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Vadim Zlotnikov (Chief Market Strategist) • email@example.com • +1-212-756-4663 Caglasu Altunkopru • firstname.lastname@example.org • +1-212-823-2630
Equity Portfolio Strategy: Does the price of gold tell us anything useful about the nature of investor fears?
"There can be no other criterion, no other standard than gold. Yes, gold which never changes, which can be shaped into ingots, bars, coins, which has no nationality and which is externally and universally accepted as the unalterable fiduciary value par excellence," Charles de Gaulle "When most money consisted of silver or gold or some other item that had a nonmonetary use, or of an enforceable promise to pay a specified amount of such an item, the 'metallist' fallacy arose that 'it is logically essential for money to consist of, or be 'covered' by, some commodity so that the logical source of the exchange value or purchasing power of money is the exchange value or purchasing power of that commodity, considered independently of its monetary role',(Schumpeter 1954, p. 288). The examples of the stone money of Yap, of cigarettes in Germany after World War II, and of paper money currently make clear that this 'metallist' view is a fallacy," Milton Friedman Gold, which is effectively just another fiat currency, has recently benefited from its perceived ability to hedge against a variety of potential economic outcomes that are currently foremost in investor's minds: inflation, sources of economic growth, downward spiral in fiat currencies, etc. Academic research does suggest that gold can be a hedge for the stock market, inflation and/or currency risk. We attempted to quantify what may be embedded in gold prices using empirical models. With some reasonable assumptions, we find that a 20% decline in the stock market or 4% inflation or 20% devaluation of the US Dollar is already priced into gold. In other words, gold could be attractive for an investor who expects a significantly worse outcome (e.g. a collapse in US Dollar due to reserve diversification by emerging countries). On the flip side, if the recovery continues to gain steam and risk aversion subsides, we could see 2040+% downside from current levels. Gold miners, especially given their current un-hedged positions, could be severely affected by any downside. Meanwhile, investors could be well-advised to consider other means of insurance and exposure to real assets. In particular, diversified portfolios of commodities that would benefit from secular growth themes such as emerging market growth could continue to be attractive as a hedge and a diversification tool. Arguments for owning gold based on an anticipated return to the gold standard seem far-fetched and would not be in the interests of virtually any nation. The transition to a reserve rebalancing to include sufficient quantities of gold would be anticipated by the market and may perversely favor the US Dollar.
Recent slowing of inflows into gold ETFs and outflows from bond funds may be indicative of declining risk aversion, as investors place lower value on investments that look like insurance policies (gold as inflation
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we attempt to put gold's recent rally into historical context. with declines being indicative of more risk seeking behavior. we decided to take a more detailed look at gold: what is currently pricedin. capital spending. we are monitoring four key metrics to further increase our pro-cyclical stance: Small-business confidence. two recessions and a bout of doubledigit inflation. and whether there are superior hedges to investor concerns. pricing power and capital expenditures. households could continue to de-leverage. Strategy 2 . Investor demand for safe-haven assets have depressed yields. history. Some historical context News headlines notwithstanding. As we highlighted in previous research.S. as well historically low real yields have made gold one of the safe-haven assets of choice. The current annual change does not quite make top quintile vs. As a result. the past decade has not been a walk in the park by comparison. Two asset price bubbles have come and gone.com • +1-212-756-4663 protection and fixed income as deflation). recent long-term. as well as assets with higher expected returns than US bonds. Gold is somewhat unique in its perceived ability to hedge against a variety of fears and concerns that are currently foremost in investor's minds. what would drive upside from current levels. we have been at the brink of financial melt-down. resulting in new record-high gold prices being reached every week (see Exhibit 2). making gold increasingly attractive. In this note. and assess what types of tail events gold prices could be embedding. two oil shocks. What is remarkable however is the persistent trend of longer-term price increases since the earlier part of this decade. currently these metrics seem neutral to positive and we see no obvious catalysts to derail continued expansion in 2011. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. sovereign debt issues. In fact. and U. While the recovery remains fragile. four-year performance is only surpassed by the 70s / early 80s which featured the adjustment process to a flexible exchange rate regime. after nearly 20 years of ho-hum performance.January 4. In 1H11. As a result. sovereign debt concerns linger. The price of gold can be a useful coincidental indicator of risk aversion. depressing global demand growth. high-end consumer spending. we expect current trends to continue as enormous liquidity is re-directed toward productive uses (e. but not unprecedented (see Exhibit 1). Clearly. An uncertain economic outlook. hiring…). recent increases in the price of gold are high. deflationary and inflationary fears. gold has been a constant feature of financial news headlines over the past few months.g.zlotnikov@bernstein.
an investor who bought gold in 1990. Similarly. if it were a perfect inflation hedge. Through December 2010 200% 150% 100% % of days when return was higher excl. Once gold prices were no longer fixed.zlotnikov@bernstein. It is interesting to note however that the first round of increases only brought the gold price to where it should be. In reality.1% Exhibit 2 …but what does seem remarkable is the sustained increase since early 2000s Daily 4-Year Rolling Gold Returns 1. a quick look at history suggests that this has not always been the case (see Exhibit 3). even with gold well off its prior peak. Strategy 3 . Bernstein analysis While gold certainly enjoys the reputation of being the ultimate store-of-value and a hedge for inflation. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. last 4 yrs: 15. two recessions and double-digit inflation took their toll. Strict adherence to the gold standard would therefore mean that balance of payments surpluses were accompanied by an inflow of gold and expansion of the money supply.7% 50% 50% 0% 0% -50% -100% 70 75 80 85 90 95 00 05 10 -50% -100% 73 78 83 88 93 98 03 08 Source: Global Insight. rather than keep pace with inflation. the price of gold declined gradually for 20 years.com • +1-212-756-4663 Exhibit 1 Recent increases in gold prices do not seem exceptional in terms of magnitude… Daily 1-Year Rolling Gold Returns 250 Day Log Change. as most advanced economies were on some version of the gold standard until the collapse of the Bretton Woods agreement in 1971. caught up with inflation only in 2006. countries strove to get back on the gold standard. while the country with the current account deficit would see gold outflows and deflation. After 1980. dropping -56% below its 1980 peak by 2001. In other words. For a long stretch of history. but once peace was restored. an investor who bought gold in 1980 and held it to-date has so far lagged inflation even with the recent increases. over a relatively brief 40-year history when its price was not fixed. such that they observed fixed exchange rates relative to each other. gold prices were effectively fixed. Countries on the gold standard maintained the fixed gold price by committing to buy or sell gold at that price. central banks made efforts to maintain price stability by changing the "bank rate" or by engaging in open market operations. where central banks are no longer committed to trading gold at fixed prices. gold's performance depends on timing.000 Day Log Change. Wars typically led to suspension of the gold standard. Bernstein analysis Source: Global Insight. they increased dramatically through the 70s as the oil crises. In fact. last year: 22. especially in the post-gold standard world.January 4. gold seems to have rallied in times of crisis.Through December 2010 150% 100% % of days when return was higher excl. and just like any asset.
