1
00:00:00,160 --> 00:00:03,080
Speaker 1: Let's get to our guest, Chuck Lieberman, co founder and

2
00:00:03,160 --> 00:00:07,680
Speaker 1: chief investment officer at Advisor's Capital Management. Chuck, good morning

3
00:00:07,720 --> 00:00:10,080
Speaker 1: to you from Asia. Thanks very much for joining us.

4
00:00:10,600 --> 00:00:15,120
Speaker 1: Eddie R. Denny's narrow path sounds about right. Basically, if

5
00:00:15,120 --> 00:00:18,000
Speaker 1: the economy is too strong, you have a sledgehammer FED

6
00:00:18,040 --> 00:00:21,480
Speaker 1: to worry about, and if recession hits, well, then just

7
00:00:21,520 --> 00:00:24,280
Speaker 1: about everything suffers on that. And he says the path

8
00:00:24,360 --> 00:00:28,000
Speaker 1: to victory is really that inflation comes down a lot

9
00:00:28,120 --> 00:00:32,320
Speaker 1: faster than expected. Now, I know you doubt that a bit. Uh.

10
00:00:32,360 --> 00:00:34,760
Speaker 1: He might be right, but we have to also consider

11
00:00:34,800 --> 00:00:37,720
Speaker 1: this that a lot of the downside work has already

12
00:00:37,720 --> 00:00:41,640
Speaker 1: been done, many stocks down fifty. So does that give

13
00:00:41,720 --> 00:00:47,040
Speaker 1: us some wiggle room? Brian, it's not the stock market

14
00:00:47,080 --> 00:00:49,800
Speaker 1: that the FED is focused on. The FED is focused

15
00:00:49,800 --> 00:00:54,320
Speaker 1: on the economy and especially on inflation. And at wiggle

16
00:00:54,400 --> 00:00:58,200
Speaker 1: room that the FED has is basically the gap between

17
00:00:58,600 --> 00:01:01,840
Speaker 1: zero job growths and let's say a fifty to seventy

18
00:01:01,880 --> 00:01:05,720
Speaker 1: five thousand per month. That's how fast the labor force

19
00:01:05,880 --> 00:01:11,679
Speaker 1: is growing. If job growth exceeds it, excuse me, if

20
00:01:11,720 --> 00:01:14,959
Speaker 1: it exceeds that, then in theory, the unemployment rate should

21
00:01:14,959 --> 00:01:18,120
Speaker 1: decline further and the job market will get ever tighter,

22
00:01:18,360 --> 00:01:21,400
Speaker 1: and that puts more upward pressure on wages and therefore

23
00:01:21,440 --> 00:01:24,679
Speaker 1: on inflation. So the FED needs a slow rate of

24
00:01:24,800 --> 00:01:29,200
Speaker 1: job growth, and that's yet to be seen. The other thing, Chuck,

25
00:01:29,240 --> 00:01:31,280
Speaker 1: I mean, you know, you look at inflation and we've

26
00:01:31,280 --> 00:01:36,440
Speaker 1: got perhaps the environment doing the jump for them in

27
00:01:36,480 --> 00:01:38,520
Speaker 1: some ways as well. And you know this also begs

28
00:01:38,520 --> 00:01:40,360
Speaker 1: the policy. Will they be making a policy to say,

29
00:01:40,400 --> 00:01:43,240
Speaker 1: because I mean we've seen goods inflation slowing down certainly,

30
00:01:43,440 --> 00:01:45,800
Speaker 1: then we've also got base effects coming into play as

31
00:01:45,840 --> 00:01:48,480
Speaker 1: well in the early part of next year, So perhaps

32
00:01:48,640 --> 00:01:51,040
Speaker 1: it comes down faster than anticipated. What's the deal? Then,

33
00:01:51,080 --> 00:01:54,200
Speaker 1: what's what's you're thinking, Well, there's no doubt that the

34
00:01:54,240 --> 00:01:58,160
Speaker 1: good side of the equation is coming down pretty quickly. Uh.

35
00:01:58,280 --> 00:02:02,120
Speaker 1: If you recall, goods and lation really surged because of

36
00:02:02,160 --> 00:02:06,800
Speaker 1: the pandemic and because of all kinds of supply constraints. Um,

37
00:02:06,920 --> 00:02:10,400
Speaker 1: so that really pushed up the price of goods. Services

38
00:02:10,400 --> 00:02:12,720
Speaker 1: tend to have a lot more inertia, they didn't go

39
00:02:12,800 --> 00:02:14,760
Speaker 1: up anywhere near as much. And now we're on the

40
00:02:14,800 --> 00:02:18,400
Speaker 1: other side of that, goods are coming down in price,

41
00:02:19,120 --> 00:02:22,920
Speaker 1: and so that really pulls down inflation because goods coming

