From: US GIO <[email protected]> To: Undisclosed recipients:; Subject: J.P. Morgan Eye on the Market 5/2/2012: The road less traveled Date: Wed, 02 May 2012 13:55:19 +0000 Attachments: 05-02-2012_ - EOTM _ - The Road Less Traveled.pdf _ _ _ _ _ Inline-Images: image002.png; image004.png; image006.png; image008.png Eye on the Market, May 2, 2012 (attached PDF is easier to read, particularly the first chart) Topics: how lonely a road is Europe traveling; Graham-Dodd and Shiller US equity valuation measures; casual reading Europe and the road less traveled. As we wait for the next round of fiscal transfers from North to South, European Central Bank rescue operations, IMF firewall expansions, foreign capital flight, deferral of tighter bank capital standards, elections, Bundesbank resignations, protests, rising unemployment and generally miserable economic data in the European Periphery, it's worth remembering something broader about what Europe is up to. There is no small amount of economic hubris associated with the European monetary project, and the chart below shows why. Multinational monetary unions are rare (see Appendix). Some regions debate adopting them, like the Persian Gulf, but decide not to, preferring to retain independent monetary policy. Europe went ahead anyway, despite large differences between member countries. Just how different? Countries in the European Monetary Union are more different than just about any other monetary union you could imagine: 6056 The European Economic and Monetary Union (EMU): A Road Less Traveled Measuring the dispersion of hypothetical and actual monetary uniCaS 4, Dociersion measures the standard deviation of courry-specific facto, ineach trim. Factors reflect over 100 economic. social art pOlalcal charactenstics %triter of countnes in each union show in brackets. See temt for V 5°C* further details Source' World Economic Fonrn Global Competaveness Report. J P. Morgan Loser Ma-ogemert 0 • 40