February 14, 2020
By Steve Blumenthal
“Investing is the intersection of economics and psychology.”
“The economics, the valuation of the business, is not hard. The psychology—How much do you buy?
Do you buy it at this price? Do you wait for a lower price? What do you do when it looks like the world might end?
Those are the harder things.”
– Seth Klarman
CEO/Portfolio Manager, Baupost Group
Today feels a lot like 1999 for value investors, who find themselves underappreciated, disliked, forgotten, unloved—but perhaps not for long. Warren Buffett and Charlie Munger come to mind.
It’s reminiscent of the tech bubble: today two stocks make up 10% of the S&P 500 Index weighting and five stocks account for nearly 20%. That’s five out of the nearly 500 stocks that compose the index. And that’s where most of the money is flowing. Investors are concentrating into too few names.
Like much of the 1990s, the current cycle favors growth stocks. Back then, the tide turned and value stocks prospered from 2000-2010. Growth got crushed. I can’t help but think a similar outcome lies ahead. When? Don’t know. Data dependent, as they say.
Seth Klarman wrote one of the greatest investment books of all time called Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor. It has been out of print for years, but you can find a used copy on Amazon for $879.95 to $1,500. Fortunately for us, a few quick Google searches lead to some of Klarman’s best advice. Here are several select quotes that I believe are especially important today:
“You need to balance arrogance and humility.”
“Almost every financial blow up is because of leverage.”
“You need humility to say, ‘I might be wrong.’”
“Value investors have to be patient and disciplined, but what I really think is you need to not be greedy.”
“Those who are greedy and leverage are the ones that blow up.”
“Value investors have to realize leverage can magnify both potential for returns and losses.”
“Value investors ONLY care about market gyrations to score cheaper deals.”
“We are looking for people who put the clients first. If you put them second, that’s when the whole thing can blow up.”
Klarman emphasized that he does not root for bad times, saying, “We sort of are with the most opposite. We buy when the market is down. We sell when it’s up.”
There are many other nuggets like, “Buying is easier. Selling is hard. That’s because it’s difficult to know the exact timing for when to get out.”
And I really liked this one:
Successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands. By having confidence in their own analysis and judgement, they respond to market forces not with blind emotion but with calculated reason. Successful investors, for example, demonstrate caution in frothy markets and steadfast conviction in panicky ones. Indeed, the very way an investor views the market and its price fluctuations is a key factor in his or her ultimate investment success or failure.
I mentioned last week that I’d touch on the coronavirus today. Concerning. We’ll look at it through an economic lens. You’ll also find an excellent piece explaining what a “Minsky Moment” is and why it is inevitable. I also included a section with additional words of investment wisdom from Seth Klarman. A must-read. And you’ll find the updated dashboard and charts in Trade Signals. Next week we’ll take a look at leverage, valuations, and where we sit in the current market cycle. All provide valuable insight as to coming 3-, 5-, 7-, 10-, and 12-year returns.
One last Klarman quote: “Overvaluation is not always apparent to investors, analysts, or managements. Since security prices reflect investors’ perception of reality and not necessarily reality itself, overvaluation may persist for a long time.”
For now, the bullish trend remains our friend.
Coffee in hand? Let’s go.
If a friend forwarded this email to you and you’d like to be on the weekly list, you can sign up to receive my free On My Radar letter here.
Included in this week’s On My Radar:
- The Coronavirus – A Viral Threat
- The Next “Minsky Moment” Is Inevitable
- 10 Quotes from One of the Greatest Investment Books of All Time – Words of Wisdom from Seth Klarman
- Trade Signals – Bullish Equity and Fixed Income Trends Charge On, Despite Global Concerns of Coronavirus
- Personal Note – Red Wine
The Coronavirus – A Viral Threat
Business partner and good friend John Mauldin penned the following piece last week as part of his regular Thoughts from the Frontline series. He talked about the “viral threat” and also about GDP. To wit, I learned a few things about the imperfect math that makes up GDP. This from John:
According to the Commerce Department’s initial estimate (which will be revised), US real GDP grew at a 2.1% annualized rate last quarter. For calendar 2019, real GDP rose 2.3%, down from the 2.9% it posted in 2018.
