On My Radar - Detox and Rehab
March 14, 2025
By Steve Blumenthal
“The easy thing for us to have done would have been to come in and just keep this massive spending going. But it’s unsustainable. Could we have kept it going for another 4 years? Yeah, maybe, but you’re risking financial calamity down the road.”
— Scott Bessent, U.S. Treasury Secretary on CNBC March 12, 2025
Detox is the process of clearing an addictive substance(s) from the body and managing the withdrawal symptoms. The stronger the addiction, the more complex the process.
Detox is the first step toward recovery, but it doesn’t necessarily address the underlying reasons for the addiction. The road to recovery takes time.
On Friday, March 7, 2025, during an interview on CNBC's "Squawk Box," Bessent remarked, "The market and the economy have just become hooked, and we’ve become addicted to this government spending, and there’s going to be a detox period."
Bessent elaborated that this "detox" is a necessary transition to a more sustainable economic equilibrium, emphasizing that it does not necessarily mean a recession. On Thursday, March 13, 2025, in a follow-up CNBC interview on Squawk on the Street, he clarified, "Not at all. Doesn’t have to be [a recession], because it will depend on how quickly the baton gets handed off. Our goal is to have a smooth transition."
“Does not necessarily mean recession… a smooth transition…” Most everyone enters the rehab facility with trepidation and hope…
The Greenspan Put
The "Greenspan Put" refers to a perceived policy stance attributed to former Federal Reserve Chairman Alan Greenspan, who served from 1987 to 2006. It describes the belief among investors and market participants that the Federal Reserve will intervene to prop up financial markets.
The concept emerged from Greenspan’s actions during key events. After the 1987 stock market crash (Black Monday), the Fed, under Greenspan, issued a statement reassuring markets of its readiness to provide liquidity and subsequently lowered interest rates, helping stabilize the economy.
In the late 1990s, during the Asian financial crisis and the 1998 collapse of Long-Term Capital Management (LTCM), the Fed cut rates to calm markets. Critics argue this fostered a "moral hazard," encouraging excessive risk-taking by investors who presumed the Fed would bail them out. The Greenspan Put became a shorthand for the perception that the central bank prioritized market stability, often at the expense of allowing natural economic corrections. The put continued through Ben Bernanke’s tenure amid the 2008 Great Financial Crisis and Jerome Powell, with quantitative easing during Covid.
It’s tough to take any patient off the juice.
Former Treasury Secretary Janet Yellen used the T-Bill market to finance $2 trillion a year in government deficit spending. That’s an enormous shot of juice into an already overleveraged system. Bessent is signaling that it’s time to send the addict to rehab.
The question is, do we believe him? Another is, what will the Fed do? Bessent, yes. Fed, I don’t know.
Of course, the fatal end game for the addict in this story is too much debt. Mix into the equation an overvalued equity market and tariff wars - one shouldn’t be surprised at the market volatility we are experiencing.
I’ve been writing about ‘end of the long-term debt cycles’ for, well, way too long. The process is slow, then fast. Are we nearing the fast part? Maybe. The leader in this area is Ray Dalio.
Dalio was on CNBC on Wednesday warning about the debt crisis.
“Just as we are seeing political and geopolitical shifts that seem unimaginable to most people, if you just look at history, you will see these things repeating over and over again,” Dalio said. “We will be surprised by some of the developments that will seem equally shocking as those developments that we have seen.”
We’ve been looking the other way, but not sure exactly what to do. Now we all know dear old Uncle Sam is addicted to debt.
They tried to make me go to rehab, but I said "no, no, no!"
— Amy Winehouse
It’s time to go to rehab. Many are saying, “no, no, no.” Scott Bessent is signaling the time is now. Of course we’ll survive, but the recovery won’t be easy.
Mix in the tariff wars, and the plot thickens. This from CNBC this week, Dalio Warns U.S. Debt Will Lead to Shocking Developments:
“The first thing is the debt issue, we have a very severe supply-demand problem,” Bridgewater founder Ray Dalio told CNBC’s Sara Eisen at CONVERGE LIVE in Singapore regarding U.S. debt.
Dalio, who was speaking on the same panel as Salesforce CEO Marc Benioff, said this will require the White House to sell a quantity of debt the world is just not going to want to buy.
“That’s a set of circumstances that is imminent, OK? That is paramount importance,” he said, adding that most people don’t understand the mechanics of debt.
