“The productivity numbers that have been positive are really the result of artificial stimulus,” Lekas told CNBC. “The organic growth in corporate America is in the negative and what you have is rising cost of capital. We have 70 percent of corporate, municipal and consumer paper and the Fed trying to raise $2 trillion coming due in the next 3 to 4 years and there’s not enough money to go around.”
Lekas expects the unemployment rate to hit 16 percent as more companies consolidate and the equity markets will break their lows by the end of October and will go back the historic March 9 lows.
“You just fell off a 20-story building and you’re at floor 5,” he said. “Everything’s ok so far, but in the end, you’re just a little bit early.”
In the meantime, Veru said individual stock selection is the way to go.
“It’s ridiculous to say that all equities are bad,” said Veru. “You learn a lot more about companies through a bear market than through a bull market.”
“Companies that react to a changing economic environment with strong balance sheets and the ability to generate cash flow through this difficult environment are where we’re placing out bets,” he said.
Genesee & Wyoming Railroad
Conservative fixed income
Short the bond market — "Avoid interest rate risks which could get volatile as a lot more paper is issued," said Lekas.
Veru’s firm owns shares of GWR.
No immediate information was available for Lekas or his firm.