March 9, 2018
By Steve Blumenthal
“Invest in things that have never happened before,
hedge for regression to the mean and plan
for the unimaginable.”
― John Burbank, Passport Capital
“When the Fed moves in one direction they are
ultimately laying the seeds for what we will see in the next cycle.”
― Dr. Lacy Hunt, Hoisington Capital Management
This past Wednesday, David Rosenberg kicked off the 15th annual Mauldin Economics Strategic Investment Conference as he has each year. He didn’t disappoint. I attend many conferences, but none better than John Mauldin’s event. John didn’t disappoint!
Over the next few weeks I will be sharing my high level notes with you. Today my goal is to give you an overall feel for the conference. Frankly, I’ve taken so many notes and listened to so many outstanding presentations, I really need some down time to think and reflect before I organize my thoughts and share them with you.
I remember back in the late 1980s listening to David over the squawk box that sat on my and every Merrill Lynch broker’s desk. David joined ML in 1987. I joined in 1984. The squawk box was one of the ways the firm communicated and shared research ideas with its financial consultants. Much of what blasted over the system was pure noise, but two analysts stood head and shoulders above the rest: Bob Farrell and David Rosenberg.
Wall Street is almost always bullish; but Bob and David talked about cycles and trends. Bob is one of the great market technicians of our time and David, known as Rosey to his friends, is one of the great economic strategists. Both are straight shooters.
Rosenberg was Chief North American Economist at Merrill Lynch in New York for seven years, during which he consistently placed in the Institutional Investor All-Star rankings. He is now chief economist/strategist at Gluskin Sheff, based in Toronto. I have great respect for David. He is humble, insightful and smart. “We have never experienced a monetary policy tightening cycle that we are going to experience today,” he said and added, “Recessions are followed by expansions and expansions are followed by recessions.” David said, “Regime Change should be the title of this presentation” – speaking to the shift in central bank policy. More from David in next week’s post.
Jeffrey Gundlach, CEO of DoubleLine Capital, gave an outstanding presentation. Mark Yusko presented on the state of the market bubble (well, many bubbles) and he made a great case for why you and I should consider getting on the bitcoin blockchain bandwagon. I presented on valuations and coming 7-, 10-, and 12-year returns. Venture capital investor John Burbank, from Passport Capital, discussed “The Next Frontiers.” His session was followed by a Q&A lead by Yusko. Both men opened my eyes to the greater potential of blockchain.
There was much more: Louis Gave from Gavekal shared his expert view on China, Steve Cucchiaro and Jan vanEck discussed the opportunities and challenges with ETFs. George Friedman talked geopolitics. I found his presentation particularly insightful. Stanford University’s Niall Ferguson presented on the six laws of network science. How we humans are social beings and tend to flock together in common interests and he then debated and exchanged body blows with his friend ex-central banker and author, David McWilliams. Hope I can get you the video of that one.
As I conclude writing today, I’m listening to Dr. Lacy Hunt give the keynote concluding final session. It’s called “Macroeconomics Theory Matters, Especially So Now!” By the way, he continues to believe we will see a new low in interest rates before the system resets.
Please bear with me this week to allow me time to digest what I’ve learned. I’m running low on gas with a head that needs to get quiet, stop and think. It’s been a week of drinking global macroeconomic data from a fire hose. In a good way.
I might get to play golf at Torrey Pines later today. They are booked for months but sometimes there are last minute cancellations and I’m hoping I get lucky. Mauldin invited me to dinner with Lacy Hunt and I then head to the airport to take the dreaded “red eye” I swore I would never ever, ever, ever take again. I see one glass of wine before the sleep I hope to get on the plane. If the flight attendant turns up the speaker volume to sell that “only available on this flight special 50,000-mile credit card” offer… well, I hope I can’t hear him or her through my headphones! There should be a rule, no sales pitches on red eyes. I’m really looking forward to getting home.
Grab that coffee… Below I share a few photos from the conference. My bullet point notes on Rosenberg’s presentation and charts will hit your inbox next week. Thanks for reading and do have a wonderful weekend.
