July 12, 2024
By Steve Blumenthal
“The Chevron decision means that the American civil service and agencies will no longer have wide authority to interpret legislation. Now, they will generally require legislation to act. In practical terms, this means that there is no more latitude in engaging in administrative guidance. This means that the kind of bank bailouts and creative financing arrangements that have characterized financial crises in the past are no longer possible. All problems of that magnitude will have to be handled directly by Congress, which has never been known to be very responsive or sympathetic to financial experts making mistakes. Can the Fed even continue to engage in “forward guidance” now? The transfer of power from the administration to Congress is stunning in its importance and consequences.”
– Dr Pippa Malmgran
Truthfully, it was nice to have the week off last week. But I’m back at it, game on. Let’s go.
Today, we’ll examine the stock market’s technical shape. As you know, just a few stocks are lifting the market, and we’re witnessing a divergence seen only a few times before. Those earlier episodes didn’t end well. We’ll examine what’s going on through a series of charts and try to make some sense of it all.
Let’s begin with this chart, courtesy of Schwab’s Liz Ann Sonders, which paints the picture.
Source: @LizAnnSonders
The next chart looks at the total market cap of the top five stocks in the S&P 500 Index. Currently, they comprise nearly 27% of the index, which means the remaining 495 stocks make up 73%. To get a sense of the degree of market concentration, we’ll also look at the top 10 and top 40 stocks as well as at the Nifty 50 stock bubble in the 1970s.
There are a lot of charts, but it reads quickly. Hang in there with me!
Top 5 Stocks: Microsoft, Nvidia, Apple, Alphabet, and Amazon
Top 10 Stocks:
Click here for a ranking of the top 25 stocks. Note that combining Alphabet’s A and C share classes puts it in the top five.
The Story of the Nifty Fifty
The “Nifty Fifty” refers to a group of 50 large-cap stocks on the New York Stock Exchange that were most popular in the 1960s and early 1970s. These stocks were known for their high growth potential and were considered “one-decision” stocks, meaning investors believed they could buy and hold them indefinitely due to their consistent performance. However, this belief eventually led to a significant market correction.
Here’s a detailed explanation of the peak and crash:
The Nifty Fifty Peak
The Nifty Fifty stocks became popular because they were seen as high-quality companies with strong earnings growth. The companies included IBM, Coca-Cola, Johnson & Johnson, McDonald’s, and Xerox, among others. Because these companies were performing so well and leading their industries, investors believed they would continue to perform well regardless of economic conditions.
However, the belief in the perpetual growth of these companies led to extremely high valuations, and price-to-earnings (P/E) ratios reached unprecedented levels—over 90 for Polaroid and Xerox, for example.
The Nifty Fifty Crash
In the early 1970s, economic conditions started to change. Inflation kicked in, interest rates rose, and the economy slowed, and it dawned on investors that even high-quality, high-earning companies weren’t immune to economic cycles and slowdowns.
The high valuations of the Nifty Fifty stocks couldn’t be justified amid the slowdown, so investors started to sell off these stocks, which led to a sharp decline in their prices.
The broader stock market entered a severe bear market from 1973 to 1974. The Nifty Fifty stocks were hit particularly hard, losing significant value. For example, Polaroid’s stock price dropped from over $140 to below $15. The Nifty Fifty crash highlighted the dangers of overvaluation and the risks associated with the “one-decision” investment strategy. It took many years for some of those stocks to climb back to their peak values.
Lessons Learned
- Valuation Matters: Even the best companies can become overpriced. It’s important to consider valuation when investing.
- Diversify Your Portfolio: Relying too heavily on a small group of stocks can be risky. Diversification across different sectors and asset classes can help mitigate risk.
- Economic Sensitivity Is Real: No company is entirely immune to economic cycles. Investors need to be aware of the broader economic environment and how it can impact their investments.
The Nifty Fifty episode serves as a cautionary tale about the risks of speculative excess and the importance of disciplined investing.
Nifty 40 (This is the closest I was able to get to the Nifty 50):
Market Breadth:
Market breadth refers to the overall direction and health of the stock market, indicated by the number of stocks advancing versus those declining. It provides a broader picture of market trends beyond major indices. A market with positive breadth has more stocks rising than falling, signaling strong market sentiment and potential for sustained gains. Conversely, negative breadth, with more stocks declining than advancing, suggests underlying market weakness despite index performance. Common breadth indicators include the Advance-Decline Line, which cumulatively tracks the net number of advancing stocks over time, and the McClellan Oscillator, which measures the momentum of market breadth. These indicators help investors gauge the strength of market movements and predict potential reversals.