Tariffs ‘to cause fighting between countries’
When asked about the potential consequences of a simmering trade dispute, Dalio described the current state of affairs as “an extension of the patterns of history” — and singled out 1930s Germany as one example.
Dalio said there was a write-down of debt at that time, alongside a hike in tariffs to boost revenue and a buildup of its domestic base. “Be nationalistic, be protectionistic, be militaristic. That is the way these things operate,” he said.
“The issue is really the confrontation of all of this, the fighting of all of this. So, tariffs are going to cause fighting between countries,” Dalio said, adding that he was not necessarily talking about a military confrontation.
“But think about U.S., Canada, Mexico, China, and all of those types of fighting. There will be fighting, and that will have consequences, and I think that’s the main thing to pay attention to,” he said.
Dalio said he was sharing those views as a politically neutral observer, comparing his approach to that of a mechanic or doctor. “I’m not an ideologue,” he added.
Grab your coffee and settle into your favorite chair. Sounds dire? It depends. From a wealth perspective, I argue that this should not be depressing news. Well, that depends on what you own. It’s a question of positioning. Many investments are doing well—value plays, for example. Gold hit 3,000 this week, and commodities, in general, are doing okay, and high and growing dividend stocks are outperforming.
Further, dislocation creates opportunity. “Extreme patience and extreme decisiveness,” as the late Charlie Munger famously said. Chin up, remain patient and read on… you’ll find my bullet point note summary of the J.P.Morgan and Goldman Sachs macro presentations from the WallachBeth Winter Symposium and a few additional comments on the state of the markets in the Trade Signals section.
On My Radar:
JP Morgan and Goldman Sachs Macro Presentations
Random Tweets
Trade Signals: Update - March 12, 2025
Personal Note: Tuckman’s Theory of Team Dynamics
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.
If you like what you are reading, you can subscribe for free.
J.P.Morgan and Goldman Sachs Macro Presentations
Following are my bullet point notes (quick side note, it amazes me they don’t address the big elephant in the room, U.S and developed market DEBT):
JPMorgan’s Meera Pandit, CFA, Global Market Strategist, J.P.Morgan Asset Management
Economic and market outlook for 2025, discussing policy impacts and investment positioning strategies. Her presentation was titled, “Into the Policy Fog.”
Key Takeaways
The economy is moderating but still strong: Above-trend growth, healthy labor market, and progress in inflation.
Policy uncertainty (trade, government fiscal, and monetary) could impact growth/inflation; Fed path unclear with 1-3 cuts expected.
Rotation underway: Broadening market rally beyond top stocks; international markets showing promise.
Income focus in fixed income; equity fundamentals support continued but more volatile gains.
Economic Outlook
GDP growth moderating but still above trend, supported by consumers, businesses, and government
Labor market remains strong: ~4% unemployment, wage growth outpacing inflation.
Inflation down to ~3% from 9% peak, but services and shelter inflation remain sticky.
Policy risks: Tariffs and fiscal uncertainty could slow growth, may potentially reignite inflation pressures.
Monetary Policy
Fed expected to cut 1-3 times in 2025, but path uncertain due to data dependency and policy impacts.
Market expectations for cuts are volatile, ranging from 1 to 4+ cuts throughout the year.
A higher-for-longer rate environment is likely, with potential for yield curve volatility.
Fiscal Challenges
Deficit at 6.4% of GDP (vs. 3% historical average), driven by spending and rising interest costs.
Limited options for meaningful spending cuts or revenue increases in the short-term.
Debt/deficit concerns could put upward pressure on long-term yields.
Fixed Income Positioning
Focus on income over capital appreciation; shorter duration for volatility protection.
High yield and securitized debt attractive for yield and potential mispricing opportunities.
Expect rotation among fixed income sectors throughout the year.
Equity Market Trends
Broadening rally beyond top 7 stocks; rotation benefiting previously lagging sectors.
Double-digit profit growth is expected, but it is decelerating for top performers.
AI impact evolving to "phase 2" with broader beneficiaries across sectors and globally.
International Markets
Becoming more attractive, particularly in Japan and parts of Europe.
China rally more speculative, fundamentals still challenging.
Valuation discounts vs. U.S. starting to look compelling in some areas.
Long-term Perspective
All-time highs often lead to further gains (80% probability historically).
