White House debates economic stimulus plans

Excerpt from Politico

By BEN WHITE
09/12/2019

MORE FED BASHING — It’s old hat by now. But Trump went hard after the central bank again on Wednesday, calling Chair Jay Powell and his colleagues “Boneheads” for not cutting rates to zero or below. Interest rates, of course, are not the problem with the economy. And negative rates have not done much good elsewhere. They would also deplete the Fed’s recession-fighting toolkit for no good reason.

Cumberland’s David Kotok emails: “Zero and then negative interest rates have created a monstrosity in Europe. It worsens daily. Trump’s call for Americans to follow Europe into this quagmire would harm every saver, every insurance company, every bank in America. No wonder his approval is falling off a cliff. Trumpanomics of Fed bashing and trade war are an economic menace to the United States.”

Read the full story at POLITICO.com .


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Trump: ‘Boneheads’ at the Fed Should Drop Interest Rates to Zero, or Lower

Excerpt from The Fiscal Times

By Michael Rainey
09/11/2019

President Trump blasted the “boneheads” at the Federal Reserve Wednesday for failing to reduce interest rates to zero or below.

“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term,” Trump tweeted.

Trump framed the issue in part as a matter of competition with other advanced economies. “We have the great currency, power, and balance sheet … The USA should always be paying the the [SIC] lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads,” he wrote. But many economists say the negative interest rate policies in Europe and Japan are nothing to envy, and are likely harmful in the long run.

David Kotok of Cumberland Advisors said that “zero and then negative interest rates have created a monstrosity in Europe,” Politico reported, and Kotok warned that Trump’s desire “to follow Europe into this quagmire would harm every saver, every insurance company, every bank.” Along the same lines, Deutsche Bank CEO Christian Sewing said last month, “In the long run, negative rates ruin the financial system.”

Read the full story at The Fiscal Times & Yahoo News .


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Trashing Fed ‘Boneheads,’ Trump calls for central bank to cut interest rates to ‘ZERO’

Excerpt from Politico

By QUINT FORGEY
09/11/2019

President Donald Trump on Wednesday called on the Federal Reserve to slash U.S. interest rates “down to ZERO,” admonishing chairman Jerome Powell and other leaders of the U.S. central bank as “Boneheads.”

“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt,” Trump tweeted. “INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet.”

David Kotok, chief investment officer at Cumberland Advisors, said that “zero and then negative interest rates have created a monstrosity in Europe,” and warned Trump’s demand “to follow Europe into this quagmire would harm every saver, every insurance company, every bank” in the U.S.

“Trumpanomics of Fed bashing and trade war are an economic menace to the United States,” he added.

Read the full story at POLITICO.com .


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Cumberland Advisors Market Commentary – Does Trump-Navarro Equal Smoot-Hawley?

George Santayana said “Those who cannot remember the past are condemned to repeat it.”

Market Commentary - Cumberland Advisors - Global Trade

In an article titled “The Smoot-Hawley Tariff and the Great Depression,” authors Theodore Phalan, Deema Yazigi, and Thomas Rustici assess the role the Smoot-Hawley Tariff Act played in the Great Depression:

“In 1930, a large majority of economists believed the Smoot-Hawley Tariff Act would exacerbate the U.S. recession into a worldwide depression. On May 5 of that year, 1,028 members of the American Economic Association released a signed statement that vigorously opposed the act. The protest included five basic points. First, the tariff would raise the cost of living by ‘compelling the consumer to subsidize waste and inefficiency in [domestic] industry.’ Second, the farm sector would not be helped since ‘cotton, pork, lard, and wheat are export crops and sold in the world market’ and the price of farm equipment would rise. Third, ‘our export trade in general would suffer. Countries cannot buy from us unless they are permitted to sell to us.’ Fourth, the tariff would ‘inevitably provoke other countries to pay us back in kind against our goods.’ Finally, Americans with investments abroad would suffer since the tariff would make it ‘more difficult for their foreign debtors to pay them interest due them.’ Likewise, most of the empirical discussions of the downturn in world economic activity taking place in 1929–1933 put Smoot-Hawley at or near center stage.” (https://fee.org/articles/the-smoot-hawley-tariff-and-the-great-depression/)