Only two other times since 1962 has the momentum of market breadth been as bad as it is now, and those were in December 1999 and July 2021.
Source: Tom McClellan, SentimenTrader
This leads us to the question of stock market valuations. I write frequently about stock market valuations (most recently here in the subsection titled “Valuations and 10-year Returns”). No need to rehash the extreme nature of overvaluation today—that point has been hammered home.
But I do want to show just how concentrated investors are today relative to the overall size of the S&P 500 index companies, compared to the total size of the U.S. stock market, and the total global equity markets.
Some perspective:
- As of June 30, 2024, the S&P 500 index’s total value (market cap) is $45.8 trillion. (Source: NDR)
- As of June 30, 2024, the total U.S. stock market value is $53.38 trillion. (Source: NDR)
- As of June 30, 2023, the total size of the global stock market is around $109 trillion. (Source: Visual Capital)
Some basic math:
- This means that just five stocks make up roughly $12.36 trillion of the S&P 500 index, which is ~27% of $45.8 trillion.
- It means that just five stocks make up 23% of the total U.S. stock market, which is $12.36 trillion of $53.38 trillion.
- And it means that just five stocks make up 11% of the total global stock market.
You get the idea.
People invest in the S&P 500 index fund to get diversified exposure to the U.S. stock market. If we have 27% of the index in five stocks vs. 73% allocated to the remaining 495 stocks, one is not as diversified as one thinks. Cap-weighted index funds are in a massive bubble. If you want high concentration, then it’s okay. But if you want broad equity market diversification, there are better alternatives.
The challenge with cap-weighted indices is in the rebalancing process. On the way up, the best price gainers get an increased weighting within the index. Think about the advantage momentum gives as more money flows into the index in bull markets. The top five, 10, and 40 stocks get the most benefit as their cap-weighting exposure to the index increases. That’s fine, but the problem happens in bear markets as, by rule, their cap-weight exposure gets reduced.
Look at the charts above to see what that looks like. The selling drove prices down, with the largest weightings typically hit the hardest. When rebalanced on a quarterly basis, you end up locking in a smaller weighting percentage within the index, giving you less of a chance for the index to recover when the new bull market begins. It’s good momentum on the way up and bad momentum during meaningful market dislocations (bear markets).
In case you, like me, were curious as to the breakdown of market cap by country, here’s a look:
Source: Visual Capitalist
Grab your coffee and find your favorite chair. I’m a big fan of the Supreme Court’s ruling on the Chevron decision. I’m a subscriber to Dr. Pippa Malmgren’s Substack, and I enjoy her writing– though sometimes a stiff drink is needed. I’ve provided a link to subscribe to her letter below, along with her recent missive. Agree or disagree, I think it is important information to think through. I’ve followed Dr. Pippa’s father, Harald Malmgren, for years, too. Co-founder of Malmgren Glinsman Partners and Malmgren Institute, he is an economist, geopolitical, and security strategist, as well as a scholar and former ambassador. In fact, he was an international negotiator and senior advisor to John F. Kennedy, Lyndon B Johnson, Richard Nixon, and Gerald Ford. You can follow Harald on X @Halsrethink and Dr. Pippa @DrPippaM.
On My Radar:
- Dr. Pippa Malmgren – The Geopolitical Avalanche
- Employment Picture Worsening – Sept Fed Rate Cut?
- Random Tweets
- Personal Note: Manhattan Beach, Stonewall and Denver
- Trade Signals: July 11, 2024
See Important Disclosures at the bottom of this page. Reminder: This is not a recommendation to buy or sell any security. My views may change at any time. The information is for discussion purposes only.
Dr. Pippa Malmgren – The Geopolitical Avalanche
We are in the midst of a geopolitical avalanche. The speed, breadth, and seemingly unrelated nature of recent critical events make it hard to rise above the rolling events long enough to survey their meaning. It’s nearly impossible to assess an avalanche while still in its midst.
