EFTA02696364

TOP OPPORTUNISTIC INVESTMENT THEMES FOR 1Q 2012 Global Investment Opportunities Group J.P. Morgan Private Bank w O LLz O a cr, This presentation is intended for your personal use only and should not be circulated to any other person without our permission and any use, distribution or duplication by anyone other than the addressee is prohibited. We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. The investment products and services described herein may not be suitable for all clients. Opinions. estimates and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. This material should not be regarded as research or a J.P. Morgan research report nor as including sufficient information to support an investment decision and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investment strategies and views expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. including research. Past performance is not reliable indicator of future results. Please read the Important Information at the end of this document. J.P. Morgan EFTA_R1_02049742 EFTA02696364 Macro Global Growth At A Turning Point TOP OPPORTUNISTIC INVESTMENT THEMES FOR 1O '7012 Source: Bloomberg As of: 1/12111 Global Purchasing Manager Indices 70 65 60 55 50 45 40 35 - 30 Dec-08 Dec-09 Dec-10 Jan-08 —Japan —US — Europe —China — Brazil Dec-11 Source: Bloomberg As of: 1/9/12 J. P. M org,an EFTA_R1_02049743 EFTA02696365 Macro Markets Are Pricing In A Lot Of Bad News TOP OPPORTUNISTIC INVESTMENT THEMES FOR 1O 2012 Source: Facisel, Bloomberg. As of 12/30/11 Source: Bloomberg, As of 12/30/11 2 J. P. M organ EFTA_R1_02049744 EFTA02696366 Macro Markets Are Pricing In A Lot Of Bad News (con't)... Source: DataQuery, As of 12/3011 Source: Bloomberg, As of 12/30/11 3 J.P.Morgan EFTA_R1_02049745 EFTA02696367 Macro ...But This Is Not 2008 0 0 CO z z z cc O a. cc O. a a. 0 Source: Bloomberg Sources: FRB, BEA, ECB, Eurostat, BoE, Office for National Statistics. BoJ. Cabinet Office. Data as of O4 2011. U.S. Households Deleveraging %GDP 130% 120% 110% 100% 90% 80% 70% 60% 1980 Household Debt (LHS) —Debt Service (RHS) 1985 1990 % Disposable Income 15% 14% 13% 12% 11% 10% 1995 2000 2005 2010 Source: Federal Reserve, Bureau of Economic Analysis, As of 12/30/11 Note: Debt Service is Debt payments as % of disposed° personal income Source: Federal Reserve Bank, ECB 4 J.P.Morgan EFTA_R1_02049746 EFTA02696368 GIO: Approach to Absolute Return Investing We are asset class agnostic TOP OPPORTUNISTIC INVESTMENT THEMES FOR 1O 2012 z cc t cc A Market Dislocations Breaking News Catalyst Drhren Firm Specific Liquidity Driven Transparency TIME 5 > Global Yield Curve Global Equity Valuations JPM Strategy Market Anomalies Trade Journals JPM IB Research In-house asset class experts 3rd party investment professionals Macro view Client expertise J.P.Morgan EFTA_R1_02049747 EFTA02696369 Investment Opportunities TOP OPPORTUNISTIC INVESTMENT THEMES FOR 1O 2012 J.P.Morgan EFTA_R1_02049748 EFTA02696370 Fundamentals Globalization of Natural Gas a CC CO 2 z tu tu Co z CC CC 0 o. Ct. 0 a 2010 Natural Gas Deficit / Surplus (billion cubic metres) 150 bcm 100 bcm 50 bcm 0 bcm -50 bcm -100 bcm -150 bcm 111 Asia Europe & S. & North Middle Africa Pacific Eurasia Cent. America East America Source: BP Statistical Review lEA Gas Scenario Note: North America includes US Domestic Supply Stored World Natural Gas Consumption Power 33% Buildings (Heating) 25% Industrial 39% Transport 3% Source: International Energy Outlook. EIA, Sept 2011 Natural Gas Production (billion cubic feet) 3,500bcm 3,000bcm 2,500bcm 2,000bcm 1,500bcm 1,000bcm 500bcm Obcm 1970 1974 1978 1982 1986 1990 •Asia Pacific •Africa • Middle East • Europe & Eurasia • S. & Cent. America • North Arnerica 1994 1998 2002 2006 2010 Source: BP Statistical Review 2011 7 J.P.Morgan EFTA_R1_02049749 EFTA02696371 Fundamentals Globalization of Natural Gas 0 O cc 0 LL - 07 (1) 0- High North