Guns: Part 2, The Investment Journey

“I don’t want to invest in any gun makers,” said our client. She was and is passionate and adamant. “This shooting stuff has to stop.”

“I agree with the goal” is my repeated reply. No one wants to see the scenes we are witnessing. But let’s talk about the investing issue and not the shooting itself. We agree about the shooting.

Part of your account is invested in high-grade bonds. Some are tax-free or taxable municipal bonds, and others are investment-grade corporate bonds and government bonds. There is no junk credit there. None of the bonds are directly used to finance any gun maker. We don’t own bonds of companies like American Outdoor Brands (formerly Smith & Wesson) or Sturm, Ruger & Co., the maker of the AR-15. So the Cumberland bond accounts meet the client’s test.

But the ETFs become much more difficult. In the case of the larger and broad-based ETFs, it is almost impossible not to have some exposure to a gun maker. Barron’s examined this issue deeply and found that Blackrock and Vanguard together own 26% of Sturm Ruger. American Outdoor Brands is part of the Russell 2000 Index. So owning an ETF of that index automatically includes that gun maker. The amounts involved are relatively small. Barron’s says that “The gun companies generate huge controversy, but not much in the way of investor value — the market cap of all three gun stocks combined is just $2.5 billion, a rounding error in the trillions of dollars managed by Vanguard and BlackRock.”

Will there be any changes coming to this landscape? We shall see. Can pressures cause mutual fund companies and institutional investors to alter the composition of portfolios and indexes? We know the revelation that the Florida Retirement Pensions System had a small investment in gun manufacturers is an embarrassment to that organization and to the government of Florida. The amount is only $4 million out of $163 billion, according to Barron’s, and about half of that comes from an index fund that tracks the Russell 3000 Index.

So what is an anti-gun investor to do?

At Cumberland, we do not pick single stocks. We favor low-cost and diversified ETF strategies as an efficient and favorable way to invest in the stock markets of the US and the rest of the world. It is impossible to apply that approach without some very small exposure to gun makers or ammunition makers or the chemical companies that support them or the shipping companies that deliver guns or the retailers that sell them.

That fact doesn’t dismiss the possibility of activism by an individual who is anti-gun. There are many ways to express your views. You can see that in the news flow about organizations that are delinking with the NRA. As for the pro-gun investor, the single-stock approach allows you to put your money directly with the company that makes the AR-15 if you want to.

Lastly, we advise every investor to dig deeply and do research. Then decide for yourself. At Cumberland, we will continue to use the broad-based ETFs in the composition of our US ETF portfolios. We will apply the same standard to foreign portfolios. We think that is the best approach for investors to follow.

The first part in this series, “Guns: Part 1, A Personal Journey,” can be read online here: www.cumber.com/guns-part-1-a-personal-journey/

The second part in this series, “Guns: Part 2, The Investment Journey,” can be read online here: www.cumber.com/guns-part-2-the-investment-journey/

The third part in this series is titled, “Guns: Part 3, The Policy Journey,” can be read online here: www.cumber.com/guns-part-3-the-policy-journey/

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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Guns: Part 1, A Personal Journey

Each year at the Camp Kotok gathering in Maine, there is an optional morning for those who want to shoot. A variety of weapons are available. All shooting is supervised and all is on ranges or safe venues. We debated doing this for a few years and then tried it. The response was large. Many of the attendees hadn’t experienced guns and wanted to learn more about them.

The teachers of weaponry come from among the local fishing guides; many are also hunters or hunting guides. Some folks shoot pistols, others shotguns, and some automatic weapons. Some are doing it for the first time. I recall a 60-something financial professional whose experience with the outdoors was derived in Central Park. Her reaction to firing a weapon was surprise and respect. Conversations at lunch or dinner reveal that respect.

All realize the destructive capacity of the weapon. And all articulate additional respect for law enforcement agents who have to face such weapons daily. Several of our guides have or had law enforcement roles during their careers. Many households in northern Maine have a weapon. The same is true in Wyoming or Montana or Florida, where we also gather. Guns are part of the culture in those places. Like it or not, in America, that is not going to change.

Among our group of invitees and also among the Maine guides there are supporters of the National Rifle Association, and there are also detractors. Supporters argue that the NRA is the leading defender of their constitutional right to own a gun. Detractors say the NRA is now an intensely rigid and purely political organization. Passions run high on both sides and at all levels of the arguments. That said, the New York City resident who hates guns and the NRA member and fishing guide who taught her how to shoot a gun didn’t shoot at each other.

Both of them behaved as mature, collegial adults. She learned more about the weapon she hated. He learned more about her fear. Each of them acknowledged that our nation has a problem. And each agreed with the other that something must change when a teenager can shoot up a school. In Maine, we have had this discussion every year for a while. It is not a new subject. We will have it again this coming year. Our Maine guides are just as saddened by the news flow as are their visiting guests.

Some personal notes.

My farmer grandfather (everyone in the family called him Papa; neighbors called him Jake) had a gun. In those days nearly every farmhouse did. The first gun I learned to shoot was a single-action twelve-gauge, full-choke, long-barreled shotgun. You pulled the hammer back with your thumb. The trigger action was stiff. There was no cushion on the end of the wood stock. Papa used to say it “kicked like a mule.” By age eight I could hit something and fire a few shots before my shoulder hurt.

The first life I took with that gun was a rabbit’s. I hunted the rabbit, stalked it and killed it. Thinking about that rabbit today, I regret shooting it. The rabbit didn’t do anything to me. But as a young boy on a farm with a gun, well, hunting seemed like the right thing to do. I remember looking at that dead rabbit after it had encountered a full-choke twelve-gauge. The impression of the gun’s power is still with me.

We hunted in my town. David B. and his older brother Jerry; Gary (whom we nicknamed “Gobble” because he knew how to call wild turkeys); Vic, who took me into duck blinds and taught me to row a duck boat; and Bob M., who showed me how to “jump shoot” ducks in ditches – these were among many who owned guns and shot guns and cleaned them and stored them in cases in their houses. The Boy Scout troop was proud of teaching gun safety and respect for guns; the NRA supplied the learning materials. Several merit badges involved rifle handling and shooting. As an Eagle Scout, I earned those badges.

I remember the Remington pump twelve-gauge that was a source of pride when I saved up enough to buy it. It could hold five shells, but New Jersey law then limited shells to three, so you had to have a plug inserted to shorten the magazine. Pete’s gun shop was the place to get that modification done. Everyone in town knew Pete’s gun shop. Boys were in there looking at the guns that were behind the locked cases. Hunters were swapping stories. Yup, Pete’s was the place. Having a gun from his shop was something else, indeed.

The advantage of that Remington was that you could also use it with buckshot for deer. And my shiny new pump had a ventilated rib that allowed better “pointing,” since the heat generated by the barrel would more easily dissipate through the ventilated rib. That meant the heat waves above the barrel were less distorting. That factor becomes important when you are shooting a five stations, 25-shell round of trap (clay pigeons).

Rifles came later. My favorite was a lever-action 30-caliber Winchester. Felt like something out of a cowboy movie.

Yes, there were guns and hunting and shooting. But not one of the kids I knew would shoot up a school or even think about shooting another person. Guns were respected. Households stored them properly. Supervision was clear and careful. Hunting licenses required tests. Gun ownership required meeting standards. And infractions were punished. I do not recall any shooting incident in a school in those days. Maybe such things happened from time to time, but I don’t remember them. There was nothing like the spate of shootings we seem to have in the United States now, with what now seems to be one happening every few days.

Later, life with guns got more complicated. The pistol whipping I encountered in front of the post office on Landis Avenue in Vineland involved an angry man threatening a woman with a handgun. “Whoa! Slow down. You can kill someone.” Talk and talk and talk while backing slowly away. Hands held open and palms showing. Wait and wait and wait while every second seems like an eternity until the Vineland police arrived.

In those days the police walked up very slowly. First, the car would carefully approach. No sirens, no noise. The slow cruising of the patrol car was part of the protocol then so as to allow the gunman time to reflect. Slowly the officer would exit the car. Slowly he put on his hat. Slowly talking and slowly walking. “Put it down,” he said. “Be careful. You really don’t want to hurt anyone.”

Slowly. Talking. Walking. The victim and bystanders were terrified, me included. We were frozen in time. I think about that experience even now, many, many years later.

But that was a handgun, and that was on the street, and that was out in the open, and that was in front of the US Post Office on Landis Avenue in Vineland, New Jersey. It was not an AR-15 being fired by a 19-year-old inside a school building in Florida. It was before Columbine in Colorado. It was in a different era.

Some years later, on the corner of 17th and Lombard in Philly, came the shots fired at me. I had parked in the garage on 16th street near Pine Street and was walking up the north side of Lombard Street, carrying my briefcase in my right hand. Near the corner, a pickup truck stopped at the traffic light. The first shot missed because the gun was fired just as I started to move behind the bus stop enclosure. The second shot missed and shattered the enclosure covering. I was already dropping to the ground. The US Army teaches you to get down fast when you hear the first shot.

The light changed. The truck pulled away. I didn’t see the license plate, and I don’t know why I was the target – perhaps simply because I was there, perhaps I would have been a robbery victim. Later I found the bullet mark in the brick wall of the building next to the bus stop.

The US Army teaches that guns are for killing people. Military veterans respect weapons. I was fortunate when I wore a uniform in the 1960s – my job kept me away from the gunfire. Many were not so lucky. Some remain silent to this day about their Asian experiences. Today, that silence is about other places but the characterization of internalizing is unchanged. Then and now, some have friends who didn’t return. But in the most part there is a rare and deep respect for weapons among those who served in the 1960s. And it seems that deep respect continues through today. Think about it. How many can you name that served in the military and then went on shooting sprees? Sure, it happens, but it is rare.

Every vet I know has the deepest respect for the power of a weapon. That is regardless of branch of service or rank or expertise. Everyone I talk with is dismayed by what we are seeing in the news flow. All say that this has to stop. Whatever we are doing isn’t working, so if we keep doing it, if we change nothing, how can we expect a different outcome?

In my personal journey, I don’t shoot guns any more. I don’t even shoulder my lightweight Browning, over-under, 20-gauge quail gun. As much as I liked it, I sold it, and I know the new owner will treat it wisely. He is a good shot and a safe gun owner. I do not belong to the NRA and haven’t for years.

If I had a way to do it, I might even reach back in time and forgo that shot I took that killed that rabbit. But history cannot be revised away although revisionists can try to distort it. The question facing America now is can we learn from it?

The first part in this series, “Guns: Part 1, A Personal Journey,” can be read online here: www.cumber.com/guns-part-1-a-personal-journey/

The second part in this series, “Guns: Part 2, The Investment Journey,” can be read online here: www.cumber.com/guns-part-2-the-investment-journey/

The third part in this series is titled, “Guns: Part 3, The Policy Journey,” can be read online here: www.cumber.com/guns-part-3-the-policy-journey/

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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The Classic DuPont Model

In their February 15 DataTrek newsletter, Jessica Rabe and Nick Colas refer to the classic DuPont model in discussing how to deal with equity valuations. They admit that “Permanent changes to the tax code shift returns higher.” We agree. They then temper their outlook by introducing the deficit issue, inflation expectations, risks of higher interest rates, and other factors. We agree with their list, but we don’t agree that those factors are a reason to reduce the classic DuPont model valuation results.

