Which Morgan Stanley Should We Listen To?

Let’s assume that you are a normal, everyday client of Morgan Stanley and that you actually read the research you have access to thanks to your patronage of the firm.

Now let’s also assume that you are not suffering from multiple personality disorder and that it is not easy for you to compartmentalize dueling advice coming from the same source as through there are several people inside of you who manifest themselves at different times.

Well, making these two assumptions, tell me then how you’d react to these two calls coming from your advisor at Morgan Stanley on the same day…

Call One:  Get Long Emerging Markets for the 39% Rally, China’s Soft Landing Will Be Dandy

Emerging-market stocks may rise 39 percent by the end of next year, spurred by a “soft landing” for China’s economy, earnings growth and cheap valuations, according to Morgan Stanley.

The MSCI Emerging Markets Index may jump to 1,355 by the end of 2012 from 976.86 at the end of trading yesterday, Jonathan Garner, Morgan Stanley’s chief emerging-market and Asia strategist, said in an interview from Singapore. The U.S. brokerage joined UBS AG in favoring Chinese stocks for next year, bolstered by confidence the government will loosen monetary policies to support Asia’s biggest economy.

Source: Bloomberg November 14th 2011


Call Two:  Recession Likely, Sell Stocks and Risk Assets, Overweight Cash and Bonds

Calling the odds of a recession in the U.S. and beyond “uncomfortably high,” Morgan Stanley Smith Barney says it has shifted to an overweight position in safe haven assets and is underweighting risk assets. The change is “the most significant change to our tactical asset allocation in more than two years,” Morgan Stanley Smith Barney’s Chief Investment Officer Jeff Applegate and two colleagues wrote in a November markets report.

The allocation change increases the firm’s weighting in global cash, bonds and managed futures, while decreasing exposure to global equities, commodities and real estate investment trusts.

Source:  Financial Planning November 15th

So which is it to be?  Global slowdown and recession or risk-aapalooza with high risk emerging markets stocks leading the charge?

Because it can’t be both.  Decoupling nonsense gets its face smashed in when it tries to enter my house.

Which Morgan Stanley should we listen to?



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