Initial U.S. Jobless Claims Fell More Than Estimated to 421,000 Last Week …

Market sentiment: Positive but no one quite knows what direction to move in next. Reason being by historic standards, emerging market economies are basically fully priced, whilst developed market economies are offering nothing at all – so does the investor take the risk of entering into dangerous territory by buying into markets that are already fully priced – or do they leave the money at home earning nothing? Quite a dilemma!

Market fundamentals: (Countries in order of contribution to global GDP.)

USA. As things stand, is still too early to tell if the US’s is winning the battle to keep the current momentum of the recovery that is under way, going. The fact that Ben Bernanke has pledged to keep interest rates low and to keep markets a liquid as possible for as long as needed is a help, but now we need to get the American consumer spending and the Banks lending again. Things are however looking a little better as we now have some good news coming out of the US and not simply all bad news – but the emphasis remains on the “some” in the good news – and the Fed have indicated that they are far from convinced that the economy is now back on track and have indicated already that they will provide more quantative easing by buying up more government debt. Of course this is keeping US interest rates low and weakening the US$ - which is causing much upset globally – as can be seen in the numerous references made in the media to the words “currency wars”. Contribution to world GDP is 25% at 14 trillion US$ per year. Government debt is 53% of GDP.

China decided not to participate in the global recession and continues to do well. The fact that they continue to peg the Yuan to the US$, thus keeping their exports cheap and their imports expensive is causing a lot of political heat in the US thus putting a lot of pressure on the Senate and House of Representatives to “do something”. One can only hope that they do not as that would be tantamount to firing the first shot in a full blown currency war I think. Contribution to world GDP is 9.1% at 5.2 trillion US$ per year. Government debt is 17% of GDP

Japan has not had a good quarter, with GDP way below estimates and the Yen ending the quarter way to strong. Factor in the size of their debt, 20 years of deflation, and the Japanese predisposition to save rather than to spend makes me wonder just what it is they need to do to break out of this “death spiral”. Contribution to world GDP is 8.7 % at 5.0 trillion US$ per year. Government debt is 190% of GDP

Germany continues to break all sorts of records on the upside. It is however creating problems for the ECB as the ECB needs to keep its interest rates low for most of the other European Union Countries who are battling under a mountain of debt and declining growth rates, whilst it needs to raise interest rates to moderate German inflationary pressures – although latest figures seem to indicate that this may not be a problem at all. So far so good anyway! Contribution to world GDP is 5, 7 % at 3.3 trillion US$ per year. Government debt is 72% of GDP

Together the above countries make up 47% of global GDP, with the US making up more than half of this 47% on its own.

^^^^^^^ NEWS SNIPPETS OUT OF THE US ^^^^^^^

(Bloomberg)

Initial U.S. Jobless Claims Fell More Than Estimated to 421,000 Last Week The number of workers filing first- time claims for unemployment insurance payments fell last week in the U.S., showing the labor market continues to improve.

U.S. Stock-Index Futures Extend Advance on Decline in Unemployment Claims U.S. stock futures extended gains, signaling the Standard & Poor’s 500 Index may remain at a two- year high, after a bigger-than-estimated decrease in jobless claims bolstered optimism in the economy.

Homes in U.S. Poised to Lose $1.7 Trillion in Value This Year, Zillow Says U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.

SocGen, HSBC Tap U.S. for Funds as Europe Sales Evaporate: Credit Markets Societe Generale SA and HSBC Holdings Plc issued almost $3 billion of dollar-denominated bonds as an expanding sovereign-debt crisis slowed sales in Europe.

Greenlaw as Top Spending Forecaster Sees U.S. Consumer Pickup on Job Gains American consumers will again be the drivers of the economic expansion in 2011 as employment picks up and wages grow, said David Greenlaw, Morgan Stanley’s chief fixed-income economist.

^^^^^^^ NEWS SNIPPETS OUT OF CHINA ^^^^^^^

(Bloomberg)

November Passenger-Car Sales to Dealers in China Increases 29.3% on Year China’s passenger-car deliveries to dealers rose to a record in November as customers rushed to take advantage of government incentives supporting vehicle-buying that may expire at the end of the year.

China May End Auto Sales Tax Rebate, Association Says; Europe Shares Fall China, the world’s biggest car market, may end tax incentives for buying passenger cars next year, said Xiong Chuanlin, vice secretary-general of the China Automobile Industry Association. Shares of automakers in Europe plunged.

Yuan Gain May Quicken as Trade Surplus Sparks Senate Protest: China Credit China’s trade surplus may have exceeded $21 billion in November, set to match the biggest quarterly gap since 2008 and adding to pressure for yuan gains to appease U.S. lawmakers and cool inflation.

China's Stocks Decline to Two-Month Low on Policy Tighterning Speculation China’s stocks fell, driving the benchmark index down to the lowest in almost two months, as inflation concerns and a think-tank report saying property prices are inflated boosted prospects for more policy tightening.

^^^^^^^ NEWS SNIPPETS OUT OF JAPAN ^^^^^^^

(Bloomberg)

Nikkei 225 Rises to Seven-Month High on GDP, Strong Euro; Banks Lead Gains Japanese stocks gained, sending the Nikkei 225 Stock Average to almost a seven-month high, as Japan’s economy grew faster than expected and the euro strengthened against the yen.

