Matt McAleer talks Markets with Oliver Renick on TD Ameritrade 2019-05-13

Matt McAleer, Executive Vice President & Director of Equity Strategies for Cumberland Advisors, appears on the TD Ameritrade Network, May 13th, to discuss financial markets with Oliver Renick.

Matt McAleer talks Markets with Oliver Renick on TD Ameritrade 2019-05-13

View the discussion here: https://tdameritradenetwork.com

You can watch Matt’s deliver weekly updated market commentary here on Cumberland Advisors’ YouTube Channel.




Matt McAleer talks Markets on TD Ameritrade 2019-03-14

Matt McAleer, Executive Vice President & Director of Equity Strategies for Cumberland Advisors, appears on the TD Ameritrade Network to discuss financial markets with Oliver Renick.

View the discussion here: https://tdameritradenetwork.com

You can watch Matt’s deliver weekly updated market commentary here on Cumberland Advisors’ YouTube Channel.

Morning Trade Live_ 03_14_2019 _ TD Ameritrade Network

Can’t get enough of Matt? Listen to him during a 2018 radio discussion about Financial Literacy in advance of Cumberland Advisors’ annual event with GIC and USFSM here: Suncoast Speaks interview with John Mousseau & Matt McAleer about Financial Literacy




Matt McAleer talks Markets on TD Ameritrade

Matt McAleer, Executive Vice President & Director of Equity Strategies for Cumberland Advisors, appears on the TD Ameritrade Network to discuss financial markets with Oliver Renick.

View the discussion here: https://tdameritradenetwork.com

You can watch Matt’s deliver weekly updated market commentary here on Cumberland Advisors’ YouTube Channel.

Matthew McAleer, Executive Vice President & Director of Equity Strategies for Cumberland Advisors, appears on the TD Ameritrade Network to discuss financial markets.

Can’t get enough of Matt? Listen to him during a 2018 radio discussion about Financial Literacy in advance of Cumberland Advisors’ annual event with GIC and USFSM here: Suncoast Speaks interview with John Mousseau & Matt McAleer about Financial Literacy




Shutdown #6

US agriculture was not well positioned to suffer a federal government shutdown in December and January. In an era of low commodity prices, many farms cannot afford trade-war shenanigans and cannot afford government shutdowns.

Market Commentary - Cumberland Advisors - Shutdown Hamilton Quote

Across the US, median farm income for 2018 was -$1548 (yes, a negative $1548), a fifteen-year low, despite record farm productivity (https://www.ajc.com/news/farmers-knife-edge-bad-weather-tariff-war-shutdown-exact-toll/BcQhMALKUmNBslXllcSjcL/). That data includes, of course, not only large corporate farms but also small farms where producers rely on off-farm jobs to make ends meet.

To top off the twin challenges of low prices and foreign markets evaporated by the trade war, weather-related losses have hit some farms hard, making assistance far more critical. Take the situation for South Georgia pecan growers, for example (https://www.ajc.com/news/farmers-knife-edge-bad-weather-tariff-war-shutdown-exact-toll/BcQhMALKUmNBslXllcSjcL), Justin Jones among them. Hurricane Michael destroyed many of Jones’ trees, trimming potential income for years to come. A significant portion of what was a bounty crop of nuts could not be harvested because of heavy rains. Jones’ crop losses weren’t mitigated by higher prices, either, despite a diminished supply, because the Chinese stopped buying US pecans. Meanwhile, South Georgia farmers found themselves waiting on federal relief and crop insurance payments because of the shutdown. Old debt, instead of being paid off by a generous harvest, had to be wrapped into new loans.

The shutdown was especially ill-timed, because farm bankruptcies are up, as the Wall Street Journal reports in an must-read article titled, “This One Here Is Going to Kick My Butt: Farm Belt Bankruptcies Are Soaring” (https://www.wsj.com/articles/this-one-here-is-gonna-kick-my-buttfarm-belt-bankruptcies-are-soaring-11549468759). Farmers must contend with low commodity prices, trade war impacts on exports, and higher costs for fertilizer and equipment. The WSJ report sizes up the unfolding damage:

“Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier.

