From: US GIO

From: US GIO To: Undisclosed recipients:; Subject: Eye on the Market: May 17, 2011 Date: Tue, 17 May 2011 14:37:49 +0000 Attachments: 05-17-11_ EOTM - Lazarus_retumsn private_equity_after_the_recession.pdf Eye on the Market, May 17, 2011 Topics: Private Equity after the Recession; update on Microsoft and Skype Our recent Eye on the Market notes have spent a lot of time on the US debt ceiling, the situation in Japan*, rising oil prices and the failure of Middle Eastern growth models, the deteriorating European periphery, Asian inflation and other challenges to the robust global improvement in corporate profits. I cannot recall a period when there were quite so many macroeconomic headwinds facing a private sector recovery. Our view remains the same: while profits are likely to grow again this year (by 10%-12%), markets are unlikely to pay much for them, since P/E multiples reflect sustainability of the profits themselves. Portfolios are positioned for a single-digit return year for developed market equities. This week, a look at private equity in the wake of the recession, with sections on the performance and the return of capital of our funds offered from 2005 to 2010; recent academic studies focusing on the performance of private equity versus public equity over extended periods; current pricing and leverage trends; the prospects for corporate carve-outs; and an update on Skype, the largest holding of one of our growth equity managers, now that Microsoft has announced its intention to buy it for $8.5 billion. Michael Cembalest Chief Investment Officer * There has probably been a melt-through in reactors I, 2 and 3, unnoticed by plant managers until last week due to faulty readings of pressure differentials designed to indicate water levels. Without water to serve as a heat transfer, decay heat of the nuclear materials appears to have burned through reactor vessels. The risk of faulty pressure differential readings was discovered in the US in 1993; unclear if Japan was aware of it. More next week. The material contained herein is intended as a general market commentary. Opinions expressed herein are those of Michael Cembalest and may differ from those of other J.P. Morgan employees and affiliates. This information in no way constitutes JP Morgan research and should not be treated as. uch. Further, the vleus expressed herein may diffit from that contained in J.P. Morgan research reports. The above summary/prices/quotes/statistics have been obtained from. ources deemed to be reliable, but we do not guarantee their accuracy or completeness. any yield referenced is indicative and. ubject to change. Past performance is not a guarantee offuture results. References to the performance or character of our portfolios generally refer to our Balanced Model Portfolios constructed by J.P. 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