Today one of my picks for the year, Anglo American ADR (NASDAQ: AAUK), was upgraded from neutral to buy at the investment bank now regular bank Goldman Sachs Group, Inc. (NYSE: GS).It was only yesterday that AAUK was downgraded from neutral to underweight by JPMorgan Chase & Co. (NYSE: JPM). No doubt they were responding to the news that Standard & Poors cut Anglo's rating two notches to 'BBB' based on it's 40% leverage and the potential for its cash-flow and income to be impacted by continuing soft markets throughout the year in many commodities.
In my view S&P is taking the conservative view, as they should -- because they were embarrassed and chastised for being complicit in the financial melt-down we are now experiencing, through their miscalculation of the risks associated with CDO's and other toxic financial instruments.
Goldman Sachs is probably responding to the stock's lower price after the downgrade, and like me sees upside potential when commodity prices eventually turn around. And they will -- just look at the trillions of dollars being introduced into the economy every month. Dollars not counterbalanced by increased productivity, goods, or services.
I have heard many discussions about the pricing of commodities, government spending, and even lackluster markets lasting for years, but I have heard scant conversations promoting the idea that you could print trillions of dollars with no inflationary effect.
Last week I reported Chasing Value: Anglo American cuts 19,000 jobs & dividend and believe the company is not hiding from the market reality it is faced with. I am sticking with this stock and ignoring the noise on the street for now.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of AAUK and options.
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