the system was self-defeating. it is only a matter of time before fiat money becomes worthless and we revert back to the gold standard.627 1. as Assistant Secretary for International Affairs at the U.S. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. the last attempt at a gold standard. Nixon "closed the gold window".January 4." (Fred Bergsten.com • +1-212-756-4663 Exhibit 3 Gold's performance as an inflation hedge has depended on timing with periods of outperformance coinciding with post Bretton Woods periods of distress Historical Gold Price vs. While the Treasury has allowed a limited amount of gold to be sold. In the absence of a gold standard there has not been an effort to accumulate gold reserves. putting the final nail in the coffin of the Bretton Woods agreement. Since then. The US maintained gold reserves and settled accounts in terms of gold. Global Insight. government debt at alarming levels (domestically and abroad). in 1971. Annual Average. especially in the 70s with the belief that "Neither gold nor any other commodity provides a suitable base for monetary arrangements. comparable to the mid-60s. Strategy 2003 4 . the US gold reserves gradually diminished. Finally. pegged all other currencies to the US$ and the US$ to gold at $35 per ounce.20 per ounce. further depleting US gold reserves. while all others used US$ to settle international accounts.S. With world trade growing well ahead of the gold base. However. the value announced by Nixon in February 1973. Bernstein analysis A related argument favored by gold bulls is that. The erosion of the gold reserve to currency ratio goes back to the post-World War II period (see Exhibit 4). and the ever-widening fiscal deficit. Log Scale From 1833 From 1970 From 1980 From 1990 Actual US$ set at $20. Treasury Department).000 100 U.225 642 457 203 10 1833 1843 1853 1863 1873 1883 1893 1903 1913 1923 1933 1943 1953 1963 1973 1983 1993 Note: Gold price at a given starting point grown at CPI such that the calculated price reflects the price gold would trade at if it were a "perfect" inflation hedge Source: Kitco. with fiat money having grown exponentially in the absence of the "iron discipline" of gold. This in turn created a confidence problem in the participating email@example.com per troy oz Resumption Act WW I Oil Crises DotCom Bubble Burst Great Recession 10. Inflation Hedge Price* London PM Fix. Civil War and afterma th Classical Gold Standard Gold Great Excha Depressi nge on and Standa WW II rd Bretton Woods 1. If marked to market. such that the 25% gold cover had to be eliminated in 1968.000 1. BLS. current gold reserves are sufficient to "cover" 40% of currency. with Switzerland and France redeeming part of their US Dollar holdings for gold. as well as persistent US balance of payments deficits. this has not been substantial in volume. The Bretton Woods agreement. US gold reserves as reported by the Treasury have remained broadly unchanged both in weight and reported value which is booked at $42.
Taking this one step further.67 per oz Gold Reserves / Currency Mandated Gold Cover Gold Reserves at Market Value / Currency Gold cover reduced Start of Vietnam War US$ devalued vs. there is yet another $3. Bernstein analysis If gold reserves were marked to market.zlotnikov@bernstein. if all reserves were to be converted to gold. Gold Reserves to Currency in Circulation 300% 250% 200% 150% 100% 50% 0% 14 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99 04 09 Gold WWI & Exchange aftermath Standard Great Depres sion US$ Gold convertibility suspended Genoa Conference WW II Bretton Woods Gold Reserve Act: US$ devalued vs. Currently. Even though M2-to-reserves is somewhat higher than 1959 levels.6tr of foreign reserves whose allocation is unknown. While we do not anticipate a re-valuation of US reserves any time soon. especially if US policies fail to show fiscal responsibility. Global Insight.January 4. St. as confidence in the US$ waned. this would equate to about 6bn oz. This leads to the argument posed by US$ bears and gold bulls…what if the countries holding US Dollardenominated assets decided to dump those assets and switch to gold. What is more difficult to assess is the potential for further significant expansion of the monetary supply as a result of the ballooning federal debt. deposits and government debt. comparable to mid-60s Ratio of U. equivalent to 30% of global reserve holdings (Exhibit 8). H. of gold. M2 remains reasonable compared to subsequent years (see Exhibit 7). gold to $35 from $20. Obviously. While this is a possibility. gold to $42.S. we do believe that the marked-to-market figures provide a more realistic assessment of monetary ratios.2 per oz Gold Gold cover window eliminated closed Gold commission established 40% Source: Banking and Monetary Statistics. foreign banks have much to lose by this move. gold reserves stand at 40% of currency. One may conclude that the US Dollar has effectively de-valued vs. gold to $38 per oz US$ devalued vs. the picture is not complete without a discussion of global reserves. while M1 is significantly lower. Louis Fed (1914-1947). analogous to what we saw at the end of the Bretton Woods regime. Federal Reserve.8tr US Dollar-denominated claims including currency. These figures indicate that currency-to-reserves is broadly inline with 1959 levels. increasing financial sophistication may account for part of the increase. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. Exhibit 6 summarizes money supply to overall reserve ratios both as reported and adjusted for gold reserves valued at prevailing market prices. more than double current global gold reserves. Converting just the known $2. foreign reserve banks hold a known $2.8tr of US Dollar-denominated reserves to gold would require over 2bn oz. as the possibility of such transaction would cause gold to be bid up well above any level of practicality. Strategy 5 . 6 Money Stock Measures. meanwhile.com • +1-212-756-4663 Exhibit 4 With gold marked to market. gold would account for 74% of total US reserves compared to the reported 8% (see Exhibit 5). Moreover. Given that the US Dollar remains a key reserve currency. gold to normalize the money supply to reserve ratios. of gold at current prices. this could never happen in practice.
3 1.5 27.5tr of reserve assets represent claims on US Dollar denominated securities 120 Summary of Global Reserve Positions with Gold Marked to Market US$tr.5 M2 12. Federal Reserve Banks.2 54. Bernstein analysis Source: Federal Reserve. and the vaults of depository institutions M1: Currency. Bernstein analysis Source: IMF.9 4.06 11% 8. 74% of current reserves are in gold Exhibit 6 With US reserves adjusted for the market value of gold.3 13. savings and small time deposits Source: Federal Reserve.28 70% 0.8 1.0 1.84 5. As of YE 2009 US as % of Global 26.9 0.7 36.5 3.S.8 67.com • +1-212-756-4663 Exhibit 5 With gold marked to market.0 6.33 0.2 2.7 11.2 3.3 18.7 1. Global Insight.5 110.8 Adjusted for Gold at Market Value Curr M1 M2 U.4 30.3% 24% Strategy 59 64 69 74 79 84 89 94 99 04 09 GDP *The Fed also holds $2tr of US$ denominated securities ** Includes banknotes. bank deposits.2% 0.12 60 65.7 4. Reserves 100% 80% 74% 60% Jan-69 Jan-79 Jan-89 Jan-99 40% Jan-09 Nov-10 20% As Reported Gold Marked to Market 8% Current Value ($tr) 0% 42 49 56 63 70 77 84 91 98 05 Currency: Physical currency outside the U.8 21.5 16. Bernstein analysis 6 .40 14. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. Gold Reserves as % of Total U.3 2.6 5. Global Insight.8 Jan-59 1.0 30 18.23 US* 0.January 4.8 18.3 4. history Money Supply Relative to Reserves Based on Reported Figures Curr M1 firstname.lastname@example.org 4.12 30% 0.S. gov't securities Source: Federal Reserve.4 65.S. M2 to Reserves Through November 2010 Reported Figures Gold Marked to Market 90 Exhibit 8 At least $2. traveler's checks.25 9. Bernstein analysis Exhibit 7 Adjusted M2 is now somewhat higher than 1959 levels. Treasury.17 86% 2.48 58.5% 2. Global Insight.6 7.8tr of $9.9% Global Gold % of total 1.1 0 FX Holdings* % of total Known US$ Other Other Total 1.0 62. current money supply relative to reserves seems reasonable vs. Global Insight.9 17.6 21.1 8. demand & other checkable deposits M2: M1 plus retail money funds.0 13.4 5.9 5. T-bills.2 12.S. but the increase may be partly explained by increased financial sophistication U.
