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David R. Kotok
Sun Mar 17, 2024

I’m starting this commentary with an analysis of Putin’s recent state of the nation address (“Putin’s Six-Year Manifesto Sets Sights Beyond Ukraine,” Please take a few minutes. The source is the Carnegie Endowment for International Peace. The message is serious and sobering.
Here are two excerpts.

Putin’s address should have been a mere pre-election formality, but in the event, it created an extremely chilling impression of an unraveling spiral of escalation. Russia is gradually entering into an all-encompassing political and military mobilization. People are not being sent to the front en masse just yet (and indeed are unlikely to be in the near future), but the frontline context is beginning to permeate all aspects of civilian life, from the imposition of “traditional values” to the cultivation of “heroes of the special military operation” whom Putin is now trying to promote to the position of the “genuine elite.”
We’re in charge here,” Putin appears to be saying: both to the world, and to those resigned and helpless Russians who oppose the war. Amid the shocking death of the jailed opposition leader Alexei Navalny and the authorities’ cynical actions to obstruct his funeral, despair is growing everywhere: in Ukraine, in Russia among opponents of the regime and the war, and in the West among those who fear a Russian “victory.” This in itself is another element of escalation, since despair can give rise to terrible consequences.

Readers can follow these additional items that are indicative of Putin’s policies in action: 
1. What’s going on in Moldova, with pro-Russian fomenting of division and turmoil in the breakaway region of Transnistria. (See “WARNING: Transnistria May Organize a Referendum on Annexation to Russia to Support Russian Hybrid Operation Against Moldova,”
2. Internal repression in Belarus. Remember that Belarus is now a contiguous puppet state of Russia, but it also borders Poland and Ukraine. It was used by Putin to stage the invasion of Ukraine two years ago. (See “Belarus: EU prolongs restrictive measures for another year,” and “Belarus Sanctions,” US Dept. of State,
3. The Iran–Russia–North Korea military weaponry connection and how those weapons are being improved. (See “Arsenal of Autocracy: North Korea and Iran are arming Russia in Ukraine,” and “Exclusive: Iran sends Russia hundreds of ballistic missiles,”
Let’s add to that Iran’s proxy war in the Middle East conducted by the Houthis. The US, UK, and allies are now conducting daily military missions against Houthi targets. 12% of the world’s shipping is now redirected away from the region. Container shipping costs and marine insurance rates are multiples higher than they were before this regional war started. (See “Ending the Houthi Threat to Red Sea Shipping,” I recommend a full reading of this AEI commentary. Here’s an excerpt:

• The United States and its allies will have to put at risk something more valuable to the Houthis than what they gain from these attacks on shipping. The only thing that meets that threshold is Houthi control of Yemeni territory, which the Houthis have demonstrated they will make sacrifices to retain.
• Consequently, the United States should begin to arm, train, equip, and otherwise support the internationally recognized government of Yemen in its ongoing conflict with the Houthis to take back conquered lands from them. Doing so would not require US ground troops in Yemen, would likely be extremely popular with the vast majority of the population of Yemen and America’s regional allies, and would end further Houthi aggression in the Middle East.

And there’s more damage revealed about the Houthi–Iran–North Korea–Putin axis of harm. Here's an example of poisoning by 41000 tons of fertilizer from a sunk ship near Yemen. War effects can be global ( Here’s another example from a report on Houthi attacks on undersea cable communications: “Houthis knock out underwater cables linking Europe to Asia – report,” Here’s an inventory of Russians found dead, apparently at the hands of the Kremlin: “Russians Keep Turning Up Dead All Over the World,” And here’s a report showing how Russia recruits “cannon fodder”: “Russia Lures Migrant Workers Into Ukraine, Only to Put Many on the Front Line,”
As this is written, the US House of Representatives has a two-vote Republican majority, and Speaker Johnson can face a motion to vacate at any time. The announced surprise early departure of Colorado Congressman Buck further complicates things for the slim Republican majority. NO one wants to see a repeat of the political demise of Speaker Kevin McCarthy and its aftermath. This fear has empowered the extremists who threaten it. Thus, we witness a dysfunctional and dangerous situation in the House of Representatives. The federal budget is continuously in limbo, with CR after CR extending a week or two weeks at a time. Speaker Johnson promises no more continuing resolutions and then repeats and repeats the short-term fixes.
Every poll and every indication provide evidence that a full vote of the House would pass the Ukraine military assistance package and an unencumbered House majority would get the US federal government funded and operating on more than a hand-to-mouth, week-to-week basis. The reason such a vote doesn’t occur is that House Speaker Johnson hasn’t permitted a vote. Note that every time the House holds a full vote, about half (or more) the Republicans join most of the Democrats and pass the needed legislation. The second reason the House continues to fail is that there has been no fusion (The recent Tik-Tok vote in the House is a rare exception) between the Democrats and those Republicans who mutually agree to put American national policy ahead of selfish individual political agendas. And the third reason is that the presumptive Republican presidential nominee, former President Trump, appears able to use his control of the Republican Party to block anything he deems unhelpful to his electoral prospects. 
So, that’s where we are. The question is: Where are we going to go? 
One Republican who has deep respect from folks in the financial & economic community is Patrick McHenry. He is retiring this year. He is a conservative. He was the designated interim (temporary) speaker after McCarthy was ousted by his colleagues. He declined to replace McCarthy or run for the vacated speakership. And he presently chairs the very important House Financial Services Committee. McHenry is now unrestrained by partisanship politics after announcing his retirement from Congress. He has unleashed a scathing criticism of the failed leadership of his colleagues, including Speaker Johnson. Here’s a link to the full discussion: “McHenry’s ‘extreme candor’ on Johnson splits GOP,”
Here’s my take. There may be differing opinions within Cumberland. So, readers please consider this opinion to come from me alone. 
I believe that Putin’s behavior is a latter-day version of Hitler’s behavior in the 1930s. Putin may have learned from Stalin, but his playbook is more Hitlerian, in my opinion. I believe we are in the modern equivalent of the pre-WW2 historical period of 1937 or 1938. History is not repeating itself precisely but, as Mark Twain was reputed to say, it is “rhyming.” In the late 1930s the US was in the midst of political turmoil after coming out of the Great Depression. Today we are coming out of the Covid shock period and political turmoil is visible everywhere. Isolationism of the type we now see in some American political circles was strong in the 1930s, too. Any reader who is following the candidates and their pronouncements knows exactly who is courting isolationism and who is thinking and talking from a global perspective. For an example of isolationism, see Congresswoman Marjorie Taylor Greene. Evaluate her behavior and voting record for yourself ( For comparison, check out her opponent, retired Brigadier General Shawn Harris (
Here’s a reminder for those who may have forgotten their history. In February 1939, the American Nazi Party held a rally in Madison Square Garden (“American Nazism and Madison Square Garden,” That was six months before Hitler invaded Poland. 