But, we can already see some critical happenings that need to be understood as a whole. They are as follows:
The Chevron decision means that the American civil service and agencies will no longer have wide authority to interpret legislation. Now, they will generally require legislation to act. In practical terms, this means that there is no more latitude in engaging in administrative guidance. This means that the kind of bank bailouts and creative financing arrangements that have characterized financial crises in the past are no longer possible. All problems of that magnitude will have to be handled directly by Congress, which has never been known to be very responsive or sympathetic to financial experts making mistakes. Can the Fed even continue to engage in “forward guidance” now? The transfer of power from the administration to Congress is stunning in its importance and consequences.
The Supreme Court’s decision on Presidential immunity means that any President can now pursue almost any action without consequence. As one observer put it, Presidents could always fire a Cabinet Member, but could they assassinate them? Now, they can, in theory. This takes on more meaning now that it is more apparent that The President himself is not running things at The White House. So, who is? He says he will not use these new powers, but that does not preclude his team from using them. All agencies can now simply say, “The President ordered it.” Nobody can prove that he didn’t, especially if national security matters precludes access to internal communications. Given that The President is first and foremost The Commander in Chief, the new powers “put the military in a tricky spot” because they serve to protect the Constitution, not The President. Will the gain of immunity plus the loss of administrative guidance hang a President more than help him? Probably. Will all this make it much harder to run the country? Certainly yes.
The Presidential race has now descended into chaos in part because of the President’s cognitive condition. He’s made strange statements in a radio interview about being the “first black woman” to serve “with a black President.” Will he remain the nominee? Biden says, “God will tell him.” Meanwhile, it seems a Parkinson’s specialist from Walter Reed visited the White House eight times since last year. Rumours abound that President just had a prolonged medical emergency. Then again, the Secretary of Defence also went AWOL for days before anybody noticed. The Democratic National Committee has long believed that the candidate is not as important as the party. Any nominee just needs to execute the party’s position. They believe that people vote for the party, not the person. This is why Governor Gavin Newsom’s name keeps coming up even though most Americans don’t want California policies. This is irrelevant to the party leadership. It is also the main reason the Democratic leadership won’t consider bringing Robert Kennedy back into the fold even though his live debate attracted three times as many live viewers as the CNN official debate (ultimately 10m+) and even though Zogby polls show that Kennedy is the only person who beats Trump in a head-to-head race. Instead, there is now rising chatter about bringing Hillary Clinton back, perhaps even as a VP to Kamala Harris. Clinton has been running a mini-campaign behind the scenes, showing up (sometimes unexpectedly or uninvited) at Democratic fundraisers for some time. Her new book is conveniently coming out in early September. Will Democrats bet on a Trump-Clinton redux? Or a Harris-Clinton ticket? They might. Meanwhile, Kennedy’s popularity keeps rising, especially amongst the under 45-year-olds. It is probably going to rise a lot more for these reasons:
- As many as 50% of Americans now identify as independent. Many of these are“double haters,” who hate both Trump and Biden and want to vote for “anybody else.” I believe that Kennedy now has the signatures he needs to be on all the ballots.
- The courts and the data are increasingly confirming that Kennedy’s point about the novel MRNA vaccine developed for COVID perhaps saved some lives but also caused an unacceptable level of deaths and vaccine injuries. The data is changing the legal situation. The 9thCircuit Court of Appeals recently said, “At this stage, we must accept Plaintiff’s allegations that the vaccine does not prevent the spread of COVID-19 as true.” This opens the possibility that the vaccine makers will no longer be immune from prosecution. Astra Zeneca’s vaccine has been removed from the market, not because of “lack of demand,” as stated by CNN, but because it causes thrombosis. Lawsuits from individuals and states are increasingly moving against the vaccine makers.
- Finally, the public is increasingly seeing the choice between hate and love. See Kennedy riffing on his father’s call for love in the aftermath of Martin Luther King’s death, while Biden and Trump called each other hateful names in the debate: liar, sucker, loser, horrible, criminal, killer, etc. Kennedy refuses to “hate on” the candidates and calls for love to reunite Americans (see his Instagram feed). Voters increasingly care more about tone because the other candidates can be quite tone deaf. Double haters ironically want love. The bottom line is that Kennedy’s chances of triggering a contingent election keep rising.
I think we are witnessing something more profound than a tussle over nominees or policy. We are witnessing the end of the 6th Party System and the start of the 7th Party System, which I first argued here in November 2023. Incumbents can’t distinguish between a political landslide and a geopolitical avalanche, which are very different things. This is a major reason we keep seeing election upsets around the world.