Let’s use a hypothetical. Assume for a minute that the 500 companies in the S&P 500 Index all merged and are a huge global conglomerate that has diverse businesses that are represented by the sectors of the S&P large-cap index. The company’s 2018 earnings were estimated at $140 per share before the new tax code was implemented. And the expected growth rate of those earnings for the next 10 years was 6% per year. Therefore the earnings estimate for 2019 was 1.06 times $140, which equals $148.40 per share next year.

Now along come the tax code changes. The 2018 earnings number is revised upward to $154 per share. The 6% growth rate is unchanged. Thus the new estimate for 2019 is $163.24. Readers can quickly see how this works. Start with a higher threshold, and the growth rate is applied to a larger number. Thus the future years’ earnings numbers will be higher than they would otherwise be, and the trajectory of that future growth is based on a higher compounding rate than it would otherwise be.

So how do we value the tax code change? Do we use the same multiple of earnings that we used for the original $140 but apply it to $154? Or is it higher? Or lower? We think it is higher.

Here is where the DataTrek list becomes a challenge. Of course, future paths of growth and interest rates and inflation and other factors alter the future earnings estimates. That would be the case with or without the tax code changes.

The critical question is whether the compounding of the earnings growth rate is altered so that it is lower than the effects of the changes introduced by expectations of inflation and interest rates. And we must remember that inflation is a nominal item, so that stated earnings (in nominal terms) can be increased by inflation. That used to be a detriment, because higher tax rates were applied to those nominal earnings. That impact too has changed, since the baseline corporate tax rate has declined from 35% to 21%.

So a second item in the calculus is the reduction of the inflation tax premium. DataTrek mentions real returns in general terms. We agree. But we think that too needs more elaboration.

Note that we won’t see earnings reported for Q1 of 2018 until April. But all we have seen for 2017 revealed a very positive picture. Credit Suisse stated (February 16) that 85.9% of the S&P 500 market cap had reported earnings for Q4 of last year. They note a “beat rate” of 4.9%, with 73% of companies surpassing bottom-line estimates. They remind us that this compares with 4.7% and 68% over the past three years.

In sum, the earnings reports of the S&P 500 were pointing to an improving trend before the tax code change. Add in the new tax code, and it only gets better.

Note that we haven’t mentioned the repatriation effects. They are coming. Cisco, for example, has announced its intention to repatriate $67 billion and to use $44 billion of that for share repurchases and dividends. Clearly, Cisco’s earnings per share are positively impacted, as is its stock price. For details see https://www.nytimes.com/2018/02/14/business/cisco-repatriation-tax-law.html. Dan Clifton of Strategas adds this observation on February 20, 2018: “We also note that Cisco’s repatriation in 2018 will be nearly as large as the combined tax cuts for all US companies in 2018 – just one company’s repatriation.”

The stock market correction took US stock prices down to levels below those that preceded the tax code passage. In fact those levels were even lower than the prices that preceded the expectations that the new tax code change would be passed. The average stock corrected about 14%. We think that was way overdone. It created an entry opportunity, and we became fully invested in our US and US Core ETF accounts. We remain that way today.

We still expect an S&P 500 Index above 3000 by decade’s end, and we still believe the disaggregation of the classic DuPont model has merit today, given the permanent nature of the tax code changes.

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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Vexed by VIX? Ask Pravit Chintawongvanich.

Many market agents seem vexed by the VIX. Their recent lessons include a dramatic spiking of volatility, the reactionary pricing of an exchange-traded note (ETN), some forced liquidation, and a blisteringly fast correction in stock prices. The average stock dropped 14% in only a few weeks. Everyone following the investment markets in the US knows the headlines, so we won’t repeat more of them here.

I had a conversation about these events with Jon Ferro and Gina Martin Adams on Bloomberg TV at 9 AM on February 12. On the set with us was Pravit Chintawongvanich, head of derivatives strategy at Macro Risk Advisors. The VIX was on our minds.

Pravit was kind enough to allow us to quote his work and views:

• “The wipeout of the short VIX ETPs should lead to lower vol-of-vol, and more stability in the VIX futures market.
• “Significantly smaller VIX rebalance should lead to lower realized vol in VIX futures and lower implied vol in VIX options.
• “A dynamic source of ‘vol supply’ may have disappeared as previous XIV/SVXY investors may no longer be as keen to sell vol.
• “The blowup in VIX products was largely localized to VIX, with little spillover into FX, rates, or commodity volatility.”

Pravit discussed the mechanical details with me off camera and described them in his Bloomberg TV interview with Jon. Here is his outlook for the post-VIX crash results:

“With the short VIX ETPs all but wiped out, a major source of instability and ‘blowup risk’ in the VIX futures market has disappeared. The short VIX ETPs were exacerbating moves in VIX futures through their daily ‘rebalance’ trading – buying VIX futures on days when VIX was up, and vice versa. Since the VIX ETPs had to buy increasingly many VIX futures as VIX rose, this sent them into a vicious cycle where they pushed vol up, in turn needing to buy even more – causing the ‘VIX blowup’ that we have predicted in many earlier notes. While other levered ETPs continue to exist, the size of this potential rebalance is significantly smaller after the destruction of XIV and SVXY…. On a +4 point move in VIX futures, the ETPs had to buy over 140,000 VIX futures on close. After the blowup, that number has shrunk to a mere 20,000 – back to early 2013 levels.”

