Cumberland Advisors Market Commentary – Paul Schulte: Q & A, Covid, China-US, AI, 5G, 2 Books

With honor and gratitude, we wish to introduce Paul Schulte, the founder of Singapore-based Schulte Research. He has three decades in applied financial research and has worked for all three branches of the US government, including the NSC at the White House. He teaches worldwide, has written five books, and a whole lot more. His expertise in finance and technology are sought globally by serious investing institutions. I read nearly everything he writes. We thank Paul for agreeing to answer a few questions in this Q&A. But first, let me recommend two of his books; both are in my library.

His latest co-authored book is The Race for 5G Supremacy: Why China is Surging, Where Millennials Struggle & How America Can Prevail (2020). In this book, Paul and his coauthor, Austin Groves, after an analysis of what is propelling China forward and what is holding America back, propose parallel “Apollo Programs” for America—one focused on helping America to catch up with China and even surpass it technologically, and the other focused on generational issues of millennials, a generation key to American success, but one “bogged down by a host of under-appreciated and intertwined issues which cause anxiety and alienation and lead to massive losses in workplace productivity.” Readers can find the book on Amazon: https://www.amazon.com/dp/B0894345YG/.

Here’s a quote from page 63: “The charts in Sections 5.1 and 5.2 show the phenomenon that is Huawei. It has emerged as the predominant global player in 5G at a time when the US does not have a single major player in this area. Its total revenues have exceeded US$100 billion. It operates in more than 100 countries. It is the dominant player in Africa and Asia, and it has overtaken Apple in global market share. ATT and Verizon are trying to get up to speed but are at least 1–2 years behind Huawei.” This book is a “must” for anyone interested in investing in the technology and communications sectors. Paul’s thinking is global. His views are all supported with curated expertise.

His previous co-authored book is AI & Quantum Computing for Finance & Insurance: Fortunes And Challenges For China And America (2019), available on Amazon at this link: https://www.amazon.com/dp/B07R8CL879/. Paul and his coauthor, David Kuo Cheun Lee, equip readers with the technological literacy to assess and map the future of AI in the financial and banking industries. We will quote from page 41. “Alibaba has expanded its e-commerce business Taobao and Tmall to Finance (Ants Financial) and Tech Service Provider (Alibaba Cloud). Figure 2.8 shows the fullest AI ecosystem that is unmatched by any other, and it has achieved all these innovations while being the most profitable of any tech companies. Alibaba will produce its own AI chip as well as develop quantum processors expanding into a semiconductor business 2019Q2. AliNPU, the new AY chip, had the potential to support technologies used in autonomous driving, smart cities, and smart logistics and driven by its R&D arm, Damo Academy. Pingtouge, a new semiconductor subsidiary will focus on customized AI chips and embedded processors.”

Dear readers who are serious about the worldwide tech sector and how to invest in it, we recommend you buy and read both books now.


Here’s the Q&A with Paul. We thank him for taking the time to answer these questions.

Q1. In the US we have a COVID-19 disaster. Many Americans do not understand how the Chinese applied technology to rapidly address COVID outbreaks. Can you describe the reaction function and techniques used recently when the cluster of new cases erupted in the Beijing food market? We want our readers to learn what a high-tech reaction function can look like so they can compare it to what they see happening in the US.

Schulte: Asia learned the hard way to deal with viruses when SARS struck in Hong Kong in 2003. SARS had a mortality rate of 50% (and it hit hard in Beijing). So, most governments (Taiwan, Singapore, HK, China, Korea) had established pandemic response teams to deal with COVID when it hit. China had one of the most draconian responses in human history. It made more than 500 million people stay home for 56 days. This was to [prevent] the virus from spreading, i.e., getting the R0 way below 1. (As a result, China is now back to normal). One person (the same person) was allowed to leave the house to buy groceries. Drone food deliveries became common. Autonomous vehicles were used to sterilise streets. 5G was used to transmit remote thoracic scans to hospitals. China built one mass hospital in Wuhan in 6 days from pre fab equipment. Two weeks ago, there was an outbreak in a vegetable market, and China closed locked down two districts of Beijing. (These districts have about 2 million people each.) It conducted 300,000 tests in 48 hours. Each phone in China (and here in Singapore) has an app to show where you have been to accelerate contact tracing and to alert people if they have been exposed to the virus. China is doing exactly what Dr. Fauci says over and over. Test. Discover. Isolate. Quarantine if necessary. Retest, Discover. Repeat.

