Conference Call November 19, 2006

The Economy Housing markets have not reached a bottom yet New housing starts fell 14.6% in October – lowest level since July 2000 Building Permits  leading indicator for housing starts – permits fell 6.3% in October  the largest decline in 7 years Housing starts are down 27.4% YTD Building permit are down 28% YTD

The Economy Consumer prices seem to be better recently – CPI declined 0.5% in October  second straight monthly decline Decline was due to falling prices for gasoline and automobiles – The core CPI rose 0.1% in October  smallest increase in 8 months Core CPI is up 2.7% YTD Federal Reserve still is not satisfied with numbers Median CPI, another way to measure CPI without excluding food and energy prices, is up 3.6% YTD The Federal Reserve believes consumer prices are relatively stable when they rise less than 2% yearly

The Market The major stock indexes were up for the 2nd week – Decline in energy prices are cause of rally in stock prices – Crude oil has declined 25% since July – How much more can global energy prices fall? Investors hope the Fed will cut short-term interest rates to stimulate economy

The Markets Best-performing sectors in Q306 are Consumer Discretionary, Information Technology, and Materials – Historically, these sectors have led the stock market after Fed cut interest rates – Stock investors are ahead of Fed in this business cycle Business cycle model still in Easeoff, but economy may be close to changing to the Plunge phase