All this is happening just as two conflicting forces in geopolitics are becoming more apparent. The world is edging toward a deal over Ukraine and toward WWIII at the same time. Zelensky is now ready for a resolution. Viktor Orban just communicated to the West that Putin is, too. The West has come up with a clever way to get around the critical question of NATO membership by telling Ukraine that it is too corrupt to be either in the EU or in NATO. That solves that problem. Trump’s team is preparing to announce a land-for-peace deal if he wins, which the NATO Secretary General is already trying to prevent. But he can’t if the new US President wants it. I imagine Ms Harris will do that deal right away if she ends up as President, even if only for 5 minutes. Trump and Kennedy will cut that deal in days. We are heading towards an armistice where Russia keeps what it controls, Ukraine keeps what it still has, and a demilitarized zone will keep them apart. There will be no winner and no loser. The US and Ukraine just signed a temporary defense pact (10 years) as a substitute to keep Russia from challenging the deal. President Biden wanted that deal to happen in September or October to help his election chances. Awful as that sounds, pretty much every President would think this way about timing and PR. There are those with a darker take on all this. It’s worth listening to Jeffrey Sachs’ takedown of American foreign policy on Piers Morgan. He rightly points out that America’s hands are not entirely clean. From a Russian perspective, the strange goings on in The White House confirm that someone other than the President is actually calling the shots. They’ll also be watching carefully to see whether Hillary Clinton has a shot at the Oval Office because they view her and her team as the origin of the provocations against Russia (rightly or wrongly).
I argued that WWIII started over two years ago. Things were not so visible then. They are more so now. But, how can that be if Ukraine is heading toward resolution? The answer is that Ukraine served a purpose. It allowed Russia and China to gather profoundly valuable intelligence about the West. It led to a depletion of traditional ammunition in the West that is so severe that it’s even constraining Israel in their conflict.
Ukraine has distracted the world from all the other military positioning that has been going on both on Earth and in space. The resolution of Ukraine may mean the commencement of a much larger conflagration. It doesn’t have to mean that. Choices are involved. But, so far, the powers that be have been deeply in denial about the nature of the geopolitical problem. This denial of the problem is now becoming bigger than the problem itself.
Richard Overy, Britain’s greatest living military historian, recently implied that it may be too late to stop WWIII from unfolding. He wisely looked well beyond Ukraine. But people still don’t see the whole landscape of the ramp-up. So, here’s an incomplete list that helps convey the breadth and depth of what is unfolding:
Russia just raised its flag over Pyramiden in Svalbard. To remind, Svalbard is the front line of WWII because it is where many, if not most, of the critical satellites connect to Earth. This is why NATO has so many ships in the harbor there. Apparently, the Russians used a flag that is physically larger than any Norwegian flag on display up there. Norway doesn’t want a confrontation and remains committed to a “low tension strategy in the High North.” But, if you recall, The Pentagon has said that space is now the most important domain because all land capability depends to some extent or another on space-based assets. Without satellites, you have no GPS, no SATNAV, no missile guidance, and little or no smartphone functionality. Remember that a few months ago, Congressman Mike Turner, the Chairman of the House Intelligence Committee, said there was intelligence that Russia was preparing to put nukes into space. He said, “If Russia were to detonate a nuclear space weapon in low-Earth orbit, it would threaten economic and social systems in a “catastrophic and devastating attack.” He implied that this national security threat should be declassified because we are “sleepwalking into an international crisis.” It is telling that the White just responded to all this by condemning Turner, calling his revelation of the problem to the public “irresponsible.”
The EU says Russia is “harassing’ their satellites and deliberately interfering with EU GPS and SATNAV. Countries including Lithuania, Latvia, Estonia, Sweden, and Finland are finding that such jamming has become routine. In some cases, airplanes can’t always land or take off because of the interrupted access. In late June, a “defunct” Russian satellite “broke up.” Accidentally? The space debris created by it has forced the astronauts on the ISS to take cover. Russia is certainly exploding its presence in space and is now building a rival to the ISS.
