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Saut Discusses Exercising Patience in Investing (Audio) · Bloomberg Intelligence

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  Speaker 1: Global business News twenty four hours a day's Bloomberg dot
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  Speaker 1: Signed Charlie Pellot. The down SMP trading little change, nez
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  Speaker 1: up six tenths of one percent, now up twenty eight
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  Speaker 1: There's an a t F that's tapped into a value
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  Speaker 1: factor in bonds. That's the word from Bloomberg Intelligence analyst
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  Speaker 1: Eric bel Tunis. It's a van k Vector's Fallen Angel
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  Speaker 1: high yield bond e t F taker a n g L.
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  Speaker 1: It focuses on corporate bonds that were investment grade at
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  Speaker 1: the time that were issued and we're later downgraded to
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  Speaker 1: below investment grade. This one has six is double b
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  Speaker 1: UM and compared to h y G which is six
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  Speaker 1: single B and triple C. So it's almost like a
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  Speaker 1: touch above high yield. But it's a kind of a
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  Speaker 1: hidden hidden gem, I think, And the reason people haven't
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  Speaker 1: really noticed it, I think is people generally just view
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  Speaker 1: the world into high yield or investment grade when bonds um,
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  Speaker 1: and they don't consider this sort of I called purgatory
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  Speaker 1: in between investment grade and high yields, sort of like
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  Speaker 1: these bonds are living there and g L has one
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  Speaker 1: nine million dollars in total assets and a twelve months
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  Speaker 1: dividend yield of five point four is gained eleven point
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  Speaker 1: nine percent since the start of the year. That's your
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  Speaker 1: Bloomberg ETF report. I'm Katherine Cowdery. This is taking stock
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  Speaker 1: with PIM Box and Kathleen Hayes on Bloomberg Radio. Never
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  Speaker 1: say never, never say always, always re evaluate, and never
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  Speaker 1: give up. Does that sound like Jeff Saut while at
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  Speaker 1: might he's the chief investment strategist of Raymond James, helping
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  Speaker 1: to manage about four hundred billion dollars of customer assets
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  Speaker 1: based in St. Petersburg, Florida. Jeff Saut, thank you very
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  Speaker 1: much for beating with us. A pleasure to talk with
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  Speaker 1: you again. Pim, So, where does this saying fit into
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  Speaker 1: an investment strategy? Well, it's more of a it's more
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  Speaker 1: of a life statement than it is a stock market strategy.
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  Speaker 1: My my model, proprietary model. When the SMP UH five
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  Speaker 1: didn't follow its brethren, the SMP total returned to new
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  Speaker 1: all time highs about three weeks ago, the model turned
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  Speaker 1: negative and was looking for a low sometime this week,
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  Speaker 1: and with two with Wednesdays, was a Wednesday Tuesday's rally
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  Speaker 1: of two hundred and twenty two points. You know, it
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  Speaker 1: looked to me like the model was was gonna be wrong.
