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Advisors' Chuck Lieberman Likes Exxon Mobil, Citigroup (Audio) · Bloomberg Intelligence

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  Speaker 1: Global business news twenty four hours a day at Bloomberg
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  Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.
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  Speaker 1: I'm Charlie Pelatontal. The SMP nastac Hall advancing stocks heading
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  Speaker 1: toward a record after better than forecast jobs data underscored
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  Speaker 1: fifty two nineteen down Industrials up one hundred seventy nine
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  Speaker 1: points a gain of one percent, to Dow at eighteen thousand,
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  Speaker 1: of one point nine percent, and crude oil West Texas
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  Speaker 1: Texas Intermediate down one tenth of one percent. I'm Charlie
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  Speaker 1: Pelt and that's a Bloomberg Business Flash. This is taking
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  Speaker 1: stock with Bim Box and Kathleen Hayes on Bloomberg Radio
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  Speaker 1: and considering what to do with your money. There is
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  Speaker 1: a lot you do not know, a lot that we
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  Speaker 1: don't know, but there are many things that we do know,
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  Speaker 1: and here to tell us about them is Chuck Lieberman.
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  Speaker 1: He is the chief investment Officer and managing partner for
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  Speaker 1: Advisor's Capital Management. They're based in Ridgewood, New Jersey, helping
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  Speaker 1: to manage more than one point three billion dollars of
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  Speaker 1: customer assets. Chuck Lieberman, thank you for being with me. Thanks.
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  Speaker 1: I want you to continue this theme about uncertainty. We're
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  Speaker 1: always going to not know a lot. There's always going
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  Speaker 1: to be uncertainty for investors. No one knows what the
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  Speaker 1: outcome of Brexit will mean. No one knows what the
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  Speaker 1: dollar will trade out a year from now. But you
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  Speaker 1: maintain there is a lot that we do know and
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  Speaker 1: we can profit from it. Explain well, Uh, the feed
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  Speaker 1: is actually used this uncertainty to help justify differring any
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  Speaker 1: interest rate increases. But when you look at the data,
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  Speaker 1: and today's employment data are really perfect for providing great insight. Uh,
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  Speaker 1: it's pretty clear that the U. S economy is doing
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  Speaker 1: quite well. Um, the job market has tightened considerably. H
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  Speaker 1: We're beginning to see enough tightness in the job market
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  Speaker 1: that it's flowing over into some of the pockets that
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  Speaker 1: have been weakest, meaning those who are least educated, even
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  Speaker 1: their finding jobs that are very very good clip In fact,
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  Speaker 1: they accounted for virtually all of the jobs reported this
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  Speaker 1: past month. Unemployment declined very dramatically for that group, whereas
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  Speaker 1: it didn't budge for the most educated. So it shows
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  Speaker 1: you that firms are having difficulty finding people with college degrees,
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  Speaker 1: and they're being forced to hire less skilled, less educated
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  Speaker 1: workers and potentially train them and incur high or costs
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  Speaker 1: in order to fill positions. It suggests a degree of
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  Speaker 1: of h a real need. Well, you mentioned that there
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  Speaker 1: are these elements of everybody's life which are knowable, such
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  Speaker 1: as you eat breakfast, lunch, dinner, you wear clothes, you
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  Speaker 1: drive cars. All of these things feed into what is
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  Speaker 1: potentially a profit making investment, right, And there's implicitly an
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  Speaker 1: argument out there that somehow corporate profits are not going
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  Speaker 1: to do well, that corporate profits have been weak recently.
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  Speaker 1: But of course there's a lot of activity that you,
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  Speaker 1: as you just mentioned, will continue. Um, we do know
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  Speaker 1: that the car fleet outstanding is the oldest on record. Uh,
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  Speaker 1: those cars are wearing out. They do have to be replaced.
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  Speaker 1: That creates a lot of pent up demand for for cars.
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  Speaker 1: We know plenty about the demographics of the economy, of
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  Speaker 1: the population. We know that there are a lot more
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  Speaker 1: elderly people. That creates a lot of demand for health here.
