The Cumberland Advisors Week in Review is a recap of news, commentary, and opinion from our team. These are not revised assessments, and circumstances may have changed in the market from the time of original publication. We also include older commentaries that our editors have determined may be of interest to our audience. Your feedback is always welcome.
MATT MCALEER'S WEEKLY RECAP
Volatility! And a great month for bonds. What numbers indicate panic? We probably have some more work to do in equities. Does 2008 belong in our calculus? Is the economy slowing or bringing with it a downside? Or are we just in a skirmish? Matt McAleer explains and fills in details concerning Cumberland Advisors' strategies. WATCH HERE.
MARKET COMMENTARY
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4Q2018 Review: Munis Turn It Around
John R. Mousseau, CFA 12/28/2018
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Yogi Berra, the Fed’s Balance Sheet, and Liquidity
Robert Eisenbeis, Ph.D. 12/28/2018
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Stock Market and Tariff Truce
David R. Kotok 12/21/2018
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More Evidence Supporting a 60/40 Portfolio
Gabriel Hament 12/24/2018
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Market Backlash
Robert Eisenbeis, Ph.D. 12/21/2018
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Is Climate Warming Creating More Dangerous Hurricanes?
Bob Bunting 12/21/2018
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4Q 2018 Review: Market Volatility
Leo Chen, Ph.D. 12/19/2018
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FEATURED INTERVIEWS
Health-Care Sector Favored, Cumberland Advisors CIO Says
David Kotok, chairman and chief investment officer at Cumberland Advisors, talks about his investment strategy for exchange-traded funds. He speaks with Paul Allen and Kathleen Hays on “Bloomberg Daybreak: Australia.”
Watch here: https://www.cumber.com/health-care-sector-favored-cumberland-advisors-cio-says/
Yahoo Finance: David Kotok on Recession, Consumer Spending Power, & Oil/Gas Prices
Yahoo Finance’s Adam Shapiro and Julie Hyman are joined by Jetco CEO Brian Fielkow and Cumberland Advisors Chairman & CIO David Kotok to discuss oil and the future of the trucking industry.
David Kotok of Cumberland Advisors: “Every penny down or up in the price of gasoline is a billion and a half direct disposable income in American consumers’ pockets. We have just had a huge infusion of spending power with a drop in the oil price.”
Watch here: https://news.yahoo.com/trucking-ceo-lot-bring-drivers-174355387.html
IN THE NEWS
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- Fortune Magazine - ‘A Tremendous Opportunity to Buy.’ How Presidents Have Fared as Stock Market Prognosticators
- Quoted:Cumberland Advisors 12/28/2018
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- Bloomberg Radio - Fair For Mnuchin To Pinpoint Algo-Trading: Eisenbeis (Radio) – Bloomberg Markets
- Quoted:David R. Kotok 12/17/2018
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- Wallet Hub - What are the Do’s and Don’ts of New Year’s resolution-making?
- Quoted:Gabriel Hament 12/19/2018
We wish all the best to our readers and friends for the holidays. We hope you enjoy some great days with your families and friends and look forward to a prosperous 2019. We wish a great new year for all of you and particularly those less fortunate. And hope everyone in their own ways helps to “pay it forward”. Happy Holidays.
IN CASE YOU MISSED IT
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Market Violence & Interest Rates
David R. Kotok 02/05/2017Fierce forces at work on interest rates … or are we just seeing a mild adjustment? There is no way to know. We are referring to US Treasury interest rates on bills, notes, and bonds. Some bullets follow. 1. It is clear that the newly installed leadership of the Federal Reserve want to raise short-term rates to what they believe is “more normal.” That path seems to point to another 3/4 of 1% higher rates in shorter-term T-bills during 2018. The recent employment report guarantees this outcome. 2. The Fed’s strongest force is applied to short-term rates. Essentially, the Fed can put them at any level it chooses. What happens to markets and economic growth is a derivative of that Fed short-term rate policy decision. 3. The global impact of the short-term rate change can be profound. About $150 trillion in US dollar-denominated debt and notional derivatives is tied to this rate policy. Thus about half of the entire world financial system and debt structure undergoes a shift between lenders and borrowers as short-term rates change. Each single basis point (1/100th of 1%) equates to an annualized rate of transfer of $15 billion. That is the first-order effect. The second-order effects are found in the actions of market agents as each responds to the Fed’s policy change. Economic agents like businesses and households react, too, but do so with a greater time lag than financial markets. 4. The Fed is simultaneously engaged in QT (quantitative tightening). Continued...