Q2. The intensity of “blame game” rhetoric is growing in both the US and China. Some characterize the widening divide as a “cold war.” How do you see the evolution of this competition? Can the US successfully “catch up” in the 5G race? What happens after the November elections in America?

Schulte: I worked in the NSC in the 1980s in Reagan II. I see the same dynamics at play now in the conflict with China as I saw in the Cold War with the USSR. Hegemonic powers who claim a superior way of life need to hold on to transportation, roads, seaways, telecoms, space, mail (now email), and money in order to maintain political and economic control. This is the nature of a hegemon. 5G rollout by China (with no rollout in the US at all) poses a threat to the US as it can disrupt the monopoly on telecom that the US had with 4G. So, it makes sense for the US to try to slow China down in order to buy time to catch up. There really is no “alternative” to 5G at the moment, as it is a system which is already “baked in the cake.” Why? The US military is loath to give up spectrum to the private sector. Also, ATT and Verizon might have dropped the ball here. But China has already rolled out 5G in hundreds of cities and is doing fascinating things in melding finance to property. Banking and insurance are now mixed with commercial, residential and industrial property to create entirely new industries. The US should pay attention.

Q3. Hong Kong is on the minds of global financial managers. Will there be a capital flight? A brain drain? Is the “one country, two systems” model permanently dead? Please give us your views from the unencumbered Asian financial center of Singapore.

Schulte: I lived in Hong Kong a total of 18 years before decamping to Singapore two years ago. The center of wealth in America is New York, and it revolves around financial transactions. The GFC created animosity toward the elites on Wall Street. The center of wealth in Hong Kong is the Peak — the TOP of the island occupied by the property tycoons. These billionaire tycoons have had a cartel for decades and have literally funded the government through highly controlled land sales for decades. This has created THE most expensive city in the world while the salary for a college graduate from a TOP Hong Kong university is about $21,000 Hong Kong dollars a month. This is USD $2,000 per month after tax. The average rent for a SMALL one bedroom apartment in Hong Kong is $1,500–$2000 per month. So, you either live in very cramped conditions with your family or get a second job just to feed yourself. Incidentally, while the housing price index has gone up four times since 2008, these salaries are virtually unchanged. So, the standard of living has collapsed for most Hong Kong people.

Somehow, people do not blame inept HK government policies which wholly ignored these problems festering right in front of everyone’s eyes. They do not blame property tycoons who made billions in HK property and then invested their profits overseas. They blame China. It’s not surprising, as blaming a foreign power is easier than taking an honest look at one’s own shortcomings. There’s a lot of that going around now.

Watch this space, though. China has implemented the new national security law to create a “Special Branch” similar to what the British had for decades. (It was disclosed that the US Congress — presumably through the CIA — had provided $2 million for ‘secure communications’ for the protesters). So, this is the kind of thing that China wants to go after. Imagine if it was discovered that the PLA had provided $2 million in funds to help Antifa protesters in Atlanta or Raleigh? The US would flip its lid.

In the same breath, China has reinforced its support for the Hong Kong Stock Exchange and more Chinese listings. Hong Kong will remain a dollar funding center full of very unhappy people. I presume many will leave to find a better way of life. Hong Kong people are some of the toughest and hardest working people I have ever met. Any country would be lucky to get them.

Q4. The US has two aircraft carrier groups on maneuvers in the South China Sea. The regional tensions are rising, and many countries are involved. Do you fear a cold war risk becoming a “hot war” event? Even with leaders trying to avoid shooting war, accidents happen. And some players, like North Korea, are dangerous and unpredictable. Please give us your geopolitical risk assessment.

Schulte: I’m very skeptical that there will be any violence between US and Chinese naval vessels. It’s the height of the election season in the US, and having a war is bad electoral strategy. However, I do believe that either party who gains power in 2021 will carry on an aggressive hegemonic game with China. Even if Biden were to reverse course, which is unlikely, it takes a few years for the Pentagon and company to reverse course. So, we should expect things to heat up in 2021 to 2022. 2023–2024 will likely see them get to the peace table for talks.

