From: US GIO To: Undisclosed recipients:; Subject: Eye on the Market, January 18, 2011 Date: Tue, 18 Jan 2011 19:58:33 +0000 Attachments: 01-18-11_-_EOTM_-_0_futuro_e_agora_Brazil_.pdf I nline-Images: image001.png Eye on the Market, January 18, 2011 Topics: Market update; Brazil and related opportunities in Private Equity Market update. Developments in early January show a continuation of the 3 regional trends highlighted in our 2011 Market and Portfolio Outlook. In the US, manufacturing and service sector surveys point to expansion (strongest service sector activity in 4 years), consumer spending is solid, federal and state tax receipts are improving, and banks may reinstate dividends and stock repurchases in the second quarter. In the emerging world, rising currencies, higher interest rates and increased bank reserve requirements (particularly in China) are being used to stave off inflation. Food prices have risen sharply, which has a lot to do with it; more on that and the world's strange weather patterns next week. In Europe, even as Germany posts another round of positive economic data, financing costs for sovereigns and banks in the periphery are reaching new highs. As shown in the second chart, several European countries are growing well below the cost of financing their government debt, which is not a sustainable equilibrium. The largest concentration of 2011 European bank debt maturities lay in April; Europe may need a more comprehensive solution well before then. Recent events reinforce the rationale behind the US being the largest regional equity allocation in our portfolios. World food prices UnitedNa6COSFoodandAgricultureworldtoodpriceindex 220 200 180 160 140 120 - 100 - Peripheral Europe: an unsustainable dynamic Percent 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% fil Ing In glingLMS1 if.1§62 RPM E2 8 slemp211=g0,15 3npliPot-eZ nolig ea ot a ti z _er.u.o. p r =0 1990 1992 1994 1996 1998 2000 2032 2004 2006 2008