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Dear friends,

As we wind down our weekends and get ready for the start of the first week of 2011, I want to take a moment and thank you for your support and friendship throughout 2010. Some on this list know me very well, some are acquaintances, and some I have only met in passing. All are important to me, and I look forward to strengthening our relationships in 2011.

Please take a read through Michael Cembalest's outlook for 2011 (attached). Michael is our CIO and fearless leader when it comes to positioning portfolios for safety, strength and prosperity. He does a great job of setting the table for 2011 with this piece and I hope it gives you some themes for your own portfolios as well as your businesses.

Happy New Year and best wishes for a healthy and happy 2011,
Brian Person

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Brian Person | J.P. Morgan | 1650 Market Street, Floor 47 19103 | T: 215 640 3666 | C: 484 432 3761


Eye on the Market 2011 Outlook
Please contact your JP Morgan representative for a bound color version of the Outlook

The Printing Press. As we head into 2011, global profits are rising, U.S. household incomes and debt burdens are improving, the Asian production boom continues, global services are starting to rebound, and Germany is seeing its largest manufacturing and consumer revival since reunification. So far, so good. But to generate this outcome, most Central Banks and Treasuries around the world have been running in overdrive since January 2008 to create or redistribute money. A resulting measure of global imbalances has never been higher.

Do these imbalances matter given positive economic momentum in the US, Germany and China; low P/E multiples on both developed and emerging equity markets; and mountains of household, corporate and Sovereign Wealth Fund cash capable of driving asset prices higher? We think they do, since the risks of unintended consequences are higher when the magnitude of imbalances (and experimentation) is this high as well.

We have invested client portfolios in the belief that the world will not suffer a major relapse, with significant holdings in public and private equity, credit, hedge funds, commodities and real estate. We expect 2011 to be like 2010: volatile, and with modest returns on a balanced portfolio of financial assets. That these returns are made more attractive by the world's Printing Press policy**, which renders cash savings useless as a store of value, is a mixed blessing at best. This publication reviews our market, investment and portfolio stance as 2011 begins.

Michael Cembalest
Chief Investment Officer

** As per the Fed Chairman himself; see page 10

The material contained herein is intended as a general market commentary. Opinions expressed herein are those of Michael Cembalest and may differ from those of other J.P. Morgan employees and affiliates. This information in no way constitutes J.P. Morgan research and should not be treated as such. Further, the views expressed herein may differ from that contained in J.P. Morgan research reports. The above summary/prices/quotes/statistics have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness. Past performance is not a guarantee of future results. Investment products are not insured by the U.S. Federal Deposit Insurance Corporation; are not guaranteed by the bank or thrift affiliates; and may lose value. Not all investment ideas referenced are suitable for all investors. These recommendations may not be suitable for all investors. Speak with your J.P. Morgan representative concerning your personal situation. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Private Investments often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors and may involve complex tax structures and delays in distributing important tax information. Typically such investment ideas can only be offered to suitable investors through a confidential offering memorandum which fully describes all terms, conditions, and risks. In the United Kingdom, this material is approved by J.P. Morgan International Bank Limited (JPMIB) with the registered office located at 125 London Wall EC2Y 5AJ, registered in England No. 03838766 and is authorized and regulated by the Financial Services Authority. In addition, this material may be distributed by: JPMorgan Chase Bank, N.A. (JPMCB) Paris branch, which is regulated by the French banking authorities Autorité de Contrôle Prudentiel and Autorité des Marchés Financiers; J.P. Morgan (Suisse) SA, regulated by the Swiss Financial Market Supervisory Authority; JPMCB Bahrain branch, regulated by the Central Bank of Bahrain; JPMCB Dubai International Financial Centre branch, regulated by the Dubai Financial Services Authority; JPMCB Hong Kong branch, regulated by the Hong Kong Monetary Authority; JPMCB Singapore branch, regulated by the Monetary Authority of Singapore. Copyright 2011 JP Morgan Chase & Co.


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