So, without even digging into the details, we see growth decelerating but still positive. You can view that as a cup half empty or half full. In either case, it’s consistent with the slow but persistent recovery from the last recession. I think the base case has to be more of the same, barring surprises. But surprises happen.
As an example, there’s Boeing. The largest US exporter has stopped production on the 737 MAX and seems to keep finding more problems to fix. The damage is already trickling through its supply chain. I’ve seen estimates that Boeing alone could shave 20–30 basis points off GDP growth this year. Treasury Secretary Steven Mnuchin said this week it could be 50 basis points.
Many GDP forecasts presume the latest US-China deal takes trade-related risks off the table. However, that deal’s text says that if some disaster happens, either side can ask to renegotiate.
Does the Chinese coronavirus rise to that level? Here I have good news and bad news. The good news is that scientists will probably have an effective vaccine within a few months. I talked this week to Joseph Kim, CEO of Inovio, which has been leading research on infectious diseases like Ebola, MERS, and Zika. He said the Chinese are not at all overreacting. It is serious and far too easily transmittable. But within hours of getting the coronavirus DNA on January 10, Inovio already had a potential target vaccine that is now in animal trials. While the US process will go slower, my personal speculation is that China will speed approval if the tests look positive.
That being said, China’s travel restrictions and business closures will still have a serious and global economic impact. The disease will probably keep spreading until a vaccine is ready, as some reports suggest even asymptomatic patients can infect others. That would mean even those who show no symptoms can still spread the virus. It is not the most deadly virus we have come across, but it does spread.
We must remember that there is a reason we are encouraged to get flu vaccines every year. Five to 20% of the US population gets some kind of flu every year, with about 31 million outpatient visits every year. In 2017–18 it killed 80,000. Any flu can be serious. One that spreads faster and is more deadly than normal flu? There’s a reason authorities are concerned.
Similarly, the economic virus is already in motion. The many manufacturers around the world who depend on Chinese components may find their pipelines running dry in a few weeks. Then what? Lost sales, layoffs, and it gets worse from there.
Ian Bremmer did an excellent job of helping us better understand how the coronavirus affects the global economy. This from Ian (Time Magazine):
There are many ways to measure the costs of coronavirus. There have now been more than 24,000 officially reported cases, and nearly 500 people have died, but we’d be wise not to have much faith in these figures. A report from the Lancet estimated that as of Jan. 25 the true number of coronavirus cases in Hubei province, which includes the city of Wuhan, was not 761, as officially reported, but 75,815.
The impact on China’s economy will be considerable. Quarantine and internal border controls have been imposed, and local officials are now overcompensating in response to criticism from Beijing that they were slow to respond to the initial outbreak. Businesses and schools are likely to remain closed for weeks. Economic activity in many Chinese cities is sharply reduced.
There is also the mounting economic cost for the entire global economy. The outbreak of severe acute respiratory syndrome (SARS) in 2003 knocked one to two percentage points off China’s GDP that year, which then cost one-quarter to one-third of a percentage point in global growth, according to estimates. The larger number of infections from the coronavirus suggests the impact could be more severe this time for both China and the world. What happens in China matters more than ever for the rest of us. Its share of the global economy has surged from 8% in 2002 to 19% today, and it’s now the world’s second largest economy.
Companies in other countries dependent on Chinese supply chains are already facing a slowdown: Japan, Australia, New Zealand, Singapore, Italy and the U.S. have all imposed travel restrictions. Asian countries will see a sharp reduction in the number of arriving Chinese tourists, an important source of growth.
Oil prices have fallen 20% over the past month on expectations of lower demand from China and reduced sales of jet fuel as flights are grounded. Press reports suggest that China’s daily crude-oil consumption has fallen by 20%, an amount equal to consumption in Britain and Italy combined. OPEC and Russian officials are now debating whether to cut oil production to buoy prices. Prices for metals and other construction materials have fallen.
