Wildfires Abound

Natural disasters appear to be on track for a record year. Numerous wildfires in the West and back-to-back hurricanes in the Southeast raise questions about how the affected areas will fare in terms of people and businesses remaining in the area, the continuance of federal aid, and the availability of flood and wildfire insurance.

The Thomas Fire in Ventura and Santa Barbara Counties of California was on track to be the largest fire in California’s history; however, as of this morning, with lower winds and Herculean containment efforts, it is expected to be the second largest. The 2003 Cedar Fire in San Diego County burned 273,246 acres, killed 15, and destroyed 2,820 structures. By comparison, the Thomas Fire has so far scorched 272,000 acres, killed one person, and destroyed more than 1,000 structures. Reduced winds, topography, preparedness, and unflagging efforts to contain the fire were factors that may have kept the Thomas Fire from being as bad as it could have been. The Thomas Fire and three others that burned in Southern California in December are unusual because December is usually a low fire-incident month according to accuweather.com.

A recent article regarding the California fires noted that a number of insurance companies have their own fire brigades. Early on during a fire, the companies identify problems and conduct remediation to alleviate losses. Some have complained that those who are not insured by such companies are at a disadvantage, while others advocate for preparedness in the hope that individuals and communities will adopt preventative strategies to reduce damage. Incidentally, the article also notes that before the municipal fire departments became common, insurance companies had their own firefighters. The latest reporting by the California Insurance Commissioner (Dec 6th) stated that fire-related losses reported by 260 insurers as of December 1 exceeded $9 billion, mostly in connection with the October Northern California wildfires. One can only imagine what the total for the year will be.

When a major wildfire breaks out, the US President must first declare a natural disaster in order for the Department of Homeland Security and the Federal Emergency Management Agency (FEMA) to begin coordinating disaster relief efforts. Those efforts allow local governments and individuals to recoup some of the costs of rebuilding through FEMA and other relief funding, such as for Community Development Block Grants. The funding contributes at least 75% of rebuilding costs; for recent hurricane damage the reimbursement was up to 100% in some instances. The Army Corps of Engineers, among other agencies, helps to repair damaged military installations, highways, and other key assets.

There is legislation pending in Congress to approve an additional $81 billion in federal aid, which includes assistance for some of the California wildfires. If passed, the measure will bring total federal disaster funding this year to $137.8 billion, as reported by the National Association of Counties.

The initial costs to communities affected by natural disasters can be great; however, after a natural disaster there is usually a surge of economic activity that continues for an extended period as people and communities rebuild and money and workers flow into the area – increasing income tax and sales tax revenues to municipalities. In desirable locations like California or other coastal areas, earthquakes and wildfires, hurricanes and floods do not seem to deter residents from rebuilding.

The proposed tax bill could make residents and potential residents think twice about living in disaster-prone areas and in high-tax states. One provision would disallow deducting amounts spent on uninsured disaster-related losses, while another provision reduces deductibility of combined state and local income, property, and sales taxes (SALT) to $10,000, which would affect high-tax states with high property values such as California, New York, New Jersey, and Connecticut. The amount of federal taxes paid will go up for many, leaving less flexibility for local municipalities to raise taxes and or to sustain current rates in the face of citizens’ resistance. Realtor associations have noted that property values may well be affected by the tax bill, too. (http://www.cumber.com/the-muni-take-on-the-tax-bill-round-two/)

Increased weather variability and natural disasters have led municipal bonds rating agencies to take note and consider a municipality’s vulnerability to natural disasters as well as its preparedness both physically and financially. Moody’s notes in a November 28th report:

“Climate shocks or extreme weather events have sharp, immediate, and observable impacts on an issuer’s infrastructure, economy and revenue base, and environment. As such we factor these impacts into our analysis of an issuer’s economy, fiscal position, and capital infrastructure, as well as management’s ability to marshal resources and implement strategies to drive recovery. The interplay between an issuer’s exposure to climate shocks and its resilience to this vulnerability is an increasingly important part of our credit analysis and one that will take on even greater significance as climate change continues.”

For fires in particular, resiliency can include preparation such as efforts by localities to reduce brush, to use fire retardant materials for buildings, to let fires burn themselves out in unpopulated areas, and to conduct controlled burns on a regular basis to prevent damage.

In a December 12th piece Standard and Poor’s noted that they do not expect rating changes to the 35 municipal entities affected by the California wildfires that they rate, based on past experience with recoveries after natural disasters. However, S&P further noted that, “Going forward, we expect to more closely examine the degree to which local governments’ financial reserves and planning policies prepare them for the potential that climate change is elevating the risk of fires and flooding.”

The National Federation of Municipal Analysts (NFMA) recently updated its recommended best practices (RBPs) in disclosure for water and wastewater systems of local governments. The RBPs include requests for detail regarding resiliency and preparedness for the effects of climate change. As a side note, the new RBPs now also include cybersecurity efforts, since that is a rising area of credit risk. The work on RBPs in disclosure is one way the municipal analyst community engages with municipalities and their agents to improve disclosure. The proposed RBPs, which are in a 90-day comment period, can be found at http://www.nfma.org/.

At Cumberland Advisors we invest in high-quality municipal bonds that are supported by diverse economic bases and strong financial and management metrics. These municipalities are generally highly resilient to economic challenges and natural disasters. Macro trends such federal tax policy and disaster funding, as well as local tax policy and the economic and social amenities of a municipality, are considered in our ongoing analysis.

As always our thoughts go out to those affected by the wildfires and other disasters that have struck this year. We wish everyone a happy holiday season!

Patricia Healy, CFA
Senior Vice President of Research and Portfolio Manager
Email | Bio


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Market Volatility ETF Portfolio, 4Q 2017 Review: Will the Bull Market Continue?

With the Dow Jones Industrial Average approaching 25,000, the S&P 500 touching 2,700, and the tech-heavy Nasdaq Composite topping 7,000, our quantitative strategy has once again harvested considerable quarterly gains.

The US stock market is likely to have its second-best year since the financial crisis. While the Dow has touched a new all-time high one out of every four days this year, the Nasdaq is up almost 30% year to date. One $64-million-dollar question that every investor wonders about is, will the bull market continue next year?

