The Dog Ate My Home. By: Anirban Basu Sage Policy Group, Inc. January 11, 2012

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The Dog Ate My Home By: Anirban Basu Sage Policy Group, Inc. January 11, 2012

Penny wise, Euro foolish

Top 12 Stock Exchanges 2008 Growth Rank Exchange Index 2008 % Change 3 London SE FTSE 100-31.3% 1 NYSE Group DJI A -33.8% 12 Swiss Exchange Swiss Market -34.2% 9 TSX Group S&P TSX Composite -35.4% 2 Nasdaq NASDAQ Composite -39.6% 8 Bolsa De Medrid Madrid General -40.0% 6 Frankfurt SE DAX -40.2% 4 Tokyo SE Nikkei 225-41.5% 5 Euronext CAC 40-42.6% 11 Hong Kong Exchanges Hang Seng Index -47.9% 10 Borsa Italiana MIBTel -48.5% 7 Shanghai SE Shanghai Composite -65.4% Source: Yahoo! Finance

Top 12 Stock Exchanges 2009 Growth Rank Exchange Index 2009 % Change 7 Shanghai SE Shanghai Composite 77.2% 11 Hong Kong Exchanges Hang Seng Index 51.4% 2 Nasdaq NASDAQ Composite 43.7% 9 TSX Group S&P TSX Composite 31.2% 6 Frankfurt SE DAX 29.9% 1 NYSE Group DJI A 26.8% 8 Bolsa De Medrid Madrid General 26.7% 3 London SE FTSE 100 22.1% 5 Euronext CAC 40 21.5% 10 Borsa Italiana FTSE MIB 19.5% 12 Swiss Exchange Swiss Market 18.4% 4 Tokyo SE Nikkei 225 16.6% Source: Yahoo! Finance

Top 12 Stock Exchanges 2010 Growth Rank Exchange Index 2010 % Change 2 Nasdaq NASDAQ Composite 16.9% 6 Frankfurt SE DAX 16.1% 9 TSX Group S&P TSX Composite 14.4% 1 NYSE Group DJI A 11.0% 3 London SE FTSE 100 9.0% 11 Hong Kong Exchanges Hang Seng Index 5.3% 12 Swiss Exchange Swiss Market -1.7% 4 Tokyo SE Nikkei 225-3.0% 5 Euronext CAC 40-3.3% 10 Borsa Italiana FTSE MIB -13.2% 7 Shanghai SE Shanghai Composite -14.3% 8 Bolsa De Medrid Madrid General -19.2% Source: Yahoo! Finance

Top 12 Stock Exchanges 2011 YTD Growth through Third Quarter Rank Exchange Index % Change 1 NYSE Group DJI A -5.7% 2 Nasdaq NASDAQ Composite -9.0% 3 London SE FTSE 100-13.1% 9 TSX Group S&P TSX Composite -13.5% 8 Bolsa De Medrid Madrid General -14.0% 12 Swiss Exchange Swiss Market -14.1% 4 Tokyo SE Nikkei 225-14.9% 7 Shanghai SE Shanghai Composite -16.0% 6 Frankfurt SE DAX -20.4% 5 Euronext CAC 40-21.6% 11 Hong Kong Exchanges Hang Seng Index -23.6% 10 Borsa Italiana FTSE MIB -26.5% Source: Yahoo! Finance

Top 12 Stock Exchanges 2011 Growth Rank Exchange Index % Change 1 NYSE Group DJI A 5.5% 2 Nasdaq NASDAQ Composite -1.8% 3 London SE FTSE 100-5.6% 12 Swiss Exchange Swiss Market -7.8% 9 TSX Group S&P TSX Composite -9.2% 8 Bolsa De Medrid Madrid General -14.6% 6 Frankfurt SE DAX -14.7% 5 Euronext CAC 40-17.0% 4 Tokyo SE Nikkei 225-17.3% 11 Hong Kong Exchanges Hang Seng Index -20.0% 7 Shanghai SE Shanghai Composite -21.7% 10 Borsa Italiana FTSE MIB -25.2% Source: Yahoo! Finance

S&P 500 Performance Through YE 2011 Index 2011Q4 3-year 5-year S&P 500 Total 11.82 13.99-0.25 Consumer Discretionary 12.58 23.96 2.00 Consumer Staples 10.26 14.21 7.55 Energy 18.20 12.71 4.64 Financials 10.82 2.89-16.77 Health Care 9.96 11.47 2.78 Industrials 16.52 14.94 0.50 Information Technology 8.72 22.01 3.8 Materials 15.39 17.74 1.75 Telecommunication Services 7.90 11.16 1.38 Utilities 8.28 12.17 3.68 Source: Horizon Investments, LLC

All dressed up with no place to go

Recession Watch as of May 2009 Source: Moody s Economy

Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Index (2007 = 100) 105 Industrial Production January 2001 through November 2011 100 95 90 85 80 Source: Federal Reserve The industrial production index measures the real output of the manufacturing, mining, and electric and gas utilities industries.

