Download - US Equity Macro View 2010 03 08
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CurrentMacroEnvironment
InvestmentConsidera4ons
8March2009
ArthurOKeefe
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USEmploymentandInfla4onTrends
(hint:theyrerelated)
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Creditcon4nuestocontract
demandandnotsupplydriven
Source:St.LouisFed,March2010MonetaryTrends
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Noonewantstoborrow
Source:St.LouisFed,March2010MonetaryTrends
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Notsurprisingsincetherearenojobs
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Unemploymentprobablypeaking
here,butitsahighpeak
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Andtheunemploymentnumbersmask
under-employedpeople
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Andpeoplewhohavejustgivenup
looking
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Couldtakeadecadetoabsorb
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DeleveragingPeriod=SlowGrowth
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5+YearsofSlowGrowthAhead
Source:St.LouisFed,March2010MonetaryTrends
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Goodluckge]nginfla4oninthis
environment
Source:St.LouisFed,March2010MonetaryTrends
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CPIstar4ngfromalowbase
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USSavingsTrends
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A^erbeingburnedtwice,peoplehave
beendumpingequi4es
Source:GS
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Buttheyares4llsavingevenmoresonow
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Source:GS
Sothemoneyhasflowedintobonds
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USBusinessTrends
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Source:GS
Withincreasedsavingsandhighunemployment,
capacityu4liza4onislower
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Butbusinesstrendsarestabilizing
Source:JPM
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Businessesadjustedmuchfasterthan
theconsumerinraisingcash
Source:GS
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andde-levering
0
1
2
3
5
6
SPXNET_DEBT_TO_EBITDA
NET_DEBT_TO_EBITDA
Source:Bloomberg
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Valua4onsgotcrushedandbounced
backabit
0
5
10
15
20
25
30
35
PE_RATIO
PE_RATIO
Source:Bloomberg
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Butsodidearnings:resultisEVto
EBITDAsares4llathistoriclows
0
2
6
8
10
12
1
16
SPXEV_TO_T12M_EBITDA
EV_TO_T12M_EBITDA
Source:Bloomberg
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Valua4onss4lldontreflectthelowerleverage,
lowerriskofcompanies:Cashflowischeap
0
5
10
15
20
25
SPXPX_TO_CASH_FLOW
PX_TO_CASH_FLOW
Source:Bloomberg
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OtherConsidera4ons
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Chinaincreasinglystrugglingto
maintaingrowth
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InvestmentConclusions
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Consumerspendingweak,excess
capacity=defla4on
Source:DaveRosenberg,GluskinSheff
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Source:GS
USDeficitisnotaproblem:Withbusinesscap-exremaininglow
andAsiaandEuropepushingtomaintainexports,theonlyway
toabsorbsavingsistorunadeficit
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Source:GS
Rateswillstaylowforalong4me
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Source:GS
Saverswillstarttoreachforyieldagainmodera4ngany
weaknessinBondsandsuppor4ngequi4es
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Andvola4litywillcon4nuetodecline
ascompaniesde-levermore
Source:GS
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Source:GS
Leadingtohighqualityequi4es
recovering
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USDollarinthisenvironment
InanenvironmentliketodaytheUSDollarislargelyvaluedoffofconfidence
Aslongasothercountriesremaininworsecondi4ons,therewillbeabidfordollars
Defla4onwillcausedebttobebidandbeabsorbeddomes4cally
Essen4allythegovernmentisgivingsavingstopeoplebyconsumingforthem
Addi4onallyAsiancountrieswillcon4nuetobuydollarstomaintainexports