Since the presidential election last year, over half of the S&P 500’s sectors contributed to this one-year rally, with the Information Technology sector leading the way, miles ahead of others. Broadly speaking, 2017 can be seen as a marketwide rally. Among all the large-cap sectors, there is one particular phenomenon that is boosting investor confidence: sector rotation. Dissecting 2017 into short segments, we observe that different sectors tend to lead the market at different times. Especially, two of the heavyweights, Financials and Technology, have alternated frequently this year, with joint force from Health Care and Consumer Discretionary. This pattern is typically deemed a healthy sign of broad market participation, particularly in a  bull market like 2017’s. It also marks a crucial difference between the current bull market run and the 1999 tech-bubble:  Two decades ago, the market was led mainly by one sector.

Another major characteristic of this bull run is that volatility has remained significantly low. Twelve months ago, the VIX’s sustaining below a 10 handle was not on anyone’s forecast list for 2017. One of the main reasons explaining a low-VIX environment is that 2017 hasn’t seen any major pullback: 3% is as much as the stock market has retreated in the past twelve months. However, while many may view VIX as a bargain at this time, we would like to remind investors that VIX is cheap only if it poised to rebound soon, as trading VIX exposes investors to significant risk.

So will the bull market continue into 2018? We will have to wait to find out in our 4Q2018 quarterly review. However, just as our quant model constantly monitors the market, we should always watch closely the important factors underlying a bull market.

Leo Chen, Ph.D.
Portfolio Manager & Quantitative Strategist
Email | Bio


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The (Im)Prudent Man Rule

The question of what investments are suitable for funds held in trust for the benefit of private persons or corporations is a topic that has engaged the legal and financial communities for centuries. In the United States, the legal framework defining the manner in which funds held in trust for a finite period or in perpetuity can be invested has followed a general trajectory best characterized as a continual expansion of the discretionary powers bestowed upon the trustee and, by extension, the professional investment counselor.

The oft-cited “prudent man rule” originated in a seminal court case, Harvard College v. Amory (1830), involving Harvard College and Jonathan and Francis Amory, both trustees of a fund of $50,000 established by their brother and cousin, John McLean.[1] The fund was to distribute current income to the late Mr. McLean’s wife, Ann, and upon her death the residuum, or corpus, of the trust was to be given to Harvard College and Massachusetts General Hospital.

The trustees selected what many fiduciary advisors would view as an inappropriate weighting towards equity securities (100%) and no allocation to fixed-income instruments. After the passing of Mrs. McLean, just over $29,000 remained in the trust. Harvard sued the remaining living trustee, Francis Amory, and argued that placing the entirety of the trust’s assets in common stock, which offered no security of principal – a government guarantee or backing of a real asset – jeopardized the interests of the ultimate beneficiaries of the trust, Harvard College and Massachusetts General Hospital. In conclusion, the court sided with the defendants and decided that the trustees had acted as any prudent person would in a like position, given their skill level in the context of the economic backdrop at that time.

This legal precedent established a wide scope of discretion in which trustees could operate when constructing and managing portfolios. Thirty years later, in King v. Talbot (1869), the New York Court of Appeals greatly narrowed the list of acceptable investments that would be permitted under the prudent man rule.[2]

In essence, government bonds and notes backed by a pledge of real estate (mortgage securities) were designated as the only acceptable investment for funds held in trust. The Vanguard Group’s A Guide to Best Practices for Nonprofit Fiduciaries (2014), includes a brief history of fiduciary case law. They track the evolution of acceptable portfolio management practices dating back to 18th century events surrounding the collapse of the South Sea Company:  “Judicially created restrictions based on English common law have mandated that fiduciaries be judged on an individual investment basis rather than on the overall performance of a well-diversified portfolio.”[3] This thinking stands in stark contrast to today’s modern portfolio management techniques.

Nearly a century after King v. Talbot, Harry Markowitz, in 1952, introduced to the world Modern Portfolio Theory (MPT). MPT postulates that when a portfolio blends securities that lack strong correlations, security-specific, nonsystemic risk can be neutralized and “diversified away.” Thus volatility originating from any one security or sector or asset class is dampened, and returns attributed to the overall market can be captured. William Sharpe, in 1966, built on the MPT foundation by focusing not just on the directional price relationship of combinations of securities in a portfolio (co-variance) but also on the aggregate risk-return characteristics across a portfolio. Managers desire to construct portfolios that optimize the risk-adjusted return, garnering the largest possible return over the risk-free rate, per unit of “risk” as measured by standard deviation. Visually, this concept is depicted by graphing the efficient market frontier.

The work of Markowitz, Sharpe, and others, paired with two studies published by authors working under the Ford Foundation, elevated the importance of capital appreciation to the same level as principal preservation and current income.[4] The resulting approach, dubbed “total return investing”, is intended to preserve the real purchasing power of endowments for the benefit of current and future generations. The codification of these related concepts – MPT, the efficient market frontier, total return investing, intergenerational equity – is represented, in its most current form, by the 2006 Uniform Prudent Management of Institutional Funds Act  (https://www.cumber.com/intergenerational-equity/).

So, with the flood gates now open, large institutional pools with infinite lifespans, such as university endowments, have allocated a sizeable percentage of their assets to hedge funds, funds of hedge funds, private equity, and venture capital. An industry publication covering trends in institutional investment management, Pensions & Investments, follows the returns of 31 large university endowment funds. As reported by James Comtois, for fiscal year 2017 ending June 30th, “The average 12-month return for the large US endowments in P&I’s universe … was 13.2% vs. 1% for the prior year.”[5] The range of returns among the 31 universities was wide, with Grinnell College clocking in at 18.8% ($1.9 billion endowment) and Harvard’s $37.1 billion pool returning 8.1%. For FY 2016, Harvard lost 2%. We note that Harvard’s fund has been undergoing a significant restructuring involving the shuttering of internally managed funds, with a shift toward external managers.[6] Harvard excluded, the other 30 higher-education endowments on P&I’s radar saw returns averaging in the low-to-mid teens for FY 2017.