S. the commission considered: Treasury issue of gold bullion coins and/or gold-backed bonds A public audit of physical gold reserves as citizens "fear that the actual amounts held by the government are less than are reported officially" Strategy The appropriate size of the U. it could be argued that foreign central banks have more of an incentive today not to act against the US Dollar compared to the Bretton Woods era. a worthwhile read. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim.1% 0% 48 53 58 63 68 73 78 83 88 93 98 03 08 0. In October 1980. Exhibit 9 Decreasing share of gold in global reserves has meant increased exposure to the US$ Exhibit 10 However.6% 30% 1995 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1996* 1997* 2009 Global Gold Reserves As % Total Reserves 100% End of Bretton Woods As Reported Gold Marked to Market US$ as % of Emerging 80% 20% Source: IMF COFER. dated March 1982. they still remain below 2006 levels. since the decreasing share of gold in reserves has meant increased exposure to the Dollar (see Exhibit 9). However." Among other topics. gold stock Whether to continue to value the gold stock at $42. Congress created the Gold Commission. arguing that it will promote monetary and fiscal discipline and reduce inflationary expectations. Bernstein analysis Investors trying to assess the likelihood of a potential return to the gold standard may find the "Report to the Congress of the Commission on the Role of Gold in the Domestic and International Monetary Systems". the emerging countries which now account for 66% of global foreign exchange reserves. One point of concern could be that.2 per ounce Whether the gold stock should be put to productive use through swaps or intervention in foreign exchange markets 7 . monetary system is the solution to the problem of inflation. While global monetary authority gold reserves were up 1% in volume in 2009. As the commission stated: "Many citizens believe that an expanded and more explicit role restored to gold in the U.January 4. the -13% decline in global gold reserves in volume from 1995 to 2009 suggests that the shift has so far not been towards gold. Bernstein analysis Source: IMF COFER.com • +1-212-756-4663 In fact.S. do seem to be gradually reducing their exposure to the US$ (Exhibit 10). responding to growing concern about high and persistent inflation. emerging countries which are growing share of global reserves are gradually decreasing their exposure Emerging Countries' FX Reserves Emerging as % of Total 80% 70% 60% 60% 40% 50% 40% 12.zlotnikov@bernstein.
. Analysis of the Investment Potential and InflationHedging Ability of Precious Metals Rgold. we wanted to understand which risks gold can be shown to have been a hedge against.. With sub-sample estimates 8 . we thought the similarities to issues being discussed today were quite striking (and somewhat amusing).2% in 1983. the Fed under Volcker had raised the Federal funds rate to 20% in June 1981 and inflation dropped to 3. Bernstein research Strategy Since gold's historic performance has been rather episodic. Is Gold a Hedge or a Safe Haven? An Analysis of Stocks..5% in 1981. GB£ and ¥ Source McCown.. F.t = a+ b (Rm.t) + et Stock market Variables Rgold : Gold returns Rf : The risk free rate Rm : MSCI returns Rgold : Gold returns Rstock: MSCI U.S. 2.zlotnikov@bernstein.. and Lucey B. J.. Mills T. these risks are inter-related. we found some evidence that gold can act as a hedge for: Stock market declines. t + c2 Rbond. Exhibit 11 We looked at empirical models focusing on various hedging qualities of gold to evaluate what potential scenarios current prices could be embedding Summary of Empirical Models Utilized Model Equation Rgold.P. D.com • +1-212-756-4663 Whether gold should be reintroduced into domestic monetary arrangements through reinstituting a gold cover and allowing the gold stock to be determined by gold flows Adopting a gold standard with a fixed price of gold in terms of dollars While it is not in the scope of this piece to discuss each of these items in detail. 2009. 2007. 2009. and relative inflation is one of the factors that influence exchange rates. Wood G.S. By the time the report was released. and in bear markets in the case of the "safe haven" model. and Zimmerman J.January 4. t(q): MSCI U. C. Bonds and Gold Inflation rt = a + bpt+ g ( pt .S. t – Rf.M.K. t – Rf.G. the predicted gold price for today ranges from $588 (based on FX rates vs. inflation and US$ depreciation (see Exhibit 11). Academic research suggests that the stock market has tended to produce negative real returns during inflationary periods. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. With year-end 2006 as the starting point. What empirical models say Given gold's reputation as a hedge against various risks.R. t + b2 Rstock.pt-12) + ut Attie. Gold as a Hedge against the Dollar FX rates Dgt = b0 Dx t + a1 Dg t-1 Source: Various academic papers. 5%) rt : Gold returns pt : Inflation as measured by CPI Dgt : Ln change in gold price Dx t : Ln change US$ FX rate vs. 2004. from its peak of 13. Meanwhile.R. Clearly.. and which expectations could be embedded in current gold prices. gold peaked in January 1980 at $850 per oz and started its decline to $253 per oz in August 1999. stock returns Rbond: MSCI U.5%. t(q) + et Baur. Inflation Hedging for Long-Term Investors Capie. In our survey of academic research. t(q) + c1 Rbond. the GB£) to $720 (based on the stock market safe haven model) per oz using the "Base" model based on full-sample estimates (see Exhibit 12). bond returns Rstock. and Roache S. t = a+ b1 Rstock. a common feature of these models is that the linkages with the relevant variables were typically much stronger in the 70s. stock returns where return is less than q-percentile of historic returns (q: 1%. A.
zlotnikov@bernstein. this model produces a "predicted" current price of $844. the GB£) to $1. Taking each model individually. GB£ vs. Current 720 -49% 779 -45% 720 -49% 1. which seems to confirm the fear component of gold's recent rally. Bernstein research 9 . Yen Base Sub Sample Base Sub Sample Implied scenario if gold anticipatory Stock market Inflation (YOY) US$ valuation Frequency of predicted value (or greater) Conditional likelihood of current value (or greater) -77% -47% -68% -22% 10.January 4.127 (based on the stock market safe haven model) per oz.0% -93% -56% -96% -46% 55% 48% 55% 31% 57% 55% 74% 92% 60% 44% 29% 33% 29% 51% 27% 29% 21% 17% 26% 36% Strategy Gold Price 1. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. Starting with YE 2006.127 -20% 700 -50% 715 -49% 588 -58% 468 -67% 686 -51% 853 -39% Inflation Base Sub sample FX Rates vs. the estimates range from $468 (based on FX rates vs. the trade-weighted US$ exchange rate. the current gold price seems to embed: Over 20% drop in the stock market Over 8% inflation Or a 50% devaluation of the US$ Exhibit 12 Current gold prices seem to embed some fairly bearish scenarios Predicted Gold Prices and Scenarios Implied by Current Gold Price Based on Empirical Analyses Stock market CAPM Safe haven* Base Sub Sample Base Sub sample From YE 2006 Predicted Gold Price vs. inflation expectations and consumer expectations as dependent variables. the model tracks the realized gold price fairly closely through 2007 and much of 2008.com • +1-212-756-4663 that feature these higher sensitivities to the model variables. Global Insight. we also looked at another framework. Assuming that the current gold price is anticipatory. we then tried to quantify which level of model variables could mean that the gold price is "right" for each model and arrived at some fairly dramatic outcomes. Interestingly. but starts to lag in September 2008.4% 8. which uses mining production costs. In addition to these models. when the Lehman bankruptcy was announced.406 As of 12/30/2010 *Stock market downside estimates assume a succession of 1%-ile down days Source: Various academic papers.
