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Lee Munson on trading a market near all-time highs

Lee Munson of Portfolio Wealth Advisors on finding pockets of opportunity in this market.

Video Transcript


- 16 minutes to the closing bell, and we want to bring in Lee Munson, founder and CIO of Portfolio Wealth Advisors. There are several ways to build your wealth. And at the beginning of this show, Lee, we spoke to Carter Henderson. It was all equities, right? And I was asking him about REITs.

And here's a real-world example. Woman upstairs, lovely elderly woman, moving to Cleveland-- she should go to Florida. I love Cleveland. She's going to Cleveland. She sold the apartment, 16% discount. Four in this building-- I realize it's New York. Four have sold in the last month-- price reductions. But the mass exodus-- not so fast.

I've got to believe these kinds of dips-- I don't know commercial-- are an opportunity for people. So what do you see, at least with commercial real estate, with REITs?

LEE MUNSON: I wish they were at a bigger discount, I have to tell you. You know, when they're down 8% to 10% from last year, right-- that's the discount-- I wish I can buy them at $0.30 on the dollar. But we can't have the double standard for REITs that we do in the stock market. With rates so low, these things are kicking out 3% to 4%.

So on equity REITs, I think you hold them. Would I buy them here? I think you could buy them. I think they're a great bond alternative. But I think it's going to be a multi-year recovery. So if you like 3%-plus, which is 3 times the 10-year Treasury, I think that's the best way to go.

My personal favorite, though, are the mortgage REITs, right, because that-- you're taking leverage risk, which the Fed has said-- until 2023, we're going to keep the cost of these mortgage REITs, which own no property-- they just own the paper-- we're going to make their cost of borrowing very, very cheap for three more years. And we're also going to take the cost of hedging, you know, in option markets-- since there's no Treasury volatility, we're going to make that super cheap.

So while I like equity REITs and we're holding them, I think if you really want to look for higher yield in that 7%, 8%-plus, the mortgage REITs are the best way to go. I like the ticker symbol REM, like the '80s band, because it's an easy way to get a basket of it. That's the play.

- Hey, Lee, what about-- a lot of times investors right now-- they're a little bit hesitant to jump into US stocks. Where are you finding other opportunity, or are you finding opportunity, outside the US, because we have stocks not too far from those record highs that we got last week?

LEE MUNSON: I know. And well, you know, Paul [INAUDIBLE] Jones keeps whispering in my head, my avatar of him. And he keeps saying, Munson, winners average winners. They average up. I would say that if you just need a value, you just want to get something that's cheap, emerging markets are the only game in town. Even my small-cap value is getting overvalued.

So I think you can buy China here. But if you really want to play it and make it real simple, just buy a basic index fund, like EEM. You know, that's the main emerging markets. Vanguard is VWO.

Here's what I love about it. You've got 40%-plus in China. OK. They're growing. COVID's over. The currencies are cheap. You've got almost 10% in those indexes in Latin America.

Why would you buy Latin America? Who do you think is going to be the main beneficiary of all the stimulus and this resurgence in America? It's going to be remittance going back down to Latin America and their industrial complex.

So I think that if you look at the account-- you know, the trade deficits are great. They're undervalued. You're buying the stuff. You're getting a much better dividend. That's where you play. That's where you put new money.

- 40 seconds, real quick-- got to ask you, And I'm going to reference Katrina and the Waves from the 1980s-- "Walking on Sunshine," Lee. If you're going to Latin America-- I mean, Brazil-- it's going to be a basket case-- Argentina already is-- why would you take that risk?

LEE MUNSON: Because I like to buy things that are blown up, because I have so many things that are doing so well, like my mortgage REITs. I have things that are doing so well, like my small-cap value killing the NASDAQ last quarter, killing it this year, that I want to find things that will have a catalyst in the future.

And so you have to put that portfolio together with what has reasonable valuations and is working. And then you got to find out anticipatory-- what do you think's going to work going forward? And if you want value and you want to commit money that's not a high multiple, buy what's completely blown up, left for dead, and nobody wants to touch, period. That's how you make money.

- All right. Lee Munson, video may have killed the radio star, but certainly not you. Lee Munson is founder and CIO of Portfolio Wealth Advisors. We look forward to you coming back to continue this discussion with us another day.