Roger Altman And Salient Partners' Lee Partridge On Fed Tapering

Roger Altman, investment banker, private equity investor and former United States Deputy Secretary of the Treasury and Lee Partridge, Chief Investment Officer and Portfolio Strategist at Salient Partners, both spoke on CNBC's Squawk Box this morning to discuss the current state of the market and the possibility of the the Fed tapering. Altman said that we may have seen the lion's share of market gains for 2013. "I don't think we've seen the lion's share of the gains for over a three to five year period, because I think the macro factor is underlying the market, ah, remain positive, and I think what you're basically seeing is the United States healing slower than anybody would like, but healing," said Altman. He said that we're seeing this healing in the housing, automotive, energy, retail and lending markets. According to Altman, we're slowly building a stronger foundation for a stronger 2014, 2015, and 2016, which he foresees as good years. Altman did say that the international picture is mixed however. He noted that Europe is in for a long, slow and painful slog of a recovery, and that fast-moving China is slowing down. international picture is mixed, but outlook for equities remain positive Altman said that in regards to tapering, that two questions should be asked: 1) Is the market ready for the Fed to take it's foot off of the gas? and 2) Can the Fed unwind its balance sheet in a way that's not disruptive to markets and not disruptive to price trend. Altman went on to say that the Fed could taper to accommodate the market because they determine which pace to taper at. "If they choose, they can do it as a glacial pace," said Altman. Altman said that he's confident that the Fed can do it, but that they'll probably play it by ear. Partridge weighed in with his views from Salient Partners, covering how they're guiding their investors. "We think there's a lot of momentum in the market, and you've had pretty strong earnings, so 69 percent of the companies have released earnings that beat their forecasts. The problem is only 46 percent of them beat their revenue forests, so you're seeing positive earnings largely led by cost-cutting and some of the stimulus that's on the table, not a lot of top line growth. So when we advise clients, we say stay long equities, but be cautious, still maintain diversification, keep bonds in your portfolio," said Partridge. "We're not of the camp that says the Fed is going to unwind their balance sheet anytime soon. In fact, if you look at the impact of Fed policy, most of it is based on the rate of change and the run rate of interest rates and the run rate of asset purchases. So the first step would be to taper off the $85 billion per month that they've been purchasing, which frankly we think is just as likely to increase over the next year as it is to decrease, cause remember, we're still at a 100 percent debt to GDP." Partridge said that we're in the very early innings of a 10-15 year delivering cycle. "To think that the Fed is going to start unwinding $3 trillion and pushing those assets back on the market when they've been accumulating assets at a pace of $85 billion a month, I think is a little unrealistic. So part of our view thats more constructive on equities is dependent on the Fed maintaining an accommodative stance through 2015," said Partridge.