zlotnikov@bernstein. given the 29% likelihood of the current price. the inflation model yields a "predicted" gold price at $715. if gold were currently priced at $1. if the distribution of future macro outcomes were in-line with history. Similarly. with $715 as a lower-bound. this would suggest a distribution of "other" factors that are in-line with the Safe-Haven model history. we then try to assess which scenarios may be further embedded in the current stock price (see Exhibit 13). gold becomes an attractive hedge for investors expecting inflation above that 4%. gold should be priced at $715. the $1. given that 4% inflation already seems to be priced in.com • +1-212-756-4663 It is important to recognize that these models individually are inherently flawed. the gap vs. However. actual gold price suggests that the range of outcomes is limited to scenarios that are only worse than average since the likelihood of achieving $1. there are several variables that affect the price of gold.406 implies a set of outcomes that is substantially skewed to the downside. while in reality. if investor outlook improves to a set of outcomes that is more in-line with history.127. To illustrate. Yet. Strategy 10 . range which represents significant downside to current levels. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. as they factor in only one or two variables. Thus. This makes intuitive sense since over the past 4 years economic concerns as they pertain to gold have been much more manifest in the stock market. the predicted values.406 given $1. assessment of whether gold is fairly priced depends on one's expectations on these metrics.406 per oz. gold could trade back down to the $715-$1. the current price of $1.127 per oz as the starting point for the price of gold. which remains uncertain and the US$ which has so far benefited from the flight to safety.127 as a lower-bound is 51%. Another way to interpret the results from these empirical models is to say that the recent gold price trajectory has been dominated by the stock market safe-haven qualities of gold.January 4. Conversely. In other words.127 per oz. Assuming the stronger correlations from subsample estimates. we find that the current gold price is already embedding a combination of 20% downside to the stock market and/or 4% inflation and/or 20% devaluation of the US Dollar As such. Given the predicted value from a model and the probability of achieving the realized gold price using the predicted value as a base based on historical performance can help us assess how extreme a scenario of "other" factors is embedded in the current gold price. rather than the inflationary environment. Using $1. it can be informative to consider how extreme the current price of gold is vs. For example.
January 4. 11 .3% 4.com • +1-212-756-4663 Exhibit 13 Gold price seems to embed 20% downside to the stock market and/or 4% inflation and/or 20% devaluation of the US$ Implied Economic Scenarios Assuming Recent Gold Price Trajectory Has Been Dominated by "Safe Haven" Qualities Using 1. Bernstein analysis While gold miners' performance has only a modest correlation with the overall stock market on down days in particular (see Exhibit 16). GLD price increases have been supported by inflows… GLD Price and Shares Outstanding Index YE 2006 = 100 300 Shares o/s Price 130 Shares o/s Price 120 Exhibit 15 …but the most recent rally from mid 2010 shows a lack of conviction at these levels GLD Price and Shares Outstanding Index 3/31/2010 = 100 260 220 180 110 140 100 06 07 08 09 100 3/10 5/10 7/10 9/10 11/10 Strategy Source: Bloomberg. we have been observing some loss of steam behind gold ETF inflows.2% -49% -15% -63% -24% If investor interest is any indication. Yen Base Sub Sample Base Sub Sample -38% -21% na -22% 5. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. GB£ vs. Bernstein research Inflation Base Sub sample FX Rates vs. It seems particularly noteworthy that the Fed's announcement of a second round of quantitative easing in November has not resulted in significant inflows into gold. there is a much stronger linkage with gold prices on both up and down days (see Exhibit 17). Global Insight.zlotnikov@bernstein. which suggests a lack of conviction at these price levels (see Exhibit 15). Bernstein analysis Source: Bloomberg. While much of the increase in price from 2006 has been accompanied by inflows (see Exhibit 14). Exhibit 14 Since 2006.127$ per Troy oz as base Stock market CAPM Safe haven* Base Sub Sample Base Sub sample Implied scenario if gold anticipatory Stock market Inflation (YOY) US$ valuation *Stock market downside estimates assume a succession of 1%-ile down days Source: Various academic papers. the most recent rally from mid-2010 has not generated further inflows.
email@example.com .4514 20% S&P 500 Sample period:6/96 .0285 R2 = 0.1 Monthly Log Change in Gold Miners Index y = 1. the gold price has offered greater explanatory power given the miners' un-hedged positions… Correlation of Gold Miners' Stock Performance with the Gold Price Log Change.posing substantial risk to the stocks.0619 R2 = 0.January 4.1208x + 0. likely given the increasingly un-hedged positions of the miners which poses a substantial risk for the stocks.12/10 Coefficient 0.0798 R2 = 0.0622 R2 = 0.0286 -10% 0% 10% 20% y = 0.12/10 Coefficient 0.1 Strategy -20% -20% Monthly Log Change in Gold Price Note: Excludes 10/08 Source: Bernstein analysis Source: Bernstein analysis 12 .9766x .9484x + 0.53 T-Stat 3.72 0% y = 0. 6/96-12/10 Exhibit 17 …but they have been much more correlated to gold prices Correlation of Gold Miners' Stock Performance with the Gold Price Log Change. should gold prices start to decline (Exhibit 18). 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim.83 15.2 Adjusted R2 0. gold prices and the S&P500.com • +1-212-756-4663 Exhibit 16 Gold miner stocks have only a modest correlation to the stock market… Correlation of Gold Miners' Stock Performance with the S&P500 Log Change. 1/07-12/10 40% Exhibit 19 ….75 10.256 -10% 0% 10% 20% Monthly Log Change in S&P500 Note: Excludes 10/08 Monthly Log Change in Gold Price Note: Excludes 10/08 Source: Bernstein analysis Source: Bernstein analysis More recently.209x .27 y = 0.0 Adjusted R2 0. 6/96-12/10 40% Monthly Log Change in Gold Miners Index Monthly Log Change in Gold Miners Index 40% 20% 0% -20% -40% -20% y = -0.59 Sample period: 1/07 .0627 R2 = 0.0048 20% 0% -20% -40% -20% y = 0.47 T-Stat 4. the correlation of gold miners' performance to gold on up-days has increased. should the gold price decline Results of Bivariate Regression for Monthly Gold Miner Returns Gold Price 1.095 R2 = 0. Exhibit 19 summarizes the results of the bivariate regression of gold miners' performance vs. Exhibit 18 More recently.1389 -10% 0% 10% 20% 1.3786x + 0.0.
which would you rather have? Gold or food? Strategy 13 . TIPS are pricing in about 2% inflation up to 10 years out (see Exhibit 20).0 -2.099 vs.B.5 0.0 -0.com • +1-212-756-4663 What is the alternative? Depending on the specific risks that investors are concerned about.05 20 Copper Exhibit 21 Other commodities may offer superior hedges Inflation Sensitivity Estimates by Commodity Annual Futures Prices. it may be relatively simple to hedge against a 20% drop in the stock market with index options. high positive inflation beta for heating oil. the point is that other commodities have acted as superior inflation hedges over an extended period of time.5 2. Meanwhile.January 4.29 2.5 -2. in the worst case scenario.0 1. current levels remain somewhat below highs achieved in mid-2000s. Bernstein analysis Timberland and farmland also provide examples of how productive real assets have been able to outperform gold. Erb and Harvey find a negative inflation beta for gold and silver futures vs. While the gold beta could be significantly higher if it were possible to include data from the 70s. gold at $336 (Exhibit 22). at gold's current price it may be worth evaluating alternative methods of insurance. Moreover. (2006). these could continue to be attractive investments in the long-run. R. and Harvey C.5 03 04 05 06 07 08 09 10 10 year 7 Year 5 Year 2. $100 invested in timberland in 1986 has now turned into $2. such as growth in the emerging markets. Exhibit 20 TIPS are pricing in 2% inflation Expected Inflation per TIPS Through December 30. 1982-2003 YOY Chg in Inflation 1.0 -1. Global Insight. Given the significant pool of increasingly better off emerging markets consumers. In "The Strategic and Tactical Value of Commodity Futures".81 15 10 5 0 -5 -10 (12) (8) (4) Soybeans Gold Silver Heating oil Cattle Sugar Coffee Cotton Hog Corn Wheat Inflation 4 8 12 Source: Federal Reserve.5 1. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim. 2010 3.5 -1.0 2. investors may consider building a portfolio of commodities that are exposed to secular growth trends. Farmland has been a similarly lucrative investment (Exhibit 23).0 0. It seems worth noting that while inflation expectations per TIPS are well off their 2009 lows. Bernstein analysis Source: Erb C. hog and corn based on 1982-2003 data (Exhibit 21).zlotnikov@bernstein. Given significant volatility in commodity prices. For instance.
