Selling Assets, Buying Hope

04/23/2009 11:46 am EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

In the world war against the forces of chaos and decay, keeping hope alive is half the battle.

So pin a medal on markets taking two strides forward for every backward step and on central bankers firing from the hip no matter how low their ammunition. Hope hasn't simply survived; it's flowered this spring, to the delight of every optimist in the trenches.

Economic collapse has been warded off and the feared global depression demoted to nothing worse than the mother of all recessions. Many key indicators—joblessness, output, bad debts, foreclosed homes—continue to worsen. But the slowdown in the rate of the decline has boosted morale to its best levels in many moons.

So, for instance, State Street's index of global investor confidence has noticeably perked up, and even dour Germans have relented.  

Technology standard bearers Nokia (NYSE: NOK) and LG Electronics  (OTC: LGERF.PK) delivered better than expected results, as did the UK supermarket chain Tesco (London: TSCO.L). Big US exporter United Technologies (NYSE: UTX) said its orders stabilized in March, while Caterpillar (NYSE: CAT) imported just enough hope from China.

Hard-up European banks continued to peddle hard-won trophies. Their American rivals tanked Monday on renewed capital worries, only to bounce back Tuesday after Treasury Secretary Timothy Geithner suggested most won't need to raise new equity.         

But wars are not won by generals alone; it helps to have irregulars harass the enemy's rear. This job has been appropriated by laid off French workers who are kidnapping their bosses to secure better severance. Such protests have been especially prevalent at facilities slated for closure by foreign corporations. This is probably not the reason the French economy will shrink “only” 2.5% this year, vs. a forecast 3.5% drop for Britain and an expected 6% buzz cut in Germany.

Central banks in India, Sweden, and Canada all cut rates in the last week, and the Bank of Canada has promised to keep its benchmark rate at a quarter-point for a full year, inflation permitting. Japan and the UK prepped heavy doses of budgetary stimulus. Japan's will be underwritten by citizens who have seemingly lost the yen for everything but low-yielding bonds. Britain has not saved for this rainy day, and so will have to lean hard on the Bank of England. (Never underestimate a desperate government, however, suggests Chris Gilchrist of The IRS Report in this week's Q&A.)

The antidote to the European gloom is to be found in the malls and bazaars of Asia, where consumers are shopping much as before, says Lawrence Roulston in this week’s Global Strategies piece. Their long march to affluence won't be blocked for long by a debt reckoning half a world away.

Belle International (HK: 1880) is a promising play, on this theme, says Yiannis G. Mostrous of The Silk Road Investor. (And don’t forget to do your own research on the ideas proposed by experts here and elsewhere, of course!)

The other recommendation this week, from Tom Slee of Internet Wealth Builder, is Thomson Reuters (NYSE: TRI; Toronto:TRI.TO), a media giant shielded from the vagaries of advertising, consumer spending, and the dying print medium. Like other large-cap stocks recently featured here, it boasts a safe yield well in excess of what the banks are offering on deposits these days. Hope is great, but it doesn't pay the bills.

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