Cumberland Advisors Market Commentary – Electoral College Timeline

Market Commentary - Cumberland Advisors - Electoral College Timeline
Here’s the link to the Congressional Research Service report on the Electoral College timeline. Hat tip Politico.
https://crsreports.congress.gov/product/pdf/IF/IF11641
David R. Kotok
Chairman of the Board & Chief Investment Officer
Email | Bio

Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Cumberland Advisors Market Commentary – Election Day: A Few Case Studies

Commentary - Cumberland Advisors - Election Day- A Few Case Studies
Jack replied to our comments about voting systems and their integrity. Here’s most of his note, to think about on this Election Day:

Hi David,

I am in Savannah until Covid is over. Permanent residence Atlanta. Set up absentee ballots earlier in the year to come to Atlanta. Reaffirmed for general election in July–August period.

Georgia outsourced under our Trump-clone governor the mailing of ballots for this election. So, while each Georgia county handles the “intaking” of such requests, all those requests are then forwarded to a firm in Arizona for processing and mailing. The Georgia counties have no computer interface with the AZ firm to address problems. This can only be done by the Sec. of State’s office. And the counties have no interface there, either. If you have problems, the only way you can contact the Sec. of State’s office is to submit an online complaint. There is no category for not receiving your ballot.

So, our online ballot tracker showed that my absentee ballot, which I had requested be sent to my Savannah address was “sent” on September 24. That date doesn’t mean it was actually deposited in the US Mail, only that it has been processed and moved to the next step, mailing. My ballot had not come by the first week in October. I spent hours on the phone only to learn that the ballot had been sent to my registration address, not the address to which I clearly asked that it be sent. I was told by the Fulton County elections staff that this AZ firm had been “defaulting” to the registration address, not the requested delivery address.

So, I requested a replacement ballot. I spent nearly 40 min on the phone with the county elections rep as she kept trying to replace the ballot on the computer and the computer kept kicking the request back out. Finally, she got it to go through. Date “sent” according to ballot tracker was Oct. 5.

By the beginning of the week starting Oct. 19, when no ballot was received in Savannah, I started getting worried. I was on the phone or in contact by email just about, if not, every day trying to find out what happened to my ballot. Calls made, complaints filed, press contacted – no help. No one knew the date the ballot was actually put in the mail.

So, last Friday, Oct. 23, the county elections rep I had been working with (using my county commissioner’s name as leverage) told me she would send another ballot. This would be the third. She said it was actually mailed from Atlanta on Saturday, Oct. 24. (Sec. of State’s Office had received so many complaints about problems with AZ firm that mid-October or so they switched to issuing the ballots directly from the county or at least they did in the case of Fulton County. And that would apply to replacement ballots.)

Thursday, October 29, mail came and no ballot was received. Normally (pre-Dejoy) that would be plenty of time for mail to arrive from Atlanta to Savannah. (However, of note, several years ago in the interest of efficiency, all Savannah mail had to be routed through Jacksonville, both going and receiving. We were told all the mail processing equipment was pulled out of Jacksonville in June, and our mail, outgoing and incoming, really went to pot.)

Anyhow, early evening I frantically sent an email to my Fulton County contact with cc to my county commissioner telling her that no ballot was received and that I was running out of time to even return a received ballot in timely fashion. I offered to have her Fed Ex a ballot to me on my Fed Ex account. She agreed to do this. So, Thursday evening, I emailed her a pre-paid Fed Ex label and she then sent the ballot Fed-Ex Friday morning for Saturday delivery, all of course on my nickel. Fortunately, the Fed Ex’d ballot came Saturday just in time for me to complete it and drive it out to the Savannah Airport Fed Ex facility by 3:30pm close, for Monday morning delivery to Fulton County elections. Total cost to me about $100.

The mailed ballot from Oct. 24 still had not shown up yet with yesterday’s (Saturday’s mail). It did show up in our mailbox today, left by a neighbor, saying it had been left at the wrong address despite clearly labeled for our address. That ballot will of course be discarded.

I am a lawyer by training and know how to push the right buttons in an effort to get problems like this resolved. Sometimes works, sometimes doesn’t. Pays to support your local government official, my county commissioner. He really couldn’t do anything, but he did directly forward all my emails to him to our Sec. of State (he is a Republican, as well), and I have no doubt that helped in getting me special attention, if in fact that is what I received. I believe I did.