“States in those circuits accounted for nearly half of all sales of U.S. farm products in 2017, according to U.S. Department of Agriculture data.”

The 35-day shutdown meant that many farmers faced delays in applying for and receiving Farm Service Agency loans that they use each year to buy seeds, feed, equipment, and fertilizer. Christopher Quinn, reporting for the Atlanta Journal-Constitution, explains, “Farmers plan crops, prepare fields and line up financing January to March. But most USDA functions and local Farm Service Agency offices closed in late December and most of January. That left farmers behind and prevented them from applying for loans, collecting federal disaster aid and crop insurance and trade mitigation payments which were given to offset a portion of tariff losses. In a financially pinched time, that money would be useful.” (https://www.ajc.com/news/farmers-knife-edge-bad-weather-tariff-war-shutdown-exact-toll/BcQhMALKUmNBslXllcSjcL)

The 35-day shutdown of the federal government also delayed crucial ag reports. Just as investors need those reports, farmers need them, too, particularly information on foreign production and demand, as they make critical decisions about when to sell their corn or soybeans, or how much of what to plant for 2019. How critical are delays and a dearth of data from the USDA? A UPI report, “Lacking USDA Crop Reports, Farmers Make Critical Decisions in the Dark,” laid out the situation during the shutdown:

“This is the time of year growers across the country take out loans, purchase machinery, decide what they will plant – and buy seed. The USDA’s data on price outlooks and international supply and demand for agricultural commodities can be crucial in making those decisions.

“‘Here, we’ve been a month with no information,’ said Tim Bardole, a corn and soy grower in Iowa. ‘As far as planting goes, we’ve got our seed bought. We kind of took a shot in the dark. When the reports come out, we’ll find out how far off we were.’” (https://www.upi.com/Lacking-USDA-crop-reports-farmers-make-critical-decisions-in-the-dark/6301548967114/)

As it braces for a possible second shutdown, the USDA has been scrambling to produce those reports that couldn’t happen in January. The long-awaited World Agricultural Supply and Demand Estimate, or WASDE, was finally released on February 8. Fortunately for investors and for farmers, it held no big surprises. US soybean production, corn production, and projected exports were down, while wheat, sorghum, and rice were up.But nothing in the report spurred the price volatility many had feared.

The shutdown interfered, too, with the timely implementation of the 2018 Farm Bill, which the USDA is scrambling to implement. Among its other “farm-friendly” provisions, the 2018 Farm Bill includes much-needed aid to struggling dairy farmers and a provision for insurance against low milk prices under the Margin Protection Program (http://www.thedailynewsonline.com/bdn01/kirsten-gillibrand-calls-for-rapid-implementation-of-farm-bill-post-shutdown-20190206).

The USDA has obviously done its level best to forestall damaging impacts on farmers. During the first shutdown it temporarily reopened almost half of its Farm Service Agency offices on a part-time basis to help with existing loans and to produce 1099s needed for 2018 taxes. The Washington Post reports that some USDA employees who worked through the shutdown did not see their back pay until more than two weeks after the shutdown ended, basically because the computer system used to issue payments choked with the overload. When accounts are finally settled, the federal government will have footed the bill not only for back pay but also for the overtime pay that is unavoidably the price of catching up. (https://www.washingtonpost.com/national/health-science/after-the-shutdown-federal-workers-are-coping-with-a-rocky-restart/2019/02/07/34494bea-2a41-11e9-b011-d8500644dc98_story.html)

One can only speculate on how the situation will worsen if another shutdown unfolds as US farmers prepare for planting season. Will FSA payments, Market Facilitation Program payments, and farm subsidy payments be made in time, or will some farmers be unable to obtain the money they need to bring a crop to harvest or livestock to market? Will crop loss insurance payments reach those wiped out by a hurricane? Will dairy farmers get insurance payments long overdue? A second shutdown has further potential implications not only for farmers and the Agriculture sector as a whole, but perhaps also for consumers who have to put dinner on the table on a budget.