This is also a hit to the “Phase 1” trade deal the U.S. and China concluded last month. China was already unlikely to purchase the additional $200 billion of U.S. goods over two years that it committed to buying. The slowdown will make that figure hard to achieve.
But the greatest cost will come to China’s reputation as a reliable trade partner. In developed countries, health care systems are quick to identify public-health risks and better able to respond to them. China’s top-down authoritarian political system makes things worse. In the early stages of these kinds of crises, local officials try to avoid blame from Beijing by hiding information about outbreaks and the extent to which health facilities are overmatched. In later stages of the crisis, they overcorrect to show Beijing they’ve taken charge of the problem.
In the process, China creates the impression that it has learned little since the SARS crisis, giving the rest of the world reason to try to reduce its dependence on China for growth and production.
We’re moving closer to the day when it is China’s increasingly hefty economy, not America’s, that’s most to blame for a global recession.
The US and global recession models are updated once a month in Trade Signals. They are my go-to models for timing recessions. This is important because the really bad market dislocations happen in recessions: lending dries up, poor creditors default, growth turns negative, margin calls kick in and valuations reset. It’s also when the best investment-buying opportunities present. And there will be another recession. The good news, for now, is that there is no sign of recession in the next six months. My best guess is there is a 33% probability of recession in 2020. That really just a guess… Bottom line: Recession risk probabilities remain low.
The good news for value investors: your day will come.
The Next “Minsky Moment” Is Inevitable
A good friend forwarded me the following article this week. Lance Roberts of RealInvestmentAdvice.com does an excellent job of explaining the “Minsky Moment” — an inevitable event in my view. Here it is:
In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a “Minsky Moment.” At that time, this idea fell on “deaf ears” as the markets, and economy, were in full swing.
However, it wasn’t too long before the 2008 “Financial Crisis” brought the “Minsky Moment” thesis to the forefront. What was revealed, of course, was the dangers of profligacy which resulted in the triggering of a wave of margin calls, a massive selloff in assets to cover debts, and higher default rates.
So, what exactly is a “Minsky Moment?”
Economist Hyman Minsky argued that the economic cycle is driven more by surges in the banking system, and in the supply of credit than by the relationship which is traditionally thought more important, between companies and workers in the labor market.
In other words, during periods of bullish speculation, if they last long enough, the excesses generated by reckless, speculative, activity will eventually lead to a crisis. Of course, the longer the speculation occurs, the more severe the crisis will be.
Hyman Minsky argued there is an inherent instability in financial markets. He postulated that an abnormally long bullish economic growth cycle would spur an asymmetric rise in market speculation which would eventually result in market instability and collapse. A “Minsky Moment” crisis follows a prolonged period of bullish speculation which is also associated with high amounts of debt taken on by both retail and institutional investors.
One way to look at “leverage,” as it relates to the financial markets, is through “margin debt,” and in particular, the level of “free cash” investors have to deploy. In periods of “high speculation,” investors are likely to be levered (borrow money) to invest, which leaves them with “negative” cash balances. (SB Here: The “We are here” and “We’d be better off here” are my notations. Also note the high margin/low free cash balance in January 2000 and look at all the positive free cash at the bottom of the Great Financial Crisis in 2008–09.)
The mainstream analysis dismisses margin debt under the assumption that it is the reflection of “bullish attitudes” in the market. Leverage fuels the market rise. In the early stages of an advance, this is correct. However, in the later stages of an advance, when bullish optimism and speculative behaviors are at the peaks, leverage has a “dark side” to it.
As I discussed previously:
“At some point, a reversion process will take hold. It is when investor ‘psychology‘ collides with ‘leverage and the problems associated with market liquidity. It will be the equivalent of striking a match, lighting a stick of dynamite, and throwing it into a tanker full of gasoline.”
That moment is the “Minsky Moment.”