But, to your piece this PM about voting, how many people have the resources, time, perseverance and knowledge to do what I did? And yet it took me four tries to get my ballot!!

You no doubt have seen coverage in the news about the large number of people supposedly not returning their ballot. In my case, there would be three ballots not returned. How many of those people never received their ballot? The Fulton County election reps I have been working with told me that they were receiving hundreds of complaints a day, if not more, of people who had never received their ballots despite weeks if not longer having passed. (My daughter requested hers in July and received it on Oct. 5. My wife requested hers at the same time and received it in September. Both are registered in Chatham County (Savannah) where, as I said, I am registered in Fulton County (Atlanta). Chatham is a “red” county. Fulton is a “blue” county. Could that in any way be part of the reason for me having all the problems???

A number of the Fulton County elections reps told me that they had not received their absentee ballot. One told me that she waited three weeks and, having received no ballot, voted in person. There is little question in my mind that Georgia’s outsourcing the handling of our absentee ballots has played a role in my ballot problems and those of others. There is NO question in my mind that Trump and DeJoy have successfully interfered with the P.O.’s delivery functions and efficiency in the name of voter suppression and that they are a large part of my ballot problems.

It Trump should win this election, this is one voter, because of the experience outlined above, who will have zero confidence in the outcome of the election. Were it not for our ability to afford Fed Ex, even with the “mailed” ballot received today, I would have to use Fed Ex to get it delivered by Tuesday to Fulton County.

David, our democracy is in trouble. Sorry this is long but, given your interest in this election, I thought you might find my story interesting and of great concern for the November 3 election.

Best, Jack

Lisa, another Georgia voter, writes:

“In our exceeding red county in North Georgia, we got our absentee ballots at the end of September. We returned them by mail not too long after, with pickup truck stamps on the envelopes. I confirmed on the My Voter Page that both had been accepted. Voting here has always been easy. That’s obviously not the experience in the Atlanta area.”

For our other Election Day case study, we’re going to use the story of Florida governor Ron DeSantis as reported by the Washington Post: “Gov. Ron DeSantis had trouble voting. A 20-year-old Florida man is to blame, police say,” https://www.washingtonpost.com/nation/2020/10/29/florida-man-desantis-voting-address/

Florida man charged with felonies for changing Gov. Ron DeSantis’s voter registration address – The Washington Post

When Florida Gov. Ron DeSantis (R) arrived at his Tallahassee voting site to cast a vote for president on Monday, a clerk told him there was a problem: The governor’s primary address had…

www.washingtonpost.com

Is voting secure when a 20-year-old can change a voter’s address?

We asked an expert to weigh in on the matter of election security. We were seeking information about “dirty tricks” and a truthful assessment. Here’s an expert opinion. We thank Academy Securities for permission to share General Robert Walsh’s views with our readers.

General Walsh responded:

“It’s a good question as there is no absolute level of security. Manipulating voter registration databases and hacking voting machines are two separate types of attacks. The chance someone manipulating voter registration information is greater than someone hacking polling place machines. The chance of an attack such as on Governor DeSantis’s voter registration address information in the Florida voter registration database is greater than an attack on voting machines that have been hardened by election officials since 2016. Manipulation of voter registration databases by foreign actors would be more aimed at causing chaos at the polling places on election day and discrediting the election process. In this case, it appears to be an isolated instance of an attack on Governor DeSantis that was caught by him at the polling place. The concern would be that if this occurs across large numbers of voters it could cause chaos at polling places as voting officials have to take the time to correct the voter registration address problems before voters vote.

“Last week the FBI and the Cybersecurity and Infrastructure Agency released a warning that focused on disinformation campaigns to cast doubt in elections. They also said that there is no evidence of cyber-attacks on election infrastructure resulting in compromising an election. There are certainly still vulnerabilities in such a large election infrastructure spread out across 50 states. Since 2016, election officials have worked to close any physical security gaps. A Senate Intelligence Committee report said that there is no evidence that cyber-attacks on any voting machines led to the direct manipulation of election results.”

General Robert Walsh, Academy Securities Geopolitical Intelligence Group

Happy Election Day. Hope you voted and hope it got honestly counted.

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


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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The 2000 recount was a mess. A contested election now would be much scarier for Wall Street

The 2000 recount was a mess. A contested election now would be much scarier for Wall Street

Cumberland-Advisors-David-Kotok-In-The-News

By Matt Egan, CNN Business – November 2, 2020

Excerpt below:

New York (CNN Business)Uncertainty is the enemy of markets. And it doesn’t get much more uncertain than a messy fight over who the leader of the free world is.