At Cumberland Advisors, we are not exuberant supporters of “2-and-20” hedge funds, funds of hedge funds, and other alternative investments. Multi-year lock-out periods, the relinquishing of custody of donor funds to general partners, onerous fee structures, and lack of real-time reporting and transparency inherent in these partnerships all provoke a healthy dose of skepticism. We express this reservation particularly in regard to the lack of public oversight in the management of 501(c)(3) monies. In contrast to the near total transparency involved in the selection and monitoring of managers for state and local government pools, the public has little access to the inner workings of investment committees of community foundations, colleges, and other not-for-profit organizations.

The following links will lead you to:

  1. The Pensions and Investments article referenced above. In that article the 1, 5 and 10-year average returns of endowments with over $500 million, as reported by the Wilshire Trust Universe Comparison Service. (http://www.pionline.com/article/20171113/PRINT/171119964/endowments-get-needed-bounce-but-cautioned-to-stay-nimble)
  2. The Vanguard Balanced Index Fund’s Semiannual Report, which includes average annual total returns (1, 5 and 10 years) for the period ending June 30th, 2017.   (https://personal.vanguard.com/funds/reports/q022.pdf?2210130136)

The jury is still out on whether the inclusion of exotic instruments is necessary or appropriate for perpetual pools of funds supporting charitable activities.

We wish our readers a happy holiday season and a wonderful New Year.

Gabriel Hament
Foundations and Charitable Accounts
Email | Bio

Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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4Q2017 Review: Looking Forward

The FOMC delivered on the expected 25-basis-point increase in its target range for the federal funds rate and has penciled in three more rate hikes for 2018. Of course, all of this future activity is “data-dependent.” How likely is it that the data will justify those three rate hikes, and what could go wrong?

First, the good news keeps coming. Keep in mind that in December the FOMC had only lagging hard information on GDP growth in Q1–Q3 of 2017. They did have fragmentary anecdotal information on Q4 and monthly data on spending and employment. Virtually all that information was positive. There were over 225K jobs created in both October and November. New claims for unemployment insurance during this quarter are about 20K lower than in the third quarter.[1] The unemployment rate was 4.1% for the past two months and FOMC forecasts have it moving even lower.[2] In October consumer spending posted its biggest gain since 2009, driven in part by replacement of autos and cleanup spending in the wake of the hurricanes. Inventory investment is up, and this trend signals additional expectations of future sales, given the strength of real GDP growth, rather than an unanticipated accumulation of unsold goods. Finally, the Atlanta Federal Reserve Bank’s GDPNow forecast suggests that Q4 growth will be 3.3%, the third quarter in a row with GDP growth in excess of 3%.[3] All of this suggests that we go into the New Year with an improving real economy.

As for what the Fed has been doing to reduce the size of its portfolio, from September 28 to December 13, the system’s total holdings of Treasuries, agencies, and MBS have declined by only $1.5 billion, less than might have been expected given the plan put forward by the FOMC. Interestingly, the Fed’s holdings of MBS have actually increased by $12.1 billion, according the Board of Governors’ H.4.1 reports.[4] These small asset adjustments have not had much effect on the term structure. The short end of the Treasury curve moved up before the FOMC December meeting, largely in anticipation of the rate hike; but following the meeting there was a flattening of the long end of the Treasury curve by some 11 bps on the 20-year and by about 18 bps on the 30-year. This flattening continues a trend for 2017, where the spread between the two-year and ten-year Treasury has declined from about 128 bps to about 56 bps.

The flattening of the curve concerns many managers, who worry about investors being tempted to reach for yield without appropriate compensation for credit risk or maturity risk. Thus one of the most frequent questions now is, when will the next recession start?  Some believe that the stock market is overvalued, while others argue that although the market is rich, it hasn’t yet reached a level that should generate concern. Moreover, the yield curve is far from inverted, which suggests that a downturn is still a ways out.

What could go wrong?  There are clearly plenty of possibilities. First, we are in uncharted waters when it comes to international central bank policy. A flood of liquidity has been created by that policy, and some assert that this liquidity has contributed to dampening volatility in virtually all key financial markets to historic lows. What the policy exit looks like is uncertain, and right now the Fed is rowing against the tide.

Uncertainty in the classical Frank Knight sense is the major concern. There is economic and central bank policy uncertainty and we simply have no way of assessing the probabilities of major shocks that loom on the horizon from a variety of sources. Positive economic growth in Europe and selected parts of Asia continues, but turmoil plagues Latin America including Argentina, Brazil and Venezuela.  As for Africa, political unrest and civil wars are destroying more wealth than is being created. Unrest and war continue in the Arab Middle East, and the outcome of the Palestinian and Israeli situation is still far from clear. Then there is North Korea.

All of these uncertainties suggest that investment opportunities with lower risk remain centered on the US and Europe. However, there is an interesting dynamic at play even here when it comes to interest rates. With negative rates still in effect in Europe and the Fed’s continuing on its current path of gradually raising rates, it makes perfect sense for European banks to continue to hold reserves at the Fed at a continuingly widening spread to take advantage of the risk-free arbitrage that currently exists. This practice will put upward pressure on US exchange rates and also bid up Treasury prices on the margin to the extent that foreign banks buy Treasuries. When the ECB and Bank of Japan reverse course, much of this activity will unwind and act to tighten policy here in the US with no action taken by the Fed.

So, while there is room for optimism with respect to the US, cautious is the watchword going into 2018.

Robert Eisenbeis, Ph.D.
Vice Chairman & Chief Monetary Economist
Email | Bio


[1] Source: St Louis Fed FRED

[2] Source: Bureau of Economic Analysis
[3] Source: Federal Reserve Bank of Atlanta
[4] Source: Board of Governors of the Federal Reserve System

Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Cuba and the Caribbean: What Now?

Recent changes in US policies toward Cuba have reinvigorated debate over US-Cuba relations. How will these revised policies affect American business, trade, and travel, as well as the well-being of the Cuban people? What does the future hold? Please join Cumberland Advisors, the Global Interdependence Center (GIC), the University of South Florida Sarasota-Manatee, the Federal Reserve Bank of Atlanta, and our panels of leading experts as we discuss money payments, tourism, policy, security, Puerto Rico, and the state of US-Cuba relations and the outlook going forward on Thursday, February 22, 2018, in Sarasota, FL.