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Cash, NIRP & Bonds
David R. Kotok 07/29/2016Take a look at the $100 bill, ¥10,000 note, and €100 note. They are all pieces of paper with an intrinsic value near zero. Their money-like characteristics establish the value for each bill or note. With roughly the same monetary value, give or take a fluctuating amount in foreign exchange markets, they can each buy a good meal in Tokyo, New York, or Paris. Cumberland Advisors - David Kotok - Financial Literacy at USF Sarasota Manatee Things become a little more complicated when a currency is used outside of its normal jurisdiction. A cashier at a US supermarket may be confused if a shopper pays with a ¥10,000 note instead of a $100 bill. But there are some establishments that do accept foreign currencies. They may be found in countries that do not trust their currency in circulation. A prime example today is Venezuela, with its hyperinflation, destructive government, scarce goods for sale, and rush for food – all while President Nicolás Maduro uses the army to suppress his hungry population. The euro, yen, and US dollar have terrific value in Venezuela. The characteristics of cash include the value of its purchasing power. “Store of value” is one of money’s prime attributes. Another attribute is its function as a unit of account – a way to measure. Compare a $10 bill with a $100 bill. What is the difference? There is a different face engraved on the front of the $100 bill and one more zero printed on the piece of paper. In America, the difference is simply accepted. Each person in the world who uses money makes an acceptance decision every day. Some of us are lucky enough to have choices. Most folks do not. The third money characteristic — its function as a medium of exchange – depends on where you are. We just wrote about that and how acceptable money is in the US. If you have a hyperinflation – like in Zimbabwe, or in Germany in the early 1930s during the Weimer Republic, or currently in places like Venezuela – money no longer works well as a medium of exchange. Nobody wants cash because it is losing value at a very rapid rate. Take the same characteristics and turn them around. With little inflation in the price level and mostly stable prices, the “medium of exchange” function becomes very reliable. How do negative interest rates influence the use and the characteristics of money? Continued...
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UPCOMING EVENTS
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Adapting to a Changing Climate
From hurricanes to red tide and sea level rise, learn how a changing climate affects the Sarasota-Manatee region and the state of Florida. Expert speakers will discuss the challenges and impact on Florida and other coastal communities while uncovering the adaptive strategies that bring unique social and economic opportunities. The featured speaker is Bob Bunting, CEO Waterstone Strategies/Scientist/Entrepreneur - January 25, 2019 – Selby Auditorium, USFSM , 8:30 am – 3 pm. Lunch is included. Cumberland Advisors is a sponsor and Patricia Healy, CFA, from our firm will discuss "Climate, Municipal Bonds and Infrastructure" with the audience. Details Here.
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U.S. Manufacturing in a Global Context
Save the Date! GIC is returning to Sarasota, FL on Friday, February 1, 2019 to partner with the Financial Planning Associates of the Suncoast and Cumberland Advisors. Join us at the Sarasota Yacht Club as we welcome Bill Strauss, Senior Economist and Economic Adviser of the Federal Reserve Bank of Chicago, for a presentation on U.S. Manufacturing in a Global Context. Strauss is a senior economist and economic adviser in the economic research department at the Federal Reserve Bank of Chicago, which he joined in 1982. His chief responsibilities include analyzing the current performance of both the Midwest economy and the manufacturing sector for use in monetary policy. Details Here.
ADDITIONAL RESOURCES
Lessons from Thucydides
David R. Kotok has written the monograph pamphlet, “Lessons from Thucydides” detailing information asymmetries and their implications for investors and world affairs. The concept of a Thucydides Trap and its rise and avoidability (or lack thereof) is often debated and David makes a case for dealing with them weaving current and historical events into a comprehensive narrative.
This free monograph also has lessons for President Donald Trump’s trade policy. Can the United States avoid a Thucydides Trap with China & Xi Jinping? Will you benefit from the Lessons of Thucydides or fall victim to a Thucydides Trap? If information is key, you now have a handbook at your fingertips. Download a copy of this monograph in either PDF (free) or Kindle ($.99) format. https://www.cumber.com/thucydides/
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