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Jack Ablin, Harris Private Bank CIO, weighs in on markets, China and natural gas.
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To the global economy joining us now -- -- Harris private bank chief investment officer.
Jack I don't disagree with you with respect to China -- -- for a while it is a straw that stirs the economic drink all over.
I think the fears are overblown.
Well I think they -- the I'm not so sure about the direction of China and that's part of my concern is that.
I think that there's a lot of the information that subject to debate.
And which ever way that that ball falls will likely.
The the global economy will trend along with -- itself.
I think that while we certainly know what's going on in Europe and we have you know while it's not great we have our arms at least around.
What those circumstances are I think it's just hard to know what's likely to transpire China which direction.
You know last week Alcoa's earnings world pretty good they beat the street by mile impart the China.
And then by by -- which is the the largest exporter of iron ore out of -- so they're gonna build 100 -- those gigantic tankers specifically the transport ore to China.
When I see -- -- that kind of stuff you know I don't really get worried about one or two points on an 8% GDP in it.
If it turns out that this this overblown with respect to China what what the implications be for the economy and our stock market.
Sure I think my concern is really more structurally for China than it is.
More -- a call and here -- we've got China that relies roughly half of its economic growth.
-- capital investment.
They've done over the last ten years what President Obama would've loved to have done and that is create jobs by building stuff.
And now we've reached a point where like -- -- half an economic growth history derived by.
Road building airports trains you know building commercial and residential real estate.
And only a third of their economic growth is fueled by household spending.
And -- As a result of this -- I think that you know we'll have to just see where the disruptions are gonna be but my -- is while -- I'd love to tell you it's gonna be a smooth transition.
Mike my guess is it forward if I were to just you know really think about it there're there are going to be some disruptions and it may be.
A little turbulence along the way Jack let's.
-- here Dusan downs because I know you're not a stock picker per -- -- do employees strategy easier recommending out there that a little bit adopted been passed.
You are recommending to your clients to drive in come from equities meaning.
-- and now p.'s preferred stock why did he seem really attractive right now vs common equity.
Or even fixed income opportunities out there.
Sure and again more this is really more longer term I suppose them for the next deal couple weeks and that that these sister Bonnie is that.
Ultimately we're gonna need inflation running higher than interest rates as it is right now.
To help reduce our overall debt and pay back our our public and private debt with cheaper dollars.
And so it any retiree who has historically relied on the income from their portfolio to.
To meet their spending needs it will be disappointed if they rely on.
High quality fixed income bonds to meet those needs so what we're trying to do is encourage our retirees particularly those that are looking for -- -- beyond five years.
To shift into what we call these hybrid securities because think about a REIT.
You know you've got if inflation goes up -- the income which is used to pay the dividend will rise.
And also all -- the replacement cost of the principal value.
Should go up as well where is a bond obviously you know right now ten year bond is going to be stuck it under 2% -- And -- means to track somebody down now -- -- some some risk associated with industry a lot of these MLP's Jack are tied to the energy industry Nat gas for example.
Not necessarily great growth prospects particularly if they are -- -- Nat gas so how do you sort of Parse out.
What what industries are what sectors -- faring better than vs others.
Sure again the thesis here -- should -- long term and I do believe Nat gas is ultimately.
A growth area but we are obviously right now have a ton of inventory we're trading -- you know about two dollars and twenty cents an MC up.
But remarkably if you look at what Europe's paying for that same natural gas.
-- -- they're paying eight or nine dollars for the same same output and and Japan's -- probably closer to thirteen to fifteen dollars so I think.
Couple longer term once we can get the infrastructure in place to move this gas to other continents and perhaps shift some of the reliance on our.
-- energy usage toward natural gas you know another another remarkable stat I think on natural gas is.
You know while -- barrel of oil is -- But -- 102 dollars or somewhere thereabouts the same output using natural gas as a barrel of oil can be derived for about nineteen dollars so.
A bit chilly and again it is long term.
I think that we we are gonna see convergence and I think Nat gas in the US I'm.
And back then Boone Pickens -- nearby -- Begin -- high side.
Right about now think all right that's -- Baghdad gavel and by Harris private bank thanks a lot we appreciate it.