Meanwhile, back on Earth, Russia is challenging the borders in the Baltics. The Swedish Army Chief says Russia has “both eyes” on Sweden’s Gotland Island, which is of immense strategic importance in the Baltic. Sweden acceded to NATO, but few have registered that the agreement allows for as many as 17 new NATO bases to be established in Sweden, one of which will be in Gotland. The Russians are also focused on other islands in the Baltics, including Denmark’s Bornholm the Aaland chain, Gotska Sanden and Christiansoe. Putin’s hero, Peter the Great, said that these islands, but especially Gotland, are “the key to the region and thus to the West.” Russia recently removed the maritime border with Estonia by taking all the marker buoys out of the water there. Now, it’s much harder to tell where the border really is. Speaking of borders, the Poles are so worried about the escalating Russian presence around them that they want to build a wall. Poland’s wall with Belarus was finished in 2022 but now there is talk of holding Russia back via an additional £2.1 billion, 434-mile fortified wall that would, in theory, protect Poland and the West from Russia’s ground forces. Is this just Maginot Line thinking? Sweden’s Prime Minister has indicated that he is not averse to having NATO’s nuclear weapons placed in Sweden in the event of war. The US and NATO started placing Typhon launchers and cruise missiles in Bornholm a few years ago but may be ramping up this presence now in the aftermath of the annual BALTOPS exercises.
Elections across Europe are raising the possibility of domestic unrest, hard right outcomes, and the possibility that bond investors will lose confidence in European markets. The question is, what happens to the bond market if the hard right keeps expanding its presence in France? In Germany. In the UK? This is related to the geostrategic concerns because Russia and China are well aware of the West’s financial and economic vulnerability. Reuters asks, “Can France count on an ECB rescue if vote upsets markets?” A better question is, “Can an ECB rescue work if Europe finds itself with a new right-leaning leadership, domestic social unrest, and a strategic security confrontation with Russia all at the same time?”
Asia continues to see a fast-advancing military buildup throughout the region. Russia and North Korea are aligning. Russia says they’ll use North Korean recruits unless the West agrees to a deal in Ukraine. North Koreans are not very good at many things, but they are good at missile systems. Is the world vulnerable to this? Yes. China is now building infrastructure like the new Tumen River Bridge in collaboration with North Korea to reach further into Siberia and into the Sea of Japan. The Chinese are pushing into Russia more aggressively than ever in search of protein, water, land, forestry, minerals, energy, and strategic access to both the Arctic and the Sea of Japan. Russia knows it cannot stop this, but it can partner with China. Check out the New Land Grain Corridor (NLGC). All this is important because we will probably wake up to find that China has soon effectively doubled in size thanks to its friendly partnership with Russia. This has enormous implications for Japan, South Korea, all Pacific nations, and Australia. This means that China will grow again, but only through expansion, not exports. Markets have yet to consider what this means for the world economy. Russia wins from Chinese investment, especially military investment, as long as the border does not officially move. But, the unofficial movement of the border with China probably makes Russia effectively smaller and more European-facing, even as Russia and China now send their warships into the Sea of Japan together. In response, the US is ramping up its capabilities in Japan, especially at Kadena. B-2 Bombers are back in Guam after a 5-year hiatus.
The geopolitical consequences of all this are historic, but there is almost no comprehensive discussion of it anywhere.
To finish, Sir Niall Ferguson recently wrote a compelling piece saying We Are All Soviets Now. He says this is because we have bloated debt and are run by “senescent leaders.” He has a point, but there is something bigger at stake. We are all Soviets now because of our internal denial and willful blindness. We are stumbling into WWIII because we think Ukraine is the war and it’s about to come to an end while not having any discussion about the broader geopolitical problems that range from vast space to tiny Scandinavian islands. We are stumbling into WWIII because no one wants to cross the President’s position, which is that the war in Ukraine was totally unprovoked which maybe it wasn’t. We do not recognize our own vulnerability to our own bureaucratic system, which has created not only massive debt but also a certain way of running the country which are now about to change thanks to The Supreme Court rulings. The most popular Presidential candidate is not getting any airtime because he is a threat to the two-party system and to their financial backers. The parties are bought, becoming increasingly dysfunctional and refusing to embrace change. That makes us a lot like the Soviets. Biden is the new Brezhnev. The apparatchiks will not acknowledge or address any uncomfortable facts, preferring to label anyone who mentions them, hence Robert Hur is a traitor for pointing out the obvious. Europe is in denial, too as it becomes Trumpian, shifting to the right. America is in danger of an election that might not happen (thanks to a new pandemic or something else), might have yet unknown candidates, might have an unknown outcome (one where nobody gets 270 Electoral College votes), or might drag on for months in a Contingent Election process. Right now, Trump looks set to win, but what if he loses? Will he go home quietly? All of this might happen without the traditional tools for dealing with financial and political consequences and crises because of the recent Supreme Court rulings. What if trouble starts on a tiny Swedish or Norwegian island, in space, or in the aftermath of the French elections? Will hardly anyone mention it in the interest of keeping things “low-tension?” Denial is now the problem more than the problem is the problem.