Following the show, I asked Pravit about “tracking errors” in the crash and in the after-market trading. His view is that this activity was not a tracking-error issue. The influences included the participation of “retail investors” who may not have had the full skillset to understand what they were doing. Pravit responded:
“Good meeting you on the show this morning. I wanted to provide a little more color on how the inverse products performed last Monday (I paraphrased it to not get overly technical on TV). While the ETF, SVXY, performed as it should have during the equity trading day, XIV actually started trading at a significant premium to NAV (it did not go down as much as it should). After the equity close at 4:00 p.m. but going into the futures close at 4:15, these products both decoupled significantly. At 4:15 PM, the net asset value of XIV was $4.22, but the ETN itself was still trading at over $70! In fact, even at 8 PM when after hours trading closed, it was still trading at over $15.”

Pravit’s outlook for the future is clear:

“With the blowup of XIV and SVXY, an entire class of (mostly retail) investors may have soured on ‘short volatility.’ Even though SVXY still exists as an ‘easy access’ vehicle for shorting volatility, one would think the appetite among the ‘XIV crowd’ is significantly lower post-blowup (we have also heard anecdotally that many retail investing platforms are not allowing clients to buy SVXY anyway). These investors emerged when vol spiked and acted as a source of supply to meet volatility buying demand, potentially causing vol spikes to reverse themselves more quickly than they would have otherwise. This dynamic source of supply will no longer play as large of a role in helping to neutralize vol spikes.”

Pravit also sent along a link to a podcast he recently recorded, with this note:

“If you’re looking for a finance podcast to listen to this weekend, I was on this week’s ‘Odd Lots’ to walk through the dynamics of the short vol trade, and how two of the biggest ‘short VIX’ products blew up in a single day. It’s a 30-minute listen and a nice high level overview of what happened.”

Here’s the link to his podcast: https://www.bloomberg.com/news/audio/2018-02-16/how-one-of-the-most-profitable-trades-blew-up-in-one-day.

We add one other viewpoint of our own.

The VIX became ubiquitous. It was a fixture in the lower-right-hand corner of the financial TV screen. It appeared every day in the headlines. It got nicknamed the “Fear Index”. In our view the VIX became subject to Goodhart’s law, named for Bank of England Governor Charles Goodhart. The law posits that when no one is focusing on an indicator, it has predictive value; but when everyone is looking at it, it has lost its efficacy and will be, at best, a contemporaneous measure. Thus the VIX is now worthless for predicting the future and questionable for explaining the present. It is reactive, not predictive. Hence any derivative of the VIX has a similar risk profile. Retail investors may have reached this new understanding the hard way.

We thank Pravit for permission to quote him and his work. And we thank Jon Ferro and the Bloomberg TV producers who were kind enough to include me in the discussion with Pravit and Gina.

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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Eurozone Economy Robust Despite Equity Market Correction

Eurozone equity markets have declined in step with global markets in a widely expected market correction. While there has been some recovery in the first two days of this week, it is not yet clear that the correction has run its course. Concerns that interest rates in both the United States and Europe will rise faster than had earlier been expected appear to have been a trigger, with technical factors amplifying market swings. Following a correction in early 2016, equity markets climbed steadily, until they fell off the cliff at the end of January. The market gains in 2017 were exceptional. The US equity market gained 21.8% as measured by the SPDR S&P 500 ETF, SPY; and equity markets outside of the US gained even more, 27.8%, as measured by the iShares MSCI ACWI ex US ETF, ACWX. A correction was long overdue.

Eurozone equities peaked on January 26th in sync with the U.S. and other major markets. In most cases, however, the subsequent declines in the Eurozone were more moderate. While SPY was down 2.02% year-to-date at the end of last week, the iShares MSCI Eurozone ETF, EZU, lost 1.24%. Several Eurozone markets performed considerably better. The iShares MSCI Spain Capped ETF, EWP, declined only 0.31%; the iShares MSCI Belgium Capped ETF, EWK, still had a positive year-to-date return of 1.90%; and the iShares MSCI Italy Capped ETF, EWI, registered a 4.14% year-to-date gain. German equities, in contrast, underperformed. The iShares MSCI Germany ETF, EWG, was down 2.85%. Monday Eurozone equities followed the recovery in the US and Asia, but then fell back a bit on Tuesday. Market volatility remains high.

Fundamental factors suggest the lengthy bull market in Eurozone equities still has legs. The future prospect of higher interest rates represents the greatest risk to this outlook. The European Union has raised its growth forecast for the Eurozone economy in 2018 to 2.3%. Recent strong data for both industrial production and retail sales support this forecast. One of the best leading indicators, the HIS Markit Eurozone Composite Purchasing Managers’ Index (PMI), stood at 58.8 for January, the highest reading for this indicator since June 2006. Economic output growth was strong in all the major Eurozone economies, with France registering the strongest growth and Germany, Italy, and Ireland close behind. Business confidence is reported at an 11-month high.

The strong growth is beginning to put some pressure on prices. Input and output costs are both rising. The strong euro is likely to have a moderating effect on import prices. Nevertheless, if inflation does gather pace significantly, particularly in the second half of the year, monetary policy would then very likely become more hawkish, with the European Central Bank advancing its schedule for reducing its bond purchases and eventually raising policy interest rates. This would follow the tightening of monetary policy already well underway in the US and recently threatened by the Bank of England. At present, however, the European Central Bank continues to signal that it will maintain substantial monetary ease in the coming months, which will be a positive for Eurozone equities as long as this policy stance is maintained.  Other positives for Eurozone equities are the strong earnings momentum, easing fears of populism, and continued robust economic growth in the markets for the Eurozone’s exports.

We are maintaining our Eurozone positions in our International and Global Equity portfolios while closely monitoring inflation developments.