Wall Street’s nightmare scenario is that one or both presidential candidates contest the results of Tuesday’s election.

The vast majority, 83%, of portfolio managers surveyed by RBC Capital Markets believe a contested election will be either bearish or very bearish for stocks. Just 2% see that scenario as bullish.

“The biggest risk to markets is a violent response to whatever Tuesday night and Wednesday bring,” said David Kotok, chief investment officer of Cumberland Advisors. “Markets don’t like violence.”

Read the full story at CNN: https://www.cnn.com/2020/11/02/business/wall-street-contested-election-trump-biden/index.html


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Yogi: “It aint over”

“It aint over till its over” is exactly how Yogi Berra signed this ball when I bought it at a charity auction decades ago. He did put a dot over each lower case i. He didn’t use an apostrophe in ain’t, nor in it’s, and he did use till instead of until. Yogi’s message is just as valid today as it was then.

Baseball

The stock market is moving with events. Those events are far from over. The political data points arrive fast and furiously, in what seems to be a bewildering and often chaotic sequence. Politics are not over.

Bullets follow. This is an incomplete list, as every day brings more. We’ll do the stock market first.

1.   The DataTrek Morning Briefing for October 5 (http://datatrekresearch.com/) reminds us of history:

“Treat those historical tables that show either Republican or Democratic Presidents are better/worse for stock prices with caution. There’s simply not enough data for a robust statistical analysis, and if you just eyeball the dates of changes in power you’ll see they coincide with economic turning points/Fed policy shifts more than politics. It does seem to help if one political party ‘owns’ the economy. Since 1945, when Democrats control Congress and the White House, the mean annual return for the S&P 500 is 14.3%. When the GOP has Congress and the White House, the mean return has been 16.0%. Both are better than the average S&P return of 10.9% since 1945. There is some logic to the idea that a Democratic sweep this November will cause individual asset owners to sell securities in order to avoid a likely increase in capital gains taxes.”

2.   America’s stock markets seem to be discounting a Biden victory and a growing probability of a “blue wave” election where Democrats gain control of the Senate and widen their margin in the House. FiveThirtyEight (https://projects.fivethirtyeight.com/2020-election-forecast/) and PredictIt (https://www.predictit.org) gapped wider after all the revelations about the White House COVID cluster and the superspreader event in the Rose Garden. The story about Trump’s medical treatment and about the New Jersey and Minnesota fundraising events are still incomplete, as is the growing list of infected persons in the White House, the Congress, and elsewhere in the government, including the Pentagon. This story ain’t over.

3.   Here’s a six-minute Wall Street Journal video on the market outlook: “The Stock Market Is Ignoring the Economy. Here’s Why,” https://www.wsj.com/video/the-stock-market-is-ignoring-the-economy-here-why/353A01DC-4548-456B-BC07-CC278FC9EA21.html. It paints a clear, concise picture of where we are.

At Cumberland, we remain nearly fully invested in our nonquantitively-driven strategies. There is some cash reserve allocable to the quant work and small cash reserves unallocated. Vol and Lev Vol are in cash, awaiting an entry. Our US ETF strategy favors the ESG grouping with a heavy overweight. Also overweight are biotech and healthcare. For updates, we recommend that readers take time to watch each Friday’s Cumberland Advisors Week in Review, https://www.youtube.com/playlist?list=PLu1JZIQ1mPrtx_q7i_C9FWN-cb9f594C1. You will see a crisp discussion of the week’s stock market and bond market. In Sarasota you can also see a summary version of this on Friday nights on SNN-TV. Bottom line – stocks are in an uptrend and likely to work their way higher over the next months and years, but volatility remains high and will carry into the post-election period.

Bonds are changing, and defensive structures are warranted. See John Mousseau’s municipal bond market discussion, “Muni Bonds Turn Toward the Election,” here: https://www.cumber.com/cumberland-advisors-market-commentary-muni-bonds-turn-toward-the-election/.

