By: Anirban Basu Sage Policy Group, Inc. April 26, 2012 The Dog Ate My Home On Behalf of Commonwealth Business Travel Group

Penny wise, Euro foolish

Historic and Projected World Output Growth 2004 through 2013* Source: International Monetary Fund * data are projections

Top 12 Stock Exchanges 2008 Growth RankExchangeIndex2008 % Change 3London SEFTSE % 1NYSE GroupDJI A-33.8% 12Swiss ExchangeSwiss Market-34.2% 9TSX GroupS&P TSX Composite-35.4% 2NasdaqNASDAQ Composite-39.6% 8Bolsa De MedridMadrid General-40.0% 6Frankfurt SEDAX-40.2% 4Tokyo SENikkei % 5EuronextCAC % 11Hong Kong ExchangesHang Seng Index-47.9% 10Borsa ItalianaMIBTel-48.5% 7Shanghai SEShanghai Composite-65.4% Source: Yahoo! Finance

Top 12 Stock Exchanges 2009 Growth RankExchangeIndex2009 % Change 7Shanghai SEShanghai Composite 77.2% 11Hong Kong ExchangesHang Seng Index 51.4% 2NasdaqNASDAQ Composite 43.7% 9TSX GroupS&P TSX Composite 31.2% 6Frankfurt SEDAX 29.9% 1NYSE GroupDJI A 26.8% 8Bolsa De MedridMadrid General 26.7% 3London SEFTSE % 5EuronextCAC % 10Borsa ItalianaFTSE MIB 19.5% 12Swiss ExchangeSwiss Market 18.4% 4Tokyo SENikkei % Source: Yahoo! Finance

Top 12 Stock Exchanges 2010 Growth RankExchangeIndex2010 % Change 2NasdaqNASDAQ Composite 16.9% 6Frankfurt SEDAX 16.1% 9TSX GroupS&P TSX Composite 14.4% 1NYSE GroupDJI A 11.0% 3London SEFTSE % 11Hong Kong ExchangesHang Seng Index 5.3% 12Swiss ExchangeSwiss Market -1.7% 4Tokyo SENikkei % 5EuronextCAC % 10Borsa ItalianaFTSE MIB -13.2% 7Shanghai SEShanghai Composite -14.3% 8Bolsa De MedridMadrid General -19.2% Source: Yahoo! Finance

Top 12 Stock Exchanges 2011 YTD Growth through Third Quarter RankExchangeIndex% Change 1NYSE GroupDJI A -5.7% 2NasdaqNASDAQ Composite -9.0% 3London SEFTSE % 9TSX GroupS&P TSX Composite -13.5% 8Bolsa De MedridMadrid General -14.0% 12Swiss ExchangeSwiss Market -14.1% 4Tokyo SENikkei % 7Shanghai SEShanghai Composite -16.0% 6Frankfurt SEDAX -20.4% 5EuronextCAC % 11Hong Kong ExchangesHang Seng Index -23.6% 10Borsa ItalianaFTSE MIB -26.5% Source: Yahoo! Finance

Top 12 Stock Exchanges 2011 Growth RankExchangeIndex% Change 1NYSE GroupDJI A5.5% 2NasdaqNASDAQ Composite-1.8% 3London SEFTSE % 12Swiss ExchangeSwiss Market-7.8% 9TSX GroupS&P TSX Composite-9.2% 8Bolsa De MedridIGBM-14.6% 6Frankfurt SEDAX-14.7% 5EuronextCAC % 4Tokyo SENikkei % 11Hong Kong ExchangesHang Seng Index-20.0% 7Shanghai SEShanghai Composite-21.7% 10Borsa ItalianaFTSE MIB-25.2% Source: Yahoo! Finance

All dressed up with no place to go

Industrial Production January 2001 through March 2012 Source: Federal Reserve The industrial production index measures the real output of the manufacturing, mining, and electric and gas utilities industries.

Gross Domestic Product 1990Q1 through 2011Q4 Source: Bureau of Economic Analysis 2011Q4: 3.0%

Source: Bureau of Labor Statistics Net Change in U.S. Jobs, BLS January 2001 through March /12: +120K Between March 2011 and March 2012, the nation gained 1,899,000 jobs.

