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On My Radar: December 20, 2012

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December 20, 2012
By Steve Blumenthal

As I dive through a broad range of independent research each week, following are several bullet points I found interesting:

James Rickards – Capital Account Interview with Lauren Lyster

  • Rickards argues that the Fed is fighting deflation and a depression and explains why the Fed is doing what it is doing.  The game plan is to get the velocity of money moving to deliver an inflation shock in order to force individuals to spend.  Jim is the clearest thinker I know on the implications of global currency manipulation.
  • From the interview…“It is a race between the Fed trying to achieve their goals and the whole system imploding because of total loss of confidence in the dollar.”  The interview begins at the two minute and thirty-five second mark and lasts about 12 minutes.
  • Here is the link to the video. Jim Rickards: the Fed is Racing to Create Inflation Before the US Economy Implodes!

Fitch expects ‘Bond Bubble’ carnage when rate cycle turns – by Ambrose Evans-Pritchard

Trade Signals – sentiment is moving into the Extreme Optimism (bearish) zone.  Get ready to hedge.

  • For years I have found Investor Sentiment to be one of the most effective tools to help manage long directional equity risk exposure.  My very simple approach is to go against the crowd at points of behavioral extreme.  In this weekly piece, I talk about how and when to hedge the long equity exposure you might have in your portfolio(s).     
  • Here is the link to Wednesday’s investor sentiment charts and short commentary on the current “Risk On” trade.

I hope you find this information helpful.  Please feel free to share it with your clients.

The last few weeks have been exciting for me.  I spoke at the IMCA Conference in Scottsdale on building stronger, more resilient portfolios and was thrilled to return to the NY Stock Exchange where I presented to 250 advisors at the Index Universe Conference on ETFs.  This past Tuesday and Wednesday I was in San Francisco and San Diego meeting with several unique managers and a group of advisors.

Speaking of the NYSE, it was just over 30 years ago that my “adopted” godfather, Steven Mittel, set up an internship with his firm, Montgomery Securities.  After two weeks on the floor of the NYSE in the summer of 1982, my lights were lit.  I had a coffee with Steve early yesterday morning.  We talked about my father who passed a little more than a year ago and shared some great memories.  What a treat for me.  Steven, I remain forever grateful for what you did for me.

Today I’m writing from Dallas and really looking forward to getting together with my partner, John Mauldin.  The plan is to hit the gym this afternoon, head to dinner and then we are going to tonight’s Mav’s game.  Tomorrow it is home and some last minute shopping before Christmas.

Wishing you and your family a wonderful, warm and joyous holiday!

With warm regards,

Steve

Stephen B. Blumenthal
Founder & CEO
CMG Capital Management Group, Inc.
steve@cmgwealth.com
610-989-9090 Phone

PS: When I look at the world, I try my best to view it from a probability perspective.  I read endlessly and have access to some outstanding hedge fund and independent investment research.  Fortunately, if you dig deep enough, you have access to a great deal of information on the internet.  This certainly wasn’t the way it was in 1984 when I started in the business.

I believe we are in a challenging low return environment and that most individual investors hold higher return expectations; those expectations will not be met and investors will seek a better solution.  I see an unprecedented opportunity for you to grow your advisory business.

With this piece I try to share some information that I have found to be important.  To me the evidence is clear, but I most certainly could be wrong.

Whether I am correct or incorrect in my thinking, my overriding belief is that you can create and manage successful portfolios for the period ahead.  This environment requires more work (mixing a diverse set of risk drivers and more active beta hedging) than exists in a secular bull market cycle, but also offers you the ability to separate yourself from the 98+% of your competition that is heavily weighted in the old 60/40 stock/bond construction model.

The good news is that the investment opportunity has been greatly expanded and solutions exist.  While risk is an inescapable companion in the investment process, I believe it can be quantified and minimized by expanding the asset classes you include in your portfolios.

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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).