1. Challenges to 15 by 15 Alan Brochstein August 1, 2009

2. AB Analytical Services2 What Kind of Recovery? WUVLJWUVLJ

3. AB Analytical Services3 Typically, a U or a V

4. AB Analytical Services4 GDP – The Long View

5. AB Analytical Services5 The Case for L This time is different (careful!) Deleveraging will continue –Consumers –Banks/REITs/Corporations –Eventually Government (Taxes) Exports and deficit spending could offset

6. AB Analytical Services6 Unemployment: Here to Stay

7. AB Analytical Services7 Consumer Spending: Rare Decline

8. AB Analytical Services8 Housing: Bust to Boom?

9. AB Analytical Services9 New Cycle of Saving?

10. AB Analytical Services10 Money Supply: Liquidity Abounds

11. AB Analytical Services11 Government Getting Squeezed

12. AB Analytical Services12 Will Interest Rates Stay Low?

13. AB Analytical Services13 Exports: Recovery Likely

14. AB Analytical Services14 Stocks Rebound from Hell 666 intraday low represented 49% y-o-y decline 50% rally leaves stocks down 20% y-o-y

15. AB Analytical Services15 Stocks: The Long View

16. AB Analytical Services16 Valuing Stocks Key elements – Interest Rates and Earnings Interest Rates: Corporate Bonds not Treasuries Earnings: Sales & Margins

17. AB Analytical Services17 Treasuries Low, Spreads High

18. AB Analytical Services18 Margins Depressed, Valuations Fair

19. AB Analytical Services19 Dow 15K in 2015 10% annual return Will require earnings growth –Revenues? –Margins? Headwinds: –Rates wont help –Dilution from deleveraging

20. AB Analytical Services20 Stacking the Deck Go Conservative Financials –Avoid Dilution –Avoid Higher Interest Expense –Avoid Double-Dip Dunk Go Small –Nimble –Better Balance Sheets Go Overseas

21. AB Analytical Services21 Example National Instruments $2bln market cap $250mm cash/no debt Well managed Growing International Downside Protection SHOULD THE PE BE HIGH OR LOW?

22. AB Analytical Services22 Conclusions Economy likely to remain challenging (L) Good things in small packages Financial leverage is ugly Focus on companies exposed to exports Bonds may offer more value than Stocks Buy and Hold wont likely work