Bill Witherell, Ph.D.
Chief Global Economist & Portfolio Manager
Email | Bio

Sources: Bloomberg, CNBC, Oxford Economics, Financial Times, HIS Markit, Goldman Sachs Economic Research


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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Piggy Bank

One of the characteristics of a struggling republic is the inability to separate its central bank’s resources from the fiscal largesse of the federal government. Using central bank resources to avoid addressing funding of the government is a sure path to runaway inflation, economic decline, and periodic financial crisis. Take the example of Argentina, whose economy was the same size as that of the US at the turn of the century in 1900. Since then it has experienced repeated bouts of rapid inflation and crises both real and financial. Today its GDP is about the same size as that of North Carolina, which is the US’s 9th largest state in terms of GDP. One of the problems Argentina faced was the ability of the federal government to finance expenditures by relying upon central bank assets. Indeed, “The central bank was lender of first resort to the treasury,” according to Alfonso Prat-Gay, who ran the central bank from 2002 to 2004.

Early on, the US Federal Reserve was a source of rediscount finance to support the agricultural cycle. During WWII, the Fed subordinated its balance sheet and independence to support the war effort, transferring funds to the Treasury and pegging Treasury rates. That policy culminated in the 1951 Accord, reestablishing the Fed’s position as an independent central bank. In 1996, Congress requested that the GAO study the Fed’s policy of maintaining its surplus account equal to its paid-in capital as of year-end the previous year. The purpose of the surplus accounts to provide a buffer against which losses could be recognized.Member banks are required by the Federal Reserve Act to subscribe to stock in the Federal Reserve Bank in the district in which the member banks are headquartered, and the subscription is to equal to 6% of their paid-in capital and surplus. Hence, the Fed can add to its paid-in capital only as member banks grow and not by issuing more stock.

The GAO study came on the heels of two raids of the Fed’s surplus initiated in the Omnibus Budget Reconciliation Act of 1993. That act, according to the GAO, directed any Reserve Bank whose surplus exceeded 3% of the paid-in capital and surplus of member banks in its district for fiscal years 1997 and 1998, to transfer those surplus funds to the Treasury. And the Reserve Banks making those transfers were not permitted by the Act to replenish their reserves during those two fiscal years.2

The table below shows the relationship between the Fed’s surplus and paid-in capital accounts since the GAO’s 2002 study. There have been some temporary deviations of the aggregate Federal Reserve Bank surplus from paid-in stock.

In 2006, for example, there was a temporary decline, but the Federal Reserve’s 2006 annual report indicated that this decline was attributed to adoption of FAS 158, which required a reduction in surplus of $1.849 billion and then required the sharp subsequent adjustment shown in the chart.3

Recently, Congress has repeatedly resorted to tapping the Fed’s balance sheet in an effort to fund pet projects, creating a dangerous precedent and threatening the Fed’s independence. The first nose under the tent occurred with the 2010 Dodd-Frank Act, which created the Consumer Financial Protection Bureau. Congress mandated the Fed to fund the new bureau rather than subjecting the agency to traditional financing through appropriations.4

Then in December 2015, Congress struck again and reduced the Fed’s surplus even further with passage of the $305 billion Highway and Transportation Funding Act of 2015. That Act expropriated about $19 billion of the Fed’s surplus and capped the amount in the Fed’s surplus account going forward to $10 billion. It further reduced the 6% dividend on Federal Reserve stock paid to member banks.5

There are two important facts to recognize about these actions. First, as the 2002 GAO report points out, transferring resources from the Federal Reserve creates the appearance of an increase in federal receipts because of the peculiarities of government accounting; but such transfers don’t actually increase government resources when viewed on a consolidated basis. Federal debt held by the public declines but, again, only because Federal Reserve Treasury holdings are considered debt held by the public, even though the Fed is a government entity (or at least the Board of Governors is).Viewed properly, all that is happening is an intra-governmental transfer of resources. Moreover, such a transfer reduces future remittance transfers from the Fed to the Treasury unless offset by additional asset purchases by the Fed.

Second, as a result of the financial crisis and expansion of the Fed’s balance sheet through its quantitative easing programs, the Fed’s leverage and loss absorption capacity has been radically reduced since its capital-to-asset ratio has declined to 0.9 percent, and we have estimated that an across-the-board 17 basis point increase in the term structure would be sufficient for the market value of Federal Reserve system assets to be less than the value of its liabilities.To make matters even worse, the two-year budget passed by Congress last week further expropriated another $2.5 billion of the Fed’s surplus, reducing it to $7.5 billion.

In the context of the budget and policies now in place, the $2.5 billion of surplus transfer is no more than rounding error, relative to the size of projected budget deficits, which could reach $1.2 trillion. But the risks to the Fed and its ability to carry out policies are now extremely limited when it comes to the ability to sell assets, if needed, as one way to reduce the size of its balance sheet. In particular, because the Fed carries securities on its books at par, any increase in interest rates would reduce the market value of its securities, which, if sold, would require recognition of those losses. The $7.5 billion surplus is clearly inadequate to absorb the potential losses. So the Fed will have to either forego assets sales or take advantage of an agreement struck by Chairman Bernanke with the Treasury permitting the Fed to record losses in a negative asset account instead of booking losses against capital. Should a negative asset account become necessary, then remittances to the Treasury will cease until the negative asset account is extinguished.

As we have written previously, the optics of an insolvent Federal Reserve – even if it is of little substantive relevance since the Fed is backed by the Treasury and the resources of the United States – does not convey an image of strength and may not be well received in financial markets both domestic and (especially) foreign. Congress is serially weakening the Fed by tapping its resources, reducing its policy flexibility at just the wrong time and for no fiscally substantive reason.That practice is wrong and dangerous for our country.  Let us not emulate struggling economies like many of those in Latin America.

