US Daily Financial Market Comment

November 3, 2008 FOR THOSE PERMISSIONED:

US Economic Research Group GS GLOBAL ECONOMIC WEBSITE

GSUSEconomicsResearch@ny.email.gs.com Economic Research from Goldman 360
at https://360.gs.com

An Election Night Viewer’s Guide

! Barack Obama leads in most national polls, and state-level polling shows him leading outside the margin of error in states
worth 278 electoral votes (270 are needed to win). Almost as important as the race for the White House are the Senate
races, where Democrats lead in seven contests for Republican-held seats, but need to win at least nine to hit the
procedurally important 60-vote threshold.
Barack Obama leads national polls by an average of 7%, and state-level polls show him leading in states worth 338 electoral
votes, 68 votes more than needed to win. Counting only states in which his advantage is outside the margin of error brings his
lead down to 278 votes. Prediction markets such as intrade.com imply a 92% probability that he will win the White House
tomorrow. For an early indication of how election night will go, we will be watching Indiana, which closes most of its polls at
6pm, and Florida, which closes most of its polls at 7pm.

Democrats currently hold 51 seats in the Senate, counting two independents. Public opinion polling and political ratings services
indicate that they are likely to make substantial gains, with seven Republican seats (AK, CO, NH, NM, NC, OR, VA) seen as likely
to flip to Democratic control. An eighth seat, in Minnesota, is truly unpredictable. Republicans are narrowly favored in three
other seats in Georgia, Kentucky, and Mississippi. Republicans have hope of picking up one Democratic seat in Louisiana but
polling shows the Democratic incumbent with a narrow advantage.

Republicans are defending 28 open seats in the House, the majority of which look very competitive. Democrats have only 6
retirements, and less than ten seriously competitive seats. Most political ratings services and prediction markets imply a
Democratic gain of around 25 seats. Below we note a few key contests that will be decided early in the night that may
foreshadow the national trend.

A full discussion of the policy implications is beyond the scope of this report, but it is worth keeping in mind the three plausible
outcomes of tomorrow’s contests:

1. An Obama victory with a Democratic Congress (below 60 votes in Senate). A change in control in the White House
would mean a cooperative relationship between Congress and the executive branch, and would imply significant
coordination of policy. If Democrats lack 60 votes in the Senate, they will continue to need to compromise with Senate
Republicans to enact legislation. The exception is when the budget reconciliation process is used. This allows the
majority party in Congress to pass tax and some spending legislation in the Senate with a simple majority (i.e 51 votes, or
50 if the majority party in Congress also controls the White House). This could become an important tool for fiscal policy
over the next two years regardless of whether Democrats gain 60 seats in the Senate.

Important disclosures appear on the last page of this document.

US Daily Financial Market Comment November 3, 2008
Goldman Sachs Economic Research

2. Obama with a Democratic Congress (close to or above 60 votes in Senate): Only a few Senate seats separate the first
scenario from this one, but the difference is significant. In addition to fiscal legislation, Democrats would have a relatively
free hand in passing other legislation not tied to the budget. In the short term, this may be viewed as a positive for risk assets
as it would allow quick enactment of additional financial and economic stabilization measures as needed. Over the longer
term, this would lead to a broader range of potential legislative outcomes and would open the door to more sweeping policy
changes.

3. McCain with a Democratic Congress (below 60 votes in Senate): This is obviously significantly different from the first
scenario, since Republicans would still have the ability to block legislation, either through Senate filibusters or more likely
through presidential veto. Thus, we would focus on areas of potential compromise instead. In addition, given the potential
for a presidential veto, it is also worthwhile to focus on policies that face deadlines of some sort; the tax cuts due to expire in
2010 are a prime example. While a President McCain and a Democratic Congress could disagree initially, they would
eventually be forced to compromise before all of the policies expire.

Below is an hour by hour guide to the contests that may be called by the networks after the polls close in each state, with an
emphasis on competitive states in the presidential contests and the Senate contests Democrats would need to win in order to
get to 60 seats. (All times are listed in eastern daylight time.)

6pm: Early Indicators, Split Time Zones: Two states close their polls at 6pm, but parts of both states actually lie in the central
time zone, meaning that some polls really close at 7pm EST. The result is that these states may be called by the networks if clear
by 6pm eastern, but some networks may not declare a winner until after 7pm.

