With emergent differences in exit strategy transparency and the dollar drop since March already at the 17% decline highlighted as debacle causality for October 1987, once again but now in late 2009, central bank/government policy (including exiting largesse) could be as problematic for risk as weaknesses in private financial institutions, globally- we favor gold as hedge. For our earnings stance of recovery to 2011 back to prior earnings peak levels, cost cutting has been a building block. Even if U.S. 9.5% productivity growth in Q3/2009 were cyclical, the imperatives for capital investment remain strong with the products/ services of the industrials and information technology in sustained enhancement and attractive for portfolio overweighting. Strategic M&A is likely to rise but the post 1950s/1960s demonstrated industrial conglomerates ill-equipped as did the post 1980s for Japanese trading houses and post the 1990s for the Korean chaebols. Now, divestiture seems likely industrials and in finance – favoring the strong.
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