Oppenheimer's Chief Investment Strategist, Brian Belski, talked to Bloomberg's Ken Prewitt, on June 8, about the U.S. economy, consumers, employment, and his best investment idea.
From Bloomberg:
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
BRIAN BELSKI, CHIEF INVESTMENT STRATEGIST, OPPENHEIMER & CO., INC, TALKS ABOUT THE ECONOMY AT BLOOMBERG SURVEILLANCE
JUNE 8, 2011
SPEAKERS: KEN PREWITT, BLOOMBERG SURVEILLANCE HOST
BRIAN BELSKI, CHIEF INVESTMENT STRATEGIST, OPPENHEIMER & CO., INC
9:37
KEN PREWITT, BLOOMBERG SURVEILLANCE HOST: On the line now, Brian Belski, Oppenheimer & Company. Stock market now only down two points, so, Brian, apparently people aren't really too shaken up about this OPEC development.
BRIAN BELSKI, CHIEF INVESTMENT STRATEGIST, OPPENHEIMER & CO., INC.: Well, no, and I think, too, that given that we were a little bit prepared for knowing that our demand - meaning the U.S. - would be going down, especially given where miles driven is and the like, and that people are becoming much more defensive in terms of what they are buying and doing. So it doesn't surprise us that we are seeing a little bit more of a muted response here this morning.
PREWITT: Well, I know you are not an oil guy, but I'll ask you this question anyway. AAA this morning - $3.75 a gallon the nationwide average for a gallon of regular, down from almost $4.00 a month ago. Have we seen the high? Is this going to continue to drift lower?
BELSKI: Well, that's interesting. It probably will, given the fact that it looks like the global economy is slowing a little bit, too.
But with respect to the pull back in oil prices on a near term basis, when individuals are planning their vacations, they don't really look at what happened a couple months ago. They are really looking at what was happening a year ago. And a year ago, oil prices and gas prices were much lower, so as people kind of plan out their summers, I think their summer is already planned. They are not going to react to weekly gyrations in gas prices.
PREWITT: Well, what is the early reading on people's summer plans? Stay-cations? The word that popped up in the lexicon a couple of years ago?
BELSKI: It sure looks like it. The interesting thing, Ken, is that non-discretionary consumption, you know, those things that we need to buy to live off of, whether or not it is toothpaste or smokes or beer or soda pop or food, those prices as a percentage of your total personal consumption expenditures are eclipsing where we were in 2008. And just to use that term - stay-cation, that was clearly a trend in 2008 and 2009 as commodity prices were rising in 2008, and clearly the recession was grabbing control in 2009.
So I think the events over the last six months have clearly shaken the consumer. And we are hearing more and more about this defensive behavior that we mentioned previously and whether or not that stay-cation could be one derivative of that.
PREWITT: Yes, the Washington Post ABC Poll out today about 2:1 Americans say the country is pretty seriously on the wrong track. Nine in ten rate the economy in negative terms - nine in ten, and six in ten say the economy has started - has not started to recover. And those who say it has, say it is weak at best. That isn't a really robust forecast for consumer spending, is it?
BELSKI: No, it isn't, especially considering that our economy runs on the consumer and on two very important words: assumption and consumption. If we assume things are going well, we are going to increase our consumption.
And as we started to think about that the second half of last year, Ken, and things have clearly in our view "hit a soft patch." That doesn't mean the overall recovery is over. Quite to the contrary, we are just kind of slowing down. Indicators on a near term basis have rolled over.
But I find it really interesting at how economists love to pick on less negative derivatives, second derivatives analysis, but now that things have become less positive and now everyone is calling for a double dip. I just think that is too reactive, Ken. I think you have to look out in the next 12 to 18 months, and clearly we think through the strength of corporate America and, yes, the consumer - the consumer balance sheets are much improved relative to where they were a couple years ago.
So the key to this whole equation, Ken, and we've been very consistent on this, is employment. We were starting to harp on employment in the fourth quarter of last year when everybody was getting all bulled up again. And that is why we are calling for single digit returns only this year. We just don't think corporate America is prepared to escalate employment growth the way that we should be, especially considering how great corporate America in terms of earnings and balance sheets are and the overall recovery in stock prices has been in the last couple of years.
Belski shares his best investment idea right now:
