Morning Review - 081310

Market Commentary – Pages 1-4, Equities/Conferences & Earnings – Page 5, Fixed Income – Page 6, Options – Page 7, Exchange-Traded Funds/Indexes
– Page 8, Social 1
Media & Internet Blogs Top Stories – Page 9
Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com
On Thursday stocks extended their losing streak (S&P 500 -0.5%, Dow -0.6%, Nasdaq -0.8%) as the Morning Markets Briefing
latest batch of economic data and comments from Cisco about hesitant customers triggered a fresh
round of worries about the recovery. In a new signal of a weakening jobs market, initial
Market Commentary: August 13th, 2010
unemployment claims unexpectedly jumped to its highest level in nearly 6 months. The number of
new claims for jobless benefits rose 2K to 484K, while the 4-week moving average climbed more than A snapshot of the markets through the
14K to 473.5K, which is the highest since the week ended February 20. In other economic news, higher lens of ConvergEx.
oil prices pushed import prices up 0.2% in July after falling 1.3% in June. Prices for exported goods fell
0.2% following a 0.7% decline the prior month.
Life on the Edge – Leveraged Short Exchange Traded Funds
Summary: Exchange traded funds that feature leveraged short exposure to markets and sectors are clearly the “bad boys” of the otherwise calm and orderly ETF space.
Their daily reset feature makes them ill-suited to many buy and hold strategies, even as a hedge. Yet you can use these products to measure market sentiment and think
about opportune entry points. Despite a stock market that is essentially flat on the year, the top ten leveraged short ETFs (by assets under management) are actually up
in terms of assets in 2010, to some $7.7 billion. That’s a clear sign of skepticism relative to the near term future of U.S. stocks. Looking more closely at the SDS (ProShares
UltraShort S&P 500 ETF), tradable bottoms in U.S. stocks usually come with a decline in SDS share count. That was the case with the May 6th “Flash Crash” and the July
lows. By that measure the current sell-off has a ways to go – SDS shares outstanding have barely budged in recent days.
As a cigar-smoking, motorcycle riding, frequent tourist traveler to the Middle East kind of guy I think I have a good understanding of the psychology of needless
risk. In the past few years I have fallen from a motorcycle (ouch), several horses (not as bad as the bike), and had lunch next to a group of Hezbollah officials in the
Bekaa valley of Lebanon. Despite my 40-something age cohort, this disregard for personal safety isn’t (I hope) a function of mid-life crisis; it has been going on since my
20s. Perhaps it is a belated rebellion from a youth spent more in study than at play. Or an offset to a play-by-the-rules approach to everything else in my life. I don’t
have the inclination to spend the time or money in therapy to find out.
Leveraged short exchange traded funds – those that return 2x or 3x the market’s daily move - have a similar reputation for needless risk. The rap on them is that
they reset daily, so by definition they need a market in the midst of a multi-day “Black Swan” event to really pay off. Try to trade them as retail investor and you will be
met with warnings from your online broker that make it sound like you are about to buy third rate crystal meth from a Hells Angel with obviously counterfeit $20 bills.
Success or failure seem to carry equally harsh outcomes.
1
Yet for all the notoriety these funds have in the investment landscape, they are really more interesting (and actually useful) backwater than snarling threat.
Here’s a brief outline of the leveraged short ETF universe:
• There are a total of 39 leveraged short funds listed on U.S. markets dedicated to domestic stocks. The aggregate market cap amounts to some $8 billion as
of yesterday. Incidentally, there are 41 leveraged long products with a coincidently similar amount of market cap. To put these balances into some context, there
are 1,046 Exchange Traded Products (Funds and Notes) listed in the U.S., with assets totaling about $830 billion. Leveraged short funds are less than 1% of the ETF
ecosystem, but clearly box over their weight class in terms of market attention.
• Only ten leveraged short ETF have market caps over $100 million. These are listed in the attached table, along with their month-end capitalizations thus far
through the year. The most popular fund is the ProShares UltraShort S&P 500 (SDS), a 2x fund, with $3.4 billion in current market cap. The next largest fund is the
Direxion Financial Bear 3X Shares ETF (FAZ), which tracks the daily performance of the Russell 1000 Financial Services Index and has just over $1 billion in assets.
• The rap on these funds – that they decay in value waiting for the “Big One” to arrive – appears to have some merit. In just this year, three of the top ten
funds have needed to do 1:5 reverse splits to keep their share prices at respectable levels. These funds are the ProShares UltraShort Basic Materials (SMN), the
ProShares UltraShort Oil & Gas (DUG) and the Direxion Small Cap Bear 3X Shares (TZA).
Despite their daily-reset structures and resultant challenging payoff possibilities, these funds have grown in 2010. That’s notable not only because of the
countervailing headwinds of bad press, but also because equity-linked ETF products just have not been the flavor of the day, month, or year. Fixed income ETFs have seen
the rapid growth in assets in 2010, not stock-based products. We have attached the charts showing the shares outstanding for the top 10 leveraged short funds for 2010
year-to-date.
Eight of the ten funds have seen rising share counts in 2010. The only two that have not – Proshares UltraShort Financials (SKF) and ProShares UltraShort Oil and Gas
(DUG) –are down 20-50% in shares outstanding. The balance of the list has seen anywhere from 11% to over 150% in incremental shares out. We use that as a sign of
market demand, as more share are created with incremental demand for the product.
Overall market cap for the top 10 funds, which make up well over 90% of the entire capitalization of all short leverage ETFs, has risen in 2010 from $7.4 billion
to $7.7 billion. Again, that’s a drop in the bucket versus in the world of ETFs, but when combined with the share count analysis above shows that demand for these
products continues to grow.
To close out this note, we will look at the most popular leveraged short ETF, the SDS, and show that tracking this fund can lead to useful signals about the
market. The attached chart shows S&P 500 market levels relative to shares outstanding for this product. While there is a pretty steady climb in shares outstanding
through much of 2010, two periods saw a noticeable decline in share count. One was the “Flash Crash” of May 6, and the other took place around the July lows for the
market. Both proved to be opportune times to buy stocks for a trade, even though the S&P 500 is down overall for the year.
We would posit that when SDS traders decide that the “easy” money has been made, they sell enough shares that Authorized Participants (select brokers that
can create or redeem ETF shares) work with the ETF sponsor to reduce the share count. That is simply a function of supply and demand. It just so happens that this
phenomenon is also a useful signal of an oversold market.
By that measure, markets are not yet sufficiently oversold to merit near term bottom-fishing. As is evident from the same chart we described above, shares
outstanding in the SDS have declined only modestly, even as markets have tanked in recent days.
2
Now, before you read that as a negative enough signal to go out and actually buy some SDS, consider what kind of market we need to see to make that
security pay off in size. We have attached a simple analysis that shows how many down days of 1-5% declines we need to see to get the SDS to 50, or 100. A summary
of that table:
• From current market levels, you need to have 21 sequential down days of 1% to see the SDS at $50. Yesterday’s close was $33.38. To see 100, you need 56
days of the same percentage decline.
• The real payoff in the SDS is, of course, an uninterrupted series of really rough days for stocks. You only need 5 down days at 5% to get over $50 for the
SDS, or 12 similar days to get over 100. The fund has only closed over $38 twice in 2010 –on February 8 and again on July 2nd. No coincidence, of course, that
those were the two best tradable lows for the year.
To sum up, the leveraged short funds serve a purpose even if you never actually trade them. By measuring their popularity, you can get an interesting take on
market sentiment. Demand for popular funds like the SDS will actually decline when stocks are oversold. And, of course, their prices will rise to noticeably higher levels –
perhaps even new highs – when we have had a string of losing days.
By both measures, U.S. stocks do not look cheap enough to buy, even with the recent selloff.
Assets Under Management at Month End (in $ millions)