The many roles of the USDA – from the administration of SNAP to food safety inspections to the complex programs that help farmers plant their crops and feed their livestock and bring them to market so that America eats – cannot be adequately fulfilled during a shutdown, even a partial one. Some politicians grasp this. House Agriculture Committee Chairman Collin Peterson has proposed a bill to keep Farm Service Agency offices running during a shutdown. (https://www.rfdtv.com/story/39871614/house-ag-committee-chairman-collin-peterson-proposes-to-keep-farm-service-agency-offices-open-if-another-shutdown-occurs#.XFsK2dF7nFQ)

But all industrial sectors and all consumers sectors and all services of government and all impacts on our lives are better served if there is no second shutdown. The discussion in Congress is to avoid this type of punishment of our citizens by changing the legal structure so that shutdowns don’t repeat themselves. Nine Republican Senators have sponsored legislation called the End Government Shutdowns Act (S. 104), to ensure an automatic continuing resolution at current spending levels to be triggered when any budget appropriations deadline passes without a budget agreement. (https://www.govexec.com/management/2019/01/senate-republicans-hatch-plan-prevent-future-shutdowns/154160/)

As matters stand, President Trump, the House and the Senate, the Democrats and the Republicans, are all guilty of creating the shutdown that imperiled the finances of federal workers and many farmers alike. They are ignoring the citizens who do not want it. Congress, however, can stop shutdowns permanently, and should. Politicians, whether in Congress or in the White House, should not have a tool to waterboard the federal government, its employees, and those who are served by its programs as a means to strong-arming political outcomes.

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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Shutdown #5

My colleague Norm Dempsey reminded me to thank all the readers of our shutdown series for their emails and messages. He also noted we should do the same for those who supported the climate change series. We concur with Norm.

Cumberland Advisors Market Commentary by David Kotok

In his reminder Norm mentioned that when former Illinois governor Rod Blagojevich was sentenced by Judge James B. Zagel to 14 years in prison for extortion and soliciting bribes, the judge pointedly addressed Blagojevich as “governor.”

Zagel explained why: “It serves as a reminder to those of us who vote and those of us who don’t. It reminds the voters of the maxim, ‘The American people always get precisely the government that they deserve.’ Your case is another lesson for us.”

Many readers responded with messages about the phone calls they made to their elected representatives in the House and the Senate during the shutdown period. The country thanks each and every citizen who took a few minutes to raise a voice loudly. We also thank the many folks who worked without pay during the longest shutdown in history. You will be made whole in your paycheck if you are a directly paid federal employee. If your paycheck is earned in an indirect way, your recompense may be problematic.

For the nation the shutdown has a permanent cost. We cannot restore the lost GDP. Example: The worker who went without pay and didn’t take his shirts to a cleaner during those 35 days will now take the shirts to be cleaned and pay the cleaner. But he won’t have taken them twice. The GDP loss in the first quarter of this year will only partially be made up. And that assumes there is not going to be another shutdown.

We also cannot undo the sentiment shift that has further injured Americans’ view of their political leaders. Neither can we expect to restore America’s tarnished image in the geopolitical realm. As the preeminent world power, we acted poorly, and nearly all on the global scene know it. As for our domestic politics, the damage control will be intensive.

John Harwood used his CNBC blog to recite some post-shutdown polling numbers for President Trump. (See “Americans fault Trump for chaotic government shutdown, as more believe US is ‘on the wrong track’: NBC-WSJ poll,” https://www.cnbc.com/2019/01/27/trump-faulted-for-government-shutdown-nbc-wsj-poll.html.) Here are some excerpts that demonstrate the damage.

“The poll’s results showed that by 63 percent to 28 percent , a margin greater than two to one, Americans believe the country is ‘off on the wrong track’ rather than ‘headed in the right direction….