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


Historically, such losses have typically been temporary and associated with foreign exchange transactions. The system has never had an annual loss, and Reserve Banks have recognized only temporary losses against their surplus accounts.

See GAO, Federal Reserve System: The Surplus Account, Report to Congressional Requesters, September 2002.

 See Annual Report 2006, Board of Governors of the Federal Reserve System, https://www.federalreserve.gov/boarddocs/rptcongress/annual06/pdf/ar06.pdf, pg. 128
The legality of the structure of that agency is under scrutiny by the Administration.
Small community banks were exempted.
Presumably, this treatment is due to the fact that the Reserve Banks are technically owned by member banks in their respective districts, and reserve bank employees are not considered federal employees.
See http://www.cumber.com/~cumber/pdf/duration.pdf
See Charles Plosser, “Argentina Redux,” July 2, 206 https://www.hoover.org/research/argentina-redux for a former Federal Reserve Bank president’s concern about potential polarization of the Fed.

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Trump Infrastructure – First Take

The President’s infrastructure vision is now in the hands of Congress, which is tasked with devising a plan that promotes investment in our nation’s well-being. The vision includes over $1 trillion in investment over the next ten years. Infrastructure investment is sorely needed, as is demonstrated by the Association of Civil Engineers’ report card on our nation’s infrastructure, which gives the US a D+ rating. See https://www.infrastructurereportcard.org. The vision includes leveraging of federal funds, better coordination and partnering of federal and local stakeholders in the development of projects, and streamlining of the regulatory permitting process by eliminating redundancies in an effort to shorten the time frame for projects.

An expanded version of the plan is expected to be released today. Public-private partnerships have been touted in the rebuilding of our infrastructure; however municipalities will remain major stakeholders. The municipal finance industry is encouraging a number of recommendations that would make investment less costly and less confusing. Education will be paramount, as some stakeholders are worried that relaxation of certain processes will have environmental or economic development ramifications.

Private activity bonds (PABs), which finance transportation, utility, housing, higher education, and other infrastructure projects on a tax-exempt basis were threatened in the tax reform bill. The tax exemption was saved as legislators realized that needed infrastructure was financed with PABs. However, these bonds are subject to volume caps with no escalation provisions. Market participants are advocating for the elimination of AMT on interest on PABs and  that volume caps be eliminated, or at least increased, to allow more projects.

A number of recommendations resurrect items lost in the recent tax reform bill, including the ability to issue advance refunding bonds, which allow borrowers to refinance higher-coupon bonds to yield savings. See John Mousseau’s commentary at http://www.cumber.com/the-muni-take-on-the-tax-bill-round-two/. This move may be advisable, because other structures such as taxable bonds, variable-rate debt, and swaps, which could be used to refinance debt and produce similar outcomes, are more expensive or more complicated and expose issuers to different risks than do traditional advance refunding bonds.

Other recommendations that municipal market participants will support include making adjustments to arbitrage restrictions (or at least simplifying rules), insulating Build America Bond credit payments to municipalities from reductions during sequestration, and increasing the ability of issuers to designate their bonds as bank-qualified by raising the bond size limit from $10 million to $30 million with an escalation for inflation and an expansion of the issuers that can take advantage of the designation. The bank-qualified designation allows the issuer to bypass traditional underwriting and sell tax-exempt bonds directly to local banks. It especially benefits smaller municipalities.

Some complain that the President’s comments are short on detail; however, since infrastructure is important to all in America, it is imperative that Congress and other interested parties make their positions known so that a bipartisan plan can be arrived at. One bipartisan bill, proposed by US Senators John Cornyn (R-TX) and Mark Warner (D-VA), is titled “Building United States Infrastructure Projects and Leveraging Development,” or BUILD. The bill would allow governments to enter into additional public-private partnerships to finance surface transportation projects and increase the amount of PABs that could be issued by state and local governments by $5.8 billion. Another bipartisan bill would create $5 billion in PABs for public buildings such as schools, colleges, libraries, and courthouses.

There needs to be a program for other sectors of the municipal market, including water and wastewater projects, hospitals, public power, and other transportation projects. WIFIA, the Water Infrastructure Finance and Innovation Act, which is already established but has yet to approve a project, will help finance utilities with low-interest loans and flexible repayment programs. TIFIA, the Transportation Infrastructure Finance and Innovation Act, has done the same for public-private partnership financing structures for roads and bridges. Possibly, these programs will be expanded. Since progress on how to best finance infrastructure is slow in coming, many jurisdictions are working on their own plans and have raised gas taxes and other taxes to help fund projects. Some states doing so include Tennessee, South Carolina, and New Jersey. Municipalities have competing expenses such as pension payments, which are a growing portion of budgets; however, it remains important to fund improvement of our infrastructure to attract growth and development, as well as to improve safety.

Infrastructure Week in Washington DC is May 14th through the 21st. Here is a link to a site devoted to it: http://infrastructureweek.org/.  I found articles on needed investment but not any on how to finance the $1 trillion needed over 10 years. During the week, Municipal Bonds for America is planning an educational outreach day for members of Congress and their staff. Municipal Bonds for America is a nonpartisan coalition of municipal market participants, from issuers to investors, that helps increase awareness of the benefits of municipal bonds. See http://www.munibondsforamerica.org/.

Regarding infrastructure, one of the elephants in the room is the rebuilding of Puerto Rico. Federal aid remains largely undetermined or pending. In particular, FEMA rebuilding funds are for replacing infrastructure to its condition before a disaster; but Puerto Rico already needed more-reliable, storm-resistant electric and water systems; and so changes to the FEMA regulations are being discussed. As has been well publicized, the lack of electrical service since the storm has hampered the ability of merchants to remain open, reducing their ability to remit sales taxes to the Commonwealth, employ workers, or reinvest in their businesses – and has resulted in an exodus of citizens. As of Friday the island reported that 72.98% of power had been restored. On February 28th there is a hearing before Congress regarding the slow rebuilding process and plans for the future. Possibly, the President’s infrastructure plan to be released Monday will address Puerto Rico and/or national storm resiliency.