Lance quoted Robert Barbera. It is a quote I shared with you a few weeks ago in On My Radar: The Instability of Investment Prompted by Financial Speculation:
“The last five major global cyclical events were the early 1990s recession —
largely occasioned by the U.S. Savings & Loan crisis, the collapse of Japan Inc.
after the stock market crash of 1990, the Asian crisis of the mid-1990s,
the fabulous technology boom/bust cycle at the turn of the millennium
and the unprecedented rise and then collapse for U.S. residential real estate in 2007-2008.
“All five episodes delivered recessions, either global or regional.
In no case was there as significant prior acceleration of wages and general prices.
In each case, an investment boom and an associated asset market ran to improbably heights and then collapsed.
From 1945 to 1985 there was no recession caused by the instability of investment prompted by financial speculation —
and since 1985 there has been no recession that has not been caused by these factors.”
– Robert Barbera’s explanation of Hyman Minsky’s ideas,The Cost of Capitalism
(Featured in “It’s a Tidal Wave of Liquidity. And Waves Crash” by John Authers)
The article continues:
As noted in “The Fed & The Stability Instability Paradox:”
“In the U.S., the Federal Reserve has been the catalyst behind every preceding financial event since they became ‘active,’ monetarily policy-wise, in the late 70’s. As shown in the chart below, when the Fed has lifted the short-term lending rates to a level higher than the 2-year rate, bad ‘stuff’ has historically followed.” [SB here: Red arrows and “We are here” are my notations.]
The Fed Is Doing It Again
As noted above, “Minsky Moment” crises occur because investors, engaging in excessively aggressive speculation, take on additional credit risk during prosperous times, or bull markets. The longer a bull market lasts, the more investors borrow to try and capitalize on market moves.
However, it hasn’t just been investors tapping into debt to capitalize on the bull market advance, but corporations have gorged on debt for unproductive spending, dividend issuance, and share buybacks. As I noted in last week’s MacroView:
“Since the economy is driven by consumption, and theoretically, companies should be taking on debt for productive purposes to meet rising demand, analyzing corporate debt relative to underlying economic growth gives us a view on leverage levels.”
“The problem with debt, of course, is it is leverage that has to be serviced by underlying cash flows of the business. While asset prices have surged to historic highs, corporate profits for the entirety of U.S. business have remained flat since 2014. Such doesn’t suggest the addition of leverage is being done to ‘grow’ profits, but rather to ‘sustain’ them.”
Over the last decade, the Federal Reserve’s ongoing liquidity interventions, zero interest-rates, and maintaining extremely “accommodative” policies, has led to substantial increases in speculative investment. Such was driven by the belief that if “something breaks,” the Fed will be there to fix to it.
Despite a decade long economic expansion, record stock market prices, and record low unemployment, the Fed continues to support financial speculation through ongoing interventions.
John Authers recently penned an excellent piece on this issue for Bloomberg:
“Why does liquidity look quite so bullish? As ever, we can thank central banks and particularly the Federal Reserve. Twelve months ago, the U.S. central bank intended to restrict liquidity steadily by shrinking the assets on its balance sheet on “auto-pilot.” That changed, though. It reversed course and then cut rates three times. And most importantly, it started to build its balance sheet again in an attempt to shore up the repo market — which banks use to access short-term finance — when it suddenly froze up in September. In terms of the increase in U.S. liquidity over 12 months, by CrossBorder’s measures, this was the biggest liquidity boost ever:”
While John believes we are early in the global liquidity cycle, I personally am not so sure given the magnitude of the increase Central Bank balance sheets over the last decade.
Currently, global Central Bank balance sheets have grown from roughly $5 Trillion in 2007, to $21 Trillion currently. In other words, Central Bank balance sheets are equivalent to the size of the entire U.S. economy.
In 2007, the global stock market capitalization was $65 Trillion. In 2019, the global stock market capitalization hit $85 Trillion, which was an increase of $20 Trillion, or roughly equivalent to the expansion of the Central Bank balance sheets.
In the U.S., there has been a clear correlation between the Fed’s balance sheet expansions, and speculative risk-taking in the financial markets.
Is Another Minsky Moment Looming?