Here are some political bullets we are watching:

1.   Biden’s poll surge notwithstanding, the outlook for elections is still uncertain. Here’s an example. Texas governor Greg Abbott has restricted drop boxes for absentee ballots to one per county (“Texas governor shuts down drop-off sites for early mail votes,” https://www.reuters.com/article/us-usa-election-texas/texas-governor-shuts-down-drop-off-sites-for-early-mail-votes-idUSKBN26M7BX). A court battle ensued over Abbot’s October 1 order, which, though blocked by a federal judge on Friday, October 9, was formally upheld on Monday, October 12, by a panel of three federal judges, all of them appointed by President Trump to the Fifth Circuit Court of Appeals (“Texas counties can offer only one drop-off ballot location, federal appeals court rules, upholding Gov. Greg Abbott’s order,” https://www.texastribune.org/2020/10/13/texas-election-ballot-drop-off/).

Now what? What does that mean? As Yogi said: “It ain’t over.”

2.   The election outcome here in Florida remains uncertain but is now leaning for Biden. Some Republicans are openly abandoning Trump. Here’s a YouTube of the former president of the second largest Republican Club chapter in Florida. That happens to be the Sarasota chapter: “Why This Longtime Republican Rejects Trump,” https://www.youtube.com/watch?feature=emb_logo&v=-wqA-pbN7sQ.

3.   We’re watching down-ballot congressional races for clues, and some are very close. In Florida’s 16th Congressional District (my home district), Margaret Good’s campaign against incumbent Vern Buchanan has become, at the time of this writing, a pollster’s “too close to call.” See https://projects.fivethirtyeight.com/polls/house/florida/16/ for the latest in the evolving race. Buchanan (https://buchanan.house.gov) is on the House Committee on Ways and Means and now has to defend his votes that have aligned with Trump, while Good (https://margaretgood.com/) has a clear pro-environmental policy stance and is a veteran legislator. This outcome is critical. Can a down-ballot contest provide coattails to a presidential election? That would be unusual but possible in this extraordinary year.

4.   In the October 13 edition of AM/FX, titled “BW-B-M-FL,” Brent Donnelly of HSBC included a Florida election factoid from Steve Schale:

“‘If you take all the people who have voted in Presidential elections since 1992, Florida has seen north of 51 million ballots cast, and the difference between the total number of Republican ballots and total number of Democratic ballots is less than 20,000 votes. Yes, you read that right’ (“Everything You Wanted To Know About Florida, But Were Afraid To Ask – The 2020 Version,” http://steveschale.squarespace.com/blog/2020/9/14/everything-you-wanted-to-know-about-florida-but-were-afraid.html). Schale’s blog goes deep in the weeds, but if you are interested in Florida election minutiae, it’s the place to go. Here is the latest one: http://steveschale.squarespace.com/blog/2020/10/12/florida-22-days-out-why-am-i-still-doing-this-to-myself.html.”

Readers can continue to follow these political developments in Florida and beyond for themselves. All the swing states are lurching through dramatically changing outlooks. But more October surprises may still lie ahead. This ain’t over.

Last on our list are COVID-19 and vaccine, treatment, mitigation issues, as daily case surges and hospitalizations and deaths continue to make headlines. Meanwhile mitigation with masks and distancing remains controversial. In Florida, Governor DeSantis has overruled the City of Sarasota’s ordinance imposing fines on those who do not wear face masks indoors in public places; and though the city has not shelved the ordinance altogether, the city’s bars are again crowded with people who are mostly unmasked. As Forrest Gump said, “Stupid is as stupid does.”

Finally, here’s Sam Fazoli, in the October 13 edition of Bloomberg Prognosis, with a last, wise word on vaccines:

“Like everyone else on the planet, I want to get back to normal as soon as possible, and a vaccine will help get us there. But I only want a vaccine that has been through all the rigors of a full-sized trial. A little patience would help deliver much more information and give other vaccine hopefuls a chance to prove their worth as well. We would all be better off for it.”

As Yogi scrawled on my prized baseball: “It aint over till its over”.

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

 




Elecciones en EE.UU: Wall Street teme que se llegue a los comicios sin un claro ganador a la vista | El Cronista

Elecciones en EE.UU: Wall Street teme que se llegue a los comicios sin un claro ganador a la vista

A brief quote by David R. Kotok appears online at the “El Cronista” website.

Author Martin Burbridge – September 23. 2020

Cumberland-Advisors-David-Kotok-In-The-News

Original Spanish:
Pero incluso Biden tampoco ayudó a calmar a los inversores al advertir que Trump podría negarse a abandonar la Casa Blanca de manera voluntaria. Por eso, los mercados financieros ya tomaron nota que este año podría llegar a ser difícil atravesar el proceso electoral sin grandes sobresaltos. “Hay una preocupación que está creciendo. Si las encuestas muestran un resultado parejo, vamos a tener una corrección del mercado a medida que nos acerquemos a las elecciones”, afirmó David Kotok, fundador de la consultora Cumberland Advisors.