In 2019, nearly every economist disagrees with the Navarro-advised Trump tariff policy. At our recent gathering in Maine we polled the group, which represented about $2 trillion in assets under management and thousands of households and many hundreds of thousands of beneficiaries of retirement plans and millions of investors and savers in the US. Asked about Navarro, 1 supported him, 36 opposed, and 3 weren’t sure. Asked about the Trump trade policy, about 3/4 of our group opposed it and saw it doing increasing damage to the US.

The late Allan Meltzer noted in A History of the Federal Reserve Volume 1: 1913-1951 that “Research suggesting a small effect [i.e., from tariffs] ignores the pronounced effect on farm exports, distress, bankruptcies, and bank failures in farm states” (p. 564, note 299). Readers are invited to check the rising bankruptcy statistics in farm states in 2019. The Trump-Navarro trade policy is responsible; the correlation between the Trump trade war and rising distress is very high.

How historic and vital are the fundamental economic lessons of the Smith-Hawley Tariff Act and its consequences? As Milton Friedman and Anna Jacobson Schwartz note in A Monetary History of the United States, 1860–1967, “To find anything in our history remotely comparable to the monetary contraction of 1929–1933, one must go back nearly a century to the contraction of 1839 to 1843” (p. 299, chapter 7). I recommend that readers who wish to take a deeper dive study all of Chapter 7.

Dear readers, this is a brief response to the events of Friday, August 23, 2019. I could easily add 100 citations.

Peter Navarro owns the advisory role and the argument in favor of the present US trade war policy. President Trump owns the decisions. Together they are digging a hole, and that hole is getting deeper. Market agents know it. Farm-state voters know it. Financial agents know it.

No matter what Navarro says and whom Trump blames, the truth is that the responsibility for the economic slowdown and the financial volatility lands squarely on the Oval Office desk and in the lap of the president and his advisors. He does not have the courage to admit an error. He avoids any self-blame. He constantly bashes the Fed since it (and Jay Powell) is a convenient and distracting target.

There is a fitting adage attributed to Will Rogers: “If you find yourself in a hole, stop digging.”

Mr. Navarro, Mr. Trump, read history. You are digging a deeper and deeper hole for the nation and the world. Stop digging.

David R. Kotok
Chairman of the Board & Chief Investment Officer
Email | Bio


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UBS Sees No Fed Rate Cut Until at Least 2021

UBS Sees No Fed Rate Cut Until at Least 2021

June 18, 2019

David Kotok, Cumberland Advisors Chairman and CIO, and Laura Kane, UBS head of Americas investing themes, discuss their outlook for the Fed. They appear on “Bloomberg Daybreak: Americas.”

David R. Kotok - Fed Rate Cut - Bloomberg

Watch at Bloomberg TV or in the embedded player below.




Trump revs up his Wayback Machine

Excerpt from…

Trump revs up his Wayback Machine

In a single week, the president leaned heavily into economic theories from as far back as the 18th century.

By BEN WHITE (bwhite@politico.com; @morningmoneyben)
06/20/2019 05:15 AM EDT

Cumberland-Advisors-Robert-Bob-Eisenbeis-In-The-News

Stanley Fischer, the former Fed vice chair, said at a forum Tuesday that slashing rates right now following pressure from Trump “would destroy the independence of the Fed,“ adding “it’s not something that should be done.”

Economists also note that monetary policy remains fairly loose and that one or two cuts is not likely to address damage from Trump’s trade policies.

