The McNamee Wealth Management Group

Thursday, February 24Thursday, February 24thth at 7:30 pm ESTat 7:30 pm EST

g pat Morgan Stanley Smith BarneyConference Call – February 2011

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Notice to Readers

The views expressed herein are those of the author and do not necessarily reflect theviews of Morgan Stanley Smith Barney or its affiliates. All opinions are subject to changewithout notice. Neither the information provided nor any opinions expressed constitutesa solicitation for the purchase or sale of any security. Past performance is no guaranteeof future results.

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OPENING

3

Source: “How the Great Recession Was Brought to an End, July 27, 2010, by Alan S. Blinder and Mark Zandi4

ESTABLISHMENT SURVEY AND NON-FARM PAYROLL EMPLOYMENT

5

Source: Chart of the Day - Current decade job growth: positive but slow – January 7, 20106

Source: BLS – Job Openings and Labor Turnover Survey Highlights December 2010 – Bureau of Labor Statistics – February 8, 20117

Source: ADP National Employment Report – January 2011 ADP National Employment Report– February 2, 20118

UNEMPLOYMENT RATE

9

Source: http://research.stlouisfed.org/fred2/series/UNRATE10

Source: Chart of the Day - Educational attainment has a dramatic impact on employment – February 4, 201111

Source: BSL – The employment situation – January 2010 – Released February 4, 201112

NON-FARM PRIVATE EMPLOYMENT

13

Source: Recessions are on the margin by John Mauldin - November 26, 201014

Source: Citi – U.S. Economic & Markets Daily – January 5, 201115

US Population vs Employment vs Labor Force vs Continued UnemployedUS Population vs. Employment, vs. Labor Force, vs. Continued Unemployed

Source: Howestreet.com – What does the “Take this Job and Shove-It Indicator” say about the Economy? – December 10, 201016

WE KNOW IT’S BAD OUT THERE

17

Source: Gluskin Sheff’s Economic Research Featuring David Rosenberg - Snack with Dave – November 22, 201018

Source: Gluskin Sheff – Breakfast with Dave – January 19, 201119

Source: Wells Fargo – Special Commentary: Credit Quality Monitor – December 2010 – December 10, 201020

Source: Wells Fargo Securities – Weekly Economic & Financial Commentary – February 11, 201121

Source: Wells Fargo Securities – Weekly Economic & Financial Commentary – February 4, 201122

Source: BLS – Job Openings and Labor Turnover Survey Highlights December 2010 – Bureau of Labor Statistics – February 8, 2011 23

Source: Howestreet.com – What does the “Take this Job and Shove-It Indicator” say about the Economy? – December 10, 201024

Source: Gluskin Sheff – Breakfast with Dave – January 5, 201125

Source: Gluskin Sheff – Lunch With Dave – January 7, 201126

Source: Gluskin Sheff – Breakfast with Dave – January 10, 201127

Source: Blackrock – The Economy, Interest Rates and Fixed Income Markets: What to Expect in 2010 - Point of View with Curtis Arledge and Eric Pellicciaro- APRIL 201028

WHY JOB RECOVERY IS NOT STRONGER?

29

Source: Citi – Portfolio Strategist – December 9, 201030

Source: Gluskin Sheff – Breakfast with Dave – 12/15/1031

Source: Gluskin Sheff – Breakfast with Dave – December 9, 201032

MANUFACTURING

33

Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=MANEMP34

Source: Recessions are on the margin by John Mauldin - November 26, 201035

THERE IS SOME GOOD OUT THERE

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Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=INDPRO37

Source: Citi – U.S. Outlook 2011 – January 3, 2011 38

Source: Citi - Port Strat: Economic & Market Analysis - January 6, 201139

Source: BLS – Job Openings and Labor Turnover Survey Highlights December 2010 – Bureau of Labor Statistics – February 8, 201140

Source: Wells capital Management – Economic and Market Perspectives – January 2011 -- A “Sustained” Economic Recovery!! [January 2011]41

Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=IC4WSA42

INDICATORS

43

Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=BUSLOANS44

Source: Citi – US Economic & Markets Daily – December 3, 201045

CONCLUSION

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Source: Wells Fargo – Special Commentary: Credit Quality Monitor – December 201047

Source: Wells capital Management – Economic and Market Perspectives – January 2011 -- A “Sustained” Economic Recovery!! [January 2011]48

Definitions

ADP Employment Report: “The ADP national employment report is computed from a subset of ADP records that in the last six months of 2008, represented approximately 400,000 U.S. business clients and approximately 24 million U.S. employees working in all private industrial sectors. The data are collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments. ADP also use ADP contracted with Macroeconomic Advisors to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic's employment situation. The ADP report only covers private (excluding government) payrolls at this time. As a simplification of the process used by Macroeconomic Advisors estimates are based upon statistical comparison of ADP growth rates to BLS payroll employment growth rates at the industryMacroeconomic Advisors, estimates are based upon statistical comparison of ADP growth rates to BLS payroll employment growth rates at the industry level. ADP also adds in the BLS initial claims data for the week just prior to the employment report as part of its estimation procedure. (Automatic Data Processing (ADP)/Macroeconomic Advisers)”1

“The new ADP employment report is aimed at improving payroll forecasts by providing information in advance of the employment report.”1

BLS diffusion index is a measure of how widespread changes in employment are. Some people think it measures the percent of industries increasing employment, but that isn't quite correct. 2p y qFrom the BLS handbook: “The diffusion indexes for private nonfarm payroll employment are based on estimates for 278 industries, while the manufacturing indexes are based on estimates for 84 industries. Each component series is assigned a value of 0, 50, or 100 percent, depending on whether its employment showed a decrease, no change, or an increase over a given period. The average (mean) value is then calculated, and this percent is the diffusion index number.” 2

Challenger Job-Cut Report: “This monthly report counts and categorizes announcements of corporate layoffs based on mass layoff data from state departments of labor The job cut report must be analyzed with caution It doesn't distinguish between layoffs scheduled for the short term or the long termdepartments of labor. The job-cut report must be analyzed with caution. It doesn't distinguish between layoffs scheduled for the short-term or the long term, or whether job cuts are handled through attrition or actual layoffs. Also, the job-cut report does not include jobs eliminated in small batches over a longer time period. Unlike most economic data, this series is not adjusted for seasonal variation.”1

“The Challenger Job-Cut Report could serve as a leading indicator for new jobless claims. However, not all layoff announcements result in near term job losses. For instance, companies often announce layoffs that will result in job losses but not immediately. Companies would simply not replace workers who quit voluntarily.”1

Commercial and Industrial (C&I) Loan: “Any type of loan made to a business or corporation and not to an individual. Commercial and industrial loans can be made in order to provide either working capital or to finance major capital expenditures. This type of loan is usually short-term in nature and is almost always backed with some sort of collateral.”4

Components of personal income: “Personal Income is the income that is received by all persons from all sources. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors' income with inventory valuation and capital consumption adjustments, rental income

f ith it l ti dj t t l di id d i l i t t i d l t t f i t lof persons with capital consumption adjustment, personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance.”3 “The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients.”3

1. econoday.com2. http://www.calculatedriskblog.com/2009/07/unemployment-stress-test-scenarios.html3. Bureau of Economic Analysis4. Investopedia.com

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Definitions

Continuing claims: “… a measure of unemployment …”1

“Continuing claims refers to unemployed workers that qualify for benefits under unemployment insurance. In order to be included in continuing claims, the person must have been covered by unemployment insurance and be currently receiving benefits. Data on unemployment claims is published by the Department of Labor on a weekly basis, allowing for frequent updates on the levels of unemployment.”2

Covered Employee: “The exact meaning of ‘covered employee’ varies slightly state to state, but not by much. In simple terms it means one is eligible for unemployment insurance benefits.” 3

“Most states exclude the self-employed, commission based employment such as real estate agents, those in student training programs, academic and hospital internships, employment by churches or religious organizations, and rehabilitation programs.” 3