So, the US has FINALLY pivoted to Asia after threatening to do so for many years. It is solidifying its alliances with Japan, Korea, Singapore, Australia, and (tentatively) India. This is basically surrounding China. In its corner, China has its own territories, Hong Kong, Pakistan, Philippines (kind of), and the Spratly Islands. Both Trump and Xi get poor marks for soft power, but I strongly believe a new non-aligned movement is being created just like the one in the 1960s. Back then, its center was Jakarta. Now it is Beijing. The question is, non-aligned with whom?

Q5. This question is personal. On visiting Singapore, I experienced a long walk around the world-famous Bonsai Garden. And, of course, I toured the Orchid Garden before a lovely lunch in the glass-enclosed restaurant at the bottom of the hill. In the Arctic, the temperature is rising three times faster than it is on the equator. But accelerating climate change and the damage from it is frightening worldwide. How do you experience it on the equator? And for personal information, how are those gardens faring today?

Schulte: Climate change is having a particularly devastating effect on poor countries who cannot afford state-of-the-art systems for flood control, landslides, avalanches, and flash flooding. Singapore’s temperature is the same every day — 77 degrees at night and 96 degrees at day. We have had very heavy rains this year, but the superb quality of flood control and water runoff means there are rarely any floods. If you have the foresight and money, climate change can be kept at bay. Poorer countries like the Philippines, Bangladesh, and those in the Caribbean are being persistently devastated. (And yes — the bonsai and orchids gardens are still there. Come and visit.)

Q6. What’s the likely outcome for the Singapore elections?

Schulte: The PAP is likely to sweep into power again with more than 80 seats in the 89-member Parliament. Singaporeans are often cynical about the PAP; but when you nail them down, they are very proud of what they have achieved. There is inequality. But there is no crime. No guns. No widespread drug addiction. No religious strife or sectarian violence. No flooding or frequent mudslides. There is strict rule of law and a highly responsive civil service which is squeaky clean. And the response to COVID has been quite good [after] a wobbly start. And 80% of people live in decent crime-free and drug-free public housing.
I was having a dinner party with three people from the World Economic Forum a few months ago, and one (American) person said, “I think this is what is known as governance. America should try it.” There is grousing on the fringes about a lack of entrepreneurship, too much rote education, a lack of planning for what Singapore wants to become. But these are high quality problems which do not cause people to switch parties. I left Hong Kong two years ago because a blind person could see that it was a seething cauldron. People here have trust and confidence in their government and in each other. It’s a good example of consent of the governed.


Paul, we thank you for sharing these views with our readers. Please be safe and careful. When the opportunity presents itself, lunch in Singapore or New York or on a fishing trip to Maine is on the list for the future.

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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Warren Buffett doesn’t need the Fed’s help. But he’s getting it anyway

Warren Buffett doesn’t need the Fed’s help. But he’s getting it anyway

 

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

Excerpts below.

By Matt Egan, CNN Business
Jun 29, 2020

It’s not that Berkshire needs or requested assistance from the Fed — nor that the relatively tiny bond purchases will move the needle for Buffett’s massive company. Other blue-chip names including Walmart, Boeing, ExxonMobil and Coca-Cola also had their bonds bought by the Fed facility, which launched this month. CNN owner AT&T is also on the list.

Still, the fact that Buffett’s Berkshire, which is sitting on $43 billion in cash, now has some of its bonds owned by the Fed program underscores just how far the central bank is going to prop up the capital markets. And it raises concerns among some that the Fed experiment is distorting the normal functioning of markets.

The goal of the program is not to bail out specific companies but to make sure creditworthy firms have access to capital. Without it, a tidal wave of bankruptcies would happen all at once, potentially crashing the economy into a depression.

“This is a very clever tool,” David Kotok, chairman and chief investment officer at Cumberland Advisors, told CNN Business. “The Fed wants to give incentives and inducements to Berkshire, Verizon, Apple and the rest to become more economically active.”

Still, Kotok fears this intervention will distort the functioning of the capital markets.

“The Fed is now in the business of picking corporate winners and therefore by definition also losers,” Kotok told CNN Business. “The corporate winners have the market perception that the wind is at their back, otherwise why would the Fed buy our bonds?”