42
00:02:22,919 --> 00:02:26,160
Speaker 1: down in price, that's deflation. That's a negative sign. And

43
00:02:26,240 --> 00:02:31,320
Speaker 1: so you're averaging negative inflation from goods but positive inflation

44
00:02:31,560 --> 00:02:35,359
Speaker 1: from services, and the net gives you a lot more

45
00:02:35,440 --> 00:02:39,200
Speaker 1: moderation than is than is appropriate because the truth of

46
00:02:39,240 --> 00:02:42,280
Speaker 1: the matter is, once the good side settles down and

47
00:02:42,360 --> 00:02:45,920
Speaker 1: prices have come down to more reasonable levels, goods inflation

48
00:02:46,000 --> 00:02:50,160
Speaker 1: should match more or less service inflation, and so inflation

49
00:02:50,240 --> 00:02:54,360
Speaker 1: overall will stop declining. The wiggle room that I mentioned

50
00:02:54,360 --> 00:02:56,520
Speaker 1: in my first question didn't have to do with the

51
00:02:56,560 --> 00:02:59,720
Speaker 1: FED and its strategy, but more with stock investors strategy

52
00:03:00,360 --> 00:03:03,480
Speaker 1: and and basically the point would be that since stocks

53
00:03:03,520 --> 00:03:06,519
Speaker 1: have dropped so far, even if inflation is a little

54
00:03:06,560 --> 00:03:09,160
Speaker 1: sticky and rates stay high, you know you when you

55
00:03:09,200 --> 00:03:12,200
Speaker 1: have a stock down sixties seventent, as we see from

56
00:03:12,240 --> 00:03:17,560
Speaker 1: companies like Tesla, Meta, Microsoft down thirty, Amazon down, a

57
00:03:17,560 --> 00:03:20,640
Speaker 1: lot of that downside work has been done. That was

58
00:03:21,000 --> 00:03:24,040
Speaker 1: really the question about the wiggle room. Do you think

59
00:03:24,120 --> 00:03:26,080
Speaker 1: stocks have fallen enough or do you really see a

60
00:03:26,080 --> 00:03:30,200
Speaker 1: lot more downside? No? In that case, I'm with you,

61
00:03:30,600 --> 00:03:34,040
Speaker 1: because I think stocks have declined quite a bad. Uh.

62
00:03:34,080 --> 00:03:38,200
Speaker 1: There are tremendous numbers of stocks that very attractive valuations.

63
00:03:38,880 --> 00:03:42,760
Speaker 1: More than of the entire SMP five hundred trades well

64
00:03:42,960 --> 00:03:46,480
Speaker 1: into single digit territory. So there are lots of stocks

65
00:03:46,520 --> 00:03:50,600
Speaker 1: around that are very attractive. Earnings estimates for twenty three

66
00:03:50,640 --> 00:03:53,960
Speaker 1: have not come down that much. The bears say that

67
00:03:54,680 --> 00:03:58,040
Speaker 1: earnings will have to come down more. I'm not sure

68
00:03:58,120 --> 00:04:01,160
Speaker 1: that that's right. As far as I see the economy,

69
00:04:01,160 --> 00:04:04,680
Speaker 1: it's holding up fairly well. I don't see a recession

70
00:04:04,720 --> 00:04:08,280
Speaker 1: as being imminent. My recession concerns have been pushed further

71
00:04:08,320 --> 00:04:11,240
Speaker 1: into the future. So I think the economy is actually

72
00:04:11,240 --> 00:04:15,840
Speaker 1: holding up decently, earnings will hold up deep decently, and

73
00:04:15,880 --> 00:04:20,880
Speaker 1: therefore stocks are actually pretty attractive. Chuck is a doctor

74
00:04:20,880 --> 00:04:28,279
Speaker 1: of economics. Have you ever known an environment like this one? Yeah, well,

75
00:04:30,200 --> 00:04:32,799
Speaker 1: I'm not sure which There's so many other of these

76
00:04:32,839 --> 00:04:37,680
Speaker 1: about this particular environment you can pick and choose. Um. Certainly,

77
00:04:38,120 --> 00:04:41,200
Speaker 1: when the FED tighten monetary policy because inflation you went

78
00:04:41,200 --> 00:04:46,520
Speaker 1: through the roof. Initially, they eased up too soon and

79
00:04:46,600 --> 00:04:48,839
Speaker 1: Bulker came to regret that and I had to really

80
00:04:49,040 --> 00:04:53,000
Speaker 1: rack up interest rates even more, and that precipitated recession.

