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

again there of eight tenths of one percent. Nasdaq is up fifty three points, a gain of one percent at fifty two nineteen down Industrials up one hundred seventy nine points a gain of one percent, to Dow at eighteen thousand,

five hundred thirty two. The ten year down twenty five thirty seconds, the yield one point five eight percent, Gold down seventy ounce to thirteen thirty seven, a drop there of one point nine percent, and crude oil West Texas Intermediate down five live sense fort for barrel of West Texas Intermediate down one tenth of one percent. I'm Charlie Pelt and that's a Bloomberg Business Flash. This is taking stock with Bim Box and Kathleen Hayes on Bloomberg Radio

and considering what to do with your money. There is a lot you do not know, a lot that we don't know, but there are many things that we do know, and here to tell us about them is Chuck Lieberman. He is the chief investment Officer and managing partner for Advisor's Capital Management. They're based in Ridgewood, New Jersey, helping to manage more than one point three billion dollars of customer assets. Chuck Lieberman, thank you for being with me. Thanks.

I want you to continue this theme about uncertainty. We're always going to not know a lot. There's always going to be uncertainty for investors. No one knows what the outcome of Brexit will mean. No one knows what the dollar will trade out a year from now. But you maintain there is a lot that we do know and we can profit from it. Explain well, Uh, the feed is actually used this uncertainty to help justify differring any interest rate increases. But when you look at the data,

and today's employment data are really perfect for providing great insight. Uh, it's pretty clear that the U. S economy is doing quite well. Um, the job market has tightened considerably. H We're beginning to see enough tightness in the job market that it's flowing over into some of the pockets that have been weakest, meaning those who are least educated, even their finding jobs that are very very good clip In fact, they accounted for virtually all of the jobs reported this

past month. Unemployment declined very dramatically for that group, whereas it didn't budge for the most educated. So it shows you that firms are having difficulty finding people with college degrees, and they're being forced to hire less skilled, less educated workers and potentially train them and incur high or costs in order to fill positions. It suggests a degree of

of h a real need. Well, you mentioned that there are these elements of everybody's life which are knowable, such as you eat breakfast, lunch, dinner, you wear clothes, you drive cars. All of these things feed into what is potentially a profit making investment, right, And there's implicitly an argument out there that somehow corporate profits are not going to do well, that corporate profits have been weak recently. But of course there's a lot of activity that you,

as you just mentioned, will continue. Um, we do know that the car fleet outstanding is the oldest on record. Uh, those cars are wearing out. They do have to be replaced. That creates a lot of pent up demand for for cars. We know plenty about the demographics of the economy, of the population. We know that there are a lot more elderly people. That creates a lot of demand for health here. We also know that, uh, there's a lot of household formation, and yet we have not seen a full recovery in

the pace of new construction. And so that suggests there's actually plenty of pent up demand for new construction in the housing arena. So there are lots of things you can figure out that will support the expansion going forward. A new study by the Wharton School of Business says that most patient people grow richer and healthier than they're

more impetuous peers. Or if you could tell us some investment themes that being patient for will yield profits, well, I think there's a little bit too much emphasis and too many quarters about short term profitability. UM, people looking one quarter ahead or two quarters ahead. We've heard many comments about corporate management looking at the next uh number, the next quarterly call on their profits and pushing things

around in order to eat the next quarterly number. And they're not thinking enough about the long term consequences for their business and making longer term decisions and making the investments and that they need to make for those longer term decisions, that that comes at the expense of the

upcoming quarter. Um, that's a problem. And UH, when we look around at the investment opportunities that are out there, many times you can distinguish between those companies and we'd much rather invest with with managers who are thinking longer term and and evaluing how the economy will affect their business rather than just making the next number. Can you give us some examples. Well, within the energy space, one of the managements that I think is absolutely top rated

would be Excenmobile. Uh. This is a firm that has never thought about the next quarter, that has always thought longer term, puts every single investment capital investment that they make through the ringer to make judgments about whether or

not it's a worth while investment. UH. They don't pay out a huge dividend, so in the past have had lots and lots of free cash flow and they haven't squandered it looking for oil and really, uh, very very widespread locations are difficult to extract, locations where there's a lot of costs in the in the investment and it may or may not turn out to be worthwhile. Uh So they have a lot of excess cash flow which they've used to buy back an ablute ton of stock

over the years. Right now, the stock is relatively cheap seven dollars trades at an estimated uh pe I believe of thirty six uh gross yield about three point four percent. Stock is of about twelve percent so far this year. And the number that you mentioned that is really the most outstanding is that yield three point four percent. Uh That has not been a yield that you could have gotten on Exxon for many many years. Uh It's available now because the stock has fallen, corporate profits are down.

Uh So the stock looks a little bit expensive on current earnings. But this is an extremely well managed company and as a long term play for exposure and energy, these are the guys you want to get in bed with. Okay, so this is energy. Let's move on to another industry sector. Tell us what else you're looking for? Uh. Well, another one that I think of is a really attractive play is a City Group. UM. Not exactly a popular choice

these days. A lot of people blame the banks for some of the problems associated with the last recession in the housing crisis. But under current management, they are slowly but methodically uh pulling costs Dound three structuring the company. Uh. It's trading at a dramatic discount to book UM. And they have a lot of capital. Uh. They are well ahead, way ahead of where they need to be to meet the Basil three capital requirements. UM. Their profitability is has

improved dramatically. UM. They are a problem for the FED because the FED has got to approve their dividend increases. Uh, and they're now sitting on so much capital if the FED had no choice but to approve a pretty sizable dividend increasing Yet their dividend is still on the low side. So I think this is again another long term investment that should be very attractive. All the shares of City Group are up about four percent today. Taking a look, the stock is down about eleven and a half percent

year to date, the yield one point four percent. Do you find that clients are honest in telling you how long and how patient they will remain for an investment to pan out. Absolutely not. Um. It's funny because anytime the market goes down, patients goes out the window almost immediately. UM. Clients are patient only as long as the market's going up, and when the market isn't going up, their patients has gone.

Tell us a little bit about rebalancing a portfolio. Many people were trained to rebalance so that you don't get your asset allocations tipped to one industry group over another. Do you find that people have actually been having the discipline to do so, because they would have added to their energy holdings earlier in the year in order to rebalance, And the same goes for the financial industry. Yeah, it's a great question, PIM, because people often don't have the

discipline to do it. Um. Of course, what happens when energy goes down is that scares the living daylights out of them, and so they're much less inclined to expose themselves to energy, and so they tend to avoid it. And the same thing was true with the financials when the financials uh fell out of bed. Uh. So sometimes it's easier when they use funds or et f s, because then they don't see the rebalancing or they're not

participating in making the investment decisions. But certainly when UH with many managers, UH, they respond to the UH, the fears and the desires of their clients, and so they tend to be pretty cautious about rebalancing and taking advantage of some of the dislocations in the market. Do you have any any any direction for someone that was looking at a ten year treasury at one point five eight percent and saying I can't live on that? What do

you recommend? Well, we think you shouldn't live on that, because treasuries at that yield imply little income and lots and lots of risk, no risk of default, but lots of risk of siner or later the value of that asset getting crushed. UM. There are a lot of high yield opportunities available in the marketplace. Some of them are out of favor, but yet they're really attractive. So one that I like is Master Limited Partnerships, the pure pipeline companies. UH.

They offer pretty substantial yields, Thank you very much. Chuck Lieberman is the chief investment officer and the man eaching partner of Advisors Capital Management. They're based in Ridgewood, New Jersey, helping to manage more than one point three billion dollars of customer assets. We'll take you through to the close. Next, this is Bloomberg