Please be our guest.

The discussion lineup is a first-class assemblage with valuable and varied perspectives to share.  Jorge Duany, director of the Cuban Research Institute and professor at Florida International University, and Collin Laverty, president of Cuba Educational Travel, senior partner at Havana Strategies, and a leading expert on US–Cuba relations, and David Seleski, president and CEO of Stonegate Bank (the licensed banker to handle transfers and money payments between Cuba and the US), will also speak. A bipartisan panel discussion with Congressman Carlos Curbelo, who serves Florida’s 26th Congressional District, which includes the Florida Keys, and Congresswoman Stacey Plaskett, who represents the U.S. Virgin Islands will be moderated by Ben White, a CNBC political correspondent and journalist from Politico. Finally, a former US ambassador to Cuba, Vicki Huddleston, is on the program.

Please join us.

Economic and financial issues will be thoroughly discussed. Sara Banaszak of Exxon Mobil, who has expertise in the energy sector along with others will weigh in on everything from Puerto Rico Electric Power, to offshore drilling, to national constraints.

Should the money be spent to transform Puerto Rico’s power grid into a more stable, efficient, and less vulnerable system consisting of batteries and solar arrays? Should the old system simply be updated in the interest of time/money? Or a hybrid solution?

Eugenio Alemán carries the Latin connection; he is senior economist at Wells Fargo Securities. And to round out this discussion we add Steve Kay, director of the Americas Center, Federal Reserve Bank of Atlanta.

This full day is designed to inform a broad range of people — tourists, travel agents, investors, policy wonks, and weather-forecasting folks. And those who wish to think about the government’s responsibility and actions in the hurricane-damaged parts of Florida or Texas or Virgin Islands or Puerto Rico or Cuba or elsewhere in the Caribbean, this program will touch on that too. The event is only $50 and includes a Cuban inspired lunch.

Please come.

Speakers for the “Cuba and the Caribbean: What Now? event include:

Karen Holbrook – Executive Vice President at the University of South Florida Sarasota-Manatee and Sr. Advisor to the President at the University of South Florida. She is currently serving as the Executive Vice President at the University of South Florida Sarasota-Manatee and Sr. Advisor to the President at the University of South Florida. Prior to this position, she served as the Interim president at Embry-Riddle Aeronautical University, after leaving the University of South Florida where she was Senior Vice President for Research and Innovation, then Senior Vice President for Global Affairs and International Research. Before coming to USF, Dr. Holbrook served as president of The Ohio State University from 2002-2007. She was also the senior vice president for academic affairs and provost and professor of cell biology at the University of Georgia, vice president for research and dean of the Graduate School at the University of Florida, and associate dean for research and professor of biological structure and medicine at the University of Washington, School of Medicine.

David Kotok – CIO of Cumberland Advisors. He cofounded Cumberland Advisors in 1973 and has been its chief investment officer since inception. David holds a B.S. in economics from the Wharton School of the University of Pennsylvania, an M.S. in organizational dynamics from the School of Arts and Sciences at the University of Pennsylvania, and a master’s in philosophy from the University of Pennsylvania.

Stephen Kay – Center Director of the Atlanta Fed’s Americas Center. Dr. Kay is part of the financial markets team. His research focuses on political economy and public policy in Latin America. His articles on pension reform in Latin America have appeared in the Journal of Comparative Politics, Foreign Policy Journal, Journal of Aging & Social Policy, Journal of European Social Policy, Journal of Interamerican Studies and World Affairs, International Social Security Review, Latin American Politics and Society, Social Security Bulletin, and the Atlanta Fed’s Economic Review. Dr. Kay is a coeditor of Lessons from Pension Reform in the Americas (with Tapen Sinha, Oxford University Press) and an author of Social Security in Latin America: Pension Reform and the Challenge of Universal Coverage (with Carolina Felix and Tapen Sinha, Cambridge University Press, forthcoming). He has testified twice before committees of the United States Congress on pension reform in Latin America. Dr. Kay received his bachelor’s degree from the University of California and his doctorate in political science from the University of California, Los Angeles.

Donald Rissmiller – Founding Partner of Strategas. Donald has been the firm’s chief economist since 2006, directing its macroeconomic research effort. He oversees Strategas’ high-frequency econometric forecasting and thematic economic research. Mr. Rissmiller’s research has been consistently recognized by Institutional Investor magazine in their annual survey: he was ranked best up and coming economist in 2008, and was third in their 2009 All-America Independent Research Team survey. He is frequently quoted in the financial press.

Partners for this event include the University of South Florida Sarasota-Manatee (USFSM) the Federal Reserve Bank of Atlanta, and the Global Interdependence Center who’s mission is to encourage the expansion of global dialogue and free trade in order to improve cooperation and understanding among nations, with the goal of reducing international conflicts and improving worldwide living standards.

For a list of sponsors and a link for registration, please visit USF Sarasota-Manatee’s website.

USF Sarasota-Manatee: http://usfsm.edu/event/cuba-and-the-caribbean-what-now/

Event Details
Date: Thursday, February 22, 2018
Time: 08:00 AM – 03:00 PM

Event Location
University of South Florida Sarasota-Manatee, Selby Auditorium
8350 N. Tamiami Trail
Sarasota, FL 34243

Bob Bunting, a friend and accomplished professor whose expertise includes hurricanes, joined our small, fact-finding group on a trip to Key West and five other Keys that were hit by Hurricane Irma. Here is his narrative of the trip, which he has agreed to share with our readers. We thank Bob for joining us and reflecting on his findings: http://www.cumber.com/key-west-bob-bunting/

SNN, The Suncoast News Network, accepted Cumberland Advisors’ offer to accompany us to the Florida Keys and document the dire conditions that so many residents and the fishing guide community that we hold dear endured and continue to struggle under. See their news footage here: http://www.cumber.com/florida-keys-devastation-after-hurricane-irma/

CubPhotos of Cuba from 2017 and of Florida Keys after Irma.