81
00:04:53,360 --> 00:04:57,440
Speaker 1: I've also seen a circumstance where the FED saw the

82
00:04:57,480 --> 00:05:01,320
Speaker 1: economy fall out of bed. Maybe you were at one point,

83
00:05:01,600 --> 00:05:04,760
Speaker 1: I think was Jimmy Carter who said that Americans were

84
00:05:04,960 --> 00:05:08,080
Speaker 1: using their credit cards too much and he wanted them

85
00:05:08,080 --> 00:05:10,719
Speaker 1: to stop used in their credit cards. And some people

86
00:05:10,800 --> 00:05:14,599
Speaker 1: thought that the government had revoked the use of credit cards,

87
00:05:14,680 --> 00:05:17,400
Speaker 1: and the economy fell off a cliff. And when they

88
00:05:17,440 --> 00:05:21,320
Speaker 1: realized very quickly what they had done, uh, the immediately

89
00:05:21,520 --> 00:05:25,719
Speaker 1: reverse course and the economy came right back. So you

90
00:05:25,800 --> 00:05:30,440
Speaker 1: get these kind of extraordinary moves. What the actor matter is,

91
00:05:30,680 --> 00:05:34,400
Speaker 1: stocks are cheap. Interest rates are not going to come down.

92
00:05:34,760 --> 00:05:37,640
Speaker 1: I think interest rates are going to ultimately move higher,

93
00:05:37,920 --> 00:05:40,920
Speaker 1: but maybe not so much in the near term. Well,

94
00:05:41,120 --> 00:05:44,599
Speaker 1: what's unique about this time is that you've got quantitative tightening.

95
00:05:44,640 --> 00:05:47,440
Speaker 1: We've only had it three times two thousand and eight,

96
00:05:47,440 --> 00:05:50,680
Speaker 1: two thousand eighteen, I suppose. And and now you've got

97
00:05:50,720 --> 00:05:54,719
Speaker 1: falling m two here. Uh, and you've got bond yields higher.

98
00:05:54,760 --> 00:05:59,159
Speaker 1: So equities are facing less and less money available that's

99
00:05:59,240 --> 00:06:03,359
Speaker 1: chasing them. So in arguing against the rally in stocks,

100
00:06:03,480 --> 00:06:06,440
Speaker 1: let me put it to you this way. Ise in

101
00:06:06,520 --> 00:06:12,200
Speaker 1: that year is sideways. The new up It could be um.

102
00:06:12,360 --> 00:06:14,720
Speaker 1: Most of those variables that you mentioned, Brian are not

103
00:06:14,839 --> 00:06:17,919
Speaker 1: ones that I particularly care about. What I care about

104
00:06:17,920 --> 00:06:23,400
Speaker 1: our interest rates. That's what really determines competitive prices. UM

105
00:06:23,440 --> 00:06:27,440
Speaker 1: and interest rates are likely to be flatter going forward

106
00:06:27,440 --> 00:06:30,000
Speaker 1: for the near term because there's a fight in the

107
00:06:30,040 --> 00:06:32,520
Speaker 1: market between the bulls and the bears, and it's not

108
00:06:32,600 --> 00:06:35,320
Speaker 1: clear that either one is going to win that battle

109
00:06:35,360 --> 00:06:37,880
Speaker 1: in the near term. So I don't think it porstrates

110
00:06:37,960 --> 00:06:39,960
Speaker 1: move a great deal. But I look at thirty years

111
00:06:40,000 --> 00:06:43,520
Speaker 1: excuse me, ten year treasuries. Those yields are simply too

112
00:06:43,560 --> 00:06:46,760
Speaker 1: low relative to the inflation rates that I see, and

113
00:06:46,800 --> 00:06:49,920
Speaker 1: it'll take a while for the market to figure that out. Yeah,

114
00:06:50,000 --> 00:06:52,840
Speaker 1: and if it does, and but did I just want

115
00:06:52,880 --> 00:06:54,360
Speaker 1: to get you your take on what's going on in

116
00:06:54,440 --> 00:06:57,240
Speaker 1: the global economy here as well, with the China re entry,

117
00:06:57,279 --> 00:07:01,320
Speaker 1: albeit one which is let's say diplomatically bumpy, to say

118
00:07:01,320 --> 00:07:06,600
Speaker 1: at least, how does that change the whole dynamic? Uh,

119
00:07:06,800 --> 00:07:10,480
Speaker 1: that's a great question, Richard. Uh So. I think that

120
00:07:10,600 --> 00:07:15,920
Speaker 1: China's reopening will provide another engine for growth, or another

121
00:07:16,200 --> 00:07:19,600
Speaker 1: piston for growth for the engine on the global economy,

122
00:07:19,800 --> 00:07:22,880
Speaker 1: but it may take a month or two Initially, the

123
00:07:22,960 --> 00:07:25,600
Speaker 1: Chinese are being very cautious because so many people have

124
00:07:25,760 --> 00:07:30,200
Speaker 1: come down with COVID, But hopefully this wave of COVID

