Wednesday, February 17, 2010 – my comments are in italics

• Stimulus spending – the bulk of the $787B stimulus package from ’09 has yet to be spent according
to the WSJ; The White House is releasing its first annual report on the American Recovery and
Reinvestment Act on Wednesday; Obama speaking @ 10:25amET today – the bulk of the first 1/3 of the
spending has been on social services, tax cuts, and entitlements; the spending will shift now going
forward, w/more of a focus on infrastructure projects. WSJ
• Fed worried on deficit - Fed officials, normally tight lipped over matters concerning Congress and
spending, have been voicing concern over the deficit, worried that continued expansion could lead to
inflation down the road – NYT• Spending - Obama will name former Clinton White House Chief of
Staff Erskine Bowles and former Republican Sen. Alan Simpson as co-chairmen of a commission designed
to tackle the federal debt; the commission will be tasked w/cutting the deficit to 3% of GDP by ‘15 – WSJ
– this is a good thing…and if they actually follow through and cut the deficit, perhaps demand will
remain strong for treasuries, particularly those that are longer dated.
• US debt – China no longer largest holder of US debt - China sold a record amount of its U.S. Treasury
holdings in December (it sold $34B, bringing its holdings down to $755.4B); Japan is now the largest
holder for the first time since Aug ‘08. WSJ

China’s Holdings of US Treasuries – Rolling over?

• Housing – Treasury officials believe great progress has been made, and that the housing market is
stabilizing, they admit that more can be done, and they are hinting that more will be done in the coming
months. Treasury officials today said they are still concerned about a coming wave of foreclosures,
many from pay option ARMs and many from the prime jumbo basket. Treasury's monthly status report
on its Home Affordable Modification Program (HAMP) is due out today. CNBC
• From our futures desk: US equity index futs put up a lackluster 70-80% of 5 day avg volume on a day
indexes saw gains of 1%+. Resistance in S&P futures is right here at 1093 and of course the big figure
1100 will create some of its own psych resistance. What we need to pay particular attention is the SP
futs 1115 to 1125. Heavy handed shorts appeared to have been layed out the last time the mkt legged
down through these levels. If shorts have not covered on the way back up there should be a bit of a
scramble up to the mid 1120's
• Corp debt sold by large multinationals may be a safer investment than paper issued by many of the
world’s sovereigns – Reuters Breakingviews/NYT
• Berkshire - company sold 26 percent of its stake in Johnson & Johnson, 9 percent of its Procter &
Gamble, and 34 percent of oil producer ConocoPhillips; Berkshire also disclosed reduced stakes in Exxon
Mobil Corp., SunTrust Banks Inc., Ingersoll-Rand Plc, UnitedHealth Group Inc., WellPoint Inc., Gannett
Co. and CarMax Inc. Bloomberg
• C – the stock is proving “irresistible” to hedge funds according to Bloomberg - Firms run by John
Paulson, Eric Mindich and George Soros purchased almost half a billion shares in Citigroup Inc. last
quarter; in total, nearly 120 hedge funds bought shares in Citi in Q4. Paulson & Co. reported a stake
equal to 506.7 million shares in New York-based Citigroup, up from about 300 million at the end of the
third quarter – Bloomberg
• Gold - Soros More Than Doubled Gold ETF Stake in 4th Quarter – Bloomberg