenitsyn, rocker Nikki Sixx of Motley Crue, and former First Lady Barbara Bush all have in common? They are all New
York Times bestselling authors. Since 1942 the Times has published a weekly list of top selling fiction and nonfiction books, making and breaking thousands of authors in
the process. While susceptible to occasional manipulation, the NYT bestsellers list is still the prize most commercially-aware authors would most dearly like to win.

Since the list is a reflection of popular trends, I wondered if the types of nonfiction books people like to read varies with the economic cycle. Would people flock
to the bookstores to read bleak portrays of Soviet gulag life during market bottoms? Well, if you look at the list for October 1974 – a market low – you will find
Solzhenitsyn’s masterpiece The Gulag Archipelago at #7. And when things are rocking along at new highs, even Nikki Sixx of the Crue can get a book on the list. His
Heroin Diaries was also #7, but at the week of a market high (apologies for the pun) in October 2007.

Market Commentary – Pages 1-3, Equities/Conferences & Earnings – Page 4, Fixed Income – Page 5, Options – Page 6, Exchange-Traded Funds/Indexes – Page 7, Social
Media & Internet Blogs Top Stories – Page 8
Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com

In fact, looking at 12 market turning points, there are some noticeable correlations between high and low periods for equities (and the economy) and what
kinds of books sit on the NYT bestsellers list. In the accompanying tables, we show 6 market peaks and 6 market troughs along with the types of books on the list. I’ll
be the first to admit that there is some subjectivity in how we categorized things. Is Alan Greenspan’s #1 bestseller for October 2007 (yes, Alan and Nikki appear on the
same best sellers list) “history” or “business?” Yes, we know his critics would probably try to categorize it as “humor.” We chose “business.”

Even with this ad hoc approach, it seems like some categories really do sell better in down markets.

• The most noticeable category is “Inspirational and Self Help,” where there are an average of three such books on the list during bad times. That compares to
2.5 such offerings when markets have had a good run. That makes sense – lean economic times cause a lot of stress and readers are looking for advice on how
to deal with their problems.
• Book on policy and politics also rise in the ranks during market lows. Presumably readers want understand what errors were made by government that put
the economy on the wrong track.
• The area that suffers most during bad times in the stock market is History/Biography. Contrary to popular belief, people do not seem to wax nostalgic
during low points in the economy. When times are good, fully half of the 15-book bestsellers list is in this category. But when things have been running off the
rails for a while and the market has been performing poorly, readers seem to focus on the “here and now” of self help and political analysis.

So where do we stand right now by this “NYT Bestseller as economic indicator?” Well, the market may not be on its lows, but the NYT list reads more like a market
bottom than something indicative of a further rally. Consider the following points:

• There are three self help books circulating through the list at the moment. The Times has made the bestsellers list a lot more real-time in recent years, so
comparisons to the old school once-a-week-on-Sundays format are not precise. Still, Outliers, Change Your Brain, Change Your Body and The Upside of
Irrationality are selling very well. As we mentioned, three self help books in the top 15 is a sign of a market low.
• Politics and Policy books are very popular. Newt Gingrich’s To Save America has been selling especially well, but The Promise is also in the top 15. Again,
this interest in policy is usually more a sign that Americans are ill at ease with the political landscape.

Let’s be clear – this is meant to be a little food for thought, rather than a multi-course meal of analysis. While the current NYT bestsellers list does strike me as
something more in line with a population doubting of its political leadership and looking for consolation, the historical perspective of looking through these lists reminds
me that “It was ever thus.” Economic cycles repeat because people repeat the same boom and bust behaviors. And, they pick up self help/inspirational books in the
down times, and switch over to a memoir when things are looking up. Look at the bright side: Americans do, in fact, love to read history. Whether the bulls or the bears
rule the Street, we like nothing more than a good biography or historical tale.

Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com

1/11/1973 8/25/1987 7/17/1998 3/24/2000 10/9/2007 4/23/2010 Total
Autobio/Bio/History 4 7 11 12 8 3 45
Finance/Money 1 1 2 1 0 3 8
Humor 0 0 0 1 0 2 3
Inspirational/Self Help 5 2 1 1 2 4 15
Policy/Politics 0 1 0 0 4 3 8
Other 0 4 1 0 1 0 6

10/3/1974 8/12/1982 12/4/1987 12/8/1994 10/9/2002 3/9/2009 Total
Autobio/Bio/History 4 5 6 5 11 5 36
Finance/Money 2 0 2 0 1 2 7
Humor 0 1 1 2 0 1 5
Inspirational/Self Help 2 7 4 2 1 2 18
Policy/Politics 1 1 1 2 2 3 10
Other 1 1 1 4 0 2 9

Current Bestsellers vs. Average from Lows/Highs

6/23/2010 Avg Lows Avg Highs
Autobio/Bio/History 7 6.0 7.5
Finance/Money 1 1.2 1.3
Humor 1 0.8 0.5
Inspirational/Self Help 3 3.0 2.5
Policy/Politics 2 1.7 1.3
Other 1 1.5 1.0

Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com


ADBE dropped 7.3% after forecasting third quarter revenue as low as $950 million, versus analysts’ estimates for $962 million in sales. PM (+3.3%)
increased its 2010 profit forecast by as much as 17 percent, citing improving markets and price increases. RAD (+5.0%) posted a first quarter loss of 9
cents a share, beating the average analyst estimate of 14 cents a share. Telecom shares advanced after Credit Suisse raised the sector to “Market
Weight” from “Underweight,” with S (+4.6%) as its top pick.

Important Earnings Today (with Estimates) From… S&P Futures

ƒ ACN: $0.69 ƒ MLHR: $0.18 One Day (High – 1097.75; Low – 1080.25):
ƒ CAG: $0.40 ƒ LEN: $-0.01
ƒ DFS: $0.11 ƒ MKC: $0.44
ƒ FINL: $0.15 ƒ ORCL: $0.52
ƒ HRB: $2.04 Source: Bloomberg

Important Conferences/Corporate Meetings Today:

Deutsche Bank Industrials Conference – Chicago, IL
Wells Fargo Securities Healthcare Conference – Boston, MA
Dell, Inc. Analyst Meeting – Austin, TX

Prior Day SPX (High – 1099.64; Low – 1085.31; Close – 1092.02): Three Day (High – 1129.50; Low – 1080.25):

Source: Thomson ONE
Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com


Treasuries rose Wednesday, pushing 2-year note yields to the lowest this year and 10-year yields to a 52-week low, as new home sales plunged and the
Fed indicated the European debt disaster could harm America’s economic recovery. The Treasury’s $38 billion auction of 5-year securities drew a higher-
than-forecast yield of 1.995 percent. Coverage was 2.58 times – lower than the average of 2.65 times over the past 10 offerings. Indirect bidders
purchased 34.6 percent of the notes in what was the lowest level since April 2009.

Source: Bloomberg Source: Bloomberg

Today’s Important Economic Indicators/Events:

ƒ Durable Goods Orders: -0.5%
ƒ Jobless Claims: 465K
ƒ EIA Natural Gas Report

Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com

SPX – The S&P traded in a fairly tight range of +0.4% to -0.9%, ending little changed at -0.3 % on the day. The usual contraction in implied volatility in option premium
did not occur with this subdued trading, with the VIX little changed most of the day. Given the generally heighted current levels of implied volatility, this would likely
indicate a residual level of uncertainty, forecasting expectations future price movements will be more volatile than today’s muted activity. Trading in the index options
was also very light today. One interesting trade was in August, where the 990/1030/1070 put butterfly was bought 2,000 times.

ETFs - With the market hovering around even and volatility muted, total option volume was depressed. With new home sales out Wednesday morning we saw bearish
activity in XHB with volume running roughly 4x the usual and expected volatility up about 5 points; Investors were focused on the Sep 15, Aug 15 and Aug 16 puts. Across
the rest of the ETF space we saw a mixed bag of trading with sellers emerging in EFA, FXI and IWM. In EFA an investor sold 12,500 Dec 45 puts, in FXI we saw a seller of
10k Jul 40 puts delta neutral and in IWM we saw a roll of 12,500 short Jun 63(quarterly) puts into the Jul 63 puts. In financial name XLF, we saw a buyer of 17,500 Aug
14/12 put spreads which was financed through the sale of 17,500 Aug 16 calls. Lastly, we noted flow in GLD with investors buying 7700 Jul 110 puts.


