Equities, Commodities & Asset Allocation

N ed D avis R esearch G roup Equities, Commodities & Asset Allocation – Trends Intact Or In Trouble? November 8, 2006 Schroders Tim Hayes, CMT Chie...
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N ed D avis R esearch G roup

Equities, Commodities & Asset Allocation – Trends Intact Or In Trouble?

November 8, 2006 Schroders

Tim Hayes, CMT Chief Investment Strategist

About NDR Ned Davis Research (NDR) is an independent, institutional research company with global reach. Since 1980, NDR has provided institutional investors with unbiased, "one-stop" investment research. Over the years, NDR’s professional staff has developed a reputation for espousing a disciplined approach to in–depth financial analysis which is supported by the firm’s sophisticated analytic tools, commitment to data integrity, and unsurpassed customer support. With more than 10 commentary publications, clients receive some of the broadest and most unbiased historical market perspectives on the Street. From asset allocation to sector and group work, individual stocks, economic, or quantitative research projects, NDR offers its clients unparalleled access to over 10,000 charts, reports, models and studies, many of which are illustrated by the firm’s hallmark-rich graphics. NDR’s underlying database is one of the largest, most consistent and accurate in the industry since the firm dedicates an entire department to scouring and scrubbing data from over 175 different data vendors. Using services from the Custom Research division, clients are able to work with analysts to design and build proprietary indicators, studies, models, custom screens, analytic testing, or various other sophisticated projects. With clients in over 30 countries, NDR serves more than 5,000 users worldwide at investment firms, banks, insurance companies, mutual funds, hedge funds, pension and endowment funds, registered investment advisors, equity research departments, and other major financial institutions. Ned Davis Research Group is comprised of Ned Davis Research, Inc. (NDR) located in Venice, Florida, and Davis, Mendel & Regenstein, Inc. (DMR), an NASD institutional brokerage firm, located in Atlanta, Georgia. DMR is the exclusive provider of NDR’s products and services. The two closely integrated firms presently employ over 70 people ranging from market strategists, economists, quantitative and market analysts, and other market professionals.

TABLE OF CONTENTS Position Summary Global Economy Reflation Theme Interest Rate Cycle Economic Cycle Asset Allocation Models U.S. Stock Market Outlook Composite Assessment Market Internals/Sentiment Election Influences Last Rate Hike Effects Earnings/Valuation Relative Strength Commodity Demand Theme Correlating Uptrends Commodity Demand Energy Gold U.S. Dollar China Addendum Europe Japan More U.S. Perspectives Housing Styles Sectors Currencies and Commodities Ned Davis Research Group

1 2 3-4 5-6 7 8 9 - 12 13 14 - 16 17 - 20 21 - 22 23 - 24 25 26 - 25 27 28 29 - 30 A1 - A4 A5 - A10 A11 - A14 A15 - A19 A20 - A25 A26 - A28 A29 - A36

Position Summary • Economic Growth

No better than 3%, working assumption of 2.5% for 2007

• Inflation

Neutral, headline rate and core rate convergence around 3%

• Fed

On hold for rest of 2006, first cut in Q2

• 10-year Treasury

Trading range of 4.55% to 4.95% - 5%

• Bond duration

105% of benchmark

• Domestic Allocation

50% stocks (underweight), 30% bonds (marketweight), 15% cash (overweight)

• Global Allocation

62% stocks (overweight), 38% bonds (overweight), 1% cash (underweight)

• Style Allocation

Neutral on Value vs. Growth, Large vs. Small

• Sector Allocation

Modest Overweight to Telecom, Industrials, Materials. Underweight to Health Care, Consumer Staples

• Regional Allocation Emerging over Developed, selectively in commodity-producing markets. Pacific favored long-term. Watching for peak in European relative strength. • Commodities

Long-term bullish

• Gold

Long-term bullish

• U.S. Dollar

Long term bearish

Ned Davis Research Group



• Reflation continues ...

591 480 391 318 258 210 171 139 113 92 75 61 49 40

Quarterly Data 3/31/1968 - 9/30/2006 (Log Scale)

Gold vs Nominal GDP Minus Long-Term Bond Yields

Gold Spot Price Gold Gain/Annum When: GDP Minus Bond Yield Spread:

Gain/ Annum

* Above 0

18. 9

39. 6

0. 3

60. 4

0 and Below

% of Time

9/30/2006 = 598.6

14 13 12 11 10 9 8 7 6 5 4 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 (AA404)

Nominal GDP Year-to-Year Change (Bars) 9/30/2006 = 5.8%

Long-Term T-Bond Yields ( ) 9/30/2006 = 4.9%

Nominal GDP Minus Long-Term Bond Yield

9/30/2006 = 1.0%

Concept Courtesy: Comstock Partners 1970

Ned Davis Research Group

1975

1980

1985

1990



1995

2000

2005

Please see important disclosures at the end of this document.

591 480 391 318 258 210 171 139 113 92 75 61 49 40 14 13 12 11 10 9 8 7 6 5 4 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8

• ... as does the tightening cycle, which is global in scope.

Daily Data 7/01/1948 - 11/02/2006 (Log Scale)

Central Bank Policy Changes

12

Discount Rate Before 1/2/1989

10

U.S. Fed Funds Rate 11/02/2006 = 5.25% (scale right)

8 6 4 2

8 7 6 5 4 3 2 1

Dashed Vertical Lines Mark Start Of Easing Cycles Solid Vertical Lines Mark Start Of Tightening Cycles

Quantitative Easing 3/19/2001 to 3/9/2006

Bank Of Japan Target Uncollateralized Overnight Call Rate 11/02/2006 = 0.25% (scale left)

European Central Bank Target Discount Rate 11/02/2006 = 3.25% (scale right)

8

Discount Rate Before 1/16/1998

7 6 5 4 3

16 14 12 10 8 6 4

Target Repo Rate Before 6/8/2006

Ned Davis Research Group



2003

1998

1993

1988

1983

1978

1973

1968

1963

1958

Minimum Lending Rate Before 8/25/1981 Bank Rate Before 10/16/1972 Minimum Band Dealing Rate Before 5/6/1997

1953

(IE510)

German Data Before 1/1/1999

Bank of England Official Bank Rate 11/02/2006 = 4.75% (scale left)

Please see important disclosures at the end of this document.

• Composite global yield curve has flattened, which is negative for stocks versus bonds ...

10/31/2006 = 456.1 Global Stock/Bond Total Return Ratio

Ratio GPA

When Global Yield Curve: Above 1.75% * Between 0.5% And 1.75% 0.5% And Below Buy/Hold

MS World TR GPA

-5. 3

6. 3

% of Time

12. 3

Stock Returns Based on MSCI World Total Return Index

24. 9

7. 7

16. 9

8. 6

49. 8

-7. 9

-0. 5

8. 0

25. 3

0. 2

9. 6

9. 3

100. 0

3.0 2.7 2.4 2.1 1.8 1.5 1.2 0.9 0.6 0.3 0.0 -0.3 -0.6 -0.9 -1.2 -1.5 -1.8

Bond Returns Based on Lehman Global Long-Term Government Bond Total Return Index (NDR Estimates Prior to 5/31/1987)

Global Yield Curve Composite (10-Year Minus Three-Month) Favors Bonds

Favors Stocks

Favors Bonds

Ned Davis Research Group



Please see important disclosures at the end of this document.

2007

2006

2005

2004

2003

2002

2000

1999

1998

1997

1996

1995

1994

1993

1991

1990

1989

1988

1987

1986

*German data used prior to Euro-Zone data

2001

Yield Curve Moved Ahead Six Months 10/31/2006 = 0.80% 4/30/2007 = 0.19%

*Equal-Weighted Composite of Gov't Interest Rates from U.S., Japan, Euro-Zone, U.K., Switzerland, and Canada

1985

(I 4 0 3 2 )

LT Bonds GPA

1992

721 689 657 628 599 572 546 522 498 476 454 434 414 395 377 360 344 329 314 299

Monthly Data 1/31/1985 - 4/30/2007 (Log Scale)

Global Stock/Bond Ratio vs. Global Yield Curve Composite

721 689 657 628 599 572 546 522 498 476 454 434 414 395 377 360 344 329 314 299 3.0 2.7 2.4 2.1 1.8 1.5 1.2 0.9 0.6 0.3 0.0 -0.3 -0.6 -0.9 -1.2 -1.5 -1.8

• ... and global economic outlook is worsening. Chart reflects data revisions

Monthly Data 1/31/1985 - 10/31/2006 (Log Scale)

Stock/Bond Ratio vs. OECD G7 Composite Leading Indicator Index Momentum

When G7 Leading Index Momentum:

Ratio GPA

MS World TR GPA

LT Bonds GPA

% of Time

Favors Stocks

5. 4

12. 0

6. 3

54. 9

* Favors Bonds

-5. 8

6. 7

13. 2

45. 1

0. 2

9. 6

9. 3

100. 0

Buy/Hold

104 100 96 92 88 84 80 76 72 68

Stock Returns Based on MSCI World Total Return Index Bond Returns Based on Lehman Global Long-Term Government Bond Total Return Index (NDR Estimates Prior to 5/31/1987)

OECD G7 Composite Leading Indicator (CLI) Index (Moved Ahead Two Months)

10/31/2006 = 104.8 CLI Six-Month Point Momentum

Ned Davis Research Group



Please see important disclosures at the end of this document.

2006

2005

10/31/2006 = -0.3% 2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1991

1990

1989

1988

1987

1986

1985

Rises One Percentage Point From Trough = Favors Stocks Falls One Percentage Point From Peak = Favors Bonds

2004

5 4 3 2 1 0 -1 -2 -3 -4 (I 4 0 3 4 )

10/31/2006 = 456.1

Global Stock/Bond Total Return Ratio

1992

715 669 626 586 549 514 481 450 421 394 369 346 324 303

715 669 626 586 549 514 481 450 421 394 369 346 324 303

104 100 96 92 88 84 80 76 72 68 5 4 3 2 1 0 -1 -2 -3 -4

• Business confidence has peaked.

Chart reflects data revisions.

Monthly Data 1/31/1985 - 10/31/2006 (Log Scale)

712 663 617 574 534 497 462 430 400 373 347 323 300 279

Global Stock/Bond Ratio vs. NDR Global Business Sentiment Composite

10/31/2006 = 456.1

Global Stock/Bond Total Return Ratio

When Business Confidence Indicators:

Ratio GPA

Favor Stocks (+1 to +2) * Mixed (0) Favor Bonds (-2 to -1) Buy/Hold

150 145 140 135 130 125 120 115 110 105

MS World TR GPA

LT Bonds GPA

% of Time 26. 1

6. 0

7. 8

1. 6

1. 6

11. 6

9. 8

51. 7

-9. 2

7. 3

18. 1

22. 2

0. 2

9. 6

9. 3

100. 0

Stock Returns Based on MSCI World Total Return Index Bond Returns Based on Lehman Global Long-Term Government Bond Total Return Index (NDR Estimates Prior to 5/31/1987)

Composite Rises 1% = Favors Stocks

10/31/2006 = 148.2 (-1)

NDR Business Sentiment Composite is EqualWeighted Average of: U.S. ISM Index German Ifo Index Japan Tankan Survey of Large Manufacturers (Three-Month Smoothing)

20 16

Sentiment Rises Above 4% Stocks Overbought, Bonds Oversold

12

Composite Falls 0.5% = Favors Bonds

Six-Month Momentum of Business Sentiment Composite

20 16 8 4

0 -4

0 -4

Ned Davis Research Group



Please see important disclosures at the end of this document.

2006

2005

2004

2002

2001

2000

1999

1998

1997

1996

1995

1994

10/31/2006 = -3.4% (1)

1993

1992

1991

1990

1989

1988

1987

1986

1985

Sentiment Falls -3% And Below Stocks Oversold, Bonds Overbought

2003

-8 -12

4030)

150 145 140 135 130 125 120 115 110 105

12

8 4

(I

712 663 617 574 534 497 462 430 400 373 347 323 300 279

-8 -12

• Our global and domestic asset allocation models are indecisive toward equities ...

60

80

80

60

60

40

40

75 45 30



Please see important disclosures at the end of this document.

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

11/03/2006 = 16.7%

1996

Model Cash %

1995

32 28 24 20 16 12 8 4

1994

50 45 40 35 30 25 20 15 10 5

1993

11/03/2006 = 28.8%

1992

Model Bond %

1991

70 60 50 40 30 20 10

(AA500)

3118 2237 1605 1151 826 592 425 305 219 157 113 100

20

Dashed Lines Indicate Benchmark Weights

80 70 60 50 40 30 20 10

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

10/31/2006 = 0.9%

1991

Model Cash %

1990

50 45 40 35 30 25 20 15 10 5 1989

10/31/2006 = 37.6%

1988

Model Bond %

1987

80 70 60 50 40 30 20 10

Ned Davis Research Group

20

15

Dashed Lines Indicate Benchmark Weights

1990

15

1989

30

1988

45

11/03/2006 = 54.5%

Model Equity %

1987

60

(I 4000)

100

11/03/2006 = 3663.0 11/03/2006 = 1724.1

1986

75

90

Model Equity Line 2/06/1981 - 11/03/2006 GPA = 15.01% Std. Dev. of 52-Week Returns = 11.83% Benchmark Equity Line (55/35/10 Stocks/Bonds/Cash) 2/06/1981 - 11/03/2006 GPA = 11.69% Std. Dev. of 52-Week Returns = 11.29%

1985

10/31/2006 = 61.5%

Model Equity %

90

3118 2237 1605 1151 826 592 425 305 219 157 113

1984

10/31/2006 = 884.2 10/31/2006 = 532.4

802 659 541 445 365 300 247 203 167 137 112

1983

Model Equity Line 3/31/1986 - 10/31/2006 GPA = 11.16% Std. Dev. of 12-Month Returns = 8.23% Benchmark Equity Line (55/35/10 Stocks/Bonds/Cash) 3/31/1986 - 10/31/2006 GPA = 8.46% Std. Dev. of 12-Month Returns = 9.26%

Weekly Data 2/06/1981 - 11/03/2006 (Log Scale)

NDR Balanced Account Model

1982

802 659 541 445 365 300 247 203 167 137 112

Monthly Data 3/31/1986 - 10/31/2006 (Log Scale)

NDR Global Balanced Account Model

70 60 50 40 30 20 10 32 28 24 20 16 12 8 4

• ... and Big Mo is still neutral.

1330 1017 777 594 454 347 266 203 155 119

Weekly Data 1/04/1980 - 10/27/2006 (Log Scale)

S&P 500 Index vs. Big Mo Composite Model S&P 500 Index

S&P 500 Gain/Annum When: Big Mo Composite Model: Above 75%

Gain/ Annum

% of Time

28.8

40.5

3.9

39.9

-10.7

19.6

* Between 55% and 75% 55% and Below

1330 1017 777 594 454 347 266 203 155 119

90

90

60

60

75

Big Mo Composite* Tape Composite (50%) External Composite (50%) External Composite Indicators Indicator Monetary: Yield Curve Three-Month T-Bill Yield Momentum Three-Year T-Note Yield Momentum 10-Year Treasury Yield Deviation from Trend Long-Term Bond Yield Economic: Real Monetary Fiscal & Exchange Rate Index NDR ISM Leading Index Real M2 Minus Industrial Production Commodity Price Momentum Dollar-Adjusted Oil Momentum Sentiment: NDR Crowd Sentiment Composite*** II Bull/Bear Sentiment + Monetary VIX Deviation from Trend*** Total Put/Call Deviation from Trend*** CBOE Five-Day Put/Call*** Valuation: Median S&P 500 Earnings Yield Real Earnings Yield BAA Yield Minus Earnings Yield Earnings Yield Minus T-Bill Yield Real Bond Yield/Dividend Yield

75

45

45

30 15

30

Big Mo Tape Composite 10/27/2006 = 78.1%

15

90

90

60

60

75

75

45

45

30

30

Big Mo External Composite

15

10/27/2006 = 68.8% 10/27/2006 = 73.4%

90 80 70 60 50 40 30 20 10

Ned Davis Research Group

15 90 80 70 60 50 40 30 20 10

Unsmoothed External Composite Reading External Composite Reading (Five-Week Moving Average)

Chart Number S38 S035 S37

Current Mode** Neutral Neutral Mildly Bullish

11/03/2006 74.0 77.3 70.6

Chart Number

11/03/2006

AA47 S945 S950 S876 S947

Bearish Bearish Neutral Bullish Bullish

AA530 S1101A AA528 S972 S992

Bullish Bullish Neutral Bullish Bullish

DAVIS65 S502 S0235 S586 S0584A

Neutral Neutral Bearish Bearish Bullish

S782 S698A AA526 S790A S788

Neutral Bullish Bullish Neutral Bullish

S37

71.9 70.6

*Big Mo Composite Model consists of 50% Big Mo Tape Composite and 50% Big Mo External Composite. **Current Mode based on performance box shown in chart regardless of direction. ***Indicator reading updated weekly with Big Mo Composite. Chart reading is updated daily, so intra-week readings on this report may differ from chart. Ned Davis Research, Inc. SMS_8.RPT

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

Big Mo Composite Model (50% Tape, 50% External) 1981

(S38)

NDR Big Mo Composite Model



Please see important disclosures at the end of this document.

• Breadth remains divergent ...

900 625 400 225 100 25 0 -25 -100 -225 -400 -625 -900 -1225 -1600 (S128)

1040 516

654

645

857

405

428

470

590 390

566

1516

398 213

663

211

324

209

237

763

2005

164 326

336

475

1116

1034

1132

539 997

1607

New Highs and New Lows

Ned Davis Research Group



12615 10855 9340 8037 6916 5951 5121 4406 3792 3263 2808 2416 2079 1789 1539 1325 1140 981 844

2006 668

300

606

Source: Barrons

834

614

83

122

2004

2003

2002

2001

2000

1999

1997

1996

1998

1129 731

402

923

Weekly New Lows

10/27/2006 = 12090.26

1008 747

224

706

1995

1994

1993

1992

1991

596

243

232

272

1990

Weekly New Highs 421

356

1989

1988

1987

1986

1985

1984

1983

1982

In the past 12 NDR-defined bull markets (last 7 shown) weekly new highs peaked out prior to each major market top by a median lead time of 32.5 weeks (We have also signalled current cycle's peak on 1/09/2004)

1981

12615 10855 9340 8037 6916 5951 5121 4406 3792 3263 2808 2416 2079 1789 1539 1325 1140 981 844

Weekly Data 7/03/1980 - 10/27/2006 (Log Scale)

Dow Jones Industrial Average

Please see important disclosures at the end of this document.

900 625 400 225 100 25 0 -25 -100 -225 -400 -625 -900 -1225 -1600

• ... as does volume ...

