From: US GIO To: Undisclosed recipients:; Subject: J.P. Morgan Eye on the Market, November 4, 2011 Date: Fri, 04 Nov 2011 15:36:30 +0000 Attachments: 11-04-11_ _ EOTM_ - _ The_ austerity_club.pdf Inline-Images: image005.jpg; image01 1.jpg; image013.png; image014.jpg; image015.jpg; image016.png Eye on the Market, November 4, 2011 (attached PDF easier to read) The intersection of politics and economics comes to a head in the US, Italy and Greece; Chart of the Year I can't remember a time when stock price movements were quite so heavily affected by macroeconomic developments. One of our models indicates that 75%-80% of stock price movements for the S&P 100 are now explained by macro forces, a new all-time high. With that in mind, here are the latest developments in countries facing the political realities of fiscal austerity. This is not a fun time to be a politician in the birthplace of Western Democracy (Italy, Greece), or its 18th century offshoot (the US). The United States, and the I net-edible Shrinkingsweesuons for the Joint Select Committee on Deficit Reduction The chorus of voices calling for compromise and "big bang" long-term deficit reduction includes a bipartisan group of 100 House Democrats and Republicans in a letter to the Deficit Reduction Committee (DRC). However, so far, most policy proposals we hear about are far less ambitious, while others are already back-tracking on the Budget Control Act: ** A November 3 letter to the DRC by 33 Republican Senators calling for tax reform that lowers rates with no net tax increase ** A plan to have the DRC agree to a few hundred million of revenue increases, but then assign the task of finding them to other congressional committees, whose decisions would not be binding ** Using lower forecasts of war funding assumptions (declines in "Overseas Contingency Operations") to get to the targeted deficit reduction, rather than tackling structural deficits ** If the DRC does not come to agree