“Self-employed individuals must pay into unemployment insurance programs, however, the self-employed are not eligible for benefits anywhere.”3

Employment-To-Population Ratio: “A macroeconomic statistic that takes the ratio of the total working age of the labor force currently employed to the total working age population of a region municipality or country It is calculated by: labor force employed divided by total population ” 4total working age population of a region, municipality or country. It is calculated by: labor force employed divided by total population. 4

Employment Situation: “The employment situation is a set of labor market indicators based on two separate surveys in this one report. Based on the Household Survey, the unemployment rate measures the number of unemployed as a percentage of the labor force. Other key series come from the Establishment Survey (of business establishments). Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls.”4g y j p y

The establishment survey“The establishment survey provides information on employment, hours, and earnings of employees on nonfarm payrolls …”5

“BLS collects these data each month from the payroll records of a sample of nonagricultural business establishments. The sample includes about 140,000 businesses and government agencies representing approximately 410,000 worksites and is drawn from a sampling frame of roughly 8.9 million unemployment insurance tax accounts. The active sample includes approximately one-third of all nonfarm payroll employees.” 5

“E t bli h t Th l t bli h t d f i t f b i h f t i ffi d t ll f“Establishment survey. The sample establishments are drawn from private nonfarm businesses such as factories, offices, and stores, as well as from federal, state, and local government entities. Employees on nonfarm payrolls are those who received pay for any part of the reference pay period, including persons on paid leave. Persons are counted in each job they hold. Hours and earnings data are produced for the private sector for all employees and for production and nonsupervisory employees.” 5

“The establishment survey, which is the number we read as the ‘headline’ number, is created by calling up a statistically significant percentage of established businesses every month and asking them how many people they employ. Almost by definition they do not poll small businesses and start-ups, which is where the job creation really happens They have to make an estimate of those jobs and this is called the birth/death ratio ”6which is where the job creation really happens. They have to make an estimate of those jobs, and this is called the birth/death ratio.

1. State Street Global Advisors – G7 Weekly Economic Perspectives – January 7, 20112. Investopedia.com3. Howestreet.com – What does the “Take this Job and Shove-It Indicator” say about the Economy? – December 10, 2010 4. econoday.com5. BSL – The employment situation – December 2010 – Released January 7, 20116. John Mauldin's Weekly E-Letter – Forecast 2011: Better than Muddle Through By John Mauldin – January 8, 2011

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Definitions

The household survey: “The household survey provides information on the labor force, employment, and unemployment that appears in the ’ tables, marked HOUSEHOLD DATA. It is a sample survey of about 60,000 households conducted by the U.S. Census Bureau for the U.S. Bureau of Labor Statistics (BLS).”1

“Household survey. The sample is selected to reflect the entire civilian noninstitutional population. Based on responses to a series of questions on work and job search activities, each person 16 years and over in a sample household is classified as employed, unemployed, or not in the labor force.” 1

“The household survey includes agricultural workers, the self-employed, unpaid family workers, and private household workers among the employed. These groups are excluded from the establishment survey.” 1

“The household survey includes people on unpaid leave among the employed. The establishment survey does not.” 1

“The household survey is limited to workers 16 years of age and older. The establishment survey is not limited by age.” 1

“The household survey has no duplication of individuals, because individuals are counted only once, even if they hold more than one job. In the establishment survey, employees working at more than one job and thus appearing on more than one payroll are counted separately for each appearance.”1

initial claims for unemployment insurance: “… a measure of job shedding …”2

Insured unemployment rate: “Obtaining unemployment insurance benefits is a week-to-week process. Those filing for benefits after the initial-claim filing are included in the insured unemployed data. The insured unemployment rate or jobless rate is a calculated by dividing the number of insured unemployed by the number of employees that are considered covered or eligible for unemployment insurance. Covered employees represent those working as well as those receiving unemployment benefits. The insured unemployment data and the insured unemployment rate are reported one-week g g p y p y p y pbehind the initial claims numbers. Both are presented on a seasonally adjusted and not seasonally adjusted basis.”3