Daily Data 9/30/1981 - 11/02/2006 (Log Scale)

Volume

S&P 500 Gain/Annum When: Volume Deviation from Trend Is:

Gain/ Annum

Above 105.5

19. 4

45. 4

3. 3

54. 6

* 105.5 and Below

S&P 500

% of Time

11/02/2006 = 1367.3 11/02/2006 = 3477.9

Daily Volume (millions)

132 128 124 120 116 112 108 104 100 96 92

Ned Davis Research Group

1986

(NDRII11)

11/02/2006 = 101.8

SM

NDR II Volume Deviation from Trend 90-Day Smoothing/252-day Smoothing

10

2006

SM

2001

NDR II

1996

6303 4122 2695 1762 1152 754 493 322 211 138 90 59 39

SM

1991

1500 1212 979 791 639 517 418 337 273 220 178 144 116

NDR Institutional Index

Please see important disclosures at the end of this document.

1500 1212 979 791 639 517 418 337 273 220 178 144 116

6303 4122 2695 1762 1152 754 493 322 211 138 90 59 39 132 128 124 120 116 112 108 104 100 96 92

• ... and we may have been in a "blow-off" in the DJIA.

Blow Offs From Selected NDR Bull Markets 05/09/1901 - 10/11/2006 DJIA % Gain

Trading Days

05/09/1901 - 06/17/1901

16.1

32

11/13/1905 - 01/19/1906

27.4

56

09/01/1916 - 11/21/1916

20.8

67

08/20/1919 - 11/03/1919

21.5

61

11/27/1922 - 03/20/1923

14.5

92

05/27/1929 - 09/03/1929

29.9

82

02/26/1946 - 05/29/1946

14.2

78

03/16/1948 - 06/15/1948

16.8

74

01/23/1956 - 04/06/1956

12.7

53

09/22/1959 - 01/05/1960

11.2

72

08/09/1968 - 12/03/1968

13.3

67

10/16/1972 - 01/11/1973

14.1

59

07/05/1978 - 09/08/1978

12.7

47

02/13/1981 - 04/27/1981

9.9

50

08/08/1983 - 11/29/1983

10.7

80

05/20/1987 - 08/25/1987

22.9

68

04/27/1990 - 07/16/1990

13.4

55

11/05/1993 - 01/31/1994

9.2

60

03/05/1998 - 07/17/1998

10.6

94

10/15/1999 - 01/14/2000

17.0

64

01/29/2002 - 03/19/2002

10.6

35

07/14/2006 - 10/26/2006?

13.3

73

Median

14.1

64

Blow Off

Current case not included in summary statistics. T_245.RPT

Ned Davis Research, Inc.

Ned Davis Research Group

11

Please see important disclosures at the end of this document.

• Complacency evident in low VIX, narrow credit spreads.

High Complacency

5.1 4.8 4.5 4.2 3.9 3.6 3.3 3.0 2.7 2.4 2.1 1.8 1.5 1.2 0.9 0.6

M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1997

1998

1999

2000

Ned Davis Research Group

2001

2002

2003

2004

2005

(Q2500)

2006

12

57.4 42.6

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

44.0 40.8 37.7 34.9 32.4 30.0 27.7 25.7 23.8 22.0 20.4 18.9 17.5 16.2 15.0 13.9 12.9 11.9 11.0 10.2

1995

11/03/2006 = 11.2

1994

Implied Volatility Index

1993

High Fear

1992

55.0

0.7 -2.0

Current Proxy Direction is: FALLING

1991

-1.2

% of Time

Direction of Proxy Determined by Current Value versus Eight Weeks Ago

1990

31.3

* 1.9 and Below

All Periods When Proxy is FALLING = 2.2% GPA

1989

13.7

-0.3

Above 1.9

All Periods When Proxy is RISING = -3.5% GPA

1988

66.2

Gain/ Annum

Risk Premium is

1987

Above 28.5 Between 21.5 and 28.5

All Periods = -0.5% GPA

1986

% of Time

50 48 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14

NASDAQ/DJIA Ratio Gain/Annum When:

1985

Gain/ Annum

* 21.5 and Below

44.0 40.8 37.7 34.9 32.4 30.0 27.7 25.7 23.8 22.0 20.4 18.9 17.5 16.2 15.0 13.9 12.9 11.9 11.0 10.2 (DAVIS72)

VIX Index Is:

50 48 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14

1984

S&P 500 Gain/Annum When:

1498.8 1442.7 1388.6 1336.6 1286.6 1238.4 1192.0 1147.4 1104.4 1063.0 1023.2 984.9 948.0 912.5 878.3 845.4 813.8 783.3 754.0

1983

11/03/2006 = 1364.30

Weekly Data 5/01/1981 - 11/03/2006

Ratio of NASDAQ Composite / Dow Jones Industrial Average

1982

1498.8 1442.7 1388.6 1336.6 1286.6 1238.4 1192.0 1147.4 1104.4 1063.0 1023.2 984.9 948.0 912.5 878.3 845.4 813.8 783.3 754.0

Daily Data 12/31/1996 - 11/03/2006 (Log Scale)

Standard & Poor's 500 Stock Index vs VIX Index

Moody Baa-Rated Bond Yield minus 10-Year Treasury Yield NASDAQ/DJIA Ratio Gain/Annum When: Risk Premium is Rising and

Gain/ % Annum of Time

Above 1.9

-3.0

30.4

1.9 and Below

-4.0

16.8

NASDAQ/DJIA Ratio Gain/Annum When: Risk Premium is Falling and Above 1.9 * 1.9 and Below

Gain/ % Annum of Time 5.4

27.1

-1.1

25.9

11/03/2006 = 1.67%

Equity Risk Premium Proxy Please see important disclosures at the end of this document.

5.1 4.8 4.5 4.2 3.9 3.6 3.3 3.0 2.7 2.4 2.1 1.8 1.5 1.2 0.9 0.6

• The market has usually had trouble after a mid-term election when control of Congress has changed hands.

Dow Jones Industrial Average Percent CHANGE Around Mid-Term Elections DJIA Percent Gain Mid-Term Year

Election Day

Change in Congress*

YTD Through Election Day

1902 11/4/1902 No -0.01 1906 11/6/1906 No -2.36 1910 11/8/1910 No -14.90 1914 11/3/1914 No ** 1918 11/5/1918 Yes 16.46 1922 11/7/1922 No 22.73 1926 11/2/1926 No -3.47 1930 11/4/1930 Yes -27.64 1934 11/6/1934 No -2.35 1938 11/8/1938 No 30.81 1942 11/3/1942 No 3.24 1946 11/5/1946 Yes -12.46 1950 11/7/1950 No 12.05 1954 11/2/1954 Yes 28.69 1958 11/4/1958 No 26.39 1962 11/6/1962 No -15.78 1966 11/8/1966 No -16.44 1970 11/3/1970 No -4.03 1974 11/5/1974 No -20.70 1978 11/7/1978 No -3.74 1982 11/2/1982 No 16.81 1986 11/4/1986 Yes 22.36 1990 11/6/1990 No -9.74 1994 11/8/1994 Yes 2.04 1998 11/3/1998 No 10.09 2002 11/5/2002 No -13.40 Median, All Periods: -2.35 9.25 Median, Change in Congress: Median, No Change in Congress: -2.36 *Change in Congress defined as majority party changing in either the Senate or House of Representatives. **NYSE closed from 7/31/1914 to 12/11/1914 due to World War I.

-0.40 0.45 -3.48 ** -5.10 -0.80 3.95 -8.47 6.65 -2.10 4.22 4.93 4.98 11.86 5.99 5.90 -2.99 9.22 -8.67 0.62 2.39 0.18 5.98 0.10 5.46 -3.88 0.62 0.14 2.39

Following Year -23.61 -37.73 0.39 81.66 30.45 -3.25 28.75 -52.67 38.53 -2.92 13.81 2.23 14.37 20.77 16.40 17.00 15.20 6.11 38.32 4.19 20.27 2.26 20.32 33.45 25.22 25.32 15.80 11.52 15.80

T_SMF0634

Ned Davis Research, Inc.

Ned Davis Research Group

Election Day to End of Year

13

Please see important disclosures at the end of this document.

• Final rate hike of a tightening cycle has usually been followed by weakness. Will oil prices remain low enough, and the housing market strong enough, for a soft landing and 1995 repeat? Dow Jones Industrial Average Around Last Federal Reserve Interest Rate Hikes 102.6 102.3 102.0 101.7 101.4 101.1 100.8 100.5 100.2 99.9 99.6 99.3 99.0 98.7 98.4 98.1 97.8 97.5 97.2 96.9 96.6 96.3 96.0 95.7 95.4 95.1 94.8 94.5 94.2 93.9 93.6 93.3 93.0 92.7 92.4 92.1 91.8 91.5 91.2 90.9 (S01722)

Fed Tightening End Dates* 6/1/1920 1/8/1926 8/9/1929 10/16/1931 1/16/1953 8/23/1957 9/11/1959 12/6/1965 4/3/1969 4/25/1974 2/15/1980 5/5/1981 2/24/1989 2/1/1995 5/16/2000 Mean

DJIA Change 126 Days Later

DJIA Change 252 Days Later

-5. 23 -8. 07 -26. 83 -23. 81 -6. 18 -8. 10 -4. 80 -6. 16 -12. 82 -22. 07 9. 24 -10. 86 21. 78 21. 90 -3. 82

-15. 57 -2. 58 -35. 03 -33. 72 0. 38 6. 84 -4. 39 -15. 75 -14. 68 -2. 90 6. 18 -12. 13 14. 19 40. 23 2. 57

-5. 72

-4. 42

Last Interest Rate Hike By Federal Reserve

Daily Data Starting in 1920 12 Months = 252 Market Days -12

-11

-10

Ned Davis Research Group

-9

-8 -7 -6 -5 -4

-3

-2

-1

0

14

*At least two consecutive rate increases before a decrease. +1

+2

+3

+4 +5 +6 +7

+8

+9

+10

+11

Please see important disclosures at the end of this document.

+12

102.6 102.3 102.0 101.7 101.4 101.1 100.8 100.5 100.2 99.9 99.6 99.3 99.0 98.7 98.4 98.1 97.8 97.5 97.2 96.9 96.6 96.3 96.0 95.7 95.4 95.1 94.8 94.5 94.2 93.9 93.6 93.3 93.0 92.7 92.4 92.1 91.8 91.5 91.2 90.9

• Also after final hike, bonds and Value have outperformed, small-caps and NASDAQ have underperformed ...

Index Percent Gain between Last Federal Reserve Interest Rate Hike and First Cut1 Last Hike Date8

First Cut Date

Number of Months2

DJIA6

DJTA6

S&P 5007

Large-Cap Growth4

6/1/20

5/5/21

11.1

-11.3

2.4

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

1/8/26

4/23/26

3.5

-10.2

-3.0

n/a

n/a

-15.0

n/a

n/a

n/a

n/a

n/a

8/9/29

11/4/29

2.9

-23.8

-7.9

-27.2

n/a

-44.2

-18.8

n/a

n/a

n/a

n/a

10/16/31

2/26/32

4.4

-19.9

-35.5

-17.9

n/a

-20.4

-16.7

n/a

n/a

n/a

n/a

1/16/53

2/5/54

12.7

2.4

-4.9

4.7

n/a

-2.5

7.4

n/a

n/a

n/a

n/a

8/23/57

11/15/57

2.8

-7.7

-22.8

-2.4

n/a

-11.5

-8.4

n/a

n/a

-0.1

n/a

9/11/59

6/10/60

9.0

2.8

-6.7

3.0

n/a

5.4

3.5

n/a

n/a

-2.2

n/a

12/6/65

4/7/67

16.0

-9.2

-5.6

-8.8

n/a

25.4

3.1

n/a

n/a

-4.0

n/a

4/3/69

11/13/70

19.4

-18.1

-38.9

-14.1

n/a

-39.8

-12.2

n/a

n/a

3.8

n/a

4/25/74

12/9/74

7.5

-29.9

-20.1

-16.4

-32.7

-24.7

-24.6

n/a

n/a

1.4

n/a

2/15/80

5/30/80

3.5

-3.9

-6.3

-0.8

-7.5

-8.0

-2.1

-1.6

0.2

-7.7

16.3

5/5/81

11/2/81

6.0

-10.9

-8.0

3.9

-6.8

-5.9

-2.3

-2.4

-1.7

-5.2

-0.5

2/24/89

6/6/89

3.4

11.2

6.5

12.6

12.0

12.2

14.0

11.4

11.2

-4.2

7.4

2/1/95

7/6/95

5.1

21.2

19.7

5.6

25.7

16.7

19.1

19.1

16.4

-0.2

13.0

5/16/00

1/3/01

7.6

0.1

5.2

13.7

-29.6

-3.5

-7.4

-19.9

5.1

2.2

9.6

Mean

7.6

-7.1

-8.4

-3.4

-6.5

-8.3

-3.5

1.3

6.2

-1.6

9.2

Median

6.0

-9.2

-6.3

-0.8

-7.1

-6.9

-2.3

-1.6

5.1

-1.2

9.6

DJUA6

NASDAQ6

Small Caps3

Large-Cap Value5

Reuters-CRB CCI Index

Lehman LT Gov’t Bonds6

1. Tightening cycle requires at least two consecutive rate increases without an intervening decrease. 2. Number of calendar days multiplied by 12/365. 3. Ibbotson Small Company Total Return Index (monthly) until 1979. Russell 2000 Total Return Index thereafter. 4. S&P/BARRA 500 Growth Total Return Index (monthly) until 1993. S&P/BARRA 500 Growth Price Index (daily) thereafter. 5. S&P/BARRA 500 Valued Total Return Index (monthly) until 1993. S&P/BARRA 500 Value Price Index (daily) thereafter. 6. Price only. 7. Total return. 8. Boldface = NDR-defined bear market in progress. Bold and italics = bear market started within four months. Ned Davis Research, Inc.

Ned Davis Research Group

T_SMF0629.1

15

Please see important disclosures at the end of this document.

• ... and earnings growth has tended to slow.

S&P 500 Price/Earnings Ratio Around Last Federal Reserve Interest Rate Hike and First Cut1 Earnings Y/Y % Change3 As of As of Last Hike First Cut

Price/Earnings Ratio As of As of Last Hike First Cut % Change

Last Hike Date

First Cut Date

Number of Months2

S&P 500 % Change

08/09/1929

11/04/1929

2.9

-19.4

25.0

22.0

18.9

14.8

-22.0

10/16/1931

02/26/1932

4.4

-19.5

-39.1

-37.1

14.8

13.7

-7.6

01/16/1953

02/05/1954

12.7

1.1

-1.6

4.6

10.8

10.5

-3.4

08/23/1957

11/15/1957

2.8

-9.3

-5.0

0.3

13.0

11.6

-10.6

09/11/1959

06/10/1960

9.0

1.0

19.1

-4.1

16.9

17.1

1.3

12/06/1965

04/07/1967

16.0

-1.4

14.1

2.1

18.2

16.4

-9.9

04/03/1969

11/13/1970

19.4

-17.2

7.0

-9.0

17.3

15.6

-10.1

04/25/1974

12/09/1974

7.5

-26.8

22.9

8.9

10.7

7.2

-32.8

02/15/1980

05/30/1980

3.5

-3.6

20.5

15.0

7.8

7.3

-6.3

05/05/1981

11/02/1981

6.0

-4.7

-4.6

4.3

8.9

8.1

-9.0

02/24/1989

06/06/1989

3.4

12.9

35.7

16.4

12.1

13.0

7.5

02/01/1995

07/06/1995

5.1

17.8

39.8

36.6

15.4

16.1

4.7

05/16/2000

01/03/1901

7.6

-8.1

32.8

3.8

28.8

27.0

-6.3

06/29/2006?

?

?

?

17.9?

?

17.5?

?

?

7.7 6.0

-5.9 -4.7

12.8 19.1

4.9 4.3

14.9 14.8

13.7 13.7

-8.0 -7.6 77%

6.6 5.1

4.7 1.1

17.6 19.1

10.8 4.6

13.6 13.0

13.7 13.0

-0.1 1.3 40%

8.4 6.7

-12.6 -12.6

9.8 17.3

1.3 4.1

15.7 16.0

13.7 14.2

-13.0 -9.4 100%

All Periods: Mean Median % P/E Compression Secular Bulls: Mean Median % P/E Compression Secular Bears: Mean Median % P/E Compression

1. Tightening cycle requires at least two consecutive rate increases without an intervening decrease. 2. Number of calendar days multiplied by 12/365. 3. Earnings based on four-quarter trailing reported (GAAP) earnings per share. Current case not included in summary statistics. Shaded areas = NDR-defined secular bear markets. T_IS0603.2

Ned Davis Research, Inc.

Ned Davis Research Group

16

Please see important disclosures at the end of this document.

• Earnings growth is mean reverting ...

1218 780 499 319 205 131 84 54 34 22 14 9 6

Monthly Data 3/31/1927 - 12/31/2006 (Log Scale)

S&P 500 GAAP Earnings Growth

1218 780 499 319 205 131 84 54 34 22 14 9 6

S&P 500 Gain/Annum When: Y/Y Earnings Growth Is:

Gain/ Annum

Above 20% * Between 5% & 20% Between -20% & 5% -20% and Below

Earnings x 15.9 10/31/2006 = 1254.5 ( )

% of Time

2. 0

23. 7

5. 5

30. 3

13. 1

38. 8

-14. 8

7. 3

S&P 500 10/31/2006 = 1377.9 ( )

70 60 50 40 30 20 10 0 -10 -20 -30 -40

70 60 50 40 30 20 10 0 -10 -20 -30 -40

Y/Y S&P 500 GAAP Earnings Growth (%) Earnings Growth High

6/30/2006(A) = 17.6% 12/31/2006(E) = 15.7%

Earnings Growth Low

59

59 25

25

Average P/E at Earnings Peaks (Down Arrows) = 12.60 Average P/E at Earnings Troughs (Up Arrows) = 18.82 Based on Earnings Reversals of 10%

10

10

um er Ann G a in P % .9 5 ne = T re n d li 6/30/2006(A) = $74.49

4 2

4 2

12/31/2006(E) = $80.90

1

1

Shaded Area Indicates Estimated Earnings Used

0

Ned Davis Research Group

17

Please see important disclosures at the end of this document.