Fundamentals remain solid despite near-term volatility risks.
75% of years with 10%+ corrections still end positive.
JPM Summary
Maintain diversified portfolios with focus on longer-term horizons (3, 10, 20+ years).
Consider increasing allocation to international markets, particularly Japan and select European areas.
In fixed income, income generation is emphasized through high yield and securitized debt.
For equities, look beyond top performers to broaden opportunities across sectors.
Prepare clients for potential volatility while emphasizing strong underlying fundamentals.
Goldman Sachs, John Tousley, CFA, Global Head of Market Strategy
His presentation was titled, “Market Snapshot, Tales, Tells, and Tails.”
He began with this quote, “Anyone who tells you they know what is going on, don’t believe them, no one knows.”
Economy & Markets:
Uncertainty and Volatility: The current environment is uncertain and volatile. People are unsure "what's going on."
Short-Term Focus: There's a tendency to focus on short-term news cycles (two weeks), leading to anxiety and forgetting what was previously concerning.
Emotional Impact: The environment is emotionally challenging, making it difficult to stay focused.
Exaggerated Information: "Everything is exaggerated, amplified, designed to be quite fake." Headlines and stories should be viewed with skepticism.
Narrative Control: Those providing information may be more interested in being first or influencing than in accurately informing. Sadly true.
Need for Reliable Signals: It's crucial to seek multiple signals and sources to identify what is truly useful and truthful.
Interest Rates (Implied):
"Day to day" concerns and the need for "long term respect" suggests that interest rate fluctuations and their impact on businesses are part of the daily anxieties. The emphasis on long-term perspective suggests a need to look beyond short-term rate changes.
Geopolitics (Implied):
The general tone of uncertainty and the need to be wary of narratives suggests that geopolitical factors contribute to the overall unease. The statement about "things that are going to be run much longer than them" could be interpreted as referencing long-term geopolitical trends.
Key Takeaways:
Be selective and discerning about what information you give credence to.
Focus on Long-Term: Don't get caught up in short-term fluctuations and anxieties.
Seek Multiple Perspectives: Don't rely on single sources of information. Look for diverse signals to find the truth.
Be Skeptical: Be cautious of exaggerated or sensationalized news and narratives.
Opinions are those of J.P.Morgan and Goldman Sachs. Subject to change. The views are not CMG’s views. We may share similar views and differ on other issues.
Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only.
Random Tweets
Reiterating my point in the intro above and again in Trade Signals. Bianco points out that the administration assumes the status quo cannot be maintained. I agree.
Don’t expect an immediate bailout in the next dislocation. I see more room to the downside in this overvalued, overbought, overconcentrated U.S. stock market.
Source: @biancoresearch, CNBC, @Geiger_Capital
Source: @charliebilello
Source: @charliebilello
Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only.
Trade Signals: Update – March 12, 2025
March 12, 2025 -- S&P 500 Index 5,599
“Stay on top of the current market trends with Trade Signals.”
“Extreme patience combined with extreme decisiveness. You may call that our investment process. Yes, it’s that simple.”
– Charlie Munger
Trade Signals is Organized in the Following Sections:
Market Commentary
Trade Signals - Dashboard of Indicators
Market Valuations and Subsequent 10-year Returns
Supporting Charts with Explanations
Technicals, Fundamentals, Macroeconomics, and Investor Behavior
A quick summary of events:
It’s Not Just About Tariffs: While tariffs are getting blamed for the stock market’s decline, the problems are more profound. The AI-driven tech rally, mainly led by the "Big 7" stocks, seems to have lost steam. Uncertain revenue from AI spending and slower earnings growth are weighing on these stocks.
The "Magnificant 7" Are Losing Their Hold: These seven tech giants once made up 35% of the S&P 500. Without their dominance, the broader market lacks a clear leader to drive growth.
As of early 2024, the S&P 500 represents approximately $50 trillion in market capitalization. This accounts for about 80% of the total U.S. public stock market. The entire U.S. public stock market, which includes mid-cap, small-cap, and other listed companies across various exchanges (such as the NYSE and Nasdaq), is estimated to be around $62.2 trillion. Source: Bloomberg
Key Takeaways:
S&P 500: ~$50 trillion (~80% of the U.S. stock market). Source: Wikipedia
Total U.S. Public Stock Market: ~$62.2 trillion. Source: Siblis Research
35% of ~$50 trillion is $17.5 trillion or 25% of the entire U.S. public stock market. Seven stocks! Source: CMG Investment Research
Data as of 12-31-2024
Certain areas are performing well, like value, but the weightings are small relative to the mag 7 allocations. It will likely take some time for a new sector to step up.
