WEBVTT - Chuck Lieberman Digs Through Eco Data (Audio) (Correct)

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<v Speaker 1>You're listening to taking Stock and Pim Fox on Bloomberg Radio.

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<v Speaker 1>The muddiness of the data, Well, that's according to Chuck Lieberman,

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<v Speaker 1>chief investment officer managing Partner Advisors Capital Management with one

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<v Speaker 1>point three billion dollars of assets under management, joining us

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<v Speaker 1>from Ridgewood, New Jersey. Chuck Lieberman, you describe the muddiness

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<v Speaker 1>of data making it difficult for some market participants to

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<v Speaker 1>anticipate monetary policy. Are you one of those people? Uh? No, Uh.

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<v Speaker 1>We see the data as basically fundamentally solid. Uh. There

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<v Speaker 1>are some numbers that are literally impossible to believe. For example,

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<v Speaker 1>we've seen productivity go negative. That suggests that the business

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<v Speaker 1>people are becoming stupider each year. I'm not inclined to

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<v Speaker 1>believe that, certainly not take that at face value. And

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<v Speaker 1>that's also related to GDP. GDP has been really week

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<v Speaker 1>the last three quarters in a row. That's inconsistent with

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<v Speaker 1>the employment data, which shows much more growth. UM. I

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<v Speaker 1>still believe that it is relatively easy to count noses,

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<v Speaker 1>and so I have a lot more confidence in the

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<v Speaker 1>employment data. Uh. GDP, on the other hand, is much

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<v Speaker 1>more difficult to evaluate, and so I suspect we're understating GDP,

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<v Speaker 1>probably by a considerable margin. So then you must be thinking,

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<v Speaker 1>Chuck Lieberman, that business investment spending has been much stronger

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<v Speaker 1>than the very negative readings we've had the last few quarters.

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<v Speaker 1>And some people say there's too much uncertainty. Businesses don't

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<v Speaker 1>want to commit to long term projects and so they're

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<v Speaker 1>just playing it close to the vest. They're buying backstocks,

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<v Speaker 1>taking advantage of cheap money and more. Well, I prefer

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<v Speaker 1>to dig into the data, Kathleen, as you know, and

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<v Speaker 1>when you dig, what you see is that all of

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<v Speaker 1>the top line weakness is really coming from the energy

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<v Speaker 1>and the mining segment, which we know or a week, Uh,

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<v Speaker 1>those sectors have retired. Retail sales also started break in, Chuck,

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<v Speaker 1>But I mean, you know, aren't retail sales also challenged? No, retails.

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<v Speaker 1>Retail sales at least, consumer spending is probably the single

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<v Speaker 1>strongest part of the economy. Uh. Fat business is doing well. Uh.

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<v Speaker 1>The mix is changing. We're seeing dramatic gains by the

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<v Speaker 1>internet based retailers, and it's just tough for the retailers

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<v Speaker 1>with stores uh to really do well. Uh, And so

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<v Speaker 1>some of them are going to have to retrench there's

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<v Speaker 1>going to be a complete change in the way in

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<v Speaker 1>which goods are distributed in this country. UH companies like

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<v Speaker 1>Uber are getting involved in distributing UH products for FOR companies.

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<v Speaker 1>So you have to look at what is what what

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<v Speaker 1>is really going on. You have to add up the

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<v Speaker 1>numbers consumer spending, solid, capital spending very weak for drilling

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<v Speaker 1>for oil and by the way, oil drilling rigs have

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<v Speaker 1>increased for something like nine weeks in a row, so

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<v Speaker 1>we've probably bottomed there. But everything else, excluding UH energy

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<v Speaker 1>and excluding mining, that capital investment doesn't look bad at all. Okay,

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<v Speaker 1>so we did have the Institute for Supply Management's manufacturing

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<v Speaker 1>and their non manufacturing or services indexes decelerating a good

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<v Speaker 1>bid and of course that's more of a survey based number,

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<v Speaker 1>maybe not quite the hard number you'd want to hang

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<v Speaker 1>your your FED hat on, but more fundamentally, as Leo Brainerd,

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<v Speaker 1>FED governor pointed out dan her speech in Chicago, and

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<v Speaker 1>she doesn't see an inflation threat and a lot of

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<v Speaker 1>people don't, Chuck, is it possible that it's fine for

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<v Speaker 1>the Fed to take it long, take us time to

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<v Speaker 1>high rates and the stock market can do fine because

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<v Speaker 1>you've you've got all the positive fundamentals, but if there's

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<v Speaker 1>not a lot of inflation welling up, why should the

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<v Speaker 1>FED be in a hurry to shift. Well, that's precisely

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<v Speaker 1>lele Brander's position, and she would like to take longer

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<v Speaker 1>like the FED to keep rates down for a while.

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<v Speaker 1>But as you heard from both stand Fisher and from

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<v Speaker 1>Janet Yelling, and from uh Lockhart and from uh rosen Grin,

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<v Speaker 1>and there a couple more. Besides, all of these feder

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<v Speaker 1>fish us have talked about the economy doing a bit better.

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<v Speaker 1>And my sense of it is if they're trying to

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<v Speaker 1>send the message that the FED is now a lot

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<v Speaker 1>closer to hiking rates, that's a message that the market

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<v Speaker 1>does not want to hear. When Eric rosen Grin spoke

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<v Speaker 1>on Friday and suggested that we were closer to a

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<v Speaker 1>rate hike, the market sold off pretty sharply. Today, Lyle

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<v Speaker 1>Branner suggested that she would like the FED to give

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<v Speaker 1>on hold, and in fact the market is up to fifty.

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<v Speaker 1>So I think we're getting that message where we're getting

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<v Speaker 1>mixed messages, uh, and the market is is telling you

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<v Speaker 1>what the market would prefer. The market would certainly prefer

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<v Speaker 1>for the FED to leave rates unchanged. I don't think

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<v Speaker 1>that's terribly realistic. Uh. And when I speak to clients

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<v Speaker 1>and to investment professionals, you know, probably out of a

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<v Speaker 1>hundred think that rates ultimately are gonna rise. And the

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<v Speaker 1>real issue is timing and how quickly and that sort

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<v Speaker 1>of stuff, not whether they are going to rise. Chuck Lieberman,

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<v Speaker 1>when you speak to alliance and potential clients that they

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<v Speaker 1>ask you for one really amazing investment idea, what do

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<v Speaker 1>you tell them? Well, one sector we like are the financials,

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<v Speaker 1>the banks in particular, because they will benefit when rates

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<v Speaker 1>go up. Uh. Their profit margins have been compressed. Uh.

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<v Speaker 1>City Group is trading at a severe discount to book value,

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<v Speaker 1>but its profitability will improve very sharply if rates increase.

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<v Speaker 1>We think that that's a great example of a company

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<v Speaker 1>that will do well. One more in another sector, in

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<v Speaker 1>another sector. Um, Blackstone Mortgage is another one we like.

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<v Speaker 1>So here's a company that makes commercial mortgages, not residential mortgages. Uh.

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<v Speaker 1>They lend to businesses that provide real estate as collateral

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<v Speaker 1>and there are also positioned to benefit from rising interest rates. Alright,

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<v Speaker 1>Chuck le Roman, thank you so very much, Chief investment

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<v Speaker 1>officer at Advisor's Capital Management. He started his career the

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<v Speaker 1>New York Fed. Is a FED economist, so we definitely

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<v Speaker 1>want to listen to whatever Chuck says about the FED

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<v Speaker 1>and where it's heading next. I'm Kathleen Hayes along with

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<v Speaker 1>Pim Fox, and this is Bloomberg