Haley Araki Owen Chen Richard Cheng Peter Shao The Recession is Over.

Haley Araki

Owen Chen

Richard Cheng

Peter Shao

The Recession is Over

Stock Markets

Up 70%6,547 on 3/9/09

11,205 on 4/26/10

Up 70%

Interest rate

Money

Demand

Quantity of Money

Money Supply

Investment

Demand

Investment

Interest rate

Nonfarm Employment(thousands, SAAR)

Unemployment Rate (%)

Labor Force(thousands)

Capacity Utilization Rate(percent)

April 2009 April 2009 69.5%69.5%

April 2010 April 2010 73.6%73.6%

Retail Sales($ Billions, SAAR)

Up 6%

New Home Sales (thousands, SAAR)

U.S. Census Bureau

U.S. Census Bureau

Building Permits(thousands, SAAR)

+ 29%

2009 2010

DJIA 6,547 points 10,000+ points

GDP -6.5% 3.6%

Capacity Utilization

69.5% 73.6%

Retail Sales $344 billion $364.6 billion

New Home Sales 337,000 411,000

Building Permits 523,000 685,000

Summary

• The recovery is clearly gaining traction as shown by the indicators above, which are just a representation of the myriad of indicators demonstrating positive trends.

Ventura County Star, May 22, 2010, page A16

However, the European debt crisis may slow the recovery

What’s Happening in What’s Happening in EuropeEurope

European Union GDP Growth Rate

Frankfurt Stock Exchange (DAX index)

Up nearly 30%

European Industrial ProductionEuropean Industrial Production

Index2005 = 100

PIIGSPIIGS

• PIIGS - Portugal, Italy, Ireland, Greece, Spain • Greece’s debt to GDP ratio is at 115%• Germany’s debt to GDP ratio is at 69%• Insurance premiums have increased eight-fold since ‘08

Credit-default swaps linked to Greek government bonds have surged torecord highs, signaling investors perceive them to be the world’s riskiest debt.

Ten-Year Bond Yield Spreads Ten-Year Bond Yield Spreads

Greek 10 year rate up to 9.76%

Greek 10 year rate up to 9.76%

Spread to German Bunds also rises to over 400 basis points

Spread to German Bunds also rises to over 400 basis points

•  In late April 2010, the 10-year Greek bond yield rose 164 basis points to nearly 12 percent.

• The spread exceeded 900 basis points over the German bond yield.

Value of the EuroValue of the Euro

• Fears of possible Fears of possible default push Euro down default push Euro down 20% since 200820% since 2008

• However, the European However, the European Commission forecasts a Commission forecasts a comeback after the comeback after the bailoutbailout

$/ €

Future of the EuroFuture of the Euro• May 7 - ECB and IMF approved a $1 trillion bailoutMay 7 - ECB and IMF approved a $1 trillion bailout

• Euro shot up by $0.015 in one day after bailout Euro shot up by $0.015 in one day after bailout announcementannouncement

• Over time, as fears of default subside, the strength of the Over time, as fears of default subside, the strength of the Euro should increase, bolstering US exports to EuropeEuro should increase, bolstering US exports to Europe

Euro Demand

Euro Supply

$/€

quantity

€/$

Dollar Supply

Dollar Demand

quantity

• Most US economic indicators are showing positive trends

• The recovery is gaining traction• The European debt crisis is causing volatility in

global markets due to uncertainty• However, the bailout is likely to fix the problem.

The Euro is expected to recover• US economic growth is unlikely to be

significantly impacted• The US economy will most likely transition to an

expansionary phase by 2011

Conclusion