American vs. International Natural Gas Prices —Henry Hub --- UK •Japan 1 4-i 2- 0 Sep-07 Oct-08 Oct-09 Nov-10 Dec-11 Current Gas Prices Supportive of LNG Transport $ cost per mm BTU 18 16 1 14 12 10 8 6 4 2 0 Japan LNG Cost Regasification charge Shipping Cost Henry Hub Natural Gas 121 1=1MIP -- Longer Term Liquefaction Pipelines Pipelines Exploration & Production End Users Source: JPMorgan, Alliance Bernstein, Guggenheim Research. Cheniere Energy. Data as of: 12/30/11 SO 30 $2.00 $1.75 $3.50 LNG Costs - $8 Liquefaction E&C firms focused on global energy projects MLPs LNG sites/investments or shale investments near liquefaction sites Fertilizer and Chemical Companies 8 J.P.Morgan EFTA_R1_02049750 EFTA02696372 Dislocation Dislocation: Searching for Cheap Income Criteria ■ S&P 500 Sectors that declined in 2011 ■ Stocks that declined in 2011 ■ Dividend Yield above the S&P 500 ■ Payout Ratio < 50% ■ Market Cap > $10b ■ PIE Ratio < Sector Average C. C 6 L, z cc O, a O • Rotation in Sector Valuations PIE 18 17 - 16 15 14 13 12 11 10 - 9 8 —Traditional High Dividend Sectors —2011 Worst Performance Sectors Payout Ratios are at Historic Lows Jan-10 Apr-10 Source: Bloomberg, As of 1/4/12 Jul-10 Oct-10 Jan-11 9 Utilities, Healthcare, Telecom I Financials, Materials, Industrials Apr-11 Jul-11 Oct-11 Jan-12 J.P.Morgan EFTA_R1_02049751 EFTA02696373 Tactical Opportunities Tactical Trading Opportunities <NI 0 CO 14; z 1- z z CC 0 0 0. 0 Buy Technological Game Changers 650 - —Dow Jones Tech Titans Index 600 550 500 450 Apr-11 Jul-11 Oct-11 Jan-11 Jan-12 Sell Calls on 10yr Treasuries 4.5% - 4.0% 3.5% 3.0% - 2.5% - 2.0% • 1.5% - 1.0% • Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 —10yr US Treasury %IC Source: Bloomberg, J.P. Morgan 10 Buy MXN Peso 16 - 15 • 14 13 - 12 11 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 —Mexican Peso Buy Calls on Asia Equity Upside Forward P/E 25x —Hang Seng Index 5x Jan-06 Jan-08 Jan-10 Jan-12 .ERMorgan EFTA_R1_02049752 EFTA02696374 Tactical Opportunities Tactical Trading Opportunities O 0 0 co) L. L. w 0 z Cc C a a 0 a 0 Buy South American Oil Company -South American Oil Company Yield 14% Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Buy Private Label MBS 100 - 90 80 70 60 50 - 40 - 30 - Prime Fixed Rate — Alt A — Option ARM Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Source: Bloomberg, JPMorgan, SW LCD. LCD European Mezzanine Review, 11 Highbridge Principal Strategies. As of 1/4/12 Buy Flood Control Companies —S&P Midcap Construction & Engineering Index Nov-10 May-11 Nov-11 Buy Private vs. Public Credit (YTM) 8.6% 6.7% 11.8% 9.0% 12.8% Leveraged Global HY US Single B European US Loans Bonds HY Mezzanine Mezzanine J.PMorgan EFTA R1_02049753 EFTA02696375 Protection Ideas Wildcard: Middle East TOP OPPORTUNISTICN E T ENT THEMES FOR 1O 2012 RUSSIA 279 bps UKRAINE garia 6592 bp GREECE 314 bps TURKEY 129 bps SAUDI ARABIA Source: Bloomberg. Data as of 1/6/12 12 IRAN , -a KAZAKHSTAN 308 bps PAK. 990 by 650 miles INDIA 391 bps 1,250 miles J.P.N.lorgan EFTA_R1_02049754 EFTA02696376 Protection Ideas Protection Ideas TOP OPPORTUNISTIC INVESTMENT THEMES FOR 'O Gold 2,000 1,900 1.800 1,700 1,600 1,500 1,400 1,300 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-11 Gold Jan-12 EUR / German 10yr Rates 1.50 1.45 1.40 1.35 1.30 1.25 EUR/USD (LHS) Germany 10yr Yield (RHS) VIX 50 —VIX 10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Long AUD Rates - 4% 6.0% 5.5% 5.0% 4.5% - 3% 2% 1% 4.0% Jan-11 May-11 Sep-11 Jan-12 Source: All data from Bloomberg, As of 1/9/12 13 -AUD 30yr Swap Rates Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 J. P. M org,an EFTA_R1_02049755 EFTA02696377 Definition of Indices S&P 500 Index - The S&P 500 is a capitalization-weighted index of 500 stocks from a broad range of industries. The component stocks are weighted according to the total market value of their outstanding shares. The impact