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Monthly Market Valuation Review

Posted on 11.07.16 |

11-04-09Early 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.

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Categories: Equities, Market Snapshot, Tactical Investment Strategies Tags: Equities, Hedging, On My Radar, Stephen Blumenthal, Steve Blumenthal, Tactical Investing, valuations

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.

9-16-9

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.

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Categories: Tactical Investment Strategies Tags: Debt, ETF Strategists, global debt, Hedging, Risk, Stephen Blumenthal, Steve Blumenthal, Tactical Investing

Hedging Your Equity Exposure

Posted on 10.11.15 |

Steve Blumenthal, CMG Capital Management Group, on hedging your equity exposure

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.

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Categories: Tactical Investment Strategies Tags: ETF, Hedging, SPY, Steve Blumenthal

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.

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Categories: Market Snapshot, Tactical Investment Strategies Tags: Hedging, Options, Steve Blumenthal, Zweig Bond Model

Strategy Review & Cyclical Trends

Posted on 04.25.14 |

Steve Blumenthal, Founder & CEO CMG

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.

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Categories: Portfolio Construction, Tactical Investment Strategies Tags: Big Mo, CMG Tactical Rotation Strategy, Cyclical Trends, Hedging, Steve Blumenthal

Be Careful with Equity Exposure Today

Posted on 04.03.14 |

Steve Blumenthal, Founder & CEO CMG

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.

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Categories: Equities, Tactical Investment Strategies Tags: Equity Exposure, Hedging, Steve Blumenthal, Tactical Investing, Valuation

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IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by CMG Capital Management Group, Inc (or any of its related entities-together "CMG") will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. No portion of the content should be construed as an offer or solicitation for the purchase or sale of any security. References to specific securities, investment programs or funds are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.
Certain portions of the content may contain a discussion of, and/or provide access to, opinions and/or recommendations of CMG (and those of other investment and non-investment professionals) as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current recommendations or opinions. Derivatives and options strategies are not suitable for every investor, may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Moreover, you should not assume that any discussion or information contained herein serves as the receipt of, or as a substitute for, personalized investment advice from CMG or the professional advisors of your choosing. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. CMG is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.
This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any CMG client from any specific funds or securities. Please note: In the event that CMG references performance results for an actual CMG portfolio, the results are reported net of advisory fees and inclusive of dividends. The performance referenced is that as determined and/or provided directly by the referenced funds and/or publishers, have not been independently verified, and do not reflect the performance of any specific CMG client. CMG clients may have experienced materially different performance based upon various factors during the corresponding time periods.
Hypothetical Presentations: To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including: (1) the model results do not reflect the results of actual trading using client assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight; (2) back-tested performance may not reflect the impact that any material market or economic factors might have had on the adviser’s use of the model if the model had been used during the period to actually mange client assets; and, (3) CMG’s clients may have experienced investment results during the corresponding time periods that were materially different from those portrayed in the model. Please Also Note: Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance will be profitable, or equal to any corresponding historical index. (i.e. S&P 500 Total Return or Dow Jones Wilshire U.S. 5000 Total Market Index) is also disclosed. For example, the S&P 500 Composite Total Return Index (the “S&P”) is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor’s chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The historical performance results of the S&P (and those of or all indices) and the model results do not reflect the deduction of transaction and custodial charges, nor the deduction of an investment management fee, the incurrence of which would have the effect of decreasing indicated historical performance results. For example, the deduction combined annual advisory and transaction fees of 1.00% over a 10 year period would decrease a 10% gross return to an 8.9% net return. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet, his/her investment objective(s). A corresponding description of the other comparative indices, are available from CMG upon request. It should not be assumed that any CMG holdings will correspond directly to any such comparative index. The model and indices performance results do not reflect the impact of taxes. CMG portfolios may be more or less volatile than the reflective indices and/or models.
In the event that there has been a change in an individual's investment objective or financial situation, he/she is encouraged to consult with his/her investment professionals.
Written Disclosure Statement. CMG is an SEC registered investment adviser principally located in King of Prussia, PA. Stephen B. Blumenthal is CMG's founder and CEO. Please note: The above views are those of CMG and its CEO, Stephen Blumenthal, and do not reflect those of any sub-advisor that CMG may engage to manage any CMG strategy. A copy of CMG's current written disclosure statement discussing advisory services and fees is available upon request or via CMG's internet web site at (http://www.cmgwealth.com/disclosures/advs).