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Chuck Lieberman Digs Through Eco Data (Audio) (Correct) · Bloomberg Intelligence

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  Speaker 1: You're listening to taking Stock and Pim Fox on Bloomberg Radio.
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  Speaker 1: The muddiness of the data, Well, that's according to Chuck Lieberman,
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  Speaker 1: chief investment officer managing Partner Advisors Capital Management with one
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  Speaker 1: point three billion dollars of assets under management, joining us
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  Speaker 1: from Ridgewood, New Jersey. Chuck Lieberman, you describe the muddiness
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  Speaker 1: of data making it difficult for some market participants to
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  Speaker 1: anticipate monetary policy. Are you one of those people? Uh? No, Uh.
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  Speaker 1: We see the data as basically fundamentally solid. Uh. There
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  Speaker 1: are some numbers that are literally impossible to believe. For example,
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  Speaker 1: we've seen productivity go negative. That suggests that the business
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  Speaker 1: people are becoming stupider each year. I'm not inclined to
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  Speaker 1: believe that, certainly not take that at face value. And
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  Speaker 1: that's also related to GDP. GDP has been really week
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  Speaker 1: the last three quarters in a row. That's inconsistent with
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  Speaker 1: the employment data, which shows much more growth. UM. I
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  Speaker 1: still believe that it is relatively easy to count noses,
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  Speaker 1: and so I have a lot more confidence in the
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  Speaker 1: employment data. Uh. GDP, on the other hand, is much
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  Speaker 1: more difficult to evaluate, and so I suspect we're understating GDP,
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  Speaker 1: probably by a considerable margin. So then you must be thinking,
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  Speaker 1: Chuck Lieberman, that business investment spending has been much stronger
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  Speaker 1: than the very negative readings we've had the last few quarters.
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  Speaker 1: And some people say there's too much uncertainty. Businesses don't
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  Speaker 1: want to commit to long term projects and so they're
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  Speaker 1: just playing it close to the vest. They're buying backstocks,
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  Speaker 1: taking advantage of cheap money and more. Well, I prefer
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  Speaker 1: to dig into the data, Kathleen, as you know, and
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  Speaker 1: when you dig, what you see is that all of
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  Speaker 1: the top line weakness is really coming from the energy
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  Speaker 1: and the mining segment, which we know or a week, Uh,
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  Speaker 1: those sectors have retired. Retail sales also started break in, Chuck,
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  Speaker 1: But I mean, you know, aren't retail sales also challenged? No, retails.
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  Speaker 1: Retail sales at least, consumer spending is probably the single
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  Speaker 1: strongest part of the economy. Uh. Fat business is doing well. Uh.
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  Speaker 1: The mix is changing. We're seeing dramatic gains by the
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  Speaker 1: internet based retailers, and it's just tough for the retailers
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  Speaker 1: with stores uh to really do well. Uh, And so
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  Speaker 1: some of them are going to have to retrench there's
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  Speaker 1: going to be a complete change in the way in
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  Speaker 1: which goods are distributed in this country. UH companies like
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  Speaker 1: Uber are getting involved in distributing UH products for FOR companies.
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  Speaker 1: So you have to look at what is what what
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  Speaker 1: is really going on. You have to add up the
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  Speaker 1: numbers consumer spending, solid, capital spending very weak for drilling
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  Speaker 1: for oil and by the way, oil drilling rigs have
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  Speaker 1: increased for something like nine weeks in a row, so
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  Speaker 1: we've probably bottomed there. But everything else, excluding UH energy
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  Speaker 1: and excluding mining, that capital investment doesn't look bad at all. Okay,
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  Speaker 1: so we did have the Institute for Supply Management's manufacturing
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  Speaker 1: and their non manufacturing or services indexes decelerating a good
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  Speaker 1: bid and of course that's more of a survey based number,
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  Speaker 1: maybe not quite the hard number you'd want to hang
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  Speaker 1: your your FED hat on, but more fundamentally, as Leo Brainerd,
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  Speaker 1: FED governor pointed out dan her speech in Chicago, and
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  Speaker 1: she doesn't see an inflation threat and a lot of
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  Speaker 1: people don't, Chuck, is it possible that it's fine for
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  Speaker 1: the Fed to take it long, take us time to
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  Speaker 1: high rates and the stock market can do fine because
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  Speaker 1: you've you've got all the positive fundamentals, but if there's
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  Speaker 1: not a lot of inflation welling up, why should the
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  Speaker 1: FED be in a hurry to shift. Well, that's precisely
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  Speaker 1: lele Brander's position, and she would like to take longer
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  Speaker 1: like the FED to keep rates down for a while.
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  Speaker 1: But as you heard from both stand Fisher and from
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  Speaker 1: Janet Yelling, and from uh Lockhart and from uh rosen Grin,
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  Speaker 1: and there a couple more. Besides, all of these feder
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  Speaker 1: fish us have talked about the economy doing a bit better.
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  Speaker 1: And my sense of it is if they're trying to
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  Speaker 1: send the message that the FED is now a lot
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  Speaker 1: closer to hiking rates, that's a message that the market
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  Speaker 1: does not want to hear. When Eric rosen Grin spoke
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  Speaker 1: on Friday and suggested that we were closer to a
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  Speaker 1: rate hike, the market sold off pretty sharply. Today, Lyle
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  Speaker 1: Branner suggested that she would like the FED to give
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  Speaker 1: on hold, and in fact the market is up to fifty.
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  Speaker 1: So I think we're getting that message where we're getting
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  Speaker 1: mixed messages, uh, and the market is is telling you
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  Speaker 1: what the market would prefer. The market would certainly prefer
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  Speaker 1: for the FED to leave rates unchanged. I don't think
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  Speaker 1: that's terribly realistic. Uh. And when I speak to clients
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  Speaker 1: and to investment professionals, you know, probably out of a
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  Speaker 1: hundred think that rates ultimately are gonna rise. And the
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  Speaker 1: real issue is timing and how quickly and that sort
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  Speaker 1: of stuff, not whether they are going to rise. Chuck Lieberman,
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  Speaker 1: when you speak to alliance and potential clients that they
• 5:01
  Speaker 1: ask you for one really amazing investment idea, what do
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  Speaker 1: you tell them? Well, one sector we like are the financials,
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  Speaker 1: the banks in particular, because they will benefit when rates
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  Speaker 1: go up. Uh. Their profit margins have been compressed. Uh.
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  Speaker 1: City Group is trading at a severe discount to book value,
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  Speaker 1: but its profitability will improve very sharply if rates increase.
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  Speaker 1: We think that that's a great example of a company
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  Speaker 1: that will do well. One more in another sector, in
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  Speaker 1: another sector. Um, Blackstone Mortgage is another one we like.
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  Speaker 1: So here's a company that makes commercial mortgages, not residential mortgages. Uh.
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  Speaker 1: They lend to businesses that provide real estate as collateral
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  Speaker 1: and there are also positioned to benefit from rising interest rates. Alright,
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  Speaker 1: Chuck le Roman, thank you so very much, Chief investment
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  Speaker 1: officer at Advisor's Capital Management. He started his career the
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  Speaker 1: New York Fed. Is a FED economist, so we definitely
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  Speaker 1: want to listen to whatever Chuck says about the FED
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  Speaker 1: and where it's heading next. I'm Kathleen Hayes along with
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  Speaker 1: Pim Fox, and this is Bloomberg