Month Total BGZ DUG DXD FAZ SDS SKF SMN SPXU TWM TZA
January 7,390.3 309.6 219.9 553.2 1,057.2 3,201.2 717.9 154.7 174.6 473.8 528.2
February 7,701.7 288.1 190.0 592.1 1,049.6 3,517.5 746.5 156.6 198.2 460.4 502.7
March 7,511.4 268.6 196.6 552.4 1,231.1 3,240.0 576.9 135.7 226.9 520.9 562.3
April 7,113.5 256.4 181.3 497.4 1,060.5 3,194.6 580.5 122.2 218.4 494.9 507.3
May 7,319.5 265.0 158.5 538.7 937.3 3,530.5 597.6 131.4 238.5 468.6 453.4
June 8,045.3 314.8 150.3 573.3 983.8 3,698.6 637.7 148.6 330.5 569.7 638.0
July 7,724.1 303.3 146.4 522.1 1,059.6 3,521.4 556.5 115.8 358.6 516.3 624.1
SDS Moves at 2X Inverse the Daily % Move of the S&P 500

S&P 500 SDS # Days to get SDS to: S&P 500 Would Be:
Current level: 1,086 33.3 50.0 100.0 If SDS at 50 If SDS at 100
1% Move in the S&P 500 1,076 34.0 21 56 889 625
2% Move in the S&P 500 1,065 34.7 11 29 888 617
3% Move in the S&P 500 1,054 35.3 7 19 933 628
4% Move in the S&P 500 1,043 36.0 6 15 886 614
5% Move in the S&P 500 1,032 36.7 5 12 885 618
3
UltraShort S&P500 ProShares (SDS) Share Count vs S&P 500 Index

110,000,000 1250
105,000,000 1200
100,000,000
1150
95,000,000
1100
90,000,000
85,000,000 1050
80,000,000 1000
SDS S&P 500 Index
Direxion Daily Large Cap Bear 3X Shares (BGZ) Direxion Daily Financial Bear 3X Shares (FAZ) UltraShort S&P500 ProShares (SDS)
25,000,000 100,000,000 110,000,000
24,000,000
90,000,000 YTD Change: 105,000,000
23,000,000 YTD Change:
44.3%
18.6%
22,000,000 80,000,000 100,000,000
21,000,000
20,000,000 70,000,000 95,000,000
19,000,000
60,000,000 90,000,000 YTD Change:
18,000,000 28.2%
17,000,000 50,000,000 85,000,000
16,000,000
15,000,000 40,000,000 80,000,000
UltraShort Oil & Gas ProShares (DUG)

5,000,000
4,500,000
4,000,000 YTD Change:
3,500,000 -48.9%
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Shares adjusted to reflect 1:5 stock split on 4/15/10

4
UltraShort Dow30 ProShares (DXD) UltraShort Financials ProShares (SKF) Direxion Daily Small Cap Bear 3X Shares (TZA)
25,000,000 40,000,000 20,000,000
24,000,000 38,000,000 18,000,000
23,000,000 YTD Change: 36,000,000 YTD Change: 16,000,000
10.9% -20.3% 14,000,000
22,000,000 34,000,000
12,000,000
21,000,000 32,000,000
10,000,000
20,000,000 30,000,000 8,000,000 YTD Change:
19,000,000 28,000,000 6,000,000 113.6%
18,000,000 26,000,000 4,000,000
17,000,000 24,000,000 2,000,000
16,000,000 22,000,000 0
15,000,000 20,000,000
UltraShort Basic Materials ProShares (SMN) UltraPro Short S&P500 ProShares (SPXU) UltraPro Russell2000 ProShares (TWM)
5,000,000 12,000,000 40,000,000
4,500,000 11,000,000
4,000,000 35,000,000
10,000,000 YTD Change: YTD Change:
3,500,000 164.4% 57.6%
3,000,000 9,000,000 30,000,000
2,500,000 8,000,000
25,000,000
2,000,000 7,000,000
YTD Change:
1,500,000 35.6% 6,000,000 20,000,000
1,000,000
5,000,000
500,000 15,000,000
0 4,000,000
3,000,000 10,000,000
5
U.S. EQUITIES
Shares of CSCO (-10.0%) faltered as the company posted quarterly revenue after the close on Wednesday that fell short of Wall Street’s expectations. The
company’s earnings of 43 cents a share excluding one-time items beat estimates by a penny. In other earnings news, retailer KSS (-2.7%) beat estimates
but its full-year outlook fell short of expectations. Foodmaker SLE declined 0.7% after forecasting fiscal 2011 profit that missed estimates. In the auto
industry, General Motors reported a quarterly profit of $1.3 billion and secured a $5 billion credit facility relative to its reported IPO filing on Friday. Also,
AAP advanced 5.2% as its quarterly net income increased 26% and it raised its full-year outlook.
Important Earnings Today (with Estimates) From…