" Indiana (11 Electoral Votes (EVs), McCain +1.4%): This state is usually solid red (i.e. Republican) and therefore not a
useful early indicator—it voted for Bush by 16% and 21% margins in 2000 and 2004. However, the race is much closer
this time; McCain leads by 1.4% at present, though polls have swung between an 4% Obama lead and a 5% McCain lead
over the last month. If Obama wins Indiana or loses very narrowly, it may well indicate he is on his way to winning the
election decisively: states worth 367 electoral votes are currently showing greater support for Obama than he has in
Indiana. A McCain win would be expected, but a large win—perhaps more than 5% or so—would indicate that polls
showing a close race in some traditionally Republican areas exaggerated Obama’s strength. Among House races,
Indiana Republican Rep. Mark Souder’s seat will be the one to watch; this race is closer than it should be given his
Republican leaning district, and a defeat there could signal major Democratic gains over the course of the evening.

" Kentucky (8 EVs, McCain +13.5%): The Senate race in Kentucky will be a very important early indicator even though the
presidential contest here is a foregone conclusion. In order to gain 60 seats in the Senate, Democrats will need to win
all of the eight seats currently leaning to the Democrats in recent polls plus at least one of three seats that show a
narrow Republican lead. The Senate Republican Minority Leader Mitch McConnell is among these three. Current polls
show him leading his opponent, entrepreneur Bruce Lunsford, by 5.7% with the most recent polls showing a slightly
greater advantage.

7pm: Two key presidential states, and a big Senate race:

Florida and Virginia both close at 7pm, and together could provide a clear signal as to the direction of the presidential race.
Georgia may turn out to be the most important Senate seat to watch:

" Florida: (27 EVs, Obama +2.5%): Florida is the single largest “toss-up” state, and until recently had looked more likely to
go to McCain. Polls currently show Obama with a small lead, but it is worth keeping in mind that this is within the margin
of error of most polls and just two weeks ago was essentially a tie. Like some other states noted above, the western part
of the state is in the central time zone, and will close its polls at 7pm central time (8pm eastern). This panhandle area is
strongly Republican, so it will be most relevant if Obama has a narrow lead in the rest of the state. Several Florida
House seats will be of interest: First, watch Republican Reps. Mario and Lincoln Diaz-Balart. Both are essentially tied

US Daily Financial Market Comment 2 November 3, 2008

Goldman Sachs Economic Research

and a defeat of both would indicate that Democrats may have a good night in the House. Republican Rep. Vern
Buchannan is another to watch, as he is favored over his Democratic challenger and a defeat would qualify as an upset.

" Virginia (13 EVs, Obama +4.3%) Virginia has been trending Democratic over the last several elections as the
demography of the state has changed. Obama has tied or lead McCain in most polls conducted since the summer, but
the state is still among the closest. An Obama loss in Virginia would be a major setback for Democrats, since in addition
to denying 13 electoral votes it would have negative implications for his chances in other states with similarly close
margins, such as Florida, North Carolina, and Ohio. There are 21 states worth 278 electoral votes in which Obama holds
a greater lead than in Virginia, so if nothing else a loss here would signal a much tighter than expected election.

" Georgia (15 EVs, McCain +3%): If there is one Senate seat to watch as an indicator of whether the Democrats will get to
60 votes in the Senate, it is this one. Republican incumbent Senator Saxby Chambliss holds a 3% lead going into election
day, down from a nearly 20% lead less than two months ago. As noted above, Georgia is one of three Senate contests in
which Republicans must defend narrow leads to deny the Democrats a 60 vote majority in the Senate. Of these three
seats, the Georgia race is the closest. In addition, McCain leads Obama in the state by only 3%, so coattails could play a
more important role here. One complicating factor is that Georgia election law requires a second runoff election if no
candidate wins a majority on Tuesday. This could mean that the exact number of the Senate’s majority may not be
known until December 2, when the runoff election would be held.

" The Rest: Polls show South Carolina (8) leaning heavily toward McCain, while Vermont (3) leans even more heavily
toward Obama.

7:30pm: The Big One – Ohio

" Ohio (20 EVs, Obama +3.6%): The state leans slightly Republican (it has 11 Republican and 7 Democratic members of
Congress) but has voted for the winning presidential candidate in every election since 1960. Obama leads in an average
of recent polls by 3.6%, and if he wins the state it will be difficult for McCain to pull together enough electoral votes to
win the election.

" West Virginia (5 EVs, McCain + 8.5%): McCain looks poised to win here.

8pm: Lots of results but just a few important races:

19 states close their polls (or at least close most of their polls) at 8pm EST. However, the outcome in most of these states is fairly
predictable. Among the more important contests:

" Mississippi (6 EVs, McCain +11%) : The Senate race here is another of the three “leaning Republican” seats that one
must watch to see if Democrats get to 60 votes in the Senate. Incumbent Republican Senator Roger Wicker was only
recently appointed to the job, following the retirement of former Republican leader Trent Lott. His opponent, former
Democratic governor Ronnie Musgrove, trails in the polls by 10%. A Democratic win here would be a significant upset,
and would be a very strong signal that Democrats will reach 60 votes in the Senate.