1990Q1 1990Q4 1991Q3 1992Q2 1993Q1 1993Q4 1994Q3 1995Q2 1996Q1 1996Q4 1997Q3 1998Q2 1999Q1 1999Q4 2000Q3 2001Q2 2002Q1 2002Q4 2003Q3 2004Q2 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 Percent Change from Preceding Period (SAAR) Gross Domestic Product 1990Q1 through 2011Q3 8.0 6.0 2011Q3: 1.8% 4.0 2.0 0.0-2.0-4.0-6.0-8.0-10.0 Source: Bureau of Economic Analysis

Recession Watch as of April 2010 Source: Moody s Economy

Recession Watch as of October 2011 Source: Moody s Economy

U.S. Economy Hits Soft Patch The Institute for Supply Management-Chicago business barometer rebounded in September to 60.4 from August s reading of 56.5. Employment expanded to its highest level in four months and new orders erased net declines accumulated since April. Order backlogs remained in contraction at a 23-month low. The Empire State Manufacturing Survey s general business conditions index remained negative in October at -8.5. The new orders index hovered around zero while the shipments index rose above zero to 5.3. The Pennsylvania Federal Reserve District s (PA, NJ, DE) Business Outlook Survey suggests that regional manufacturing is showing signs of recovery after several months of decline. The diffusion index of current activity increased from 17.5 in September to 8.7, the first positive reading in three months. Retail sales fell again in August in the Richmond Federal Reserve District (VA, MD, NC, SC, WV), pulling the revenues index to -32 following July s reading of 11.

Temporary Causal Factors High Gas Prices The average price for regular gasoline across the country was $3.46 a gallon as of October 24 th, an increase of 23 percent since last year. Crude oil prices were $93.17 as of October 25 th, up 12.9 percent from prices the same time last year. Weak Housing Market Indicators for the second quarter of 2011 show fragile recovery. While the national house price index rose 1.2 percent in the second quarter, the index is down 6 percent on a year-over-year basis. High Staple Prices According to the IMF, year-over-year, wheat prices have surged 16.3 percent while cotton prices are 11.4 percent higher, through October 2011. According to the Bureau of Labor Statistics, fresh fruit and vegetable prices were up 7.6 percent year-over-year as of September 2011. Failing Consumer Confidence The Conference Board s index of consumer confidence fell sharply to 39.8 in October from 46.4 in September a level last seen during the 2008-2009 recession.

Thousands Net Change in U.S. Jobs, BLS January 2001 through December 2011 500 300 100-100 -300-500 -700 Between December 2010 and December 2011, the nation gained 1,640,000 jobs. 12/11: +200K -900 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10 Sep-09 May-09 Jan-09 Sep-08 May-08 Jan-08 Sep-07 May-07 Jan-07 Sep-06 May-06 Jan-06 Sep-05 May-05 Jan-05 Sep-04 May-04 Jan-04 Sep-03 May-03 Jan-03 Sep-02 May-02 Jan-02 Sep-01 May-01 Jan-01 Source: Bureau of Labor Statistics

National Nonfarm Employment by Industry Sector Groups December 2010 v. December 2011 Professional and Business Services Education & Health Services Trade, Transportation, and Utilities 396 427 452 Leisure & Hospitality Manufacturing 225 268 Mining and Logging 91 Construction Other Services 46 44 Financial Activities Information Government -280-36 7 All told 1,640K Jobs Gained -400-200 0 200 400 600 Thousands, SA Source: Bureau of Labor Statistics

Monthly Net Change (thousands) National Construction Employment Monthly Net Change February 2000 December 2011 Feb-00 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 100 50 0-50 -100-150 -200 Industry Sector Dec-11 Nov-11 Dec-10 1-net 12-net 12-% Construction 5,544 5,527 5,498 17 46 0.8% Residential Building 567 564 563 3 4 0.6% Nonresidential Building 662.2 664.9 659.1-3 3 0.5% Heavy and Civil Engineering Construction 845.5 845.8 834.2 0 11 1.4% Specialty Trade Contractors 3,469.6 3,452.3 3,441.2 17 28 0.8% Source: Bureau of Labor Statistics Construction Annual Job Growth: 2011: +46K; 2010: -149K; 2009: -1,053K

Missouri Nonfarm Employment by Industry Sector Groups (SA) November 2010 v. November 2011 Absolute Change Manufacturing 11,500 Professional & Business Services Trade, Transportation, and Utilities 3,400 5,200 Educational & Health Services 1,300 Mining and Logging Other Services Leisure & Hospitality Financial Activities Construction Government Information -100-1,300-1,900-2,900-4,100-4,300-5,400 MO Total: +1.4K; +0.1% US Total: +1,592K; +1.2% -10,000-5,000 0 5,000 10,000 15,000 Source: Bureau of Labor Statistics