That perception in the marketplace, Kotok said, will give the winners additional financial firepower in the form of cheaper borrowing costs. And by contrast, companies that didn’t make the cut for the Fed’s list will find it relatively harder to borrow.

“The divide between the winners and losers has now widened,” Kotok said.

Read the full article at KTEN’s website: https://www.kten.com/story/42305072/warren-buffett-doesnt-need-the-feds-help-but-hes-getting-it-anyway


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. Sign up for our FREE Cumberland Market Commentaries Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.




Cumberland Advisors Market Commentary –  Two Covers; Two Sectors

If you looked at the two different covers of The Economist for May 30, 2020, you saw the 100,000-death message on the American version, and you saw the Hong Kong security law depiction on the Asian edition. Internal content was mostly the same, but the lead stories reflected the world as the Economist editors saw it and wanted to portray it to their readers.

The-Economist-Covers

In my view, The Economist is the finest weekly global news magazine in the English-speaking world.

In the US, the contrasts in economics and financial markets are extraordinary. The stock market is setting recovery new highs, one after another. See the May 29th “Week in Review” video by Matt McAleer and the charts he uses in his discussion of the trading strength of this monster rally in the US market (https://youtu.be/isgC8sSacEI).  Anyone interested in those charts can email me, and I will ask that they be sent to you. At least one viewer found them hard to see on the video (beginning at 2:47).


 

The US higher-grade bond markets seem to be calming down. John Mousseau talks about them at the beginning of the May 29th weekly video clip linked above. Readers who like the Mousseau beard or who dislike it are invited to send an email to John and voice an opinion. There is a charity bet underway, so feel free to make your opinion known directly to John.

You can get the sense of Cumberland’s various portfolio positions from those two clips, so I won’t take time to repeat the points John and Matt make here. But there is an additional portfolio issue worth discussing that last week’s videos did not cover. The issue is what will happen to the US dollar in the FX markets and how that will impact the Energy sector and the Materials sector. The two covers of the Economist help frame this debate.

What is happening to Hong Kong is a geopolitical shock. A Cold War of words is intensifying between the two largest economies in the world. Some of the policy issues are troubling. Why fight with the WHO in the midst of a global pandemic when you need to achieve globally interdependent and curated outcomes in treatment and vaccines? If the US wants to pressure China, why not move for Taiwan’s admission to world bodies like the WHO instead of withdrawing (running away from the fight). Why not open the US visa program to Hong Kong citizens like the UK just did? We have done that in the past with Hungarians when a similar power shift occurred. We did that with Cuba after the Castro power grab. The intellectual property transfer to the US from China (Hong Kong) and the brain drain we could impose on China would be enormous. All could hugely benefit the United States.

Hong Kong is a monetary and financial center, and capital flight is underway. America can benefit immensely by attracting the flows and the talent. Our doing so will alter the US dollar for the benefit of the United States. We are still the strongest financial center in the world.

The two Economist covers also reveal the underlying determinants of stock market participation for the Energy sector and the Materials sector. Both sectors do well when the world’s economies are growing. Both are weakened by worldwide recession or depression. Both require longer-term capital investment, and neither can turn production on or off in a split second. Opening or closing a mine or shutting down a natural gas pipeline or drilling platform takes time and costs money. Companies try to manipulate the volumes rather than make “on or off” binary decisions. The COVID-19 shock was abrupt and not a business-cycle transition. If there is no second killer wave, the economic bottom at a very low level is happening now, and the recovery will accelerate for the rest of the year. Coming off such a dramatic and extreme shock means that the initial phase of recovery will be robust because it starts from such a low point.

Recovery means that demand will increase in the Energy and Materials sectors, though we do not yet know how fast demand will increase and in what components. And remember, both sectors are global in nature, and most commodities are traded and priced in US dollars in their worldwide trading regimes. This is where the two covers of the Economist come together. One cover warns about the fluctuation of the US currency and the geopolitical risk. The other warns about death and disease in America and the vast divide in American politics. The tragic death of George Floyd and the events that have erupted in response only confirm how fragile the American civil society has now become.

