On My Radar - 666 to 6,666

Written By Steve Blumenthal

September 26, 2025
By Steve Blumenthal

“What an amazing, incredible, bizarre, long, strange trip it's been.”

— Peter Boockvar, The Boock Report

A short post this week with a series of charts/data you may find interesting. We examine the percentage of money allocated to U.S. equities relative to other bubble periods, assess the level of margin debt, and analyze the source of earnings for the S&P 500 Index (hint: Mag 7).

Grab your coffee, find your favorite chair. Let’s go!

On My Radar: 

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Charts/Data

I vividly recall the S&P 500 Index hitting its bottom at 666 on March 6, 2009. I wrote an On My Radar note in December 2008 titled, It’s So Bad It’s Good. It turned out that Bad was not yet bad enough.

When 6,666 crossed my computer screen this week, I couldn’t help but reflect on the symmetry. The best quote that I came across this week came from my good friend, Peter Boockvar. Right on.

1) Stocks as a Percentage of Household Financial Assets

Courtesy of Ned Davis Research: Record-high allocation to stocks by households

All you really need to do is look at the chart. It shows that households, the largest holders of stocks, owned equities valued at $51.1 trillion at the end of the quarter or a record-high allocation of 50.5% of total household financial assets.

Individual investors are all-in on stocks. They have never been more bullish.

Source NDR (see important disclosures below)

A few key points:

  • Equities = $51.1 trillion

  • Total Financial Assets = $101.25 trillion

  • Notice the peaks and troughs over time. The late 1960s, early 1980s, 2000, 2007, 2021, and the present day.

Source: NDR w CMG notations

2) Household Equity Ownership and Rolling 10-year Total Return

The following charts the actual 10-year total performance of the S&P 500. Take a look at the orange dotted line. It stops at the last known 10-year achieved return. Focus on the correlation between ownership and actual returns.

“We are here” in the chart shows that we are at the highest reading vs. data back to 1951. The left-hand side of the yellow zone is the 2000s (tech bubble peak).

  • The key read here is that when ownership is high (investors heavily invested in stocks), there is less capital available to bid prices higher.

  • The current reading forecasts a total return of -3%. In short, $100,000 declines to $97,000 ten years from now. Even worse, considering a 3% annual inflation rate.

  • One more point: note the gap between the blue line and the orange line since the start of QE. The gap may persist, but gravity, in my view, will ultimately prevail.

Source: NDR with CMG annotations

3) Leverage

Leverage always blows things up!

Source: @Kobessiletter, Augur Infinity

4) Another Look at Leverage

When the moving average of margin debt is above its six-month smoothed moving average, the trend/returns for the S&P 500 have been better than when margin debt outstanding declines below the moving average line.

Source: NDR

5) The Mag 7 - High Market Concentration

The Mag 7 stocks are ~ 34% of the S&P 500 Index. The remaining 493 stocks are ~ 66% of the index.

The following chart plots Wall Street consensus estimates for the Mag 7, the 493, and the S&P 500.

The Mag 7 stocks (green line) are the earnings growth story. Period.

Source: Apollo

6) Cass Freight Index

Except for the Mag 7, most other areas in the economy are struggling. This next chart caught my eye - things are not looking well for the shipping.

Source: @globalmktobserv, Augur Infinity

7) Data Centers

Data Centers are where construction growth is happening. The following compares data centers vs office buildings.

Not a surprise that electric power is so high.

Source: Census Bureau, JPMAM, @jimpethokoukis

Bottom line

The equity market is overvalued, overbought, highly concentrated.

Diversify. Having worked with investors for more than 40 years, and reflecting on the move from 666 to 6,666, the following passage from Ray Dalio’s book, How Countries Go Broke: The Big Cycle, stood out to me. This is something I believe many investors miss.

From Ray (emphasis mine),

“While I’ve done very well as a global macro investor betting on the future in this unique way, I am wrong a lot (at least one-third of the time relative to what the markets are expecting) and I am never exactly right. Because I know that it takes only one really bad bet or a series of moderately bad bets to knock me out of the game, I am extremely risk-averse, so I have built great risk controls. I control risks through diversification of my good risky bets rather than by avoiding risky bets. To me, the “Holy Grail of Investing” is to find and make 15 or more great uncorrelated bets. I have followed this approach for about 35 of my 50-plus years as a professional investor. I am as hooked on playing this game as I have ever been, though now I want to pass along what I’ve learned rather than keep it to myself. It is of course up to others to decide whether what I’m sharing is of value, but I know that from my own experience it is. I have made a lot of money betting on the cause/effect relationships I described earlier in this book—relationships between the short-term and long-term debt and political cycles, acts of nature, and humanity’s inventiveness creating new technologies. These relationships are also logical and have appeared across thousands of years of history. I am sure that they are the biggest and most important forces, even though there are still a lot of key unknowns and uncertainties.

Also, keep in mind that I am not fully sure of anything, except death and taxes.”

Source: Dalio, Ray. How Countries Go Broke: The Big Cycle (Principles) (pp. 361-362). (Function). Kindle Edition.

SB Here: For more on this, see last week’s On My Radar: Trapped Like a Rolling Stone

Diversification ideas - If you are interested in learning about the approach we follow at my firm, CORE and EXPLORE, we wrote a paper titled “How We Think About Wealth.”

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Registration for the paper: Please note that if you are interested in learning more about the investments we utilize to address the period ahead, we can connect with you after 30 days. There are specific regulatory qualifying rules. Regulations require us to make sure you are qualified for certain investments. If you have already been in contact with us, the 30-day regulatory rule does not apply. Please leave us a short comment if you prefer not to be contacted.

 

China, Treasuries and Gold

The following chart from Peter Boockvar’s Boock Report caught my eye this week.

China Holdings of US Treasuries

Peter noted a few key points:

  • China shed $25.7b of US Treasuries taking their holdings of US Treasuries to $731b in July which is the least since at least the end of 2008.

  • They did this as their foreign currency reserves have risen to a 10-year high, and

  • what are they owning more of instead? Gold. And as they trade more with partners in RMB, they have fewer US dollars to recycle into the US Treasury market.

  • Trade such as buying oil from Saudi Arabia and Russia in RMB and buying soybeans from Brazil in RMB instead of the U.S. etc., and

  • Those countries use the RMB to buy stuff from China.

SB point: The times they are a-changing. There is no putting the genie back in the bottle.

Source: Boock Report, Bloomberg

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. 

 

Plumbing Problems

In this next session, I’m simply pointing out the complexity in the system.

I believe we are a long way down the road to the U.S. government buying more and more of the very debt it issues. China is one example.

My belief is that “all roads lead to inflation.” The most significant contributor is the printing of money to finance U.S. government debt monetization and ongoing spending needs. To which, the interest cost as a percentage of tax revenues is nearing 25%. This is untenable.

Last week, Wall Street dealers attempted to offload nearly $24 billion of old, long-dated Treasury securities. The Treasury only bought $2 billion of the $24 billion, and only from a single issue. The Treasury issues new bonds regularly. (For example, a single issue such as a 20-year Treasury issued ten years ago at a yield of 1.75%.)

That wasn’t about juicing markets or lowering rates. It was about unclogging the plumbing.

Think of it like being stuck on the turnpike, and five miles ahead of you are workers clearing a crash. Similarly, old, illiquid bonds were jamming up trading and repo markets, making it harder for dealers to absorb the government’s massive new issuance. By selectively buying back those bonds, the Treasury is keeping traffic moving. And the Treasury needs the dealers to buy newly issued Treasury bonds.

But there is a cost. By retiring older, lower-coupon bonds and replacing them with short-term bills, the government’s near-term borrowing expenses go up. The tradeoff is stability: repo stress eases, auctions clear, and investors, foreign and domestic, can keep digesting supply without the system seizing up.

The key point: this isn’t QE (quantitative easing), which is meant to push yields down. The recent move is intended to prevent market dysfunction.

If yields rise from here, it’s about inflation, deficits, and growth - not broken plumbing.

Why this $2 billion matters

I believe the Treasury has signaled that it understands the stress in the system and will intervene to prevent a liquidity crisis. It can’t stop rates from climbing if macroeconomic forces (inflation, lack of buyers, bond vigilantes selling) demand it, but it can intervene surgically to prevent liquidity strains from escalating into a crisis.

Keep your eye on the 10-year Treasury yield and the dollar.

