Economic Committee Report February 7, 2006

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March 21, 2006
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• GOOGLED
• Federal judge orders Google Inc. to turn over
  internet search records. Will not require Google
  to divulge sensitive material but efforts are
  being sought to shield children from online
  pornography.
• HOWS YOUR CREDIT RATING
• Consumer credit reporting agencies create new
  credit scoring system. The new systems are
  designed to make it easier for financial
  institutions to evaluate loan applications.
• NOT SO FRIENDLY SKYS
• Delta Air Lines says its pilots must take pay
  cuts or company will go under. Unable to borrow
  any more money to cover its losses this may be
  the final option.

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• GAME OFF
• Sony confirmed that it was delaying the release
  of its PlayStation 3 games console until the
  autumn (it had been due to be on the shelves by
  the end of May). The electronics firm blamed the
  setback on technical hitches in the console's
  disk drive, which uses Sony's much-vaunted
  Blu-ray technology.
• EXPANDING
• Capital One Financial, a credit-card issuer,
  agreed to buy North Fork, a bank operating in
  the New York area, for 14.6 billion. It is the
  second big acquisition by Capital One in less
  than a year.
• RECORD HIGH
• Goldman Sachs kicked off what is expected to be
  another set of strong quarterly results from Wall
  Street firms by reporting a 64 increase in net
  profit for the three months ending February 24th,
  compared with a year earlier. At 2.48 billion,
  it was also Wall Street's biggest-ever quarterly
  profit, and more than Goldman Sachs earned
  throughout the entire year of 2002.

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• Gross Domestic Product (GDP)
• Last release (2/28/06) New data shows that Real
  GDP in the U.S. increased 1.6 percent in the
  fourth quarter of 05, not 1.1 percent as was
  stated on prior report. This new 1.6 percent
  increase was still less than the 4.1 percent
  increase which was witnessed in the third quarter
  of 05. Annual growth for Real GDP was 3.5
  percent in 2005 compared to 4.2 percent in 2004.
  The upward revision of 0.5 percent to real GDP
  growth reflected revisions to exports, Federal
  Govt. spending, equipment and software, imports,
  and investment inventory.

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(No Transcript)
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• Another quarter-point boost is seen as certain at
  the March 27-28 meeting of the rate-setting
  Federal Open Market Committee -- the first to be
  led by new Fed Chairman Ben Bernanke
• Fed policy-makers have said rates appear close to
  where they need to be given the economic outlook,
  suggesting that the 20-month tightening campaign
  is nearing an end.

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• Final numbers on January Trade Deficit of Goods
  and Services The U.S. Census Bureau and the U.S.
  Bureau of Economic Analysis, through the
  Department of Commerce, announced March 9th that
  total January exports of 114.4billion and
  imports of 182.9 billion resulted in a goods and
  services deficit of68.5 billion, 3.4 billion
  more than the 65.1 billion in December, revised.
  January exports were 2.8 billion more than
  December exports of 111.6 billion. January
  imports were 6.2 billion more than December
  imports of 176.6 billion.
• Februarys numbers are soon to be announced.

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Percent Change from December to January
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Dollar to EURO Five Day

• Both the U.S. budget and the trade deficit have
  put pressure on the dollar, although lately, the
  consecutive interest rate rise by the Fed has
  given the dollar strength by making some
  investment returns higher.
• Reports show that inflation is slowing sharply,
  but the reports have not yet reflected on the
  dollar, among most major currencies the dollar is
  down.

Dollar to Yen Five Day
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• Unemployment rate is given only once a month, so
  there is very little to add to this report. One
  thing to note is that most job gains were in
  construction, financial activities, and health
  care.
• From last week
• The unemployment rate for the month of February
  was 4.8. Despite the raise in unemployment, the
  number of people employed rose by 183,000 (from
  143,074,000 in January to 143,257,000 in
  February).
• The raise in unemployment rate is a good sign for
  investors, as they hope the ever-tightening labor
  market will begin to loosen up. Investors fear
  that a low rate could lead to inflationary
  pressure, which will force the Fed to raise
  interest rates. Higher interest rates generally
  negatively affect stock prices.

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• Decrease in inflation from 3.99 to 3.60.
• Increase in the CPI from 198.3 to 198.7.

Current Inflation Rate
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• Pulte Homes belongs to the residential
  construction industry and has a market cap of
  9.8B.
• The industry gained 2.15 yesterday compared to
  a 0.18 gain by the SP.
• This industry has an overall P/E of 8.3 and a ROE
  of 23.5.

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• Graph below compares the Residential
  Construction Industry (blue) to the SP 500
  (red).