The Muni Take on the Tax Bill (Round Two)

The most recent tax-reform agreement between the US House of Representatives and US Senate is less hurtful to municipal bonds than initially expected. Here are some points.

Private Activity Bonds (PABs) – These are bonds issued to finance nonprofit hospitals, airports, state housing agencies, charter schools, and private colleges and universities. Under the original House bill, these types of bonds would have been prohibited. It’s our thought that the House was very hasty on this issue and saw the light in joint committee with the Senate, whose version continued to allow the issuance of PABs. These types of issuers have used the tax-exempt market for many years, and the ability to access tax-exempt financing is very important to them: The difference between a tax-free and taxable financing rate can often be the difference that determines whether a project gets done. There may be some restrictions on the ability of issuers to carry forward their allotments of PAB issuance, but the preservation of PABs is retained.

Advance refundings – These will no longer be allowed. Advance refunding is the mechanism by which state and local governments escrow older, higher-coupon bonds that are callable in a few years. It has long been a mechanism that municipalities could employ to generate cost savings on their debt. The loss of advance refundings using tax-exempt debt does not preclude issuers using TAXABLE debt to advance refund, but clearly the cost savings would be lower. Current refundings (where issuers just call their bonds on the call date and then issue new bonds) are still allowed. With state and local governments trying to find cost savings to deal with pension issues, it’s hard to figure out why Congress eliminated this. The commonsense answer is that they wanted to REDUCE the amount of potential future tax-exempt debt. There is an assumption here that investors would just buy taxable debt instead. Actually, investors would not do so, but Congress nonetheless eliminated this cost-saving tool for municipal governments, and that will reduce financial flexibility.

It appears the final bill will reduce the corporate tax rate from 35% to 21%. At the margin this will hurt municipal bonds, as the demand from banks and insurance companies may become less, since yields will be less attractive at lower tax rates. But most companies have paid lower taxes than the stated 35% in any case, so the fallout here may not be as great as pundits think. In addition, longer-maturity, tax-free bonds are very attractive versus Treasury bonds (more on that later), so depending on the maturity buying range, demand could also remain intact.

State and local tax deduction (SALT). The House bill eliminated deductions for state and local income taxes and allowed a $10,000 deduction for local property taxes. The original Senate bill eliminated SALT in its entirety. What came out of the committee was a proposal to allow up to $10,000 in deductions from state and local income taxes, property taxes, or sales taxes (adding another wrinkle). This new proposal is clearly aimed at providing some relief to taxpayers in high-tax states such as California, New York, and New Jersey. We would expect that, at the margin, this will generate increased demand from high-income investors who want to own more in-state exempt bonds

Top individual rate – lowered from 39.6% to 37%. This is just a small adjustment, and we don’t think it will impact the demand for tax-exempt bonds at all.

What have the proposed changes meant to date?

They have meant an inundation of issuance so far this December. This has included refunding deals that are trying to beat the year-end deadline, since there will not be tax-exempt advance refundings after December 31, 2017. PAB issuers are also rushing to market. Even though the committee agreement allows PABs, they are taking no chances that there will be a last-minute change. It is mid-December, and we have already seen $44 billion of issuance. It would not surprise us to see issuance climb to over $55 billion by year-end, and it could break the existing record for issuance (December 1985: $58 billion –when issuers were trying to beat the last major tax bill). We would expect some back off in supply now that PABs will be allowed. This supply will slip back to 2018.

Bond Buyer Visible Supply (includes 30-day forward calendar plus dealer holdings)

Image source: Bloomberg

We have seen municipal yields stretch higher, with a number of longer-maturity housing deals having 40-year-plus maturities over 4% and in some cases all the way up to 4.2%. With the 30-year Treasury bond currently yielding 2.70%, muni/Treasury yield ratios are ranging from 140% to 155%, an incredible bargain in our view.

Next year we will see municipal bond new-issue supply decrease sharply, since 2018 issuance has been moved into this year. Even in a world where short-term interest rates will continue to rise as the Federal Reserve raises policy interest rates (most likely 2–3 times next year) and where long-term rates should rise slowly as the Fed lets its balance sheet shrink, tax-free yields should either stay the same or move down as the municipal bond world confronts a market with much less issuance.

Happy Holidays to all – and we will keep you informed on these developments.

John R. Mousseau, CFA
Executive Vice President & Director of Fixed Income
Email | Bio




Christopher Whalen Interview: Bob Eisenbeis on Seeking Normal at the Fed

Our chief monetary economist, Bob Eisenbeis discussed the Fed with Chris Whalen this week. Below, we reproduce the entire interview courtesy of Chris and The Institutional Risk Analyst.

David R. Kotok
Chairman and Chief Investment Officer
Email | Bio


In this issue of The Institutional Risk Analyst, let’s first ponder last week’s revelations that the European Central Bank is taking a loss on its purchase of bonds issued by Steinhoff International, the high flying (and highly levered) South African-based home retailer that was struck down by an accounting fraud scandal. This event illustrates how central banks have distorted the credit markets and allowed inferior borrowers access credit at investment grade spreads.

This notion of central bankers booking trading losses on their extraordinary open market intervention over the past decade is important because it provides context to understand their decision making. For example, based on our conversation last week with Bob Eisenbeis, Cumberland Advisors’ Vice Chairman and Chief Monetary Economist, we’re pretty certain that the Federal Open Market Committee will further flatten or even invert the Treasury yield curve in 2018 and for reasons that will astound and amaze many investors.

Going back as early as 2010 (“MBS – When Will the Purchases End and What Will Happen to Mortgage Rates?”), Bob has been writing timely analysis for Cumberland describing the dynamics of the Fed’s large scale asset purchases, euphemistically known as “quantitative easing,” and what would happen to the bond markets once QE ended. Now that the end of QE is in sight, we ask Bob if the return to normal will be as “beautiful” as Mohamed A. El-Erian suggests in his effusive Bloomberg commentary.