♦ If you are not signed up to receive my weekly On My Radar e-newsletter, you can subscribe here. ♦
Included in this week’s On My Radar:
- A Few Photos from the Mauldin Economics SIC 2018
- Trade Signals — No Changes Since Last Week; Equity Trend Persists
- Personal Note
A Few Photos from the Mauldin Economics SIC 2018
Following are a few photos from the conference. You can sign up for audio and slide presentations HERE. I believe it costs $195 and please know I do not participate in any of that fee. Providing in case you are interested.
And yours truly:
Trade Signals — No Changes Since Last Week; Equity Trend Persists
S&P 500 Index — 2,732 (03-08-2018)
Notable this week:
Trade signals are unchanged since last week. Fixed income signals remain bearish. The Zweig Bond Model (a trend model for the bond market) remains in a bearish “sell” signal. HY is also in a “sell” signal. The equity market trend remains bullish as measured by the Ned Davis Research CMG U.S. Large Cap Long/Flat Index (indicator) and the 13- vs. 34-week Moving Average (MA) of the S&P 500 Index (charts below). Volume demand (buyers) remains bullish. Don’t Fight the Tape or the Fed is signaling a moderately bearish -1 reading (see information below). We need to be on alert for a -2 indicator. The long-term trend in gold remains bullish.
Long-time readers know that I am a big fan of Ned Davis Research. I’ve been a client for years and value their service. If you’re interested in learning more about NDR, please call John P. Kornack Jr., Institutional Sales Manager, at 617-279-4876. John’s email address is firstname.lastname@example.org. I am not compensated in any way by NDR. I’m just a fan of their work.
Important note: 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.
Just after the Thursday morning session concluded, I checked my texts and saw a note from my son, Matthew. He was in Lake Placid competing in the collegiate freestyle skiing nationals. The text said, “Go online to watch the live coverage of the skier’s men’s slope style finals. Funny story,” he said, “I made the finals. I’ll tell you later.” Earlier that morning we spoke and he was frustrated he didn’t qualify. Slope style is a combination of rails and jumps and he felt he performed well enough to make the final 12.
I tuned in online, not sure if I missed his run. Then, the announcer says, “Next up from Penn State is Matt Blumenthal.” I sat with hear phones in and iPhone in hand. Just amazing what we have at our finger tips. It gave me some happy goose bumps. What happened is Matt saw the qualifying results and, though he missed by just a hair, those were preliminary numbers. So, as the finals began, he was on the side of the course with his teammates to watch the finals. To his surprise, they announced his name as the next skier. He grabbed his skies and raced about 100 yards up the hill to the starting gate. I tuned in just in time. The run consists of one rail, two jumps and a finishing rail. Matt hit the first rail ok, did a giant 360 helicopter on the first jump but didn’t land the inverted 720 on the second jump. Parenthood… that was a proud moment for dad.
But the great day didn’t end there. Late afternoon, my youngest son, Kyle, FaceTimed me to share his acceptance letter to Penn State. Dad, do you have a minute… “There may be another Penn Stater in the family,” he said. I won’t bore you with my love affair for all things PSU, but let’s say I couldn’t stop smiling. Not yet decided but in the right direction. Well, anyway, thanks for indulging me. Wishing you many great days with your family.
The Mauldin Economics Conference is really something special. It’s not just the speakers but the time spent with attendees and many old friends. You should think about attending next year. You’ll walk away richer, in many ways, for the time spent.
Wishing you and your family the very best.
♦ If you are not signed up to receive my weekly On My Radar e-newsletter, you can subscribe here. ♦
With kind regards,
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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From an investment management perspective, I’ve followed, managed and written about trend following and investor sentiment for many years. I find that reviewing various sentiment, trend and other historically valuable rules-based indicators each week helps me to stay balanced and disciplined in allocating to the various risk sets that are included within a broadly diversified total portfolio solution.
My objective is to position in line with the equity and fixed income market’s primary trends. I believe risk management is paramount in a long-term investment process. When to hedge, when to become more aggressive, etc.
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