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On My Radar – How Inflationary Depressions Come About

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February 18, 2021
By Steve Blumenthal

“Where the money and credit flow is important to determining what happens. For example, when they no longer go into lending that fuels increases in economic demand and instead go into other currencies and inflation-hedge assets, they fail to stimulate economic activity and instead cause the value of the currency to decline and the value of inflation-hedge assets to rise.

At such times high inflation can occur because the supply of money and credit has increased relative to the demand for it, which we call “monetary inflation.” That can happen at the same time as there is weak demand for goods and services and the selling of asset so that the real economy is experiencing deflation.

That is how inflationary depressions come about. For these reasons we have to watch movements in the supplies and demands of both the real economy and the financial economy to understand what is likely to happen financially and economically.”

– Ray Dalio,
Co-Chairman and Co-Chief Investment Officer, Bridgewater Associates, LP

Chess is fun to play, probably because it is complex. Chess titles indicate the strength of the best players and quickly display the differences between the various types of masters. For example, if you are an amateur player going up against someone recognized as a national master, it’s a pretty good chance you will lose. If a national master is going up against a grandmaster, probabilities favor the grandmaster saying, “checkmate.” All of the top players in the world are grandmasters, but there are many titles before becoming a grandmaster.

You can think of the markets and the various players the same way. Most of what we read each week is noise. It doesn’t matter, doesn’t matter, MATTERS! It doesn’t matter, doesn’t matter, MATTERS! I forward the “matters” material to a folder I keep in Evernote called “Potential OMR Material.” Early each Friday, I awake and go right to that file and sort through what might be most interesting/essential to share with you.

Last week I included a link to a Bloomberg video where private equity legend David Rubenstein interviewed Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world. You can click here to watch.

Global markets are complex and continuously in motion. If the average Joe is going up against Bridgewater Associates, there is a pretty good chance he will lose. Imagine, though, if, during the chess game, Ray told Joe the moves he is going to make and why. If you were passionate about chess, it would be so cool to have a grandmaster teach you the game. Most people think investing is easy, and most of the time, that’s probably true. Grandmasters show their worth when the game becomes most complex. In this direction, today, let’s follow up on last week’s Dalio discussion with more from the grandmaster on the most significant chess game of them all.

We will look at where we sit in the long-term debt cycle and what that means in terms of your wealth and everyday cash flow so you can better understand the challenges we face ahead. We have not seen these dynamics in our lifetimes, but they have happened many times before throughout history. Fortunately, we have a grandmaster who is open and willing to share his insights with global leaders, legislators, central bankers, and you and me.

Grab that coffee and find your favorite chair. I hope you find this information helpful.

If you are not signed up to receive the free weekly On My Radar letter, you can sign up here.

“Where We Are in the Big Cycle of Money, Credit, Debt, and Economic Activity and the Changing Value of Money”

By Ray Dalio
February 15, 2022

The following is from Ray Dalio. It’s excellent and explained in a way that I hope most can better understand. Highlights are mine. As always, reach out to me if you have any questions.

The purpose of this piece is to very briefly connect what is happening now to what has happened throughout history, as covered more comprehensively in my book Principles for Dealing with the Changing World Order.

It seems to me that people who received a lot of money and credit and felt richer, central bankers and central government officials who created a lot of money and credit and said that it wouldn’t create a lot of inflation, and people who believed what these officials said would all do well to review the lessons from history.

More specifically, this time around (i.e., since early April 2020) central banks (most importantly the Fed) and central governments (most importantly the US government) gave people, organizations, and state and local governments a huge amount of money and credit, and now most everyone is surprised that there is a lot of inflation. What is wrong with these people’s thinking? Where is the understanding of history and the common sense about the quantity of money and credit and the amount of inflation?

History has repeatedly shown that people tend to have a strong bias to believe that the future will look like a modestly modified version of the past even when the evidence and common-sense point toward big changes. I believe that’s what’s going on and that we are in the part of the cycle when most people’s psychology and actions are shifting from deeply imbued disinflationary ones to inflationary ones. For example, people are just beginning to transition from measuring how rich they are by how much “nominal” (i.e., not inflation-adjusted) money and wealth they have to realizing that how rich they are should be measured in “real” (i.e., inflation-adjusted) money and wealth. From studying history, and with a bit of common sense, we know that when people shift their perceptions in that way, they change their investment and non-investment behaviors in ways that produce more inflation and that make central banks’ difficulties in balancing inflation and growth harder.