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  Speaker 1: We also know that, uh, there's a lot of household formation,
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  Speaker 1: and yet we have not seen a full recovery in
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  Speaker 1: the pace of new construction. And so that suggests there's
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  Speaker 1: actually plenty of pent up demand for new construction in
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  Speaker 1: the housing arena. So there are lots of things you
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  Speaker 1: can figure out that will support the expansion going forward.
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  Speaker 1: A new study by the Wharton School of Business says
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  Speaker 1: that most patient people grow richer and healthier than they're
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  Speaker 1: more impetuous peers. Or if you could tell us some
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  Speaker 1: investment themes that being patient for will yield profits, well,
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  Speaker 1: I think there's a little bit too much emphasis and
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  Speaker 1: too many quarters about short term profitability. UM, people looking
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  Speaker 1: one quarter ahead or two quarters ahead. We've heard many
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  Speaker 1: comments about corporate management looking at the next uh number,
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  Speaker 1: the next quarterly call on their profits and pushing things
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  Speaker 1: around in order to eat the next quarterly number. And
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  Speaker 1: they're not thinking enough about the long term consequences for
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  Speaker 1: their business and making longer term decisions and making the
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  Speaker 1: investments and that they need to make for those longer
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  Speaker 1: term decisions, that that comes at the expense of the
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  Speaker 1: upcoming quarter. Um, that's a problem. And UH, when we
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  Speaker 1: look around at the investment opportunities that are out there,
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  Speaker 1: many times you can distinguish between those companies and we'd
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  Speaker 1: much rather invest with with managers who are thinking longer
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  Speaker 1: term and and evaluing how the economy will affect their
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  Speaker 1: business rather than just making the next number. Can you
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  Speaker 1: give us some examples. Well, within the energy space, one
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  Speaker 1: of the managements that I think is absolutely top rated
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  Speaker 1: would be Excenmobile. Uh. This is a firm that has
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  Speaker 1: never thought about the next quarter, that has always thought
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  Speaker 1: longer term, puts every single investment capital investment that they
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  Speaker 1: make through the ringer to make judgments about whether or
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  Speaker 1: not it's a worth while investment. UH. They don't pay
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  Speaker 1: out a huge dividend, so in the past have had
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  Speaker 1: lots and lots of free cash flow and they haven't
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  Speaker 1: squandered it looking for oil and really, uh, very very
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  Speaker 1: widespread locations are difficult to extract, locations where there's a
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  Speaker 1: lot of costs in the in the investment and it
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  Speaker 1: may or may not turn out to be worthwhile. Uh
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  Speaker 1: So they have a lot of excess cash flow which
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  Speaker 1: they've used to buy back an ablute ton of stock
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  Speaker 1: over the years. Right now, the stock is relatively cheap
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  Speaker 1: seven dollars trades at an estimated uh pe I believe
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  Speaker 1: of thirty six uh gross yield about three point four percent.
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  Speaker 1: Stock is of about twelve percent so far this year.
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  Speaker 1: And the number that you mentioned that is really the
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  Speaker 1: most outstanding is that yield three point four percent. Uh
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  Speaker 1: That has not been a yield that you could have
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  Speaker 1: gotten on Exxon for many many years. Uh It's available
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  Speaker 1: now because the stock has fallen, corporate profits are down.
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  Speaker 1: Uh So the stock looks a little bit expensive on
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  Speaker 1: current earnings. But this is an extremely well managed company
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  Speaker 1: and as a long term play for exposure and energy,
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  Speaker 1: these are the guys you want to get in bed with. Okay,
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  Speaker 1: so this is energy. Let's move on to another industry sector.
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  Speaker 1: Tell us what else you're looking for? Uh. Well, another
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  Speaker 1: one that I think of is a really attractive play
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  Speaker 1: is a City Group. UM. Not exactly a popular choice
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  Speaker 1: these days. A lot of people blame the banks for
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  Speaker 1: some of the problems associated with the last recession in
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  Speaker 1: the housing crisis. But under current management, they are slowly
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  Speaker 1: but methodically uh pulling costs Dound three structuring the company. Uh.
