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

com Leveling the Playing Field December 19, 2011 _______________________________________________________________________ As always, our last newsletter of the year is the much anticipated but never duplicated What If the Economy Played in Bowl Games? Its hard to believe another year has flown by. Thanks to everyone that has helped Pensford be successful this year and we look forward to another successful year ahead. In addition to our boring old derivative services, we also added two new services to the platform this year: 1. Defeasance consulting and successor borrower formation 2. Rate-lock verification for permanent deals A special thank you to those clients that trusted us enough to give us an opportunity to demonstrate our value on these new services. Before we begin, let us bow our heads and thank Tim for all that He has given us this holiday season (A few questions about Timmy Boy first. NFL players have been kneeling and praying to God for as long as I can remember, why is The Tebow getting so much attention? Kids getting suspended in school, really? Is Tim the first Christian to play in the NFL? Is it because his predecessors seemed like real NFL players while Tim has worse throwing mechanics than my 4 year old son, so it appears God is actually helping him directly right in front of our eyes? Or is it because he is the Great White Hope at a position that white America has been holding onto dear life since the NHL desegregated a few years ago? Ooops, not supposed to touch that one am I? Lets stick to the lesssensitive issues, like the ones going on at Penn State! Here we go!) (Editors Note putting things in parentheses makes them less offensive. FACT. Look it up on Wikipedia if you dont believe me)

Taxslayer.com Gator Bowl Real Bowl Game: Ohio State vs Florida Markets Bowl Game: Tim Geithner vs Rating Agencies Newt Gingich would like this to be called the Republicanpartyslaystaxes.com Bowl while I would like to call it the UrbanMeyerBetrayal Bowl. Urbans final recruiting class gets an opportunity to humble his new employer.

I havent heard from Tim Geithner since he guaranteed that the US wouldnt be downgraded, and I havent heard from OSU since SweaterVest was busted for doing way less offensive things than other coaches. OSU is guaranteed to win the National Title next year, which tells me Tim Jr. will play a much more prominent role heading into 2012. Both outcomes elicit vomiting from me. The rating agencies are making headlines on their own, first by downgrading the US in the summer and now by downgrading European nations. My question is why do we care what the rating agencies think? Like Florida, havent they lost all credibility after 2008 (the last time Florida won a title, see how I tied it all together)? Winner: Florida/Rating Agencies. Tim Geithner is the Joe Amendola of the US financial team. The rating agencies arent any better, but they cant really be any worse, either. This bowl game will be a lot more exciting in two years.

AdvoCare V100 Independence Bowl Real Bowl Game: UNC vs Missouri Markets Bowl Game: QE4 vs Opaque Fed UNC, like QE4, is on the horizon, you just havent gotten the memo yet. The new AD is making me drink the kool-aid and the new coach is going to have the Heels competing for a conference title within two years. For those of you asking yourself if there was a QE3, that tells you weve had enough QE to struggle remembering how many there have been. Plus, Operation Twist is really QE3 in sheeps clothing. The opacity (thanks for the Word of the Day calendar Mom!) of the Fed continues to diminish as Bernanke et al continue to move towards greater transparency. Next up on the train of full transparency? Inflation and unemployment rate targets. Winner: Heels/QE4. Both are leadpipe locks and once again Id like to thank Tim Tebow for keeping my family healthy this year.

TicketCity Bowl Real Bowl Game: Penn State vs Houston Markets Bowl Game: Jon Corzine vs Dodd-Frank Penn State QB Matt McGloin got beat up after practice by one of his WRs last week (and Penn State actually called the police this time). But why this sticks out to me is that at the beginning of the year, a WR blindsided JoePa during practice and only slightly

injured the former coach. I wrote at the time that it is pretty embarrassing that a WR in full pads running at full speed could crash into an 84 year old man and barely hurt him. So on some level, Im happy to see the WRs have toughened up since then. I initially planned on using the rogue UBS trader to represent PSU, but that was just one bad apple. We need a whole orchard of bad apples to represent PSU right now. I was reluctant to associate PSU with a Goldman Sachs CEO, senator, and governor (because do they really deserve that much credit?).but.the more I thought about his disgraced fall as head of MF Global, the more it made sense. Believing themselves to be above the system? Check. Illegal activities? Check. Cover-up? Check. Years of litigation in their future? Oh yeah. Meanwhile, Houston had a shot at really making an impact this year, going undefeated until the Conference USA championship game a few weeks ago. They looked ahead to a possible BCS birth, took their eye off of what was important, and stumbled badly. DoddFrank makes Houston look like a raging success. How does one of the biggest supporters of Fannie-backed mortgages get to suddenly switch teams and blame the banking industry for the residential collapse? This law has become a mess and banks will be relying upon it heavily in the coming years to justify all sorts of new fees. Perhaps DoddFrank can hire Jim Tressel as a consultant to figure things out. On a side note, I feel like Sandusky is on the fast track to getting at least small portion of what he deserves, mainly because his attorney is maybe the worst of all time. He tries to compare these charges with the 1986 championship game, he approved the interview with Costas, he encourage people to call 1-800-Reality which turns out to be a homosexual sex phone number, and oh yeah, he himself impregnated his own 16 year old client and then married her a year later. I miss the days when West Virginia was the punch line for jokes like these. Winner: Houston/Dodd-Frank. When teams outside the Big 10 want to pass on the Nittany Lions, they do. When Congress wants to stuff something down our throat, they do. Insight Bowl Real Bowl Game: Iowa vs Oklahoma Markets Bowl Game: LIBOR vs Treasurys Lee Corso: This has (yawn) all the makings of a classic. Iowa is coming off another stellar 7-5 season led by the greatest coach in the country, Kirk Ferentz. I cant wait to see how the Hawkeyeszzzzzzzzzz