At Cumberland, we are in constant discussion about the Energy and Materials sectors. Matt McAleer and I have talked about them, and our research focused on them every day of last week. Energy, for example, is now about 3% of the capital weight of the S&P 500 index. That is a remarkable low point in the entirety of the post-World War 2 period. Having traded the sector twice in the last few years and lost both times, we are warned about the old adage, “Fool me once and shame on you; fool me twice and shame on me.” Do we take a third attempt with the Energy sector? The same logic can be applied to the Materials sector.

We have taken overweight positions in alternative forms of energy. We are overweight the solar and wind-power sectors and also hydroelectric power as part of an ESG strategy. In fact, those positions are very heavily overweighted in our US ETF portfolios. We would point to the new Gemini project in Nevada as a billion-dollar solar power structure that will power 200,000 households: “U.S. Approves Giant Solar Project in Nevada,” https://www.wsj.com/articles/u-s-approves-giant-solar-project-in-nevada-11589216400. For readers who want a lot of detail about why that move makes sense now, here’s a link to an in-depth discussion on solar power: “Solar’s Future is Insanely Cheap (2020),” https://rameznaam.com/2020/05/14/solars-future-is-insanely-cheap-2020/.

Two covers, two videos, two sectors. As of this writing, Cumberland hasn’t bought any direct positions in Energy or Materials. Please note that could change at any time.

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 – Risking an Investment War with China

Not having learned the costly lessons of a US-China trade war, the US government has now taken action that risks triggering an investment war with China that could have serious negative effects on the economies of both countries at a time when each will be seeking to recover from the heavy impacts of the COVID-19 crisis.

Market Commentary - Cumberland Advisors - Risking an Investment War with China by William Witherell, Ph.D
The timing could not be worse. The main US federal government pension fund, the Thrift Savings Plan (TSP), which has $594bn in assets for 5.9 million government employees, is managed by the Federal Retirement Thrift Investment Board (FRTIB). White House pressure, citing how China has responded to COVID-19 and arguing that Chinese companies present a national security risk to the US, caused the FRTIB to reverse a plan for the TSP to include Chinese stocks in its international portfolio. Beijing has responded sharply and noted that the action will hurt US investors. The US action coincided with a ramping up of wide-ranging criticism of China by President Trump and some senators, adding fuel to what The Economist magazine aptly calls the developing US-China “Scold War.”

The FRTIB stated that the move to invest in Chinese stocks has been “deferred,” in part because Trump had in the previous week nominated three new board members. That certainly suggests the future investment policy of the board with respect to China will reflect the president’s views. There are several reasons to be concerned about this action.

First, as the FTRIB argued in November, not to invest in a global index of stocks that includes Chinese stocks would disadvantage the 5.5 million federal employees that invest in the pension fund. The evidence supporting that statement is strong. The board had been planning to switch their international portfolio from the MSCI EAFE Index of investible developed-market securities based in Europe, Australia, and the Far East to the MSCI ACWI ex-USA Index of international stocks, which covers investible securities of all emerging and developed markets, excluding the US. Both indexes are market capital-weighted and exclude small caps. Chinese companies account for some 11.33% of the stocks in the iShares ACWX ETF that tracks the MSCI ACWI ex-USA Index. China’s stocks are second only to Japan’s 17.28% share. In recent years Chinese stocks have outperformed most other international markets. Over the past three years, including the current year to date, the MSCI China Index gained 7.58% compared with the MSCI EAFE Index’s loss of 1.93%. The MSCI ACWI ex-USA hasn’t done much better, a loss of 1.57% as China’s strong performance has been offset by weaker performance in other markets.

A greater concern is that this move and the rhetoric surrounding it could lead to a tit-for-tat escalation of restrictions on investment flows between the world’s two largest economies, a development that would do long-term damage to both economies at a time when the global economy is in the deepest recession in memory. We already have the president saying that he is “looking very strongly at” the stocks of Chinese firms listed in the US and at whether Chinese companies should be allowed to list if they did not follow US accounting rules. He did note there is a downside to such a move. He also is increasing his rhetoric on trade, threatening to counter the progress that has been made in that area. He went so far as to say “We could cut off the whole relationship”. While some of this rhetoric can be discounted as political bluster aimed at the November elections, serious harm can result. Clearly the risk of retaliation from China that impacts investment and capital markets is great. Washington should not forget that China holds over $1 trillion of US Treasury bonds.