2005

2000

1995

1990

1985

1980

1975

1970

1965

1960

1955

1950

1945

1940

1935

(S663)

1930

0

• ... with negative implications for the stock market. New Chart

S&P 500 Index Earnings Growth Higher Than It Was 12 Months Ago S&P 500 Gain/Annum When:

* Above 15%

% of Time

8. 7

24. 6

Between 5% & 15%

-1. 9

14. 1

Between -20% & 5%

14. 1

10. 9

6. 0

2. 2

-20% and Below

Earnings Growth Lower Than It Was 12 Months Ago S&P 500 Gain/Annum When: Y/Y Earnings Growth Is Falling And: Above 15%

Gain/ Annum -3. 7

6. 7

6. 4

9. 3

11. 7

27. 2

-22. 6

5. 1

Between -20% & 5%

1990

1985

1980

1975

1970

1965

1960

1955

1950

1945

1940

1935

1995

Between 5% & 15% -20% and Below

% of Time

70

1295 938 679 492 356 258 187 135 98 71 51 37 27 19 14 10 7 5

2005

Gain/ Annum

2000

Y/Y Earnings Growth Is Rising And:

1930

1295 938 679 492 356 258 187 135 98 71 51 37 27 19 14 10 7 5

Monthly Data 3/31/1927 - 9/30/2006 (Log Scale)

70

60

60

50

50

Earnings Growth High

40

40

30

30

20

20

10

10

0

0

-10

-10

-30

-30

-20

-20

-40 (SMF0635_C)

6/30/2006 (A) = 17.6% 9/30/2006 (E) = 18.5%

Earnings Growth Low

S&P 500 GAAP Earnings Growth (Year-Over-Year Percent Change)

Ned Davis Research Group

18

Please see important disclosures at the end of this document.

-40

• Profit margins are also extreme, and threatened by rising unit labor costs.

1697 1350 1074 854 679 541 430 342 272 216 172 137 109 87 69 55 44 35 28

S&P Gain/Annum When: 9/30/1954 - 9/30/2006 Profit Margin:

Gain/ Annum

% of Time

* Above 6.2

(S658)

17.8

7.3

29.8

Between 3.3 and 5.4

12.2

45.7

3.3 and Below

-2.5

6.7

9/30/2006 = 1485.3 1955

7.25 6.80 6.39 6.00 5.63 5.29 4.96 4.66 4.38 4.11 3.86 3.62 3.40 3.19 3.00 2.82 2.64 2.48 2.33

1.1

Between 5.4 and 6.2

1960

1965

1970

Chart reflects data revisions.

Quarterly Data 9/30/1954 - 9/30/2006 (Log Scale)

Standard & Poor's Industrial Average

1975

1980

1985

Earnings & Sales Based on Four-Quarter Totals

1990

1995

2000

9/30/2006 Est. = 7.5%

1697 1350 1074 854 679 541 430 342 272 216 172 137 109 87 69 55 44 35 28

1328 1040 815 638 500 392 307 240 188 147 116 90 71 56 43 34 27 21 16

2005

12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3

Standard & Poor's Industrial Average Profit Margin (Earnings/Sales)

Ned Davis Research Group

Standard & Poor's 500 Stock Index S&P 500 Gain/Annum When: Unit Labor Costs (Y/Y Change) Are: Above 6

(S1108)

19

Gain/ Annum

3.5 and Below

% of Time

-2.2

17.9

5.3

22.6

12.3

59.4

* Between 3.5 and 6

9/30/2006 = 1335.85 1950

7.25 6.80 6.39 6.00 5.63 5.29 4.96 4.66 4.38 4.11 3.86 3.62 3.40 3.19 3.00 2.82 2.64 2.48 2.33

Quarterly Data 3/31/1948 - 9/30/2006

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

9/30/2006 = 5.3%

Labor Costs Rising

Labor Costs Falling

Non-Farm Unit Labor Costs (Year-to-Year Change) Please see important disclosures at the end of this document.

1328 1040 815 638 500 392 307 240 188 147 116 90 71 56 43 34 27 21 16

12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3

• S&P 500 not cheap from long-term perspective.

Weekly Data 3/27/1926 - 10/27/2006

S&P 500 Index Price/Earnings Ratio 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8

P/E Ratio Based on S&P 500 GAAP EPS Average from 3/27/1926 - 10/27/2006 = 15.9 (heavy dashed line) Average from 1/2/1980 - 10/27/2006 = 19.5 (narrow dashed line)

10/27/2006 = 18.5 1930

6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 (S797)

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Average from 3/27/1926 - 10/27/2006 = -0.17% (heavy dashed line) Average from 1/2/1980 - 10/27/2006 = 3.60% (narrow dashed line)

Monthly Moody's Baa yield data used prior to 1/8/1965, weekly thereafter

As of 10/27/2006: Baa Yield = 6.42% S&P Earnings Yield = 5.41% Spread = 1.01%

Moody's Baa Bond Yield Minus S&P 500 Earnings Yield

Ned Davis Research Group

20

Please see important disclosures at the end of this document.

46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8

6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13

• S&P 500 maintaining long-term downtrend versus the EAFE Index ...

S&P 500 Total Return Index Log Scale Right ( )

2004

1999

1994

1989

Source: MSCI

190 180 170 160 150 140 130 120 110 100 90 80 70 60 (I 1 1 9 A )

2853 2364 1959 1624 1346 1115 924 766 635 526 436 361 299 248 206 170 141 117

MSCI EAFE Total Return Index (U.S. Dollars) Log Scale Left ( )

1984

3485 2926 2457 2063 1732 1454 1221 1025 861 722 607 509 428 359 301 253 212 178

Daily Data 12/31/1979 - 11/02/2006

S&P 500 Total Return Index vs EAFE Total Return Index

Ratio moving up = S&P 500 Strength

Ratio moving down = EAFE Strength

Relative Strength -- Ratio of S&P 500 to EAFE

Ned Davis Research Group

21

Please see important disclosures at the end of this document.

190 180 170 160 150 140 130 120 110 100 90 80 70 60

• ... and it continues to rank low in Global Market Ranking, which shows continuing relative strength in most commodity-related emerging markets.

NDR Global Market Index Ranking

Four Position Current Previous Weeks Composite Entry Entry Current Gain/ Rank Week Ago Market Reading Date Price Price Loss (%) OVERWEIGHT Ranked 1-3 — Buy/Overweight: 1 1 1 Lima Exchange Index 190.97 2 2 2 Indice D.C. Bursatil 88.82 3 3 4 Manila Exchange Index 63.92 Ranked 4-13 After Reaching Ranks 1-3 — Hold/Continue to Overweight: 4 6 3 Jakarta Exchange Index 59.26 5 5 9 Warsaw WIG Index 51.50 6 7 5 BSE 100 50.24 8 9 7 I.P.C. 47.65 10 10 10 Johannesburg All-Shares Index 41.16 UNDERWEIGHT Ranked 30-39 After Reaching Ranks 40-42 — Continue to Underweight: 35 35 41 Prague PX-50 Index 8.38 39 42 40 Bangkok SET Index 3.13 Ranked 40-42 — Sell/Underweight: 40 41 37 Budapest Exchange Index -2.38 41 40 42 IBB General Index -3.94 42 39 36 TOPIX Index -7.87



02/05/2006 03/12/2006 10/29/2006

6314.38 29520.70 2702.37

10879.64 37992.02 2766.86

72.30 28.70 2.39

I5064 I5092 I5066



08/13/2006 07/09/2006 11/27/2005 11/27/2005 06/04/2006

1402.19 42875.60 4663.97 16879.37 20874.86

1612.92 47833.42 6682.47 23169.87 23590.57

15.03 11.56 43.28 37.27 13.01



I5044 I5068 I5042 I5056 I5072



06/04/2006 06/11/2006

1370.40 670.41

1542.10 732.30

12.53 9.23

I5028 I5086



10/22/2006 09/10/2006 08/06/2006

22318.67 9052.87 1571.70

22123.20 10328.81 1619.02

-0.88 14.09 3.01

I5040 I5026 I5052





Full Rank Four Developed Previous Weeks Market Rank Week Ago (**) Market Country Composite ↑

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42



1 2 3 6 5 7 4 9 11 10 8 12 13 15 14 26 21 19 24 18 25 17 36 29 23 16 27 31 20 28 37 22 32 30 35 34 33 38 42 41 40 39



1 2 4 3 9 5 8 7 11 10 6 32 12 13 14 19 28 20 25 22 18 15 34 27 16 17 29 26 21 24 33 23 30 38 41 35 31 39 40 37 42 36

** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **





Chart

Lima Exchange Index Indice D.C. Bursatil Manila Exchange Index Jakarta Exchange Index Warsaw WIG Index BSE 100 Madrid General Index I.P.C. Hong Kong Hang Seng Johannesburg All-Shares Index Colombo Exchange Index OBX Stock Index IGPA Index Swiss Performance Index Straits Times Taiwan Trade-Weighted Index Bovespa Index All Ordinaries NZSX 50 FF Gross Index ISEQ Overall Index Mishtanim 100 Stockholm All-Share Index Merval Index Kuala Lumpur Composite Brussels Bel-20 Index Frankfurt Xetra DAX KFX Copenhagen Milan MIBtel Index Amsterdam AEX All-Share S&P 500 Index Athens Exchange Index Paris CAC 40 London FTSE 100 Austrian Traded Index Prague PX-50 Index S&P/TSX Composite Helsinki HEX General Seoul Exchange Index Bangkok SET Index Budapest Exchange Index IBB General Index TOPIX Index

Peru Venezuela Philippines Indonesia Poland India Spain Mexico China South Africa Sri Lanka Norway Chile Switzerland Singapore Taiwan Brazil Australia New Zealand Ireland Israel Sweden Argentina Malaysia Belgium Germany Denmark Italy Netherlands U.S. Greece France U.K. Austria Czech Republic Canada Finland South Korea Thailand Hungary Colombia Japan

190.97 88.82 63.92 59.26 51.50 50.24 49.64 47.65 45.20 41.16 37.82 31.29 29.17 28.73 27.84 25.99 25.45 24.34 23.88 22.73 22.68 21.79 21.04 20.11 19.01 18.94 18.78 17.84 16.36 13.12 12.23 11.56 11.24 9.83 8.38 8.34 7.30 5.60 3.13 -2.38 -3.94 -7.87





Current Price 10879.64 37992.02 2766.86 1612.92 47833.42 6682.47 1505.62 23169.87 18749.69 23590.57 2516.00 342.57 10971.42 6796.92 2722.31 7161.61 40435.18 5396.90 3778.41 8544.15 919.02 349.41 1841.96 998.02 4180.68 6241.15 424.31 30624.00 733.25 1364.30 4177.04 5336.30 6148.10 4093.19 1542.10 12239.04 9067.78 1383.88 732.30 22123.20 10328.81 1619.02

Chart

I5064 I5092 I5066 I5044 I5068 I5042 I5076 I5056 I5024 I5072 I5078 I5062 I5022 I5082 I5070 I5084 I5018 I5012 I5060 I5046 I5048 I5080 I5010 I5054 I5016 I5036 I5030 I5050 I5058 I5090 I5038 I5034 I5088 I5014 I5028 I5020 I5032 I5074 I5086 I5040 I5026 I5052

↑ = Change from Underweight to Marketweight ** = Developed Market Out-Of-Sample Performance Results 2/9/1996 - 11/05/2006 (Weekly Rebalancing); Top Category Has Gained 26.5% Per Annum; Equal-Weighted Universe Has Gained 10.6% Per Annum; Bottom Category Has Gained 9.2% Per Annum. Ned Davis Research, Inc.

Ned Davis Research Group ↑

ICS_1

22

Please see important disclosures at the end of this document.

• China-driven commodity demand theme still well intact ...

Daily Data 7/01/1996 - 11/02/2006 (Log Scale)

Global Reflation Theme (II)

81 72 65 58 52 47 42 38 34 30 27 24

NDR Global Oil & Gas Sector / NDR Global Composite (Equal-Weighted) Scale Right 11/02/2006 = 69.91

188 171 155 140 127 115 104 95 86 78 70 64 58 52

Dow Jones Latin America Index / Dow Jones Developed Markets Index Scale Left 11/02/2006 = 188.18

695 632 575 523 475 432 393 358 325 296 269 (I 0105A)

10 7 MSCI China Index / MSCI World Index Scale Right 11/02/2006 = 2.96

Comex Gold Futures Index Scale Left 11/02/2006 = 633.30

1998

1999

Ned Davis Research Group

2000

2001

2002

2003

2004

2005

4

2

Dow Jones Emerging Markets Index / Dow Jones Developed Markets Index Scale Left 11/02/2006 = 86.73

43 39 36 33 30 27 25 23 21 19 17

NDR Global Basic Resources Sector/ NDR Global Composite Scale Right 11/02/2006 = 42.18

385 359 335 312 291 271 253 236 220 205 191

S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1997

5

3 117 107 97 89 81 74 67 61 56 51 46 42

70 63 58 53 48 44 40 36 33 30 27

NDR Australia Composite / NDR Global Composite Scale Right 11/02/2006 = 72.87

Daily Data 7/01/1996 - 11/02/2006 (Log Scale)

Global Reflation Theme (I)

2006

(I 0105)

23

Reuters-CRB Continuous Commodity Index Scale Left 11/02/2006 = 391.69

S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1997

1998

1999

2000

2001

2002

2003

2004

2005

Please see important disclosures at the end of this document.

2006

• ... with several base metals and agricultural commodities back at new highs.

Daily Data 7/01/1996 - 11/03/2006 (Log Scale)

London Metals Index and Select Components

3818 3307 2864 2481 2149 1861 1612 1396 1209 1047

London Metals Index Scale Right 11/03/2006 = 3906.1

1605 1407 1234 1082 948 831 729 639 560 491 430

9868 8974 8160 7421 6748 6136 5580 5074 4614 4196 3815

Tin Scale Right 11/03/2006 = 10190

Nickel Scale Left 11/03/2006 = 32690

Zinc Scale Right 11/03/2006 = 4340

(STH0618A_C)

S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1997

1998

1999

Ned Davis Research Group

2000

2001

2002

2003

2004

2005

292 272 253 235 219 204 189 176 164 153

Reuters-CRB Grains and Oilseeds Index Scale Right 11/03/2006 = 264.88

398 370 344 319 297 276 256 238 221 205 191

Lead Scale Left 11/03/2006 = 1710

31545 25775 21060 17207 14060 11488 9387 7670 6267 5120 4184

Daily Data 7/01/1996 - 11/03/2006 (Log Scale)

Agricultural Commodity Perspectives

Corn Futures* Scale Left 11/03/2006 = 351.38

521 480 443 408 376 347 320 295 272 250

Wheat Futures* Scale Right 11/03/2006 = 505.75

251 229 209 190 174 158 144 131 120 109

4016 3416 2906 2472 2102 1788 1521 1294 1101 936 796

Oats Futures* Scale Left 11/03/2006 = 263.62

Orange Juice Futures* Scale Right 11/03/2006 = 197.89

*91-Day Perpetual Futures Contract

2006

(STH0618B_C)

24

S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1997

1998

1999

2000

2001

2002

2003

2004

2005

Please see important disclosures at the end of this document.

2006

188 168 150 134 119 106 95 85 76 68 60

• When freight index has reflected rising demand, commodities and emerging markets have benefited.

Chart title has been changed.

Monthly Data 11/30/1992 - 9/30/2006 (Log Scale)

Monthly Data 3/31/1991 - 9/30/2006 (Log Scale)

381 361 342 324 307 291 276 261 248 235 222 211 200 189

Reuters-CRB Continuous Commodity Index vs Cass Freight Index For Expenditures Momentum Reuters-CRB Index Gain/Annum When: 12-Month % Change Of Cass Freight Index * Above 7%

Gain/ Annum

% of Time

11.4

36.5

Between -3% and 7%

0.5

45.2

-3% and Below

-4.0

18.2

Reuters-CRB Continuous Commodity Index

9/30/2006 = 370.1

2.1

2.1

Cass Freight Index For Expenditures

1.9

1.9

1.7

1.7

1.5

1.5

1.3

1.3

1.2

1.2

1.1

1.1

1.0

9/30/2006 = 2.1 Cass Freight Index 12-Month Rate of Change (Three-Month Smoothing)

25 16 9 4 1 0 -1 -4 -9

Ned Davis Research Group

Dow Jones Emerging Markets Index / Dow Jones Developed Markets Index

Emerging/Developed Gain/Annum When: Cass Freight Index Indicator:

2.1 2.0 1.9

1.0

1.8

25 16 9 4 1 0 -1 -4 -9

1.7

Favors Developed

% of Time

5.2

44.6

-6.9

55.4

9/30/2006 = 85.0 1994

1995

1996

1997

1998

9/30/2006: Cass Freight Index For Expenditures ( 9/30/2006 = 2.11 Five-Month Smoothing ( ) 9/30/2006 = 2.10

1999

2000

2001

2002

2003

2004

)

Five-Month Smoothing Rises 2.7% from Trough = Favors Emerging Markets Five-Month Smoothing Falls 0.2% from Peak = Favors Developed Markets

2005

157 146 135 125 116 108 100 93 86 80 74 68 63 59 55 51 47 43

2006

2.1 2.0 1.9 1.8 1.7

1.6

1.6

1.5

1.5

1.4

1.4

1.3

1.3

1.2

1.2

1.1

1.1

1.0

1.0

(I 3161)

25

Gain/ Annum

* Favors Emerging

1993

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

9/30/2006 = 18.8% 1992

(I 187)

157 146 135 125 116 108 100 93 86 80 74 68 63 59 55 51 47 43

381 361 342 324 307 291 276 261 248 235 222 211 200 189

Dow Jones Emerging Markets Index / Dow Jones Developed Markets Index

Cass Freight Index For Expenditures Please see important disclosures at the end of this document.

• Energy has lagged, but futures sentiment is extremely pessimistic.

719 650 588 532 482 436 394 357 323 292 264 239 216 195 177 160 145 131 118

Daily Data 10/11/1988 - 11/03/2006 (Log Scale)

Reuters-CRB Energy Index

704.5

671.0

Reuters-CRB Energy Index Gain/Annum When: Energy Sentiment Seven-Day Smoothing: Above 63 Between 45 and 63 * 45 and Below

Gain/ Annum

% of Time

-3. 5

19. 8

4. 9

44. 7

20. 9

35. 5

482.5

511.1 445.4

367.8

322.1

313.7

227.5

164.8

11/03/2006 = 533.17

719 650 588 532 482 436 394 357 323 292 264 239 216 195 177 160 145 131 118

DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S

84 80 76 72 68 64 60 56 52 48 44 40 36 32 28 24 20 (DAVIS60)

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Extreme Optimism

2003

2004

2005

83.9

2006

79.5

77.5

74.0

36.8

38.0

71.3 68.5

39.2

29.7

27.0

Extreme Pessimism

23.0

11/03/2006 = 33.04

NDR Crowd Sentiment Poll for Energy Futures (Seven-Day Smoothing)

Ned Davis Research Group

26

Please see important disclosures at the end of this document.