of a component's price change is proportional to the issue's total market value, which is the share price times the number of shares outstanding. "S&P 500" is a trademark of Standard and Poor's Corporation. Hang Seng - The Hang Seng Index is a free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. EuroStoxx 50 - The Euro Stoxx 50 Index is a free-float market capitalization-weighted index of 50 European blue-chip stocks from those countries participating in the EMU. European Itraxx - Itraxx Europe index comprises 125 equally weighted CDS on investment grade European corporate entities. C CC L. z z IX 0 a C Barclays Aggregate Bond Fund - The Barclays Aggregate Bond Fund is a market capitalization-weighted index, of U.S. traded investment grade bonds including Treasury securities. Government agency bonds, Mortgage-backed bonds. Corporate bonds, and a small amount of foreign bonds traded in the U.S. London Interbank Offered Rate - daily reference rate at which banks borrow unsecured funds from banks in the London wholesale money market. It is set daily by the British Bankers' Association. Commercial Paper — money market security with a fixed maturity of 270 days or less. It is sold by banks and corporations for short term financing needs. JPMorgan Domestic High Yield Bond Index — index tracking U.S. high yield bond securities selected by J.P.Morgan. JPMorgan US Liquid Index (JULI) — index tracking U.S. high grade bond securities selected by J.P.Morgan. 14 J.P.Morgan EFTA_R1_02049756 EFTA02696378 Important Information 0 0 Lt. N Lu l4; z z K 0 O. a a. 0 IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used. in connection with the promotion. marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. Each recipient of this presentation, and each agent thereof, may disclose to any person, without limitation, the U.S. income and franchise tax treatment and tax structure of the transactions described herein and may disclose all materials of any kind (including opinions or other lax analyses) provided to each recipient insofar as the materials relate to a U.S. income or franchise tax strategy provided to such recipient by JPMorgan Chase & Co. and its subsidiaries. Bank products and services are offered by JPMorgan Chase Bank. N.A. and its affiliates. Securities products and services are offered by J.P. 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Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Past performance is not a reliable indicator of comparable future returns and investors may get back less than the amount invested. Additional information is available upon request. 2011 JPMorgan Chase & Co. 15 J.P.Morgan EFTA_R1_02049757 EFTA02696379 Market Snap-Shot C. CC 0, 2 z z C CC a a C a Global YTD Returns (As of 12130111) Gold US Municipals 10Yr EMBIG US High Grade Bonds US Bonds Global Gov Bonds" JPM Global HY EM Local Bonds" Brent EM $ Corp iBoxx Euro Corps S&P500 US Cash FTSE 100 -4% • EM FX -4% • MSCI Europe -11% Hang Seng -15% Topix -15% rrrrr - MSCI EM $ -16% rrrrr - Brazil Bovespa -17% Corn -20% -40% -20% 0% 20% 40% Source: J.P. Morgan, Bloomberg. Returns in USD. "Hedged into USD. Euro Fixed Income is lboxx Overall Index. US HG, HY, EMBIG and EM $ Corp are JPM indices. EM FX is ELMI+ in $. 16 2.0% Jan-11 Mar-11 May-11 Jul-11 Oct-11 Dec-11 S&P 500 Sector Performance Utilities 14.8% Consumer Staples 10.5% Health Care 10.2% Consumer Discretionary 4.4% Energy 2.8% Information Technology 1.3% Telecommunication Services 0.8% S&P 500 0.0% Industrials -2.9% Materials -11.6% Financials -18.4% S&P 500 YTD Market Return Distribution Source: Bloomberg, through 12/30/11 J.PMorgan EFTA_R1_02049758 EFTA02696380 Loan Loss Provisions and Unit Labor Costs C CC C cf; L. L. v. LL 0 a a C a C Source: European Banking Authority, US 10-Ks. Data as of Dec '10 Source: OECD, Note: index, 1O00, sa 17 Italy Spain France Ireland J.P.Morgan EFTA_R1_02049759 EFTA02696381