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Near Zero Interest Rates Not The Answer

Posted on 06.13.14 |

Steve Blumenthal Founder & CEO CMG

Steve Blumenthal
Founder & CEO
CMG

Every security is priced off of Fed-set interest rates.  The ultimate question is, are rates going higher or lower?  The answer to that trickles through every other asset class, affects borrowing rates, corporate liquidity, profit margins and credit risks, stock valuations etc.

Bank rates have come down but, according to Martin Armstrong, the spread that banks are charging vs what they pay in deposits and what they charge in loans is near a record high.  Individuals and corporations have been largely deleveraging.  Less spending = slow economy.  The same thing happens when you take more money in the form of higher taxes.   Expected higher tax and higher regulation changes ones view on future expected return and shapes decisions on business expansion and risk taking.

The current Keynesian central planning approach is not the answer. The answer is in letting millions of individuals seek solutions, create new things, seeing opportunities, taking chances, filling needs, driven by their own self interest and the interest of their individual teams that when aggregated up creates a larger and healthier collective whole.

Armstrong says he has the largest economic database in the world. He believes that it has helped him better identify major trends and turning points.  That has come in handy in combination with his Adam Smith approach of staying unbiased and letting the data speak instead of the Marx-Keynesian approach of trying to force the free markets to do as a few central planners think best.

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Categories: Monetary Policy Tags: Steve Blumenthal, The Fed

Piketty Has Legs

Posted on 06.06.14 |

Steve Blumenthal Founder & CEO CMG

Steve Blumenthal
Founder & CEO
CMG

The world’s fascination with Thomas Piketty and his book Capital in the Twenty-First Century is not abating. In the Bloomberg TV video today, Piketty Says FT Made a Fool of Itself Over His Book (video embedded below), we see that the “analysis” by the FT and Piketty’s aggressive response keeps this story cycle spinning and book sales moving along briskly. This is probably the most popular economics book in generations and perhaps the most popular book of any genre now, according to the Bloomberg Anchor. As they say in Hollywood, this story has legs.

Where do I stand on the Piketty debate? I agree with this assessment by Peter Schiff: “There can be little doubt that Thomas Piketty’s new book, Capital in the 21st Century, has struck a nerve globally.  What is surprising, however, is that the absurd ideas contained in the book could captivate so many supposedly intelligent people.” If you want a thorough analysis, read Peter’s excellent article in Advisor Perspectives: Piketty’s Envy Problem.

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Categories: Global Economy, Monetary Policy Tags: Advisor Perspectives, Capital, Peter Schiff, Steve Blumenthal, Thomas Piketty

Tepper Tantrum

Posted on 05.22.14 |

PJ Grzywacz President, Chief Compliance Officer, CMG Capital Management Group

PJ Grzywacz
President & CCO
CMG

The market had a Tepper Tantrum last week. We all know what a taper tantrum is after the Fed backtracked on tapering its bond buying program last year. But what is a Tepper Tantrum?

David Tepper, aside from being a fellow Carnegie Mellon alumnus, is one of the most well-known money managers in the world. His firm, Appaloosa Management, manages more than $20 billion.  More importantly, Mr. Tepper has been right about equity markets.

Since the financial crisis, few investors have matched Tepper’s track record. His ability to read the tea leaves of Fed policy has made him a market sage.  So when David Tepper speaks, the market listens. It didn’t like what it heard last week, namely, that it’s time to take some chips off the table.  Mr. Tepper didn’t really say anything new; many market observers (ourselves included) have been highlighting the elevated risk at these equity market levels, but investors like winners, and Tepper’s winning calls have made him the highest paid hedge fund manager over the last two years.

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Categories: Equities, Monetary Policy, Tactical Investment Strategies Tags: Bonds, David Tepper, Equity Markets, PJ Grzywacz, Risk, Tactical Investing, The Fed

Is Europe Late to the Party?

Posted on 04.08.14 |

PJ Grzywacz President, Chief Compliance Officer, CMG

PJ Grzywacz
President, Chief Compliance Officer
CMG

È tempo per un po ’di QE? Nein danke. Vielleicht?

TRANSLATED:  Is it time for a little QE? No thank you. Maybe?

Although Mario Draghi, President of the European Central Bank (ECB), announced that the Bank’s governing council is prepared to take emergency action if inflation falls too low, it may be a case of too little, too late.  By emergency action, he of course means quantitative easing, which to this point has been anathema to German policy makers.

Each of the EU’s competitors has acted with some form of stimulus, loose monetary policy or unconventional quantitative easing in an attempt to stimulate growth.  In the U.S. we have gone through every monetary tool in the bag.  In the UK, the Bank of England is so pleased with its QE, it is considering whether it needs to make “any adjustments” (read “any” as in “any, ever”) at all to its bond buying programs. Read More >

Categories: Global Economy, Monetary Policy Tags: European Central Bank, EWJ, Global Economy, Monetary Policy, PJ Grzywacz, QE

Short Yen Top ETF Pick for Blumenthal in 2014

Posted on 01.03.14 |

investors Investor's Business DailyStephen Blumenthal picked YCS (Pro Shares Ultra Short Yen) as the ETF that has the best prospect to outperform in 2014.  See the full story in Investor’s Business Daily: Best ETFs For 2014: 9 Picks From 9 Strategists.

Read More >

Categories: Monetary Policy, Tactical Investment Strategies Tags: CMG Capital Management Group, Investor's Business Daily, Steve Blumenthal, YCS

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