<table><tr><th>From: </th><th>jeffrey E. &lt;jeevacation@gmail.com&gt;</th></tr><tr><td>Sent: </td><td>Thursday, August 18, 2016 4:21 PM</td></tr><tr><td>To: </td><td>Stephen Hanson</td></tr><tr><td>Subject: </td><td>Fwd: Trade recommendation</td></tr></table>

thought you might find amusing

Forwarded <u>messa e</u>
From: Richard Kahn < > >
Date: Thu, Aug=18, 2016 at 10:12 AM
Subject: Fwd: Trade recommendation
To: Jeffrey =pstein <jeevacation@gmail.com<=a»

<mailto:jeevacation@gmail.com>

Sent from my iPhone

=div>

Begin forwarded message:

Email Details:

*   From: "Ens, Amanda"
*   Date: August 18, 2016, 11:37:24 AM EDT
*   To: Richard Kahn
*   Subject: Trade recommendation

Rich,

In the short to medium term, we believe the cyclical=rotation has only just begun. Our analysis of 4000 large long-only funds m=naging $12tn shows that funds have removed their underweight in Emerging M=rkets and are now neutral relative to benchmark, in aggregate, for the first time in recent years. History su=gests that when the Global Wave (our monitor that tracks global trends in =conomic activity) is rising, the best performing region is Emerging Market=, on average, suggesting investors should continue to add to exposure to this cyclical region. Energy remains=the second most underweight sector (behind Financials). US equities remain=a big underweight.

looking a little further into year-end, an uncertain=y shock appears overdue and our 2000 year-end S&P 500 target incorpora=es a high correction probability. The rally over the last six months was i=itially driven by an improvement in the growth outlook for which investors were not positioned. Elevated valuation=, high expectations for growth and stimulus, an increase in bullish positi=ning and volatility near post-crisis lows point to a complacent market

rip= for disappointment. The growth surprises may not be so one-sided in the coming months, as a contentious e=ection season and Brexit could weigh on already weak corporate confidence =nd spending, credit fundamentals remain weak and Fed hikes should come bac= into focus.

Given low levels of volatility, we recommend cons=dering stock replacement through buying call options for upside exposure, =uch as with the AAPL call option recommendation I sent on Tuesday.

As we've discussed, we're increasing=y concerned over "irrational exuberance" in fixed income b=t very few are willing to act on this fear and reduce their bond holdings.=Our strategist said recently that selling IG bonds might be seen as equivalent to selling the irrational exuberance of the Nasdaq in Aug =E244,99, 8 months before the tech bubble popped. A "taper tantr=m" pop in yield should cause a jump in vol and flash decline in as=et prices. This risk should be hedged.

To the extent you'd rather hold your long=positions, we recommend buying some cheap downside protection against a fi=ed income-led sell-off through contingent options.

Buy SPX puts contingent on higher yields for a=>60% savings vs vanilla puts

* *=A0 Dec 16, 2016 expiry

o Buy a SPX 2125 put contingent on 2Y Swaps > 1.15= at-expiry: 0.85% premium (64% discount to the vanilla at 2.36% premium)

o Buy a SPX 2125 put contingent on 10Y Swaps > 1.6=% at-expiry: 0.75% premium (68% discount to the vanilla at 2.36% premium)<=>

Current SPX level: 21=4

Current 2y swap rate:=0.98%

Current l0y swap rate= 1.43%

## Key Events

* *=A0 Yellen Jackson Hole speech 8/26

* *=A0 FOMC 9/21, 11/2, 12/14

## Key Events (cont.)

*   *=A0 US elections 11/8

</=>

Regards,=/p>

Amanda</=>

</=>

Amanda Ens

Director

Bank of America Merrill Lynch

Merrill Lynch, Pierce, Fenner & Smith Incorporat=d

One Bryant Park, 5th Floor, New York, NY 10036 </=>

Phone: 212.449.7781 <tel:212.449.7781> Mobile: 917.386.3280 <tel:917.=86.3280> <=>

amanda.ens@baml.com <mailto:yuriko.mita@baml.com>

The power of global co=nectionstm

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## Key Events (cont.)

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