JCP: $0.05 S&P Futures
Source: Bloomberg One Day (High –1087.50; Low – 1070.50):
Important Conferences/Corporate Meetings Today:

BofA Merrill Lynch Specialty Pharmaceuticals Conference – Southampton, NY
Prior Day SPX (High – 1086.72; Low – 1076.69; Close – 1083.61): Three Day (High – 1124.75; Low – 1070.50):
Source: Thomson ONE

6
FIXED INCOME
Results were mixed for the Treasury’s monthly 30-year bond auction. The $16 billion offering drew a yield of 3.954 percent, compared with the 1:00pm
bid of 3.948 percent, while coverage at 2.77 times was lower than the 2.89 times at the previous sale. Average coverage over the past 10 auctions was
2.61 times. Buyside participation was strong with dealers accounting for 35 percent of the purchases versus a 46 percent average, as indirect bidders
bought 46 percent of the bonds versus a 10-sale average of 36 percent. Treasuries showed little reaction to the results.
Source: Bloomberg Source: Bloomberg
Today’s Important Economic Indicators/Events:

Consumer Price Index: 0.2%
Core CPI (less food & energy): 0.1%
Retail Sales: 0.5%
University of Michigan Consumer Sentiment: 69.0
Business Inventories: 0.2%
Kansas City Fed President Thomas Hoenig speaks at 11:30am
7
U.S. EQUITY
OPTIONS
SPX – Although the index sold off initially to a low of -1.2%, it rallied back to net a smaller loss of -0.5% on the day. This subdued decline also produced a muted the rise in the
VIX, which ended up only 1.3% after rising intraday as much as 7.2%. There was one large four-way trade which dominated much of the activity in SPX options. The December
800/1025 put spread was bought 7,800 times for $37.40 vs. the September 850/950 put spread being sold @ 3.55 just over 57,000 times. This was likely a closing trade on the
September spread and opening in the December positions. There was also a buyer of 15,000 September 725 puts which was also likely opening.
ETF-With the market selloff on the open we saw an initial pop in the VIX, as the day progressed the market began to trend higher and the VIX settled in to roughly
unchanged. This activity did not deter buyers of protection in the ETF space. In XLF (Financials) we saw one player finance the purchase of the Sep 13/14 put spread through the
sale of the Sep 15 calls 82,000 times. In XLK (Technology) one investor sold 10,000 Aug 22 puts to buy 15,000 Sep 21 puts. In XLI (Industrials) we saw a roll of 5,500 long Aug 29
puts into the Sep 29 puts. In EEM (Emerging Markets) we saw a buyer of 11,400 Sep 39/36 put spreads and finally in XLP (Consumer Staples) we saw a buyer of 5,000 Jan 25
straddles. In the VIX we saw some large front month activity with a seller of 50,000 Aug 40 calls as well as a seller of 12,000 Aug 32.5/40 call spreads delta neutral.
CURRENT IMPLIED VOLATILITY / CURRENT HISTORICAL VOLATILITY BIGGEST MOVERS