The IRA: Thanks for speaking with us Bob. We wanted to talk a bit about your recent comment on Marvin Goodfriend’s nomination to the Fed Board but also talk about your broader view of the normalization process. You may have seen Mohamed A. El-Erian’s fulsome public praise for the FOMC’s policy direction. We’ve always been of the view that the Fed should have stopped after QE1. How do you see it?

Eisenbeis: When you look at the research on QE, the opinions are all over the map both inside and outside of the Fed. I think there is a consensus that there were diminishing returns in the additional QEs that were engaged in after QE1. Then it’s a question of what are the costs and benefits of getting out of the program. Those who suggest that QE has been a huge success are premature in my view. You don’t really know until we are completely out. It looks to me like we are going to be OK on balance, but what really bothers me is this constant drum beat inside the Fed and by some outsiders about the huge “profit” earned from QE. They have the accounting all wrong.

The IRA: Well, the board is aligning itself with the idiocy on Capitol Hill, where the interest earned by the Fed is viewed as “income” for budget purposes. Most members have not read your 2016 testimony on the Fed’s fiscal relationship with Treasury. But Bob, really, is it possible that PhD economists don’t understand the financial relationship between the Treasury and the central bank? We always like to remind people that the US Treasury issued the original $150 million in greenbacks directly into the market to help Abraham Lincoln fund the Civil War. The Fed is the Treasury’s alter ego and is an expense to the government, which is subtracted from the earnings on the portfolio and then returned to the Treasury.

Eisenbeis: Correct. The Fed almost by definition cannot make a profit. It baffles me how people inside the system can fail to see the accounting reality here. The Fed issues short term liabilities to buy Treasuries taking duration out of the market. The Treasury makes interest payments to the Fed who takes out its operating costs, including interest payments on reserves and returns the remainder to the Treasury. If this intra governmental transfer were settled on a net basis like interest rate swaps, there would always be a net payment from the Treasury to the Fed. It is too obvious, yet I am not privy to the sidebar conversations on this issue. But back to the point on QE, if the Committee can run off the portfolio through attrition, then they’ll probably escape any need for additional action barring some unforeseen change in the economy. The current path for growth and employment in the third quarter seems pretty positive.

The IRA: Does the FOMC understand how their actions and the actions of the ECB, Bank of Japan, etc has not only pushed down the price of credit, but has suppressed volatility since these positions are not hedged? Just as with the Volcker Rule and bank investment portfolios, there is no trading around Treasury and mortgage backed securities (MBS) positions held by central banks. As we told CNBC, “Financial sector on fundamental basis is considerably overvalued,” it’s no surprise to see Citigroup (C) and other banks guiding the Street lower on trading results for the year. The dearth of duration and trading volumes is a direct result of QE, correct?

Eisenbeis: The volatility impact of QE is not something that was on anybody’s radar screen at the time to my knowledge. The bigger concern was that the longer you keep rates low, you start to get dislocations that take place in various markets. Everybody is looking for a bubble here or a bubble there, but the only place you can really argue a bubble exists is in the stock market. But that is really the concern, not the volatility issue or the impact on the markets.

The IRA: That suggests a remarkably linear view of the bond market on the part of the Fed. In the $1.7 trillion MBS portfolio, the Fed has sequestered a huge amount of duration extension risk. If prepayments fall due to rising rates, the effective maturity of the security extends and the price of MBS can fall faster than that for benchmark Treasuries. But nobody is hedging the Fed or ECB or BOJ or Bank of China holdings of MBS. As a result, we seem to be headed for a flat or even inverted yield curve environment and with flatlined volatility. Do the folks at the Board understand what the combination of passive central bank portfolios and falling trading volumes is having on large bank earnings?

Eisenbeis: If you would see anybody in the system focused on this question it would be the Fed of New York. You mentioned the May 2014 FRBNY blog post on convexity of MBS in your comment earlier. I haven’t seen anything in the FOMC minutes suggesting that Bill Dudley raised the volatility issue during his tenure. But I think the Fed is going to go very cautiously on rates for reasons you suggest. With a new Chairman and governors, you might think there would be room for some change, but in fact they are going to go very slowly. The Fed staff is going to describe to the new governors why certain things were done and under what circumstances.

The IRA: So you don’t see a lot of change in policy under Chairman Powell?

Eisenbeis: Not a chance. He and the new governors are going to move slowly in terms of any change in direction. They are looking for a community banker for the Board and that person will also tend to be cautious. And the appointment process in the Senate is likely to be slow and contentious. Marvin Goodfriend is too experienced to come onto the FOMC and start rocking the boat. The four bank presidents who are economists and voting on policy in 2018– Bostic, Dudley, Mester and Williams — are all very solid and experienced, so I’d look for a pretty slow and steady process from the Fed. Some of the governors (Powell and Quarles) and presidents, who will be FOMC participants this year, are not economists, which has a big impact on the policy process from a research perspective.

The IRA: Well, back to the market, the folks at the Fed who brag about making money on QE are about to let the markets take the risk on a bunch of FNMA 3s and 3.5s that contain a lot of duration extension risk. As this paper is held by private investors, the positions will be hedged and volumes and volatility should be restored or not?

Eisenbeis: What that will do is essentially put upward pressure on rates. This would moderate the need to make policy changes. We published a comment on the runoff of the Fed’s portfolio and when it would come into “equilibrium” so to speak in terms of size. There is no coincidence that MBS on the System Account are paying down about $20 billion per month and the Fed has chosen $20 billion threshold number for monthly portfolio reductions. We estimate that according to the Fed’s plan, the portfolio necessary to restore the currency-to-GDP ratio to its pre-crisis level, would be about $1.9 trillion and normal runoff would achieve this objective in the fall of 2023. Just from a runoff perspective, though, the impact on the markets is not going to depend so much on the Fed as on the Treasury as their issuance needs increase. The Fed is going to reinvest portfolio maturities across the yield curve in proportion to the Treasury issuance.

The IRA: Well, precisely. This goes back to the earlier point about profitability. The Fed and the Treasury are one and the same. Different faces of a Hindu deity.

Eisenbeis: But this is precisely why these MBS cannot be sold.