" New Hampshire (4 EVs; Obama +11%): The state is a toss-up state that like many others has trended toward Obama in
recent weeks, despite McCain’s history in the state. More importantly, Republican Senator John Sununu trails former
governor Jeanne Shaheen by around 10%. There is no way Democrats will make significant gains in the Senate without
taking this seat.

" Pennsylvania (21 EVs; Obama +7.6%): Polls point to an Obama victory here despite heavy campaigning by McCain in an
effort to bring it into his column. If McCain wins here, then Obama’s margin will be probably be thin and/or an upset
could be in the making.

US Daily Financial Market Comment 3 November 3, 2008

Goldman Sachs Economic Research

" The rest: In addition to the results above, Obama leads in states worth 86 points: Connecticut (7), Delaware, (3), D.C. (3),
Illinois (21) Maine (4) Maryland (10), Massachussets (12), Missouri (11), and New Jersey (15). McCain leads in the rest,
worth 17: Oklahoma (6); Tennessee (11)

8:30pm: Halfway there:

By 8:30pm, polls will have closed in states worth 275 electoral votes (270 are needed). However, since several of these states
appear likely to support McCain, there is little chance the winner will be known quite yet. Arkansas and North Carolina close
their polls at 8:30pm:

" North Carolina (15 EVs; McCain and Obama tied): North Carolina is likely to be one of the most important states in the
election. On the presidential level, Obama and McCain are tied in an average of the most recent polls here, though it is
worth noting that of the two candidates, Obama has broken the 50% mark far more frequently over the last month than
McCain. In addition, one of the closest Senate races is in North Carolina; Republican Senator Elizabeth Dole trails
Democrat Kay Hagan by 3.3%. The outcome of the presidential contest in North Carolina is not critical to Obama’s
chances, but if Republicans can hold onto this Senate seat, they are likely to deny Democrats a 60-vote majority in the
Senate.

9pm: Could it all be over in prime time?

Another 14 states close their polls at 9pm. More importantly, if current polls are accurate, Obama will have secured more than
the 270 electoral votes he needs to win with states that close at or before 9pm (in past years predictions of this sort have turned
out to be wishful thinking):

" Colorado (9 EVs, Obama +5.5%): Another of the “new” Democratic states of the southwest and Rockies, Colorado is
likely to produce an incremental Democratic seat in the Senate and put 9 electoral votes in Obama’s column.

" Minnesota (10EVs, Obama +10%): The Senate race is one of the closest in the nation: Republican incumbent Norm
Coleman leads Democratic challenger Al Franken by roughly 3% in recent polls. Complicating the race is the presence
of a third party candidate, former Senator Dean Barkley, who has managed to take around 15% of the vote in most polls.
Some of this support may shift back to the two major party candidates, but it is not clear whom this would benefit. This
race has been close for so long that most observers have tended to count it among the seats that Democrats would
build off of to reach 60. A Republican win here is likely to mean Democrats do not reach that threshold.

" New Mexico (5 EVs, Obama +7.3%): This state’s open Republican Senate seat looks likely to flip to the Democrats. The
presidential race was closer here over the summer, but Obama has been expanding his lead since September.

" The Rest: Based on current polling, New York (31), Rhode Island (4), Michigan (17), and Wisconsin (10) look likely to go
to Obama, for a total of 62 additional votes. McCain looks likely to win 70 additional votes in Arizona (10), Kansas (6),
Louisiana (9), Nebraska (5), South Dakota (3), Texas (34) and Wyoming (3).

10pm: A smattering of small states:

Four states with a total of 20 electoral votes will close their polls at 10pm: Iowa (7), Montana (3), Utah (5), and Nevada (5). The
candidates are likely to roughly split these, with McCain taking Montana and Utah and Obama taking the other two.

11pm: One big state, one big Senate seat:

Six states worth 84 electoral votes close their polls at 11pm. Based on public opinion polling, Obama looks very likely to win 77 of
these:

" California (55 EVs, Obama +24%): The outcome of the presidential race here is not in doubt.

US Daily Financial Market Comment 4 November 3, 2008

Goldman Sachs Economic Research

" Oregon (7 EVs, Obama +16%): Like California, Obama looks likely to carry the state. However, Republican Senate
incumbent Gordon Smith is one of several Republicans the Democrats have targeted in their effort to get to 60. Smith
faced close elections in 1996 and 2002, but appears at a more significant disadvantage this time. Smith’s opponent,
Oregon House Speaker Jeff Merkley, leads by 5%. Like many other Democratic Senate contenders, his lead opened up
in mid-September, as the financial crisis escalated.

