ISI Economy, Money and Markets

Dear Equity,

Good morning,

I hope you had a god weekend. I was finally able to catch up on all the
gimmicks being thrown around to jump-start the economy. Have you seen the
one that would temporarily suspend sales taxes, a la 0.0% financing on
autos? What the politico's should really do is get some ideas from the
organizers of the Victoria's Secret (no, there's no relation unfortunately)
TV show or the Britney Spear's HBO show. Have you seen the ratings on
those!? That seems to be what is drawing the American consumer these days.

But despite that being still up in the air, it looks like the economy is in
the process of bottoming anyway. Stocks have continued to rally, oil is
below $18, commodities have rallied, money is up and so is refi. If we
could only get the surveys to behave, we'd be very happy. Interest rates
had been falling up until last week when the backed up. This was largely
interpreted as the bond market smelling the economic recovery. If rates
get too high, it could obviously be a problem, but this "hiccup" in rates
is something we have seen before in periods of transition. Page 3
highlights the "hiccups" in the past when you had the economy shifted from
a recession to a recovery.

Another big question on everyone's mind is Holiday Sales. They are widely
expected to be weak, weak, weak. So where does that leave room for a
surprise? on the upside. Turn to page 6 for all the positives that could
help Holiday Sales. I for one am not expecting a lump of coal.

The political report highlights the effects of the war in Afghanistan on
globalization. Despite all the initial doom-and-gloom, it looks like it
has actually pushed global cooperation along.

Jim Moltz thinks the market is just about fairly valued here at about 22
times 2002 earnings. That being said, he also thinks the liquidity
available out there will drive the market higher when those assets start to
actively look for higher yielding instruments. Some of that could be into
the long end of the curve if rates stay higher, but some will also be into
the equity markets. Jim also tweaked his operating earnings estimate for
2001 from $38 to $39.50. 2002 is still at $50.

Have a great week and a very happy Thanksgiving. If there is anything I
can do, I will be in so please just let me know.

TABLE OF CONTENTS

p.3....BOND YIELDS ERRATIC IN THE LAST WEEKS OF
RECESSION AND EARLY MONTHS OF RECOVERY,
BUT A HICCUP IS TYPICAL.

p.4....MORE EVIDENCE OF THE U.S. ECONOMY BOTTOMING

p.6....HOLIDAY SALES HELPED BY
REFI, OIL, TAX CUTS, AND STOCKS.

p.7....END OF RECESSION VECTOR

p.9....SYNCHRONIZED DISINFLATION/DEFLATION

Please click below for the entire ECONOMY, MONEY & MARKETS report.

http://www.isigrp.com/isip/lib21/1680/31632/11-19emm.html

If you have problems working with PDF files integrated in your browser,
then click below to access the link in a way that will let you save the
file to disk before viewing or printing it.

http://www.isigrp.com/isip/down/1680/31632/11-19emm.pdf

All the best,

Freddy Victoria
212/446-9413