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  Speaker 1: And then we got yesterday down two hundred and change,
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  Speaker 1: and today we bounced once again off area for the
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  Speaker 1: for the fifth time since the April high. So I'm
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  Speaker 1: never giving up. You're never giving up, all right, So
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  Speaker 1: what do you do? I mean, if you don't give up,
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  Speaker 1: you've got to be doing something or are you just
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  Speaker 1: waiting for some more information. I'm exercising the rarest commodity
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  Speaker 1: on Wall Street, which is patients. We pushed a lot
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  Speaker 1: of chips out into equities. Uh, I think I was
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  Speaker 1: on a bloomberg. I think it was on February. I
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  Speaker 1: think it was fifth or sixth, and the model said
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  Speaker 1: the market was going to bottom next week. So we
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  Speaker 1: started buying stocks into that February eleventh low, and we've
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  Speaker 1: had pretty good gains since then. So I'm waiting to
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  Speaker 1: see if we if we swoon again tomorrow and make
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  Speaker 1: a low the first part of next week, or if
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  Speaker 1: we've made the bottom this week in the model was
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  Speaker 1: actually looking for a lower low than that. But you
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  Speaker 1: take what they give you in this business, clearly, you
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  Speaker 1: take what they give you. What are they giving you
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  Speaker 1: in terms of where to put fresh money to work? Well,
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  Speaker 1: I think you can still look at some of the
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  Speaker 1: You know, my UM Fundamental Analysts has a strong by
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  Speaker 1: rating on a Ridium, the low satellite orbiting company, and
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  Speaker 1: they have a convertible preferred with about a six percent
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  Speaker 1: yield to it. So I think something like that makes
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  Speaker 1: makes a lot of sense here, and that is are
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  Speaker 1: people looking for income, yeah, but they're also looking as
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  Speaker 1: one of my friend Rod Baron's favorite stocks. He's probably
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  Speaker 1: the largest shareholder there, and he thinks that when they
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  Speaker 1: get the birds all launched over the next eighteen to
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  Speaker 1: twenty four months, that the free cash flow yield is
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  Speaker 1: going to go through the roof and the stock is
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  Speaker 1: going to go up into the high teams of the
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  Speaker 1: low twenties. If that happens, the CONVERTI will Preferred zooms
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  Speaker 1: right up with it now. Ridium the symbol is I
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  Speaker 1: R d M. The shares trade at about eight dollars
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  Speaker 1: and twenty five cents down about two uh percent so
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  Speaker 1: far this year. This is the Global Satellite Communications System
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  Speaker 1: for low Earth orbit to satellites for a voice for
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  Speaker 1: voice and data communications. Correct, Yeah, that's that's correct. But
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  Speaker 1: any time I can get a dividend yield out of
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  Speaker 1: what looks to be a pretty dynamic situation, I'm going
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  Speaker 1: to go for the dividend yield. What do you say
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  Speaker 1: to people that look at the price of energy and
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  Speaker 1: say that they can trade equities off price of energy. Well,
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  Speaker 1: we actually were recommending some of the MLPs back in
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  Speaker 1: the February lows because you could buy a package of
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  Speaker 1: investment grade master limited partnerships in the midstream and downstream,
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  Speaker 1: not the upstreams. I think the upstreams business model is broken,
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  Speaker 1: but you could buy an investment grade package of those
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  Speaker 1: with a better than seven percent yield, and I think
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  Speaker 1: that made a lot of sense back then. Now, Jeff,
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  Speaker 1: you seem to be talking about investments that are not
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  Speaker 1: necessarily tied to what the consumer is going to do
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  Speaker 1: or my reading you wrong. Um, I like consumer discretionary stocks. Uh,
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  Speaker 1: you know. I think the GDP is going to strengthen
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  Speaker 1: in the back half of this year. I don't think
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  Speaker 1: we're going uh into a recession. That well, in recently
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  Speaker 1: driving across country on the back of I won't say
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  Speaker 1: every eighteen wheeler, but every other eighteen wheeler, it was
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  Speaker 1: drivers wanted. And at the fast food restaurants we stopped
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  Speaker 1: at with the grandkids, you know, it was help on
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  Speaker 1: it in the window. These are not the kind of
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  Speaker 1: things you see going into a recession. So why do
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  Speaker 1: we see such a mnemic GDP growth. I think you
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  Speaker 1: saw the low g DP print the other week at
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  Speaker 1: plus zero point five tents of a percent, And I
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  Speaker 1: think the measurement of g d P is not per
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  Speaker 1: se the right measurement for the overall economic strength. I
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  Speaker 1: think the economy is a lot stronger than the government's
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  Speaker 1: official figures, and that that strength showing up in you
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  Speaker 1: just described in the job market, particularly in the job market.