The Global Picture: Not all markets are suffering. While U.S. tech stocks and the dollar are falling, some international markets are doing better.
Fiscal Support Is Fading: As Scott Bessett signaled, massive government spending has propped up the U.S. economy (nearly a 7% budget deficit relative to GDP). If the new government holds firm to a needed detox, it will likely hit corporate profits and economic growth.
Wealth Effect at Risk: Wealthier consumers, buoyed by rising stock and home values, have greatly supported the economy. If the market continues to fall, their spending will likely drop, raising recession risks.
Bottom Line: The stock market is in transition from bull to bear. The tech-driven boom is fading, fiscal support as signaled by Scott Besset, is drying up, and recession risk is increasing. The 10-year Treasury yield Weekly MACD continues to signal lower rates. The S&P 500 indicators are weakening.
If you’d like a sample of this week’s Trade Signals, please email Amy@cmgwealth.com.
Trade Signals is designed for traders and investors seeking a better understanding of technical trends in various markets. Click on the link below to subscribe or login. The letter is free for CMG clients; reply to this email or contact your CMG rep.
TRADE SIGNALS SUBSCRIPTION ACKNOWLEDGEMENT / IMPORTANT DISCLOSURES
The views expressed herein are solely those of Steve Blumenthal as of the date of this report and are subject to change without notice. Not a recommendation to buy or sell any security.
Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only. Current viewpoints are subject to change. Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only.
Personal Note: Tuckman’s Theory of Team Dynamics
Tuckman's Theory of Team Dynamics applies to sports, businesses, and most things in life. Developed by psychologist Bruce Tuckman in 1965 (and later refined), it describes the stages teams typically go through as they develop and work together. It’s often summarized in five stages, each with distinct characteristics:
Forming: The team comes together, and members are polite, cautious, and focused on understanding goals and roles. There’s excitement but little trust or conflict yet—everyone’s feeling things out.
Storming: Conflict emerges as personalities clash, roles are questioned, and differences in work styles or opinions surface. This stage can be chaotic and frustrating, but it’s key for growth as the team works through tension.
Norming: The team starts to gel—norms, trust, and collaboration develop. Members resolve conflicts, establish workflows, and begin appreciating each other’s strengths. Cohesion replaces chaos.
Performing: The team hits its stride, functioning effectively toward goals with high productivity and morale. Roles are clear, communication is smooth, and the focus is on results.
Adjourning (added in 1977): The team disbands after completing its purpose. This stage involves reflection, closure, and sometimes mixed emotions as members move on.
Think of it like a team’s life cycle: starting tentative, hitting rough patches, finding harmony, excelling, then wrapping up. It’s not always linear—teams can loop back to earlier stages—but it’s a helpful framework for understanding group evolution.
USA is the dominant team on the global playing field.
We are in Tuckman’s stage 2 with the new administration. We are definitely “Storming.”
Debt remains the most significant issue, not just in the U.S. One must ask, who will buy our bonds? At what interest rate? Who will buy bonds from other countries? I think Ray Dalio has it right. This is long-term debt accumulation cycle stuff. This is the seminal issue of our day.
The fasten seat belt light remains on. Expect the ride to remain bumpy. Norming remains somewhere ahead and while it might not feel like it today, I’m confident we will get performing.
Detox and Rehab - I’m saying yes, yes, yes.
With kind regards,
Steve
You can share this letter on X by clicking here.
You can share this letter on LinkedIn by clicking here.
Subscribe to OMR for free by clicking the photo.
Stephen B. Blumenthal
Executive Chairman & CIO
CMG Capital Management Group, Inc.
10 Valley Stream Parkway, Suite 202 Malvern, PA 19355
Private Wealth Client Website
CMG Customer Relationship Summary (Form CRS)
Metric-Financial, LLC Customer Relationship Summary (Form CRS)
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. Author of Forbes Book: On My Radar, Navigating Stock Market Cycles.
Follow Steve on X @SBlumenthalCMG and LinkedIn.
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.
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.