“And by 50 percent to 37 percent, Americans blame Trump, rather than Democrats in Congress, for the debacle. That result reflects their disagreement with his stance on the issue that caused it….

“Pluralities disapprove the president’s handling of border security and immigration issues, and say would-be immigrants across the southern border with Mexico would strengthen rather than weaken America. A 52 percent majority opposes construction of a wall or fence along the U.S.-Mexico border, while 45 percent favor it….

“Underneath that unimpressive showing lies sharply negative assessments of the president. Just one-third of Americans express confidence that Trump has the right goals and policies; an even lower proportion, 28 percent, express confidence that he has the right personal characteristics to be president….

“By 47 percent to 36 percent, Americans rate Trump negatively rather than positively for ‘being a good negotiator,’ the characteristic he has long claimed as his signature quality. He fares even worse on ‘being steady and reliable’ (53 percent negative, 32 percent positive), ‘being knowledgeable and experienced enough’ (54 percent negative, 32 percent positive), ‘being honest and trustworthy’ (58 percent negative, 28 percent positive) and ‘having high personal and ethical standards’ (58 percent negative, 24 percent positive).”

In our view the breaking point was reached when the transportation system failed and particularly when LaGuardia Airport briefly closed to inbound aircraft because of security worries. (See “Flights are not halted at LaGuardia, but the shutdown is now causing flight delays,” https://qz.com/1533829/shutdown-related-faa-staffing-issues-cause-delays-at-laguardia/.)

We close with a reminder that the phone is powerful for messaging a Senator or House Member. All Senators and all House Members own the results of the shutdown, along with the President. This is a multidimensional, bipartisan political failure. The names of the failed leaders include but are not limited to Trump, Pence, McConnell, Pelosi, Hoyer, Schumer, and Durbin.

“Those who are too smart to engage in politics are punished by being governed by those who are dumber,” is an oft-quoted paraphrase of a line penned by Plato in Book I of The Republic. We tip our hat to John Loewenberg for sharing that insight. The thought, which Plato attributes to his teacher, Socrates, can be alternately translated, “One of the penalties for refusing to participate in politics, is that you end up being governed by your inferiors.” (See https://medium.com/@alex_65670/platos-warning-if-you-don-t-vote-you-will-be-governed-by-idiots-64891cd59b4 for a deeper discussion of the quote and its context.) The lesson applies today: We must diligently speak up.

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


U.S. House of Representatives
https://www.house.gov/representatives

U.S. Senate
https://www.senate.gov/senators/


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 Fed Is Guessing As it Plays With Fire: David Kotok (Radio)

David Kotok, Chairman & Chief Investment Officer of Cumberland Advisors, on what to expect from the FOMC, balance sheet, and the outlook for bonds and markets. Hosted by Abramowicz and Paul Sweeney.

Running time 12:42

 

LISTEN HERE: Bloomberg Radio

NOTE: 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.


If you like podcasts, check out this one from 2015 featuring David Kotok talking about his background and Camp Kotok with Barry Ritholtz. They also talk about the history of Cumberland Advisors since its founding, and delve into fundamental principles of investing and valuation.


Links here
https://itunes.apple.com/us/podcast/masters-in-business/id730188152?mt=2

And here
http://www.bloomberg.com/podcasts/masters-in-business/




Shutdown #4

Here is a link to an FBI report on what the shutdown is doing to safety and law enforcement and all that is related to those concerns. The report is entitled Voices from the Field (https://www.fbiaa.org/sites/default/files/downloadable/FBIAA%20Voices%20from%20the%20Field.pdf). The FBI describes it as follows:

Cumberland Advisors Market Commentary by David Kotok

Voices from the Field contains reports from FBI Special Agents nationwide. These stories illustrate how the government shutdown affects our work and identifies the risks that may emerge as it continues….

“FBIAA is releasing Voices from the Field to ensure that Congress, the Administration, and the public are aware of the real and daily challenges faced by FBI agents and the risks to national security posed by a prolonged shutdown.”