ISM manufacturing index: “The ISM manufacturing composite index is a diffusion index calculated from five of the eleven sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states. The survey queries purchasing managers about the general direction of production, new orders, order backlogs, their own inventories, customer inventories, employment, supplier deliveries, exports, imports, and prices. The five components of the composite index are new orders, production, employment, supplier deliveries, and inventories (their own,

t t i t i ) Th fi t ll i ht d Th ti lit ti th th tit ti th t i th k b t thnot customer inventories). The five components are equally weighted. The questions are qualitative rather than quantitative; that is, they ask about the general direction, rather than the specific level, of business. Each question is transformed into a diffusion index which is calculated by adding the percentage of positive responses to one-half of the unchanged responses. Five components are weighted to form the composite.”4

ISM non-manufacturing index: “The non-manufacturing ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade.”4

1. BSL – The employment situation – December 2010 – Released January 7, 2011 2. State Street Global Advisors – G7 Weekly Economic Perspectives – January 7, 20113. schwab.com4. econoday.com

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Definitions

Jobless Claims: “New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility.”3

Job openings: “Job openings are submitted by establishments on the last business day of the month and require a specific position to be available where work could start in the next 30 days. It could include full, part time and seasonal work.”1

labour force participation rate: “The labor force participation rate explains how an increase in the unemployment rate can occur simultaneously with an increase in employment. If a large amount of new workers enter the labor force but only a small fraction become employed, then the increase in the number of unemployed workers can outpace the growth in employment.” 2

Monster Employment Index: “The Monster Employment Index is a comprehensive monthly analysis of U.S. online job demand. It is conducted by Monster Worldwide Inc and is based on a real time review of a large representative selection of career sites and job boards including Monster "Monster Worldwide, Inc. and is based on a real-time review of a large, representative selection of career sites and job boards, including Monster, according to Monster Worldwide. The Index presents a snapshot of employer online recruitment activity nationwide. It was launched in April 2004 with data collected since October 2003.”3

New Jobless Claims: “Weekly series fluctuate more dramatically than monthly series even when the series are adjusted for seasonal variation. The 4-week moving average gives a better perspective on the underlying trend.” 4

Nominal consumer spending: “Purchase of goods and services by U.S. individuals, accounting for about 2/3 of the GDP. (News commentators like to say that "consumer spending makes up two-thirds of the economy.") This number includes products of both domestic and foreign origin.” 5

Non-Farm Payroll: “A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees: general government employees, private household employee, and employees of nonprofit organizations that provide assistance to individuals farm employees.”1

Personal disposable income: “Disposable personal income is total personal income minus personal current taxes.”6

1. Investopedia.com2. Peter Barth and Dennis Heffley "Taking Apart Taking Part: Local Labor Force Participation Rates" University of Connecticut, 2004.3. Econoday.com4. http://www.moneychimp.com/glossary/consumer_spending.htm5. Bureau of Economic Analysis6. http://payroll.intuit.com/employment_index/

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Definitions

Small Business Employment Index: “… the Intuit Small Business Employment Index to provide a unique view into small business employment trends. This Index is one of the few to focus on employment trends for companies with fewer than 20 employees, which represent 87 percent of all U.S. employer firms and employ nearly 20 million people1. We believe that these smallest of small businesses play a key role in the economy that is different in interesting ways from that of larger businesses.” 1

“This monthly Index offers statistically-sound, near real-time data that measures three data points: small business employment, hours worked andThis monthly Index offers statistically sound, near real time data that measures three data points: small business employment, hours worked and compensation. The data for the Index is pulled in aggregate from approximately more than 57,000 employers across the country that use Intuit Online Payroll and is published monthly on a close to real-time basis.” 1

Unemployment claim (also known as unemployment insurance claim or unemployment compensation claim): “A request made by an individual to the state government to receive temporary payments after having been laid off from a job. The United States Department of Labor keeps track of the number of weekly unemployment claims. It provides both seasonally adjusted and seasonally unadjusted claims numbers and also lists which states had

2an increase or decrease of 1,000 or more claims. These data are reported in the media as an indication of national and state economic health.”2

Vacancies: “Typically, rising vacancies are associated with lower unemployment.”3

1. http://payroll.intuit.com/employment_index/2. Investopedia.com3. State Street Global Advisors – G7 Weekly Economic Perpectives – December 10, 2010

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DisclosuresThe information herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.

