Cumberland Advisors Market Commentary – “Send them back!”

Author: David R. Kotok, Post Date: July 24, 2019
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Named for the last Hawaiian king (see https://en.wikipedia.org/wiki/Kal%C4%81kaua), Kalakaua Avenue is Waikiki’s answer to Worth Avenue or Rodeo Drive. When you turn the corner out of the Royal Hawaiian Center into the throngs walking on Kalakaua Ave., Planet Earth’s multicultural diversity lies before your eyes.

David R. Kotok

Hawaii is America’s newest and 50th state (see https://en.wikipedia.org/wiki/Hawaii_Admission_Act). It is a true American melting pot and a testament to why the outrageous chant “send them back” is an affront to everything our great nation stands for. One need only land at the airport in Honolulu and find, in the terminal, the story of a patriotic American named Dan Inouye (see https://en.wikipedia.org/wiki/Daniel_Inouye) to realize how gross an insult the president has injected into our national political life.

Our visit to furthermost western edge of the US is only a few weeks away from the trip to Maine and the region that contains the easternmost place in the US, West Quoddy Head. That landmark is six time zones from Pearl Harbor and is located about an hour’s drive from Leen’s Lodge. In that neck of the woods, too, the chant “send them back” is just as offensive.

Our encounters throughout the country in the last month took me to a dozen states where we met hundreds of citizens, young and old, of all political persuasions. Nowhere did we find “send them back” getting any support.

Many of my Republican friends simply say “I don’t agree.” They are privately distraught by this president’s behavior. Many Democrat friends say “racist” or “bigot.” They are also distraught. More than half of those I meet are simply fed up with the political divide and ugliness in our country. Many now ignore it. They tune it out. They’ve had enough of the Twitter wars.

Most financial and economics friends and colleagues are the same. We’re inundated by political trash. Added to it is Trump’s unrelenting attack on the central bank and specifically Chairman Powell. Presidents and Fed chairs rarely get along and have differed on many occasions, but Trump’s personal attack on Powell is without precedent.

Meanwhile markets ignore the political salvoes for the moment. They also ignore the shortages of labor to fill jobs. And they ignore questions in the credit sectors like commercial real estate vacancies or CLO risk or aircraft leasing.

From west to east we see signs of pressures building; we watch earnings carefully; and we worry about the deteriorating political landscape and its ugliness.

How this all tears at the national political fabric remains to be seen. But in our view the chant “send them back” resembles history from the 1930s, and it rekindles memories that run deep.

I expect the low-vol financial markets, which are intent on ignoring political forces, to get a wake-up call that may be unpleasant. “Send them back” doesn’t fly on Main Street. It won’t fly on Wall Street, either.

The great poem by Emma Lazarus inscribed on the Statue of Liberty doesn’t say “send them back.” From Hawaii to Maine, there is no broad support for slogans like that. At least that’s how it looks to this traveler.

The New Colossus

By Emma Lazarus

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep, ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”

(Source: https://www.poetryfoundation.org/poems/46550/the-new-colossus . And here is a video reading of the poem: https://www.youtube.com/watch?v=N0B9CitsfU0 .)

And finally, here is a piece from the Brookings Institution that makes the case that, as its title says, “Racism is not a distraction; It’s policy” (https://www.brookings.edu/blog/the-avenue/2019/07/19/racism-is-not-a-distraction-its-policy/) . The author reminds us that “Racism should never be diminished as a distraction – history shows well that the strategic deployment of bigotry is a default practice used to undercut democracy.”

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