Acute uncertainty

Investor sentiment continues to be tormented by acute uncertainty. It is important to understand that those directing monetary and fiscal policy in the U.S. and the European Union are no longer in control—they are forced to react to market forces which are, in turn, overwhelmed by a steadily mounting economic challenges. In Europe, there recently were comprehensive attempts at stabilization, but the huge structural uncertainties that have beset the EU for some time were left unaddressed. In Washington, meanwhile, debt negotiations continue, but even if there is an accord severe longer-term problems remain. In this climate, we believe it is prudent to minimize bond exposure and concentrate on equity investments in three areas: globally active companies with good sales exposure to the emerging markets, solid balance sheets and good dividend support; select emerging markets stocks; and high-quality commodity producers. In addition, we continue to like physical gold.