The report goes on to detail dozens of highly specific instances where FBI offices across the nation are now prevented from doing their jobs in the areas of counter-intelligence and counter-terrorism, cybersecurity, drug and gang crime, crimes against children, sex trafficking, healthcare and securities fraud, etc.

Richard G. related by email some personal and family history that has a bearing on the FBI’s current predicament. He says,

“My father, long deceased, was an FBI agent. They can make tons more money in the private sector. That’s the reason he retired at 52 years of age and went into the private sector.

“Lots of dedicated government employees are pawns in this charade. We’ll probably lose lots of them to private sector where, if an employee works, companies are required by law to pay them!

“Fingers crossed that some goodwill will come of this ugly period.”

Note we are hearing more and more anecdotes about federal employees who are not getting paid now rethinking their career paths. In nearly every case they are torn between service to the country and escaping this shutdown charade, and they express intense resentment for being used as political pawns.

Let’s not forget the Coast Guard, which is also on duty and protecting the nation while not getting paid – the only branch of the military working without pay. (See “‘Unacceptable’: Coast Guard’s top officer criticizes lack of payment in government shutdown,” https://www.washingtonpost.com/national-security/2019/01/23/unacceptable-coast-guards-top-officer-criticizes-lack-payment-government-shutdown/?utm_term=.8ba96bb4f6fa.)

We note that “Senate Minority Leader Schumer (D-N.Y.) blocked a request to pay the Coast Guard on Thursday after Republicans refused to also open the rest of the federal government” (https://thehill.com/homenews/senate/426824-schumer-blocks-bill-to-pay-coast-guard). Thus the intransigence on both sides continues, and deepens.

We are getting a lot of email about the shutdown. All those who are finger pointing at the other side are wasting effort, in my view. They certainly don’t alter the landscape. It serves no purpose to write to me and tell me I should blame Trump more than Pelosi or that Trump is right and Pelosi is the problem. And it doesn’t help to tell me that the wall is needed or to tell me that the wall is a waste of money.

As a more positive step, I recommended calls to government officials of both parties. I made mine. My message was the same to each of them, regardless of party: “You [congressman or senator] must reopen this government by finding a path to enough votes to do it. You are the responsible party.”

Jay sent a thoughtful note, which I will share:

“What makes all of this the more regrettable is that it turns on $5 billion, ‘chump change’ in the realm of U.S. government accounts. So here’s an idea: suggest that Mr. Trump find the money elsewhere, use it for the wall, and then declare an end to the shutdown, as: (a) enough money will be available to proceed with the wall; (b) he will have circumvented his opponents’ efforts to stop the wall; (c) his opponents will claim, correctly, that they did not yield to Mr. Trump and vote for something they do not like and for which they promised not to vote. The wall, if built, will not stop drug thugs. But if it is patrolled, it will deter some from trying to cross the Sonoran Desert, an often-lethal undertaking, at least during the summer. Walls didn’t save China from the Mongols (mid-1200s) or Manchus (mid-1600s). But these were armed and highly skilled invaders. A wall may focus Mexicans’ attention on their governments’ failures – over many decades – to build public safety institutions. Note the plurals. Mexican leaders’ negligence embitters the lives of Mexicans. This is partly Mexican voters’ fault: they do not punish those who abuse them. Americans do punish those who abuse them: such are not returned to office and may even be imprisoned. One final note: in the present environment, I’d never say to any public official, ‘I will hold youpersonally responsible.’ That could reasonably be construed as a personal threat. Rather, I’d say, ‘I’ll hold you politically responsible and will vote for another candidate, when comes the next election.’”

Thank you to Jay.

Folks. The telephone message to a Congressional Representative or Senator is a way to express your view. It is direct. I leave my name and address. I don’t expect return calls but sometimes get them. More importantly, the call has the strength of a message that shows that you are a constituent who is willing to make an effort, at least for the minute or two it takes to make the call.