after all.com • +1-212-756-4663 Exhibit 22 Which one glitters? Timber or gold? Cumulative Returns from Gold vs. the Christmas Basket cost only 17oz.099 Exhibit 23 Gold.500 Timberland 2. 2011 Vadim Zlotnikov (Chief Market Strategist) • vadim.s from a PA musicians union) twelve drummers (fig. Timberland Assuming $100 invested at YE 1986 2. Exhibit 24 The good news is… the Christmas Basket only cost 17oz of gold this year Ounces of Gold Needed to Purchase 12 Days of Christmas Basket 60 50 40 30 20 10 0 1984 2001 2010 17 33 57 "The Twelve Days of Christmas" basket: a partridge in a pear tree two turtle doves three French hens four calling birds five gold(en) rings six geese seven swans eight maids (assumed to be unskilled laborers at min wage) nine dancing ladies (salary fig.zlotnikov@bernstein. Global Insight.s from a PA musicians union) Source: PNC. of gold this year.500 1. Timberland Assuming $100 invested at YE 1991 800 700 600 500 400 300 200 100 0 91 94 97 00 03 06 09 370 Timberland Farmland Gold 696 695 Source: NCREIF.000 1. Bernstein analysis Source: NCREIF Global Insight.000 500 336 0 86 89 92 95 98 01 04 07 Gold 2.s from Philadanco) ten leaping lords (salary fig. Global Insight. Bernstein analysis The good news is that thanks to the significant rally in gold. Bernstein analysis Strategy Disclosure Appendix 14 .January 4.s from Philadelphia Ballet) eleven pipers (fig. is a non-productive asset Cumulative Returns from Gold vs.
HK: O (IC) 06/23/10. AEP: M (IC) 01/15/03. 2498.HK: M (IC) 01/21/10.BB: O (IC) 03/02/06.HK: M (IC) 06/23/10.LN: O (IC) 11/19/09. collectively.00% of the outstanding ordinary shares of AXA. BMW. C: M (IC) 08/12/08. and Canadian exchanges. Zlotnikov is normally not involved in specific security selection for AllianceBernstein investment products.P. BUD: O (IC) 10/08/09. ACN: O (RC) 03/15/04. 1398.SM: U (RC) 10/05/09. Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead. an Industry Specialist dedicated to Bernstein’s Computer Services and IT Consulting team.6% banking clients). LLC. BBT: O (RC) 03/04/10.. 2388.0. BT/A.18. the majority owner of Bernstein's parent. AAPL: O (RC) 10/13/08. Claude Bebear.HK: M (IC) 01/21/10. BRCM: M (IC) 06/04/09. As of 01/03/2011. or contributions to. While Mr. The amount in question is € 2. he owes fiduciary duties to the Fund and other clients of AllianceBernstein and is subject to information barriers that may prevent him from disclosing certain information to Bernstein’s clients.Disclosure Appendix SRO REQUIRED DISCLOSURES References to "Bernstein" relate to Sanford C.0% banking clients). 883.FP: M (IC) 09/16/10. ANTO. BG/.GR: O (IC) 09/16/10. Not Rated . BRBY. BME.LN: M (RC) 05/28/09. and Sanford C. 135. O (DC) 08/02/10.HK: M (IC) 01/21/10. 857. BSY. Accordingly. 3. O (RC) 06/01/10. O (RC) 05/10/10.8.HK: U (IC) 01/21/10. ALO.0% banking clients). ABC: M (RC) 11/23/09. versus the MSCI Pan Europe Index for stocks listed on the European exchanges (except for Russian companies). O (RC) 03/01/10. BA: M (RC) 11/12/10. ADP: O (RC) 10/30/09. Zlotnikov serves as Chief Market Strategist of AllianceBernstein. O (DC) 08/02/10. generating investment banking revenues.LN: M (RC) 03/23/10.HK: U (IC) 01/21/10. A company controlled by a member of Robin Bienenstock's family has a billing dispute with BT Italia.46.HK: U (RC) 10/26/10.LN: M (RC) 11/15/10.HK: O (IC) 01/21/10. within the past twelve months. 939. Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for stocks listed on the U. has received compensation from JPMorgan Chase & Co.LN: M (RC) 11/19/10. Zlotnikov is compensated for his duties at AllianceBernstein along with the compensation he receives from Bernstein. as one of the portfolio managers of the AllianceBernstein Market Neutral Strategy Fund (the “Fund”). The numbers in parentheses represent the percentage of companies in each category to whom Bernstein provided investment banking services within the last twelve (12) months. ALXN: O (RC) 09/22/10.HK: M (IC) 07/19/10. O (IC) 01/21/10.HK: U (IC) 06/23/10. O (IC) 11/19/09. 23.FP: U (RC) 11/08/10. No analysts are compensated based on performance in. BK: M (IC) 06/09/09.0% (1.HK: O (IC) 05/27/10. ALU: U (RC) 11/08/10. 386. Sanford C.S.LN: M (IC) 08/03/10.HK: M (IC) 06/23/10.HK: O (IC) 06/29/09. Market-Perform . AMTD: M (IC) 08/12/09. O (RC) 07/21/09. BBVA. BN. BMY: M (RC) 04/03/09. AVP: M (RC) 07/03/07. BNP. ABBN.682. 2. a unit of AllianceBernstein Hong Kong Limited.unless otherwise specified. O (IC) 11/24/09. BHI: O (RC) 10/01/09.FP: U (RC) 09/08/10.TT: O (IC) 10/12/10..2% (1. M (IC) 03/31/09. Mr. Underperform . and vice versa. AAL. M (IC) 06/04/09.LN: M (IC) 10/23/07. U (RC) 10/11/10. AllianceBernstein L. and versus the MSCI Asia Pacific ex-Japan Index for stocks listed on the Asian (ex-Japan) exchanges . 