CMG AdvisorCentral

Tactical investing news, views and resources for financial advisors

Archives for April 2016

All About The Fed

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CMG Capital Management Group Inc.The Fed left interest rates unchanged.  I still believe it is all about the Fed.  To that end, the Don’t Fight the Tape or the Fed indicator remains in a bullish signal.  The short-term “however” is Investor Sentiment.  It remains exceedingly bullish – which is short-term bearish for equities.

Most equity signals are bullish, yet my favorite indicator – the CMG NDR Large Cap Momentum Index remains in a sell signal.  It uses longer-term trend indicators, along with other components, and it has not yet turned bullish.  The short-term and intermediate-based indicators are bullish as shared below.

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Blumenthal on FOX Business

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FOX Business "Countdown to the Closing Bell" with Liz Claman. Guest is Steve Blumenthal, CEO, CMG Capital Management Group Inc.Steve Blumenthal, CMG Capital Management Group CEO was a guest on FOX Business “Countdown to the Closing Bell,” with Liz Claman.

Steve discusses the possibility of a recession in the U.S., following the recession that appears to be happening globally. Indications are that returns on equities will be flat to minimal for the next 10 years, says Steve, due to the high valuations of stocks.

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Blumenthal On Shiller

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(left ) Brianna Blumenthal, Professor Robert Robert Shiller, Steve Blumenthal at Annual Global ETF Awards dinner

(left ) Brianna Blumenthal, Professor Robert Shiller, Steve Blumenthal at Annual Global ETF Awards dinner

Last Thursday I met The Yale University Sterling Professor Economics Robert Shiller at the 12th Annual Global ETF Awards dinner (Shiller is recipient of the 2013 Nobel Prize in Economics).  I told him how I used his data in my research paper.  I ranked his historical month end CAPE (or Cyclically Adjusted Price Earnings) into five categories that ranged from least expensive to most expensive and then looked at what the subsequent 10-year returns turned out to be for each category.

Not surprisingly, the returns were best when valuations were most attractive (lowest CAPE) and risk too was less as measured by average and maximum drawdown.  The performance figures were somewhat similar to our median P/E calculations.

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Supply / Demand Turns Bullish

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CMG Capital Management Group Inc.The supply/demand indicator turned bullish last week.  The process looks at a smoothed total volume of declining issues versus a smoothed total volume of advancing issues, using a broad market equity index.  This indication is another sign of market strength.

The big “however” is investor sentiment.  We had been suggesting that the extreme level of pessimism supported a short-term recovery in the markets.  That has happened.  Sentiment is now showing extreme investor confidence.  Such optimism is rarely rewarded.

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Blumenthal on Financial Quarterback Show

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Josh Jalinski The Financial Quarterback interviews Steve Blumenthal, CMG Capital Management GroupCMG Capital Management Group CEO Steve Blumenthal appeared on Josh Jalinski’s Financial Quarterback show to talk about the markets and investing.  The Financial Quarterback Show can be heard every Saturday on WOR 710 AM (New York) from 9am to 11am and Sunday from 9am to 10am.

Steve is on the show for the full hour. He covers many topics, including how his weekly newsletter On My Radar evolved, what could lie ahead for the markets, and what he believes are the most important lessons for advisors and individuals to learn about investing. Listen to the segment below or on the WOR 710 web site. An excerpt:

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Bonds And Gold In Bullish Trend

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CMG Capital Management Group Inc.The CMG Managed HY Bond Program moved back to a buy signal early this week.  Bonds (the Zweig Bond Model remains in a buy signal), emerging markets, even gold (gold remains in a buy signal below) are all moving higher.

Also notable last week: the 13-week Exponential Moving Average (EMA) line crossed above the longer-term 34-week EMA line.  Trend followers smooth the historical price performance and, when a shorter-term trend line crossed above or below, it identifies a change in trend.

CMG NDR Large Cap Momentum Index

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U.S. Recession Watch

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The business cycle is the fluctuation in economic activity that an economy experiences over a period of time.  A business cycle is basically defined in terms of periods of expansion or recession.

expansion

During expansions, the economy is growing in real terms (excluding inflation), as evidenced by increases in indicators such as employment, industrial production, sales and personal incomes.  During recessions, the economy is contracting, as measured by decreases in the above indicators.

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Analyzing Long Term Investment Returns

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CMG CApital Management Group Market AnalysisIn my view, the bet today comes down to this: you believe the Fed can hold the market up (aka “the Fed Put”), you believe politicians can accomplish structural reform and you believe that the same holds true in Europe, China and Japan.  Essentially, “whatever it takes” wins.

Alternatively, you believe that extremely high equity market valuations matter, excessive debt is problematic and that it is ultimately impossible for central bankers, try as they might, to repeal economic business cycles.

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How to Use the CMG NDR Large Cap Momentum Index

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CMG Capital Management Group Inc.An advisor client asked me how I use the CMG Ned Davis Research Large Cap Momentum Index within a total portfolio.  My two cents is I like to have a systematic way, absent emotion, to raise some cash when the weight of technical evidence is negative and a way that gets me back fully invested when the weight of evidence is positive.

For example, I would favor a 30% allocation to equities at this time because, in my opinion, valuations are high (as you’ll see in Friday’s “On My Radar,” we are now at a level that is higher than it was at the market peak in 2007).  In my personal account, within my 30% equity weighting, I would have one-third invested in an ultra-low fee large cap ETF.  On sell signals, I would trade that large cap equity ETF to BIL (a short-term Treasury bill ETF).

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Blumenthal’s Total Portfolio Strategy on theStreet

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Steve Blumenthal, CEO, CMG Capital Management Group Inc. on theStreetSteve Blumenthal, CEO of CMG Capital Management Group, stopped by the studios of theStreet in New York to talk with Gregg Greenberg about some of the ETFs in the CMG portfolio. See the segment here: Four Hot ETFs With Strong Relative Momentum.

Excerpts:

Gold has been shining so far in 2016, rising 16% compared to a flat S&P 500. Blumenthal does not expect gold to lose its luster anytime soon. “We view gold as a hedge against the irresponsibility of central banks,” said Blumenthal, adding that it is in a “cyclical bull trend.” Blumenthal has a 5% gold weighting within CMG’s total portfolio solution, owning the Van Eck Merck Gold ETF (OUNZ) . He said he could take that position up to 10% considering the precious metal’s momentum.

He is also bullish on the SPDR Dow Jones REIT ETF (RWR) , which is up 3% so far this year thanks in large part to increasingly dovish talk by the Federal Reserve. Blumenthal admits that a more hawkish sounding Fed could hit REIT prices. For the time being, however, he said the sector has momentum.

Said Blumenthal:

Valuations on the market, looking at median P/E is 22.6 at the end of March. That’s a higher valuation level than where we were in 2007, at the top of the last financial crisis. Stocks are richly priced. We’ve reduced our equity exposure and we hedge equities.