TOM HUDSON: Even though the stock market has shot significantly higher this year
already, it’s off to its best start in almost 20 years, tonight’s “Market
Monitor” guest says there’s still opportunity to take risk and be rewarded.
Jack Ablin back with us. He’s chief investment officer at BMO Harris Private Bank, with us from that firm in Chicago. Jack, always great to see you. Where do you see taking good risks, even after this rally?
JACK ABLIN, CHIEF INVESTMENT OFFICER, BMO HARRIS PRIVATE BANK: Sure.
Probably the best opportunities still, Tom, are in the U.S. large cap, S&P
500-type stocks, and also emerging markets. Both trading, I would say, at
a valuation discount to most equity markets and the rest of the world.
HUDSON: Lots of concerns though have been raised about bonds. Is
that a risk to avoid in this market?
ABLIN: Yes, unfortunately, with bonds held down by the Federal
Reserve and other, I will say, artificial factors, we’re not very
comfortable owning bonds beyond five years. So anyone in retirement,
certainly go ahead and buy laddered individual bonds, maybe out to five
But once you get between five years and, say, 10 years, the
opportunity to start owning equities, we would look for more of a hybrid
solution like yielding, you know, preferred stocks or REITs or some other
kind of what we’ll call hybrid securities.
HUDSON: Sure, dividend stocks have been a great place to be over the
last six months or so. A couple of your new picks are both directed in
energy, beginning with Chesapeake Energy (NYSE:CHK). This is really a
natural gas play. And as nat gas prices are at decade lows, you’ve seen
the damage it has done to its share price of C-H-K.
ABLIN: Yes. It is, Tom. And remarkably for as cheap as natural gas
here is in the U.S. and in Canada, natural gas prices in Europe are
substantially higher. They’re, like, three times higher than they are
here. And in Japan, almost four times higher.
So at some point either we’re going to start to move to more of a
world normal energy price, or we’ll start moving this gas through to these
other continents and pick up the slack that way.
So longer term, I think Chesapeake’s position with natural gas will
rise over time.
HUDSON: OK. Another one in the nat gas field, but really all energy
patch here, is Exxon Mobil (NYSE:XOM), X-O-M, the giant that it is, with
still a decent yield at 2 percent, even though it has had a heck of a rally
over the past six months.
ABLIN: It really has, Tom. And it is well-positioned in natural gas.
It’s also, obviously, well-positioned for crude. Here a case where while a
lot of people are pointing to tensions in Iran and the Middle East as the
reason why crude prices are as high as they are, I argue another reason and
probably almost a more important reason is just the expansion of the
monetary base, the amount of money the Fed has printed is now pushing
commodities in general and crude in particular higher.
So if you look at crude prices, for example, denominated in gold,
we’re at longtime median levels, suggesting to me that a lot of this move
we’ve seen in crude has to do with monetary expansion.
ABLIN: It also means that if the tensions in the Middle East subside,
it may be we’re not going to see crude oil roll back that much.
HUDSON: Just to be clear, you’re not taking bullion to the pump, at
least not yet, though, Jack, are you?
ABLIN: No, not yet, no.
ABLIN: I’m just trying to use to triangulate.
HUDSON: Understood, understood. Previous picks, last time we saw you
was right before Labor Day in September. You liked the health care sector,
ETF of about 12 percent, nice rally there. You also liked the PowerShares
High Yield Equity Dividend Fund, up 15 percent. Putting any new money to work?
ABLIN: Yes, I would say — you know, I would look for the high
quality stocks like V-I-G would be a good place to be. And health care,
I’d stay with that as well.
HUDSON: OK. Fair enough. Do you own everything we mentioned?
HUDSON: All right. It’s our Friday “Market Monitor,” eating his own
cooking. Jack Ablin with Harris Private Bank.
ABLIN: Thank you.