Take Five with Jeffrey Saut of Raymond James

If there is an upside to potential U.S. military action in Syria it could be that President Barack Obama will be forced to negotiate with Congress over budget issues in order to get permission to go to war, according to Jeffrey D. Saut, chief investment strategist at Raymond James & Associates Inc. Mr. Saut, who pulls no punches in expressing his disdain for “professional politicians,” is optimistic about a shifting culture in Washington, which he thinks will eventually translate into a stronger and energy-independent U.S. economy. InvestmentNews: With the United States on the brink of taking military action in Syria, how should financial advisers be positioning client portfolios? Mr. Saut: You should have cash and be ready to invest because the odds that we're in a secular bull market are high. I have been telling people since May that the window between mid-July and mid-August is the first window for a meaningful decline to begin. The fact of the matter is, that's pretty much what has happened. We raised cash going into that, with the thought of putting it back to work. The situation in Syria is more serious than Libya or Egypt. When the military gets new toys, they like to test them in actual combat. If we launch cruise missiles and they shoot everything down, it escalates from there. InvestmentNews:: Do you have a market perspective involving the upcoming Washington budget debates? Mr. Saut: News only has a short-term impact. But market fundamentals rule out over the long term. What is going on in D.C. right now is compromise. They are talking, and compromise is in the air. The budget debate will be muted because Obama has to buddy up to people to try and get this vote to go into Syria. I think he's making compromises right now. InvestmentNews:: Could an economic slowdown resulting from Syria and/or the budget battle derail the Federal Reserve's plan to start reducing its quantitative-easing program beginning this month? Mr. Saut: I think with the revised jobs data that came out [Friday], tapering is now off the table. I think eventually the Fed will have to start reducing the asset purchases. I just don't think it happens in September, and there's a better than 50/50 probability that it doesn't happen this year. InvestmentNews:: You have said that you think that the 2010 mid-term elections marked a shift toward electing “smarter policymakers.” Can you elaborate on that? Mr. Saut: It was a shift in that we didn't elect only professional politicians. In the House right now there are six lawyers for every MBA, and in the Senate there are eight lawyers for every MBA. But that started to change in the 2010 mid-term elections when 63 seats turned over and most of the newly elected aren't professional politicians. This is important because the Harry Reids and the Nancy Pelosis and the Barney Fifes of the world are freaking idiots. You need more businesspeople in there to run the government more efficiently. The entitlement thing has got to be addressed. I don't have a problem helping people who need it, but I have a problem with people gaming the system. We're starting to see some states require drug testing for welfare benefits, and we saw Michigan pass a right-to-work law, which was unbelievable, but it shows that the change is happening not from Washington, but from the ground up. InvestmentNews:: Is it realistic to expect that the United States could achieve energy independence within a decade, as some analysts have predicted? Mr. Saut: In 2008, the Eagle Ford oil field in eastern Texas produced 352 barrels a day. As of April, it was producing 536,000 barrels a day. The Bakken oil field in North Dakota was producing 127,000 barrels a day in 2008, but by the end of this year it will be producing more than a million barrels a day. If this country becomes energy independent, it changes the whole world's geopolitical structure. If companies can keep labor costs down through automation, then there's no incentive to build a plant outside this country when the cost of energy is coming down. You could invest in this trend now through some of the exploration-and-production companies that still look cheap. But the real beneficiaries are probably going to be the end users of energy, like airlines and railroads.