 

Trade Signals: Euphoria

Trade Signals is Organized in the Following Sections:

*Trade Signals basics: The Market Commentary section summarizes notable changes in the core key indicators: Investor sentiment, market breadth, stocks, treasury yields, the dollar, and gold. The Dashboard of Indicators provides a detailed view of all Trade Signals indicators.

Commentary: Euphoria

Euphoria and the Emotional Investment Cycle

About Trade Signals

Trade Signals is a paid subscription service that posts the daily, weekly, and monthly trends in the markets (and more). Free for CMG clients. Not a recommendation to buy or sell any security. For discussion purposes only.

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Yes, it’s that simple.”

– Charlie Munger

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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: Tampa, Phoenix, and Team

"She's the anchor, I'm a sailor, We're lost in the height of the wave."

  • Mt. Joy, Silver Lining

I am writing you from sunny, warm, and humid Tampa, Florida. It’s been a fun week.

I attended an outstanding dinner in NYC on Tuesday evening hosted by Jan van Eck, CEO of Van Eck. In the early 2000s, CMG ran a fund of hedge funds strategy, and Jan’s father and brother ran one of the funds in our portfolio.

Jan has grown the firm $132.9 billion in assets under management. VanEck offers both active and passive products, including mutual funds, ETFs, and separately managed accounts, with a notable early focus on international equities, gold, and emerging markets.

I was surprised to learn that they are also investing in early-stage and mid-stage private companies. That is an area of great interest to my firm. Jan, we need to talk.

Other guests were chief investment officers from various firms. What I like about Jan’s dinners is the interactive dialogue he shepards. We discussed market outlook, AI's integration into our lives, India, China, the Stablecoin Bill, and much more.

Following are a few comments (not a recommendation, views are subject to change):

  • Best guess: The government deficit decreases from 6.4% to 4.5%. SB here: Scott Bessent’s target is 3%. Let’s hope.

  • Tech efficiency is boosting profits. The chart shared showed Microsoft reached its peak employee count in 2024, and the count is meaningfully declining while profits are rising. Here are a few quotes from CEO’s:

    • AI will take “Half of all white collar jobs.” Jim Farley, Ford CEO

    • JPM could lose 10% of operational jobs

    • AI could cause 10-20% unemployment, says Dario Amodei, Anthropic CEO

  • I loved this quote from VanEck’s Angus S.: “Personal trainers will have dog walkers.” Think humanoid Robots… I think he is right.

  • The collective view was that gold has a long way to run. Perhaps just three years into a long-term bull market. I continue to hold a bullish view on gold.

  • Henry, an analyst at Bernstein, noted that derivative-based ETFs have grown at an incredible pace. He said, “I wonder what the end state will be.” Synthetic ETFs use stock options and managed futures contracts to express a defined return and downside outcome. Bernstein has an American Renaissance ETF that we’ll be looking into.

  • A fixed-income manager from a large firm said, “right now, you can refinance a ham sandwich.” That may be my favorite quote of the day. What he is saying is that there is a great deal of liquidity in the system.

I walked away from the dinner with a handful of new ideas and was stimulated by the depth of the discussions. Thank you, Jan.

Team update: A 3-0 halftime lead for the MP Friars evaporated in the second half. After two overtimes, the game finished 3-3. The boys look out of gas. I’ll be anxiously waiting to hear from Susan after today’s home game. Go Friars.

For new readers, my wife, Susan, is the boys’ varsity soccer coach. I serve as an assistant coach on game days. "She's the anchor, I'm a sailor…” And so happily lost in the height of the wave with her.

Mt. Joy is playing at the Mann Music Center in Philadelphia tomorrow evening. And we have tickets! Can’t wait.

Finally, if you are a golf fan, I’m sure you are tuning in to watch the Ryder Cup. Hope you enjoy watching. Go USA. However, I must say that I am a fan of many of the European golfers.

At the time of this writing, Europe took the morning matches and leads 3 points to 1. The afternoon matches are underway, with the US up in two of the matches and Europe up in the other two. Europe needs 13 1/2 points to retain the Cup. The US needs 14 1/2 points to win it back. The Ryder Cup concludes Sunday.

Channel your inner Mt. Joy, and hold your wine glass up high - “This is gonna be the best day of your life.”

Have a great week!

Kind regards,

Steve

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Stephen B. Blumenthal
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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. Author of Forbes Book: On My Radar, Navigating Stock Market Cycles.

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On My Radar - Trapped Like a Rolling Stone