Those who are interested in a deeper discussion of issues affecting the Caribbean, please join us February 22 at the University of Southern Florida in Sarasota for the program “Cuba and the Caribbean: What Now?” The full program and registration information can be found here: https://www.wusf.usf.edu/cuba_and_the_caribbean_what_now.

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


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Politics Threatens the Fed

“Yet there is also good reason to worry,” wrote the Economist on a page 10 editorial dated February 3, 2018. We agree.

They made the case with this summary: “An independent central bank can be better trusted to act swiftly to curb inflation. That trust also gives it freedom to cut interest rates when the economy turns down. The kinds of problems set by a booming world economy and elevated asset prices are best tackled by experts at some distance from politics. What central banks need is not the appointment of officials who are less inclined to disappoint their political masters.”

Could the turmoil in the US central bank’s composition and its interface with politics be one of the hidden ingredients that exacerbate market turmoil and worsen violent volatility? The answer may be yes.

Consider the evidence.

Our Federal Reserve functions without a full Board of Governors because of politics. The new chairman, Jay Powell, has two colleagues seated on a seven-member board. A third nominee is now in political trouble because a Senator doesn’t like his views. The nomination of Marvin Goodfriend squeaked through the Senate committee on a partisan 13 to 12 vote. We shall see if he is confirmed or if he falls to the wayside. Three other vacancies on the board await nominations by President Trump. So right now the five voting presidents outnumber the three voting governors, and that is likely to be the situation for months. Some might argue that ratio is a good thing, as regional bank presidents are selected by their banks and are not subject to Senate confirmation of presidential appointments.

Please note that this situation is not unique to Trump. It started under Bush and continued under Obama. Even in the midst of the worst financial crisis since the Great Depression, the Fed’s Board of Governors chaired by Bernanke had two vacancies. In those days the Board had a requirement for a supermajority five votes to rule on an emergency action. So Bernanke had to live under a unanimity rule imposed by a US Senate that was unwilling to confirm appointees.

Meanwhile, the Fed has the political problem of less than robust congressional objection to how the Congress raids the central bank. The most recent example was hidden in the budget deal. Christopher Condon of Bloomberg caught it and reported it in a story entitled “Congress Raids Fed’s Surplus for $2.5 billion in Budget Deal.” For those with Bloomberg access, the time stamp entry is 2018-02-09 16:39;01,750 GMT. Condon reports that the Congressional raid on the Fed’s surplus reduced the Fed’s account to $7.5 billion and forced America’s central bank to send the money to the Treasury.

Please note that the Fed routinely sends any accumulated surplus to the Treasury, but this $2.5 billion was a sleight-of-hand maneuver by politicians to get the budget deal through. This transfer was NOT part of the regular remittances process. It means that those remittances will be reduced by $2.5 billion.

Congress previously pulled a fast one like this by raiding the Fed’s surplus to finance a highway spending program. And before that it forced the Fed to fund the Consumer Financial Protection Bureau. What is next? Can you imagine an emergency funding measure that raids the Fed for hurricane disaster relief or mosquito control or anything else on a list that could become open-ended? Remember that this type of raid bypasses the traditional budget-determined spending and taxing mechanism. It hides things from scrutiny. Only a journalist with skills can ferret it out and make it public.

Now, there is no way to put a numerical value on political risk to a central bank. We know it is there, but we cannot measure it in isolation. We can see the results after a shock. We can measure them after emergency funding actions like the Fed’s Maiden Lane bailout of Bear Stearns during the financial crisis. But otherwise the precise cost of political interference with a central bank is elusive. We may see it reflected in some credit spreads, but there are multiple reasons for those to widen or narrow.

Market turmoil worldwide is raising volatility. Central banks’ exposure to politics seems to be part of the cause. Besides the Fed, we are looking at changes coming to the European Central Bank. Draghi’s term ends next year. The predictability of the ECB is lessened by this forthcoming leadership change while there is still no confirmed path that market agents may rely upon for the ECB’s tapering to normal. Predictability is further worsened at the ECB because Vice-President Constancio’s term ends in May.

In Japan, Governor Kuroda’s term is ending soon, too. He may be reappointed, or there may be a change as early as April. In China, the current governor is expected to retire. There are other larger central banks looking at changes as well.

The bottom line is that political shenanigans and influence pose a continuing threat to central bank independence, and the outlook in the US is worsening for the Fed’s independence. Is that adding to market volatility? We think so.

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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Presidents & Stock Market Quotes

First we must say that we think the market is now very oversold and panicked.  That is why we were on the buying side today and especially so in the last hour. Most of the cash in the US and US Core ETF portfolios is deployed as of 4 PM today. The quantitative Lev Vol and Vol strategy accounts are also deployed. Now let’s get to Presidents and Stock Markets.

Politico ran a story by Jason Furman titled “Why Presidents Shouldn’t Talk About the Stock Market,” Subtitle: “Obama learned that lesson the hard way. Trump will, too.” You can read that story here: https://www.politico.com/magazine/story/2018/02/06/trump-stock-market-216944.

We cannot speak about what presidents learn or don’t learn. But we can point to history. Presidents do poorly when they claim stock market gains as their doing. They do poorly when they give investment advice to the American public. And they do poorly when they stray into the market’s dynamic arena. Presidents, whether Democrat or Republican, hurt themselves when they do anything of the sort.

