Inconsistenicies and Inordinate Market Faith in Government

We started 2010 with our note dated January 4, 2010 and entitled “New Year Resolution: Wary of Socialization of Capitalism”. With the numerous developments during 2010 like the sovereign debt crisis in Europe, the pressures on global currency markets and culminating now October of the 2010 World Bank/IMF meetings in terms of what was stated but also left undone, it is appropriate to focus on inconsistencies and inordinate market faith in government, even as currency and hence trade pressures build.

Our conclusions are that markets are likely in trading ranges until mid 2011 and that quality of delivery is likely to count for more irrespective of sector or asset class, with less dependence simply on government largesse than appears generally realized in the every day of market gyrations even as the deluge emerges of corporate earnings and revenue expectations for 2011. Our stance differs from the often blithely stated mantra today about buy- and- hold likely not to be working, after years into 2007 of similar droning about bottom up selection being crucial with top down considerations being irrelevant. Increased political stress globally and strengthening bank lending based on quality is likely to be more than a financial institutions issue and one of differentiation for companies in this cycle compared to the last one.

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