The investments listed may not be suitable for all investors. Morgan Stanley Smith Barney LLC recommends that investors independently evaluateparticular investments, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment will dependupon an investor’s individual circumstances and objectives.

International investing may not be suitable for every investor and is subject to additional risks, including currency fluctuations, political factors,withholding, lack of liquidity, the absence of adequate financial information, and exchange control restrictions impacting foreign issuers. These risks maybe magnified in emerging markets.

30 Year Treasury ‐ A U.S. Treasury debt obligation that has a maturity of 30 years. The 30‐year Treasury will generally pay a higher interest rate thanshorter Treasuries to compensate for the additional risks inherent in the longer maturity. However, when compared to other bonds, Treasuries areshorter Treasuries to compensate for the additional risks inherent in the longer maturity. However, when compared to other bonds, Treasuries arerelatively safe because they are backed by the U.S. government.

Dow Jones Industrial Average ‐ Dow Jones Industrial Average is a price‐weighted index of the 30 “blue‐chip” stocks and serves as a measure of the U.S.market, covering such diverse industries as financial services, technology, retail, entertainment and consumer goods.

MSCI AC World Index (Net) ‐ The MSCI ACWI (All Country World Index) Index is a free float‐adjusted market capitalization index that is designed tomeasure equity market performance in the global developed and emerging markets. For historical return purposes the AC World gross returns are beingused from 1/31/1988 to 12/31/1998 and the net returns begin as of 1/31/1999.

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Standard & Poor’s 500 Index ‐ S&P 500 Index is an unmanaged market value‐weighted index of 500 stocks generally representative of the broad stockStandard & Poor s 500 Index S&P 500 Index is an unmanaged, market value weighted index of 500 stocks generally representative of the broad stockmarket. An investment cannot be made directly in a market index. An investment cannot be made directly in a market index.

An investment cannot be made directly in a market index.

Content provided as general information only and should not be taken as investment advise. All content shall not be construed as a recommendation to buy or sell anysecurity or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this are solely the opinions of the author(s) whomay or may not have a position in any company Any action that you take as a result of information analysis or advertisement on is ultimately your responsibilitymay or may not have a position in any company. Any action that you take as a result of information, analysis, or advertisement on is ultimately your responsibility.

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The McNamee Wealth Management Group atMorgan Stanley Smith Barney

Edward F. McNamee, CFP®Managing Director - Wealth ManagementSenior Investment Management ConsultantFinancial Planning Specialist Financial Planning Specialist Family Wealth DirectorSenior Portfolio Management DirectorFinancial Advisor

Brett E. McNamee, CFP®, CIMA®, CRPS®Portfolio Management Associate

Jacqueline FranciscoRegistered Marketing Associate

Cheryl A. MaraRegistered Marketing AssociatePortfolio Management Associate

Registered Marketing AssociateFinancial Planning Specialist

John M. BadenhopSenior Vice President - Wealth ManagementInvestment Management Specialist

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Richard M. GuminaPortfolio Management Associate

Harold ShorrRegistered Marketing Associateg p

Frank J. FierroSenior Vice President - Wealth ManagementFinancial Advisor

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Diana BredbennerClient Service Associate

1030 Broad Street3rd Floor

Shrewsbury, NJ 07702Tel 732 389 8640 / 800 631 2221

Fax 732 389 8690th @ bthemcnameegroup@mssb.com

Visit us at: www.fa.smithbarney.com/edward_mcnameeMorgan Stanley Smith Barney LLC. Member SIPC.

Date of first use: February 24, 201155