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  Speaker 1: It's trading at a dramatic discount to book UM. And
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  Speaker 1: they have a lot of capital. Uh. They are well ahead,
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  Speaker 1: way ahead of where they need to be to meet
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  Speaker 1: the Basil three capital requirements. UM. Their profitability is has
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  Speaker 1: improved dramatically. UM. They are a problem for the FED
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  Speaker 1: because the FED has got to approve their dividend increases. Uh,
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  Speaker 1: and they're now sitting on so much capital if the
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  Speaker 1: FED had no choice but to approve a pretty sizable
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  Speaker 1: dividend increasing Yet their dividend is still on the low side.
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  Speaker 1: So I think this is again another long term investment
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  Speaker 1: that should be very attractive. All the shares of City
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  Speaker 1: Group are up about four percent today. Taking a look,
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  Speaker 1: the stock is down about eleven and a half percent
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  Speaker 1: year to date, the yield one point four percent. Do
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  Speaker 1: you find that clients are honest in telling you how
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  Speaker 1: long and how patient they will remain for an investment
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  Speaker 1: to pan out. Absolutely not. Um. It's funny because anytime
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  Speaker 1: the market goes down, patients goes out the window almost immediately. UM.
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  Speaker 1: Clients are patient only as long as the market's going up,
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  Speaker 1: and when the market isn't going up, their patients has gone.
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  Speaker 1: Tell us a little bit about rebalancing a portfolio. Many
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  Speaker 1: people were trained to rebalance so that you don't get
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  Speaker 1: your asset allocations tipped to one industry group over another.
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  Speaker 1: Do you find that people have actually been having the
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  Speaker 1: discipline to do so, because they would have added to
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  Speaker 1: their energy holdings earlier in the year in order to rebalance,
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  Speaker 1: And the same goes for the financial industry. Yeah, it's
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  Speaker 1: a great question, PIM, because people often don't have the
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  Speaker 1: discipline to do it. Um. Of course, what happens when
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  Speaker 1: energy goes down is that scares the living daylights out
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  Speaker 1: of them, and so they're much less inclined to expose
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  Speaker 1: themselves to energy, and so they tend to avoid it.
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  Speaker 1: And the same thing was true with the financials when
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  Speaker 1: the financials uh fell out of bed. Uh. So sometimes
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  Speaker 1: it's easier when they use funds or et f s,
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  Speaker 1: because then they don't see the rebalancing or they're not
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  Speaker 1: participating in making the investment decisions. But certainly when UH
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  Speaker 1: with many managers, UH, they respond to the UH, the
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  Speaker 1: fears and the desires of their clients, and so they
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  Speaker 1: tend to be pretty cautious about rebalancing and taking advantage
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  Speaker 1: of some of the dislocations in the market. Do you
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  Speaker 1: have any any any direction for someone that was looking
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  Speaker 1: at a ten year treasury at one point five eight
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  Speaker 1: percent and saying I can't live on that? What do
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  Speaker 1: you recommend? Well, we think you shouldn't live on that,
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  Speaker 1: because treasuries at that yield imply little income and lots
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  Speaker 1: and lots of risk, no risk of default, but lots
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  Speaker 1: of risk of siner or later the value of that
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  Speaker 1: asset getting crushed. UM. There are a lot of high
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  Speaker 1: yield opportunities available in the marketplace. Some of them are
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  Speaker 1: out of favor, but yet they're really attractive. So one
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  Speaker 1: that I like is Master Limited Partnerships, the pure pipeline companies. UH.
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  Speaker 1: They offer pretty substantial yields, Thank you very much. Chuck
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  Speaker 1: Lieberman is the chief investment officer and the man eaching
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  Speaker 1: partner of Advisors Capital Management. They're based in Ridgewood, New Jersey,
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  Speaker 1: helping to manage more than one point three billion dollars
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  Speaker 1: of customer assets. We'll take you through to the close. Next,
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  Speaker 1: this is Bloomberg