I will close with a little history. The current global integration of capital markets has played an important role in the post-World War II recovery and growth of the global economy and economic development. The reduction and eventual elimination of most restrictions on capital flows was encouraged and overseen by the OECD and the IMF, recognizing that financial integration needs to be matched with sound domestic policies. The OECD’s Capital Movements Code, the sole multilateral agreement among states addressing capital flow policies, has served for over 60 years. For 26 of those years I directed the OECD’s peer-exchange and peer-review mechanisms with respect to the liberalization of capital flows. The Code was revised and adopted in 2019. The updates included increased transparency and efficiency along with closer ties to the IMF and the G20. The objectives of removing barriers to the movement of capital while tackling economic and financial instability remain valid for the international financial architecture. We take threats to that architecture seriously.

The ETF mentioned in this commentary, ACWX, is currently held in Cumberland Advisors International and Global portfolios. It is not held by the author.

Bill Witherell, Ph.D.
Chief Global Economist & Portfolio Manager
Email | Bio
____________________________________________________________________
Sources: Financial Times, New York Times, CNBC, http://OECD.org, BBH Currency Strategy


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 –  Trump Opportunity, Puerto Rico, Pharma

My friend Dennis Gartman had a guest commentary in the wonderful and comprehensive monthly research publication offered by Gary Shilling (www.agaryshilling.com) and thoughtfully assembled and edited by Fred Rossi. I thank both Gary and Fred for permission to quote their work.

Cumberland Advisors Market Commentary - Trump Opportunity, Puerto Rico, Pharma

Dennis wrote:

“Puerto Rico shall be a huge winner, for it was only a bit more than a decade ago that the Commonwealth was a massive supplier of pharmaceuticals to the US for a number of reasons, not the least of which was the tax model that applied to the pharmaceutical companies located there. Congress would do well to reinstitute those tax laws; and if Congress does, Puerto Rico’s economy will benefit… greatly.”

Dennis and Gary published on this topic before I did, so they must be credited here. We agree and must add that PR holds the key to the resurgence of domestic American pharmaceutical manufacturing. If President Trump and his advisers want to return the safety of US medical manufacturing to America, they can do it with the stroke of a pen (with congressional help).

The history is simple.

For years the American pharma companies manufactured in PR. They were there under a special tax provision known as Section 936, which had been in the law for years. President Clinton launched an initiative to repeal 936. That repeal took effect in 1996, and the incentives were phased out over a ten-year period. So the full impact hit after 2006. While a 2006 GAO study reported data that overall manufacturing activity had grown during the phaseout, with pharma manufacturing being more than replaced by other business development in the chemical industry (GAO, 2006, https://www.gao.gov/products/GAO-06-541, pg. 17), the more telling statistic is that Puerto Rico’s overall manufacturing job base fell by more than 40% during the phase-out and today is more than 50% lower than in 1996. Overall labor force growth was flat to negative for the past half-decade, while in the US mainland it was strongly upward (until COVID-19). See “Here’s how an obscure tax change sank Puerto Rico’s economy,” CNBC, Sept. 26, 2017, https://www.cnbc.com/2017/09/26/heres-how-an-obscure-tax-change-sank-puerto-ricos-economy.html.

PR’s financial decline landed it in the present dire circumstances. The situation was then made far worse by damage from Hurricane Maria in 2017, and now COVID-19 has hit.

Pharma moved to India, China, and elsewhere. Now the US policy makers want to move things back. White House trade adviser Peter Navarro announced on March 16 that he was bringing to President Trump an executive order that would require US companies to relocate their medical supply chains back to the United States. Big Pharma immediately pushed back hard, and Navarro counterattacked (“Trump advisor Peter Navarro slams Big Pharma’s lobbying against possible ‘Buy America’ executive order,” CNBC, March 19, 2020, https://www.cnbc.com/2020/03/19/coronavirus-trump-aide-peter-navarro-slams-big-pharma.html). As of May 4, the order had still not been signed, and Reuters reported that the issue had divided some of Trump’s key advisers, with Treasury Secretary Mnuchin and economic adviser Larry Kudlow opposing the order (“Trump order to buy U.S.-made medical supplies coming soon –Navarro,” Nasdaq, May 4, 2020, https://www.nasdaq.com/articles/trump-order-to-buy-u.s.-made-medical-supplies-coming-soon-navarro-2020-05-04).