Will the President step down or fall down? Either way, there is now a fragility that renders the world more vulnerable to geopolitical and strategic trouble than we think.
Source: Dr Pippa, Substack
This is not a recommendation to buy or sell any security. It is for educational discussion purposes only. Opinions are subject to change. Consult your advisor
Employment Picture Worsening – Sept Fed Rate Cut?
“I’ve been arguing that we’re in a new era of inflation volatility, and today’s figure meshes with that, I think. I don’t believe we’re going back to a 2% inflation rate and magically staying there. Also, I’ll say again, having inflation fall after the spike is one thing, keeping inflation down is another. So, while we’re going to get a rate cut in September and likely another in December, this rate-cutting cycle is going to be VERY different than what we got used to for decades in response to every economic downturn where policy rates were slashed and burned and with a large dose of QE. The Fed I believe is just not going to have the same wiggle room to react.”
– Peter Boockvar, July 12, 2024 Boock Report
Last week’s employment numbers support a weakening economy. The June jobs report showed unemployment rising to 4.1%. That is enough to trigger something called the Sahm Rule.
The Sahm Rule is a recession indicator that tracks the shifts in the US unemployment rate, comparing a three-month average of unemployment data to the past 12 months. Created by former Federal Reserve Board economist Claudia Sahm — whom the rule is named after. It’s simple:
- Required is a 0.50% increase in the unemployment rate above the last three month average of unemployment. That just happened with last Friday’s unemployment print.
- When it happened historically, we were already in recession. Lights on!
Here is a link to an excellent economic summary of last Friday’s Employment number. A special hat tip to my good friend Barry Habib and his team for allowing me to share it with you.
The latest jobs report from the Bureau of Labor Statistics (BLS) showed weak job growth, with an overestimation due to the BLS’s faulty birth-death model. Dan Habib shares a chart in the video showing the past Sahm Rule signals. Well worth the watch.
The unemployment rate increased, and wage growth decelerated. Speakers discussed the implications of these findings, including the loss of full-time jobs and the inflation outlook.
In Peter Boockvar’s morning note this morning he summarized his thoughts around the June CPI and PPI numbers that came out this week.
- June’s headline CPI unexpectedly fell one-tenth compared to the estimate of up one-tenth. The core rate was higher by one tenth compared to the estimate of up two-tenths.
- Compared to last June, headline CPI is up 3%, and the core rate is up 3.3% compared to 3.3% and 3.4%, respectively, in May.
- PPI surprised to the upside: Wholesale prices in June exceeded expectations, and the May figures were revised higher. The headline gain of .2% was vs. a one-tenth estimate, and May was revised up by two-tenths. The core rate grew by .4%, double the forecast, and May was revised up by three-tenths.
- The y/o/y headline gain was 2.6% vs. 2.4% last month, and the core gain was 3% y/o/y, up from 2.6% in May.
Bottom line: Reread Peter’s intro quote in this section above.
A September interest rate cut is likely.
Not a recommendation to buy or sell any security. For discussion purposes only. Current viewpoints are subject to change.
Random Tweets
Signs of Weakening Economy:
Source: Bloomberg, @SoberLook
Loved the sarcasm in this:
I “like” and “retweet” posts I find interesting. I enjoy X because I can easily follow people I like to keep On My Radar.
You can follow me on X (formerly Twitter) @SBlumenthalCMG.
Not a recommendation to buy or sell any security. For discussion purposes only. Current viewpoints are subject to change.
Personal Note: Manhattan Beach, Stonewall, and Denver
Last week, on July 4, I made a quick trip to San Diego. I got to my hotel at Torrey Pines around 7:30 p.m. PST, put my bags in my room, grabbed a nice California red, and found a quiet chair outside overlooking the 18th hole on Torrey Pines’s famous South Course. The sun was just setting over the Pacific Ocean. So beautiful, so peaceful.