The IRA: Is this an institutional issue for the Fed? Are they avoiding sales of MBS to avoid taking a loss on the portfolio and thereby eroding the need for chest thumping about the profitability of QE?

Eisenbeis: I think that is a good bit of it. If you recall, the Treasury robbed the Fed’s capital a few years back to fund spending for a highway bill. There’s a cap now on Fed equity at $40 billion. And the Fed cut a deal with Treasury that if the Fed takes a loss on the sale of assets they don’t have to write it off against capital. They create a “negative asset” account. What is that? You can do the math and see that the bank’s net worth may be negative.

The IRA: It’s like a net operating loss for a central banker. But Bob are you suggesting that the Fed is more worried about the possibility of embarrassment over taking a loss on the sale of MBS than they are about the impact of policy on the financial markets? Even to the extent of seeing a negative yield curve in the Treasury market? How can we do three hikes in 2018 and not have an inverted curve?

Eisenbeis: Substantively as we’ve discussed, it is the Treasury that backs everything up. But it’s the optics that matter. The optics of the Fed losing money or being insolvent are bad, both in Washington or around the world. Thus they will run off the MBS naturally via prepayments to the extent possible and avoid losses on sales. More important, though, it is very clear that we will have a flat yield curve both on the long end with continued demand and on the short end with the Fed raising benchmark rates. But all of this means that the Fed will go slow.

The IRA: Thanks Bob


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4Q2017 REVIEW: US ETF

The last quarter of 2017 revealed continued bullish momentum in the US stock market and ongoing increases in earnings of US public companies. Through the middle of December, the market made progressive new index highs. Rotation among sectors finally took some steam from the “FAANMG” stocks.

Notwithstanding the high price levels, we expect stocks to rise into next year. Earnings momentum is a powerful force. Tax policy changes portend well for US companies.

We end the year with an overweight of smaller-cap stocks. Note that in the first eleven months of 2017, the Russell 2000 Index achieved about half the return of the NASDAQ 100 (about 14% versus about 30%). We think that relative performance will reverse into yearend and early next year.

We have rotated down in our overweight of tech stocks. We have Energy positions focused on US domestic oil and gas. We like the Health sector. Our US ETF accounts are fully invested.

Over time various broad market measures tend to converge. This year’s divergence has been huge; we expect reversal. That anticipated convergence supports our small-cap overweight theme. For the last 10 years the annualized results range from Russell 3000 (lowest, at 8.5%) to NASDAQ 100 (highest, at 13%). Note that the FAANMG stocks’ recent extraordinary outperformance is responsible for this gap. Without FAANMG, the market averaged about 9% annualized for the decade. Remember that the decade includes the 2008–09 bear market period.

We do not think the bull market is over. In 2018, we expect more volatility within an upward trend.

David R. Kotok
Chairman and Chief Investment Officer
Email | Bio


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Shrinkage Tantrum-2 & Hillsdale

We thank readers for their thoughtful comments regarding our discussion entitled “Tax Bill & Shrinkage Tantrum.” For those who may have missed it, here is the link: http://www.cumber.com/tax-bill-shrinkage-tantrum/.

One astute reader called our attention to the internal workings of the Senate via a link to a Politico story about Hillsdale College in Michigan. Here is that link: https://www.politico.com/story/2017/12/01/senate-tax-bill-hillsdale-college-endowment-275980?lo=ap_e1.

The Politico report articulates how this single school was destined for special treatment in the tax bill. The “carve-out” amendment was authored by Senator Pat Toomey (R-Pa). There is no explanation of Toomey’s role as the sponsor. His general statement is quoted by Politico.

In the midst of the notorious Senate debate last Friday evening, a bipartisan effort passed an amendment to strip the Toomey-authored provision from the final bill. The Politico report has the details. It also describes the connections between Hillsdale College and the DeVos family and relationships that allegedly tied the amendment to our Education Secretary.

My point here is not just about this attempt to use a legal provision to favor Hillsdale. I’ve never been to that college and have no plans to visit. My point is that the political forces of our nation continue to use these special interest maneuvers, as Toomey tried to do. Only the intense scrutiny of a free press saves our citizens from many politically motivated giveaways like this. We have written on this issue and cited examples in the past. The best a citizen can do is to protect the freedom of our press and to encourage the press to report without inhibition, to remain observant and vociferous, and to not give up. We must not fall silent.

Incidentally, Hillsdale College advertises a free course called Constitution 101 on social media, along with a batch of other free courses listed at its website. (See https://www.hillsdale.edu/academics/free-online-courses/.) It might be instructive to compare that Constitution 101 course with, say, one from Yale (see for example https://www.coursera.org/learn/written-constitution).

On a different issue, a skilled and seasoned reader (who will remain anonymous) sent the following observation:

“Unfortunately, by the lessons my mentor taught me about econometrics, the reliability of ANY estimate like the CBO estimate you attached, for any year into the future, falls in a parabolic manner. The first year may have 66% reliability, but by year five that’s likely to be no more than 25%, and by year 10 it is entirely garbage. That doesn’t mean Congress is wrong to use these processes – there needs to be some standardized basis for understanding what they are doing. In this case, however, when one combines (1) a demonstrably benign T-rate assumption, (2) absolutely no assumption on the credit spreads that the private sector will have to pay, and (3) the fact that government is now only a tiny fraction of the size of the total US economy (the post WW II data on which I learned econometrics was far more heavily weighted to government than now), whatever may trigger the tantrum you note, it will render this projection irrelevant.”

Another skilled and deeply experienced reader, who shall also remain anonymous, sent an extensive analysis of the tax reform effort. Here is an excerpt:

“Your skepticism about the new tax ‘reform’ impact on economic growth is fully justified. At a meeting last spring of the National Economists Club, the Director of the CBO responded to my question about the CBO’s current assumption of potential GDP growth being only 1.8% a.r. until 2027.

“He cited the following reasons: The secular slowdown in labor and capital productivity, ageing of the population, slowing of net immigration, and the fact that the last two are slowing growth of the labor force. I would add that the U.S. failure to save more (a reflection of private consumption being 70% of GDP and perpetual government deficits) is one of the principal brakes on capital spending which would boost productivity.”