English Translation:
But even Biden also didn’t help calm investors by warning that Trump might refuse to voluntarily leave the White House. For this reason, the financial markets have already taken note that this year it could become difficult to go through the electoral process without major shocks. “There is a growing concern. If the polls show a consistent result, we are going to have a market correction as we get closer to the elections,” said David Kotok, founder of consulting firm Cumberland Advisors.

Read the full article, in Spanish, at: https://www.cronista.com/finanzasmercados/Elecciones-en-EE.UU-Wall-Street-teme-que-se-llegue-a-los-comicios-sin-un-claro-ganador-a-la-vista-20200923-0001.html


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Cumberland Advisors Market Commentary – Echoes of 1968

Brent Donnelly is a good friend and fellow camper at Leen’s Lodge. He is also a highly respected senior FX dealer at HSBC New York and the author of The Art of Currency Trading and the daily FX commentary AM/FX. On September 3, Brent penned “Echoes of ’68,” a thought-provoking comparison of the years 1968 (remember that doozy?) and 2020. Did you know that ’68 included a global pandemic that killed 4 million, including 100,000 Americans? The similarities between the two years in the economy and markets are striking, too.
 
Here is Brent’s complete “Echoes of ’68,” redistributed with his kind permission. Thank you, Brent.

Click the image or this link to read “Echoes of ’68”: https://www.cumber.com/pdf/AMFX-Echoes-of-1968-03SEP2020-Brent-Donnelly.pdf

Echoes of 1968 by Brent Donnelly
 

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


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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The U.S. election is getting ugly – and investors are getting nervous

The U.S. election is getting ugly – and investors are getting nervous

July 31, 2020 – By David Randall and April Joyner

Cumberland-Advisors-David-Kotok-In-The-News

Excerpt:

NEW YORK (Reuters) – Investors are increasingly preparing for the risk of a contested U.S. presidential election come the fall, worried that an ugly political situation will create volatility across markets.

A key risk is that Republican President Donald Trump is already questioning the legitimacy of the election, analysts said. His Democratic challenger, former Vice President Joe Biden, currently has a 9 percentage point advantage among likely voters and a significant advantage among voters who are undecided, according to a Reuters/Ipsos opinion poll.

“It is going to get ugly,” said Nick Maroutsos, head of global bonds at Janus Henderson Investors. “I would expect a lot of volatility … but it will be very short-lived, you are talking about a two-week span.”

A contested election due to mail-in ballots would likely be more extensive than the hanging chad issue in Florida in 2000, said David Kotok, chief investment officer at Cumberland Advisors, referring to the confusion over voter intention due to a ballot in Florida that led then-Vice President Gore to challenge the election outcome and call for a recount. The U.S. Supreme Court eventually ruled that Florida did not have to do a statewide recount, ensuring the election of then-Texas Governor Bush.

“My guess is that markets would sell off and maybe sharply with that outcome,” Kotok said.

Read the full article here: https://wkzo.com/news/articles/2020/jul/31/the-us-election-is-getting-ugly-and-investors-are-getting-nervous/1045015/


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Cumberland Advisors Market Commentary – Warren?

Elizabeth Warren (@ewarren)

“On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands. And I will ban fracking—everywhere.” (Twitter, 4:26 PM, Sep 6, 2019)

Market Commentary - Cumberland Advisors - “You can’t make this stuff up” by Suzanne Greenberg

Elizabeth Warren’s increasing political strength relative to Joe Biden’s is leading market agents to become serious about policy changes under a Warren presidency. The tweet above is an example of a proposed policy.

Meanwhile, Trump’s growing impeachment problems and his Navarro-advised failing trade policy have weakened the US Manufacturing sector and changed some of the granular polling data. It is now impossible to confidently forecast the 2020 election outcomes. While the Democrats are still favored to keep their majority in the House and the Republicans to keep their majority in the Senate, the best guesses today are made with high uncertainty.

Meanwhile, market agents are repricing risk, and that risk includes possible changes in health care and banks/financial and, given the above tweet, the domestic US Energy sector.

Let’s use an example.

Natural gas is a terrific American production success. We have a lot. It’s a clean fuel. The world wants to buy it. America is a safe source and has reliable long-term contract law.

