Monthly Market Valuation Review

Posted on 11.07.16 |

Early each month, we look at market valuations to see where we are. It’s also important to consider what valuations may indicate with respect to probable (7- and 10-year) forward returns. We believe risk is most when we feel it least and the risk is least when we feel it most. Today, we feel it least.

In Friday’s On My Radar, we presented several valuation charts, including median price-to-earnings (P/E) and Warren Buffett’s favorite.

Bottom line: the market remains overvalued. Trend following strategies can help you participate and protect.

Global Debt Jubilee?

Posted on 09.20.16 |

When you borrow from tomorrow to spend today, that leveraged spending is good for growth. At some point, you reach an end to just how much debt you can take on. Reinhart and Rogoff suggest that threshold, based on hundreds of years of study, is 90% debt-to-GDP. At some point, you cross a line. Take a look at the chart below.

I believe we are in a low growth, deflationary-pressured world until we solve and reorganize the debt mess. A global debt jubilee? We have a serious problem to solve and there is little motivation at this point to get started. The markets may just force that hand.

Hedging Your Equity Exposure

Posted on 10.11.15 |

Steve Blumenthal, CEO, CMG Capital Management Group

I continue to favor 30% Equities (hedged), 30% Fixed Income and 40% Alternative (defined as anything other than traditional buy-and-hold). Find complimentary (low-correlating) ETFs, funds and strategies to build your alternative bucket just as you’d diversify your equity and fixed income allocations.

One of the great advantages advisors and individuals have over large endowments and pensions is the ability to source liquidity quickly. One of the great disadvantages is that many individuals are unable to gain access to exceptional hedge fund managers or private equity funds. Though you can get close enough.

Extreme Optimism Suggests Caution

Posted on 11.13.14 |

Market Sentiment CMG Capital Management Group

Technical trends remain positive

CMG CAPITAL MANAGEMENT GROUP
MID-WEEK MARKET REVIEW

By Steve Blumenthal, CIO, CMG Capital Management Group

Technical evidence remains positive. Big Momentum (“Mo”) is in a buy signal since October 14, 2011 and trend evidence (as measured by the 13/34-Week EMA (see chart below) is positive.

Investor sentiment has moved quickly from Extreme Pessimism to Extreme Optimism. This is neutral at best with such optimism suggesting caution.

Strategy Review & Cyclical Trends

Posted on 04.25.14 |

Steve Blumenthal, Founder & CEO
CMG

CMG Tactical Strategy Review. No major changes since last week: We continue to hold mostly long equity exposure in our CMG Opportunistic All Asset Strategies with a modest move toward emerging markets across the portfolio. The portfolios are approximately 70% Equity, 30% Fixed Income. Our CMG Tactical Rotation Strategy moved to a more defensive position for April: 50% TLT (iShares Treasury Bonds) and VNQ (Vanguard REIT). High yield bond prices are firm to higher. We remain positioned long high yield bond fund exposure.

The cyclical trend remains positive as measured by Big Mo, investor sentiment is mixed and the Fed is supportive for now. Immediately ahead of us is the seasonally challenged May-October period. I believe that putting hedges in place remains the prudent thing to do. Risk is so significantly elevated due to Fed manipulation. The system is more leveraged than it was in 2008 and this cyclical bull is aged. Tactical strategies can further your portfolio diversification in important ways.

Now, here is a look at the S&P 500 Cycle Composite for 2014. The blue line in the chart below shows the tendency for the market to correct in the May to October period.

Be Careful with Equity Exposure Today

Posted on 04.03.14 |

Steve Blumenthal
Founder & CEO
CMG

Advisors are wondering: What percentage of equity should I hold in my client portfolios? How frothy is this market? Is it time to get more defensive?

The short answers: this market is expensive – stay cautious. Hedge long-term equity exposure.

How do we realize this? On the chart below, the table shows stock market performance six-months to five years after over- or under-valuation is reached.

In the bottom clip, note the S&P’s current price to its Normal Valuation Line (dotted red middle line) and the zones that identify valuations to be “overvalued” or “undervalued”. The yellow circle identifies current valuation. The idea is to get a sense of a market that is above or below its normal valuation. When the S&P 500 is 20% above its normal valuation, we consider it overvalued; at 20% below normal we consider it undervalued.

CMG CAPITAL MANAGEMENT GROUP MID-WEEK MARKET REVIEW

CMG CAPITAL MANAGEMENT GROUP
MID-WEEK MARKET REVIEW