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Economic Committee Report

The Mizzou Investment Fund Management ProgramThe Mizzou Investment Fund Management Program

Tuesday, June 19, 2007

Economist: Mei-Lin (Emily) Chang

Economic Committee:James ChengPaul Hoffman Michelle LeeCasey PohlTerala, Vikranth Gupta



HeadlinesHeadlines

Energy July Oil Futures: $68.25

Housing Down 1.27% in May Sub-prime concerns

Dollar Declining value Trade deficit decreased from $62.4B to $58.5B

Growing Gap of Income Disparity Possible governmental interference

Economic Growth 86% of economist see improvements over next year



GDPGDP

Increased by 0.6 percent in first quarter of 2007 Increased by 2.5 in fourth quarter of 2006 Deceleration of GDP is due to increase in imports,

decrease in exports, private investment spending and governmental spending

GDPGDP



Crude OilCrude Oil

Oil Futures

$66.50$67.00$67.50$68.00$68.50$69.00$69.50$70.00$70.50$71.00$71.50

Series1

Price expected to increase to over $70 per barrel over the next six months

Possibility for $4 per gallon at the pump



CPICPI

CPI was up 0.7% in May 12 month adjusted average is 2.7% December forecast 2.8%



Real personal disposable incomeReal personal disposable income

Real DPI decreased 0.4 % compared to 0.3% increase in March Real consumer spending increased 0.2% after remaining flat in March Prices increased 0.1%



Trade DeficitTrade Deficit

Trade deficit decreased to $58.5 billion in April from $62.4 billion in March Exports increased by $0.2 billion in April to $129.5 billion Imports decreased by $3.6 billion to $188 billion



UnemploymentUnemployment

Non farm payroll employment increased by 157,000 in May Employment rate unchanged at 4.5% Jobless rate forecast for November is 4.7% Payrolls intend to grow by 1055,255 jobs per month



Strength of the DollarStrength of the Dollar

Dollar Euro Pound SFranc Peso Yen CdnDlr Canada 1.0683 1.4294 2.1098 0.85980 0.09906 0.00865 ... Japan 123.47 165.20 243.84 99.372 11.449 ... 115.58 Mexico 10.784 14.429 21.297 8.6793 ... 0.08734 10.095 Switzerland

1.2425 1.6625 2.4538 ... 0.11522 0.01006 1.1631

U.K. 0.50635 0.67750 ... 0.40753 0.04695 0.00410 0.47398 Euro 0.74738 ... 1.4760 0.60152 0.06930 0.00605 0.69960 U.S. ... 1.3380 1.9749 0.80483 0.09273 0.00810 0.93607 Source: Reuters



Federal funds rateFederal funds rate

FFR for May – 5.25% Forecasted the same for June Expected to be down by quarter points

for December



Current interest ratesCurrent interest rates

Primary credit - 6.25% Secondary credit – 6.75% Seasonal credit - 5.30%



Sector Performance

Leaders1. Basic Material (17.83%)

2. Oil & Gas (16.24%)

3. Telecommunication (14.60%)

Losers1. Financials (1.74%)

2. Consumer Service (4.77%)



Basic MaterialBasic Material

Basic Materials 17.83%

Chemicals 13.77%

Basic Resources 22.71%

Forestry & Paper 15.25%

Industrial Metals 30.06%

Aluminum 33.78%

Steel 31.02%

Mining 13.76%

Coal 22.35%

General Mining 40.51%

Gold Mining -14.48%

Platinum & Precious Metals -5.09%



Basic MaterialBasic Material

Continuing growth in this prospective sector

Big Ideas for a Greener World Energy companies are vying for

investor dollars with some audacious approaches to providing cheap, clean energy.



