Memorial Day Reflections

“[On Saturday, May 25,] more than 980 cadets became army second lieutenants at West Point’s football stadium. America’s Vice-President, Mike Pence, told them President Trump has proposed a $750bn defense budget for 2020 and said the US ‘is once again embracing our role as the leader of the free world.’

“ ‘It is a virtual certainty that you will fight on a battlefield for America at some point in your life,’ Pence said. ‘You will lead soldiers in combat. It will happen. Some of you may even be called upon to serve in this hemisphere.’

“The class was the most diverse in West Point’s history, and Pence said he wanted to acknowledge ‘the historic milestones that we’re marking today.’ The 2019 cadets included 34 black women and 223 women, both all-time highs since the first female cadets graduated in 1980. The academy graduated its 5,000th woman on Saturday.

“The 110 African Americans who graduated were double the number from 2013. Pence said graduates also included the academy’s 1,000th Jewish cadet.

“Pence did not serve in the military but noted that his late father served in the Korean War.”

(Source: The Guardian, May 26, 2019: https://www.theguardian.com/us-news/2019/may/25/mike-pence-us-military-academy-west-point)

Arlington National Cemetery - Official White House Photo by Tia Dufour

Memorial Day weekend, 2019. Some go to the beach or hike in the mountains or picnic in the park. Others decorate the graves of veterans who served honorably to defend the United States. Others march in parades. Many just hang out. A few still wear poppies.

Ponder the news flow and look around the globe. On every continent but Antarctica we see strife and civil unrest. In many areas we see actual combat. In many more places we see preparations for combat. And belligerency seems to have replaced diplomacy. “Speak softly and carry a big stick” (Teddy Roosevelt, January 26, 1900) has been replaced with “Tweet loudly (using CAPS for emphasis) and be inconsistent and ambiguous.”

The spreading use of Twitter as a political messaging medium has been intensified by President Trump. Indeed, he has managed to make its use ubiquitous. Twitter is now a tool of psychological warfare. Ambiguity and confusion are Trump’s go-to tactics in this modern method of rhetorical warfare.

Technology has always been key to the waging of war, and so it shouldn’t be surprising that these days the battle front has shifted into the realm of digital devices and network security. The effort by several Western nations, including the US, to exclude the Chinese firm Huawei from the build-out of the 5G broadband network is a prominent example of that battle. Here’s an instance of an apparent transgression by Huawei against an American firm: “Huawei is a ‘national security threat’ that tried to steal my tech: Akhan Semiconductor CEO,” https://finance.yahoo.com/news/huawei-akhan-semiconductor-202413843.html . Thank you to Bob Bunting for the link.

Instruments that were originally designed for good work in the biological, communications, and electromagnetic spheres are now the underpinnings of war. All can kill. They necessitate very sophisticated defenses, and change is rapid. 5G is about speed. America’s West Point graduates are taught this lesson.

Another form of warfare is rapidly expanding in the realm of trade, with sanctions, tariffs, and other restrictions meted out as punishments in various economic forms. Money itself is an instrument of war. Since earliest times, money has played that role. Almost 2500 years ago, Athens hired mercenaries to fight against Sparta. Today, Maduro sells his national Venezuelan gold hoard in order to raise the cash to buy the continued loyalty of his key military folks. They will turn on him when the money runs out, just as the Thracians turned on Athens when they weren’t paid what was promised. In some ways, nothing has changed in 2500 years.

In America this Memorial Day we find a deeply divided body politic. The antagonists are diverse and numerous, and the rhetoric is harsh. The protagonists pledge allegiance to their rigid views above all and lack civility. Centrists have no place to hide from the storm, no source of comfort to ease their worry, no leadership backed by a moderate social-historical gestalt to guide them. America seems to be increasingly embroiled in a modernist form of civil war.

So what are we fighting for?

My friend Michael Drury has reminded me that the Second Amendment to the US Constitution is number two for a reason. He argues that the numbering sequence in the Bill of Rights is quite intentional. In the American Revolutionary War, the British were headed for the armory in Concord to seize the guns kept there by the nationalist militia.

But what were the guns protecting?

It is the words of the First Amendment that set our nation on its democratic path. Those 45 words protect us. Religion, speech, press, assembly, and the right to petition are the five First Amendment freedoms. They are what the guns defend.

Our West Point graduates, the most diverse group of graduates in our nation’s history, are taught that lesson, too.

Jon Meacham concludes his marvelous book, The Soul of America: The Battle for Our Better Angels (https://www.penguinrandomhouse.com/books/554220/the-soul-of-america-by-jon-meacham/9780399589829/), with this story:

“To the veterans returning to Ohio after the battle, Lincoln made brief remarks as they prepared to go west. No one knew when the war would end; no one knew if Lincoln, who was facing reelection in November, would be president in a matter of months. He spoke not with the poetry of Gettysburg, but his words on that August day said much about why the salvation of the Union would repay any price in blood and toil and treasure. The tall, tired president, his face heavily lined, his burdens unimaginable, was straightforward.

“ ‘It is,’ he said, ‘in order that each one of you may have, through this free government which we have enjoyed, an open field, and a fair chance for your industry, enterprise, and intelligence; that you may all have equal privileges in the race of life with all its desirable human aspiration – it is for this that the struggle should be maintained, that we may not lose our birthrights – not only for one, but for two or three years, if necessary.’ And finally: ‘The nation is worth fighting for, to secure such an inestimable jewel.’ ”

Meacham concludes his book with this:

“For all of our darker impulses, for all of our shortcomings, and for all of the dreams denied and deferred, the experiment begun so long ago, carried out so imperfectly, is worth the fight. There is, in fact, no struggle more important, and none nobler, than the one we wage in the service of those better angels who, however besieged, are always ready for battle.”