The lesson from history is stay away from the stock market if you are a politician.

Remember the 700-point decline during the financial crisis when the US Senate couldn’t find a way to pass legislation in the midst of a global economic meltdown. Remember the demise of the Bretton Woods fixed currency regime under Richard Nixon. Remember the recent Donald Trump claim in the State of the Union. The evidence for the poor mixing of political rhetoric and markets is pretty strong.

The bottom line is that markets ignore politicians regardless of their political stripes. Markets move in the very short term based on technical factors and momentum. Markets move in the medium term based on monetary policy, global trade, economic growth, and inflation expectations. And markets move in the longer term based on earnings and valuations (both relative and absolute). We are paraphrasing an excellent summary of these three stages outlined in a recent research piece by BCA Research. We cannot find the quote but recall the source.

Here is some history on what presidents have said about stock market performance. We’ve asked our researchers to make this bipartisan!

President Trump

Feb. 5, 2018, New York Times

“President Trump took credit for rising stocks at least 25 times in January alone.”

Feb. 8, 2018, New York Times

“President Trump, who has taken credit for a rising stock market as a measure of his own success, complained on Twitter Wednesday that ‘good (great) news’ in the economy led to an abrupt decline in stock prices, his first comments about the stock market since its sharp drop earlier this week.

“In the early-morning tweet, Mr. Trump lamented that in the ‘old days,’ stocks would rise on good economic news, saying ‘Today, when good news is reported, the Stock Market goes down. Big mistake.’ The tweet did not elaborate on what he meant by the ‘old days’ or explain further his analysis of why stocks plummeted on Friday and Monday.”

https://www.nytimes.com/2018/02/07/us/politics/trump-stock-market-plunge.html

President Obama

March 3, 2009

“ ‘What I’m looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics. It bobs up and down day to day, and if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong. On the other hand, what you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it.’

“The reaction [to Obama’s remarks quoted above] was swift and brutal, referring to the president as ‘Stockpicker in Chief’ and the ‘First Stockbroker’ and partisan opponents rushing to condemn the comments. A few hours later, the White House press secretary effectively walked back the president’s remarks, and for the next seven and three quarters years the president never repeated anything like this.”

“Why Presidents Shouldn’t Talk About the Stock Market”
https://www.politico.com/magazine/story/2018/02/06/trump-stock-market-216944

President George W. Bush

Sept. 24, 2008, in response to the economic crisis

“I’m a strong believer in free enterprise, so my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America’s financial system are at risk of shutting down.

“The government’s top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.

“More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.”

President Clinton

Oct. 28, 1997

“It may be disappointing, but I think it is neither prudent nor appropriate for any president to comment on the hour-by-hour or the day-by-day movements of the market.”

President Reagan

Oct. 20, 1987 – the day after Black Monday, Oct. 19

“Informal Exchange with Reporters on the Stock Market Decline and the Federal Deficit”

Q. Mr. President, the Democrats say that it’s your economic policies that caused that downturn on Wall Street yesterday.

The President. Yes, it’s funny, Bill [Bill Plante, CBS News], that I couldn’t understand, at the beginning, that creating 14 million new jobs, eliminating inflation – or virtually eliminating it, bringing it down-lowering interest rates, increasing the prosperity of the people – I just wouldn’t understand that that could hurt the stock market.

Q. What word will you have for investors today, Mr. President?

The President. Well, we’re in constant consultations. I think everyone has been caught by surprise in this. And it is true that at this point of the day the market is in a far better situation than it was yesterday at this time, with about the same number of sales of stock – trading of stock. But I’m very pleased and gratified with the action that has been taken so far by the Federal Reserve Board and the fact that two of the major banks have lowered their interest rates.

https://quod.lib.umich.edu/p/ppotpus/4732393.1987.002?rgn=main;view=fulltext

President Carter

Jan. 12, 1978

“I think that until the question of energy is resolved, the uncertainty about this subject and the realization that our excessive imports of oil or adverse balance of trade is going to be permanent, those two things are going to contribute to the deleterious effects of increasing interest rates and also uncertainty in the stock market.”

Nov. 3, 1978

“In the last two days, the value of the dollar has gone up against the deutschemark, for instance, in Germany 8 percent. As you know, day before yesterday, the stock market went up more than it ever had in history, over 35 points. That’s an indication of confidence in our Government.”

Apparently, both President Roosevelt and President Hoover studiously avoided direct mentions of stock market performance in the wake of the 1929 collapse. We haven’t been able to find any exceptions.




Money, Banking, Energy, Economics on February 22

Economic and financial issues will be thoroughly discussed on February 22 at USF Sarasota-Manatee. The confirmed lineup includes Sara Banaszak of Exxon Mobil, who has expertise in the energy sector. Everything from Puerto Rico Electric Power to offshore drilling to national constraints is on the table. Eugenio Alemán carries the Latin connection; he is senior economist at Wells Fargo Securities.

To round out this discussion we add banking, including payments issues, with David Seleski, president of Stonegate Bank; and we have confirmed the participation of Steve Kay, director of the Americas Center, Federal Reserve Bank of Atlanta.

The full program and registration information can be obtained with this link: https://www.wusf.usf.edu/cuba_and_the_caribbean_what_now

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 is for you.

The event costs only 50 bucks, and that covers lunch. This open forum is made possible by USFSM, the Atlanta Fed Americas Center, and the Global Interdependence Center. All media are welcome to cover the panel, and the entire community is invited.

Cumberland Advisors provided a grant to USFSM and to GIC to assist this event aimed at public education. Please come.

Cumberland Advisors is a proud sponsor of the Global Interdependence Center: https://www.interdependence.org/

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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Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.