Rank 6/17/2010 6/18/2010 6/21/2010 6/22/2010 6/23/2010 30-Day Implied Vol
2 PBCT KG KG MIL KG 56.13 Top 10 30-Day Implied Vol Bottom 10 30-Day Implied Vol
FTR 29.49% 27.82 PKI -65.24% 27.89
5 UNH DGX DGX DV UNH 30.10 XL 24.37% 32.61 ADBE -30.13% 29.05
6 FDO WIN WIN DF PBCT 28.59 IBM 22.14% 16.10 PPL -25.77% 41.66
CNP 19.95% 28.52 JBL -25.76% 36.57
9 CVH APOL APOL LEN QCOM 31.28 GE 19.17% 32.42 PNW -24.98% 30.03
10 DGX NOVL NOVL RSH CVH 39.07 MCK 17.93% 28.07 RHT -19.63% 26.21
WIN 17.40% 23.82 EFX -9.95% 28.39
13 SAI CFN CFN CVH WIN 29.68 PCS 15.51% 40.58 BBBY -6.85% 38.98
14 MO FTR FTR Q DPS 30.93 AEE 14.91% 23.72 CPWR -6.09% 44.76
MKC 13.88% 28.13 S -5.99% 54.10
16 STJ MO MO LXK MOT 33.15
20 HUM HUM HUM SAI APOL 59.74 We ranked the S&P 500 companies from the highest to lowest 30 day implied to
21 AIG AIG AIG EFX CI 32.67 historical volatility ratio. Above we identify the 10 most positive and negative
22 GS CI CI DRI DRI 36.28 movers.
23 HSY Q Q MOT Q 24.59
The table to the left represents the 25 highest 30 day implied to historical
volatility ratios within the S&P 500 companies. The green represents names
BAX SWY RHT, STJ, CI, HUM new to the list while the red represents names that have fallen out.
Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com

Exchange-Traded Funds/Indexes

Prior Day Peformance of Largest ETFs by Assets S&P 500 Sector ETFs
Name (Net Assets*) Ticker Category Daily Return Sector Ticker 1-Day Perf YTD Perf Sector Ticker 1-Day Perf YTD Perf
SPDRs (66.71B) SPY Large Blend -0.28% Energy XLE -0.76% -6.23% Telecomm IYZ 0.97% -1.20%
SPDR Gold Shares (38.54B) GLD N/A -0.41% Health XLV -0.41% -6.24% Technology XLK -0.36% -4.49%
iShares MSCI Emerging Markets Index (36.02B) EEM Diversified Emerging Mkts -0.26% Industrials XLI -0.38% 5.11% Consumer Discretionary XLY -0.06% 5.78%
iShares MSCI EAFE Index (33.64B) EFA Foreign Large Blend -0.67% Utilities XLU -0.89% -7.06% Financials XLF -0.45% 0.76%
iShares S&P 500 Index (20.86B) IVV Large Blend -0.35% Consumer Staples XLP 0.65% -0.11% Materials XLB 0.20% -7.70%
*As of January 31, 2010
Prior Day Top Volume ETFs Currency ETFs
Name Ticker Category Shares Traded Currency Ticker 1-Day Perf YTD Perf Currency Ticker 1-Day Perf YTD Perf
SPDRs SPY Large Blend 231,309,352 Australian Dollar FXA 0.08% -2.86% Mexican Peso FXM -0.91% 3.44%
Financial Select SPDR XLF Specialty - Financial 106,435,432 British Pound Sterling FXB 0.98% -7.60% Swedish Krona FXS 1.48% -7.98%
iShares MSCI Emerging Markets Index EEM Diversified Emerging Mkts 86,320,353 Canadian Dollar FXC -0.91% 1.00% Swiss Franc FXF 0.18% -6.44%
PowerShares QQQ QQQQ Large Growth 81,050,629 Euro FXE 0.25% -14.15% USD Index Bearish UDN 0.36% -9.51%
iShares Russell 2000 Index IWM Small Blend 62,631,576 Japanese Yen FXY 0.52% 3.39% USD Index Bullish UUP -0.40% 8.28%
Prior Day Top Performers VIX ETNs Fixed Income ETFs
Name Ticker Category Daily Return Name Ticker 1-Day Perf YTD Perf Bonds Ticker 1-Day Perf YTD Perf
PowerShares DB Crude Oil Dble Short ETN DTO Bear Market 4.85% iPath S&P 500 VIX VXX 0.79% -21.63% Aggregate AGG 0.25% 3.38%
UltraShort DJ-UBS Crude Oil ProShares SCO Bear Market 4.74% Short-Term Futures ETN Investment Grade LQD 0.42% 3.45%
GlobalShares FTSE All-World GSW N/A 3.41% High Yield HYG -0.07% -2.21%
PowerShares DB Commodity Dble Short ETN DEE Bear Market 3.26% iPath S&P 500 VIX VXZ 1.47% 12.82% 1-3 Year Treasuries SHY 0.07% 1.25%
Direxion Daily Energy Bear 3X Shrs ERY Bear Market 3.02% Mid-Term Futures ETN 7-10 Year Treasuries IEF 0.37% 6.52%
20+ Year Treasuries TLT 0.68% 10.40%
ETF Ticker 1-Day Perf YTD Perf ETF Ticker 1-Day Perf YTD Perf
Gold GLD -0.41% 12.71% Crude Oil USO -2.17% -12.83%
Silver SLV -1.30% 9.92% EAFE Index EFA 0.67% -10.56%
Natural Gas UNG 0.37% -19.25% Emerging Markets EEM 0.26% -4.41%
SPDRs SPY -0.28% -1.96%

