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If you haven't stumbled across Steve Blumenthal's weekly comments at CMG advisors, about the precarious nature of both equity and bond market valuations, you should put this on your weekly email list.
There are many reasons to believe that we are in for a hard time ahead. Similar outlook to GMO but a shorter read with lots of great charts and weekly updates of trends
What is even more scary is the performance of the CMG funds most especially their long/short fund. Still, glad to see some contrarians out there as bullishness in many of the sentiment polls is beyond ebullient now.
I have been looking at their funds. The Tactical all Asset and the Bond fund are rather transparent as Blumenthal publishes his allocations on line weekly. He has little or no info on the long short strategy, which would probably be the hardest to implement. The mutual funds do not have a long track record as they started in 2015 but the separate accounts go back years and if you believe his summaries they seem to be relatively low risk and seem to deliver what they promise. Unless you want to pay 1.7% for the bond fund, you can tease out his strategy online...
I am not sure this is such a contrarian view. It is perhaps more withering than some others, but we are inundated by doom and gloom most every day. The last few years have forced investors to be contrarians if they want to have a positive return. Perhaps CGM and others are so bleak because their funds are crappy?
The thing about valuation, it's rarely the trigger for a selloff. It does however measure how severe a selloff will be when one occurs. For valuations to revert to their historical mean there needs to be some catalyst that shakes investors' confidence in the markets. And that is why these dire predictions based on valuation are so often wrong in their timing. You have to know what the trigger will be too and when it will occur. A few potential ones today--interest rates rising, tariffs and a consequent trade war, an actual war, terrorist attack, some sort of major fraud being revealed or bankruptcy filing particularly at a bellwether stock. Without one of these triggers or some other unforeseen one it may not matter that the stock and bond markets are overvalued. But the more overvalued they are, the worse it will be when the trigger event happens.
Wasn't worried until I read Lewis' list of potential triggers. Of the given choices, I'll choose CAn actual war. A hot war with China, escalating out of the South China Sea islands dispute would be very disruptive to global commerce and would probably trigger a U.S. - and possibly global - market collapse. We can hope "cooler" heads prevail (but that may be an oxymoron).
As we are lucky to live in an era of being able to utilize investment products that represent underlying production of excess returns over buy and hold ( as per academic literature ), using well designed, systematic, objective tactical strategies have produced asset accumulation growth (with the benefit of income withdrawal). Over the 60+ year sample, it appears that the myriad of many scary contrarian forecasts, geopolitical events, market shocks, presidential administrations, etc. had little affect on returns. https://docs.google.com/document/d/14OG8dGZolcXg7WGy_vGFN1dTJq1TccfgKwK7x27HAAA/edit?usp=sharing Be wary of expert opinion and anecdote and stay on course with "the evidence".
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http://www.cmgmutualfunds.com/fund-performance/
Kevin
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Old_Skeet
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A hot war with China, escalating out of the South China Sea islands dispute would be very disruptive to global commerce and would probably trigger a U.S. - and possibly global - market collapse. We can hope "cooler" heads prevail (but that may be an oxymoron).
@hank- With respect to the incoming admin I'd guess just an ordinary moron.
https://docs.google.com/document/d/14OG8dGZolcXg7WGy_vGFN1dTJq1TccfgKwK7x27HAAA/edit?usp=sharing
Be wary of expert opinion and anecdote and stay on course with "the evidence".