February 05, 2010

Although monetary policy is not directly under the Obama administration, we look for the inflation rate to increase some time after 2010. An environment of higher taxes, rising regulation and rising inflation will, according to our research, favor the smaller capitalization stocks. Unfortunately, the lack of credit will affect smaller cap stocks negatively. Putting this together with the tax on foreign earnings, our view is that the mid-cap stocks are sufficiently nimble to circumvent much of the government regulation, to have access to the credit markets and to have minimal foreign earnings.

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