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Eye on the Market, October 24, 2011
Topics: A biological look at the latest attempt to resolve the European Monetary Union debt crisis; US Q3 earnings

The EMU (technical name: Economic and Monetary Union, common name: European Monetary Union) is beginning to bear more and more resemblance to its aviary twin: the flightless, awkward, and bumbling emu (dromaius novaehollandiae). Europe's long-awaited sovereign and bank bailout package will soon attempt liftoff; we will know more after yet another summit on Wednesday. Why is this so important? Bank recaps in Sweden ('92), the US ('92, '08), Japan ('99) and Asia ('98) were close to marking the bottom of the equity market cycle....but were not designed using the equivalent of the "Goal Seek" function in Microsoft Excel. See attached PDF for details on what may weigh the emu bailout down.

Also, an update on US corporate profits, which will hit a new all-time high in Q3; and a bucket of cold water from the Chairman of the Board of Supervisors of China Investment Corporation.

Michael Cembalest
Chief Investment Officer

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