CMG AdvisorCentral

Tactical investing news, views and resources for financial advisors

Russia ETFs Crumbling Blumenthal Tells IBD

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Investor's Business DailyCMG Capital Management Group CEO Steve Blumenthal is quoted in the Investor’s Business Daily story Russia ETFs Reel From Crumbling Ruble, Rate Hikes. Excerpt fom the story:

“Raising rates is an attempt to attract foreign investors to buy Russian bonds at 17%,” thereby shoring up the ruble,” said Steve Blumenthal, CEO of CMG Capital Management.

Top-Heavy In Energy

The fortunes of Russia ETFs are closely tied to oil and gas; energy stocks make up 40% of RSX’s portfolio. The highly concentrated RSX’s top 10 holdings include Novatek, Lukoil (OTCPK:LUKOY) and Gazprom (OTCPK:OGZPY).

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U.S. Equities Have Room To Run

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By Steve Blumenthal, CEO, CMG Capital Management Group

Steve Blumenthal, CEO, CMG Capital Management Group

Steve Blumenthal, CEO, CMG Capital Management Group

Last week Bill Gross and the former co-CIO of PIMCO, Mohamed El-Erian, were advising clients to lighten up on stocks. You may agree that these two people certainly have a passion for what they do. To that end, we all benefit.

I personally believe there is more run left in the equity market. Yet risk is high and I certainly don’t want to be left sitting on the tracks in front of an oncoming train. Stay nimble and alert. And remember while risk can be measured (high today due to high valuations), it is more difficult to time.

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Investment Risk Elevates

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Extreme bullish sentiment, pushes risk arrow farther to the right.

Extreme bullish sentiment, pushes risk arrow farther to the right.

By Steve Blumenthal, CIO
CMG Capital Management Group

Trade Signals, Wednesday Nov. 26, 2014 —  Trend evidence remains positive as measured by Big Mo and the 13/34-Week EMA on the S&P 500. Sentiment is far too bullish, suggesting short-term caution.

Sentiment has reached the extreme bullish state about 28.5% of the time since 1994. The average return is a -10% when such extremes have been reached. The simple message is to be weary of crowds at extremes.

Investment Risk Elevates: Due to current extreme bullish sentiment, I’ve moved the risk arrow farther to the right.

Conclusion: Trend evidence remains positive and don’t fight the Fed or the tape remain the important theme. Own equities (but hedged).

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Blumenthal On Bonds

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1977 Treasury BondBy Steve Blumenthal, CIO
CMG Capital Management Group

Trend following process moved us from HY
to very short-term bond exposure last week

For more than 22 years I’ve been trading the intermediate-term trends in the high yield market. I wake up each day, grab a coffee and sit in my favorite chair. With laptop online, the first thing I do is look at the prior day’s high yield bond mutual funds’ closing prices – it’s a pretty long list. Do anything for that long a period of time and you gain a feel for trend. Of course, my wife looks over and says, “Looking at charts again.” It has remained so interesting to me. I know – I need to get a life.

Anyway, I’ve been warning on the coming default wave in high yield and I can say with some confidence that high yield is usually one of the first asset classes to warn of recession. Though, of course, past performance means zilcho in this business.

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The New Enhanced Portfolio

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InvestmentNewsThe traditional 60/40 buy and hold portfolio is dead, CMG Capital Management Group CEO Steve Blumenthal told InvestmentNews in the story Investment Managers ditching 60/40 portfolios in favor of more liquid alternatives

Enhanced Modern Portfolio Theory is what Blumenthal calls it. It’s not that Modern Portfolio Theory (MPT) is wrong, rather that it’s time to question whether 60/40 remains the best way to optimize the risk-reward relationship. This asset mix is simply too narrow in the current low-dividend-yield, low-inflation, low-interest-rate environment.

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Mid-Week Market Snapshot

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Market Sentiment CMG Capital Management Group

The CMG risk meter tilts back slightly.

