Hurricane Ian Notice

Due to the impending Hurricane Ian and its impact on the Sarasota area; Cumberland Advisors has mobilized and relocated our disaster recovery team to our Vineland, NJ office. If the storm does affect the Sarasota area, Cumberland Advisors’ staff members are on standby, and ready to provide you with any assistance you may need.  Our phone lines and emails will be monitored, and we will respond to matters on a priority basis.
For any urgent concerns you may also contact the following individuals by email directly:

For our clients residing in the Sarasota area, Cumberland Advisors knows nothing is more important than the safety of you and your family. We urge you to take the necessary steps to protect your loved ones. Check your supplies and make sure you have plenty of fresh water, flashlights, and a battery-operated radio. Cumberland values our customers’ security and peace of mind, and our goal is to provide outstanding service.
Thank you for entrusting us to continue to provide you service and may all stay safe.


Byron Callan’s Guest Commentary about Defense

David R. Kotok
Tue Jun 7, 2022

I would like to thank Byron Callan and Capital Alpha Partners ( for permission to share with our readers their incisive list of bullet points on what we might expect going forward for defense, given the path Vladimir Putin has charted for Russia.

“Defense Implications of Russia as a Pariah State. NL Spending Increases.”

May 30, 2022 | DEFENSE

  • So long as Putin, or someone who shares Putin’s beliefs and vision leads Russia, the country is likely to remain a pariah. This should shape defense in the 2020s and in turn, impact defense contractors, though impacts could be uneven.
  • Some presumptions: (1) Putin expected a short swift war against Ukraine. (2) The magnitude and unity of sanctions and export controls likely were a surprise. (3) Russia’s defense industries were not prepared for a long war.
  • We have not seen evidence that autarkic policies were implemented prior to 2022 to reduce Russian dependence on Western technology or critical industrial enablers such as machine tools. We have not seen reports of surges in the Russian production of military equipment. Overhead imagery and social media were good at reporting on the signs of a Russian military buildup around Ukraine in late 2021–early 2022. These same skills, as well as state intelligence agencies, should be capable of picking signs of increased military production. Signs would include imagery suggesting second/third shifts at industrial plants, railcar movements, and social media reports of new hiring by defense enterprises. We also have not seen any reports of conversion of commercial industries, such as automotive, to the production of military equipment.
  • Russia is devolving into a pariah state, though it can’t be binned in the same category as Iran or North Korea because of its (1) population, (2) land mass, (3) role as a commodity producer and (4) likely importance to China as a strategic counterweight to the U.S. This video titled “What it is like to live in a rogue state” by Redaktsiya, which was reported by the Washington Post, has 8.4 million views. It’s a Russian explaining what life is like in Iran, which prior to February 2022 was the most-sanctioned country in the world. The point is that life will be harder, but not impossible.
  • Russia’s defense spending may be a poor metric to assess its generation of military power. (1) Domestic inflation will chew into purchasing power. (2) Black-market purchases of microelectronics and machine tools will cost more than open-market ones. (3) Corruption has been a factor in Russia, and it’s not at all clear if Putin will tackle this.
  • Our core premise is that Russia’s military will evolve to look more like Iran’s and North Korea’s in the 2020s. Without militarization of society or the economy (which we define as 15%–20% or more of GDP for defense), we doubt that Russia will be able to develop and field new conventional military platforms at scale and [expect] that it will have a tough time replacing equipment it has lost in Ukraine. North Korea has not seen any significant modernization of its air and ground forces since the 1980s and has instead focused on rocket and nuclear programs. Iran has also focused on drone and rocket forces; and even after the expiration of a UN conventional arms embargo in Oct. 2020, it has not placed major orders from Russia or China for aircraft, armor, artillery, networks, or naval vessels. Iran has enough of an industry, however, to field its own drone/missile forces and provide support to the Hezbollah in Lebanon, its forces in Syria, and Houthis in Yemen. Russia won’t have the conventional combat units in numbers that could pose a conventional military invasion threat to Poland, Finland, or other states; and offensively taking on NATO in the 2020s poses a new calculus for Russia.
  • Pariah states tend to cooperate on defense matters. Germany and the Soviet Union are classic examples from the 1920s–30s. We expect Russia will cooperate more with Iran and North Korea in the future. An open issue is how sanctions and impoverishment of Russia will shape domestic beliefs and attitudes. Isolation from outside news sources and strict security measures could harden Russian attitudes towards the U.S. and Europe.
  • There are three themes to consider in the 2020s for defense and Russia. (1) If Russia places more emphasis on rocket/missile forces in the 2020s, this will increase demand for missile defense programs. Raytheon’s exposure has been diluted by the merger with UTC, but other beneficiaries could include Lockheed Martin and Kongsberg. We expect there will be upside pressure on the U.S. Patriot Force structure, which is now 14 battalions, plus another training one. (2) Ukrainian military modernization will be another theme, with the question of how to pay for it. (3) Russia will shrink as a factor in global defense markets. Russia has been a core supplier to Algeria, Vietnam, and India and has also made some sales in the Middle East (Egypt, Turkey, UAE). We are skeptical that U.S. and European contractors will replace Russia due to the cost and complexity of their products. The defense sectors of China, Turkey, and South Korea could instead benefit, but this will take years to play out.
  • De Telegraaf of the Netherlands on May 30 reported that Dutch increases of EUR 5 billion annually in defense spending will fund six additional F-35As, Reaper drones, and expansion of its Patriot air defense units, as well as on logistics and medical support. We are not yet seeing the expansion of European militaries—just accelerated modernization and the addition of stand-off weapons.

A Cumberland note: we remain overweight the aerospace-defense sector in our US Equity ETF accounts.  


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