84 80 76 72 68 64 60 56 52 48 44 40 36 32 28 24 20

• Resource stocks still supported by commodity momentum, dollar weakness and gold strength. Chart title has been changed.

Weekly Data 1/06/1985 - 10/29/2006 (Log Scale)

-10 -20

30

30

30

10

20

20

0

10

10

-10

0

0

-20

-10

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

Ned Davis Research Group

10/29/2006 = 26.3%

-20

10/29/2006 = 18.0% (I 8011)

40

(I 8010)

27

Please see important disclosures at the end of this document.

2006

0

50

2005

10

20

60

40

2004

20

50

10/29/2006 = 598.2

680 640 600 560 520 480 440 400 360 320 280

Gold 52-Week Rate of Change (Three-Week Smoothing)

2003

30

60

40

10/29/2006 = 42.1 Comex Gold

2002

40

10.6

680 640 600 560 520 480 440 400 360 320 280

50

Reuters-CRB Continuous Commodity Index / Dollar Ratio 52-Week Rate of Change (Four-Week Smoothing)

65.8

-11.8

2001

50

23.6

-2.8

2000

10/29/2006 = 453.4

450 420 390 360 330 300 270 240 210 180

-12 and Below

10.0

1999

Reuters-CRB Continuous Commodity Index / Trade-Weighted U.S. Dollar Ratio

Between -12 and 12

1998

10/29/2006 = 42.1

* Above 12

1997

26.9

1996

32.9

-7.7

% of Time

1995

-3.0

-8 and Below

Gain/ Annum

1994

Between -8 and 10

Smoothed 52-Week % Change of Gold:

1993

40.2

1992

5.2

* Above 10

Relative Strength Gain/Annum When:

1991

% of Time

71 63 56 50 45 40 36 32 28 25 22 20 18

NDR Global Basic Resources Sector/ NDR Global Composite (Equal-Weighted)

1990

Gain/ Annum

71 63 56 50 45 40 36 32 28 25 22 20 18

1989

Basic Resources Sector RS Line Gain/Annum When CRB/Dollar Ratio Momentum Is:

71 63 56 50 45 40 36 32 28 25 22 20 18

1988

450 420 390 360 330 300 270 240 210 180

NDR Global Basic Resources Sector/ NDR Global Composite (Equal-Weighted)

Weekly Data 1/05/1986 - 10/29/2006 (Log Scale)

NDR Global Basic Resources Sector Relative Strength vs Comex Gold Momentum

1987

71 63 56 50 45 40 36 32 28 25 22 20 18

NDR Global Basic Resources Sector RS Line vs Reuters-CRB/Trade-Weighted U.S. Dollar

-10 -20

• Inverse correlation evident in opposite trends and dropping dollar/gold ratio.

104.5

11/02/2006: U.S. Dollar Index (Solid Line) = 85.34 200-Day MA (Dashed Line) = 86.93 200-Day MA is Falling

102.4 100.3

98.2

106.7

U.S. Dollar Index Gain/Annum When: 5/08/1980 - 11/02/2006 200-Day Moving Average:

96.2

104.5

Gain/ Annum

% of Time

Is Rising

2.2

55.8

* Is Falling

-2.9

44.2

100.3

Dollar GPA

Gold GPA

% of Time

Rising

8.8

2.9

-5.5

47.4

* Falling

-7.4

-2.9

4.9

52.6

-1.7

-0.1

1.6

100.0

U.S. Dollar Index Scale Right 11/02/2006 = 85.3

96.2 94.2 92.3

90.4

90.4

819 746 680 620 565 515 469 427 389 355 323 295 269

85.0

83.2

83.2

81.5

81.5 N

J

2003

M

M

J

S

N

J

2004

Gold Futures Gain/Annum When: 11/03/1980 - 11/02/2006 200-Day Moving Average:

Gain/ Annum

% of Time

* Is Rising

4.7

52.2

Is Falling

-5.2

47.8

M

M

J

S

N

J

2005

M

M

J

S

N

11/02/2006: Comex Gold Perpetual Futures (Solid Line) = 633.30 200-Day MA (Dashed Line) = 608.54 200-Day MA is Rising

Moving average direction based on reversals of 0.5% or greater.

J

2006

M

M

J

S

N

706 676 647 619 593 567 543 520 497 476 456 436 418 400 383 366 350 335 321

56 52 48 44 40 36 32 28 24 20 16 12

Gold Futures vs. 200-Day Moving Average

Ned Davis Research Group

(I 242)

28

160 151 143 135 128 121 114 108 102 96 91 86 81

Comex Gold Scale Left 11/02/2006 = 633.3

56 52 48 44 40 36 32 28 24 20 16 12

11/02/2006: U.S. Dollar / Gold (Solid Line) = 13.48 200-Day MA (Dashed Line) = 14.36 200-Day MA is Falling Moving Average direction based on reversals of 0.5% or greater.

Please see important disclosures at the end of this document.

2004

85.0

1994

86.8

1999

88.6

86.8

1989

88.6

(I 241)

Ratio GPA

Buy/Hold

98.2

92.3

706 676 647 619 593 567 543 520 497 476 456 436 418 400 383 366 350 335 321

When Dollar/Gold 200-Day Moving Average:

102.4

Moving average direction based on reversals of 0.5% or greater.

94.2

Daily Data 10/15/1979 - 11/02/2006 (Log Scale)

U.S. Dollar and Gold vs. Dollar / Gold 200-Day Moving Average

1984

106.7

Daily Data 11/01/2002 - 11/02/2006 (Log Scale)

U.S. Dollar Index vs. 200-Day Moving Average

• China's expansion continuing at manageable pace ...

1 2003

2

3

4

Ned Davis Research Group

1 2004

2

3

4

1 2005

2

3

4

1 2006

2

3

(IE15000)

29

Prime Lending Rate 9/30/2006 = 6.12% ( )

Source: Haver Analytics

Please see important disclosures at the end of this document.

2006

4

9/30/2006 = 4.7

16 14 12 10 8 6 4 2 0 -2 -4 -6 -8

2005

Year-to-Year Point Change

2004

9/30/2006 = 0.8

Source: Haver Analytics, China National Bureau of Statistics

2003

Business Climate Weakening

2001

Business Climate Improving

2000

15 12 9 6 3 0 -3 -6 -9 -12

Quarterly Point Change

1999

(IE15202)

118

9/30/2006 = 136.7

1998

15 12 9 6 3 0 -3 -6 -9 -12 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8

120

Not Seasonally Adjusted

1997

118

1996

122

120

1995

124

122

1994

124

Industrial Production Value Added Smoothed Year-to-Year Change 9/30/2006 = 16.17% ( )

Consumer Price Index Year-to-Year Change 9/30/2006 = 1.5% ( )

1993

126

1992

128

126

1991

128

1990

130

1989

132

130

28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2

%

1988

132

28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2

134

Mean = 132.5

1987

134

1986

136

1985

136

Monthly Data 1/31/1985 - 9/30/2006

Chinese Economic Factors

2002

Quarterly Data 12/31/2002 - 9/30/2006

Chinese Business Climate Index

• ... and for China and commodities alike, the bubble stage has yet to be reached.

369

(Log Scale)

Commodities & China Market vs. Bubbles

369

Reuters-CRB Continuous Commodity Index (2000 - 2006)

326

326

Reuters-CRB Percent Gain Ending 10/31/2006:

288

Time Period:

255 225

288

% Gain

One-Year Prior

17.5%

Six-Years Prior

75.1%

255 225

199

199 D

M J

S

2001

37

D

M J

S

2002

D

M J

S

2003

D

M J

S

2004

D

M J

S

2005

D

M J

S

2006

D

M J

S

2007

MSCI China Index (2000 - 2006)

31

D

M J

S

2008

D

M J

S

2009

37 31

MSCI China Index Percent Gain Ending 10/31/2006:

26

Time Period:

22 18

26

% Gain

One-Year Prior

54.9%

Six-Years Prior

58.3%

22 18

15

15 D

2158 1588

S

2001

3985 2933

M J

D

M J

S

2002

D

M J

2003

NASDAQ Percent Gain Ending 2/29/2000: Time Period:

S

D

M J

S

2004

D

M J

S

2005

D

M J

S

2006

D

M J

S

2007

D

M J

S

2008

D

M J

S

2009

3985

NASDAQ Composite Index (1994 - 2003)

% Gain

One-Year Prior

105.3%

Six-Years Prior

492.6%

2933 2158 1588

1168

1168

860

860

M J

310

S

D

M J

S

1995

D

M J

S

1996

D

M J

S

1997

D

M J

S

1998

D

M J

S

1999

D

M J

S

2000

D

M J

S

2001

D

M J

S

2002

D

2003 310

Dow Jones Industrial Average (1923 - 1932)

212

212

145

145

99 68

Time Period:

47 S 35520 29234

D

M J

S

1924

D

M J

S

1925

Time Period:

% Gain

19802

One-Year Prior

29.0%

Six-Years Prior

293.3%

58.2%

Six-Years Prior

306.9%

D

M J

S

1926

241

S

D

47

M J

S

1928

D

M J

S

1929

D

M J

S

1930

D

M J

S

1931

D

M J

1932

35520

19802 16298

Nikkei 225 Average (1983 - 1992)

M J

324

M J

1927

24060

11039

435

D

29234

13413

583

68

% Gain

One-Year Prior

Nikkei Percent Gain Ending 12/31/1989:

24060 16298

99

DJIA Percent Gain Ending 8/31/1929:

1984

S

D

M J

S

1985

D

M J

1986

S

D

M J

1987

S

D

M J

1988

S

13413 11039

D

M J

1989

S

D

M J

1990

S

D

M J

1991

S

D

M J

1992

S

D

583

Gold Percent Gain Ending 1/31/1980: Time Period:

435

% Gain

One-Year Prior

189.7%

Six-Years Prior

426.6%

324 241

Comex Gold (1974 - 1983)

180

180

134 (I 0 1 8 1 A )

Ned Davis Research Group

134 M J

S

D

M J

1975

S

D

M J

1976

S

D

M J

1977

S

D

M J

1978

30

S

D

M J

1979

S

D

M J

1980

S

D

M J

1981

S

D

M J

1982

S

D

1983

Please see important disclosures at the end of this document.

ADDENDUM

Ned Davis Research Group

Europe

39 38 37

36.67

Composite Advance-Decline Line 11/03/2006 = 53.63

50-Day Smoothing (---)

53.6

53.6

53.34

53.2

53.2

53.01

52.8 52.36

52.39

52.0

52.87

52.70

52.65

52.4

52.8

52.81

52.4

52.29

52.0

51.96

51.6

51.6

% Issues at 30-Day New Highs & New Lows

50

38

25

48

36

50

36

25

0

0

-25

-25

-50

50

-75 N

(IGB4000)

D

J

F

M

A

M

J

2005 Performance Analysis Dates: (9/11/1985 - 11/03/2006)

Current Mode Entry Date: 7/25/2006

Ned Davis Research Group

-50

51

J

A

S

O

NDR Europe Composite / NDR Global Composite 11/05/2006 = 84.9

N

D

J

F

2006

M

A

M

80

-75 J

Performance When Price & A/D Lines are: * Both Above Smoothings At Least One Below

1987

37.00

J

A

S

O

N

% Gain/Annum

% of Time

33. 3

51. 1

-6. 7

48. 9

60 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30

(IGR4000)

A1

90 85 80 75 70 65 60 55

40-Week Smoothings (---)

60 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30

Scale = % Points

37.53

1907 1495 1172 919 721 565 443 347 272 214 167

2006

38.70

+4

37.34

38.25

+3

38.06

37

40 39.32

+2

38

38.71

+1

38.98

38.45

M

39

41

39.88

39.55

Dashed Lines = Std Dev

40

2005

42

40.97

41

2004

43

2002

42

2001

44

43.05

43

2000

44

90 85 80 75 70 65 60 55

45

50-Day Smoothing (---)

-1

45

Relative Strength Line 11/03/2006 = 44.17

1999

960

Current = 400 Issues

1998

1020

1997

1080

1075.5

1048.1

1020

1140

-2

1080 960

1200

1168.7

1148.2

1140

1996

1260

1239.2

1200

40-Week Smoothings (---)

1995

1320

1260

1994

1320

1993

1380

NDR Europe Composite (Log Scale) 11/05/2006 = 1489.5

1992

1380

1907 1495 1172 919 721 565 443 347 272 214 167

1991

1440

1990

1500

1455.0

1440

1989

50-Day Smoothing (---)

1988

Composite Price Line 11/03/2006 = 1489.48

1500

Weekly Data 1/05/1986 - 11/05/2006

NDR Equal-Weighted Europe Composite and Relative Strength

2003

Daily Data 11/03/2004 - 11/03/2006

NDR Europe Composite vs. Breadth Indicators

Europe Composite (Y/Y) minus Global Composite (Y/Y) -- NDR Equal-Weighted Indices

Weekly Data 11/09/2003 - 11/05/2006 (Log Scale)

1510

NDR Europe Composite Stock Participation Indicators

11/05/2006 = 1489.48 1510

NDR Europe Composite

1447

1447

1386

1386

1328

1328

1273

1273

1220

1220

1169

1169

1120

1120

1073

Composite Performance Analysis Dates: (10/06/1985 - 11/05/2006)

1029 986

Composite Performance When Participation Indicators are:

944

* Both in Upper Modes

% Gain/ Annum 32. 8

Mixed

905 867 100

Weekly Data 4/12/1992 - 11/05/2006

% of Time 29. 1

5. 2

53. 9

Both in Lower Modes

-1. 2

17. 0

Buy/Hold

11. 4

100. 0

Percentage of Composite's Stocks Above Their 10-Week Moving Averages

Upside Participation

1073 1029 986 944 905 867 100

90

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10 100 95 90 85 80 75 70 65 60 55 50 45 40 35 (IGP4000)

Downside Participation

11/05/2006 = 85.32 Percentage of Composite's Stocks Above Their 40-Week Moving Averages

11/05/2006 = 87.50 D J F

2004

M A M

Upside Participation

Downside Participation J J A

Ned Davis Research Group

S O N D J

F M A M

2005

J J

A S O N D J

F M A M J J

2006

A S O N

10 100 95 90 85 80 75 70 65 60 55 50 45 40 35

175 170 165 160 155 150 145 140 135 130 125 120 115 110 105 100 95 90 85 80 75 70 65

Ratio of Dow Jones Stoxx Index to JP Morgan European Monetary Union Bond Index vs Momentum Indicator When Momentum Indicator is:

STOXX TR GPA

Bonds TR GPA

Ratio GPA

% of Time

Between-4% and 6%

12.5

8.8

3.4

55.3

Buy/Hold

11.5

* Above 6%

-4% and Below

A2

-2.9

3.0

11.1 7.7

18.3

-12.6 3.5

25.1

19.6

100.0

Based on Total Return Indices

JP Morgan European Bond Index used prior to 1/3/1995.

27 24 21 18 15 12 9 6 3 0 -3 -6 -9 -12 -15 -18 -21 -24 -27 -30 (I 2104)

21.8

175 170 165 160 155 150 145 140 135 130 125 120 115 110 105 100 95 90 85 80 75 70 65

Favors Stocks

Six-Week Smoothing of Six-Week Rate of Change of STOXX Index Minus Six-Week Rate of Change of Bond Index

Favors Bonds

11/05/2006 = 6.9%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

27 24 21 18 15 12 9 6 3 0 -3 -6 -9 -12 -15 -18 -21 -24 -27 -30

108

108

103

103

98

98

94

94

90

90

86

86

Ned Davis Research Group

2006

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

(IE4230)

10/31/2006 = 111.8 2005

82

Source: Haver Analytics, Ifo Institute For Economic Research, www.ifo.de

82

30 25 20 15 10 5 0 -5 -10 -15 -20

(IE1200A)

A3

10/31/2006 = 1.0

Sentiment Improving

EUCOM Index Year-to-Year Point Change

10/31/2006 = 9.9

Sentiment Deteriorating

Source: Haver Analytics, European Commission

2006

113

Current Situation

EUCOM Index Monthly Point Change

2005

113

4 3 2 1 0 -1 -2 -3 -4 -5

2004

10/31/2006 = 99.2

105 102 100 98 96 94 92 90 88 86 84

Expectations

10/31/2006 = 110.3

2003

85

2001

105 102 100 98 96 94 92 90 88 86 84

10/31/2006 = 105.3

2000

85

1999

88

1998

88

1997

91

1996

91

1995

94

1994

94

1993

97

1992

97

1991

100

1990

100

1989

103

1988

103

European Commission Euro-Zone Economic Sentiment Index

116 112 108 104 100 96 92 88 84 80 76

1987

107

Business Climate

1986

107

Monthly Data 1/31/1986 - 10/31/2006

European Commission Euro-Zone Economic Sentiment Indicator

2002

Monthly Data 1/31/1991 - 10/31/2006 (Log Scale)

Ifo Institute's Survey of Pan-German Business Sentiment

116 112 108 104 100 96 92 88 84 80 76 4 3 2 1 0 -1 -2 -3 -4 -5 30 25 20 15 10 5 0 -5 -10 -15 -20

5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 (IE7203)

Source: Haver Analytics

ISAE Business Confidence Survey (Monthly Point Change)

Ned Davis Research Group

120 117 114 111 108 105 102 99 96 93 90 87 84 81 78 75

10/31/2006 = -0.2

Above Normal

Mean = 100.0

Below Normal

5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9

5

120 117 114 111 108 105 102 99 96 93 90 87 84 81 78 75

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

10/31/2006 = 2

Business Climate Improving

5

4

4

3

3

2

2

1

1

0

0

-1

-1

-2

-2

-3

-3

-4

Business Climate Weakening

-5 Source: Haver Analytics (IE6202)

A4

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1977

10/31/2006 = 108 1978

102 100 98 96 94 92 90 88 86 84 82 80 78 76 74 72

Monthly Data 4/30/1976 - 10/31/2006

INSEE French Composite Business Climate Indicator

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

10/31/2006 = 97.1 1991

102 100 98 96 94 92 90 88 86 84 82 80 78 76 74 72

Monthly Data 1/31/1991 - 10/31/2006

ISAE Italian Business Confidence Survey

French Business Climate Indicator (Monthly Point Change)

-4 -5

JAPAN Monthly Data 1/31/1966 - 9/30/2006

Japanese Economic Factors 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 -14 -15 -16 (IE3000)

%

Three-Month Interest Rate 9/30/2006 = 0.34 ( )

Consumer Price Index Year-to-Year Change 9/30/2006 = 0.60 ( )

Industrial Production Mining and Manufacturing Smoothed Year-to-Year Change 9/30/2006 = 4.48 ( )