Thank you.

U.S. House of Representatives
https://www.house.gov/representatives

U.S. Senate
https://www.senate.gov/senators/


 

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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Shutdown #3

We believe one of the Achilles heels of the Trump-Pelosi shutdown war is found in air travel. Growing waits at airports. More “blue flu” sick-outs. TSA workers unpaid. And much more.
Cumberland Advisors Market Commentary by David KotokThis is a festering and growing, artificially concocted crisis as our political leaders fiddle and our nation (like ancient Rome) burns.

Trump’s approval is plummeting as two-thirds of the nation’s voters blame him. That emboldens the Pelosi-Schumer side, who seek to sink him. Both sides are now guilty. Each side blames the other as being worse. Meanwhile the USA endures a growing list of bad outcomes.

Citizens have limited power, but the phone still works. Every House member and Senator has local and Washington offices, with phones. The call takes one minute. The message is simple: I hold you (Democrats or Republicans) personally responsible. Stop this ping-pong shutdown crap NOW!

U.S. House of Representatives
https://www.house.gov/representatives

U.S. Senate
https://www.senate.gov/senators/


 

We are reproducing in full below an aviation-related warning that comes from the Association of Flight Attendants-CWA, AFL-CIO.

Air Traffic Controllers, Pilots, Flight Attendants Detail Serious Safety Concerns Due to Shutdown

Washington, D.C. — On Day 33 of the government shutdown, National Air Traffic Controllers Association (NATCA) President Paul Rinaldi, Air Line Pilots Association (ALPA) President Joe DePete, and Association of Flight Attendants-CWA (AFA) President Sara Nelson released the following statement:

“We have a growing concern for the safety and security of our members, our airlines, and the traveling public due to the government shutdown. This is already the longest government shutdown in the history of the United States and there is no end in sight. In our risk averse industry, we cannot even calculate the level of risk currently at play, nor predict the point at which the entire system will break. It is unprecedented.

“Due to the shutdown, air traffic controllers, transportation security officers, safety inspectors, air marshals, federal law enforcement officers, FBI agents, and many other critical workers have been working without pay for over a month. Staffing in our air traffic control facilities is already at a 30-year low and controllers are only able to maintain the system’s efficiency and capacity by working overtime, including 10-hour days and 6-day workweeks at many of our nation’s busiest facilities. Due to the shutdown, the FAA has frozen hiring and shuttered its training academy, so there is no plan in effect to fill the FAA’s critical staffing need. Even if the FAA were hiring, it takes two to four years to become fully facility certified and achieve Certified Professional Controller (CPC) status. Almost 20% of CPCs are eligible to retire today. There are no options to keep these professionals at work without a paycheck when they can no longer afford to support their families. When they elect to retire, the National Airspace System (NAS) will be crippled.

“The situation is changing at a rapid pace. Major airports are already seeing security checkpoint closures, with many more potentially to follow. Safety inspectors and federal cyber security staff are not back on the job at pre-shutdown levels, and those not on furlough are working without pay. Last Saturday, TSA management announced that a growing number of officers cannot come to work due to the financial toll of the shutdown. In addition, we are not confident that system-wide analyses of safety reporting data, which is used to identify and implement corrective actions in order to reduce risks and prevent accidents is 100 percent operational due to reduced FAA resources.

“As union leaders, we find it unconscionable that aviation professionals are being asked to work without pay and in an air safety environment that is deteriorating by the day. To avoid disruption to our aviation system, we urge Congress and the White House to take all necessary steps to end this shutdown immediately.”

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

Original Press Release: https://www.afacwa.org/air_traffic_controllers_pilots_flight_attendants_detail_serious_safety_concerns_due_to_shutdown


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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Shutdown. Markets. #2.