Congress could immediately undo the damage it did in 1996. Trump could then rightfully claim credit for restoring medical manufacturing and relocating it back to Puerto Rico, where there is still a residual of skills and some residual capital (“A Hotspot for Pharmaceutical Manufacturing,” Government of Puerto Rico, http://www.pridco.com/industries/Pages/Pharmaceutical.aspx). The incentives that worked in the past would likely start an immediate inflow of capital, and America’s medical supplies would be returning under the safe US umbrella of supervision and domestic manufacturing.

At the same time PR would likely begin to heal its economic malaise.

All it takes is concerted action from our politicians.

Disclosure: Please note that Cumberland has a number of clients with investments in certain insured PR debt instruments and has positions in ETFs with certain pharmaceutical companies.

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


Download a PDF version of this commentary:  Cumberland Advisors Market Commentary-Trump Opportunity, Puerto Rico, Pharma by David R. Kotok


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 Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.




Cumberland Advisors Market Commentary – The Covid-19 Blame Game, Part 1

As the SARS-CoV-2 coronavirus emerged in Wuhan, spread throughout China (as millions of Wuhan residents fled their city), and then found its way overseas to cause a global pandemic, pressure mounted on governments to justify their actions in response, and a blame game soon ensued, with the Chinese and US among the main players.

Market Commentary - Cumberland Advisors - The Covid-19 Blame Game, Part 1

Initially, and just days after signing the Phase 1 trade deal, President Trump praised Chinese efforts to control the virus. On January 24, he said on Twitter,

“China has been working very hard to contain the Coronavirus. The United States greatly appreciates their efforts and transparency. It will all work out well. In particular, on behalf of the American People, I want to thank President Xi!”

And on February 7 Trump tweeted, “President Xi strongly leads what will be a very successful operation. We are working closely with China to help!”

However, on March 6, as the first US community-spread cases were appearing and Trump was still trying to label Covid-19 as a Chinese problem that had no real impact on the US, the president told reporters, “We just learned about [the virus] a very short while ago.”

The following day the administration’s own Centers for Disease Control and Prevention (CDC) hastened to mention that the US had “heard early on, at the beginning of – end of December – about this unusual illness that was taking place in Wuhan, China.”

On March 11, White House National Security Adviser Robert O’Brien criticized China for covering up the Covid-19 outbreak. “It probably cost the world community two months to respond, during which we could have dramatically curtailed what happened both in China and what’s now happening across the world,” O’Brien intoned.

The next day, Chinese foreign ministry spokesman Zhao Lijian opined on Twitter that it might have been the US military that “brought the epidemic to Wuhan.” He shared articles from a conspiratorial website to bolster his claim.

During the week that followed (March 17 to 23), President Trump repeatedly referred to SARS-CoV-2 as “the Chinese virus.” The Chinese foreign ministry responded that it was “strongly indignant and opposed” to Trump’s use of the term.

On March 21, after Trump imposed bans on travel to and from China and Europe, declared a national emergency, and invoked the Defense Production Act; after the rollout of the initial US testing program was declared “a failing” by Dr. Anthony Fauci; and after US cases exceeded 10,000, Trump mused, “I wish China would have told us more about what was going on in China, long prior to us reading about it, even though the news isn’t exactly disseminated.” A day later he added, “I wish they told us three months sooner that this was a problem. We didn’t know about it. They knew about it and they should have told us. We could have saved a lot of lives throughout the world.”

The Chinese foreign ministry spokesman then listed seven occasions between January and mid-March when the two countries had communicated about the outbreak, including phone conversations between the two presidents and with health officials on both sides, a US embassy briefing in China, and a nine-day China field trip that included two American experts. “China has kept the US informed of the situation since the epidemic broke out,” the spokesman stated.

(“Fact vs fiction: Timeline of a coronavirus war of words between Beijing and Washington,” South China Morning Post, March 25, 2020, https://www.scmp.com/news/china/politics/article/3076800/fact-vs-fiction-timeline-coronavirus-war-words-between-beijing)

Meanwhile, as this high-level tit for tat was playing out, the Global Times, a daily tabloid newspaper that is a propaganda arm of the Chinese Communist Party, published an article about a Feb. 22 program that was broadcast on Japan’s Asahi TV network, in which the suspicion was expressed that 14,000 Americans who had officially died of influenza might have actually succumbed to Covid-19.