Source: Economist Magazine, Haver Analytics

1970

1975

Ned Davis Research Group

1980

1985

1990

1995

2000

2005

24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 -14 -15 -16

2.6 2.5 2.4 2.3 2.2 2.1 2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8 -0.9 -1.0 -1.1 -1.2 -1.3 -1.4 -1.5 (IE3702)

A5

Monthly Data 1/31/1996 - 9/30/2006

Japanese Consumer Price Measures (Year-to-Year Changes) Consumer Price Index ( ) Core Consumer Price Index (

2.6 2.5 2.4 2.3 2.2 2.1 2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8 -0.9 -1.0 -1.1 -1.2 -1.3 -1.4 -1.5

0.6% ) 0.2%

Seasonally Adjusted

Source: Haver Analytics

M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Monthly Data 3/31/1978 - 9/30/2006

Japanese Consumer Price Index (Year-to-Year Change)

CPI Points/Annum When:

8 7

Operating Rate Is:

6

* Between 97.7 and 109.5

Points/ Annum

% of Time

0.3

21.1

0.0

59.5

-0.6

19.3

Above 109.5

5

Below 97.7

8 7 6 5

4

4

3

9/30/2006 = 0.6%

3

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

Tight Capacity - Inflationary

110 108 106 104

114 112 110 108 106 104

102 100

102 100

98 96

Excess Capacity - Disinflationary

94 92

(IE3753)

1993

8/31/2006 = 106.3%

114 112

90 88

1992

1991

1990

1989

1988

1987

1986

-1

1985

-1

1984

0

1983

0

1982

1

1981

1

1980

2

1979

2

Source: Haver Analytics

Japanese Manufacturing Operating Rate

Ned Davis Research Group

98 96 94 92 90 88

65 60 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30

(IE3214)

A6

Tankan Survey of Large Manufacturing Enterprises 9/30/2006 = 24 Scale Right ( )

Tankan Survey of Large Non-Manufacturing Enterprises 9/30/2006 = 20 Scale Left ( )

More Businesses Confident

*

*

*Survey methodology changed 3/31/2004 Data adjusted historically

More Businesses Pessimistic

Large Manufacturer Sentiment Quarterly Index Change

15 10 5 0 -5 -10 -15 -20 9 6 3 0 -3 -6 -9 -12

Quarterly Data 6/30/1983 - 9/30/2006

Tankan Survey of Large Enterprises

9/30/2006 = 3

Large Non-Manufacturer Sentiment Quarterly Index Change

9/30/2006 = 0

Source: Bank of Japan

1985

1990

1995

2000

2005

45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 -50 15 10 5 0 -5 -10 -15 -20 9 6 3 0 -3 -6 -9 -12

0.70

0.7074

0.7096 0.6969

0.68

0.6892

8.11 7.98

Chinese Yuan Scale Left 11/01/2006 = 6.73

7.92

7.62 7.39

7.29 7.23

7.07

6.76

6.68

N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N

(STH0618F_C)

2004

Ned Davis Research Group

2005

2006

0

-1

-1

2006

2005

2004

2003

0.72

2002

0.76

-2

German data used prior to 1999, Euro-Zone data used thereafter. 2001

-2

2000

0.7219

0.7131

0

1999

0.7211

1

0.74

0.7272

0.72

1

1998

0.74

2

1997

0.7505

2

1996

0.76

0.78

%

9

0.70

8

0.68

Canada U.S. Japan

7

8.1 8.0 7.9 7.8 7.7 7.6 7.5 7.4 7.3 7.2 7.1 7.0 6.9 6.8 6.7 6.6

3.47 ( 3.05 ( -0.23 (

) ) )

9 8 7

6

6

5

5

4

4

3

3

2

2

1

1

0

0

-1

-1

(IE911)

A7

6

3

1995

0.7638

0.80

7

3

1994

Euro Scale Left 11/02/2006 = 0.6683

8

4

1993

0.7928

) ) )

4

1992

0.8033

( ( (

5

1991

0.8402 0.8267

2.17 1.54 1.17

5

1990

0.8734

6

1989

0.8762

7

1988

0.8869

% Euro-Zone Switzerland U.K.

1987

0.9111

8

1986

0.8923

0.78

8.1 8.0 7.9 7.8 7.7 7.6 7.5 7.4 7.3 7.2 7.1 7.0 6.9 6.8 6.7 6.6

0.9155

0.9205

0.98 0.97 0.96 0.95 0.94 0.93 0.92 0.91 0.90 0.89 0.88 0.87 0.86 0.85 0.84 0.83 0.82

1985

U.S. Dollar Scale Right 11/02/2006 = 0.8539

1984

0.80

0.9800

0.9638

Weekly Data 7/09/1982 - 10/27/2006

Three-Month Real Interest Rates (U.K., Euro-Zone, Switzerland)

1983

0.98 0.97 0.96 0.95 0.94 0.93 0.92 0.91 0.90 0.89 0.88 0.87 0.86 0.85 0.84 0.83 0.82

Daily Data 11/03/2003 - 11/02/2006

Foreign Currencies per 100 Japanese Yen

Three-Month Real Interest Rates (U.S., Canada, Japan)

-10 -20 -30 -40 (IGR999)

2006

2005

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

+2 SD

30 20

+1 SD

Scale = % Points

0

40

10 0

Mean

10

-10 -20 -30 -40

Japan Composite (Y/Y) minus Global Composite (Y/Y) -- NDR Equal-Weighted Indices

Ned Davis Research Group

S

S

S

B B

B S

S

B B

B

S B

S B

B

B

S

S

S

S S

S

S

S

S

S

B

S

S

S

S

S

B B

S B S

B B B B

B

B

B

B

B

B

Cyclical Turning Points Based on NDR Criteria

B B

Dow Jones Industrial Average Bull and Bear Markets - Cyclical and Secular

S

B

49918 34748 24188 16837 11720 8158 5679 3953 2752 1915 1333 928 646 450 313 218 152 106

2004

1999

1994

1989

1974

1969

B

1984

Shaded Areas - Secular Bear Markets Up Arrows - Start of Cyclical Bull Markets Down Arrows - Start of Cyclical Bear Markets

B

1979

S

14342 10863 8227 6231 4720 3575 2707 2051 1553 1176 891 675 511 387 293 222 168 127

A8

S

S

B

(I 364)

S

S

1964

49918 34748 24188 16837 11720 8158 5679 3953 2752 1915 1333 928 646 450 313 218 152 106

1959

90 80 70 60 50 40 30 20

50

-1 SD

40

641 547 468 399 341 292 249 213 182 155 133

60

-2 SD

50

20

40-Week Smoothing (---)

+3 SD

60

1988

1987

NDR Japan Composite / NDR Global Composite 10/29/2006 = 24.6

2004

90 80 70 60 50 40 30 20

40-Week Smoothings (---)

Daily Data 5/16/1949 - 11/02/2006 (Log Scale)

Nikkei 225 Average Bull and Bear Markets - Cyclical and Secular

1954

NDR Japan Composite (Log Scale) 10/29/2006 = 434.5

2003

641 547 468 399 341 292 249 213 182 155 133

30

Weekly Data 1/05/1986 - 10/29/2006

NDR Equal-Weighted Japan Composite and Relative Strength

B

14342 10863 8227 6231 4720 3575 2707 2051 1553 1176 891 675 511 387 293 222 168 127

New Chart

3

10/29/2006 = 0.28%

2 1

4

3 2

3

1

Stock Earnings Yield Rising Relative To 10-Year Gov. Bond Yield

1591 1472 1362 1261 1166 1079 999 924 855 791 732 677 627 580 537 497 459 425 393

2006

2005

2004

4

2003

5

CD Rate

10/31/2006 = 1010.6 2002

4

38.6

2001

5

61.4

-6.3

2000

6

11.6

Below 0

1999

6

* Above 0

1998

7

1997

7

% of Time

1996

8

Gain/ Annum

1995

8

When Yield Spread Momentum:

1994

10/29/2006 = 16669.07

MSCI Japan Index Gain/Annum When:

1993

26.5

1992

50.3

8.2

-0.3 and Below

1991

23.3

4.3

1990

-8.5

1989

Above 0.1 * Between -0.3 & 0.1

1988

Gain/ % Annum of Time

Monthly Data 6/30/1983 - 10/31/2006 (Log Scale)

MSCI Japan Index

1987

CD Rate Point Change Is:

1591 1472 1362 1261 1166 1079 999 924 855 791 732 677 627 580 537 497 459 425 393

1986

42072 37448 33333 29670 26410 23507 20924 18625 16578 14756 13135 11691 10407 9263 8245

Nikkei 225 Gain/Annum When:

1984

42072 37448 33333 29670 26410 23507 20924 18625 16578 14756 13135 11691 10407 9263 8245

Nikkei 225 Average vs. Japan's Three-Month CD Interest Rate (26-Week Point Change)

1985

Weekly Data 6/10/1984 - 10/29/2006 (Log Scale)

10/31/2006 = 0.21% Points

4 3

2

2

1

1

1

0

0

0

0

-1

-1

-1

-1

-2

-2

-3

-3

Two-Week Smoothing

26-Week Point Change

Bearish

1

-2

-2

Bullish

-4

Ned Davis Research Group

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

(I 379)

1985

10/29/2006 = 0.10% Points

-5 (I 382)

A9

Stock Earnings Yield Falling Relative To 10-Year Gov. Bond Yield

MSCI Japan Earnings Yield Minus Japan 10-Year Gov't Bond Yield (12-Month % Point Change)

-4 -5

Earnings Yield Percent From Rolling Moving Averages MSCI Index

Five-Year Mean

10-Year Mean

25-Year Mean

Chart

World

22.5

38.6

13.5

IV100

North America

16.7

29.2

-6.3

IV140

World ex. U.S.

27.8

47.4

35.3

IV130

U.S.

16.3

28.9

-7.6

IV200

EAFE

28.4

48.6

37.9

IV110

EAFE ex. Japan

20.5

34.6

8.2

IV120

Europe

21.6

37.9

9.7

IV2000

Europe ex. U.K.

27.5

42.9

11.9

IV2010

Pacific Basin

59.3

92.7

73.0

IV14000

Far East

76.3

114.1

84.3

IV14020

U.K.

14.4

30.2

7.1

IV400

Japan

95.6

171.1

111.6

IV300

France

58.7

78.8

37.0

IV700

Pacific ex. Japan

10.6

5.6

N/A

IV14010

Canada

18.9

29.3

16.6

IV500

Germany

45.7

59.5

25.4

IV600

Australia

13.7

16.9

-7.2

IV900

Italy

32.1

47.1

N/A

IV800

Emerging

-2.5

9.3

N/A

IV3000

All Countries World

21.3

37.1

N/A

IV3010 ICS_25.RPT

Ned Davis Research, Inc.

Ned Davis Research Group

A10

more u.s. perspectives

8.76 8.05 7.74 7.06 6.79

6.95

5.44

5.53

5.25

5.19

4.89 4.61 4.16

4.22 3.70

Ned Davis Research Group

2003

1998

1993

3.13

3.89

4

LT Bonds TR GPA 10.6 9.3 4.5 8.4

Cash GPA 4.8 5.9 8.0 6.2

Gold GPA 3.6 5.6 14.9 7.4

5605 4464 3555 2832 2255 1796 1430 1139 907 723 575 458 365 291 231 184 147 117 93

% of Time 26.7 47.4 25.9 100.0

Steep Yield Curve

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

9.09

1975

9.47

1974

10.12

S&P 500 TR GPA 7.6 19.6 -1.5 10.8

Stock Returns Based on S&P 500 Total Return (Thin Solid Line) Bond Returns Based on Long-Term Government Bond Total Return (Heavy Solid Line) Cash Returns Based on 91-Day Treasury Bill Total Return (Thin Dashed Line) Gold Returns Based on New York Spot Gold Prices (Heavy Dashed Line) 1973

10.23

When 10-Yr/T-Bill Yield Spread is: Above 2.6 Between 0.6 and 2.6 * 0.6 and Below Buy/Hold

1972

11/02/2006 = 4.60%

5605 4464 3555 2832 2255 1796 1430 1139 907 723 575 458 365 291 231 184 147 117 93

1971

13.99 13.65

15.6 15.2 14.8 14.4 14.0 13.6 13.2 12.8 12.4 12.0 11.6 11.2 10.8 10.4 10.0 9.6 9.2 8.8 8.4 8.0 7.6 7.2 6.8 6.4 6.0 5.6 5.2 4.8 4.4 4.0 3.6 3.2

1969

%

1988

(B151)

15.84

1983

15.6 15.2 14.8 14.4 14.0 13.6 13.2 12.8 12.4 12.0 11.6 11.2 10.8 10.4 10.0 9.6 9.2 8.8 8.4 8.0 7.6 7.2 6.8 6.4 6.0 5.6 5.2 4.8 4.4 4.0 3.6 3.2

Weekly Data 1/05/1968 - 11/03/2006 (Log Scale)

Stocks/Bonds/Cash/Gold Returns

1970

Daily Data 1/02/1979 - 11/02/2006

10-Year Constant Maturity Treasury Note Yields

4

3

3

2

2

1

1

0

0

-1

11/03/2006 10-Year Yield = 4.64%

-2 -3 (AA408)

A11

Flat or Inverted Yield Curve

Yield Curve - 10-Year Minus Three-Month Treasury Yield

Three-Month Yield = 4.95% Spread = -0.31%

-1 -2 -3

NDR-Defined Secular & Cyclical Bull & Bear Markets NDR-Defined Cyclical Bear Markets Days Date DJIA Date DJIA %Gain Secular Bull Market 3/31/1900 - 1/19/1906 9/24/00 38.80 6/17/01 57.33 47.8 266 6/17/01 57.33 11/9/03 30.88 -46.1 11/9/03 30.88 1/19/06 75.45 144.4 802 Secular Bear Market 1/19/1906 - 8/24/1921 1/19/06 75.45 11/15/07 38.83 -48.5 11/15/07 38.83 11/19/09 73.64 89.7 735 11/19/09 73.64 9/25/11 53.43 -27.4 9/25/11 53.43 9/30/12 68.97 29.1 371 9/30/12 68.97 7/30/14 52.32 -24.1 12/24/14 53.17 11/21/16 110.15 107.2 698 11/21/16 110.15 12/19/17 65.95 -40.1 12/19/17 65.95 11/3/19 119.62 81.4 684 11/3/19 119.62 8/24/21 63.90 -46.6 Secular Bull Market 8/24/1921 - 9/3/1929 8/24/21 63.90 3/20/23 105.38 64.9 573 3/20/23 105.38 10/27/23 85.76 -18.6 10/27/23 85.76 9/3/29 381.17 344.5 2138 Secular Bear Market 9/3/1929 - 4/28/1942 9/3/29 381.17 11/13/29 198.69 -47.9 11/13/29 198.69 4/17/30 294.07 48.0 155 4/17/30 294.07 7/8/32 41.22 -86.0 7/8/32 41.22 9/7/32 79.93 93.9 61 9/7/32 79.93 2/27/33 50.16 -37.2 2/27/33 50.16 2/5/34 110.74 120.8 343 2/5/34 110.74 7/26/34 85.51 -22.8 7/26/34 85.51 3/10/37 194.40 127.3 958 3/10/37 194.40 3/31/38 98.95 -49.1 3/31/38 98.95 11/12/38 158.41 60.1 226 11/12/38 158.41 4/8/39 121.44 -23.3 4/8/39 121.44 9/12/39 155.92 28.4 157 9/12/39 155.92 4/28/42 92.92 -40.4 Secular Bull Market 4/28/1942 - 2/9/1966 4/28/42 92.92 5/29/46 212.50 128.7 1492 5/29/46 212.50 5/17/47 163.21 -23.2 5/17/47 163.21 6/15/48 193.16 18.4 395 6/15/48 193.16 6/13/49 161.60 -16.3 6/13/49 161.60 1/5/53 293.79 81.8 1302 1/5/53 293.79 9/14/53 255.49 -13.0 9/14/53 255.49 4/6/56 521.05 103.9 935 4/6/56 521.05 10/22/57 419.79 -19.4 10/22/57 419.79 1/5/60 685.47 63.3 805 1/5/60 685.47 10/25/60 566.05 -17.4 10/25/60 566.05 12/13/61 734.91 29.8 414 12/13/61 734.91 6/26/62 535.76 -27.1 6/26/62 535.76 2/9/66 995.15 85.7 1324 Secular Bear Market 2/9/1966 - 8/12/1982 2/9/66 995.15 10/7/66 744.32 -25.2 10/7/66 744.32 12/3/68 985.21 32.4 788 12/3/68 985.21 5/26/70 631.16 -35.9 5/26/70 631.16 4/28/71 950.82 50.6 337 4/28/71 950.82 11/23/71 797.97 -16.1 11/23/71 797.97 1/11/73 1051.70 31.8 415 1/11/73 1051.70 12/6/74 577.60 -45.1 12/6/74 577.60 9/21/76 1014.79 75.7 655 9/21/76 1014.79 2/28/78 742.12 -26.9 2/28/78 742.12 9/8/78 907.74 22.3 192 9/8/78 907.74 4/21/80 759.13 -16.4 4/21/80 759.13 4/27/81 1024.05 34.9 371 4/27/81 1024.05 8/12/82 776.92 -24.1 Secular Bull Market 8/12/1982 - 1/14/2000 8/12/82 776.92 11/29/83 1287.20 65.7 474 11/29/83 1287.20 7/24/84 1086.57 -15.6 7/24/84 1086.57 8/25/87 2722.42 150.6 1127 8/25/87 2722.42 10/19/87 1738.74 -36.1 10/19/87 1738.74 7/16/90 2999.75 72.5 1001 7/16/90 2999.75 10/11/90 2365.10 -21.2 10/11/90 2365.10 7/17/98 9337.97 294.8 2836 7/17/98 9337.97 8/31/98 7539.07 -19.3 8/31/98 7539.07 1/14/00 11722.98 55.5 501 Secular Bear Market 1/14/2000 - ? 1/14/00 11722.98 9/21/01 8235.81 -29.7 9/21/01 8235.81 3/19/02 11727.34 29.1 179 3/19/02 10635.25 10/9/02 7286.27 -31.5 10/9/02 7286.27 10/26/2006 (?) 12163.66 66.9 1478 # Cases % Gain # Days Cyclical Bear Markets # Cases % Gain Cyclical Bull Markets All Cyclical Bulls All Cyclical Bears 33 85.3 718 Mean 33 -30.8 Mean 33 65.7 573 Median 33 -26.9 Median Cyclical Bulls within Secular Bulls Cyclical Bears within Secular Bulls 16 109.5 1024 Mean 12 -22.8 Mean 16 77.2 870 Median 12 -19.4 Median Cyclical Bulls within Secular Bears Cyclical Bears within Secular Bears 17 62.5 431 Mean 21 -35.4 Mean 17 50.6 371 Median 21 -31.5 Median Data begins 3/31/1900. Current cyclical bull market not included in summary statistics. Days are calendar days Ned Davis Reserch, Inc. Date

Ned Davis Research Group

NDR-Defined Cyclical Bull Markets DJIA Date DJIA

%Gain

A12

Days 875 665 675 668 393 660 221 71 813 173 171 386 147 959 353 363 252 564 294 195 240 539 209 694 525 591 472 238 55 87 45 616 204 # Days 406 363 295 245 470 525 T_STH0617

14.6 12.5 10.7 9.2 7.8 6.7 5.7 4.9 4.2 3.6 3.1 2.6 2.2 1.9 1.6 1.4 1.2 1.0 (S620)

1945

1950

1955

1960

1965

1970

1975

1980

1985

Shaded Areas Indicate NDR-Defined Secular Bear Markets

Percent GPA During Secular Bull Markets Dates

Percent GPA During Secular Bear Markets

S&P 500

Dividend Yield

3/31/1942 - 12/31/1965

10.8

-4.4

9/30/1929 - 3/31/1942

-10.1

8.7

6/30/1982 - 12/31/1999

16.0

-9.2

12/31/1965 - 6/30/1982

1.0

4.6

12/31/1999 - 9/30/2006?