The International Monetary Fund (IMF) has been issuing global warnings of high debt levels and slowing global economic growth, which has the potential to result in Minsky Moment crises around the globe.
While this has not come to fruition yet, the warning signs are there. Globally, there is roughly $15 Trillion in negative-yielding debt with asset prices fundamentally detached for corporate profitability, and excessive valuations on multiple levels.
As Desmond Lachman wrote:
“How else can one explain that the risky U.S. leveraged loan market has increased to more than $1.3 trillion and that the size of today’s global leveraged loan market is some two and a half times the size of the U.S. subprime market in 2008? Or how else can one explain that in 2017 Argentina was able to place a 100-year bond? Or that European high yield borrowers can place their debt at negative interest rates? Or that as dysfunctional and heavily indebted government as that of Italy can borrow at a lower interest rate than that of the United States?
Or that the government of Greece can borrow at negative interest rates?
These are all clear indications that speculative excess is present in the markets currently.
However, there is one other prime ingredient needed to complete the environment for a “Minsky Moment” to occur.
That ingredient is complacency.
“Yet despite the clearest signs that global credit has been grossly misallocated and that global credit risk has been seriously mispriced, both markets and policymakers seem to be remarkably sanguine. It would seem that the furthest thing from their minds is that once again we could experience a Minsky moment involving a violent repricing of risky assets that could cause real strains in the financial markets.”
Desmond is correct. Currently, despite record asset prices, leverage, debt, combined with slowing economic growth, the level of complacency is extraordinarily high. Given that no one currently believes another “credit-related crisis” can occur is what is needed to allow one to happen.
Professor Minsky taught that markets have short memories, and that they repeatedly delude themselves into believing that this time will be different. Sadly, judging by today’s market exuberance in the face of mounting economic and political risks, once again, Minsky is likely to be proved correct.
The great value investors are licking their chops. Heed the sage advice from Seth Klarman. Remain patient and prepared. More defense than offense. And get ready to put your offense on the field when the opportunity presents.
A hat tip to my friend at JP Morgan who forwarded me Lance’s “Minsky Moment” piece.
10 Quotes from One of the Greatest Investment Books of All Time – Words of Wisdom from Seth Klarman
Here are 10 standout quotes courtesy of Morgan Housel via Motley Fool.
1. “The disciplined pursuit of bargains makes value investing very much a risk-averse approach. The greatest challenge for value investors is maintaining the required discipline. Being a value investor usually means standing apart from the crowd, challenging conventional wisdom, and opposing the prevailing investment winds. It can be a very lonely undertaking. A value investor may experience poor, even horrendous, performance compared with that of other investors or the market as a whole during prolonged periods of market overvaluation. Yet over the long run the value approach works so successfully that few, if any, advocates of the philosophy ever abandon it.
2. “To achieve long-term success over many financial market and economic cycles, observing a few rules is not enough. Too many things change too quickly in the investment world for that approach to succeed. It is necessary instead to understand the rationale behind the rules in order to appreciate why they work when they do and don’t when they don’t.
Investors should pay attention not only to whether but also to why current holdings are undervalued. It is critical to know why you have made an investment and to sell when the reason for owning it no longer applies. Look for investments with catalysts that may assist directly in the realization of underlying value. Give reference to companies having good managements with a personal financial stake in the business. Finally, diversify your holdings and hedge when it is financially attractive to do so.”
3. “The future is unpredictable. No one knows whether the economy will shrink or grow (or how fast), what the rate of inflation will be, and whether interest rates and share prices will rise or fall. Investors intent on avoiding loss consequently must position themselves to survey and even prosper under any circumstances. Bad luck can befall you; mistakes happen. The river may overflow its banks only once or twice in a century, but you still buy flood insurance on your house each year. Similarly we may only have one or two economic depressions or financial panics in a century and hyperinflation may never ruin the U.S. economy, but the prudent, farsighted investor manages his or her portfolio with the knowledge that financial catastrophes can and do occur. Investors must be willing to forego some near-term return, if necessary, as an insurance premium against unexpected and unpredictable adversity.”
