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No Deal Could Cause Major Market Drop?

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    Lebenthal Asset Management president James Lebenthal gives his outlook for the markets.

  • Duration 4:27
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We did see the Dow turned positive in the once again -- going into negative territory is all of this as a worries about the fiscal -- -- some about Europe.

Our next guest though says if there's not a fiscal -- solution we may get a replay a replay.

Of 2009.

This is what happened the markets back in 2000 not remember this ever want James -- thought -- thought asset manager president of equity asset management joins me now in.

Do you say that markets if we don't get a deal one in three chance we don't have one markets could drop five to 10% like that -- I think that's easily the comparison the can be made.

And it's also reminiscent to me of -- TARP was first turned down in the fall 2008.

And the markets really fell out of bed and a few days later I think we probably talked about it at the time.

Congress enacted it so it is something that I think.

The lack of any political will to come together and solve this I think it will really dramatically impact the funny that you also have something else about the markets for 2013 -- is very disconcerting you're talking about the second half of 2013.

The markets welcome back and told them.

Because of other issues flat profits from from you know corporations across this country lousy earnings -- quarter did not look great right so let's let's pick up.

On that the third quarter one of the things that we saw quite a bit of was flat revenue growth and there's nothing to indicate that going forward in the fourth quarter.

Or the first quarter of next year that revenues going to pick up so if prop.

You put all this together what you've got his uncertainty in corporate boardrooms it's keeping a lid on any sort of investment that would get.

Aggregate demand and revenue growth going so we see flat profit growth up for the next six months or sell.

That's the bad news the good news is underneath all this there are the animal spirits trying to get this economy growing again the labor market seemed to be picking up housing is definitely picking up if editor -- get through this political drama that worry and.

That could see -- market doesn't -- that can't what we're seeing though is investor fear and it yet it's warmed to it and it's unwarranted absolutely you've got high network clients -- -- the you do coming in your office and saying you.

What are we gonna do how to -- -- rebalance before the end of the year because of the unknown and I'm sorry but I don't see any good will coming out of Washington if anything it's the opposite right now that -- -- amid sitting on -- negotiate.

Amazingly so because I still I'm scratching my head on what's to be gained.

By this brinksmanship to the last minute but putting that aside to your point about what clients should be doing right now what we've advised.

Is in the risk portion of their portfolios primarily the stock portion their portfolios.

We got fifteen to 20% in cash on the sidelines.

We do see opportunities out there that were ready to put that money to work at a moment's notice.

But frankly were not going to do it while taking a gamble which is really what is on whether the fiscal -- is -- -- us.

About a couple things because you're also looking at the commodities space you're looking at natural gas in particular -- -- opportunity there are no matter what happens right but the clapping -- Nat gas at -- point 4% this year where the where the buys right counties and.

Right so natural gas and it's not just into commodities just where we see the value it had got really hammered earlier this year down below three dollars a share.

Consequently a lot of producers here in the US shut down their rigs shut in their wells.

What we're seeing now is that supply is on the margins a little bit lower demand is a little bit higher and prices are coming back up there now three dollars and 75 cents.

We see that pendulum continuing to swing up to four dollars and fifty cents.

We have to factor in here that crude oil is coming down at the same time.

Which helps the profitability of exploration and production companies to go out there and drill more wells.

So we see opportunity in royalty trusts like the San Juan Basin Royalty Trust okay which is a little bit down 43% though Jeremy and -- -- that's where the value on lives.

Are no.

I mean you're certainly not telling me that I should be -- buying it when it's up forty.

And I know you Sheryl you're -- a value investor -- so I don't think you're suggesting that.

No that that's there's definitely opportunity there as natural gas prices climb back up another 20%.

You could see the same price action in the shares of San Juan Basin Royalty Trust.

And lastly look for that the beaten down stocks there's an exploration and production company that has a lot of gas potential.

Called Newfield Exploration trading below book value we like it I can't -- it felt like the -- thank you very much healthier and the negotiations initials AJ I can't do well these are on and it's.

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