Kirk: Thats right coach. Meanwhile, Oklahoma came into the year as a preseason #2, only to finish with 3 losses. But they have to be delighted (cough cough) at the opportunity to hoist the coveted Insight Bowl trophy Chris Fowler: Actually Kirk, the Insight Bowl hands out medallions to the winning team, as well as a $15 gift certificate to Applebees and a hug from Tim Tebow. You got it Iowa fans, after finally beating you for the first time in about 40 years, Penn State got to enjoy it for three weeks before the world collapsed, so I am punishing you here by comparing you to LIBOR. LIBOR has less credibility than David Stern right now. Plus, with the Fed on hold, LIBOR is as boring as a Big Ten rushing matchup in November. Oklahoma has had another disappointing season (relatively speaking of course) with plenty of ups and downs, just like the Treasury market. Twelve months ago, the 10yr Treasury was spiking more than 1.00% in a month in the face of QE2. But this year it has been pretty boring, spending most of the second half of the year around 2.00%. I mean, the US got downgraded and yields actually moved lower! Winner: Oklahoma/Treasurys. The US needs interest rates to stay low so it can service its own debt and to keep the economy from plunging into another recession. The Fed is buying up Treasurys. The Eurozone is still on the verge of a meltdown, making Treasurys even more attractive. Meanwhile LIBOR is a joke, just like the Big Ten. Oklahoma in a three TD win.

GoDaddy.com Bowl Real Bowl Game: Northern Illinois vs Arkansas State Markets Bowl Game: who cares, why is this game being played on January 8th? My only wish for this game is that GoDaddy.com goes back to using real models instead of Danica Patrick in their commercials. Or go get some legitimately attractive athletes like Allison Stokke, Alex Morgan, or Tom Brady. (Allison, if youre reading this, please call me) (Heck. Tom, if youre reading this, please call me)

SEC Title Game (aka Allstate BCS National Championship Game) Real Bowl Game: LSU vs Alabama Markets Bowl Game: Bernanke vs European Crisis In a year from now, none of us will remember that Oklahoma State deserved to be in this game more than Alabama. Hopefully we can say the same about the European crisis. Bernanke is the financial worlds Mad Hatter, dropping unlimited money from the skies and making Lil Wayne jealous. And with budget crisis, Supercommittee debacle, and derisive politics ahead, could hit footing be any more stable? I hope he starts listing Siri as a voting member of the FOMC. The European crisis looms large. Italys 10yr government yield is back up to 6.50% with the all-important 7% benchmark on the horizon. France deserves to be downgraded. Greece is out of the euro. And European banks hold a ton of sovereign debt (ton being a highly scientific term I use on a lazy Sunday rather than actually looking it up). My head says to pick Bama and European crisis. My heart (which I do in fact have, despite repeated assertions from my ex-wife) cant go against Les is More. If Tim has a direct line to the big man upstairs, Les has a contract with the guy downstairs. He doesnt lose these games, he just doesnt. I dont know what price he paid, but he worked out a sweet deal for himself. And I cant go against Bernanke. Hes the Teflon Don right now and Ron Paul cant stick to him no matter how hard he tries. But I will say this it will be a lot more interesting than the first meeting.

Resolutions for 2012: 1. 2. 3. 4. 5. 6. 7. 8. Figure out what interest rates are going to do Get twitter followers up to 50 and start a new account #sh*tmyswapguysays Lose 20lbs and find my hair Host a conference with a soon to be retired Fed governor as the keynote speaker Watch the Heels win the NCAA basketball tournament. In person. Read more Bill Simmons and less Peter King Get an A in my daughters math class Open a satellite office in the Caribbean

Thanks again for a great 2011 and we hope everyone is ready for an even better 2012! Merry Christmas, happy Hanukah, and have a happy New Years!

ECONOMIC CALENDAR
Economic Data Day Monday Tuesday Time 10:00AM 8:30AM 8:30AM 8:30AM 8:30AM Wednesday 7:00AM 10:00AM 10:00AM Thursday 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 9:55AM 10:00AM 10:00AM Friday 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 8:30AM 10:00AM 10:00AM Report NAHB Housing Market Index Housing Starts Housing Starts (MoM) Building Permits Building Permits (MoM) MBA Mortgage Applications Existing Home Sales Existing Home Sales (MoM) Initial Jobless Claims Continuing Claims Chicago Fed National Activity Index GDP (QoQ) GDP Price Index Core PCE (QoQ) Personal Consumption University of Michigan Confidence Leading Indicators House Price Index (MoM) Durable Goods Orders Durables Ex Transportation Personal Income Personal Spending PCE Deflator (YoY) PCE Core (MoM) PCE Core (YoY) New Home Sales New Home Sales (MoM) 5.06mm 2.2% 375k 3600k -0.10 2.0% 2.5% 2.0% 2.3% 68.0 0.3% 0.2% 2.1% 0.4% 0.3% 0.3% 2.7% 0.1% 1.7% 313k 2.0% Forecast 20 635k 1.1% 633k -1.8% Previous 20 628k -0.3% 653k 10.9% 4.1% 4.97mm 1.4% 366k 3603k -0.13 2.0% 2.5% 2.0% 2.3% 67.7 0.9% 0.9% -0.7% 0.7% 0.4% 0.1% 2.7% 0.1% 1.7% 307k 1.3%

Speeches and Events Day Monday Time 12:30PM Report Fed's Lacker, Bank of America's Moynihan speak Place Charlotte, NC

Day Monday Tuesday Wednesday

Closing 1:00PM 1:00PM 1:00PM 2 year Treasury 5 year Treasury 7 year Treasury

Issues

Size $35B $35B $29B

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