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Archives for July 2016

The Quest For Yield

Posted on 07.31.16 |

CMG Capital Management Group Market AnalysisAt a recent investment conference, one of the panelists was an investment officer for the China Investment Corporation (CIC) – the Chinese sovereign wealth fund.  She was particularly critical of the performance of their hedge fund managers.  The CIC and others have been exiting their hedge fund investments.  A common theme of late.

“The secret to my success is I buy when everyone else is selling and I sell when everyone else is buying,” said the great Sir John Templeton to me in 1985.  He added, “If you can do that, you’ll be amongst the best in the business.”  The contrarian in me just couldn’t help but to think back to that sage advice.  It seems to me like we may be arriving at one of those points in time, Sir John.  Just saying.

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Categories: Tactical Investment Strategies Tags: Gold, On My Radar, Steve Blumenthal

Trade Signals – Strength in Health Care, Telecom And Fixed Income

Posted on 07.28.16 |

The “Don’t Fight the Fed or the Tape” indicator is showing the strongest reading in some time (+2).  The reading has been +1 for a number of months.  Note in the following chart that such readings have happened only 5.74% of the time since early 1999.  The annual gain per annum was 25.60%.  A +2 reading can last for days or months.

7.27.1

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Categories: Tactical Investment Strategies Tags: Don't Fight The Fed, fixed income, Health Care, high yield, Steve Blumenthal, Trade Signals

High Yield Bond Opportunity On The Horizon

Posted on 07.25.16 |

steve_foxThe chart below tracks the delinquency rate on commercial and industrial loans from all commercial banks on a percent change from the prior year (blue line).  It then compares that change to Bank of America/Merrill Lynch US High Yield spread (red line).  The spread is simply the current yield minus the comparable yield for a safe investment, like U.S. Treasurys, that has a similar maturity.  If the average maturity is five years on the ML HY Index, then the spread is that yield less the five-year Treasury yield.

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Categories: Tactical Investment Strategies Tags: BlackRock, high yield, Steve Blumenthal, trend following

Trade Signals – Investor Sentiment Reflects Extreme Optimism

Posted on 07.22.16 |

CMG Capital Management Group Inc.I like to think of this weekly process as a risk management dashboard.  Of note this week is the extreme level of investor optimism.  Generally, such readings are short-term bearish for equities and suggest a pause or correction within what is a bullish trend environment (see 13/34-Week EMA chart below) for equities.

HY remains in a buy.  The Zweig Bond Model suggests holding longer-dated high quality bonds.  The CMG Ned Davis Research Large Cap Momentum Index continues to signal caution (i.e., own large-cap equities but hedged).  Within the CMG Opportunistic All Asset Strategy, fixed income is showing the strongest relative price strength.

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Categories: Tactical Investment Strategies Tags: CMG NDR Large Cap Momentum Index, Steve Blumenthal, Trade Signals, Zweig Bond Model

Zweig Bond Model Signals What ETFs To Be In

Posted on 07.20.16 |

ETF.comAs one of “the more influential ETF strategists in the money management industry” CMG Capital Management Group CEO Steve Blumenthal was invited to write a column for ETF.com about bond investing. Steve writes:

“Most analysts missed the great bond rally of the last two years. The Zweig bond model provides a disciplined, rules-based way that may help you better navigate and profit from the up and down trends in interest rates.

“I’ve long been a fan of the great Marty Zweig. In the mid-1980s, Marty and Ned Davis Research (NDR) created the Zweig bond model. Back then, the world was dealing with a rising interest rate environment. The 10-year yield peaked at 14% in 1984.”

See full story in ETF.com here.

Categories: Tactical Investment Strategies Tags: BIL, BND, Bonds, ETF.com, fixed income, SPY, Steve Blumenthal, TLT, Zweig Bond Model

Use Caution Chasing Yield

Posted on 07.17.16 |

CMG Capital Management Group Market AnalysisWe have four interns this year. At the start of their internships, we required that they read “How the Economic Machine Works” by Ray Dalio.  The paper discusses how central bankers have certain levers they can pull, such as raising and lowering interest rates and other tools to speed up or slow down the economy.

I told them that I’m thrilled our fixed income strategies are doing well yet the unprecedented central bank experiments have so distorted price discovery that I just don’t know if I should scream or shout.  I’m concerned that the Fed has boxed itself into a Keynesian corner.

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Categories: Market Snapshot Tags: On My Radar, Ray Dalio, Research Affiliates, Steve Blumenthal

Brexit – Italian Banks

Posted on 07.17.16 |

CMG Capital Management Group Market AnalysisLet’s take a quick look at Brexit-related news this week.  Think in terms of contagion.  We are at the beginning of the Brexit-related issues and not the end.  My personal view is that the single largest systemic risk we face is a sovereign debt crisis stemming from Europe.  But it could come from China or Japan or the EM.  Debt is the common denominator.  The globe is facing a long-term debt deleveraging cycle few of us alive have witnessed.

The debt problems are above the 90% debt-to-GDP level in most of the developed world.  We’ll get through this somehow, but as Yoda might say, “think differently we must.”

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Categories: Global Economy Tags: Brexit, On My Radar, Steve Blumenthal

Trade Signals: All-Time Record High

Posted on 07.15.16 |

CMG Capital Management Group Inc.There are no major changes this week; though, daily investor sentiment is nearing Extreme Optimism.  The cyclical trend for U.S. equities remains bullish.  With valuations high (and they could go higher), risk remains high.  Hedge any equity exposure.

The Zweig Bond Model remains in a buy signal, suggesting longer-term high-quality bond ETF exposure.  High yield remains in a buy signal.  Gold remains in a cyclical bull market uptrend.

Following are the most recent Trade Signals:

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Categories: Tactical Investment Strategies Tags: CMG NDR Large Cap Momentum Index, Gold, Steve Blumenthal, Trade Signals

Gold Remains Bullish, Equity Valuations High

Posted on 07.11.16 |

CMG Capital Management Group Market AnalysisWe are living in an unprecedented interest rate and monetary policy period in time.  Gold moved into a cyclical bull market environment in January and the trend remains bullish. (Please visit my Trade Signals post and scroll down to the gold chart).  I like gold for up to 10% of a total portfolio structure.

Today let’s take a look at what the most recent equity market valuation data is telling us.  We’ll look at one-to-three year, seven-year and 10-year forward time horizons.

You’ll find that U.S. equities are significantly overvalued.  This continues to suggest caution and setting realistic expectations on stock market returns.

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Categories: Tactical Investment Strategies Tags: Gold, On My Radar, Steve Blumenthal

Trade Signals – A Great First Half for Long Duration Bonds and High Yield

Posted on 07.08.16 |

CMG Capital Management Group Inc.Bonds, utilities and gold show the strongest relative price strength. On the equity front, investor sentiment remains extremely pessimistic, which is short-term bullish for equities.

You’ll find the most recent valuation updates in this Friday’s “On My Radar.” Corporate profits have been weak six quarters in a row, yet the S&P 500 Index remains about 2.5% from its all-time high of 2136. Median P/E remains above 23. I’d feel a lot better about the equity market if the market were not so expensively priced. In my view, risk remains high.

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Categories: Tactical Investment Strategies Tags: CMG NDR Large Cap Momentum Index, Steve Blumenthal, Trade Signals

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