Source: Bureau of Labor Statistics National Nonfarm Employment by Industry Sector Groups March 2011 v. March 2012 All told 1,899K Jobs Gained

Issues with the Federal Budget The automatic sequestration mandated by the Budget Control Act of 2011 is set to begin in January Both defense and non-defense programs will be cut by $54.7 billion each year from 2013 through 2021 – a total of approximately $109.3 billion per year or $984 billion through In addition, if Congress does not act by the end of the year, nearly 50 items in the tax code will expire. Among the most significant items are the “Bush tax cuts” and the payroll tax cut. Bush Tax Cuts: If tax cuts are not extended, approximately 60 percent of taxpayers will see an increase in their tax rate between 3 and 5 percentage points (e.g. a couple that makes $90,000/year will pay an extra $2,700 in federal income taxes). Expiring tax cuts also mean reductions to investment income. If the current rates expire, the tax rate for capital gains would increase from 15 percent to 20 percent and dividends would be taxed as normal income, instead of the current 15-percent rate. Payroll Tax Cut: If allowed to expire, roughly 160 million workers will see a 2 percentage point tax increase in payroll taxes, or an average of $714 or more/year for each worker. The Joint Committee on Taxation reports that the payroll tax cut will save workers $114 billion in 2012.

Source: Bureau of Labor Statistics U.S. Year-over-year Percent Change: 1.5% Employment Growth, U.S. States (SA) March 2012 v. March 2011 Percent Change RankState%RankState%RankState% 1North Dakota6.5%18West Virginia1.3%35Hawaii0.6% 2Oklahoma2.4%19California1.3%36New Mexico0.6% 3Utah2.4%20Indiana1.3%37Illinois0.6% 4Texas2.3%21Florida1.2%38Nevada0.4% 5Louisiana2.3%22Minnesota1.2%39Arkansas0.4% 6Arizona2.1%23Ohio1.2%40Nebraska0.4% 7Colorado2.0%24Virginia1.0%41South Dakota0.3% 8Maryland2.0%25New Jersey1.0%42Delaware0.3% 9Kentucky1.9%26North Carolina1.0%43Maine0.2% 10District of Columbia1.8%27Wyoming1.0%44Missouri0.2% 11New York1.8%28Massachusetts0.9%45Oregon0.1% 12Tennessee1.7%29Iowa0.9%46New Hampshire0.1% 13Kansas1.6%30Vermont0.9%47Alabama0.0% 14Washington1.6%31Georgia0.8%48Mississippi-0.3% 15Idaho1.5%32Pennsylvania0.8%49Montana-0.3% 16Michigan1.4%33Alaska0.7%50Rhode Island-0.5% 17South Carolina1.3%34Connecticut0.6%51Wisconsin-0.9%

Source: Bureau of Labor Statistics U.S. Unemployment Rate: March ‘12= 8.2% Unemployment Rates, U.S. States (SA) March 2012 RankStateRateRankStateRateRankStateRate 1NORTH DAKOTA3.018DELAWARE6.935WASHINGTON8.3 2NEBRASKA4.018WEST VIRGINIA6.936MICHIGAN8.5 3SOUTH DAKOTA4.320ALASKA7.036NEW YORK8.5 4VERMONT4.820TEXAS7.038ARIZONA8.6 5IOWA5.222LOUISIANA7.138KENTUCKY8.6 5NEW HAMPSHIRE5.223MAINE7.238OREGON8.6 7WYOMING5.323NEW MEXICO7.241ILLINOIS8.8 8OKLAHOMA5.425ALABAMA7.342SOUTH CAROLINA8.9 9VIRGINIA5.626ARKANSAS7.443FLORIDA9.0 10MINNESOTA5.826MISSOURI7.443GEORGIA9.0 10UTAH5.828OHIO7.543MISSISSIPPI9.0 12KANSAS6.228PENNSYLVANIA7.543NEW JERSEY9.0 12MONTANA6.230CONNECTICUT7.747NORTH CAROLINA9.7 14HAWAII6.431COLORADO7.848DISTRICT OF COLUMBIA9.8 15MASSACHUSETTS6.532IDAHO7.949CALIFORNIA MARYLAND6.632TENNESSEE7.950RHODE ISLAND WISCONSIN6.834INDIANA8.251NEVADA12.0

