ISI Economy, Money and Markets

Dear Equity,

Good morning,

I hope you were out shopping this weekend; the sales even got me out.

We will have a special installment of out Retail Survey this afternoon to
see how this weekend went. Hopefully the relative strength reported by
TeleCheck will be confirmed.

The feeling here is Holiday sales and 4Q GDP will surprise, and be strong
versus expectations. We raised our estimate for 4Q GDP from -2% to -1%.
The next two week's data should determine whether or not we are correct.

The weekly report builds on the "over but not finished" theme we debuted
last week. The evidence we've had over the last 7 weeks suggests the
recession is ending. We expect this quarter and next to surprise versus
the consensus, but then in 2H02, the relative strength should peter-out.
The first 7 pages cover this theme and page 6 has the table we love to put
out comparing 4Q retail sales and the Wilshire.

Ed and Nancy spent more time on the previous "hiccups" in bond yields and
what their causes were. The only thing they could come up with were
rallies in the stock market. Our estimate for the 10 yr has also been
changed - we now have yields rising to 5.5% in 2Q and falling to 5.3% in 3Q.

If there is any political risk to the market, it is that it gets jitters
about the stimulus package. Tom Gallagher reports both parties are acting
surprisingly partisan, but he still bets there is a 2/3 chance the bill
gets done. Andy Laperriere reports on the Hill - the terrorism insurance
bill should get done in the House this week, benefiting AIG, ALL, CB, and
BRK. Andy also has a useful table of which AIRLINE is getting how much of
the first half of the bailout.

Finally, Jim is looking at this market in an "absolute vs. relative" manor.
Yes, valuations are high. But there is a lot of liquidity out there (also
highlighted in the EMM) and there is evidence of it "trickling down" into
the high yield and junk markets. This liquidity makes Jim comfortable with
the idea of the market being able to go a little bit higher in the short
term.

Have a great day.

TABLE OF CONTENTS

p.3....MORE END OF RECESSION EVIDENCE

p.7....Next Two Weeks Likely To
Determine 4Q Real GDP

p.8....LIQUIDITY DRIVEN STOCK MARKET

p.9....SYNCHRONIZED GLOBAL RECOVERY

p.10...DEFLATIONARY BOOM?

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

http://www.isigrp.com/isip/lib21/1723/31632/11-26emm.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/1723/31632/11-26emm.pdf

All the best,

Freddy Victoria
212/446-9413