Unfortunately, I didn’t have time for golf. I was there to visit one of our larger investments. It was worth the trip.
The next day, I hopped on an Amtrak Surfliner train for a 2.5-hour ride to Los Angeles to meet my son Kyle, daughter Brianna, and Brianna’s boyfriend for dinner in Manhattan Beach.
Kyle, Dad and Brie (Manhattan Beach) – Heading to dinner
The next photo is rather blurred due to the window shade on the Amtrak train, but you get the idea. Is it worth the high taxes? Many say yes. At the very least, the train ride is certainly better than the train from Phila to NYC.
Photo en route from San Diego to LA (Amtrak Surfliner)
What a fun visit.
I’m making up for not playing golf last weekend this weekend, but I’ll make sure to make time to fix some things around the house. Two electricians and a painter are coming to the house on Sunday, and we are going to rewire the outdoor lights. “We” is generous. My job is to make sure the post-work Corona Lights are on ice and help with the painting touch-up work. More like, “Steve, can you hold that ladder?”
Up next is a business trip to Denver on July 25, which includes a round at Colorado Golf Club with a private equity firm we work with and my son Matt. I’m really looking forward to it.
Keeping with the theme, my good friend Michael Gale, an outstanding photographer, recently sent me this beautiful photo of my beloved Stonewall. He lives near it and walks the course early most mornings. Here is a shot from the fairway of Stonewall’s North Course on hole number three, looking down the eighth fairway with the eighth green in the background. It’s just stunning.
Stonewall North Course, suburban Phila, photo by Michael Gale
If you are a golfer and visiting the Phila area, don’t be shy. I am happy to have you as my guest. I don’t overpromise many things, but I always overpromise a bucket list experience at Stonewall.
I hope your week includes something fun for you.
With kind regards,
Steve
“Extreme patience combined with extreme decisiveness. You may call that our investment process. Yes, it’s that simple.”
– Charlie Munger
Notable this week:
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IMPORTANT DISCLOSURE INFORMATION
This document is prepared by CMG Capital Management Group, Inc. (“CMG”) and is circulated for informational and educational purposes only. There is no consideration given to the specific investment needs, objectives, or tolerances of any of the recipients. Additionally, CMG’s actual investment positions may, and often will, vary from its conclusions discussed herein based on any number of factors, such as client investment restrictions, portfolio rebalancing, and transaction costs, among others. Recipients should consult their own advisors, including tax advisors, before making any investment decision. This material is for informational and educational purposes only and is not an offer to sell or the solicitation of an offer to buy the securities or other instruments mentioned. This material does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors which are necessary considerations before making any investment decision. Investors should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, where appropriate, seek professional advice, including legal, tax, accounting, investment, or other advice. The views expressed herein are solely those of Steve Blumenthal as of the date of this report and are subject to change without notice.
Investing involves risk.
This letter may contain forward-looking statements relating to the objectives, opportunities, and future performance of the various investment markets, indices, and investments. Forward-looking statements may be identified by the use of such words as; “believe,” anticipate,” “planned,” “potential,” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular market, index, investment, or investment strategy. All are subject to various factors, including, but not limited to, general and local economic conditions, changing levels of competition within certain industries and markets, changes in legislation or regulation, Federal Reserve policy, and other economic, competitive, governmental, regulatory, and technological factors affecting markets, indices, investments, investment strategy and portfolio positioning that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties, and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Investors are cautioned not to place undue reliance on any forward-looking statements or examples. All statements made herein speak only as of the date that they were made. Investing is inherently risky and all investing involves the potential risk of loss.
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, has not been independently verified, and does 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 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 purposes.
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.
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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.Please take note of the following text:
“The blue line in the lower section shows how much the orange line is above or below the long-term trend line. It is currently in the “Overvalued” zone. Lastly, the data boxes at the bottom of the chart display the annualized gains based on each zone (Overvalued, Fairly Valued – blue line in the middle zone, or Undervalued).”Please take note of the following text:
“The blue line in the lower section shows how much the orange line is above or below the long-term trend line. It is currently in the “Overvalued” zone. Lastly, the data boxes at the bottom of the chart display the annualized gains based on each zone (Overvalued, Fairly Valued – blue line in the middle zone, or Undervalued).”