" The Rest: Obama leads polls in Washington (11) and Hawaii (4), while McCain leads Idaho (4). North Dakota is up for
grabs, though worth only 3 points.

1am: If you want to know the Senate outcome, stay up late:

" Alaska (3 EVs, McCain +15%): The final piece of the Democratic strategy to capture 60 votes in the Senate lies in
Alaska, where Republican Senator Ted Stevens faces an uphill battle against Democratic Anchorage Mayor Mark
Begich, who leads Stevens by 10%. It is worth noting that while McCain surged in the polls on the heels of his
nomination of Alaska Governor Sarah Palin, the dynamic in the Senate race depends largely on the legal situation facing
Senator Stevens, who was recently convicted on corruption charges.

Alec Phillips

SM
Goldman Sachs Financial Conditions Index *(October 20, 2003=100)
*Revised as described in our April 8, 2005, US Economics Analyst.
Monday Friday Thursday Wk ending 3 mos. 6 mos.
11/03 (prel.) 10/31 10/30 Wed 10/29 earlier earlier
101.13 101.19 101.25 101.75 99.00 28.20

US Economic Research Group

Copyright 2008 The Goldman Sachs Group, Inc. All rights reserved.
This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the
general information of clients of The Goldman Sachs Group, Inc. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any
advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the
income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. The
Goldman Sachs Group, Inc. does not provide tax advice to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment. Certain transactions - including those involving futures, options, and
other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete,
and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.
We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons
involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives (including options) thereof of companies mentioned herein. For
purposes of calculating whether The Goldman Sachs Group, Inc. beneficially owns or controls, including having the right to vote for directors, 1% of more of a class of the common equity security of the subject issuer of a research report, The
Goldman Sachs Group, Inc. includes all derivatives that, by their terms, give a right to acquire the common equity security within 60 days through the conversion or exercise of a warrant, option, or other right but does not aggregate accounts
managed by Goldman Sachs Asset Management. No part of this material may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without The Goldman Sachs Group, Inc.’s prior written consent.
The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and pursuant to certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs
offices around the world produce equity research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy.
This research is disseminated in Australia by Goldman Sachs JBWere Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Canada by Goldman Sachs Canada Inc. regarding Canadian equities and by Goldman Sachs & Co. (all other
research); in Germany by Goldman Sachs & Co. oHG; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd, in the Republic of Korea by Goldman
Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs JBWere (NZ) Limited on behalf of Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the United States of
America by Goldman, Sachs & Co. Goldman Sachs International has approved this research in connection with its distribution in the United Kingdom and European Union.This material has been issued by The Goldman Sachs Group, Inc. and/or
one of its affiliates and has been approved for the purposes of section 21 of the Financial Services and Markets Act 2000 by Goldman Sachs International, which is regulated by the Financial Services Authority, in connection with its distribution
in the United Kingdom, and by Goldman Sachs Canada, in connection with its distribution in Canada. Goldman Sachs International and its non-US affiliates may, to the extent permitted under applicable law, have acted on or used this research,
to the extent that it relates to non-US issuers, prior to or immediately following its publication. Foreign-currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or
income derived from, the investment. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. In addition, options involve risk and are not suitable for all
investors. Please ensure that you have read and understood the current options disclosure document before entering into any options transactions.
Further information on any of the securities mentioned in this material may be obtained on request, and for this purpose, persons in Italy should contact Goldman Sachs S.I.M. S.p.A. in Milan or its London branch office at 133 Fleet Street;
persons in Hong Kong should contact Goldman Sachs (Asia) L.L.C. at 2 Queen’s Road Central; persons in Australia should contact Goldman Sachs JBWere Pty Ltd. (ABN 21 006 797 897), and persons in New Zealand should contact
Goldman Sachs JBWere( NZ) Ltd . Persons who would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Services Authority, should read this material in conjunction with the last published
reports on the companies mentioned herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these risk warnings is available from the offices of Goldman Sachs International on
request. A glossary of certain of the financial terms used in this material is also available on request. Derivatives research is not suitable for retail clients. Unless governing law permits otherwise, you must contact a Goldman Sachs entity in your
home jurisdiction if you want to use our services in effecting a transaction in the securities mentioned in this material.
Other disclosure information is available at http://www.gs.com/research/hedge.html or from Research Compliance, One New York Plaza, New York, NY 10004.

US Daily Financial Market Comment 5 November 3, 2008