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Google, Goldman, and God

10/22/2012

I’m not sure which company I dislike the most.  One gleefully shreds our right to privacy, and the other bets against its own clients.  On the other hand, Google also makes a world of information available to average users, and Goldman Sachs has a truly great group of investment strategists.

In their latest commentary, Goldman expects U.S. growth to be 2.2% this year, dropping to 1.9% next year.  In Europe, they expect actual GDP contraction of 0.5% this year and anemic growth of 0.2% next year.  In China, they expect a still-robust 7.6% growth rate this year, rising to 8.0% next year.  The big news is that they do expect some minimal growth in Europe next year, which would be a leap of faith for me.

Interestingly, Goldman accuses the Fed of “out-doving” other central banks with more quantitative easing (QE3), which will weaken the dollar, fuel commodity inflation (including gold), and will limit stock market growth.  I also expect creeping inflation, which favors commodity prices and often limits stock market growth but not always.  There is a tsunami of money on balance sheets and in retail investor accounts that need to be invested somewhere.

Looking into 2013, Goldman prefers U.S. stocks and dividend-paying stocks outside the U.S., and I agree.  They don’t expect the Fiscal Cliff to be a significant long-term problem, and I hope they know something I don’t!  As they believe QE3 will stir inflation, they are extending the average length of their bond portfolios as rates begin to rise.  I’m not prepared to “fight the Fed” on this, which has promised to keep the anchor short-term rates historically low.

Of course, there are other companies that make information available (Microsoft’s Bing, for example) and other companies that do investment banking as well as Goldman does.  So, I remember what I learned in the Army . . . “kill’em all and let God sort’em out” . . .  OK, just kidding . . . “bankrupt’em all and let God bail’em out?”

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