1288.HK: U (IC) 06/23/10.LN: M (RC) 08/27/09. M (RC) 12/11/08. BMPS.IM: U (IC) 10/15/10.VX: O (RC) 07/28/10. In addition to his role at Bernstein. We would like to thank Christienne Genaro. M (IC) 06/30/08. AI.SS: O (RC) 07/28/10. ACA. AKZA.LN: M (RC) 02/12/08. 998. CA.GR: M (RC) 04/06/09. 12-Month Rating History as of 01/02/2011 11.SM: O (IC) 10/15/10. AAP: M (IC) 05/06/08. BP. Bernstein & Co. O (IC) 05/22/09. ABF. productivity and proactivity of investment ideas. M (IC) 07/08/04.6% banking clients) .8% (0. 6.HK: M (IC) 06/29/09. 2688. M (IC) 06/30/08.HK: M (RC) 11/15/10. Sanford C. O (IC) 05/12/09. versus the MSCI Emerging Markets Index for Russian companies and stocks listed on emerging markets exchanges outside of the Asia Pacific region. 836. AMD: O (RC) 12/07/09. ADI: O (RC) 03/10/10.FP: O (RC) 07/17/08. BA/.NA: M (IC) 09/16/10. Target Price and estimates (if any) have been suspended temporarily.FP: M (IC) 11/24/09.HK: O (IC) 06/29/09. Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead. O (IC) 07/15/04. 763.LN: O (IC) 01/22/09. AZN.LN / British Telecom. BAYN. CAG: M (RC) . the chairman of the Supervisory Board of AXA. Zlotnikov shares with Bernstein’s clients may differ from or be contrary to positions taken by the Fund and other AllianceBernstein investment products.P. AET: O (IC) 10/03/08.45. AH. BARC.P. M (IC) 03/31/09. Not Rated: The stock Rating. O (IC) 05/22/09. BAC: O (IC) 10/02/09. AGN: O (IC) 03/02/06. BRCD: M (RC) 03/25/10. BSX: M (RC) 01/21/10. BBL: O (IC) 01/13/10. BP/. AMGN: O (RC) 06/16/09. BBY: M (RC) 10/23/06.GR: O (IC) 09/16/10. Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration. We have three categories of ratings: Outperform: Stock will outpace the market index by more than 15 pp in the year ahead. M (RC) 07/27/06.IM: M (IC) 10/15/10. M (RC) 03/03/09. AZN: M (IC) 10/23/07. and as an advisor to the portfolio managers of other AllianceBernstein investment products. AFL: M (RC) 03/23/10.HK: M (IC) 01/21/10. BP: M (IC) 08/03/10. A junior member of the research analyst's team. BLT. 902. Bernstein. M (IC) 11/24/09. BEI.FP: M (IC) 06/07/06. BAS. O (RC) 07/17/09. M (RC) 03/03/09.HK: M (IC) 06/23/10.LN: O (IC) 11/19/09. U (IC) 01/21/10. AMP: O (IC) 10/20/06. is also a non-executive Director of Vivendi SA. M (DC) 07/21/08. AllianceBernstein L. Bernstein Limited. BIIB: U (RC) 07/30/10. a subsidiary of BT/A. the majority owner of Bernstein's parent. insights and analysis that Mr. an asset management firm and Bernstein affiliate. ALU. ABB. Peter Handy. O (RC) 05/10/10. BBBY: O (RC) 01/22/08. BNP Paribas owns more than 5. 3328. M (RC) 05/17/10.GR: U (IC) 01/20/06. Bernstein Limited and BBVA have entered into a research distribution agreement under which BBVA may distribute Bernstein Research in certain limited markets. M (IC) 11/09/09. his former employer.LN: M (RC) 09/08/10. 3968. M (RC) 09/08/10. 3988.HK: O (IC) 06/23/10. ABI. O (DC) 06/04/09. AXP: M (IC) 10/06/09. AZO: M (RC) 01/12/09. for her contributions to our research on topics covered in this report.NA: O (RC) 09/08/09. 991. ABT: M (RC) 11/18/10. Vadim Zlotnikov is also an employee of AllianceBernstein L. Mr..FP: O (IC) 03/31/09.HK: M (IC) 06/23/10.0% (0. Bernstein's ratings were distributed as follows: Outperform .
ITV. CEPH: M (RC) 08/15/06. O (IC) 12/18/09. VOD.AU: O (RC) 07/12/10. HNP: O (IC) 06/23/10. M (RC) 03/16/09. DXNS. GSK: M (IC) 10/23/07. M (RC) 05/14/09.LI: O (RC) 07/16/09. KMB: M (IC) 05/07/07.FP: O (IC) 11/30/10. SLE: O (RC) 12/14/10.AU: O (RC) 11/17/09. M (RC) 04/21/10. ROSN. MI: M (RC) 12/20/10. RF: O (RC) 09/13/10.GR: M (RC) 08/12/09.LN: M (RC) 08/13/07.BZ: U (IC) 05/12/10.FP: M (RC) 03/01/10. PTC. SPR: M (RC) 04/14/09. O (RC) 05/20/10. VIVO3. DC . STT: M (RC) 05/28/10.VX: M (IC) 11/12/09. O (IC) 09/25/09.FP: U (RC) 01/13/09. GENZ: O (RC) 05/13/08.NA: O (RC) 05/13/09. O (IC) 03/07/06. O (IC) 05/26/06. OR.FP: M (RC) 09/30/10.IN: M (RC) 04/27/10.GR: O (IC) 02/01/06. M (RC) 11/18/09.NA: O (IC) 08/03/10. M (IC) 02/05/09.GR: O (RC) 10/29/09. MRW.IM: O (IC) 10/15/10. M .LN: M (IC) 10/23/07. O (RC) 02/16/10. CCE: M (IC) 11/16/10.LN: M (RC) 11/30/09.VX: O (RC) 09/30/10. DEO: O (IC) 10/08/09. VOW. RDSA. O (RC) 07/21/09. D: M (RC) 09/04/07. TLPP4.PL: U (RC) 12/15/10. LPLA: M (IC) 12/28/10. STJ: O (IC) 05/22/09.LN: M (RC) 05/07/10.IN: M (IC) 06/23/10. WSM: M (RC) 05/11/09.LN: O (RC) 06/09/09. O (IC) 02/02/10. RDC: M (RC) 02/19/09. MCK: O (RC) 12/15/10.DC: U (RC) 08/25/10. DG: O (IC) 12/23/09. ONGC. DF: M (RC) 05/11/10. O (DC) 08/02/10.FP: M (IC) 10/23/07. M (RC) 03/16/09. M (IC) 01/22/09. O (DC) 08/02/10. MDT: O (RC) 12/17/10. NSRGY: O (IC) 04/22/03. WPL. O (RC) 02/16/10. EAD.VX: M (IC) 09/16/10. SCHW: M (RC) 02/02/09. TSCO. TOT: O (IC) 08/03/10. M (RC) 10/23/09. M (IC) 10/13/09.LN: O (RC) 04/12/10. RDSA. GD: M (RC) 10/19/06. TLW. RR/. THC: M (DC) 02/10/06. U (RC) 03/23/10.FP: M (IC) 10/17/08.SM: U (IC) 10/15/10.GR: M (RC) 12/06/10. VZ: U (RC) 10/12/10.NA: O (RC) 01/12/10.IM: O (RC) 02/18/10.VX: M (IC) 09/19/08. ORLY: M (IC) 05/06/08. HAL: O (RC) 11/12/07. PMI.GR: O (IC) 01/20/06. UTX: M (RC) 01/23/09.GR: M (RC) 03/01/10. M (IC) 01/16/09. M (DC) 08/02/10. M (IC) 10/17/07.SM: M (IC) 10/15/10. XTA. NVS: O (RC) 05/09/08. M (IC) 06/07/06. CLX: U (RC) 05/11/09. DELL: O (RC) 02/08/06. TIT. MS: O (RC) 08/09/07.Not Rated Rating Actions: IC .LN: M (RC) 09/10/08. M (IC) 06/04/08. NOVOB. TLPP3.SM: U (IC) 10/15/10. CCL. SHPGY: M (RC) 07/30/10. ENR: O (IC) 05/14/08. K: O (IC) 08/02/06.FP: M (RC) 01/18/10. STL. U (RC) 01/05/09.GR: M (RC) 08/17/10. O (IC) 05/30/03. NVTK. O (DC) 08/02/10.IN: U (IC) 06/23/10.Dropped Coverage. HON: O (IC) 02/05/09. SYNN.SM: O (RC) 03/26/07. U (IC) 06/04/09. U (RC) 03/03/09. MRK. U (RC) 07/09/10. PTTEP. M (RC) 06/01/09.AU: O (IC) 06/29/09. SNP: M (IC) 06/29/09. LNC: O (RC) 09/08/09. M (RC) 02/16/10. O (IC) 10/13/09. RPWR. HIG: M (IC) 12/17/09. DHR: O (RC) 09/03/09. O (RC) 01/06/10.IM: M (IC) 10/15/10.LN: O (RC) 02/19/10. PTR: O (IC) 06/29/09. UNA. N . M (RC) 11/05/08. O (RC) 03/06/07.03/27/09. UBSN. SNV: O (RC) 01/29/10. O (RC) 08/05/09. SJM: M (IC) 02/12/10. MMT.FP: O (RC) 12/17/09. O (IC) 01/07/10. TRI: M (IC) 04/29/09. REN. HUM: O (IC) 10/03/08. UN: O (RC) 05/13/09. NEE: M (IC) 12/18/09.NA: M (RC) 03/17/10. M (DC) 07/21/08. SLB: M (IC) 09/19/07. CPB: O (RC) 07/18/07. M (DC) 11/05/08. O (IC) 10/13/08.LN: O (IC) 08/03/10. MET: O (RC) 01/15/08. FE: M (RC) 10/27/10.NA: M (RC) 10/14/09. O (RC) 10/16/08. SBRY. U (IC) 05/14/09. RIO. CMA: M (RC) 09/21/09. STO. EMR: M (RC) 11/30/10.LN: O (RC) 01/07/10. M (RC) 07/30/10. GLW: O (RC) 06/08/10. FTE. SN/. PRU: O (RC) 10/09/03. VRTX: O (RC) 06/01/04. HP: O (IC) 10/01/09. M (RC) 03/01/10. M (RC) 04/21/10. GSK. VIV. M (RC) 05/14/09. M (RC) 03/31/09. VMW: U (DC) 10/30/08. O (RC) 02/16/10. WEN: M (IC) 09/25/09. M (RC) 04/26/10. TXN: O (RC) 10/30/09. SYK: O (RC) 05/04/10. HMB. PEP: O (IC) 11/16/10. NE: M (RC) 02/19/09. O (RC) 09/01/10. CL: M (IC) 05/07/07. M (IC) 10/03/08. O (DC) 07/21/08. KEY: M (RC) 04/19/05. CTSH: O (RC) 09/12/07. MS.IM: M (RC) 12/17/09. O (IC) 12/04/07.Market-Perform. M (RC) 06/17/09.FH: U (RC) 09/27/10. O (RC) 10/16/08. M (RC) 03/16/09. U (DC) 01/31/08. ROG. JNPR: M (RC) 11/12/07.LN: O (RC) 05/17/10.VX: O (RC) 09/08/10.SS: O (RC) 05/26/09.LN: O (IC) 12/04/07. M (IC) 05/12/10. UG. UL: O (RC) 05/13/09. EMC: M (RC) 05/20/08. O (IC) 03/13/07. SNN: U (RC) 08/03/09. HEN3. CVH: O (RC) 11/08/10. O (IC) 05/15/08. WFT: O (RC) 08/18/10.IN: M (RC) 11/17/09. O (DC) 08/02/10.VX: M (RC) 09/28/09. O (IC) 06/29/09. IBM: O (RC) 07/13/05. RIG: O (RC) 02/19/09. O (RC) 02/16/10.PL: O (RC) 05/26/10. O (IC) 12/14/09. FFIV: M (IC) 10/17/08. TWC: O (RC) 11/02/10. SAPE: O (RC) 09/26/03.FP: U (RC) 06/09/09. M (RC) 01/06/10. PP. PTEN: O (RC) 09/07/07. Bernstein will advise as and when coverage of securities commences and ceases. PAYX: M (RC) 01/27/09. RIGD. EIX: M (RC) 10/08/09. PCS: M (RC) 08/09/10. O (RC) 11/23/09. M (IC) 05/12/10. O (RC) 11/17/08. LEAP: O (IC) 12/14/09.LN: M (RC) 10/22/07. M (DC) 01/31/08. NOK1V. NOVN. PSON. ERICB. M (IC) 02/25/09.GR: O (RC) 09/27/07. CVS: O (IC) 01/16/09. CCL: O (RC) 04/12/10. O (DC) 08/02/10. H: M (RC) 08/09/10.LN: O (RC) 05/13/09. M (DC) 11/05/08. FITB: M (RC) 03/04/10. RTN: M (RC) 02/12/09. O (DC) 07/21/08. O (IC) 06/29/09. CFR. O (RC) 09/03/09. GNW: M (IC) 10/20/06. M (RC) 12/16/08.BZ: O (RC) 07/30/10. O (IC) 10/13/09. DPS: O (IC) 11/16/10. M (IC) 10/13/08. FME. MYL: O (RC) 08/09/10. O (DC) 04/22/10. RC . GR: O (IC) 01/13/10. M (IC) 02/25/09.LN: M (RC) 05/17/10.LN: M (RC) 10/22/07. VOW3.Outperform. O (RC) 11/17/08.LI: U (IC) 01/15/09. M (RC) 02/11/09. CEO: O (IC) 06/29/09. MKC: M (RC) 07/08/10. JDSU: O (RC) 08/11/10.FP: O (RC) 12/18/07. FMS: O (IC) 03/26/09. FRX: M (RC) 01/03/11. KFT: O (IC) 08/02/06. ESV: M (RC) 02/19/09. DAI. NOC: O (RC) 02/12/09. HEIA.LN: U (RC) 05/27/10. WFC: O (RC) 09/21/09. NVO: U (RC) 08/29/08. U (RC) 11/24/09. SGGD. LMT: O (IC) 01/04/05. MMM: O (RC) 02/11/10. NOBN. O (DC) 08/02/10. M (RC) 10/31/08. DBK. KGF.BZ: U (IC) 05/12/10. PFE: O (RC) 11/01/10. HOT: M (RC) 05/13/09. M (RC) 06/03/10.LN: M (IC) 05/26/06. JPM: O (IC) 08/12/08. TGT: O (IC) 09/30/09.TB: M (IC) 06/11/10. TSP: U (IC) 05/12/10. KAZ. DTV: M (RC) 04/24/08. LVS: O (IC) 02/25/09. RIL.FP: M (RC) 03/09/10. CHKP: O (IC) 10/02/09. PG: M (RC) 01/15/09. RI. SAN. M (RC) 05/10/10.IM: O (RC) 02/18/10.IM: O (IC) 08/03/10. ERIC: O (RC) 05/26/09. TSU: M (IC) 05/12/10. COST: M (IC) 09/30/09. MC.IM: O (IC) 10/15/10. M (DC) 07/16/10. MRX: M (RC) 10/29/10. M (RC) 