Kansas City MSA Nonfarm Employment by Industry Sector Groups (NSA) November 2010 v. November 2011 Absolute Change Manufacturing Educational & Health Services Trade, Transportation, and Utilities Government Professional & Business Services 3,400 2,600 1,900 1,600 1,300 Other Services Construction, Mining and Logging Financial Activities -1,900-2,200-500 KC Total: +0.3K; +0.1% MO Total: +1.4K; +0.1% Information Leisure & Hospitality -3,600-2,300 US Total: +1,592K; +1.2% -5,000-3,000-1,000 1,000 3,000 5,000 Source: Bureau of Labor Statistics

St. Louis, MO-IL MSA Nonfarm Employment by Industry Sector Groups (NSA) November 2010 v. November 2011 Absolute Change Manufacturing 6,000 Trade, Transportation, and Utilities Leisure & Hospitality 3,800 3,500 Other Services 1,200 Professional & Business Services Educational & Health Services 400 200 St. Louis Total: +5.9K; +0.5% Financial Activities Information Government Construction, Mining and Logging -4,100-2,900-1,600-300 MO Total: +1.4K; +0.1% US Total: +1,592K; +1.2% -6,000-4,000-2,000 0 2,000 4,000 6,000 8,000 Source: Bureau of Labor Statistics

Unemployment Rates, Largest 20 Metros (NSA) November 2011 Rank MSA UR Rank MSA UR Minneapolis-St. Paul-Bloomington, MN- New York-Northern New Jersey- 1 WI 5.1 11 Long Island, NY-NJ-PA 8.3 2 Washington-Arlington-Alexandria, DC- VA-MD-WV 5.4 12 San Francisco-Oakland-Fremont, CA 8.7 3 Boston-Cambridge-Quincy, MA-NH 5.7 13 Atlanta-Sandy Springs-Marietta, GA 9.2 4 Baltimore-Towson, MD 6.7 13 San Diego-Carlsbad-San Marcos, CA 9.2 5 San Antonio-New Braunfels, TX 7.0 15 Miami-Fort Lauderdale-Pompano Beach, FL 9.4 6 Dallas-Fort Worth-Arlington, TX 7.4 16 Detroit-Warren-Livonia, MI 9.5 Chicago-Joliet-Naperville, IL- 7 Houston-Sugar Land-Baytown, TX 7.6 17 IN-WI 9.6 8 Phoenix-Mesa-Glendale, AZ 7.7 18 9 Seattle-Tacoma-Bellevue, WA 8.0 19 Philadelphia-Camden-Wilmington, PA- 10 NJ-DE-MD 8.1 20 Tampa-St. Petersburg-Clearwater, FL 10.3 Los Angeles-Long Beach-Santa Ana, CA 10.7 Riverside-San Bernardino-Ontario, CA 12.5 Source: Bureau of Labor Statistics

Unemployment Rates, U.S. States (SA) November 2011 Rank State Rate Rank State Rate Rank State Rate 1 NORTH DAKOTA 3.4 17 MASSACHUSETTS 7.0 33 WASHINGTON 8.7 2 NEBRASKA 4.1 19 MONTANA 7.1 36 INDIANA 9.0 3 SOUTH DAKOTA 4.3 20 ALASKA 7.3 37 NEW JERSEY 9.1 4 NEW HAMPSHIRE 5.2 20 WISCONSIN 7.3 37 OREGON 9.1 5 VERMONT 5.3 22 DELAWARE 7.6 37 TENNESSEE 9.1 6 IOWA 5.7 23 PENNSYLVANIA 7.9 40 KENTUCKY 9.4 7 WYOMING 5.8 23 WEST VIRGINIA 7.9 41 MICHIGAN 9.8 8 MINNESOTA 5.9 25 ARKANSAS 8.0 42 GEORGIA 9.9 9 OKLAHOMA 6.1 25 COLORADO 8.0 42 SOUTH CAROLINA 9.9 10 VIRGINIA 6.2 25 NEW YORK 8.0 44 FLORIDA 10.0 11 UTAH 6.4 28 TEXAS 8.1 44 ILLINOIS 10.0 12 HAWAII 6.5 29 MISSOURI 8.2 44 NORTH CAROLINA 10.0 12 KANSAS 6.5 30 CONNECTICUT 8.4 47 MISSISSIPPI 10.5 12 NEW MEXICO 6.5 31 IDAHO 8.5 47 RHODE ISLAND 10.5 15 LOUISIANA 6.9 31 OHIO 8.5 49 DISTRICT OF COLUMBIA 10.6 15 MARYLAND 6.9 33 ALABAMA 8.7 50 CALIFORNIA 11.3 17 MAINE 7.0 33 ARIZONA 8.7 51 NEVADA 13.0 Source: Bureau of Labor Statistics U.S. Unemployment Rate: November 11 = 8.7%