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  Speaker 1: I mean, you know how much I travel. I'm fine
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  Speaker 1: in full planes, I'm eating in full restaurants. Um. I
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  Speaker 1: just I just don't. I don't see where where the
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  Speaker 1: economy is any sign of going into a recession. Having
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  Speaker 1: said that, with the ten year treasury at one point
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  Speaker 1: seven five right now, a lot of people might get
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  Speaker 1: hurt if they don't do something about that bond. Well,
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  Speaker 1: I think the bond is being anchored by the negative
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  Speaker 1: rates in place, is like Germany and Japan, and by
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  Speaker 1: capital flows. If you look on the Bloomberg terminal, you
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  Speaker 1: saw a story this morning about nine billion or nine
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  Speaker 1: it was, I think it was trillion looking to come
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  Speaker 1: into the US. Because if you're getting negative rates in
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  Speaker 1: Germany and Japan, if you can get just even twenty
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  Speaker 1: basis point positive return here, um, that's you know, that's
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  Speaker 1: capital flows. And that's one of the reasons that ted
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  Speaker 1: spread has widened out here in the past few weeks.
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  Speaker 1: What will that do to the dollar? If anything, I
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  Speaker 1: think the dollar is peaked. I look at the dollar,
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  Speaker 1: the Dixie Index. I've been saying for a year, it
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  Speaker 1: looks like a great, big rounded top. I get club
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  Speaker 1: by some of the economists by saying, but the trade
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  Speaker 1: weighted dollars still going up, and go down to your
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  Speaker 1: bank and try and buy some trade weighted dollars. You
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  Speaker 1: have never seen a trade weighted dollar. I haven't never
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  Speaker 1: seen a trade weighted dollar. So the dollar index, the
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  Speaker 1: d x Y, looks to me like it's peaked. Well,
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  Speaker 1: you bring up an interesting point, Chefs thought that you know,
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  Speaker 1: many of the indicators that are used by professional investment
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  Speaker 1: managers are not necessarily applicable to making investment decisions. Is
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  Speaker 1: that correct? I think that's absolutely correct. Why is that
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  Speaker 1: developed in such a way? I think, I think to
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  Speaker 1: large degree. And you can look at the energy e
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  Speaker 1: I a look at the wide variants in in the
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  Speaker 1: government statistics and the private market statistics. And this guy
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  Speaker 1: named Rothman that used to run the energy desk at
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  Speaker 1: that Merrill Lynch, who does his own independent channel checks,
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  Speaker 1: and he, to my knowledge, is the only person that
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  Speaker 1: got yesterday's draw down in in the grude oil inventories.
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  Speaker 1: Right when you travel around the country, and I want
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  Speaker 1: to connect the energy theme, you see people driving and
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  Speaker 1: using gasoline. The cost of gasoline may have increased marginally recently,
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  Speaker 1: but where is all the savings going? Is that for
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  Speaker 1: for low gasoline prices, that going into as you say,
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  Speaker 1: restaurants and consumer discretionary purchases. Well, it's that's been that's
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  Speaker 1: been a conundrum here because the way the price of
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  Speaker 1: gasoline has come down, you would have thought, uh that
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  Speaker 1: there would be more purchasing by the individual consumer, and
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  Speaker 1: it hasn't showed up yet. I think they're still stunned
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  Speaker 1: from what happened back in oh eight o nine, But
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  Speaker 1: I think they were going to loosen their pocket books
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  Speaker 1: as we get into the back half of this year.
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  Speaker 1: And Jeff Sawt this last point, You I haven't heard
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  Speaker 1: just talk about the election, the political season. Does that
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  Speaker 1: matter for investors? Uh? There will be winners and losers
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  Speaker 1: depending on who's who's going to be elected. But I
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  Speaker 1: have I have a real problem with the you know,
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  Speaker 1: I don't like any of the candidates. I think you've
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  Speaker 1: got a lot of company there. All right, Thank you
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  Speaker 1: very much. Jeff Sawt is the chief investment strategist for
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  Speaker 1: Raymond and James. He's based in St. Petersburg, Florida, but
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  Speaker 1: as he said, he spends a lot of time traveling
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  Speaker 1: an own the country, helping to manage four hundred billion
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  Speaker 1: dollars of customer assets. Thank you very much for joining us.
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  Speaker 1: You're listening to taking Stock. I'm pim Fox will take
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  Speaker 1: you through to the close of trading next