National Socialist Rally, New York, 1939
National WWII Museum

The media of the day (radio, print) conducted their versions of the Tucker Carlson–Putin appeasement interview. UK Prime Minister Chamberlain tried to negotiate peace with Hitler (“The British Policy of Appeasement toward Hitler and Nazi Germany,” Britain was drawn into the war when Germany invaded Poland in September 1939 (“How Europe Went To War In 1939,” There was no NATO then. Britain had a treaty with Poland. It had to either fail to honor it or enter the fight against Hitler. Meanwhile, President Roosevelt had the isolationists trying to unseat him, and he faced a divided American political landscape confronting him. After Hitler invaded Poland and Britain and Germany were officially at war, the American Nazi Party went underground. From a high-profile public rally in February to a purposeful disappearance in November, crystallized by an event of war. But the country’s isolationist direction continued.
The seemingly inevitable descent into World War 2 started in the early 1930s. It spread and spread and spread. It took the attack on Pearl Harbor on December 7, 1941, to get America to wake up and unify. It took an unmistakable act of war to galvanize the United States into focusing single-mindedly on national defense, and it took that attack to persuade the political body of the United States to set aside divisive and hateful partisan politics and put the country first. 
Kotok’s view: IMHO, American politics reveal that we are incapable of unifying in advance of some a cataclysmic event, whether it is a Pearl Harbor or a 9/11. We have plenty of warnings. But our politicians, purposefully or inadvertently, ignore them so they can go on advancing their personal political agendas. That is the case today. In my opinion, we currently have very little national will to unify. 
While many in the country desire unity, it seems that they don’t want it badly enough. We are led by two political parties, fighting tooth and nail, and they are failing the country. Polls repeatedly show that Biden and Trump are not popular choices (“The Big Change Between the 2020 and 2024 Races: Biden Is Unpopular,” That column was written before Biden’s State of the Union (SOTU) speech and before the now infamous Republican response from Senator Katie Britt (“Katie Britt defends human trafficking story in State of the Union response amid backlash,” The first polling after the SOTU showed little has changed.
We shall see if the polling opinions will evolve as the long general election campaign commences in earnest this year.
In a dramatic column worthy of a read, Bloomberg polling and analysis showed that Biden is “too old” and Trump is “too dangerous”: “Biden Is Too Old But Trump Is Dangerous, Swing-State Poll Shows,” I urge readers to read this one twice. 
I personally worry about the “too old” choice, and I find the “too dangerous” choice worrisome, too. Age doesn’t mean the policy changes; dangerous means that it might. It appears that two additional perspectives are now inserted into the election process. They are the No Labels ticket and the Robert F. Kennedy, Jr. initiative. The financial markets have difficulty pricing electoral outcome probabilities, which is why they haven’t done so. 
But many that I talk with say that this time they won’t stay home. The MAGA Trumpers and the Never Trumpers have made up their minds. But it sure looks like there are many others who don’t know how they will vote but are feeling compelled to vote and not stay home. They and I see the world as a very uncertain and threatening place and getting worse. That may lead to some voter rebellion and therefore changes in the fortunes of Senators and Congresswomen and -men who are failing America because they don’t have the courage to do the right thing. They are puppets of their party’s leadership system, which is clearly broken. IMHO, incumbents who feel “safe” may be in for a rude awakening. I personally hope so since I abhor rigid allegiance to either or any political party. Note how extreme members like democrat AOC or republican Boebert are each challenged this time around from within their own party.
I fully concur with my friend Michael Drury, McVean Trading Chief Economist, who summed up the outlook like this (I thank Michael for permission to quote him):