4. “To value investors the concept of indexing is at best silly and at worst quite hazardous. Warren Buffett has observed that “in any sort of a contest — financial, mental or physical — it’s an enormous advantage to have opponents who have been taught that it’s useless to even try.” I believe that over time value investors will outperform the market and that choosing to match it is both lazy and shortsighted.”
5. “Warren Buffett likes to say that the first rule of investing is “Don’t lose money,” and the second rule is, “Never forget the first rule.” I too believe that avoiding loss should be the primary goal of every investor. This does not mean that investors should never incur the risk of any loss at all. Rather “don’t lose money” means that over several years an investment portfolio should not be exposed to appreciable loss of principal.
While no one wishes to incur losses, you couldn’t prove it from an examination of the behavior of most investors and speculators. The speculative urge that lies within most of us is strong; the prospect of a free lunch can be compelling, especially when others have already seemingly partaken. It can be hard to concentrate on potential losses while others are greedily reaching for gains and your broker is on the phone offering shares in the latest “hot” initial public offering. Yet the avoidance of loss is the surest way to ensure a profitable outcome.”
6. “It would be a serious mistake to think that all the facts that describe a particular investment are or could be known. Not only may questions remain unanswered; all the right questions may not even have been asked. Even if the present could somehow be perfectly understood, most investments are dependent on outcomes that cannot be accurately foreseen. Even if everything could be known about an investment, the complicating reality is that business values are not carved in stone. Investing would be much simpler if business values did remain constant while stock prices revolved predictably around them like the planets around the sun. If you cannot be certain of value, after all, then how can you be certain that are you buying at a discount? The truth is you cannot.”
7. Frequent comparative ranking can only reinforce a short-term investment perspective. It is understandably difficult to maintain a long-term view when, faced with the penalties for poor short-term performance, the long-term view may well be from the unemployment line … Relative-performance-oriented investors really act as speculators. Rather than making sensible judgments about the attractiveness of specific stocks and bonds, they try to guess what others are going to do and then do it first.”
8. “Value investing is simple to understand but difficult to implement. Value investors are not supersophisticated analytical wizards who create and apply intricate computer models to find attractive opportunities or assess underlying value. The hard part is discipline, patience, and judgment. Investors need discipline to avoid the many unattractive pitches that are thrown, patience to wait for the right pitch, and judgment to know when it is time to swing.”
9. “Wall Street can be a dangerous place for investors. You have no choice but to do business there, but you must always be on your guard. The standard behavior of Wall Streeters is to pursue maximization of self-interest; the orientation is usually short term. This must be acknowledged, accepted, and dealt with. If you transact business with Wall Street with these caveats in mind, you can prosper. If you depend on Wall Street to help you, investment success may remain elusive.”
10. “Avoiding where others go wrong is an important step in achieving investment success. In fact, it almost assures it.”
I hope you found these tips helpful. I sure did.
Trade Signals – Bullish Equity and Fixed Income Trends Charge On, Despite Global Concerns of Coronavirus
February 12, 2020
S&P 500 Index — 3,370 (open)
Notable this week:
Essentially no major changes to the trade signals since last week’s post. The equity, fixed income and gold signals remain in a bullish trend. The CMG Managed High Yield Bond Program moved to a buy signal from a sell. Additionally, the Ned Davis Research (NDR) Crowd Sentiment Poll changed to Extreme Optimism, which is generally a short-term bearish signal, from a Neutral sentiment.
The New York Federal Reserve Bank reported that, in 4Q 2019, total household debt increased by $193 billion, or 1.4 percent, to reach $14.15 trillion. This marks the 22nd consecutive quarterly increase, with total household debt now $1.5 trillion higher, in nominal terms, than the pre-recession peak of $12.68 trillion, set in the third quarter of 2008. Notably, while total household debt has risen, the level of household debt service as a percentage of disposable income has fallen to an all-time low, according to St. Louis Fed data. (Source: Axios.)
Not a recommendation for you to buy or sell any security. For information purposes only. Please talk with your advisor about needs, goals, time horizon and risk tolerances.
