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Notes [a] I like the idea of extending the holding period for short term capital gains to 3-5 years, and cutting the long term capital gains rate closer to 5%-10%. It could encourage more business formation, since more of what people create, they keep. Ifthe cutoff year is properly set, it could be done on a deficit-neutral basis. [b] According to methodology described by Keith Poole of the University of San Diego in the American Journal of Political Science, McGovern ranks as the 99 most liberal politician out of 3,320 politicians serving from 1937 to 2002. [c] In a letter to the Wall Street Journal. Reprinted with permission; emphasis added. [d] This may not have been a permanent change. The National Taxpayers Union rated the Blue Dog Democrats as having a fiscal conservatism score of 52% in 1995; by 2009, it had fallen to 18%. [e] Would McGovern’s focus on red tape make sense today? According to surveys conducted by the National Federation of Small Business, the answer would be yes. The 3 issues most frequently mentioned as each respondent’s “single most important problem” are Poor Sales, Regulation & Red Tape, and Taxes. Two things of note. First, Regulation & Red Tape concerns have been steadily rising over the last two years. Secondly, availability of credit does not show up as an issue. As the NFIB wrote in May 2011, “92 percent reported that all their credit needs were met or that they were not interested in borrowing. Eight percent reported that not all of their credit needs were satisfied. Three percent reported financing as their #1 business problem, so credit supply 1s not a problem for the overwhelming majority.” What's the largest problem facing small business? Percentof respondents 35% 30% Regulation & Red Tape 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source Nationa Federation of Independent Business [f] As reported by Reuters, Gerald Wynn, November 22, 2010. 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 J.P. Morgan research and should not be treated as such. Further, the views expressed herein may differ jrom that contained in J.P. Morgan research reports. The above summary/prices/quotes/statistics have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness, any yield referenced is indicative and subject to change. Past performance is not a guarantee of future results. References to the performance or character of our portfolios generally refer to our Balanced Model Portfolios constructed by J.P. Morgan. It is a proxy for client performance and may not represent actual transactions or investments in client accounts. The model portfolio can be implemented across brokerage or managed accounts depending on the unique objectives of each client and is serviced through distinct legal entities licensed for specific activities. Bank, trust and investment management services are provided by J.P. Morgan Chase Bank, N.A, and its affiliates. Securities are offered through J.P. Morgan Securities LLC (JPMS), Member NYSE, FINRA and SIPC. Securities products purchased or sold through JPMS are not insured by the Federal Deposit Insurance Corporation ("FDIC"); are not deposits or other obligations of its bank or thrift affiliates and are not guaranteed by its bank or thrift affiliates; and are subject to investment risks, including possible loss of the principal invested. Not all investment ideas referenced are suitable for all investors. These views may not be suitable for all investors. Speak with your J.P. Morgan Representative concerning your personal situation. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Private Investments may engage in leveraging and other speculative practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuations to investors and may involve complex tax structures and delays in distributing important tax information. Typically such investment ideas can only be offered to suitable investors through a confidential offering memorandum which fully describes all terms, conditions, and risks. 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. Note that J.P. Morgan is not a licensed insurance provider. © 2011 JPMorgan Chase & Co. All rights reserved. HOUSE_OVERSIGHT_030008