Northern Trust Focus Conference Takeaways

Paul Kasriel – Director of Economic Research
•There will be a feeble recovery with housing leading (most affordable in 40 years and he thinks sales have bottomed).
•Consumer spending has stabilized
•Exports have hit a record high (13% of GDP), the weak dollar has helped. The U.S. has “stolen” exports from Germany and Japan who have declining populations
•Capital expenditures declining at a slower pace
•Growth is all about emerging markets
•U.S. to become export demand economy
•EM consumers (especially China) will drive global growth
•The U.S. will have a jobless recovery
•GDP Growth will be too slow to re-employ the laid of workers very quickly (He expects unemployment to peak at 10.5% by mid 2010)
•The work week is at record lows
•Many jobs that were lost are not coming back
•40% of stimulus has been spent
•He is negative on commercial real-estate
•Lending among financial institutions is strong, but future losses will come from commercial real-estate
•He believes a move away from the dollar and to a basket of currencies to trade oil would have a limited impact on the dollar
•He thinks this would also be a mistake by countries who hold large amounts of dollars (i.e. China)
•Yields are low on U.S. treasuries (even given the increase in borrowing) are because of low consumer borrowing
•Does not see inflation until at least 2011
•Inflation must be fed by demand, no demand for products and labor
•Low money supply growth
•U.S. dollar weakening to due increased risk appetite

Jim McDonald – Chief Investment Strategist
•Developing economies will do better than developed economies due to stronger financial markets and institutions
•Inflation will be muted because of no wage pressures

Jason Desana Trennert – Chief Investment Strategist of Strategas Research
•Government spending to drive growth… until the bill comes due
•Consumers have hit a ceiling
•Overweight- Commodities, Materials, Consumer Staples, Health care
•Underweight – Consumer Discretionary, Utilites, Telecom
•He believes the next couple of quarters will be better than expected
•Referenced Japan’s “lost decade” and that there were 7 rallies of over 60% in that time frame
•Japan’s growth during that decade was dependent of the government’s spending and the U.S. could see that same outcome
•Compared 1982 to current times and pointed out how much worse it looked
•Thinks buy and hold is dead for now
•Average holding period for stocks has fallen from 8 years in 1960 to 0.7 years in 2007
•Money market assets as a % of U.S. market capitalization are at 34%, much higher than the historical average of around 12%

Main Themes
•Extremely bullish on international (especially emerging markets) Northern Trust is now 50/50 domestic/international in its aggressive growth portfolio
•Still bullish on stocks in general
•No one is worried about inflation, in the near term