Consumer Staples

Consumer Goods 1.09%

Food & Beverage 0.90%

Beverages -0.28%

Brewers 4.70%

Distillers & Vintners 4.27%

Soft Drinks -1.33%

Food Producers 2.35%

Food Products 2.35%

Personal & Household Goods 1.19%

Household Goods -0.07%

Durable Household Products -0.54%

Personal Goods 2.89%

Personal Products 0.60%

Tobacco 0.77%



Consumer DiscretionaryConsumer DiscretionaryConsumer Goods 1.09%

Automobiles -0.49%

Auto Parts 2.47%

Tires 7.35%

Personal & Household Goods 1.19%

Nondurable Household Products 0.34%

Furnishings 2.88%

Home Construction -3.06%

Leisure Goods 3.63%

Consumer Electronics 9.98%

Recreational Products 10.65%

Toys -1.68%

Personal Goods 2.89%

Clothing & Accessories 5.65%

Footwear 5.18%



Consumer Staple & DiscretionaryConsumer Staple & Discretionary

Still performing well

Michigan Consumer Sentiment Index Fell in June

Increased marketing spending



Energy

Oil & Gas 16.24%

Oil & Gas Producers 15.06%

Exploration & Production 22.42%

Integrated Oil & Gas 12.23%

Oil Equipment, Services & Distribution 19.75%

Oil Equipment & Services 21.07%

Pipelines 8.51%



EnergyEnergy

Most prosperous sector Capitol Hill’s goal to reduce oil

consumption and increase other biofuel production and research

Maintain high gas prices, refineries neglected

Increase gasoline exports to keep up with demand

Most productive sub-industry: Exploration and Production



EnergyEnergy



Industrial SectorIndustrial Sector

Increase growth opportunities through emerging markets

Aerospace and Defense sub-industries highly profitable

Heavy Construction remains strong as residential construction declines

Commercial Vehicles & Trucks, as well as Railroads become more appealing as more expensive airline fuel force the economy to find cheaper alternatives to ship goods.



Financial SectorFinancial Sector

Struggling Sector Shanghai losses lead to

cascade of falling financials in emerging markets

Increasing sub-prime mortgage defaults

Insurance and Investment Banking sub-industries still remain strong



•Energy - Overweight

•Oil & Gas Exploration and Production

•Industrials - Overweight

•Aerospace and Defense

•Heavy Construction

•Commercial Vehicles & Trucks

•Railroads•Financials - Underweight

•Insurance - Overweight



Technology Headlines

New Intel Chips Represent Change in Strategy Intel Corp. discussed two additions to its Itanium Chip line, each reflecting shifts

in strategy. On model expected in late 2008, called Tukwila. With Poulson, a sequel to Tukwila, will be built using a process that won’t arrive until at least 2009.

Google, Intel Drive Effort To Lift Energy Efficiency, Reduce Greenhouse Cases Google and Intel want to get computer makers and customers to reduce energy

consumption. Google Intensifies Microsoft Fight; Complaints Spur Review Over Whether

Vista System Violates ’02 Antitrust Pact Internet companies view desktop search as a key to building consumer loyalty

and use of new services. Google to Open Shanghai R&D Center in June seeking to wrest market

leadership in China from Internet search-engine firm Baidu.com Inc. IBM’s Deal to Acquire Telelogic Underscores Software Strategy rapidly

reshaping the company as an acquisitive software vendor. GE, Microsoft Discussed Buying Dow Jones



Technology

Technology 7.66%

Software & Computer Services 5.41%

Computer Services 8.85%

Internet 4.51%

Software 4.36%

Technology Hardware & Equipment 9.22%

Computer Hardware 13.04%

Electronic Office Equipment 5.10%

Semiconductors 9.78%

Telecommunications Equipment 5.47%



TechnologyTechnology

The computer and Peripherals Industry likely will face some headwinds this year, but it will post decent sales and profit gains. Assuming a more vigorous economic advance starting next year, we look for faster earnings growth for this sector.

The Semiconductor Industry is highly susceptible to changing economic conditions. The fortunes of the chip market are highly dependent on the economy. The primary catalyst for growth in the broader chip market will likely continue to be the consumer.

The estimation is slower top-line growth in 2007 for the semiconductor capital equipment industry. This forecast is predicted on the assumption that capacity will eventually catch up with production at the chip companies.