Major Index Changes:


ETFs in the Headlines and Blogs:

ƒ Gold ETF’s bullion holdings set fresh high - http://www.marketwatch.com/story/gold-etfs-bullion-holdings-set-fresh-high-2010-06-23
ƒ Emerging Markets Bank ETF Burns Up the Chart - http://www.forbes.com/2010/06/22/tuesdays-etf-movers-emfn-ptrp-marketnewsvideo.html

Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com

Top Online Social Networking Stories

Latest Popular Digg.com Business Stories:

ƒ Britain unveils ‘unavoidable’ austerity budget - http://us.cnn.com/2010/BUSINESS/06/22/uk.budget/index.html?hpt=T2
ƒ Top 10 Cities to Buy vs Rent - http://www.mint.com/blog/trends/buy-vs-rent-06222010/

Calculated Risk
ƒ Estimate of June Decennial Census impact on payroll employment: minus 243,000 - http://www.calculatedriskblog.com/2010/06/estimate-of-june-
ƒ New Home Sales collapse to Record Low in May - http://www.calculatedriskblog.com/2010/06/new-home-sales-collapse-to-record-low.html
ƒ MBA: Mortgage Purchase Applications Decrease in Weekly Survey - http://www.calculatedriskblog.com/2010/06/mba-mortgage-purchase-
ƒ AIA: Architecture Billings Index declines in May - http://www.calculatedriskblog.com/2010/06/aia-architecture-billings-index.html
ƒ How high will Existing Home Months-of-Supply increase this summer? - http://www.calculatedriskblog.com/2010/06/how-high-will-existing-home-months-

The Big Picture

ƒ What Is Driving State Budget Woes? Unemployment - http://www.ritholtz.com/blog/2010/06/what-is-driving-state-budget-woes-unemployment/
ƒ New Home Sales Plunge 33% - http://www.ritholtz.com/blog/2010/06/new-home-sales-plunge/
ƒ The Next Leg Down in Housing - http://www.ritholtz.com/blog/2010/06/the-next-leg-down-in-housing/
ƒ ECRI Weekly Leading Indicators Widely Misunderstood - http://www.ritholtz.com/blog/2010/06/ecri-weekly-leadinbg-indicators-widely-misunderstood/

Bespoke Investment Group

ƒ New Home Sales Miss by Most Since at Least 1998; Lowest Reading Ever - http://www.bespokeinvest.com/thinkbig/2010/6/23/new-home-sales-miss-by-
ƒ Ten Year Treasury Yield Hits 52-Week Low - http://www.bespokeinvest.com/thinkbig/2010/6/23/ten-year-treasury-yield-hits-a-52-week-low.html
ƒ AAPL is 20% of the Nasdaq 100 - http://www.bespokeinvest.com/thinkbig/2010/6/22/apple-aapl-is-20-of-the-nasdaq-100.html
ƒ Baltic Dry Index Down 17 Days in a Row - http://www.bespokeinvest.com/thinkbig/2010/6/22/baltic-dry-index-down-17-days-in-a-row.html

The Baseline Scenario

ƒ “Chuck Prince” Is Going to Run This Bank (Into the Ground) - http://baselinescenario.com/2010/06/23/chuck-prince-is-going-to-run-this-bank/

Economist’s View
ƒ US Ranks Last among Seven Countries on Health System Performance - http://economistsview.typepad.com/economistsview/2010/06/us-ranks-last-

Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com


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