One key reason for our uncertainty about the outlook for 2025 is the US Presidential and Congressional elections. With Super Tuesday now behind us, the Presidential candidates are obvious – and even speculation about Democratic substitutes can cease as the ticket has enough delegates to get the nomination. What is not clear is who will win, and which party will control the two chambers of Congress. Anyone who suggests they definitively know is lying. That means CEOs must prepare for two very divergent paths in 2025. By design, much of the government’s relatively recently adopted tax policy and spending initiatives will be sunset in 2025. Both parties passed laws that depended on expiration to keep their costs within budget requirements – both sides expecting to win in 2025 and keep their priorities while cancelling the losers. Given the bitter partisanship evident in Washington, one should not doubt that given the opportunity – like by controlling both chambers and the White House – that would happen. Regardless of which side wins. Keep in mind that since Clinton, every President had control of both chambers sometime in their first term – but not in their second.
Even a President without control of Congress can have great influence through dominance of international policy – including tariffs, sanctions, treaties, and their powers as Commander and Chief. The US is already involved in two wars in two different regions – and very concerned about a third in another. Any business involved in any of those three regions, which is to say almost any multinational, must be concerned about rapid and significant changes in policy that may strand assets, as happened in Russia. They also must consider collateral damage from new rules that alter their access to customers, funding, supply chains, etc. Will current policies be continued? Or virtually reversed? On defense outlays, green policies, other industrial policies, immigration? Will the current anti-trust push be sustained or abandoned? Firms face a plethora of potential outcomes. Can they, or will they, hope for the best, but prepare for the worst?
In our own efforts to divine the path of politics in 2025, we hark back to the snake of the electoral college. Only a handful of states will matter in the Presidential contest – most critically, Michigan, Pennsylvania, Wisconsin, Georgia, and Arizona. All were won by Trump over Clinton, and all by Biden over Trump. The easiest way to determine which way a particular area will vote is to look at population density. The more urban, the more Democrat; the more rural, the more Republican. Clinton lost Wisconsin, Michigan, and Pennsylvania because these former reliable Blue Wall states had declining urban cores. Biden reclaimed them narrowly – but added Arizona and Georgia, where the urban mix was rising. Which way will they go in 2024? And what are their new targets? Nevada, North Carolina, Florida?
We note that the urban density is now subject to huge uncertainty because the Covid-induced shift to work from home has significantly altered a huge populations relationship with their urban centers. Suburbs were always the swing factor within swing states. They generally house a disproportionate share of more educated, and often independent, voters. They are harder to court, often focusing on one issue (or divergent issues) rather than one party. In an environment where the front runner for both parties is sporting low approval ratings – will they turn out to vote at all? Republicans could hit 270 with just the two largest – Pennsylvania and Georgia. Democrats would fail with just the three smallest – Michigan, Wisconsin, and Arizona. Wild cards in Florida, North Carolina or Nevada would make it a mess.
Bottom line is, we don’t know – and we think anyone being honest would admit that they might hope or want but they don’t know. The Street wanted seven eases back in October – but in the end they didn’t need it, and now more and more don’t care. That is not likely to be true of the Presidential and Congressional outcome. Indeed, a Trump victory might mean as much for the FOMC as it has meant for the Supreme Court. A flip in both the House and the Senate – which many political prognosticators see as a credible option – may keep government divided, but it will provide Trump with a far easier path to advice and consent on appointments. Especially with McConnell out of the way. Nor does a Biden victory assuage all uncertainty, as his age, health, and successor will all remain issues if he wins. Like Socrates, regarding 2025, what we know is that we don’t know – and will act accordingly in trying to predict with a foggy crystal ball.
(McVean Weekly Economic Update, March 9, 2024 – subscribers only)

We remain overweighted in the defense sector in the US Equity ETF portfolio. I believe that circumstances will evolve and the defense budget gap of $100 billion in needed funding versus the presently failing week-to-week CR funding, will end. It will end in a political compromise that puts the nation’s security first. Or it will end because of an external, geopolitical or an internal, terrorist event that galvanizes America’s national will. 
But, IMHO, the political deadlock will end because it must end. If not, America will have been defeated, not by Putin and his partners but by our own American miscreant politicians. 
George Santayana’s poetry guides me: “Those who cannot remember the past are condemned to repeat it.” (“What did George Santayana say about the past?”
PS. Here's a research source on the Russian-Ukrainian war. I believe that the tenacity of Ukraine defending itself against Russia and Putin is well demonstrated by the report herein: “Russian Offensive Campaign Assessment, March 9, 2024,”


David R. Kotok
Chief Investment Officer
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