I’m in Colorado. My Tuesday night speech will be hosted by a West Point graduate. Like those in this year’s class, he is dedicated to patriotism and service to our nation. I thank him for hosting me.

We hope your Memorial Day was safe and pleasant and that it honored those who serve(d) all of us in our great country.

My personal best wishes to Steve, who was a first lieutenant when I was a second lieutenant and who was my senior officer sponsor. And to Skip and all in his family, as I’m thinking of you and them and your experience on one side of the world when I was on its other side.

And I reflect today about my father, who served in the South Pacific; and my first cousin, who served in Korea; and my uncle, who served in Europe; and many others in my family and among friends. We remember you all on Memorial Day.

To all of our readers: please be safe.

David R. Kotok, captain, US Army, 1966–1969
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A Trifecta of Hate

The recent trifecta of hate crimes casts a pall. It just feels so heavy. Somber reflection adds to the weight.

Cumberland Advisors Market Commentary by David Kotok

Conversations at meals and in meetings are muted. Sure, we talk about it. Sure, we mourn. And sure, we are lost for answers about these three heinous lone wolves. Sure, we worry about the next one and the one after that.

The political debate over fault-finding is rancorous and tiresome. I’m sick of hearing Fox blame the left. When Chris Farrell is interviewed by Lou Dobbs and attributes the source of funding for the Honduran march to George Soros and uses all the codes words for hatred and anti-Semitism, I’m disheartened. (See https://twitter.com/joshtpm/status/1056324117329297409?s=11.) To Fox’s credit, they subsequently pulled the interview and pledged not to use the interviewee again. (See https://www.newsmax.com/newsfront/lou-dobbs-cancels-show-george-soros/2018/10/28/id/888320/.)

I’m equally tired of CNN’s behavior, where, for example, in interviews of people who survived the Pittsburgh synagogue shooting, they ask baited questions such as, “Do you think President Trump said the right thing? Or said enough?” The anti Trump bias is the mirror image of the Fox pro Trump bias.  CNN feeds its constituency just as Fox feeds its constituency. The weight gets heavier. More somber reflection.

And here we go again about guns. Armed guards? No guards? Second Amendment? Legal purchase? Illegal purchase? No one seems to offer a rational and thoughtful way to reduce or eliminate or thwart the murderous lone wolves – unless the constitutionally protected freedoms that are currently threatened are removed. Do we really want to do that? I certainly don’t.

At the end of the day there is a pervasive sense that nothing will change. Perhaps that is the worst part of the aftermath of hate crimes as successive horrors give way to bleak reflection. No one I talk with expects anything to change.

Few expect politics to change for the better, either. Many believe bipartisanship is dead. I worry they may be correct. I worry that instead of seeking “a more perfect union,” we are on a trajectory of competitive dominance aimed at achieving destructive divisiveness.

Both political parties are responsible. The two-party system seems to be failing. But how do we change it when the insiders of those two parties are the powerful minority?

More Somber reflection. Our political situation is going to get worse.

Here is an example of a hopelessly partisan tweet by a leading Republican:

“We cannot allow Soros, Steyer, and Bloomberg to BUY this election! Get out and vote Republican November 6th. #MAGA” – House Majority Leader Kevin McCarthy, Oct. 27, Twitter

McCarthy later deleted that tweet, but not before an active progressive Democrat jumped on him and accused “the Kochs, the Mercers, and Adelson” of buying the election from the other political wing. See https://twitter.com/feysperson/status/1056378207065108480?s=11.

Implied in this comparison is how difficult bipartisan outcomes are to obtain. The writers of these tweets are using them to rouse political constituencies in adversarial ways only. The current system has no incentives for these folks to behave in any conciliatory manner.

Consider this deeper history, too.

It was a Democrat Senate leader, Harry Reid, who undermined the 60-vote rule in 2013 as his departing attack on the Republicans. (See https://en.wikipedia.org/wiki/Nuclear_option.) What went around came back around. In 2017 the Senate Republicans, led by Mitch McConnell, turned the tables by extending the “nuclear option” to the consideration of Supreme Court nominees.

The next chapter is about to unfold, and I fear it will make no difference which party gets the majority in the House of Representatives. We will quote the POLITICO Playbook for Oct. 28. (See https://www.politico.com/newsletters/playbook/2018/10/28/a-week-of-violence-anti-semitism-and-domestic-terrorism-334882 for the complete Playbook issue.)

“THE INVESTIGATIONS – ANTHONY ADRAGNA – The powerful weapon House Republicans handed Democrats: Democrats eager to investigate the Trump administration if they seize the House would have the GOP to thank for one of their most potent tools – a sweeping subpoena authority that Democratic lawmakers denounced as an abusive power grab three years ago.

“House Republicans changed the rules in 2015 to allow many of their committee chairmen to issue subpoenas without consulting the minority party, overriding Democrats’ objections that likened the tactic to something out of the McCarthy era.

“Now the weapon that the GOP wielded dozens of times against Barack Obama’s agencies could allow Democrats to bombard President Donald Trump’s most controversial appointees with demands for information. And many Democrats are itching to use it.” (For the complete POLITICO story on the subpoena rule change, see https://www.politico.com/story/2018/10/28/house-republicans-subpoena-trump-943265.)

We’ll stop. Heaviness and somber reflection from the trifecta of hate have brought fatigue. This last week was tough.

Readers may obtain the market outlook and our market comments and strategies from the Cumberland Saturday morning weekly summary. See http://www.cumber.com/cumberland-advisors-week-in-review-oct-22-2018-oct-26-2018/.

David R. Kotok
Chairman and Chief Investment Officer
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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.