Creating Conditions Conducive for Normaity

Despite credit crunch from late 2007, investors also need today to focus upon the creation of conditions conducive for normality, which we target for 2011. Stability and central bank policy are likely to play central roles as will the ability of companies to deliver revenue growth. From recent 12-18 month peaks (of 1.25/Euro on November 11, 2008 and 106 Yen on September 30, 2008), the U.S. dollar has had a precipitous decline of 15-20% that should be cause for some apprehension about the interrelationships referred to in the 1987 Brady report. In linking politics to markets, the German Christian Democrats ironing out coalition with Free Democrats could mean support for more overt rectitude on fiscal/monetary policy not just in Europe but globally. We were further encouraged by an October 17, 2009 Financial Times interview with Jurgen Stark, Germany’s member on the European Central Bank. Nonetheless with high deficits and low administered rates, we maintain gold as hedge. In corporate releases, we believe that too lax a criteria is cost cutting driven bottom line earnings beating of consensus that have been lowered drastically after the fact.
 
More focus needs to be placed on revenues, quality and leadership. From consumer discretionary to information technology to financials to healthcare so far and internationally, only some leadership cohorts indicate better visibility. We will be watching operational issues as more important than exchange rate gains for sustainable corporate results and continue to favor quality in a period, recent equity market gains notwithstanding, likely to be marked by prolonged bifurcation.

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