For example, people realize that cash is a trashy investment rather than a safe one, that virtually all debt assets (i.e., bonds) are bad, that inventories and forward coverage should be built up to protect against inflation, and that cost-of-living adjustments should be built into contracts to protect against inflation—all of which make upward inflation pressure more intense. Think of bond investors. Prices rose for over 40 years and yields declined to lousy levels (in both nominal and real terms), and they accepted them. Now they still have those lousy yields (though slightly better than when they were at the absolute lows) plus they are now experiencing price losses. After that huge 40+ year bull market in bonds, imagine how many investors are complacently long and beginning to get stung, and imagine how their behaviors could change to become sellers of bonds, and imagine the effects that would have. The total amount of bonds that would then have to be sold would equal the new bonds offered plus those being sold—a gigantic amount. When the supply is greater than the demand, either a) the interest rate has to go up to the point that it curtails the demand for credit, which weakens the economy, or b) the central banks have to print money and buy enough of the debt to bridge the gap, which cheapens the value of money and raises inflation. Whether it’s tighter or looser, it won’t be good.

We know from studying history and a bit of common sense that these developments will make central bankers’ jobs in trying to balance growth and inflation much more difficult and these things (i.e., higher inflation, tighter money, and their impact on markets and the economy) will have disruptive political and social implications that will make managing the inflation-growth and debtor-creditor trade-offs much more difficult.

All of this has happened many times before for the same ol’ timeless and universal cause/effect relationships. If you want to see the linkages and the historical cases more clearly and more comprehensively, I suggest that you read Chapter 3 (“The Big Cycle of Money, Credit, Debt, and Economic Activity”) and Chapter 4 (“The Changing Value of Money”) in my book Principles for Dealing with the Changing World Order.

(Steve here: Highlighted emphasis is mine.)

Several excerpts from these chapters can be found below.

Excerpt 1:

While money and credit are associated with wealth, they aren’t the same thing as wealth. Because money and credit can buy wealth (i.e., goods and services), the amount of money and credit you have and the amount of wealth you have look pretty much the same. But you cannot create more wealth simply by creating more money and credit. To create more wealth, you have to be more productive. The relationship between the creation of money and credit and the creation of wealth is often confused, yet it is the biggest driver of economic cycles. Let’s look at it more closely.

There is typically a mutually reinforcing relationship between the creation of money and credit and the creation of goods, services, and investment assets that are produced, which is why they’re often confused as being the same thing. Think of it this way: there is both a financial economy and a real economy. Though they are related, they are different. Each has its own supply-and-demand factors that drive it. In the real economy, supply and demand are driven by the amount of goods and services produced and the number of buyers who want them. When the level of goods and services demanded is strong and rising and there is not enough capacity to produce the things demanded, the real economy’s capacity to grow is limited. If demand keeps rising faster than the capacity to produce, prices go up and inflation rises. That’s where the financial economy comes in. Facing inflation, central banks normally tighten money and credit to slow demand in the real economy; when there is too little demand, they do the opposite by providing money and credit to stimulate demand. By raising and lowering supplies of money and credit, central banks are able to raise and lower the demand and production of financial assets, goods, and services. But they’re unable to do this perfectly, so we have the short-term debt cycle, which we experience as alternating periods of growth and recession.

Then of course there is the value of money and credit to consider, which is based on its own supply and demand. When a lot of a currency is created relative to the demand for it, it declines in value. Where the money and credit flow is important to determining what happens. For example, when they no longer go into lending that fuels increases in economic demand and instead go into other currencies and inflation-hedge assets, they fail to stimulate economic activity and instead cause the value of the currency to decline and the value of inflation-hedge assets to rise. At such times high inflation can occur because the supply of money and credit has increased relative to the demand for it, which we call “monetary inflation.” That can happen at the same time as there is weak demand for goods and services and the selling of asset so that the real economy is experiencing deflation. That is how inflationary depressions come about. For these reasons we have to watch movements in the supplies and demands of both the real economy and the financial economy to understand what is likely to happen financially and economically. (Steve here: highlight is mine.)

For example, how financial assets are produced by the government through fiscal and monetary policy has a huge effect on who gets the buying power that goes along with them, which also determines what the buying power is spent on. Normally money and credit are created by central banks and flow into financial assets, which the private credit system uses to finance people’s borrowing and spending. But in moments of crisis, governments can choose where to direct money, credit, and buying power rather than it being allocated by the marketplace, and capitalism as we know it is suspended. This is what happened worldwide in response to the COVID-19 pandemic.