-1.4

7.1

S&P 500 Dividend Yield vs. Secular Trends

Ned Davis Research Group

Dates

S&P 500

Dividend Yield

1990

1995

2000

14.6 12.5 10.7 9.2 7.8 6.7 5.7 4.9 4.2 3.6 3.1 2.6 2.2 1.9 1.6 1.4 1.2 1.0

733 612 510 426 355 297 247 207 172 144 120 100 84 70 58 49 41 34 28

2005

9/30/2006 = 1.8%

(S0202)

A13

Secular Bull Markets DJIA Real Annualized Gain (GPA) Dates

GPA

Secular Bear Markets DJIA Real Annualized Gain (GPA) Dates

GPA

3/31/1900 - 1/19/1906

6.5

1/19/1906 - 8/24/1921

-5.4

8/24/1921 - 9/3/1929

26.1

9/3/1929 - 4/28/1942

-10.1

4/28/1942 - 2/9/1966

7.3

2/9/1966 - 8/12/1982

-7.9

8/12/1982 - 1/14/2000

13.2

1/14/2000 - 11/02/2006?

-2.4

DJIA Adjusted Using Quarterly Consumer Price Index 11/02/2006 = 512.15

Inflation-Adjusted Dow Jones Industrial Average vs. Secular Trends

10298 7404 5323 3827 2751 1978 1422 1022 735 528 380 273 196 141 101 73 52 38

2005

1940

2000

1935

11/02/2006 = 12018.54 1995

9.1

Shaded Areas Indicate Secular Bear Markets

1990

-1.4

0.4

1985

12/31/1999 - 9/30/2006?

-1.5

1/14/2000 - 11/02/2006?

1980

5.2

2/9/1966 - 8/12/1982

16.8

1975

1.0

10.5

8/12/1982 - 1/14/2000

1970

12/31/1965 - 6/30/1982

4/28/1942 - 2/9/1966

1965

-7.5

-10.6

1960

16.0

9/3/1929 - 4/28/1942

1955

6/30/1982 - 12/31/1999

24.9

1950

7.7

-1.1

8/24/1921 - 9/3/1929

1945

-10.1

1930

Dates

GPA

1/19/1906 - 8/24/1921

1940

Earnings Yield

9/30/1929 - 3/31/1942

Dates

8.0

1935

S&P 500

-3.5

GPA

3/31/1900 - 1/19/1906

1930

Earnings Yield

10.8

Dates

Secular Bear Markets DJIA Nominal Annualized Gain (GPA)

1925

S&P 500

3/31/1942 - 12/31/1965

Secular Bull Markets DJIA Nominal Annualized Gain (GPA)

1920

Dates

Percent GPA During Secular Bear Markets

10298 7404 5323 3827 2751 1978 1422 1022 735 528 380 273 196 141 101 73 52 38

1915

Percent GPA During Secular Bull Markets

16.7 14.7 13.0 11.5 10.2 9.0 7.9 7.0 6.2 5.4 4.8 4.2 3.7 3.3 2.9 2.6 2.3 2.0

1910

9/30/2006 = 5.9%

Daily Data 3/31/1900 - 11/02/2006 (Log Scale)

Dow Jones Industrial Average vs. Secular Trends

1905

16.7 14.7 13.0 11.5 10.2 9.0 7.9 7.0 6.2 5.4 4.8 4.2 3.7 3.3 2.9 2.6 2.3 2.0

Quarterly Data 3/31/1926 - 9/30/2006

S&P 500 Earnings Yield vs. Secular Trends

733 612 510 426 355 297 247 207 172 144 120 100 84 70 58 49 41 34 28

1451 1313 1187 1074 971 878 795 719 650 588 532 481 435 393 356 322 291 263 238

Daily Data 6/30/1987 - 11/03/2006 (Log Scale)

Standard & Poor's 500 Stock Index S&P 500 Index Gain/Annum When: Composite Sentiment is Above 61

Gain/ Annum

% of Time

-10.7

21.2

47 - 61 from Above

0.1

25.5

* 47 - 61 from Below

14.4

30.9

30.4

22.4

Below 47

11/03/2006 = 1364.30

1451 1313 1187 1074 971 878 795 719 650 588 532 481 435 393 356 322 291 263 238

1500 1440 1380 1320 1260 1200 1140 1080 1020 960 900 840 780 720 660 600

S D M J S DM J S DM J S DM J S D M J S DM J S D M J S DM J S D M J S D M J S DM J S DM J S D M J S DM J S DM J S DM J S DM J S DM J S DM J S

80 76 72 68 64 60 56 52 48 44 40 36 32 28 24 (DAVIS65)

Extreme Pessimism

NDR Daily Crowd Sentiment Composite -- Transitional Mode Basis

Ned Davis Research Group

11/03/2006 = 54.0

Extremes Generated when Sentiment Reading: Rises above 61.5% = Extreme Optimism Declines below 55.5% = Extreme Pessimism

1500 1440 1380 1320 1260 1200 1140 1080 1020 960 900 840 780 720 660 600

Arrows represent extremes in optimism and pessimism. They do not represent buy and sell signals and can only be known for certain (and added to the chart) in hindsight.

Sentiment must reverse by 10 percentage points to signal an extreme in addition to the above extreme levels being reached.

SP500 Gain/Annum When: NDR Crowd Sentiment Poll is:

Gain/ Annum

% of Time

-2.9

33.6

8.0

35.3

20.5

31.1

* Above 62 Between 53 and 62 53 and Below

Average Value Of Indicator At: Optimistic Extremes (down arrows)= 67.7 Pessimistic Extremes (up arrows)= 46.9 Average Spread Between Extremes = 20.8

D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Excessive Optimism

Daily Data 12/01/1995 - 10/31/2006 (updated weekly on Wednesday mornings)

S&P 500 Composite Index

1996

80 76 72 68 64 60 56 52 48 44 40 36 32 28 24

75 72 69 66 63 60 57 54 51 48 45 42 39 36 33 (S574)

A14

1997

1998

1999

2000

2001

2002

2003

Extreme Optimism (Bearish) 68.8

66.7 63.0

65.1

71.8

71.1

70.4

70.5 69.6

67.3 66.8 65.3

67.2

64.8

69.2

66.8 66.4 67.2

67.1

2004

2005

75.7

73.5

68.1 66.6

66.1

2006

69.6

67.1

71.9

63.1

62.0 61.9

59.4 54.7 55.3 51.7

51.7 51.8

51.6

51.8 47.9

45.2

44.6

42.3

Extreme Pessimism (Bullish)

51.9

51.5 48.7

48.7 46.0 42.4

39.0

54.8 55.4

53.5

54.5

47.3

46.5

45.7

43.8

40.4

49.7 46.6 42.5

37.6 33.5

NDR Crowd Sentiment Poll

33.9 33.9

10/31/2006 = 69.0

75 72 69 66 63 60 57 54 51 48 45 42 39 36 33

HOUSING Monthly Data 3/31/1969 - 9/30/2006

Monthly Data 1/31/1948 - 9/30/2006 (Log Scale)

116 103 91 81 72 64 56 50 44 39 35 31 27

The Economy (The Index of Coincident Economic Indicators) vs. Housing Starts Correct Signals: Expansion Mode GPA: Contraction Mode GPA: Buy-HoldGain/Annum:

Signal Dates: 12/31/1948 - 8/31/2006

Signals Generated When Middle Clip: Rises Above 3.44 = Expansion Falls Below -7.85 = Contraction

Source: The Conference Board

20 16 12 8 4 0 -4 -8 -12 -16 -20

116 103 91 81 72 64 56 50 44 39 35 31 27

85% 3.5% -0.9% 2.7%

Housing Starts (Three-Month Rate of Change)

Shaded areas represent National Bureau of Economic Research recessions dates.

2400

9/30/2006 = -9.4%

2400

New Housing Units Started (SAAR, in thousands) 9/30/2006 = 1772

2200 2000

20 16 12 8 4 0 -4 -8 -12 -16 -20 2200 2000

1800

1800

1600

1600

1400

1400

1200

1200

1000

1000

(E240)

1950

1955

1960

1965

Ned Davis Research Group

1970

1975

1980

1985

1990

1995

2000

2005

45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40 (E876E)

A15

Existing Single-Family Home Sales and Prices (Smoothed Year-to-Year Changes) Unit Sales 9/30/2006 = -12.5% Scale Left ( )

Source:

National Association of Realtors/ Haver Analytics

1970

1975

1980

1985

1990 Unit Sales 9/30/2006 = -20.6% Scale Left ( )

New Home Sales and Prices (Smoothed Year-to-Year Changes)

17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1

Median Sale Price 9/30/2006 = -1.2% Scale Right ( )

1995

2000 Median Sale Price 9/30/2006 = -2.3% Scale Right ( )

2005

20 18 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8 -10

150

Monthly Data 1/31/1971 - 9/30/2006

Housing Affordability by Mortgage Type

150

Housing Affordability Composite Index

Higher-Risk Mortgage Delinquency Rates

Quarterly Data 3/31/1995 - 6/30/2006

Federal Housing Administration (The typical FHA borrower is a first-time home buyer with limited funds.)

140

12

130

130

11

120

120

110

110

10

10

100

100

9

9

90

90

8

8

80

80

140

70

9/30/2006 = 107.1

135 130 125 120 115 110 105 100 95 90 85 80 75 70

Housing Affordability Index for Fixed Rate Mortgages

160 150 140 130 120 110 100 90 80 70

Housing Affordability Index for Adjustable Rate Mortgages

Ned Davis Research Group

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

9/30/2006 = 109.8 1981

1980

1979

1978

1977

1976

1975

National Association of Realtors, Haver Analytics 1974

1973

1972

Source:

1971

(B659B)

9/30/2006 = 106.7

70 135 130 125 120 115 110 105 100 95 90 85 80 75 70 160 150 140 130 120 110 100 90 80 70

14 13 12 11 10 9 8 7 6 14

12 11

14 13 12 11 10 9 8 7 6

FHA Adjustable Rate

Subprime (Borrowers with impaired credit)

14

13

13

12

12

11

11 Series Break Before 2002

15

Subprime Adjustable Rate

15

14

14

13

13

12

12

11

(E0187)

A16

Source: Mortgage Bankers Association Washington, D.C. 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

11

Total Home Sales (SAAR, Smoothed) 9/30/2006 = 6.5 million Scale Right ( )

Conventional 30-Year Fixed Mortgage Rate 10/31/2006 = 6.4% Scale Left Inverted ( )

Total Home Sales 9/30/2006 = -13.9% Scale Right ( )

Conventional 30-Year Fixed Mortgage Rate 10/31/2006 = 29 basis points Scale Left Inverted ( )

Total Home Sales vs Conventional 30-Year Fixed Mortgage Rate (Year-to-Year Changes)

Ned Davis Research Group

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

-420 -360 -300 -240 -180 -120 -60 0 60 120 180 240 300 360 420 480 540 (E876A)

Correlation Coefficient = -0.67

Source: National Association of Realtors, Haver Analytics 1973

5.5 5.9 6.3 6.7 7.2 7.7 8.3 8.9 9.5 10.2 10.9 11.7 12.6 13.5 14.5 15.5 16.6 17.8

Monthly Data 4/30/1972 - 10/31/2006 (Log Scale)

Total Home Sales vs Conventional 30-Year Fixed Mortgage Rate

7.3 6.8 6.4 6.0 5.6 5.2 4.9 4.6 4.3 4.0 3.7 3.5 3.3 3.1 2.9 2.7 2.5 2.3

227 217 208 199 191 183 175 168 161 154 147 141 135 129 124 119 114 109

$ Thousands

20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 (E0758A)

A17

Single-Family Homes 9/30/2006 = 219.8 ( )

227 217 208 199 191 183 175 168 161 154 147 141 135 129 124 119 114 109

Total Existing Homes 9/30/2006 = 220.0 ( )

Condos and Co-ops 9/30/2006 = 219.8 ( )

Source:

M J

50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35

Monthly Data 1/31/1999 - 9/30/2006 (Log Scale)

Median Existing Home Prices

S D M J

2000

S D M J

2001

S D M J

2002

S D M J

2003

S D M J

2004

National Association of Realtors, Haver Analytics

S D M J

2005

Condos and Co-ops 9/30/2006 = -2.8% ( )

Total Existing Homes 9/30/2006 = -2.2% ( )

Median Existing Home Prices (Year-to-Year Changes)

Single-Family Homes 9/30/2006 = -2.5% ( )

S D M J

2006

S

20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3

10.4 10.0 9.6 9.2 8.8 8.4 8.0 7.6 7.2 6.8 6.4 6.0 5.6 5.2 4.8 4.4 4.0 3.6

8168 5526 3738 2529 1711 1157 783 530 358 242 164 111 75 520 480 440 400 360 320 280 240 200 160 120 80 (B566)

Mortgage Bankers Association's Refinance and Purchase Indexes Conventional Mortgage Rate 10/27/2006 = 6.40% ( )

Mortgage Bankers Association Refinance Index (SA)

Weekly Data 1/05/1990 - 10/27/2006 Adjustable Mortgage Rate 10/27/2006 = 5.60% ( )

High Number of Refinancing Applications High Prepayment Risk

4-Week Smoothing 10/27/2006 = 1778.7 ( )

Mortgage Bankers Association Purchase Index (SA)

4-Week Smoothing 10/27/2006 = 381.5 ( )

Low Number of Purchase Applications - Housing Market Soft

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

10.4 10.0 9.6 9.2 8.8 8.4 8.0 7.6 7.2 6.8 6.4 6.0 5.6 5.2 4.8 4.4 4.0 3.6

8168 5526 3738 2529 1711 1157 783 530 358 242 164 111 75 520 480 440 400 360 320 280 240 200 160 120 80

1297 1165 1047 941 846 760 683 614 552 496 446 401 360

SAAR, in Thousands

9/30/2006 = 1075

24 20 16 12 8 4 0 -4 -8 -12 -16 -20

One-Month % Change

80 70 60 50 40 30 20 10 0 -10 -20 -30 -40

Year-to-Year Change

(E246)

Monthly Data 1/31/1964 - 9/30/2006 (Log Scale)

New Home Sales

Shaded areas represent National Bureau of Economic Research recessions.

9/30/2006 = 5.3% Strong Sales

9/30/2006 = -14.2%

Weak Sales 1965

1970

1975

1980

1985

1990

1995

2000

1297 1165 1047 941 846 760 683 614 552 496 446 401 360 24 20 16 12 8 4 0 -4 -8 -12 -16 -20 80 70 60 50 40 30 20 10 0 -10 -20 -30 -40

2005

 Copyright 2006 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/

Ned Davis Research Group

A18

Ned Davis Research Group

4

Too Few Homes Available

Measured as Months' Available Supply

Existing Single-Family Homes

9/30/2006 = 7.1

13 12 11 10 9 8 7 6 5 4

9/30/2006 = 6.4

9

Source: Haver Analytics, National Association of Realtors

9

New Homes

A19

2006

(E246I)

2005

4 2004

4 2003

5

2002

5

2001

6

2000

6

1999

7

1998

7

1997

8

1996

8

1995

New Home Prices (Smoothed Year-to-Year Changes)

5

1994

Median Sales Price Year-to-Year Change 9/30/2006 = -2.3% ( )

20 18 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8 -10

6

5

1993

Mean Sales Price Year-to-Year Change 9/30/2006 = 3.8% ( )

2005

6

1992

2000

7

Balanced Market

1991

1995

8

7

1990

1990

8

13 12 11 10 9 8 7 6 5 4

11 9

Too Many Homes Available

1989

1985

9

4

12 10

1988

20 18 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8 -10

1980

9/30/2006 = 7.0

10

1987

1975

11

1986

1970

Total

1985

Median Sales Price 9/30/2006 = 217.1 ( )

12

1984

Mean Sales Price 9/30/2006 = 293.2 ( )

$ thousands

1965

(E0759)

291 250 215 184 158 136 117 100 86 74 64 55 47 40 35 30 26 22 19

Monthly Data 6/30/1982 - 9/30/2006

Housing Inventory-to-Sales Ratios

1983

291 250 215 184 158 136 117 100 86 74 64 55 47 40 35 30 26 22 19

Monthly Data 1/31/1963 - 9/30/2006 (Log Scale)

New Home Prices

styles Related Chart Six-Way Style Allocation Model AA600

Favors: 10/31/2006 Mid-Cap Growth

9/30/2006 Large-Cap Value

8/31/2006 Large-Cap Growth

Large/Mid/Small-Cap Model Indicator Related Chart

Favors: 10/31/2006

9/30/2006

8/31/2006

Large Small Large Small Large Large Small Large Large Small

Large Small Large Small Large Large Small Large Large Large

Large Small Large Small Large Large Large Large Large Neutral

40.4 Mid-Cap

32.7 Large-Cap

22.1 Large-Cap

Favors: 10/31/2006

9/30/2006

8/31/2006

Growth Value Growth Growth Growth Value Growth Value Growth

Growth Value Growth Growth Value Value Growth Value Value

Growth Value Growth Growth Value Value Growth Growth Value

50.0 Growth

41.7 Value

45.8 Growth

Equity Risk Premium Proxy Advisory Service Sentiment Yield Curve Momentum NYSE Breadth Relative Forward P/E Consumer Confidence Bond Momentum U.S. Dollar Coincident Indicators Trend Indicators

AA144A AA145 AA121A AA143A AA0115A AA0122A AA115A AA116A AA118 AA0127A

Composite Model AA605 Model Reading Favored Asset Class Growth/Value Model Indicator Related Chart Equity Risk Premium Proxy Yield Curve Relative Forward P/E Consumer/Cyclical Ratio Advisory Service Sentiment Insider Activity U.S. Dollar Coincident Indicators Trend Indicators Composite Model

AA90A AA71 AA084A AA74A AA85 NA AA68 AA73A AA065A AA610

Model Reading Favored Asset Class

- Large/Mid/Small-Cap Model reading is a combination of individual indicator readings, scaled from 0% to 100%: Above 55% = Favors Small-Caps (Russell 2000 Index) Between 35% and 55% = Favors Mid-Caps (Russell MidCap Index) Below 35% = Favors Large-Caps (Russell Top 200 Index) - Growth/Value Model reading is a combination of individual indicator readings, scaled from 0% to 100%: Above 45% = Favors Growth (Russell 3000 Growth Index) Below 45% = Favors Value (Russell 3000 Value Index) Ned Davis Research, Inc.

