Cumberland Advisors Market Commentary –  Readers Response to WW2 Metaphor

Author: David R. Kotok, Post Date: May 10, 2020

This Sunday morning we wish to thank readers for their many emails over the last few months. We particularly welcome the historical references and comments about our WW2 analogy for WWC, the world’s battle against COVID-19. Here are some to consider. Then we have a YouTube video for you at the end. Thank you to Lisa for sending it.
Cumberland Advisors Market Commentary - Readers Response to WW2 Metaphor

Many readers asked about the WW2 experience with interest rates and the Fed’s wartime policy. That was triggered by our piece “Fed Goes to War” ( And here’s a link to a paper about how the Fed managed the yield curve during the 1940s:

Gary sent a thoughtful note. In response to the issue of preparedness he wrote:

“It is worth remembering that we have gone into every war unprepared. It was becoming obvious we would be at war by 1938. The war started in 1939. After repeated pleas from our allies to enter the war, we held back until 1941 when we were attacked. Then it was 1944 before we were ready for the D-Day invasion. In retrospect it might seem we mobilized overnight, but it was 6 years. The problems of being unprepared for the pandemic can be attributed, in part, to shifting of our manufacturing base to China. It appears to me the President was the first to identify our manufacturing problems and takes steps to change our dependence on China. I think our current leadership has acted quickly and decisively given the circumstances of the pandemic. However, I’m sure historians will need several years to accurately evaluate the steps taken during this current crisis. We are too close to be objective.”

Domingo sent the news release from the Pentagon. Here’s an excerpt: “The Pentagon said Saturday it is using its authority under the Defense Production Act to boost the supply of N95 masks, which are essential for protecting healthcare professionals from the coronavirus and are in short supply in many places.”

Harry wrote:

“This writing is not to defend the Trump administration, rather to depict the condition of US mfg. that contributed to the WWC delay.

“1. We started maybe a month late. The delay for WWII was arguably worse, I believe.

“2. Before WWII, our economy was relatively self-sufficient, in fact it had excess capacity due to the depression. In contrast, our mfg. economy has now been hollowed out such that there are broad product categories we do not produce or barely produce. It is hard to get exact #s, but in 2019 we were, approximately, making 5 or 10% of the gloves, masks, gowns, antibiotics, etc. that we consumed. Then daily demand spiked maybe 10X. To respond in a few months with an increase of 100X is not feasible, especially when we do not make many of the raw materials going into the products or the machines that make the products and raw materials. All of this happened just when our largest source of those materials, China, was shut down for New Years and then for the virus and was keeping the materials for its own use. We were not similarly dependent on Germany [before WWII].

“3. Very few US workers have any mfg. skills to apply to the challenge.

“4. WWII was a visible, existential event. Win or be conquered by Germany. For the first months the virus threat was only large based on statistical models that had huge ranges of uncertainty.

“5. If you want a clearer picture, instead of generalizing, I suggest graphing the monthly production rate on key products during WWII and WWC. I suspect the ramp-up is sharper in WWC. Of course, airplanes are more complex than masks. I would love to see the results.”

Joseph wrote:

“I understand the parallel to WWII, and as it was our shining moment it’s easy to make the comparison. Yet there are some differences. The US was already producing arms under the lend-lease program before we entered the war. The country was still in a depression and gearing up to manufacture arms was a profitable way for US business to employ capacity. The war was on for years before the US entered, and it took Pearl Harbor to do so. A time-honored way to galvanize a nation is to fight the “bad guys.” A war galvanizes people to community and to work together, while a pandemic reduces community and isolates. People have been fighting wars forever; pandemics we have only generally survived as a species and never in the globally interdependent state we are in now. As Churchill said, ‘America will always do the right thing after exhausting all other remedies.’ I can only hope that our current challenge can spur humanity into a new level of global cooperation, technological advancement for good, and the rethinking of social and economic systems that promote social justice and sustainability.”

Kotok personal note: I had correspondence with the director of the Churchill Archives in London. He advised that the statement is not correctly attributed to Sir Winston, even though there is widespread internet attribution.

I will end readers’ responses with this one from Tom:

“We also had sacrifice by and determination from the American people. I am only 53, but as a history major I studied and understand the WWII era. My fiancée, aged 58, had no idea of the sacrifice, the rationing, material drives, the ban on unnecessary travel, etc. that the American people dealt with, with determination, during that period. Now people are whining, even protesting, that they have to wear a mask and can’t go to their favorite, cafe, beach or pub. Well, boo-hoo.

“Yes, I feel badly for those who cannot work. I feel badly for the small businesses that cannot open. However, spreading the infection around the population is economic suicide, more so than trying to prevent the spread. Now we have people threatening violence in Stillwater, Oklahoma, against city officials trying to enforce mask requirements. Are people that self-centered and ignorant? I guess they are. I guess the “me generation” attitude has taken hold in this country. We are the forward thinkers. One would think that activists who wish to save the planet by lowering emissions, creating renewable energy sources, and cleaning the environment would be leading the charge for distancing, masks, and other commonsense safety measures. They have been noticeably silent.

“I fear not a second wave of infection, but a continuous wave. The national infection rate continues to rise. This is not over. Thus far, reports from states that have opened have been underwhelming, in terms of economic activity. If infections continue to rise, the economy will remain effectively closed as most people stay away in droves. My financial industry firm has informed us that we are working from home until further notice. There is serious discussion that some degree of working from home could become permanent, perhaps with alternating days in the office to thwart this and future pandemics.

“Crises breeds change, change in what we do and change in how we do it. Those who believe we can revert to the old normal are pushing on a rope.”

We thank ALL readers for their thoughtful and diverse opinions.

Let’s end this Sunday morning with a YouTube video, “The Great Realisation,” from poet Tomos Roberts, aka Tom Foolery:

cumber map
Cumberland Advisors® is registered with the SEC under the Investment Advisers Act of 1940. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. Such an offer can only be made in the states where Cumberland Advisors is either registered or is a Notice Filer or where an exemption from such registration or filing is available. New accounts will not be accepted unless and until all local regulations have been satisfied. This presentation does not purport to be a complete description of our performance or investment services. Please feel free to forward our commentaries (with proper attribution) to others who may be interested. It is not our intention to state or imply in any manner that past results and profitability is an indication of future performance. All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed.