Jack Ablin: Preferreds Could Get Boost From Shift out of Common Stock

By on November 17, 2012

Jack Ablin - BMO Harris Private BankThe Nightly Business Report’s Tom Hudson interviewed “Market Monitor” Jack Ablin, chief investment officer at BMO Harris Private Bank yesterday. Hudson mentioned that with 45 days before the end of the year, lawmakers said they would speed up negotiations to avoid going over the fiscal cliff. Ablin commented that the five percent downdraft endured since the election was pretty emotional. His inclination would be to speculate that the news will turn out fine even if lawmakers make a temporary compromise.

Ablin said he was bullish on emerging markets because they are trading at roughly a 20 percent discount to the U.S., but unlike Europe, many emerging market countries have the financial wherewithal and the monetary firepower to actually continue to stabilize their economies if we do “run into some rough water.” Ablin recommended investing in the Vanguard Emerging Markets ETF (VWO).

Ablin indicated he was also bullish on the Powershares Preferred Portfolio ETF (PGX). Ablin speculated that we might see flows out of common stock and into preferreds as investors get worried that the tax rate could go up on common stock dividends. He added that it’s a good way to collect some good income as we could see a transfer out of common stocks and into preferreds, which are currently taxed at different rates.

Ablin commented on a couple of previous picks from his visit back in March; Chesapeake Energy (CHK), down around 30% from when he recommended it and ExxonMobil (XOM) which has risen about 2.5 percent. Ablin believes that long term natural gas is going to be one of the key ingredients to revive our growth. He said natural gas and some of the other fossil fuels have come under attack, especially under the new administration. We’re going to still have a nice tailwind for this longer term, he added.

Ablin said he owned the two ETFs mentioned in the interview, but did not own the common stocks.

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