"What matters to us is persistence to cash flow rather than price-to-concept, and big companies like Microsoft or Oracle—two of our biggest tech holdings, for example—they generate oodles of cash flow, they buy back stock and these companies like Microsoft, they have dividend yields close to 3 percent," he said.
McLennan said he was buying stocks during the recent, short-lived selloff.
"If you're a buyer of good businesses at good prices, you should wait for those moments where you can buy them at good prices," he said. "And today, the bottom-up pickings are a little scarce."
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McLennan added too much debt was largely responsible for low interest rates, a situation that could continue.
"In a sense, everybody was getting ready for the rising cycle in the United States. Witness the decline in the price of gold. Witness the decline in the euro versus the dollar and all of these kinds of variable," he said. "But if you look around the world and you look at the countries that have had the most debt—add sovereign debt to consumer and corporate debt—those countries have typically resorted to sustained financial repression. And so, we may have to get used to an environment where the authorities try to repress interest rates on a more generational basis, as opposed to on a cyclical basis."
McLennan said debt levels in the United States relative to GDP are higher than before the financial crisis in 2007, according to federal data.
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"So, the deleveraging has not happened," he said.
Gold, McLennan added, was a way to add portfolio protection.
"If you think there's too much debt in the system and you want a potential hedge against the policy risk from that, be it sustained financial repression or ultimately longer-term inflation, then we think gold is a good potential hedge against that," he said. "It's nature's alternative to manmade money."
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