PM kitchen sinks 2009

2009 EPS guidance of $2.85-$3.00 vs $3.41 consensus. The most interesting thing is this - on an organic basis, EPS would grow 10%-14% from the $3.32 base of 2008. There is a $0.80 hit from currency, i.e. currency is hitting the bottomline by 25%. So, on the core biz, the company is quite recession resistant. I haven't listened to the conf call, but I think they are also kitchen sinking 2009 - I don't see how you get -10% EPS based on current exchange rates. They must be using the forward curve for rouble and all other currencies. 

More than any other company I have seen, this is the company impacted by dollar strength and euro/emerging market weakness. There will come a time to become a dollar bear. This is probably the best stock to buy at that time.  Also a great stock to test the purchasing power parity theory. 

On dollar strength, there is another observation. People are saying that gold hasn't moved much. That is true in dollars - gold is still at $900. But look at it in roubles, pounds and all the other junk currencies there, and it is probably hitting all time highs. Till three months back, gold was inversely correlated to dollar. That correlation seems to have broken. Considering that consumption demand in India has fallen off a cliff, investment demand should have picked up a lot - this is just a guess. 

In 1930's there was deflation in some countries and hyperinflation in some others. Probably a similar dynamic is going to happen in the next two years - there are definitely some countries that are going to get caught in the hyperinflation scenario.

Disclosure: Long PM