Fixed Income strategy as of 10 29 2007

--Treasury subsector a.bet on yield curve slope: buy 10- short 2, now 57 bps, will be above 80 in 6 months (historical high 300 in July/25/2003): Fed wil cut interest at least 25 bps (expect 50 bps) by the end of year; lower interest rate will reduce 2y yield and drive up 10y yield due to the inflation concern --Brokerage subsector long list Merrill lynch a.really convervative portfoilio repricing relative to other rivals (senior AAA high grade 20%, GS and MS <= 6%) b.liquidity is not a concern (excess liquidyt 20 bil and credit facilities 30 bil) c.management shakout represents positive outlook d.bond evaluation is attractive 177 bps (AA- bond, A+ company) stategy: buy ML and short BSC short list a.level --Bank sector long Countrywide Financial a.quite convervative in provision b.bond evaluation is attractive 9y bond 500 bps and 5y CDS 380, 10y CDS 300 bps c.positive guidance for 4th quarter d.liquity is not a issue e.there are investors stand by to support the company