“Realistically, a cut in rates is not going to counter the damage to farmers trying to sell their soybeans,” said Robert Eisenbeis, chief monetary economist at Cumberland Advisors and former research director at the Atlanta Fed. “A rate cut is pretty far removed from the damage the administration is doing with their tariff policy. If you are a farmer or a car maker trying to figure out what to do, it doesn’t help you.”

Trump also signaled this week that he may not wind up cutting a deal with China.

Read the full article at POLITICO.com .


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U.S. Trade Representative is grilled on Capitol Hill about China and Mexico

U.S. Trade Representative is grilled on Capitol Hill about China and Mexico

June 18, 2019

Yahoo Finance - David R. Kotok - U.S. Trade

President Trump’s top trade negotiator Robert Lighthizer was in the Congressional hot seat today facing tough questions from lawmakers on trade and tariffs. Rick Helfenbein, American Apparel and Footwear Association CEO, joins Yahoo Finance’s Julie Hyman and Adam Shapiro, Cornell Capital’s Ann Berry and Cumberland Advisors Chairman David Kotok to talk about the latest trade headlines.

“The tariff wars create winners and losers. You just hear from losers. They’re worried. With good reason. There are no tariffs on the healthcare sector. You can’t name them. It’s 18% of our GDP. In our portfolios, we’re overweight in the healthcare sector. Why? Do we want this tariff war? No. But as a portfolio manager and investment advisor, you have to pick and choose. And tariff wars by definition pick winners and losers and they have unintended consequences. And we’re just seeing the unintended consequences revealed now,” says David R. Kotok.

Watch at Yahoo Finance or in the embedded player below.




Analyst: I’m 50 years in this business. What do I buy, and do I base it on a tweet?

Analyst: I’m 50 years in this business. What do I buy, and do I base it on a tweet?

June 18, 2019

Yahoo Finance - David R. Kotok

Yahoo Finance’s Adam Shapiro and Julie Hyman sit down with David Kotok, Cumberland Advisors Chairman & Chief Investment Officer.

“I won’t take my money and lend it to the United States of America at 2% for 10 years and I won’t pay Austria money to hold money for me and charge me to do so for 100 years. How can I possible do that for a client? So if I won’t do that with my money I’m not going to do it for a client,” says David R. Kotok.

Watch at Yahoo Finance or in the embedded player below.




Trump’s two-front trade war triggers alarms

Excerpt from Politico

By BEN WHITE and ADAM BEHSUDI
05/31/2019 02:30 PM EDT

President Donald Trump’s decision to open a second front in his trade war sent tremors through global markets, unnerved corporate America and spurred economists to raise new warnings about the potential for a sharp economic slowdown just as the 2020 presidential contest heats up.

Trump’s surprise Thursday night threat to impose tariffs — beginning at 5 percent and potentially rising as high as 25 percent on Mexican exports to the United States — also threatened to raise consumer prices on everything from avocados to blue jeans to automobiles.

“This is a colossal blunder,” said David Kotok, chief investment officer at Cumberland Advisors. He said the advice of Peter Navarro, one of Trump’s top trade advisers who favors liberal use of tariffs, “is wrongheaded and sinking his president.”

Read the full story at POLITICO.com .


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Markets freak (a little)

Excerpt from Politico Morning Money

By BEN WHITE (bwhite@politico.com; @morningmoneyben) , AUBREE ELIZA WEAVER (aweaver@politico.com; @AubreeEWeaver)
05/08/2019 08:00 AM EDT

Markets freak (a little) — Wall Street finally gave a nod to the possibility that talks with China could fail and President Trump could follow through on his threat of full trade war. But it wasn’t much of a drop.

What happened — Cumberland’s David Kotok tells MM: “The trade war risk is now being confirmed. That is a healthy realization rather than a fantasy goldilocks scenario. It’s about time markets woke up to the reality that a trade war hurts everyone and that includes economic growth, earnings, profits and stock prices worldwide.”

Read the full Morning Money Newsletter at POLITICO.com .


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