Click here for this week’s Trade Signals.
Personal Note – Red Wine
“If we did all the things we are capable of, we would literally astonish ourselves.”
— Thomas Edison
I must confess that Susan and I love wine. I’m all red all the time and Susan is red most of the time—though a buttery Chardonnay is always good.
Trash night is Wednesday, and the boys are responsible for hauling the garbage up to the top of the driveway. On most weeks, that’s seven bottles adding to the recyclable weight. They do say one glass of wine a day is good for you. What about two (three gets to my head)? Each year my doctor nods yes. My annual physical is coming up next month. I do hope it’s another thumbs up.
A good friend sent me a link to a WSJ article titled, “7 Reasons We Love Wine” by Lettie Teague. His note to me read, “Amen to number 3!” Here it is:
3. Wine People
With a few notable exceptions (all of whom shall remain nameless), I’ve found that the people who have chosen to make wine a big part of their life are very much the sort of people I want to have in my life. These men and women have an ungovernable passion, whether for growing grapes, making wine, selling it or just drinking it regularly, and they tend to bring passion to other pursuits too. I’ve had meaningful conversations with wine people on all sorts of non-wine topics, from opera to literature, horses and golf. Wine lovers just seem to have a particularly brilliant life spark.
With Valentine’s Day and my beautiful Susan on my mind, I really like reason number 7, too.
7. Emotion
Wine, more than any beverage I know, can evoke a vast range of emotions. It can inspire love—of the wine itself or the person with whom you might be sharing a bottle. It can inspire friendship, as well. One of my most popular friends is a wine collector with an enviable cellar of grand-cru Burgundy that he gladly shares. His wines have helped him to connect with some pretty great people who, thanks to a shared bottle or five, are now among the collector’s very best friends.
Love and friendship, all stemming from a single bottle of wine (or five… or seven)? Sounds right to me.
Though, to be honest, I don’t like how wines are explained. It’s one of my pet peeves…
The wine’s bouquet soars from the glass, presented as bold black cherry, toasted vanilla marshmallow, dark chocolate, and undertones of sweet tobacco and roasted nuts. The chewy tannins that linger after each sip make for a perfect companion to tender filet…
But why complain? Grab your favorite wine and enjoy it with the people in your life you love most. Hold your glass high: Here’s a toast to life (glass number one) and a toast to love (glass number two).
Wishing you a happy Valentine’s Day and a great week.
Warm regards,
Steve
Stephen B. Blumenthal
Executive Chairman & CIO
CMG Capital Management Group, Inc.
Stephen Blumenthal founded CMG Capital Management Group in 1992 and serves today as its Executive Chairman and CIO. Steve authors a free weekly e-letter entitled, “On My Radar.” Steve shares his views on macroeconomic research, valuations, portfolio construction, asset allocation and risk management.
Click here to receive his free weekly e-letter.
Follow Steve on Twitter @SBlumenthalCMG and LinkedIn.
IMPORTANT DISCLOSURE INFORMATION
Investing involves risk. Past performance does not guarantee or indicate 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 (collectively “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. See in links provided citing limitations of hypothetical back-tested information. Past performance cannot predict or guarantee future performance. Not a recommendation to buy or sell. Please talk to your advisor.
Information herein has been obtained from sources believed to be reliable, but we do not warrant its accuracy. This document is a general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purpose.
In a rising interest rate environment, the value of fixed income securities generally declines and conversely, in a falling interest rate environment, the value of fixed income securities generally increases. High-yield securities may be subject to heightened market, interest rate or credit risk and should not be purchased solely because of the stated yield. Ratings are measured on a scale that ranges from AAA or Aaa (highest) to D or C (lowest). Investment-grade investments are those rated from highest down to BBB- or Baa3.
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
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 professional.
Written Disclosure Statement. CMG is an SEC-registered investment adviser located in Malvern, Pennsylvania. 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 www.cmgwealth.com/disclosures. CMG is committed to protecting your personal information. Click here to review CMG’s privacy policies.