Related to this confusion between the financial economy and the real economy is the relationship between the prices of things and the value of things. Because they tend to go together, they can be confused as being the same thing. They tend to go together because when people have more money and credit, they are more inclined to spend more and can spend more. To the extent that spending increases economic production and raises the prices of goods, services, and financial assets, it can be said to increase wealth because the people who already own those assets become “richer” when measured by the way we account for wealth. However, that increase in wealth is more an illusion than a reality for two reasons: 1) the increased credit that pushes prices and production up has to be paid back, which, all things being equal, will have the opposite effect when the bill comes due and 2) the intrinsic value of a thing doesn’t increase just because its price goes up.

Think about it this way: if you own a house and the government creates a lot of money and credit, there might be many eager buyers who would push the price of your house up. But it’s still the same house; your actual wealth hasn’t increased, just your calculated wealth. It’s the same with any other investment asset you own that goes up in price when the government creates money—stocks, bonds, etc. The amount of calculated wealth goes up but the amount of actual wealth hasn’t gone up because you own the exact same thing you did before it was considered to be worth more. In other words, using the market values of what one owns to measure one’s wealth gives an illusion of changes in wealth that don’t really exist. As far as understanding how the economic machine works, the important thing to understand is that money and credit are stimulative when they’re given out and depressing when they have to be paid back. That’s what normally makes money, credit, and economic growth so cyclical.

Excerpt 2:

History has shown that we shouldn’t rely on governments to protect us financially. On the contrary, we should expect most governments to abuse their privileged positions as the creators and users of money and credit for the same reasons that you might commit those abuses if you were in their shoes. That is because no one policy maker owns the whole cycle. Each comes in at one or another part of it and does what is in their interest to do given their circumstances at the time and what they believe is best (including breaking promises, even though the way they collectively handle the whole cycle is bad). Since early in the debt cycle governments are considered trustworthy and they need and want money as much as or more than anyone else does, they are typically the biggest borrowers. Later in the cycle, new government leaders and new central bankers have to face the challenge of paying back debts with less stimulant in the bottle. To make matters worse, governments also have to bail out debtors whose failures would hurt the system—the “too big to fail” syndrome. As a result, they tend to get themselves into cash flow jams that are much larger than those of individuals, companies, and most other entities. In virtually every case, the government contributes to the accumulation of debt with its actions and by becoming a large debtor itself. When the debt bubble bursts, the government bails itself and others out by buying assets and/or printing money and devaluing it. The larger the debt crisis, the more that is true. While undesirable, it is understandable why this happens. When one can manufacture money and credit and pass them out to everyone to make them happy, it is very hard to resist the temptation to do so. It is a classic financial move. Throughout history, rulers have run up debts that won’t come due until long after their own reigns are over, leaving it to their successors to pay the bill.

Printing money and buying financial assets (mostly bonds) holds interest rates down, which stimulates borrowing and buying. Those investors holding bonds are encouraged to sell them. The low interest rates also encourage investors, businesses, and individuals to borrow and invest in higher-returning assets, getting what they want through monthly payments they can afford.

This leads central banks to print more money and buy more bonds and sometimes other financial assets. That typically does a good job of pushing up financial asset prices but is relatively inefficient at getting money, credit, and buying power into the hands of those who need them most. That is what happened in 2008 and what happened for most of the time until the 2020 coronavirus-induced crisis. When money printing and purchasing of financial assets fail to get money and credit to where they need to go, the central government borrows money from the central bank (which prints it) so the government can spend it on what it needs to be spent on. The Fed announced that plan on April 9, 2020. That approach of printing money to buy debt (called “debt monetization”) is vastly more politically palatable as a way of shifting wealth from those who have it to those who need it than imposing taxes because those who are taxed get angry. That is why central banks always end up printing money and devaluing.

When governments print a lot of money and buy a lot of debt, they cheapen both, which essentially taxes those who own it, making it easier for debtors and borrowers. When this happens to the point that the holders of money and debt assets realize what is going on, they seek to sell their debt assets and/or borrow money to get into debt they can pay back with cheap money. They also often move their wealth into better storeholds, such as gold and certain types of stocks, or to another country not having these problems. At such times central banks have typically continued to print money and buy debt directly or indirectly (e.g., by having banks do the buying for them) while outlawing the flow of money into inflation-hedge assets, alternative currencies, and alternative places.