125
00:07:30,240 --> 00:07:33,400
Speaker 1: will pass through the population very quickly. I've seen estimates

126
00:07:33,400 --> 00:07:36,360
Speaker 1: suggesting that as much as fifty of the population in

127
00:07:36,440 --> 00:07:40,600
Speaker 1: Beijing has tested or is positive for COVID, whether or

128
00:07:40,600 --> 00:07:43,600
Speaker 1: not they're being tested. So if that's the case, then

129
00:07:43,680 --> 00:07:46,960
Speaker 1: they'll be through that fairly quickly, in which case, UH

130
00:07:47,240 --> 00:07:51,440
Speaker 1: spending will pick up, activity will pick up, China will

131
00:07:51,560 --> 00:07:54,840
Speaker 1: export more. It may be bumpy for the next month

132
00:07:54,960 --> 00:07:57,400
Speaker 1: or so, but then after that it should really pick up.

133
00:07:57,400 --> 00:08:00,640
Speaker 1: And that's another source of demand for commodities around the world.

134
00:08:00,720 --> 00:08:04,640
Speaker 1: Some uppard pressure on commodity prices UM and maybe some

135
00:08:04,760 --> 00:08:07,680
Speaker 1: uppard pressure on the price of Chinese exports as well.

136
00:08:09,000 --> 00:08:11,560
Speaker 1: So if we look for companies with good dividends, whether

137
00:08:11,640 --> 00:08:14,200
Speaker 1: they're in Hong Kong and China or whether they're in

138
00:08:14,240 --> 00:08:18,760
Speaker 1: the United States, how do you identify companies whose dividends

139
00:08:18,800 --> 00:08:25,320
Speaker 1: have staying power. Well, I'm I managed a portfolio that

140
00:08:25,400 --> 00:08:30,400
Speaker 1: invests a lot in income UM. We it's income with growth.

141
00:08:30,440 --> 00:08:33,720
Speaker 1: We have a high yield mandate from our clients UM

142
00:08:33,760 --> 00:08:35,880
Speaker 1: and we do it based on a lot of equities

143
00:08:35,880 --> 00:08:39,760
Speaker 1: that produce recurring dividends. There are lots of great companies

144
00:08:39,800 --> 00:08:43,400
Speaker 1: out there that fit that qualification, UH, some of real

145
00:08:43,520 --> 00:08:47,440
Speaker 1: estate investment trust, some our business development companies, all paying

146
00:08:47,480 --> 00:08:51,839
Speaker 1: out dividends out of recurring cash flow. And then there

147
00:08:51,840 --> 00:08:55,040
Speaker 1: are plenty of others that have great fundamentals that can

148
00:08:55,080 --> 00:08:58,480
Speaker 1: do that as well. So we're trying to buy h

149
00:08:58,880 --> 00:09:02,360
Speaker 1: high yielding stocks that will grow their dividends over time.

150
00:09:02,800 --> 00:09:06,040
Speaker 1: A perfect example of that, by the way, it would

151
00:09:06,040 --> 00:09:11,240
Speaker 1: be UH Assignment Properties. They've increased their dividend multiple quarters

152
00:09:11,320 --> 00:09:15,400
Speaker 1: in a row, and the value of the stock is cheap.

153
00:09:16,080 --> 00:09:19,640
Speaker 1: UH excellent free cash flow over billion dollars in free

154
00:09:19,679 --> 00:09:24,760
Speaker 1: cash flow. Very healthy company. Energy Transfer, a pipeline company

155
00:09:24,760 --> 00:09:28,760
Speaker 1: in the United States. UH increase its dividend multiple times

156
00:09:28,760 --> 00:09:31,720
Speaker 1: in the last number of quarters, and they're expected to

157
00:09:31,760 --> 00:09:34,400
Speaker 1: do that again. So there are lots of opportunities if

158
00:09:34,400 --> 00:09:37,760
Speaker 1: you look all right, well, Chunk, thanks very much. We

159
00:09:37,800 --> 00:09:40,840
Speaker 1: always love to hear names mentioned. UH. You mentioned Simon

160
00:09:40,880 --> 00:09:44,160
Speaker 1: Property and what was the second one again, energy Transfer,

161
00:09:44,200 --> 00:09:49,280
Speaker 1: SI Belief Transfer. Yeah, excellent, very good, good information. Nice

162
00:09:49,360 --> 00:09:51,440
Speaker 1: chat with you, Chuck, Thank you very much, and we'll

163
00:09:51,679 --> 00:09:54,960
Speaker 1: We'll talk with you again soon. Chuck Lieberman, co founder

164
00:09:55,000 --> 00:09:58,840
Speaker 1: and chief investment officer at Advisors and Capital Management,