MMG Update + By the Numbers - Monday, June 2, 2008 9:17am ET Current Trend Direction:  Battling Resistance at the 200-day Risks favor:  Bias towards Locking Current Price of FNMA 5.5% Bond: $99.38, +19bp   Mortgage Bonds are trying to bounce higher this morning, but prices will have to contend with a strong ceiling of resistance at the 200-day Moving Average, just above present levels. Wachovia Corp.'s CEO, Kennedy Thompson, was removed by the Board of Directors effective immediately, after sub-prime losses cost the lender more than half of its stock value in the past year.  Bank stocks in the U.K. are selling off as lender Bradford & Bingley issued a profit warning.  As a result of this morning's news, financial stocks are leading the stock market lower and giving a slight boost to Mortgage Bonds. The ISM Index is due to be released at 10:00am ET.  If the report misses expectations by a significant margin, prices may have a strong reaction.  We will be monitoring this for you. Even though prices are slightly higher, we have to be mindful of the high volatility and tough ceiling of resistance at the 200-day Moving Average.  Our bias continues to be a locking one, with the 200-day MA just overhead. BY THE NUMBER$ We hope you enjoy this edition of "BY THE NUMBERS" below 1. BIG DAY - The best performance day YTD (i.e., ranked by percentage gain) for the S&P 500 took place on 3/18/08. The index's gain of +4.2% on that day ranks as the 16th best 1-day gain over the 50 years ending last Friday, a period that included 12,585 trading days. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research). 2. DOWN FROM A YEAR AGO - The profits of the companies in the S&P 500 stock index on a trailing 1-year basis are 25% less today than they were 1-year ago (source: Barron's). 3. BIG AND REALLY BIG BUSINESS - 43 publicly-held US companies produced at least $1 billion of sales per week in 2007. But just 2 companies generated at least $1 billion of sales a day for the year (source: Fortune). 4. THE MAGIC OF COMPOUND INTEREST - $1 growing at 8% on a tax-deferred basis will accumulate to $10.06 over 30 years. $1 growing at 4% on a tax-deferred basis will accumulate to $3.24 over 30 years. Thus, achieving a return 2 times as great will produce a balance more than 3 times as large over 30 years. This mathematical calculation ignores the ultimate impact of taxes on the account which are due upon withdrawal, is for illustrative purposes only and is not intended to reflect any specific investment or performance. Actual results will fluctuate with market conditions and will vary (source: BTN Research). 5. THEN AND NOW - As of January 1, 1934, 44% of all US homes were in default on their mortgages. As of 3/31/08, just 4.5% of mortgages were at least 30 days delinquent on the payment of their monthly principal and interest amount (source: Federal Reserve Bank of St. Louis Review, Wall Street Journal, Equifax). 6. ABOUT TWICE AS MANY - As of 4/30/08, there were 4.6 million existing homes for sale in the USA. Just 3 years earlier (4/30/05), the number of homes on the market was 2.5 million (source: NAR). 7. ALMOST EVERY DAY - The national average price of a gallon of gasoline set an all-time record high on 51 of 61 days during the months of April and May this year, peaking at $3.97 a gallon on Saturday (source: AAA). 8. LONG-TERM CARE STAT - Although 50% of current retirees will not spend any money on long-term care expenditures during their lifetimes, 6% of retirees will spend at least $100,000 (a present value amount) on long-term care expenses (source: Academy Health, Kemper, Komisar and Alecxih). 9. TOO MUCH TO HANDLE - 55% of all personal bankruptcies in the United States occurred at least in part due to medical expenses that the debtor was unable to pay. E.g., medical expenses due to illness, injury, death of a family member, or the birth of a new child (source: Health Affairs). 10. I WANT IT NOW - A person born in 1946 is eligible for full Social Security retirement benefits at age 66 or in 2012. If that individual elected to take his/her benefits early at age 62 (i.e., in the year 2008), the monthly checks will be permanently reduced by 25% vs. what he/she would otherwise receive at his/her full retirement age (source: SSA). 11. I KNOW BETTER - More than 3 out of every 5 working Americans (61%) earning more than $150,000 (before-tax) believe they are not saving as much money as they should be saving for their eventual retirement (source: Oakland Tribune, Pew Research). 12. SLOW GROWTH - The growth in the US economy in the 1st quarter 2008 was +0.9% (quarter-over-quarter gain expressed as an annualized total). The Fed's low-end growth estimate for the entire 2008 calendar year is only +0.3%. The last time the US had annualized growth for a calendar year of +0.3% or lower was 1991 (source: Commerce Department, Federal Reserve). 13. DIFFERENT GAME PLANS - The last time the US Federal Reserve lowered interest rates to stimulate our economy was on 4/30/08, its 7th rate cut since September 2007. The last time the European Central Bank (ECB) lowered interest rates for the 15-nations that use the euro was on 6/05/03 or nearly 5 years ago (source: Federal Reserve, ECB). 14. QUICKER ON THE WAY DOWN - It took the Fed just 7 1/2 months to lower interest rates by 3.25% to its current level of 2.0%. But in the Fed's last rate-raising cycle (which began on 6/30/04), it took the Fed 17 1/2 months to increase rates by 3.25% (source: Federal Reserve). 15. JUST LIKE YOU AND ME - Republican Presidential candidate John McCain reported $387,000 of adjusted gross income (AGI) on his "married filing separate" 2007 income tax return. McCain's wife Cindy has filed an extension on her 2007 return but she did report $6.1 million of AGI on her 2006 tax return (source: TaxAnalysts.com).