Rank 8/6/2010 8/9/2010 8/10/2010 8/11/2010 8/12/2010 30-Day Implied Vol
1 ARG Q ARG Q Q 44.2924 Top 10 30-Day Implied Vol Bottom 10 30-Day Implied Vol
2 Q ARG Q ARG ARG 22.7455 WYN 545.92% 40.65 HOG -36.63% 47.03
3 PTV PTV PTV PTV NOLV 51.1224
Q 209.27% 44.29 TMO -36.65% 25.44
4 NOVL NOVL NOVL NOVL PTV 50.62
5 EL NU CFN KR KR 26.6883 ARG 128.54% 22.75 GNW -37.84% 52.16
6 CFN CFN KR CRM CRM 47.2692 PCAR 123.69% 37.22 LSI -38.33% 42.44
7 MJN FLIR CRM AMAT AMAT 36.6082
8 KR EL SWN LMT MO 17.1318
PTV 108.63% 50.62 CL -43.79% 16.67
9 FLIR KR MJN STZ SAI 28.8437 CVH 97.10% 37.96 PBI -44.87% 26.64
10 AMAT MJN LMT LO LMT 21.6966 NOVL 89.24% 51.12 PWR -54.06% 33.84
11 SAI SAI PLL MO LO 20.8581
12 SWN AMAT DE MJN DE 37.1723 STZ 83.05% 25.95 ATI -63.04% 49.30
13 SJM CPB AMAT CPB CPB 18.3014 FLIR 76.75% 31.64 QCOM -75.65% 29.50
14 FRX INTU EL INTU STZ 25.9503
15 MRK SWN INTU FLIR MRK 24.9374
PCP 75.98% 31.47 WY -84.11% 45.59
16 PLL SLE FLIR SAI L 27.4209
17 SLE CRM CPB SWN INTU 29.4101
18 CPB SJM RDC DE TGT 28.4124
19 INTU PLL LO PLL MJN 33.4706
20 TGT NSM NSM MCK NSM 35.505
21 TSN FRX STZ NSM T 19.2721 We ranked the S&P 500 companies from the highest to lowest 30 day implied to
22 CRM MCK SLE EL SWN 38.179
historical volatility ratio. Above we identify the 10 most positive and negative
23 NSM MDT CPWR MRK FLIR 31.6423
24 MCK RDC AAPL DVN PX 24.7996
movers.
25 CLX BIG SAI AZO AZO 21.0597
The table to the left represents the 25 highest 30 day implied to historical
AZO CLX BIG AAPL PLL
AIG TSN MDT CPWR MCK
volatility ratios within the S&P 500 companies. The green represents names
TGT MCK SLE EL new to the list while the red represents names that have fallen out.
MRK MRK RDC DVN
NU CFN
FRX
8
Exchange-Traded Funds/Indexes
Prior Day Peformance of Largest ETFs by Assets S&P 500 Sector ETFs
Name (Net Assets*) Ticker Category Daily Return Sector Ticker 1-Day Perf YTD Perf Sector Ticker 1-Day Perf YTD Perf
SPDRs SPY Large Blend -0.64% Energy XLE 0.60% -6.26% Telecomm IYZ 0.55% 0.40%
SPDR Gold Shares GLD N/A 1.22% Health XLV 0.41% -5.99% Technology XLK -1.38% -6.80%
iShares MSCI Emerging Markets Index EEM Diversified Emerging Mkts 0.22% Industrials XLI -0.71% 5.94% Consumer Discretionary XLY -0.38% 4.47%
iShares MSCI EAFE Index EFA Foreign Large Blend -0.12% Utilities XLU -0.20% -1.39% Financials XLF -0.70% -2.01%
iShares S&P 500 Index IVV Large Blend -0.64% Consumer Staples XLP -0.11% 1.28% Materials XLB 0.64% -4.67%
Prior Day Top Volume ETFs Currency ETFs
Name Ticker Category Shares Traded Currency Ticker 1-Day Perf YTD Perf Currency Ticker 1-Day Perf YTD Perf
SPDRs SPY Large Blend 231,400,909 Australian Dollar FXA -0.27% -0.38% Mexican Peso FXM 0.18% 2.35%
Financial Select SPDR XLF Specialty - Financial 71,911,843 British Pound Sterling FXB -0.65% -3.75% Swedish Krona FXS -0.39% -3.28%
PowerShares QQQ QQQQ Large Growth 63,269,177 Canadian Dollar FXC 0.23% 0.53% Swiss Franc FXF 0.79% -1.59%
iShares Russell 2000 Index IWM Small Blend 62,791,919 Euro FXE -0.44% -10.55% USD Index Bearish UDN -0.31% -6.28%
iShares MSCI Emerging Markets Index EEM Diversified Emerging Mkts 43,906,790 Japanese Yen FXY -0.61% 8.13% USD Index Bullish UUP 0.33% 4.03%
Prior Day Top Performers VIX ETNs Fixed Income ETFs
Name Ticker Category Daily Return Name Ticker 1-Day Perf YTD Perf Bonds Ticker 1-Day Perf YTD Perf
GlobalShares FTSE All-World GSW N/A 10.09% iPath S&P 500 VIX VXX 1.36% -32.05% Aggregate AGG -0.16% 4.41%
UltraShort Russell3000 ProShares TWQ Bear Market 8.78% Short-Term Futures ETN Investment Grade LQD -0.38% 5.82%
UBS AG Exchange Traded Access S MLPG N/A 7.28% High Yield HYG -0.34% -1.26%
B2B Internet HOLDRs BHH Specialty - Technology 6.54% iPath S&P 500 VIX VXZ 0.94% 15.04% 1-3 Year Treasuries SHY -0.02% 1.52%
Direxion Daily Technology Bear 3X shares TYP Bear Market 5.32% Mid-Term Futures ETN 7-10 Year Treasuries IEF -0.26% 10.21%
20+ Year Treasuries TLT -0.25% 12.39%
Others
ETF Ticker 1-Day Perf YTD Perf ETF Ticker 1-Day Perf YTD Perf
Gold GLD 1.22% 10.68% Crude Oil USO -2.36% -13.62%
Silver SLV 0.91% 6.96% EAFE Index EFA -0.12% -7.94%
Natural Gas UNG -0.69% -28.37% Emerging Markets EEM 0.22% -2.46%
SPDRs SPY -0.64% -2.55%
Major Index Changes:

None
ETFs in the Headlines and Blogs:

Gold Miner ETFs Fail to Shine Despite Spectacular Earnings - http://seekingalpha.com/article/220131-gold-miner-etfs-fail-to-shine-despite-spectacular-earnings
What’s gotten Into Yen ETFs? - http://etfdb.com/2010/whats-gotten-into-yen-etfs/
9
Top Online Social Networking Stories
Latest Popular Digg.com Business Stories:

Where’s relief for homeowners who played by rules? - http://articles.orlandosentinel.com/2010-05-20/business/os-kassab-foreclosure-solution-
05212020100520_1_underwater-homeowners-mortgage-payments-default
The Sweet Smell of Sour Grapes: Companies that Win Big Despite – or Because of – Conflicts - http://www.newsweek.com/photo/2010/08/04/companies-
that-succeed-despite-or-because-of-conflicts.html
7 of the Worst VC Investments of All Time - http://www.focus.com/fyi/finance/7-worst-vc-investments-all-time/
‘Chop-shop’ remark causes outrage - http://www.thehindu.com/news/international/article564908.ece
Calculated Risk
Weekly Initial Unemployment Claims increase, Highest since February - http://www.calculatedriskblog.com/2010/08/weekly-initial-unemployment-
claims_12.html
Cisco Comments: Mixed Signals, Recovery has slowed - http://www.calculatedriskblog.com/2010/08/cisco-comments-mixed-signals-recovery.html
The Big Picture

6 Billion Errors Per Day, Minimum - http://www.ritholtz.com/blog/2010/08/6-billion-errors-per-day-minimum/
Robert Reich’s Blog

America’s Biggest Jobs Program – the U.S. Military - http://robertreich.org/post/938938180/americas-biggest-jobs-program-the-u-s-military
Bespoke Investment Group