We thank many readers for their responses to my January 22 commentary, “Shutdown and Markets” (https://www.cumber.com/shutdown-and-markets/).
Cumberland Advisors Market Commentary by David KotokResponses were varied, as expected. Some folks maintained their sense of humor. Others blamed one side or the other and criticized my final sentence, in which I suggested that both sides share a measure of the blame. So let me expand on that point and then offer some responses from our readers. The culprits of this shutdown are now seven to be named. Those names are Trump, Pence, McConnell, Pelosi, Hoyer, Schumer, and Durbin. One could add a lot more names and come up with a list of over 500. We elect them. We get what we vote for.

Below is what some folks think of the situation:

Raphael asked, “Who elected Anne Coulter President and Rush Limbaugh Secretary of State?” Trump has caved in [to] the wrong people, and they will sink him.

Richard G. wrote, “I was at the Winter Antiques show in NY this weekend. A lot of lookers but few buyers. The effect on the art and antique market is significant. Some of the auctions, such as Sotheby’s, [were] reasonably good this weekend. The mega rich are still buying, but the ‘somewhat’ rich are not feeling as rich! That’s the extent of my grass roots research.”

Mindy wrote, “Didn’t Trump win on the wall?” She meant in 2016 and clarified when I asked her. She also said, “Maybe the markets want the wall, and maybe they are tired of the Dem’s BS.”

Anonymous wrote, “Markets don’t care about the wall. 5.7 billion is a rounding error in a 20 trillion economy. The shutdown has already cost more, and the cost is increasing daily and accelerating exponentially and not arithmetically.”

Bob wrote, “Granted. But if a child gets behind the wheel of his dad’s car and runs you over, you are still dead. It is childish behavior, but it is starting to have an impact… There is weakness around us. The Fed has hiked rates and damaged the housing sector; the danger is that weakness gets to a critical mass, and then uncontrollable weakness cumulates. I think there is more real risk here. The markets sometimes brake too late or, like Thelma and Louise, keep their foot on the accelerator far too long.”

Here is a link to an article [“Shutdown’s economic impact is a forceful reminder of why government matters”] by two distinguished economists [Andrew J. Hoffman and Ellen Hughes-Cromwick of the University of Michigan]: (https://theconversation.com/shutdowns-economic-impact-is-a-forceful-reminder-of-why-government-matters-105940).

Yesterday at Morning Money, Ben White quotes Pantheon’s Ian Shepherdson regarding the shutdown’s impact on growth: “Our base case for true Q1 growth was 2.5%, but we expected a print of about 1.75% because of a persistent seasonal adjustment problem…. Adding in our guesstimate of the direct shutdown hit, reported growth looks more like 0.5-to-0.75%. Second-round effects could then bring that number to zero”

White notes, “Sentiment surveys are also declining. The University of Michigan consumer sentiment survey for January dropped from 98.3 to 90.7, the lowest level of Trump’s presidency. The Conference Board’s expectations index recently plunged from 112.3 to 99.1.” (https://www.politico.com/newsletters/morning-money/2019/01/22/shutdown-continues-to-drag-on-the-economy-487289).

Fred sent this: “Good points, but your bias was showing. You ignored what I think is the real problem, and McConnell. He, we, and Pelosi all know Trump is a world-class louse. Trump thinks keeping the gov closed will, eventually, force the Mueller probe to stop along with the third branch, the judiciary. He won’t let go because he is now caught in “dictators’ dilemma.” Mueller has him for “bribery” and “treason,” so worry over what “high crimes and misdemeanors” means is now over—when the gov. reopens the path to impeachment begins, and Trump’s entire team knows the process will end Trump as a national figure…. I suspect Pelosi mastered the art of decimating bullies by having overcome her five older brothers. She is clearly a master of that art—a capacity that is essential to ending the national scourge of our war-brat-baby president.”

Journalist Joe asked, “Question – do you have any reason to believe small businesses are more vulnerable to the shutdown? I’ve been hearing from SBA lender and borrowers who say they are stalled and very concerned where this is headed. Most businesses don’t have new loans let alone SBA loans in a given month, but maybe this is an important group of expansion-minded firms not getting capital, hiring or building acquisition funds they were counting on. Significant impact beyond what’s measured?” Our response was that we may see this in NFIB survey data in a couple of months. Remember US government data is shut down.