Unemployment Rates, Missouri MSA s (NSA) November 2011 v. November 2010 St. Louis, MO-IL 8.2 9.5 St. Joseph, MO-KS Springfield, MO 6.6 6.7 8.4 8.5 Kansas City, MO-KS 7.4 9.1 Joplin, MO 6.6 8.6 Jefferson City, MO Fayetteville-Springdale-Rogers, AR-MO Columbia, MO 5.0 5.8 5.9 5.5 6.1 7.0 Nov-10 Nov-11 0 1 2 3 4 5 6 7 8 9 10 Unemployment Rate Source: Bureau of Labor Statistics

It could be worse, right??

Rate 15-Year & 30-Year Fixed Mortgage Rates January 1995 through December 2011 10% 9% 8% 15-yr 30-yr 7% 6% 5% 4% 3% Source: Freddie Mac

Thousands, SAAR U.S. New Home Sales January 1999 through November 2011 1,600 1,400 1,200 1,000 800 600 400 200 0 Source: Economy.com, Census Bureau

Jan-99 Aug-99 Mar-00 Oct-00 May-01 Dec-01 Jul-02 Feb-03 Sep-03 Apr-04 Nov-04 Jun-05 Jan-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08 Jul-09 Feb-10 Sep-10 Apr-11 Nov-11 Thousands, SAAR 2,700 U.S. Housing Starts January 1999 through November 2011 2,200 1,700 1,200 700 200 Source: Economy.com

1995Q2 1996Q1 1996Q4 1997Q3 1998Q2 1999Q1 1999Q4 2000Q3 2001Q2 2002Q1 2002Q4 2003Q3 2004Q2 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 2011Q4 Net Percentage of Domestic Respondents Supply and Demand for Commercial Real Estate Loans 1995Q2 through 2011Q4 100 Tightening Standards for Loans 80 Stronger Demand for Loans 60 40 20 0-20 -40-60 -80 Source: Federal Reserve

Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Architecture Billings Index December 2007 through November 2011 60 55 50 45 40 35 55.4 50.7 41.7 39.7 45.5 43.4 47.6 46.8 46.1 41.4 36.2 35.3 34.7 34.1 33.3 43.7 42.8 42.9 37.7 43.1 43.1 41.7 46.1 42.8 43.4 42.5 46.1 44.8 48.4 45.846.0 47.948.2 50.4 48.7 52.0 54.2 50.6 50.0 50.5 47.6 47.2 46.3 45.1 51.4 46.9 52.0 49.4 30 Source: The American Institute of Architects

Nonresidential Construction Put-in-Place June 2006 through November 2011 SAAR ($billions) Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 800 700 600 Oct. 08: $719.0 billion Nov. 11: $555.7 billion -22.7% 500 400 300 200 100 0 Source: U.S. Census Bureau Type Value % Oct-11 % Nov-10 Private $278.6 0.0% 4.5% Public $277.1 1.8% -4.4% Total $555.7 0.9% -0.1%

National Nonresidential Construction Spending by Subsector November 2011 v. November 2010 Manufacturing Commercial Power Educational Highway and street Public safety Office Health care Transportation Sewage and waste disposal Amusement and recreation Communication Water supply Lodging Religious -23.1-19.0-2.3-3.2-3.2-4.2-5.8-7.7-9.1-9.4-10.6 3.9 6.5 11.4 13.3 Conservation and development -23.3-30 -20-10 0 10 20 12-month %Change Source: U.S. Census Bureau

Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 12-month % Change Inputs to Construction PPI January 2001- November 2011 15% 10% 5% 0% -5% -10% Source: Bureau of Labor Statistics

Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 12-month % Change 12-month % Change Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 12-month % Change 12-month % Change Key Commodity Prices January 2001- November 2011 50 40 30 20 10 0-10 -20-30 -40 Iron & Steel PPI 40 30 20 10 0-10 -20 Softwood Lumber PPI 12 10 8 6 4 2 0-2 -4 Concrete Products PPI 100 80 60 40 20 0-20 -40-60 NYMEX Crude Oil Source: BLS: EIA

Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 One-month Percent Change Conference Board Leading Economic Indicators Index August 2007 through December 2011 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% December 2011 = 94.3 where 2004=100-1.5% Source: Conference Board

It s difficult to forecast, particularly the future Economy hit a soft patch; Construction now in recovery; Recession no longer imminent; Black swan threats: (1) Iran (2) Israel/Iran (3) Europe; Many headwinds remain and the nascent recovery could easily falter; and Recovery is now almost exclusively driven by private construction;