Japan May Offer $210 Million Loan for Florida High-Speed Train to Help Bid Japan may offer as much as $210 million in loans to help pay for a Florida high-speed railway as a Central Japan Railway Co.-led group competes against Asian and European companies to build the first U.S. bullet-train line.

Japan's Economy Grew 4.5% in Third Quarter, More Than Previously Estimated Japan’s economy expanded more than the government initially calculated in the third quarter because of a bigger-than-reported increase in capital spending.

Tokyo Office Vacancy Rate Rises For First Time in Three Months in November Tokyo’s office vacancy rate rose for the first time in three months in November as some companies reduced office space, said Miki Shoji Co. Property stocks fell.

Dollar Falls as Treasury Yields Drop Before Central Bank Meeting Next Week The dollar fell against 15 of its 16 major counterparts as U.S. Treasury yields dropped from their highest in six months, tempering demand for the greenback.

Japan Bonds Drop for a Third Day as Recovery Signs, Shares Curb Safety Bid Japanese bonds fell, sending 10-year yields to a six-month high, as signs the worldwide economic recovery is gaining momentum curbed demand for safer assets.

Nikkei 225 `Golden Cross' Signals Rally to April High: Technical Analysis Japan’s Nikkei 225 Stock Average formed a so-called golden cross, indicating the gauge may climb 11 percent back to this year’s April high within the next quarter, according to Nomura Holdings Inc.

^^^^^^^ NEWS SNIPPETS OUT OF GERMANY ^^^^^^^

(Bloomberg)

France Backs Germany Rejecting More Aid, Joint Euro Bonds Before EU Summit France backed Germany in refusing to add to the European Union’s 440 billion-euro ($581 billion) rescue fund and rejecting joint euro-area bonds, deepening bloc- wide divisions before next week’s summit of EU leaders.

European Stocks, U.S. Futures Rise on Faster-Than-Forecast Japanese Growth European stocks rose to a two-year high as reports reassured investors that the global economic recovery is intact. Asian stocks and U.S. stock-index futures also advanced.

Bunds Rise as 3% Yield for First Time in Seven Months Attracts Investors German government bonds climbed, snapping a two-day drop, as France backed Germany in refusing to add to the European Union’s 440 billion-euro ($581 billion) rescue fund and rejecting joint euro-area debt securities.

Deutsche Bank Proposes Plan B to Help ECB Fight Debt Turmoil: Euro Credit The European Central Bank should draft commercial lenders as allies in its fight to stem the euro-region financial crisis by giving them incentives to buy bonds of debt-swamped governments, Deutsche Bank AG says.

Greece Selling Diaspora Bonds Mimics Israel in Tapping Citizens Overseas Nina Vacratsis left Greece 64 years ago, and the old country is counting on her more than ever.

^^^^^^^ NEWS SNIPPETS OUT OF THE UK & IRELAND ^^^^^^^

(Bloomberg)

BOE Holds Bond-Purchase Plan on Signs Economy Will Withstand Spending Cuts The Bank of England kept its emergency stimulus program unchanged after recent data suggested the economy may be strong enough to weather the government’s impending spending cuts, undermining the case for more aid.

Standard Chartered Forecasts Record Full-Year Profit, Says Margins Narrow Standard Chartered Plc, the British bank generating more than three quarters of earnings from Asia, forecast record full-year profit even as expansion and increased regulatory scrutiny drove costs higher.

Banks in Britain Must Pay Higher Tax on Balance Sheets Than First Proposed The U.K. government will tax banks’ balance sheets at a higher rate than first proposed, raising almost 9 billion pounds ($14 billion) over the next four years.

U.K. Homebuyers Can Rest Assured Prices Are Rising, Unless They're Falling U.K. home prices are rising. Or they’re falling. It depends whom you ask.

^^^^^^^ THE NUMBERS FOR THE DAY ^^^^^^^

Against this background the ALSI ended -0.48% down for the day closing out at 31617 which makes it

-0.12% undervalued at optimistic future growth rates, giving a 12 month forward return of 11.95%

10.18% overvalued at pessimistic future growth rates, giving a 12 month forward return of -0.21%

The average Money Market Rate at present is 6.08% (Trend is continuing downwards. starting at 7.26% on the 26/04/2010)

The closing CBT VIX (which essentially measures the degree of fear born out of uncertainty out there amongst share traders globally – with a value of 0 being “no fear” and 100 being unbridled terror. Please remember that as one can never be absolutely certain about the markets, there will ALWAYS be a degree of fear born out of uncertainty, but I would say anything above 20 shows a higher degree of uncertainty than “normal” with “normal” being somewhere between 10 and 20)

5 days ago                  4 days ago                     3 days ago                     2 days ago                     Yesterday

17.92                           17.97                           18.13                           17.80                           17.37

My model portfolio returns on an initial investment of R10, 000 after being invested for 228 days are as follows:

            Cash                            Stable Fund                 Balanced Fund            Aggressive Fund

            R10, 413.63                   R9,833.12                     R10,157.78                    R10,393.74

            +4.14%                         -1.67%                            +1.58%                         +3.94%

The “Cash” assumes a cost and tax free investment of R10, 000 into a money market fund. Returns are based on the average yield of 18 different money market funds.

Note that the figures for the Stable, Balanced and Equity Funds are shown after subtracting MAXIMUM upfront fees of 3.42% (including VAT) from the R10, 000 and applying ANNUAL FEES thereafter of 1.77% including VAT to the remaining balance, into perpetuity.

Have a great day! The CMEFS investment team