Glenn said, “Pelosi? Someone must stand up to Trump’s BS. He is dangerous. The wall is complete BS which will further feed the ignorance of the Republican base (Fox News-deluded goofballs). Dems are fed-up with a con-man felon in charge.”

Joel asked, “Just wondering… at what level would the unemployment rate concern you that the ‘slowdown’ would impact consumer sentiment and spending? I think with so many looking for or calling for a recession that it won’t happen in the traditional way.” We thought about this and recalled that TLR (formerly The Liscio Report, http://www.tlranalytics.com/) is a high frequency user of state-sourced data and that it is a particularly good reference when federal government data sources are compromised by the shutdown.

Frank asked, “How do we get Pelosi and Trump to stop thinking that each one has the other in a bathtub? Or over a barrel? Or up a tree? Is there a way both of them can agree that they can compromise without appearing to blink? David, I remember you said your dad had words for three levels of craziness. I never knew how to spell them, but the most chaotic level sounded, as I recall, like ungecacht. I recall the words of the Notre Dame boosters, to, I think, Rockne, or maybe it was Parseghian, “We’re with you, win or tie.” (It was before football decided there could be no ties.) Can the bases of both P and T be energized enough to adopt that as something their leaders can hear? Constantine locked all Christian philosophers in a room in Nicaea in 355, I have heard, and would not let them out until they agreed on what Christianity was and what it was not. Can we get his ghost to come and lock D and P in a room? Is there some way of locking them both in a room filled with the misery of 800,000 cries for common sense? Quo usque tandem abutere?”

Bob didn’t know my father, but he does know who Frank is and was copied on Frank’s email to me. Bob answered “ongepotchket: ungepatshkey, ongepotchkeyed, ongepatshky, overly elaborate, excessively decorated, slapped together senselessly. Consider: A shandeh un a charpeh: A shame and a disgrace. So much for a Yiddish lesson.” Thank you, Bob.

We end with a repeat of the famous Churchill Quote and our original final sentence. And we thank Steve Blumenthal for his kind words about our usage of the Churchill quote.

Regarding the shutdown and the behavior of our politicians, we recall Sir Winston Churchill’s take on the messiness of the democratic process. In 1947, in the House of Commons, he said, “Many forms of government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. 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….”  (https://winstonchurchill.org/resources/quotes/the-worst-form-of-government/). Pelosi and Trump are living testament to Churchill’s sagacity.




Shutdown and Markets

The stock market is ignoring the shutdown. The bond market is, too. So, too, are commodities, currencies, precious metals, fine art and other collectibles, sovereign debt, and many other asset classes. Those markets are moving for other reasons and not Federal shutdown.

Why?

Cumberland Advisors Market Commentary by David Kotok

Markets believe the shutdown is temporary. Market agents look at the childish behavior of our political leaders, roll their eyes in disdain, and move on. Markets are focused on the US-China trade war’s winding down, on earnings, and on economic issues.

If the shutdown ends quickly, markets will have ignored it. Pelosi yanks the auditorium and Trump yanks the airplane and market agents wish these folks would do better than playground politics, but market agents move right past the theater.

If the shutdown persists, all this changes as GDP growth slows, business decisions are deferred, credit problems appear, and 800,000 households run into daily living problems because their salaries are unpaid.

Right now we are still fully invested in our US ETF strategy. We expect the trade war with China to continue to de-escalate (or wind down) on the basis of the Buenos Aires truce.

Regarding the shutdown and the behavior of our politicians, we recall Sir Winston Churchill’s take on the messiness of the democratic process. In 1947, in the House of Commons, he said, “Many forms of government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. 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…” (https://winstonchurchill.org/resources/quotes/the-worst-form-of-government/). Pelosi and Trump are living testament to Churchill’s sagacity.