Source: Bureau of Labor Statistics U.S. Growth = +5.1% Personal Income Growth, U.S. States (SA) 2011 v RankState% ΔRankState% ΔRankState% Δ 1North Dakota8.118Wisconsin5.235Rhode Island4.6 2Iowa6.819Minnesota5.135Ohio4.6 3Texas6.619Montana5.135West Virgnia4.6 4South Dakota6.221Connecticut5.038New Mexico4.5 4Oklahoma6.221Massachusetts5.038Hawaii4.5 6Nebraska5.921Indiana5.040New York4.4 6Wyoming5.921Georgia5.041Vermont4.3 8Colorado5.721Arizona5.041Kansas4.3 9District of Columbia5.626New Hampshire4.941Arkansas4.3 9California5.626Maryland4.941North Carolina4.3 11Utah5.528Pennsylvania4.845New Jersey4.2 12Tennessee5.428Louisiana4.845Missouri4.2 12Idaho5.430Delaware4.745Alaska4.2 14Oregon5.330Florida4.748Nevada4.1 14Washington5.330Kentucky4.749Alabama3.8 16Illinois5.230South Carolina4.749Mississippi3.8 16Michigan5.230Virgnia4.751Maine3.4

Unemployment Rates, Largest 20 Metros (NSA) February 2012 Source: Bureau of Labor Statistics RankMSAURRankMSAUR 1 Washington-Arlington-Alexandria, DC- VA-MD-WV Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Minneapolis-St. Paul-Bloomington, MN- WI Atlanta-Sandy Springs-Marietta, GA 9.0 3Boston-Cambridge-Quincy, MA-NH6.612 Chicago-Joliet-Naperville, IL-IN- WI 9.0 4San Antonio-New Braunfels, TX6.812 Miami-Fort Lauderdale-Pompano Beach, FL 9.0 5Dallas-Fort Worth-Arlington, TX7.115 New York-Northern New Jersey- Long Island, NY-NJ-PA 9.3 6Houston-Sugar Land-Baytown, TX7.215 San Diego-Carlsbad-San Marcos, CA 9.3 7Baltimore-Towson, MD7.517 Tampa-St. Petersburg-Clearwater, FL 9.4 8Phoenix-Mesa-Glendale, AZ7.818Detroit-Warren-Livonia, MI10.2 9Seattle-Tacoma-Bellevue, WA8.319 Los Angeles-Long Beach-Santa Ana, CA San Francisco-Oakland-Fremont, CA8.720 Riverside-San Bernardino-Ontario, CA 12.5

It could be worse, right??

15-Year & 30-Year Fixed Mortgage Rates January 1995 through March 2012 Source: Freddie Mac

U.S. New Home Sales January 1999 through March 2012 Source: Economy.com, Census Bureau

U.S. Housing Starts January 1999 through March 2012 Source: Economy.com

A penny saved is a penny earned

U.S. Personal Savings Rate January 2002 through February 2012 Source: Bureau of Economic Analysis;Source: Bureau of Economic Analysis

U.S. Retail and Food Service Sales January 2001 through March 2012 Source: Census

U.S. Chain Store Sales Growth by Type of Store March 2011 v. March 2012 Source: Economy.com

National Vehicle Sales January 2004 through March 2012 (SAAR) Source: Autodata Corp.

Conference Board Leading Economic Indicators Index August 2007 through March 2012 Source: Conference Board March 2012 = 95.7 where 2004=100

It’s difficult to forecast, particularly the future Economy hit a soft patch; Recession no longer imminent; Black swan threats: (1) Iran (2) Israel/Iran (3) Europe; 2013 could be very different depending on…; Many headwinds remain and the nascent recovery could easily falter; and Business travel should continue to improve, but...

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