Cisco’s (CSCO) Worst earnings Report in a Decade? - http://www.bespokeinvest.com/thinkbig/2010/8/12/ciscos-csco-worst-earnings-report-in-a-
decade.html
S&P 500 Performance After 2% Declines - http://www.bespokeinvest.com/thinkbig/2010/8/11/sp-500-performance-after-2-declines.html
High Yielders Going Ex-Dividend - http://www.bespokeinvest.com/thinkbig/2010/8/11/high-yielders-going-ex-dividend.html
Up 100% in 2010 - http://www.bespokeinvest.com/thinkbig/2010/8/10/up-100-in-2010.html
“Looks Like I Picked the Wrong Week to Turn Bullish” - http://www.bespokeinvest.com/thinkbig/2010/8/12/looks-like-i-picked-the-wrong-week-to-turn-
bullish.html
The New York Times

Debts Rise, and Go Unpaid, as Bust Erodes Home Equity - http://www.nytimes.com/2010/08/12/business/12debt.html?_r=1
The Baseline Scenario

Why Won’t “Fiscal Hawks” Discuss the Real Issues? - http://baselinescenario.com/2010/08/12/why-wont-fiscal-hawks-discuss-the-real-issues/
10
GENERAL DISCLOSURES
This presentation discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions. It is
provided for general informational purposes only and should not be relied on for any other purpose. It is not, and is not intended to be, research, a
recommendation or investment advice, nor an offer to sell or the solicitation of offers to buy any BNY ConvergEx Execution Solutions LLC (“ConvergEx”)
product or service in any jurisdiction. It does not take into account the particular investment objectives, restrictions, tax and financial situations or other
needs of any specific client or potential client. Please consult with your financial and other advisors before buying or selling any securities or other
assets. This presentation is for qualified investors and NOT for retail investors.
Please be advised that options carry a high level of risk and are not suitable for all investors. To receive a copy of the Options Disclosure Document
please contact the ConvergEx Compliance Department at (800) 367-8998.
The opinions and information herein are current only as of the date appearing on the cover. ConvergEx has no obligation to provide any updates or
changes to such opinions or information. The economic and market assumptions and forecasts are subject to high levels of uncertainty that may affect
actual performance. Such assumptions and forecasts may prove untrue or inaccurate and should be viewed as merely representative of a broad range
of possibilities. They are subject to significant revision and may change materially as market, economic, political and other conditions change.
Past performance is not indicative of future results, which may vary significantly. The value of investments and the income derived from investments
can go down as well as up. Future returns are not guaranteed, and a loss of principal may occur. The information and statements provided herein do
not provide any assurance or guarantee as to returns that may be realized from investments in any securities or other assets.
The opinions expressed in this presentation are those of various authors, and do not necessarily represent the opinions of ConvergEx or its affiliates.
This material has been prepared by ConvergEx and is not a product, nor does it express the views, of other departments or divisions of BNY ConvergEx
Group, LLC and its affiliates.
11

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Market Commentary – Pages 1-4, Equities/Conferences & Earnings – Page 5, Fixed Income – Page 6, Options – Page 7, Exchange-Traded Funds/Indexes

Life on the Edge – Leveraged Short Exchange Traded Funds

Assets Under Management at Month End (in $ millions)

SDS Moves at 2X Inverse the Daily % Move of the S&P 500

UltraShort S&P500 ProShares (SDS) Share Count vs S&P 500 Index

SDS S&P 500 Index

UltraShort Oil & Gas ProShares (DUG)

Shares adjusted to reflect 1:5 stock split on 4/15/10

Shares adjusted to reflect 1:5 stock split on 7/7/10

Shares adjusted to reflect 1:5 stock split on 4/15/10

Important Earnings Today (with Estimates) From…

Important Conferences/Corporate Meetings Today:

Source: Thomson ONE

Source: Bloomberg Source: Bloomberg

Today’s Important Economic Indicators/Events:

CURRENT IMPLIED VOLATILITY / CURRENT HISTORICAL VOLATILITY BIGGEST MOVERS

Major Index Changes:

ETFs in the Headlines and Blogs:

Top Online Social Networking Stories

Latest Popular Digg.com Business Stories:

The Big Picture

Robert Reich’s Blog

Bespoke Investment Group

The New York Times

The Baseline Scenario

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