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Monday, October 11, 2010

Betting on the Incumbents

Goliath vs. David

No, I don't know how the elections next month are going to turn out.

But when it comes to the stock market, here's a tip: bet on the incumbents.

That's because today's economic environment is particularly hospitable to "incumbents" -- established, large companies -- and hostile to upstarts.

At least, that's what the capital markets are indicating.

So, "mega-cap" corporations with already strong balance sheets -- think, Microsoft, McDonalds, Johnson & Johnson, Pepsi, etc. -- are able to borrow billions at infinitesimal interest rates.

Meanwhile, smaller companies apparently are still finding themselves on the outside of a "credit drought."

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