TechnologyTechnology

Underweight Technology is in low gross profit margin The economic is down and there is no impressive product recently that

attracts consumer or companies to increase budget in technology product

A big growth market for technology sector comes from foreign countries especially China, Brazil, Russia, and India which is developing prosperous

Passive on the technology sector in the long term



Telecommunications HeadlinesTelecommunications Headlines

Telecom stocks rose Friday, with wireless carrier MetroPCS Communications Inc. up more than 8 percent as an analyst reassured investors that the company's plan to expand in Los Angeles is intact

AT&T Inc. stands a good chance of stealing customers away from other wireless operators by carrying Apple Inc.’s highly-anticipated iPhone.

Apple iPhone Users Will Need iTunes Account. Nokia to Add Bluetooth Link for Small Devices. Texas Instruments Inc. shares fell after hours the mobile-phone chip giant

narrowed its outlook for second-quarter sales and earnings. Start-Up’s Retrofitting Turns Cameras Wireless

Eye-Fi’s Card Adds Circuitry and Chips; Transfer Is Automatic



Telecommunications

Telecommunications 14.6%

Fixed Line Telecommunications 14.2%

Mobile Telecommunications 16.24%



TelecommunicationsTelecommunications

Telecommunications manufactures now find themselves in a market that is both high-tech and extremely price-sensitive. As a result, there has been a push towards consolidation. The biggest companies are not the only ones worth considering. Smaller companies are filling niches within the overall market.

The Wireless Networking Industry’s Timeliness ranking remains near the bottom 15% of all the industries covered by The Value Line Investment Survey, reflecting the negative momentum of profits and stock prices.



TelecommunicationTelecommunication

Neutral for holding Telecommunication matured in around 1930s I-phone is hot but it won't make more cell phone customers for the whole sector Telecommunication sector as a whole produce a steady stream of cash but it

doesn't have much growth potential a good defensive stock when the market goes down the market goes down, the stock will go down but the cash flow

won't be affect that much when the market is bullish, this kind of stock won't goes up as much

since there is no room for growth Companies in telecommunication give high cash dividend, therefore P/E ratio will

be an important factor when making investment decision Get one with low P/E as low as possible



UtilitiesUtilities

Utilities -4.31% Electricity -4.68%

Gas, Water & Multiutilities -3.10% Gas Distribution -0.62% Multiutilities -6.61% Water 5.43%



UtilitiesUtilities

The performance of utilities was not so good because of the high oil price.

The terroristic attack in Nigeria may cause the oil price going up in the near future.

In the long-term aspect, the sector of utilities has potential to grow due to the increasing adoption of wind and nuclear power.



Health Care

Health Care -1.01% Health Care Equipment & Service -0.20% Health Care Providers -0.96% Medical Equipment 0.35% Medical Supplies 0.72%

Pharmaceuticals & Biotechnology -1.47% Biotechnology 1.21% Pharmaceuticals -2.23%



Health CareHealth Care

The health care industry is the one which could consider to invest.

Pharmaceutical Research and Manufacturers of America, an industry group that represents drug and biotech companies, hired the Roth Group to lobby the federal government.

A new drug may be breakthrough for liver cancer.



Consumer ServiceConsumer Service

Consumer Services 1.31% Retail 1.39% Food & Drug Retailers -0.92% Drug Retailers -1.57%

Food Retailers & Wholesalers 0.55% General Retailers 2.14% Apparel Retailers 1.94% Broadline Retailers 4.20% Home Improvement Retailers -0.26% Specialized Consumer Service -0.72% Specialty Retailers 2.38%




Media 0.74% Broadcasting & entertainment 0.21% Media Agencies 5.95% Publishing 1.16%

Travel & Leisure 2.07% Airlines -2.58% Gambling 6.36% Hotels 2.85% Recreation Services 3.30% Restaurants & Bars -0.03% Travel & Tourism 5.98%




The overall performance of this sector was pretty good.

Vocation comes and people travels more.

The profit of airline decreased due to the rising oil price.

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