"Market Monitor"-Richard Lehman of Income Securities Advisors
Thursday, April 09, 2009PAUL KANGAS: My guest "Market Monitor" this week is Richard Lehmann, president of Income Securities Advisors based in Miami Lakes, Florida and Richard, welcome back to NBR.
RICHARD LEHMANN, PRESIDENT, INCOME SECURITIES ADVISORS: Thank you for having me, Paul.
KANGAS: With interest rates at just about record lows, are you finding it difficult to find decent yields without sacrificing safety?
LEHMANN: Absolutely not. This is the best of times to be buying into income securities because with the fear element that is still in the marketplace, yields are at record levels, even for investment grade securities.
KANGAS: Why is that?
LEHMANN: It's fear, pure and simple. And yet, the fear is somewhat unfounded because the government has demonstrated that it's going to support the industry and do whatever it takes to keep these companies from collapsing.
KANGAS: Uh-huh. Now which markets do you like the best that have the best buys, so to speak, the Treasury, municipal or corporate bond markets?
LEHMANN: Well, Treasuries I think are overbought and the best buys really are in the corporate arena and specifically in the financial based type securities.
KANGAS: How big a threat do you feel inflation might pose in the coming year?
LEHMANN: Inflation I think is the major concern investors should have going forward. Right now we're in a deflationary spiral. I think that that is going to end by year end. And I think by the middle of next year we're going to see inflation on everybody's (INAUDIBLE).
KANGAS: Last August on your last visit with us, you recommended four issues. The first two were bets on the auto sector and you lost pretty big time with the Ford debenture (KSK) package with GM (BGM). Are you still with these two issues?
LEHMANN: Yes, the Ford I think is fully priced at this point. I would sell it. But I think General Motors is very good bankruptcy play and is under priced.
KANGAS: That package would do better with a GM bankruptcy than if they bailed them out otherwise?
LEHMANN: I don't believe there is going to be a GM bankruptcy. And I said as much in my latest news letter.
KANGAS: OK. Fair enough. There were two others you recommended and it was a tough atmosphere, Citigroup (C) down almost 21 percent, Royal Bank Scotland (RBS) down 63. What do you do with those two?
LEHMANN: The banking industry has not yet shown the recovery that I think is there. I would sell the Citi bank at this point. I think it's fully priced. The Royal Bank of Scotland I think has tremendous recovery potential.
KANGAS: OK, fair enough. Stay with that one.
LEHMANN: Yes.
KANGAS: How about some new recommendations, Richard? Things are improving.
LEHMANN: Specifically I think that investors should be looking at things that will protect them against inflation. And in that respect, energy and commodities are the things that you want to be invested in because they are going to respond most quickly to inflationary situation.
KANGAS: This is a package of what, preferred stocks or --
LEHMANN: Specifically, no, these are all high-yielding common stocks.
KANGAS: Common stocks.
LEHMANN: Two common and two preferred. The two Canadian trusts I recommend are Enerplus Resources.
KANGAS: ERF on the big board.
LEHMANN: ERF and Penn West Energy (PWE).
KANGAS: Let's have a look at that chart. That's down too.
LEHMANN: The yield on that one is a little overstated. It is about 13 percent, not 21.
KANGAS: Thirteen percent, but that's still not bad.
LEHMANN: These pay monthly as well.
KANGAS: OK. We're running out of time. Do you have two more?
LEHMANN: Freeport McMoran (FCX pm), which is a copper and gold mining company. It's a convertible security and Archer Daniel Midland (ADM pa), which is in the commodities.
KANGAS: Let's have a look at the chart for that one. FCX on the other one and this one ADM.
LEHMANN: Both of those yield 9 percent, so that is good protection against inflation and a terrific yield to boot.
KANGAS: Do you personally own these securities, Richard?
LEHMANN: Both myself and my clients own this, yes.
KANGAS: So you have faith in inflation-resistant type of securities and that is what you want to own.
LEHMANN: I think it should be in everybody's portfolio at this point.
KANGAS: Want to thank you very much for being with us again, Richard.
LEHMANN: Thank you, Paul.
KANGAS: My guest Richard Lehmann, of Income Securities Advisors.