04/20/10. CME: M (RC) 01/23/09. DISH: M (RC) 10/10/08. S: U (RC) 01/19/10. HNT: M (IC) 03/12/10. RDS/B: O (IC) 08/03/10. PUB. RB/.FP: M (IC) 02/02/06. TITR.FP: M (IC) 04/15/08. ENI. SPLS: O (RC) 06/15/06.GR: O (RC) 02/18/10. O (RC) 11/23/09. EL: M (IC) 05/07/07. U (RC) 04/11/08. O (RC) 11/21/08. O (IC) 06/09/09. O (DC) 08/02/10. DTE. WPI: M (IC) 03/07/06. RDSB. HSY: M (RC) 06/18/10. PFG: M (RC) 09/21/09. STO: M (IC) 01/22/09. PLCM: O (IC) 09/08/10.NA: M (IC) 12/04/07. SBUX: O (IC) 09/25/09. O (IC) 12/04/07.GR: M (IC) 09/16/10. SNY: M (IC) 10/23/07. CAH: M (IC) 01/16/09.Rating Change OTHER DISCLOSURES A price movement of a security which may be temporary will not necessarily trigger a recommendation change. INFY: M (IC) 09/23/05. M (RC) 03/16/09. U . RCL: O (RC) 08/19/09. CO. M (DC) 02/04/08. M (IC) 01/13/10. HSP: O (RC) 08/12/10. CARLB. WPP. SAN. VWS.LN: O (IC) 03/02/06.NA: M (RC) 05/07/10.BZ: M (IC) 05/12/10. CSC: U (RC) 11/19/04. O (IC) 11/24/09. SYST. M (IC) 05/12/10. SAB. ESRX: M (IC) 01/16/09. O (RC) 11/21/08. YUM: M (IC) 09/25/09. LXK: O (RC) 09/06/07.LN: O (IC) 08/03/10.NA: O (IC) 08/03/10.LN: M (IC) 11/19/09. PMO.BZ: M (RC) 07/30/10. FP. COF: O (DC) 09/26/07. M (RC) 11/18/09. UHR. PCG: O (RC) 03/22/07.DC: M (RC) 10/19/10. CELG: O (RC) 04/22/09. HPQ: O (RC) 09/09/08. LMI. O (DC) 01/31/08.LI: U (IC) 01/15/09. O (IC) 05/29/03.LN: U (RC) 08/03/09. M (RC) 04/26/10.SM: M (RC) 06/03/10.NO: M (IC) 01/22/09. HGSI: M (RC) 09/13/10. DB1. HEN. M (RC) 10/16/09. M (IC) 10/23/07. U (RC) 07/09/10. O (RC) 06/30/10. SU. M (IC) 06/06/07. M (RC) 07/14/10. MGM: M (RC) 08/06/09. O (RC) 02/16/10. O (RC) 06/17/09. LIN. M (IC) 04/24/09.CN: U (IC) 10/20/09.VX: O (RC) 07/30/10. M (RC) 10/14/09. HBAN: O (RC) 09/13/10. O (DC) 08/02/10. U (RC) 03/03/09. O (RC) 05/19/09. MKS. CSCO: O (RC) 05/12/06. REL. CI: O (IC) 10/03/08. O (IC) 05/30/03. PNC: M (RC) 08/24/09.LN: M (RC) 07/30/10. SAB. KO: O (IC) 11/16/10.FP: M (RC) 07/30/10.BZ: O (RC) 12/15/10. LKOD. LOW: M (RC) 05/11/09. ULVR.DC: M (RC) 07/28/09. STMN. O (RC) 02/16/10. QCOM: O (IC) 06/04/09. WYNN: M (RC) 05/06/09. M (IC) 06/26/09. ISP. Rating Guide: O . TRI. O (IC) 10/01/09.LN: O (RC) 08/25/09. HD: M (RC) 05/11/09. LLY: M (IC) 10/23/07.FP: O (RC) 10/27/09.LI: O (IC) 01/15/09. DRI: M (RC) 05/21/10. TCSL3. U (IC) 11/11/09.LN: M (IC) 11/19/09.LN: O (IC) 01/22/09. MAR: O (RC) 10/26/10.Underperform. HNZ: M (RC) 01/14/09. M (RC) 04/09/10.VX: O (IC) 02/21/02. NSM: M (RC) 03/12/10. CSGN. VIV: O (RC) 12/15/10. M (RC) 02/09/10. WLP: M (IC) 10/03/08. CMCSA: O (RC) 12/14/10. UCG. UBI. CBK. M (RC) 05/10/10. ZION: O (RC) 09/13/10.GR: U (DC) 01/20/06. NTRS: M (IC) 06/09/09. MCD: O (IC) 09/25/09. TCSL4. RDSB. ICE: O (IC) 06/19/07. PAH3. ZMH: O (RC) 09/21/09.SW: O (IC) 09/19/08. DO: M (RC) 07/26/10. M (RC) 01/21/09. VOD: O (RC) 04/16/09. RIMM: U (IC) 10/06/09. LSE. O (RC) 09/13/10.LI: M (RC) 04/27/10. GALP. Bernstein has no policy or standard as to the frequency of any updates or changes to its . GE: O (RC) 11/06/09. NXT. NOK: U (RC) 09/27/10. O (IC) 09/09/08. UHS: M (DC) 02/10/06. M (IC) 10/13/08. WKL. NESN. DUK: M (RC) 08/05/04. O (RC) 01/12/05.IM: O (RC) 09/20/10. MU: M (DC) 07/06/06.VX: M (RC) 06/23/10. TEVA: M (RC) 07/26/10. GS: O (RC) 06/04/09. M (IC) 03/02/06.LN: O (IC) 06/07/06. M (IC) 01/22/09.SS: O (RC) 06/23/10. MHS: O (IC) 01/16/09.GR: M (RC) 03/23/10.Initiated Coverage. O (IC) 05/12/10. O (IC) 01/07/10.IM: U (IC) 10/15/10. TFI. V: M (RC) 09/13/10. MEO. JNJ: M (IC) 05/22/09. M (IC) 11/19/09. SIE. EAT: M (RC) 11/05/09. ITX.GR: O (RC) 09/18/09. M (DC) 08/02/10. MTB: M (RC) 03/04/10. CVC: M (RC) 05/10/10. GIS: M (IC) 08/02/06. M (IC) 05/22/09. F. MA: M (RC) 09/13/10. RNO.CN: M (IC) 04/29/09. NATP. M (RC) 09/14/09. OGZD. U (IC) 11/19/09.VX: M (IC) 10/23/07. O (RC) 01/13/10. T: M (RC) 01/05/09. RDS/A: O (IC) 08/03/10. RHHBY: M (IC) 11/12/09. NBR: O (RC) 09/07/07. M (RC) 02/16/10. O (IC) 03/30/04. VIVO4. U (RC) 04/30/09. M (RC) 03/16/09. M (RC) 03/16/09.LN: O (IC) 11/30/10.LI: U (IC) 01/15/09. USB: M (IC) 03/12/09. GILD: M (RC) 07/16/10. CNE. RIO: O (RC) 05/17/10.LN: O (RC) 05/19/10. M (RC) 04/28/09. MRK: O (RC) 03/13/09.FP: O (RC) 04/06/09. M (RC) 01/29/07. M (IC) 05/22/09. EXC: M (RC) 02/05/10. SHP. TEF. GLE. U (RC) 03/23/10. STI: M (RC) 10/19/07. POP. MOT: O (IC) 12/08/09. RIM.LN: O (IC) 01/22/09. PHIA.LN: O (RC) 04/16/09. U (IC) 05/16/06. DGE. WMT: M (IC) 09/30/09. O (RC) 09/21/09.GR: M (RC) 08/17/10.GR: M (RC) 06/24/10. UNH: O (RC) 03/17/09. E: O (IC) 08/03/10. O (RC) 05/08/09. INTC: M (IC) 06/04/09. TYC: M (RC) 09/15/10. M (IC) 05/12/10. IR: O (IC) 10/06/10. O (RC) 09/21/09. O (IC) 02/02/10. PDE: M (RC) 12/17/10. KPN. O (IC) 04/29/08. ODP: O (IC) 11/07/01. O (DC) 06/04/09. OSH.FP: O (IC) 08/03/10.
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