CMG Capital Management Group Mid-Week Market Snapshot

By Steve Blumenthal, CIO, CMG Capital Management Group

Investor Sentiment

The S&P 500 is down nearly 10% from its September high of 2019. I’m going to tilt back the risk meter just a bit as investor sentiment is now at levels of extreme pessimism and the market is testing some technical support.

On the concern list: QE is ending this month and Europe, Japan and China are in decline (with recession in Europe), commodities are in a steep sell-off (signaling global economic weakness), war risk and add Ebola. We know risk to be elevated – whether a short-term market scare or the beginning of another crisis remains to be seen.

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Bonds Bullish, Equities Still Long

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Investor sentiment has become more pessimistic which is short-term bullish for the equity market.

Investor sentiment has become more pessimistic which is short-term bullish for the equity market

Mid-week review of the markets
from CMG Capital Management Group

Equities The equity market trend remains positive as measured by Big Mo and 13/34-week EMA.   There is good technical support at S&P 500 Index 1900 area.

Bonds After a pretty healthy sell-off, our high yield strategy has moved back into a “buy” signal. The Zweig Bond Model is also back in a “buy” signal reflecting a bullish environment for longer-term treasury and corporate bond exposure.

Sentiment Daily sentiment is in the Extreme Pessimism zone (a bullish counter indicator) and weekly sentiment is nearing Extreme Pessimism.

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Blumenthal At Morningstar ETF Conference

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Steve Blumenthal, CEO, CMG Capital Management Group

Steve Blumenthal, CEO, CMG Capital Management Group

CMG Capital Management Group CEO Steve Blumenthal will be at the Morningstar ETF Conference in Chicago tomorrow through Friday.

Some of the ETF landscape’s sharpest minds will be on hand to help sort out the complexities, theories, and opportunities surrounding ETFs.

If you’re at the Conference catch Steve on a panel discussion. Steve joins Robert Smith, from Sage Advisory, and Morningstar moderator David Sekera on Friday, Sept. 19, 9:40 a.m. – 10:30 a.m. for Breakout Session 5, Managed Portfolios. Facing the Fed-induced Headwinds.

Follow the Conference on Twitter: #MStarETFUS.

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Blumenthal On Zweig Bond Model In Forbes

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Steve Blumenthal, CEO, CMG Capital Management Group

Steve Blumenthal, CEO, CMG Capital Management Group

CMG Capital Management Group CEO Steve Blumenthal initiated his monthly analysis of the Zweig Bond Model in Forbes. See Zweig Bond Model Remains Bullish.

Created in the mid 1980’s by famed investor Marty Zweig, the Zweig Bond Model’s objective is to invest in bonds with longer maturities when interest rates are declining (a good environment for bond investments) and to invest in shorter-term instruments when interest rates are rising (a bad environment for bond investments).

It’s a mathematical and unemotional process.  While Wall Street was saying interest rates will head higher in 2014, this process stayed invested in longer-term bond funds and bond ETFs.  So far, year-to-date, that has been the right move (bullish buy signal for bonds).

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Blumenthal on High Yield Bonds in Forbes

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ForbesCMG Capital Management Group CEO Steve Blumenthal sounds the alarm on high yield bonds in his latest Forbes article (excerpt below). See the whole article here: Code Red In High Yield.

Steve is off this week, enjoying a vacation in Nantucket. Read about that and his further discussion of the dangers/opportunity in the high yield market in his 7/25/2014 On My Radar: “Seen through my lens, another “once in a generation” buying opportunity is fast approaching. I remember saying the same thing in 1999 and 2007.  The lines between generations must be shrinking as such opportunities seem to appear about once every seven years or so.”

In my 20 years of managing high yield bond investments, I’ve never seen so many signals that scream caution.  Desperate to find yield, investors have poured billions into high yield bond funds and ETFs driving the yield on the Barclays High Yield Bond Index to just 5.54% — the lowest level in history.  Investors are positioning in a risk they may not fully understand.

Let’s look at what will lead to the next default wave and discuss a tactical strategy that may help you further participate in price gains and also protect your wealth during periods of significant price loss.

– Forbes Code Red in High Yield.