Ned Davis Research Group

SMS_6.HTML

A20

Ned Davis Research Group

112

112

103

103

95

95

87

87

80

80 When Model Reading Is:

Ratio GPA

Growth TR GPA

Value TR GPA

68

* Above 45%

4.9

24.7

18.9

40.0

45% and Below

-7.7

2.6

11.2

60.0

62

Buy/Hold

-2.9

11.0

14.2

100.0

90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5

A21

68 62

10/31/2006 = 50.0%

Growth/Value Model Favors Growth

2006

2005

2004

2003

Favors Value 2002

(AA610)

74

% of Time

2001

74

2000

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

121

1999

NDR Large/Mid/Small-Cap Model

121

1998

(AA605)

10/31/2006 = 40.4%

90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5

132

1997

90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5

1989

1988

1987

1986

1985

1984

1983

1982

1981

Model Reading: Above 55%: Favors Small Caps Between 35% and 55%: Favors Mid-Caps Below 35%: Favors Large Caps

Russell 3000 Value Total Return Index

1996

Large-Caps = Russell Top 200 Index (Heavy Solid Line) Mid-Caps = Russell MidCap Index (Narrow Solid Line) Small-Caps = Russell 2000 Index (Dashed Line)

132

1995

40.7 100.0

1994

7.7 13.1

1993

13.3 15.2

143

1992

18.0 12.8

Russell 3000 Growth Total Return Index /

1991

35% and Below Buy/Hold

143

1990

33.4

1989

25.8

9.3

1988

27.9

14.5

156

1987

19.2

9.8

156

1986

8.9

Above 55% * Between 35% and 55%

4683 3765 3027 2434 1957 1573 1265 1017 818 657 528 425 342 275 221 178 143 115

1985

% of Time

1984

Small-Cap TR GPA

1983

Mid-Cap TR GPA

1982

Large-Cap TR GPA

Monthly Data 2/29/1980 - 10/31/2006 (Log Scale)

NDR Growth/Value Model

1981

When Model Reading Is:

1980

4683 3765 3027 2434 1957 1573 1265 1017 818 657 528 425 342 275 221 178 143 115

Monthly Data 2/28/1979 - 10/31/2006 (Log Scale)

Russell Indices

90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5

Ned Davis Research Group

A22

0.78

3.97

8.76

* Real-time since 10/31/1998

For 11/30/2006 Recommended Weights (%)

45

0

45

2000 Value

0

5

2000 Growth

0

5

2005

100

1000 Growth

2004

1000 Value

Benchmark Weights (%)

2006

Russell Index

2003

(AA54)

4.02

2002

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

(AA600)

1986

Small Cap Growth

0.94

S&P500 ( )

2001

Small Cap Value

4.13

2000

Mid Cap Growth

1.16

1999

Mid Cap Value

13.66

Benchmark ( ) 10.83

1998

Large Cap Growth

S.D. of Monthly Return

1997

Large Cap Value

Mean % Monthly Gain

1996

Returns Based on Growth & Value Indices For: Russell Top 200 Index = Large-Cap Russell MidCap Index = Mid-Cap Russell 2000 Index = Small-Cap

Model ( )

% GPA

1995

Bars Below Indicate Model's Favored Style Each Month Model Equity Line Assumes 100% Invested In Favored Style Index Each Month Benchmark Equity Line Assumes Equal Weighting In All Six Style Indices

Model Out-of-Sample Performance*

1994

Six-Way Model Combines Readings of Large/Mid/Small-Cap Model and Growth/Value Model

672 635 601 568 537 508 480 454 429 406 384 363 343 324 307 290 274 259 245 232 219 207 196 185 175 165 156 148 140 132 125 118 112 106 100

1993

6837 5201 3956 3009 2289 1741 1325 1008 767 583 444 As of 10/31/2006: 337 Model Equity Line ( ) = $7041 257 Gain Per Annum = 22.6% Benchmark Equity Line ( ) = $1039 195 Gain Per Annum = 11.9% 149 (12/31/1985 = $100) 113 Model real-time since May 2003 86

For November 2006 Model Favors: Mid-Cap Growth

Monthly Data 9/30/1991 - 10/31/2006 (Log Scale)

Russell Index Regression Model Performance

1992

6837 5201 3956 3009 2289 1741 1325 1008 767 583 444 337 257 195 149 113 86

Monthly Data 12/31/1985 - 11/30/2006 (Log Scale)

NDR Six-Way Equity Style Allocation Model

672 635 601 568 537 508 480 454 429 406 384 363 343 324 307 290 274 259 245 232 219 207 196 185 175 165 156 148 140 132 125 118 112 106 100

Weekly Data 6/26/1981 - 10/27/2006

Ratio of Russell 2000 / Russell 1000 Index All Periods = -0.3% GPA

1.6

All Periods When Proxy is RISING = -4.3% GPA

Weekly Data 12/29/1978 - 10/27/2006

Russell 2000 Index / Russell 1000 Index 1.6

1.6

1.6

1.5

All Periods When Proxy is FALLING = 3.3% GPA

1.5

1.5

1.4

Direction of Proxy Determined by Current Value versus 8 Weeks Ago

1.4

1.4

1.3

1.3

1.3

1.2

1.2

1.2

1.1

1.1

1.0

1.0

5.7 5.4 5.1 4.8 4.5 4.2 3.9 3.6 3.3 3.0 2.7 2.4 2.1 1.8 1.5 1.2 (AA144)

Moody Baa Bond Yield minus 10-Year Treasury Bond Yield Russell 2000/ Russell 1000 Ratio Gain/Annum When: Risk Premium Proxy is Rising and

Russell 2000/ Russell 1000 Ratio Gain/Annum When:

Gain/ Annum

% of Time

Above 2.2

5.2

19.8

Above 2.2

Between 1.7 and 2.2

-8.2

19.8

Between 1.7 and 2.2

-16.9

7.6

Below 1.7

Risk Premium Proxy is Falling and

* Below 1.7

Gain/ Annum

% of Time

13.6

15.6

5.6

19.9

-7.5

17.3

10/27/2006 = 1.56%

Equity Risk Premium Proxy

Ned Davis Research Group

1.1

0.9

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

0.8 1991

1989

1988

1987

1986

52.2 47.8

1985

4.6 -2.7

1984

Favors Small-Caps * Favors Large-Caps

1983

0.8

1.0

% of Time

1990

Gain/ Annum

Yield Curve

1979

5.7 5.4 5.1 4.8 4.5 4.2 3.9 3.6 3.3 3.0 2.7 2.4 2.1 1.8 1.5 1.2

1.4

Russell 2000/ Russell 1000 Ratio Gain/Annum When:

0.9

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

0.8 1990

24.9

0.9

1989

-10.4

* Below 1.7

1987

39.7

1986

35.5

-1.5

1985

8.8

Between 1.7 and 2.2

1982

0.8

Above 2.2

1984

0.9

Risk Premium Proxy is

1983

1.0

Gain/ % Annum of Time

1988

1.1

1982

Russell 2000/ Russell 1000 Ratio Gain/Annum When:

1981

1.2

1980

1.3

1.5

Up Arrow = Favors Small-Caps Down Arrow = Favors Large-Caps

4

4

3

3

2

2

1

1

0

0

10-Year Minus Three-Month Treasury Yield

-1 -2 -3 (AA121)

A23

-1

Crosses Above 2.0% = Favors Small-Caps Crosses Below 1.2% = Favors Large-Caps

-2

10/27/2006 = -0.22%

Yield Curve

-3

A24

2006

(AA0114)

-1 Standard Deviation 2005

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

0.2 1992

1991

1990

1989

1988

1986

1985

1984

1983

1982

1981

1980

1979

Ned Davis Research Group

1987

-2 Standard Deviations

0.2

27.8-Year Mean = 0.67

2004

0.3

2003

-1 Standard Deviation

0.3

+1 Standard Deviation

2002

0.4

2001

27.8-Year Mean = 0.46

0.4

+2 Standard Deviations

2000

0.5

1999

0.5

1998

+1 Standard Deviation

9/30/2006 = 0.68

Russell 2000 Index Yield / Russell 1000 Index Yield

1997

0.6

1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5

1996

0.6

(AA095)

9/30/2006 = 0.47

Russell 1000 Growth Index Yield / Russell 1000 Value Index Yield

1993

1

2

1992

1

2

1991

2

3

1990

2

4

3

1989

3

1988

3

1987

4

1986

4

4

1985

5

151 139 128 118 109 100 92 85 78 72 66 61

5

Russell 1000 Index Dividend Yield (dashed line) 9/30/2006 = 1.8%

1984

5

5

1983

6

Russell 1000 Value Index Dividend Yield (dashed line) 9/30/2006 = 2.5%

Russell 2000 Index Dividend Yield (solid line) 9/30/2006 = 1.2%

1982

7

1981

6

27.8-Year Mean = 101.1

8

Russell 1000 Growth Index Dividend Yield (solid line) 9/30/2006 = 1.1%

7

9/30/2006 = 95.3 Russell 2000 Total Return Index / Russell 1000 Total Return Index

1980

8

151 139 128 118 109 100 92 85 78 72 66 61

1995

27.8-Year Mean = 95.6

148 137 127 118 110 102 94 87 81 75 70 65 60

1994

9/30/2006 = 58.6 Russell 1000 Growth Index / Russell 1000 Value Index

Monthly Data 12/31/1978 - 9/30/2006 (Log Scale)

Russell 2000 & Russell 1000 Index Relative Dividend Yields

1979

148 137 127 118 110 102 94 87 81 75 70 65 60

Monthly Data 12/31/1978 - 9/30/2006 (Log Scale)

Russell 1000 Growth & Value Index Relative Dividend Yields

1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5

Monthly Data 12/31/1985 - 9/30/2006 (Log Scale)

NASDAQ Composite / S&P 500 Index

333 313 293 275 258 242 227 213 200 188 176 165 155 145 136 128 120 113

NASDAQ / S&P 500 Gain/Annum When: NASDAQ / S&P P/E: * Above 108

Gain/ Annum

% of Time

-9.2

26.6

Between 78 and 108

1.9

47.7

78 and Below

8.7

25.7

210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 (STH0618C_C)

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

9/30/2006 = 169.1

9/30/2006 = 140.8 NASDAQ P/E excludes negative earnings. NDR calculated values used from 9/30/2001 onward due to the discontinuation of data released by NASDAQ.

NASDAQ P/E and S&P 500 P/E (GAAP)

Ned Davis Research Group

S&P P/E will reflect estimate for latest completed quarter until actual earnings are released

333 313 293 275 258 242 227 213 200 188 176 165 155 145 136 128 120 113

210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50

32.80

Daily Data 10/23/2001 - 10/26/2006 (Log Scale)

NASDAQ Relative Strength Model

32.80

Ratio of NASDAQ Composite Index to NYSE Composite Index

31.63

31.63

30.50

30.50

29.41

29.41

28.35

28.35

27.34

27.34 NASDAQ/NYSE:

26.36

NASDAQ Relative Strength Model:

25.42

* Above 55% Between 40% and 55%

24.51

40% and Below

NASDAQ Relative Strength Model

100

26.36

Gain/ % Annum of Time 14.3

51.2

-4.6

14.9

-15.1

33.9

25.42 Model Above 55% = Buy NASDAQ Model 40% or Below = Buy NYSE

24.51

10/26/2006 = 61.9

Favors NASDAQ

100

90

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0 N J M M J

(STH0618D_C)

A25

2002

S N J M M J

2003

S

Favors NYSE

N J M M J

2004

0 S N

J M M J

2005

S N J M M J

2006

S

sectors

Sector Recommendations S&P 500 Sector Telecommunication Services

Modest overweight.

Wireless (New) now favored vs. Integrated.

Materials

Modest overweight.

CRB/U.S. $ ratio rising. Diversified Metals overweighted. Gold Mining on emerging list (long-term favorable).

Industrials

Modest overweight.

Breadth weakening. Transports approaching marketweight. Construction & Farm Machinery, Environmental Services and Railroads overweighted.

Energy

Marketweight.

Rank, breadth and crowd sentiment improved, but waiting on improvement from oil prices.

Financials

Maketweight (New).

Fed cycle favorable, but rank weakening. Investment Banking & Brokerage overweighted. Diversified Banks > Regional Banks.

Information Technology

Marketweight.

Software favored vs. Hardware. IT Consulting & Services and Computer Storage & Peripherals favored.

Utilities

Marketweight.

Rank improved. Relative valuation negative/neutral. Fed cycle favorable.

Consumer Discretionary

Marketweight.

Short-term breadth mixed. We advise marketweighting Casinos & Gaming (New) ahead of our ranks.

Consumer Staples

Modest underweight.

Tobacco ranked highest.

Health Care

Modest underweight.

Small-cap / large-cap performance turning mixed. Marketweight Pharma - Major for now.

Ned Davis Research Group

A26

S&P 500 Sector Percent Gain between Last Federal Reserve Interest Rate Hike and First Cut1 Last Hike Date

First Cut Date

Number of Months2

Financials

Consumer Staples

4/25/74

12/9/74

7.5

-26.1

-25.5

2/15/80

5/30/80

3.5

2.9

5/5/81

11/2/81

6.0

2/24/89

6/6/89

2/1/95 5/16/00

Utilities

Telecommunications Services

-19.1

-21.6

-19.4

-16.8

-34.4

-39.4

-29.9

-26.3

4.4

5.5

7.1

3.1

-4.1

-8.1

-3.8

-10.2

-15.8

5.7

1.9

-3.7

8.5

13.0

-2.4

-14.9

-6.8

-15.4

-8.2

3.4

18.3

21.8

16.0

12.0

22.5

9.1

13.0

12.9

5.1

-0.8

7/6/95

5.1

19.7

15.9

13.6

6.7

8.4

12.4

20.1

14.1

23.8

42.7

1/3/01

7.6

21.9

19.1

13.3

17.3

-25.3

1.6

1.1

-9.6

-8.1

-34.4

Mean

5.5

7.1

6.3

4.3

5.0

0.4

-0.1

-3.9

-5.4

-5.8

-7.1

Median

5.5

12.0

10.2

9.4

7.8

5.7

-0.4

-3.5

-5.3

-9.2

-12.0

Health Care

Energy

Industrials

Consumer Discretionary

Materials

Information Technology

1. Tightening cycle requires at least two consecutive rate increases without an intervening decrease. Sector data is market-capitalization weighted and price only. Sectors are sorted left to right by median percent gain. 2. Number of calendar days multiplied 12/365. T_SMF0629.2

Ned Davis Research, Inc.

Ned Davis Research Group

A27

NDR DOMESTIC Sector Ranks Sector Telecommunications Services Materials Energy Industrials Utilities Information Technology Financials Consumer Discretionary Consumer Staples Health Care

Short-Term Breadth Breadth Intermediate-Term Rank Mode Chart 11/03 10/27 10/20 10/13 10/06 9/29

9/22

9/15

9/08

9/01

Favorable ESB50 Favorable ESB15 Favorable ESB10 Mixed ESB20 Favorable ESB55 Unfavorable ESB45 Unfavorable ESB40 Mixed ESB25 Mixed ESB30 Unfavorable ESB35

100 80 30 70 10 60 90 40 50 20

100 70 80 40 10 60 90 30 50 20

100 90 70 40 10 80 60 30 50 20

100 90 80 50 20 70 30 10 60 40

9/08

9/01

8/25

8/18

45.9 27.2 49.2 54.0 59.8 66.8 65.5 64.8 56.2 62.4 44.9 45.0 40.5 55.6 56.6 37.2 44.1 5.8

36.7 38.2 39.0 51.6 55.2 68.7 65.6 64.8 59.7 70.2 44.4 36.5 35.8 63.9 59.4 37.6 43.4 6.8

45.3 58.6 43.2 49.5 45.5 68.2 57.1 59.7 55.2 70.7 50.9 38.8 41.4 65.4 57.1 35.4 36.8 8.9

41.0 67.2 43.3 53.8 43.7 57.9 60.5 61.4 42.4 70.1 44.7 49.1 40.8 63.0 58.0 38.3 32.4 35.0

100 90 80 70 60 50 40 30 20 10

90 100 70 80 40 60 50 30 20 10

90 100 70 80 40 50 60 20 30 10

90 100 50 80 20 60 70 40 30 10

100 60 20 80 10 70 90 50 30 40

100 60 20 80 10 70 90 40 50 30

Based on NDR’s domestic universe. For more details see Industry Focus.

Mean Global Sector Ranks Sector

Short-Term Breadth Breadth Intermediate-Term Rank Mode Chart 10/20 10/13 10/06 9/29 9/22 9/15

Automobiles & Parts Favorable IGB2001 Basic Resources Favorable IGB2010 Chemicals Favorable IGB2015 Telecom Favorable IGB2080 Personal & Household Goods Unfavorable IGB2065 Financial Services Favorable IGB2035 Banks Mixed IGB2005 Insurance Mixed IGB2055 Travel & Leisure Favorable IGB2025 Utilities Favorable IGB2085 Industrial Goods & Services Favorable IGB2050 Health Care Unfavorable IGB2045 Construction & Materials Favorable IGB2020 Food & Beverage Mixed IGB2040 Retail Mixed IGB2070 Media Favorable IGB2060 Technology Mixed IGB2075 Oil & Gas Mixed IGB2030

67.5 66.3 60.0 59.2 56.8 56.0 55.5 55.3 55.2 52.8 50.4 50.3 49.7 44.4 44.1 38.7 27.6 20.7

71.8 75.4 60.0 57.8 52.6 61.4 47.7 47.8 55.7 56.6 57.7 48.5 36.2 33.4 48.0 45.7 29.4 31.6

55.6 67.6 47.5 51.6 45.8 65.4 48.4 58.4 51.9 58.4 53.0 53.2 49.5 40.8 44.5 36.0 40.0 39.6

Based on NDR’s global universe. For more details see Global Focus. Ned Davis Research, Inc.