Such periods of “reflation” either stimulate a new money and credit expansion that finances another economic expansion (which is good for stocks) or devalue the money so that it produces monetary inflation (which is good for inflation-hedge assets, such as gold, commodities, and inflation-linked bonds). Earlier in the long-term debt cycle, when the amount of outstanding debt isn’t large and there is a lot of room to stimulate by lowering interest rates (and failing that, printing money and buying financial assets), there is a strong likelihood that credit growth and economic growth will be good. Later in the long-term debt cycle, when the amount of debt is large and there isn’t much room to stimulate, there is a much greater likelihood of monetary inflation accompanied by economic weakness.

While people tend to believe that a currency is pretty much a permanent thing and that “cash” is the safest asset to hold, that’s not true. All currencies devalue or die, and when they do, cash and bonds (which are promises to receive currency) are devalued or wiped out. That is because printing a lot of currency and devaluing debt is the most expedient way of reducing or wiping out debt burdens.

Most people worry about whether their assets are going up or down; they rarely pay much attention to the value of their currency. Think about it. How worried are you about your currency declining? And how worried are you about how your stocks or your other assets are doing? If you are like most people, you are not nearly as aware of your currency risk as you need to be.

So, let’s explore currency risks.

ALL CURRENCIES ARE DEVALUED OR DIE

Of the roughly 750 currencies that have existed since 1700, only about 20 percent remain, and all of them have been devalued. If you went back to 1850, as an example, the world’s major currencies wouldn’t look anything like the ones today. While the dollar, pound, and Swiss franc existed in 1850, the most important currencies of that era have died. In what is now Germany, you would have used the gulden or the thaler. There was no yen, so in Japan you might have used the koban or the ryo instead. In Italy you would have used one or more of six currencies. You would have used different currencies in Spain, China, and most other countries as well. Some were completely wiped out (in most cases they were in countries that had hyperinflation and/or lost wars and had large war debts) and replaced by entirely new currencies. Some were merged into currencies that replaced them (e.g., the individual European currencies were merged into the euro). And some remain in existence but were devalued, like the British pound and the US dollar.

WHAT DO THEY DEVALUE AGAINST?

The goal of printing money is to reduce debt burdens, so the most important thing for currencies to devalue against is debt (i.e., increase the amount of money relative to the amount of debt, to make it easier for debtors to repay). Debt is a promise to deliver money, so giving more money to those who need it lessens their debt burden. Where this newly created money and credit then flow determines what happens next. In cases in which debt relief facilitates the flow of this money and credit into productivity and profits for companies, real stock prices (i.e., the value of stocks after adjusting for inflation) rise.

When the creation of money sufficiently hurts the actual and prospective returns of cash and debt assets, it drives flows out of those assets and into inflation-hedge assets like gold, commodities, inflation-indexed bonds, and other currencies (including digital). This leads to a self-reinforcing decline in the value of money. At times when the central bank faces the choice between allowing real interest rates (i.e., the rate of interest minus the rate of inflation) to rise to the detriment of the economy (and the anger of most of the public) or preventing real interest rates from rising by printing money and buying those cash and debt assets, they will choose the second path. This reinforces the bad returns of holding cash and those debt assets. The later in the long-term debt cycle this happens, the greater the likelihood there will be a breakdown in the currency and monetary system. This breakdown is most likely to occur when the amounts of debt and money are already too large to be turned into real value for the amounts of goods and services they are claims on, the level of real interest rates that is low enough to save debtors from bankruptcy is below the level required for creditors to hold the debt as a viable storehold of wealth, and the normal central bank levers of allocating capital via interest rate changes (which I call Monetary Policy 1, or MP1) and/or printing money and buying high-quality debt (Monetary Policy 2, or MP2) don’t work. This turns monetary policy into a facilitator of a political system that allocates resources in an uneconomic way.

There are systemically beneficial devaluations (though they are always costly to holders of money and debt), and there are systemically destructive ones that damage the credit/capital allocation system but are needed to wipe out debt in order to create a new monetary order. It’s important to be able to tell the difference.

Source

(Steve here again: You know you are late in a long-term debt cycle when the value of debt reaches extreme levels, and interest rates hit 0%. At the core of all this is what my partner John Mauldin calls, “The Great Reset.” In our view, we are nearing this point in time. You can learn more here.)

