8/9/2019 US Equity Macro View 2010 03 08

1/35

CurrentMacroEnvironment

InvestmentConsidera4ons

8March2009

ArthurOKeefe

8/9/2019 US Equity Macro View 2010 03 08

2/35

USEmploymentandInfla4onTrends

(hint:theyrerelated)

8/9/2019 US Equity Macro View 2010 03 08

3/35

Creditcon4nuestocontract

demandandnotsupplydriven

Source:St.LouisFed,March2010MonetaryTrends

8/9/2019 US Equity Macro View 2010 03 08

4/35

Noonewantstoborrow

Source:St.LouisFed,March2010MonetaryTrends

8/9/2019 US Equity Macro View 2010 03 08

5/35

Notsurprisingsincetherearenojobs

8/9/2019 US Equity Macro View 2010 03 08

6/35

Unemploymentprobablypeaking

here,butitsahighpeak

8/9/2019 US Equity Macro View 2010 03 08

7/35

Andtheunemploymentnumbersmask

under-employedpeople

8/9/2019 US Equity Macro View 2010 03 08

8/35

Andpeoplewhohavejustgivenup

looking

8/9/2019 US Equity Macro View 2010 03 08

9/35

Couldtakeadecadetoabsorb

8/9/2019 US Equity Macro View 2010 03 08

10/35

DeleveragingPeriod=SlowGrowth

8/9/2019 US Equity Macro View 2010 03 08

11/35

5+YearsofSlowGrowthAhead

Source:St.LouisFed,March2010MonetaryTrends

8/9/2019 US Equity Macro View 2010 03 08

12/35

Goodluckge]nginfla4oninthis

environment

Source:St.LouisFed,March2010MonetaryTrends

8/9/2019 US Equity Macro View 2010 03 08

13/35

CPIstar4ngfromalowbase

8/9/2019 US Equity Macro View 2010 03 08

14/35

USSavingsTrends

8/9/2019 US Equity Macro View 2010 03 08

15/35

A^erbeingburnedtwice,peoplehave

beendumpingequi4es

Source:GS

8/9/2019 US Equity Macro View 2010 03 08

16/35

Buttheyares4llsavingevenmoresonow

8/9/2019 US Equity Macro View 2010 03 08

17/35

Source:GS

Sothemoneyhasflowedintobonds

8/9/2019 US Equity Macro View 2010 03 08

18/35

USBusinessTrends

8/9/2019 US Equity Macro View 2010 03 08

19/35

Source:GS

Withincreasedsavingsandhighunemployment,

capacityu4liza4onislower

8/9/2019 US Equity Macro View 2010 03 08

20/35

Butbusinesstrendsarestabilizing

Source:JPM

8/9/2019 US Equity Macro View 2010 03 08

21/35

Businessesadjustedmuchfasterthan

theconsumerinraisingcash

Source:GS

8/9/2019 US Equity Macro View 2010 03 08

22/35

andde-levering

0

1

2

3

5

6

SPXNET_DEBT_TO_EBITDA

NET_DEBT_TO_EBITDA

Source:Bloomberg

8/9/2019 US Equity Macro View 2010 03 08

23/35

Valua4onsgotcrushedandbounced

backabit

0

5

10

15

20

25

30

35

PE_RATIO

PE_RATIO

Source:Bloomberg

8/9/2019 US Equity Macro View 2010 03 08

24/35

Butsodidearnings:resultisEVto

EBITDAsares4llathistoriclows

0

2

6

8

10

12

1

16

SPXEV_TO_T12M_EBITDA

EV_TO_T12M_EBITDA

Source:Bloomberg

8/9/2019 US Equity Macro View 2010 03 08

25/35

Valua4onss4lldontreflectthelowerleverage,

lowerriskofcompanies:Cashflowischeap

0

5

10

15

20

25

SPXPX_TO_CASH_FLOW

PX_TO_CASH_FLOW

Source:Bloomberg

8/9/2019 US Equity Macro View 2010 03 08

26/35

OtherConsidera4ons

8/9/2019 US Equity Macro View 2010 03 08

27/35

Chinaincreasinglystrugglingto

maintaingrowth

8/9/2019 US Equity Macro View 2010 03 08

28/35

InvestmentConclusions

8/9/2019 US Equity Macro View 2010 03 08

29/35

Consumerspendingweak,excess

capacity=defla4on

Source:DaveRosenberg,GluskinSheff

8/9/2019 US Equity Macro View 2010 03 08

30/35

Source:GS

USDeficitisnotaproblem:Withbusinesscap-exremaininglow

andAsiaandEuropepushingtomaintainexports,theonlyway

toabsorbsavingsistorunadeficit

8/9/2019 US Equity Macro View 2010 03 08

31/35

Source:GS

Rateswillstaylowforalong4me

8/9/2019 US Equity Macro View 2010 03 08

32/35

Source:GS

Saverswillstarttoreachforyieldagainmodera4ngany

weaknessinBondsandsuppor4ngequi4es

8/9/2019 US Equity Macro View 2010 03 08

33/35

Andvola4litywillcon4nuetodecline

ascompaniesde-levermore

Source:GS

8/9/2019 US Equity Macro View 2010 03 08

34/35

Source:GS

Leadingtohighqualityequi4es

recovering

8/9/2019 US Equity Macro View 2010 03 08

35/35

USDollarinthisenvironment

InanenvironmentliketodaytheUSDollarislargelyvaluedoffofconfidence

Aslongasothercountriesremaininworsecondi4ons,therewillbeabidfordollars

Defla4onwillcausedebttobebidandbeabsorbeddomes4cally

Essen4allythegovernmentisgivingsavingstopeoplebyconsumingforthem

Addi4onallyAsiancountrieswillcon4nuetobuydollarstomaintainexports