Wednesday, May 04, 2011 – my comments are in italics

China - The Shanghai index fell >2% after a number of hawkish headlines crossed inc. a) the
PBOC's quarterly monetary policy report said that stabilizing prices/inflation expectations are its top
priority & that bank RRRs have no 'absolute ceiling', b) the China Securities Journal has a front page
article discussing a rate hike in May, and c) the Shanghai Securities News has an article discussing
expanded controls of the property market into additional cities. HK was off >1% in sympathy with China
while Japan remains closed – JPM

Shanghai has underperformed versus the S&P and versus other global stock markets, but that is not
indicative of the entire Emerging Market complex.

Mexico’s CB buys 100 tones (~$4.6B at current prices; ~3.5% of mined output) of gold in Feb and
Mar according to the FT; becomes the latest emerging market country to turn towards gold as a way of
diversifying out of the US$. This marks one of the largest gold purchases by a CB in recent history. FT
Precious metals – WSJ says some prominent HFs have started selling their gold and silver
positions in recently, “signaling the sector’s rally may be entering more dangerous territory”. One
prominent HF manager thinks the chance of deflation has been reduced, lessening the need for large
precious metals positions. The article notes the huge volume in the silver ETFs and talks about some
investors receiving margin calls. – WSJ
Boehner said he favors dealing w/the debt ceiling “sooner rather than later”. "Why wait?" he
said, adding that he would rather address the matter "sooner rather than later." – Reuters
Portugal – the country’s economy is expected to contract in ’11 and ’12 as a result of the
austerity measures associated w/the EU78B bailout – Reuters