A Few Thoughts

In past On My Radars, I’ve paid a great deal of attention to inflationary and deflationary cycles. I don’t think I’ve given enough attention to or even brought up the concept of “inflationary depressions.” We need to keep this possibility in mind.

I do want to say that “The Great Reset” may not prove to be dire. Mauldin is more optimistic for a bumpy but less extreme outcome. Much will depend on balancing the disinflationary forces in play (debt, underfunded entitlement programs, underfunded pension obligations, demographics) with inflationary tools (money creation, debt forgiveness, debt monetization, fiscal policy). Dalio has mapped out the game board and considers probable human behavior. A long look at history helps shape his views. I applaud him for openly sharing his and his team’s research. When you run $150 billion, you don’t need to give your edge away.

I watched an excellent webinar presentation with Felix Zulauf and Kyle Bass moderated by Grant Williams this week. In my view, Felix is one of the great grandmasters. Felix’s grasp of how the pieces move within the system and his ability to explain it in a way more people can better understand is excellent.

From time to time, I can share my high-level notes with you. I’ll ask permission to share what I can with you over the coming months. In the meantime, you can find a link to Felix’s December 2021 (2022 Outlook) discussion on Grant Williams podcast here. I’ll be putting my running shoes on, plugging my earbuds in, and taking a walk this weekend – listening again to Felix and Grant.

As a quick aside, Felix’s subscription service is priced for professional investors, pensions, hedge funds, and firms like mine. In other words, it’s not cheap. I find it invaluable in helping me think about risk/reward/hedging and ongoing opportunities. If you’d like to learn more, please reach out to my good friend Jennifer Mendel (jennifer@bluefoxadvisors.com).

With all this said, where do I stand? My personal views on the big picture remain relatively unchanged.

  • We sit at the end of a very long-term debt supercycle. We are in the early innings of central bank-created inflation. Inflation will get better (mid-2022) before it gets far worse (2024 through much of the decade).
  • Debt and aging demographics are powerful deflationary forces. The current inflation pressures and tightening Fed policy will hit the economy hard, and the surprise will be that the global economy slows the first half of this year. Absent a major geopolitical crisis, inflation pressures will ease, and Covid-related supply chain bottlenecks open up.
  • For equities, valuations remain unattractively high, and current high inflation has the Fed in a box. To fight inflation, the Fed is intent on raising rates. They will have fully exited their monthly buying of Treasury and mortgage bonds by mid-March. If the Fed stands firm with this current chess move, the stock market may fall more than it did the last time the Fed attempted to exit QE. Then stocks declined by 20% in Q4 2018. That decline caused the famous “Powell Pivot.” Stocks subsequently rallied.
  • At some point, the heat will be too hot, and the Fed will be forced to pivot once again. I don’t think it happens at -20%. It may be -30%, but really, I’m just guessing. As Dalio suggests above, expect more liquidity from the Fed and legislators.
  • The increased liquidity to the system will likely mean another push to new highs in 2023, maybe 2024, maybe 2025. But the consequence of more money printing means that inflation pressures will become more extreme.
  • We continue on a path to The Great Reset (best guess 2028) with a secular bear market from the mid-2020s into 2028. Then, the downside risks to the stock market take us back to below fair market value similar to secular bear markets past. I’ve got some great charts that will help us zero in on what that looks like in terms of target areas.
  • That aligns well with my forward equity market probable return data, long-term trend data, Jeremy Grantham’s 3-Sigma, and Felix’s views; we could see the end of the secular bull market within a few years.

I’ve really been struggling to see how inflationary pressures can overtake the deflationary headwinds of crazy high debt, underfunded pensions, and demographics. But oh, dear God, the idea of an “inflationary depression.” Then we are looking at Grantham’s 3-Sigma minus 80%. It remains a risk.

A few final thoughts/ideas: 

I am obligated to state that the following is not a recommendation or offer to you to buy or sell any security. I do not have any information or knowledge about your specific financial situation and the following is not investment advice for you.

Equity exposure: Do nothing if you can stomach an equity market decline of -30% or more between now and sometime later this year. Ride it out. I believe the Fed will come in with guns blazing. (No guarantees, of course.)

Alternatively, it’s easy to buy put options to hedge your market exposure, write some out-of-the-money calls, and/or raise some cash. Think of it like homeowner’s insurance; if I’m right, good to protect against significant loss. If I’m wrong, it’s a small cost. There are also mutual funds and ETFs that have hedging processes built in. Email me if you need a few ideas.

