Monday, January 18, 2010

A View from the Bullish Side (Video)

It is always constructive to look at the "other side" - if nothing else to see what the herd might be thinking.  This is the first time I have heard of Ms. Thouin but in as much of a recovery as we do have, I do agree with her themes that it is going to be focused on the corporation, or Eastern hemisphere consumer... not the Western consumer - especially of the American kind.  (except those domestic breed who work in government, or live in the upper 5% economic band)  Frankly that is how the portfolio is positioned for the most part.

Perhaps with a European bias she views the world differently; but  claims that we can indeed have a V shaped recovery only with the corporation - which begs the question, without end demand what do said corporations do with their rebuilt inventory?  I suppose in our current structure the government gives the consumer money it does not have, and consumers use that money to buy the product.

If Ms. Thouin is right this will mark a sea change - the first time the globe does not need the $14 Trillion economy of the United States (70% of which is consumer consumption) - but can go along it's merry way with smaller tier of Asian economies leading the way.  My view?  In 15 years she has a valid argument.  Right now - based on the divergence in sizes of the economies it is an impossible dream with 1 strong caveat.  My comments are on a purely organic economy where governments are not borrowing / printing like mad to subsidize their consumers.

6 minute video (email readers will need to come to site, to view)


The recovery won't be bolstered by the consumer, like in previous recessions. Instead demand will come from a build-up of low inventories and large companies' exposure to emerging market growth, Edith Thouin, vice president of ABN Amro Private Banking said Monday.

"We do think we are in a V-shaped recovery and equities are the place to be," she said, adding that investors should still shift their focus into a more diversified portfolio.

She told CNBC investors should bet on industrial and base material companies, as well as international companies with good exposure to China, South America and other emerging market countries.

"The appetite for especially anything exposed to the growth markets in Asia, in Latin America, is still very attractive to investors and because private investors have been holding back here — they really haven't participated in this rally — it's good to lure them back into the equity markets," Thouin said.

She likes global miner BHP Billiton (BHP) in the base material sector, as well as steel companies like Arcelor Mittal and ABB.  Engineering companies like Siemens and Philips also look good, according to Thouin.

Mid- and small-cap companies, which have suffered recently during the downturn, hold investment potential as they will benefit in the pickup in inventory activity as they often supply larger companies, Thouin said.

"We would focus on the high-quality companies in the mid-segment. The ones with good balance sheets; the ones that have come through the crisis well enough; and the ones that also have very high market shares and very good reputations, because they will be the preferred suppliers to these large companies as the large companies continue to merge and consolidate," she told "Strictly Money."

A recovery in industrial companies has been priced in by the market, with good earnings expected in the fourth quarter of 2009, as well as the first and second quarter of 2010, according to Thouin.

"We actually think that defensives are coming a bit back into fashion again," she said. "There will be a renewed interest in the defensives sectors, especially the ones that continue to show good earnings growth. For instance the pharmaceuticals sector but also the consumer staples (sector)."

Luxury goods producers like Richemont, who reported good figures Monday, are attractive as "there is this huge demand from Asian consumers, especially for Western products," she said.

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