Warren’s tweet puts energy capex on notice. Does she encourage investment in energy or discourage it? You know the answer.

Add to her tweet her advocacy of a Sanders-type wealth tax and apply that tax to risk-taking in oil and gas production, exploration, transportation (pipeline), and equipment supplies. Does she encourage or discourage these investments? You know the answer.

Meanwhile, once-expected LNG exports to China and elsewhere are slowed by the ill-conceived, Navarro-designed Trump Trade War. Encourage or discourage? You know the answer.

Is it any wonder the US Manufacturing sector is mired in a slowdown and economic growth is under 2%? Trump and Warren are polar political opposites whose widely divergent policies harm or stand to harm a large sector of the US economy.

We are a year from an election, and this writer only expects the various proposals to get worse while the debate gets uglier. The opinions expressed on CNN and Fox now epitomize the divide. Tax increases or cuts won’t happen for at least two years, and this writer is not sanguine about any of the outcomes.

Dear readers, once fiscally responsible Republicans have delivered a one-trillion-dollar deficit and a modern version of Smoot-Hawley protectionism, while some Democratic hopefuls seek to destroy wealth with taxation and to attack capital formation in American industries and business.

The now-familiar expression “You can’t make this stuff up” was coined by Suzanne Greenberg, a now-deceased former Cumberland Partner. She was prescient.

Fortunately, the Fed has awakened to the liquidity issue after dodging the repo bullet. Better late than never.

To this writer, stock markets seem to be discounting the worst as the ugly headlines continue. As long as the markets remain fearful of worst-case risks, stocks can rally to new highs as we progress to year end. Widespread pessimism is a buying opportunity.

We remain fully invested in our US stock market ETF strategy and in our US stock market quantitative strategies (three of them). Please email me if you would like to see the white paper on the quantitative work.

P.S. Here’s a Bloomberg opinion column we recommend. It focuses on truth, politicians, and constitutional issues of free speech. It also has a warning for each of us.

https://www.bloomberg.com/opinion/articles/2019-10-09/facebook-can-fight-lies-in-political-ads.

David R. Kotok
Chairman and Chief Investment Officer
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Funding Markets Face ‘Small Shock’ From Fed Unwind

(Bloomberg) — Between the reinstatement of the debt ceiling in March and the unwind of the Fed’s balance sheet, a “small shock is coming to the short-term funding markets,” Cumberland Advisors Chief Investment Officer David Kotok says in note.

Cumberland-Advisors-David-Kotok-In-The-News

• The 2019 debt-limit fight will occur in the shadow of “recent nasty midterms” and as the 2020 presidential election cycle fires up
• Treasury has to reduce its cash balance to $200b when the debt ceiling is reinstated on March 1; the reduction acts as an increase in bank reserves since it’s an actual transfer of cash from the Treasury to the banking system
o So the higher the Treasury cash balance at the Fed, the lower the excess reserves in the banking system and vice versa
• The Fed may also have to make another adjustment to the interest on excess reserves (IOER) rate; “note that for many technical reasons the Fed’s task is becoming more and more difficult as the Fed shrinks the balance sheet”
• Cumberland expects that by March/April/May the Fed will reach a point where “short-term funding markets will no longer have the luxury of those large balances of excess reserves”
o However, the timing is uncertain and the list of factors that could change things “stretches longer than a page”

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net




‘That was shocking’: Strong job gains give GOP extra fuel heading into Election Day

Excerpt from The Washington Post,
‘That was shocking’: Strong job gains give GOP extra fuel heading into Election Day
By Heather Long and
Danielle Paquette
November 2, 2018

Cumberland-Advisors-David-Kotok-In-The-News

Hiring surged and wages grew more than they have in almost a decade, the government said Friday in a report seized on by Republicans just before the midterm elections as evidence their policies are delivering for American workers.

Trump and Republican candidates painted the jobs report as further proof of an economic boom, but many independent economists warn that growth has probably peaked and that it is likely there will be a slowdown, especially if trade tensions continue to escalate.

“The economy peaked in the second quarter of this year and has been slowing for four to five months,” said David Kotok, chair of Cumberland Advisors. “The trade war is slowing the growth rate, because tariffs are a sales tax imposed on Americans by the U.S. government.”

Markets jumped immediately after the release of the report Friday but ended the day in the red, with the Dow Jones industrial average down almost 110 points mainly on concerns that the U.S.-China trade battle won’t end soon.

Read the full article at The Washington Post