Ned Davis Research Group

46.6 51.1 44.5 60.5 58.7 64.4 63.2 63.6 55.2 49.6 44.2 43.4 43.5 50.5 57.4 36.6 44.3 13.5

51.1 35.9 52.7 60.5 58.0 68.3 61.5 64.8 54.0 57.9 42.6 48.4 49.5 45.1 57.2 38.6 35.6 12.9

56.8 37.4 57.8 61.5 56.8 68.8 58.1 58.5 53.9 59.1 45.1 51.9 48.8 47.5 50.7 36.1 33.3 19.0

ICS_44A.RPT

A28

currencies and commodities

Currency Market Relative Strength Ranking

Rank

One Week Ago

Four Weeks Ago

1

2

4

2

4

3

Currency Market

Total Composite

Short-Term Model

Intermediate-Term Model

Long-Term Model

Canadian Dollar

68.75

90.00

60.00

56.25

6

British Pound

63.33

90.00

50.00

50.00

3

7

Australian Dollar

62.50

83.33

66.67

37.50

4

1

2

Swedish Krona

60.97

66.67

60.00

56.25

5

5

5

Euro

52.78

33.33

50.00

75.00

6

6

3

Japanese Yen

51.39

75.00

16.67

62.50

7

8

8

Swiss Franc

41.67

50.00

25.00

50.00

8

7

1

U.S. Dollar

39.26

0.00

77.78

40.00

* Model readings represent the percentage of indicators in the model that are positive scaled from 0% to 100% * (100% = all indicators positive); Total Composite is an arithmetic mean of the Short-Term, IntermediateTerm and Long-Term model readings; * Model readings are linked to corresponding charts. For example, to access the Daily Euro Short-Term Model chart, click on the “Short-Term Model” reading for Euro. Ned Davis Research,Inc.

Ned Davis Research Group

ICS_2.RPT

A29

0.7

High Volatility

0.6

0.8

2.8 2.6 2.4

Upper = 15% Above Avg. (0.43%)

0.7

Lower = 15% Below Avg. (0.32%)

0.6

11/02/2006 = 0.26%

0.5

0.5

0.4

0.4

0.3

0.3

0.2 (I 224)

75-Day Average of Dollar's Absolute Change

75-Day U.S. Dollar Volatility Index

Ned Davis Research Group

Low Volatility

150-Day Index Is: * >15% Above 1-Yr Avg.

0.2

A30

20.4

29.0

Between Bands

11.6

43.4

>15% Below 1-Yr Avg.

-10.2

27.6

Upper = 15% Above Avg. (1.12%) Lower = 15% Below Avg. (0.82%) 11/02/2006 = 1.29%

1.4 1.2 1.0 0.8

(AA411)

% of Time

Bands vs. One-Year Moving Average of 150-Day Gold Volatility Index:

2.2 2.0 1.8 1.6

0.6 0.4 0.2

Gain/ Annum

High Volatility

150-Day Average of Gold's Absolute Change

150-Day Gold Volatility Index

812 676 563 469 391 325 271 226 188 156 130 108 90 75 63 52 43 36

2003

1993

1988

Bands vs. One-Year Moving Average of 75-Day Dollar Volatility Index:

Gold Gain/Annum When:

1998

20.6

1993

-4.7

1988

23.0 56.4

1983

7.3 -1.2

1998

>15% Above 1-Yr Avg. Between Bands * >15% Below 1-Yr Avg.

0.8

% of Time

1973

Gain/ Annum

812 676 563 469 391 325 271 226 188 156 130 108 90 75 63 52 43 36

2003

75-Day Index Is:

164 157 150 143 137 131 125 119 114 109 104 99 95 91 87 83 79

Daily Data 3/20/1968 - 11/02/2006 (Log Scale)

Gold Bullion

1978

Dollar Gain/Annum When:

1983

164 157 150 143 137 131 125 119 114 109 104 99 95 91 87 83 79

Daily Data 1/02/1979 - 11/02/2006 (Log Scale)

U.S. Dollar Index

Low Volatility

2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2

1071 923 795 685 590 508 438 377 325 280 241

18 15 12 9 6 3 0 -3 -6 -9 (I 258)

Foreign Holdings of U.S. Government Securities At The Fed ($Billions, Log Scale) 10/27/2006 = 1142.93

Foreign Central Bank Holdings 26-Week Rate of Change Holdings Increasing

Holdings Decreasing 10/27/2006 = 2.3%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Ned Davis Research Group

18 15 12 9 6 3 0 -3 -6 -9

25 20 15 10 5 0 -5 -10 80 70 60 50 40 30 20 10 0 -10

(I 336)

A31

46.2

U.S. Dollar / Japanese Yen 8/31/2006 = 85.19

Japanese Net Purchases of U.S. Treasurys

113 103 94 86 78 71 65 59 54 49 45 41 25 20 15 10 5 0 -5 -10

8/31/2006 = $10.64 billion Japanese Net Purchases of U.S. Treasurys (Three-Month Total)

80 70 60 50 40 30 20 10 0 -10

8/31/2006 = $11.16 billion 2006

1071 923 795 685 590 508 438 377 325 280 241

6.5

2005

81

31.6

3 And Below

2004

81

22.2

2.3

2003

85

-2.0

Between 3 And 9

2002

85

* Above 9

2001

89

% of Time

2000

89

Gain/ Annum

1999

93

1998

93

Yen Gain/Annum When: Net Purchases Three-Month Total (bottom clip):

1997

97

1996

102

1995

21.4

1994

59.0

0 and Below

1993

-0.9 -3.7

* Between 0 and 10

107

1992

19.6

1991

3.1

112

1990

Above 10

U.S. Dollar Index

1989

97

% of Time

1988

102

Gain/ Annum

113 103 94 86 78 71 65 59 54 49 45 41

117

1987

107

Indicator in Bottom Clip is:

10/27/2006 = 85.6

Monthly Data 6/30/1984 - 8/31/2006 (Log Scale)

Japanese Yen vs. Japanese Net Purchases of U.S. Treasurys

1986

112

U.S. Dollar Index Gain/Annum When: 12/01/1989 - 10/27/2006

Weekly Data 12/01/1989 - 10/27/2006 (Log Scale)

1985

117

U.S. Dollar Index vs. Foreign Central Bank Holdings

MAJOR FOREIGN HOLDERS OF U.S. TREASURY SECURITIES * as of 6/30/2006 Current Holdings $ Billions

$ Change from Prior Month

As a Percent Of Foreign Holdings

As a Percent Of Marketable Treasury Securities

Japan

635.3

-2.6

30.4

14.9

Mainland China

327.7

3.1

15.7

7.7

United Kingdom

201.4

26.4

9.6

4.7

Caribbean Banking Ctr

60.3

1.8

2.9

1.4

Hong Kong

48.8

0.4

2.3

1.1

Taiwan

67.1

-0.4

3.2

1.6

Germany

48.3

1.1

2.3

1.1

OPEC

101.5

-1.1

4.9

2.4

Korea

68.9

0.1

3.3

1.6

Switzerland

30.6

0.1

1.5

0.7

Mexico

46.0

2.6

2.2

1.1

Luxembourg

37.4

-1.1

1.8

0.9

Canada

41.3

0.4

2.0

1.0

Singapore

34.6

-1.1

1.7

0.8

Australia

9.3

0.0

0.4

0.2

Brazil

33.4

0.5

1.6

0.8

India

12.5

0.3

0.6

0.3

Belgium

16.9

-0.6

0.8

0.4

Turkey

19.1

-2.4

0.9

0.4

Italy

15.2

1.0

0.7

0.4

Netherlands

16.9

1.5

0.8

0.4

Israel

11.4

-2.0

0.5

0.3

Sweden

18.2

0.1

0.9

0.4

France

28.9

-1.8

1.4

0.7

Ireland

20.0

1.0

1.0

0.5

Thailand

15.8

0.3

0.8

0.4

Spain

11.9

0.0

0.6

0.3

120.8

-5.5

5.8

2.8

Grand Total

2089.7

20.2

100.0

49.1

Foreign Official Instit.

1273.0

-11.5

60.9

29.9

188.0

-7.1

9.0

4.4

1085.0

-4.4

51.9

25.5

Country

All Others

Bills Bonds and Notes

BMS_30.RPT

Ned Davis Research, Inc.

Ned Davis Research Group

A32

115.1 113.2 111.4 109.6 107.8 106.0 104.3 102.6 100.9 99.3 97.7 96.1 94.5 91.5

1980

(DAVIS43)

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1996

1997

1998

1999

Ned Davis Research Group

2000

2001

2002

2003

2004

2005

2006

2007

2008

1.3

25.2

-2.1 - 1.3 from Above

-11.5

37.5

-2.1 - 1.3 from Below

8.6

27.9

Below -2.1

-5.3

9.0

S

S

S

S S

S

B

B

B

S

S B

B S

B

S B

B

B

B

S S

S

S

S

S

S

B B

% of Time

B

B

B

B

Signals are Generated When Sentiment Indicator Falls Below Upper Bracket = Sell Rises Above Lower Bracket = Buy

B

S

B

Excessive Optimism

B

11/02/2006 = 1.7

3

0

0

-1

-1

-2

-2

-3

-3

M J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S D DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S

* Above 1.3

B

Gain/ Annum

163 155 148 141 134 127 121 115 110 105 100 95 90 86 82 78 74 71

1

85.7

80.2

NDR Crowd Sentiment Poll for US Dollar:

11/02/2006 = 85.34

1

87.1

81.5

U.S. Dollar Index Gain/Annum When: (9/04/1984 - 11/02/2006)

2

88.5

82.9

Profitable Trades: 82% Gain/Annum: 8.9% Buy-HoldGain/Annum: -2.3% Latest Signal 6/19/2006 = 86.31

2

90.0

1995-Present Dollar Scale Right ( ) 1979-1992 Dollar Scale Left ( )

S

3

93.0

84.3

S

2004

117.0

163 155 148 141 134 127 121 115 110 105 100 95 90 86 82 78 74 71

1999

118.9

1989

161.4 157.8 154.2 150.8 147.4 144.1 140.9 137.8 134.7 131.7 128.7 125.9 123.1 120.3 117.6 115.0 112.4 109.9 107.5 105.1 102.7 100.4 98.2 96.0 93.8 91.7 89.7 87.7 85.7 83.8 81.9

Daily Data 9/04/1984 - 11/02/2006 (Log Scale)

U.S. Dollar Index

1994

Weekly Data (Log Scale)

1995 - Present U.S. Dollar Index vs. 1979 - 1992 U.S. Dollar Index

1992

Extreme Pessimism (DAVIS62)

A33

NDR Crowd Sentiment Poll for U.S. Dollar -- Transitional Mode

Daily Data 6/02/1987 - 11/02/2006

U.S. Dollar in Terms of Euro and Yen

1.21

1.19 1.16

Euro Per U.S. Dollar Scale Right 11/02/2006 = 0.78

1.12

1.08 1.04 0.99

0.98 0.95 0.92

0.90

0.91

0.89

0.89

0.84

0.82

0.80 0.75 159.64

155 150 145 140 135 130 125 120 115 110 105 100 95 90 85 80 (I 202)

152.95

0.93 0.92

0.86

0.83

0.93

0.83

0.86 0.82

0.84

0.82

0.78

0.74

0.78 0.73

0.69

149.37

Japanese Yen Per U.S. Dollar Scale Left 11/02/2006 = 117.11

147.25 141.64 134.83 127.10

121.01 121.11

123.35

119.32

111.20

118.8 116.2 113.7

112.10

111.2

111.75

108.8

108.40 104.17

102.60

101.39

98.64

97.31

123 93.26

96.83

125.55

97.06

111

95.3

110.33

109.45

107.73

91.1

90.43

89.1

112.78 108.35

93.2

92.33

91.99

118.16

85.90

84.97

85.11

87.2

86.30

85.3 83.89

107.95

111.23

81.6

103.06 101.42

99.61

99

98.36

96

Unweighted U.S. Dollar Scale Left 11/02/2006 = 89.81

97.84

95.84

98.18

97.51

96.71 94.81

89.66

89.20

89.85

90.57 88.28

85.47 728.6

115.69

571 527 429.1

102.04

393.7 383.6

380.3

366.9 337.4 320.3

317.5

280.4

80.63

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

730 620

Comex Gold Log Scale Right 11/02/2006 = 633.3

109.76

J S D M J S DM J S DM J S DM J S D M J S DM J S D M J S DM J S D M J S D M J S DM J S DM J S D M J S DM J S DM J S DM J S DM J S DM J S DM J S

793 673

114.50

108.72

83.4

80.53

102

87

97.4

92.29 115.53

105

90

99.6

124.94

92.20

108

101.8

122.77

117 114

104.1

101.98 99.07

95.17

120

106.4

106.02

104.58

343.0

Ned Davis Research Group

121.5

120.22

120.96

101.60

101.13

120.88 118.61

U.S. Dollar Index - Trade Weighted Log Scale Right 11/02/2006 = 85.34

126.68

124.33

112.85

1.20 1.17 1.14 1.11 1.08 1.05 1.02 0.99 0.96 0.93 0.90 0.87 0.84 0.81 0.78 0.75 0.72 0.69

93

134.79 126.09

124.75

0.84

0.74

0.70

136.50

0.86

Daily Data 4/30/1996 - 11/02/2006

Dollar & Gold

303.6

296.7

(I 205)

A34

294.9

279.0 257.1

254.1

447 412

415.4

379

376.0

350

329.2

326.3 320.0

277.3

485

458.6

303.9

273.2

322

322.5

297

Source: = Commodity System, Inc. (CSI) www.csidata.com

J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

274 252

700 663 628 594 563 533 504 477 452 428 405 384 363 344 326 308 292 276 262

Daily Data 6/02/1989 - 11/03/2006 (Log Scale)

Gold Bullion Gold Bullion Gain/Annum When: Gold Sentiment Index Is:

Gain/ % Annum of Time

Above 66.4

-5.8

25.6

Neutral moving down

-0.4

21.4

Neutral moving up * 37.9 and Below

3.6

19.2

12.5

33.8

Composite's Direction is Determined By Whether it is Higher or Lower Than it Was 3 Days Ago

11/03/2006 = 626.90

700 663 628 594 563 533 504 477 452 428 405 384 363 344 326 308 292 276 262

369 335 304 276 251 228 207 188 170 155 140 127 116 105 95 87 79 71 65

(DAVIS63)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Excessive Optimism

Extreme Pessimism

NDR Crowd Sentiment Poll for Gold Bullion -- Directional Mode Basis

Ned Davis Research Group

Composite Direction = UP

S&P 500 Index Gain/Annum When: Market Sentiment is

% of Time

Above 61.5

-7.6

28.1

Between 31 and 61.5

12.7

49.9

14.6

22.1

* Below 31

Source: Commodity System, Inc. (CSI) www.csidata.com

Gain/ Annum

11/02/2006 = 329.75

369 335 304 276 251 228 207 188 170 155 140 127 116 105 95 87 79 71 65

M J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S

J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S DM J S

84 80 76 72 68 64 60 56 52 48 44 40 36 32 28 24 20 16

Daily Data 12/13/1989 - 11/02/2006 (Log Scale)

Copper (HG)

84 80 76 72 68 64 60 56 52 48 44 40 36 32 28 24 20 16

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 (DAVIS66)

A35

Excessive Optimism

Extreme Pessimism

NDR Crowd Sentiment Poll for Copper -- Mode Basis

11/02/2006 = 21.5

95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0

New Chart

Yearly Data 12/31/1970 - 12/31/2004

Ned Davis Research Group

15 14 13 12 11 10 9 8 7 6 5 4 3 2

Chinese Real GDP Growth 12/31/2005 = 10.2% (Scale Right) ( )

1 0 -1 -2 -3

A36

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1993

1992

1991

1990

1989

1988

(ESX1084A)

1994

Sources: Energy Information Administration and Haver Analytics, China National Bureau of Statistics

Correlation Coefficient = 0.42 1987

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

ESX1083A

1972

1970

Sources: Energy Information Administration and U.S. Census Bureau

16

1986

2004 2004 2004 2004 2004 2004

1985

25.8 15.3 6.6 4.2 1.8 0.8

1984

) ) ) ) ) )

15.0 14.7 14.4 14.1 13.8 13.5 13.2 12.9 12.6 12.3 12.0 11.7 11.4 11.1 10.8 10.5 10.2 9.9 9.6 9.3 9.0 8.7 8.4 8.1 7.8 7.5 7.2 6.9 6.6 6.3 6.0 5.7 5.4 5.1 4.8 4.5 4.2 3.9

Chinese Oil Demand (Year-to-Year Change) 12/31/2005 = 10.3% (Scale Left) ( )

1983

( ( ( ( ( (

17

1982

United States Japan Russia Brazil China India

31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1

1981

Consumption per Capita Year

Country

1980

In Barrels per Person per Year

31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1

Yearly Data 12/31/1979 - 12/31/2005

Chinese Oil Demand vs Real GDP Growth

1979

Petroleum Consumption per Capita for Selected Countries

Biographical Sketch Timothy W. Hayes, CMT, is NDR’s Chief Investment Strategist. Tim joined the firm in 1986 and currently heads up the firm’s global and U.S. asset allocation services. He serves as Research Council coordinator and oversees NDR’s quarterly Investment Strategy, writing sections on strategy, asset allocation, U.S. stock market and style allocation, and global allocation. Tim writes the Stock Market Focus, which features top-down stock market perspective, quantitatively-based analyses, asset allocation recommendations, and sector rankings. Tim also writes Global Focus, which focuses on the most significant global themes in addressing global asset allocation and the outlook for the world’s various stock markets and global sectors. His team also produces a complementary Global Chart of the Day. Tim is featured regularly on CNBC and Bloomberg TV, and his market commentary is often quoted in The Wall Street Journal and other financial media in the U.S. and globally. Timothy W. Hayes, CMT Chief Investment Strategist

He has written a book, The Research-Driven Investor, published in November 2000. He has contributed to several other books, and his research articles have appeared in the Journal of Technical Analysis, Technical Analysis of Stocks and Commodities, and other publications. In 1996, Tim won the Charles H. Dow Award for groundbreaking research in technical analysis. Sponsored by Dow Jones Telerate, the Market Technicians Association, and Barron’s, the award recognizes an outstanding original work that best expounds on the principles of technical analysis.

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