We thank many readers for their comments and observations on our “shrinkage tantrum” missive. We say “yes” to those who argued that tax cuts are stimulative. They can be. Another “yes” to those who noted that repatriation is stimulative or may be. Also “yes” to those who agreed that a debt-to-GDP ratio rising toward 100% is a serious issue. And “yes” to those who agreed that a normalization of interest rates – whatever that means – portends a rising federal interest payment burden.

Finally, a number of readers reminded us of earlier periods in American economic history when rising interest rates led to the “crowding out” of private investment spending. We don’t know whether that situation will be repeated, but we share your concern.

David R. Kotok 
Chairman and Chief Investment Officer
Email | Bio


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Tax Bill & Shrinkage Tantrum

The Congressional Budget Office (CBO) scoring of the tax bill was released at 8:49 PM on Friday night, and this link will take you to it: https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/53362-summarysenatereconciliation.pdf. The title of this one-page document is a mouthful: “Summary of the Deficit Effects of a Bill to Provide for Reconciliation Pursuant to the Concurrent Resolution on the Budget for Fiscal Year 2018, As Filed by the Senate on December 1, 2017.” The numbers here are critically important, though there may be some additional financial adjustments, given that the Senate debate ended in the early hours of Saturday morning and given that the Senate-version text has handwritten notes on the legislation that have not been read (let alone scored) by CBO. We note that some commentators believe the notes are not even legible.

Anyway, this is our political system, like it or not. As Churchill observed in the House of Commons in 1947, “Indeed it has been said that democracy is the worst form of government, except for all those other forms that have been tried from time to time.…” Sir Winston did not originate the line, but he did make it famous. Its origin is subject to debate. I personally verified that factoid with the chief archivist of the Churchill Library.

The Senate version of the tax bill (whatever it is) and the House version (which we have been able to read) will now go to a conference for the next round in this political dogfight. Our view remains that there will be a final tax bill and that Trump will sign it no matter what the final bill looks like.

We will set aside comments on the detailed tax changes, as they have already been discussed and are not final until we get a House-Senate conference version.

Let’s get to the deficit.

We are using the CBO scoring detailed in the link as a guide. Remember that budget and deficit projections have a wide margin of error. They are based on lots of assumptions. About the only thing we really know about those assumptions is that they are wrong on the day you make them. The whole idea is to get the theme right and to try to get close to what the final numbers will be.

Here are the themes.

The additional federal deficit that is expected to occur as a result of this tax bill is added to the baseline of projected deficits. Thus we can combine the baseline we know with the CBO scoring we see, and that leads us to an estimate of total deficit over the next ten years. We know that the interest component and other components (like transfer payments) are fixed as legal obligations and are non-discretionary. The United States will pay the interest on its debt no matter what the rate is. We can project that rate, but we are guessing because we do not know what rates will be set by the Federal Reserve during the next decade.

We do not even know what the rates will be next year. We can only make educated guesses at that. About the only thing we know of long-term interest rate forecasts is they have proven consistently wrong.

We expect that the cumulative effect of these tax bill changes will take the deficit to 100% of the GDP of the nation in the “out years.” Which year that happens is irrelevant! It is the trend that counts. And that trend is up and will be accelerating after the tax bill passes and starts to be phased in.

In 2018 the impact will be small and not meaningfully felt by markets. In 2019 the impact will start to rise, and markets may be absorbing $700–800 billion of incremental new federal debt issuance at the same time the Federal Reserve is disgorging hundreds of billions in federally guaranteed holdings while the Fed also shrinks its balance sheet. Note that the Fed will not be selling: It just won’t buy as much replacement debt when maturities occur.

We have enough information from Fed-official testimony and Fed releases to estimate that the Fed will shrink its balance sheet by a total of about $1 trillion or more. This process will take years. We have a projected path of shrinkage that the Fed has disclosed. But we also know that the Fed does not intend to shock or derail the economy or markets, so there may be some flexibility in the Fed’s path if a crisis unfolds.

We want to coin a new term. We expect that the shrinkage path will not be a smooth one. Paths to shrinkage rarely are. So we expect to see a “shrinkage tantrum.” That tantrum may remind us (and markets) of the “taper tantrum” that ensued when Fed Chairman Bernanke first mentioned a tapering policy half a decade ago.

The shrinkage tantrum may erupt without market preparation and reflect a global change in sentiment. We think the reaction will coincide with the changes that are forthcoming as the European Central Bank starts to taper up to zero from negative rates. It becomes easy to project a ten-year German government bond trading at a positive interest rate of near 1%, while a ten-year US Treasury note trades at a positive interest rate of 3%. Readers can do the rest of the math to create forward rate curves, a calculation we do every day at Cumberland.

Note that these are estimates of levels. They assume that low inflation remains with us; they assume gradualism by the major central banks; and they assume a baseline of no external shocks like North Korea or an Ebola/Zika outbreak or a recession and/or a constriction of consumer demand and consumer spending and/or sharply contractionary impacts from changes in America’s trade policy (including NAFTA).

Market dynamics alone will pressure interest rates upward. Other factors can exacerbate the direction and accelerate the trend change.

When?

Ay,” wrote Willy Shakespeare in Hamlet’s immortal soliloquy, “there’s the rub” (https://www.poets.org/poetsorg/poem/hamlet-act-iii-scene-i-be-or-not-be).

The numbers we see projected are on a path to be gradual. A 3% US Treasury note may not arrive for another 2–3–4 years. That is the benign scenario. But that projection has no margin for errors. And it has no “expectations” component. And that is where we find “the rub.” How far in advance will markets begin to price in these changes, and how much additional interest-rate premia will bond purchasers require for evolving and uncertain risk? No one knows.

In sum…

There will be a final tax bill. There will be a rising deficit that will eventually pressure interest rates higher. The Fed balance sheet shrinkage exacerbates this transition.

Lastly, a “shrinkage tantrum” probably lies ahead. When, and how serious a tantrum it will be, we cannot yet know.

David R. Kotok
Chairman and Chief Investment Officer
Email | Bio


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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