Fixed income exposure: If I’m right, and I may not be, interest rates will be lower by the summertime. Use that opportunity to rethink your bond exposure. There are ways to earn high single digits in well-collateralized short-term private credit and select specialty funds. When inflation becomes crystal clear to all in 2023/2024, as Dalio points out, the masses will be unloading bonds while new bonds will be needed to be issued. You and I have not seen this in our lifetimes. It’s coming.

Bonds, bond funds, and bond ETFs lose value when interest rates go up. And simple logic says that today’s 2% bond yields can’t possibly help you.

It seems the chess game is advancing pretty much along the course that Ray Dalio outlined above. If I lived on a farm 45-minutes upstream from you and called you to tell you the flood water just breached the embankments and is coming your way, you’d have time to move your cattle and equipment to higher ground quickly. I’m saying, protect the cows and the equipment. There is no need to take the hit.

Trade Signals – Market Breadth Continues to Weaken

February 16, 2022

Posted each Wednesday, Trade Signals looks at several of my favorite equity markets, investor sentiment, fixed income, economic, recession, and gold market indicators.

For new readers – Trade Signals is organized into three sections:

  • Market Commentary
  • Trade Signals — Dashboard of Indicators
  • Charts with Explanations

Market Commentary

Notable this week:

The intermediate-term trend in interest rates remains higher. The 10-year Treasury yield is above 2%.

Investor sentiment is bearish, supporting a short-term bullish move for equities. Volume Demand vs. Volume Supply remains in a sell signal (more sellers than buyers). The Ned Davis Research CMG U.S. Long/Flat Index continues to weaken. In short, it is showing underlying weakness across 24 sub-industry sectors. The indicator stands at 57.06. Generally, scores above 50 indicate a robust market environment, and scores below 50 indicate a weak market environment. You’ll find the chart with explanations below.

While I post the 200-day moving average signals for the S&P 500 Index and NASDAQ, far too many investors follow these popular trends following rules, and market professionals know it. There is a tendency for quant funds to play games to drive investor selling and buying activity around the 200-day moving averages of popular mutual fund and ETF index-based funds. While they help us get a good sense of direction in the overall market trend, I don’t favor processes that are widely adopted and easy to manipulate.

I’m keeping a close eye on Volume Demand vs. Volume Supply and NDR CMG U.S. Long/Flat. Market breadth continues to weaken.

HY remains in a sell signal. On the high-grade side in fixed income, the indicators continue to signal higher interest rates (lower bond prices). The 10-year Treasury yield has gone from 1.40% in December to above 2% this week. When rates rise, bond prices decline in value. The popular Vanguard Extended Duration Treasury ETF is down about 15% over that same period of time. All eyes are on the Fed. Needless to say, we are at an exciting point in the cycle.

Click HERE to see the Dashboard of Indicators in Wednesday’s Trade Signals post.

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.

Personal Note – Chatter Creek, BC, Park City, and Powder Snow

Next Wednesday night, I fly to Vancouver. I land late, and I’m being picked up at the airport by my friend Syd B. and his team, and they are taking me on a tour of their sustainable farm. During Zoom calls, I’ve gotten a little bit of a feel for the farm but nothing like what is immediately ahead. They then kindly take me back to the airport where I fly to Calgary to meet up with my daughter Brianna.

A beautiful two-hour drive to Banff, British Columbia, for dinner, great wine, and we’ll spend the night. Early the following morning, we drive another hour and a half, mostly west to Golden, British Columbia. There we meet a helicopter for a rapid jump to Chatter Creek. Four days of powder skiing follow.

Early March 2, I fly from Calgary to Salt Lake City and meet up with good friends Andy McOrmond, Jennica Ross, Dana Martin, Eric Ambrose, and David Beth and about 100 of their best friends for the annual WallachBeth Symposium in Park City.

I’m checking in happy and looking forward to the trip ahead.

Next week’s On My Radar will be a game-day decision. No writing on a powder day. 🙂

Thanks for reading and have a great week!

With kind regards,

Steve

Stephen B. Blumenthal
Executive Chairman & CIO
CMG Capital Management Group, Inc.

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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.

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Investing involves risk. Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CMG), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CMG. Please remember to contact CMG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. CMG is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice.

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.

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, or exclusively determines any internal strategy employed by CMG. 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.