“The Military World Games were held in Wuhan in October,” the Global Times noted, adding, “Perhaps the US delegates brought the coronavirus to Wuhan, and some mutation occurred to the virus, making it more deadly and contagious, and causing a widespread outbreak this year.”

(“How China’s fake news machine is rewriting the history of Covid-19, even as the pandemic unfolds,” Politico, April 4, 2020, https://www.politico.com/news/magazine/2020/04/04/china-fake-news-coronavirus-164652)

The Global Times piece went viral overnight in China, on Feb. 23. The Global Times followed up with a second piece, in which it reported that the US CDC had told the Global Times that there was no evidence to support Asahi TV ‘s story. (Whether the CDC actually did so is of course open to question. There is no verifiable report of its having done so.) To its everlasting credit, the Global Times added, “TV Asahi’s story on Saturday sparked various conspiracy theories on Chinese cyberspace.”

The story was picked up by GlobalResearch.ca, a conspiracy website run by Prof. Michel Chossudovsky, professor emeritus of economics at the University of Ottawa and president and director of the Centre for Research on Globalization, which is much given to publishing conspiracy theories. In a March 4 article titled “China’s Coronavirus: A Shocking Update. Did The Virus Originate in the US?” Global Research regurgitates the Chinese fake news about the virus’s origins, and then cites and provides a screenshot of a “Taiwan virologist” supposedly delivering a lecture about the origins of the virus in Taipei. The “virologist” (who turns out to be a politician from the pro-Beijing New Party and a member of the Taipei City Council, who, before entering politics in 2002, was a pharmacology professor) goes on about Chinese, Russian, and Georgian defectors carrying American biowarfare secrets, and mosquitoes and bats developed by the US military for nefarious purposes.

Then the man in the video mentions that the CDC had “suddenly and totally shut down” the US Army’s Fort Detrick bio-weapons lab in September 2019, because “the facilities were insufficient to prevent loss of pathogens.” Well, actually, the “virologist” doesn’t mention Fort Detrick in his lecture – that’s a Global Research contribution to the tale. The suggestion here is that nasty critters from Fort Detrick were spirited into Wuhan and released by US participants in the Military World Games in October.

(“US CDC refutes TV Asahi story, claiming no evidence shows flu deaths in US were caused by coronavirus,” Global Times, Feb. 22, 2020 [apparently back-dated], https://www.globaltimes.cn/content/1180415.shtml)

Unfortunately, the US Army had provided fuel for the conspiratorial flames, because the CDC did in fact shut down Fort Detrick, though in mid-July, not September. (“Army lab fights coronavirus and its own demons,” Roll Call, March 26, 2020, https://www.rollcall.com/2020/03/26/army-lab-fights-coronavirus-and-its-own-demons/)

In any case, it was the Global Research hit piece that Zhao Lijian, the Chinese foreign ministry spokesman, cited nine days later, on March 12, when he suggested the US Army had delivered the virus to Wuhan.

(Incidentally, Fort Detrick was fully reopened in March 2020. [“Maryland lawmakers applaud CDC’s decision to reopen Fort Detrick facility,” Homeland Preparedness News, April 1, 2020, https://homelandprepnews.com/stories/46681-maryland-lawmakers-applaud-cdcs-decision-to-reopen-fort-detrick-facility/])

To demonstrate just how far Chinese state media were willing to go in the attempt to shift the blame for Covid-19 to the US, we will cite a report from MEMRI, the Middle East Media Research Institute (https://www.memri.org/) a Washington DC-based policy think tank that translates Middle Eastern language media into English. On April 17 MEMRI reported that CGTN Arabic, China’s official Arabic language TV, had broadcast a program on March 17 which strongly suggested that Covid-19 had come from the United States.

MEMRI invited the host of the CGTN program, a Chinese vlogger called “Ms. V,” onto their own “China Views” broadcast, and she dutifully rehashed all the conspiratorial claims from the Global Times and Global Research articles. Here is the link to the MEMRI program, featuring the “China Views” video: https://www.memri.org/reports/chinas-official-arabic-language-tv-covid-19-does-not-appear-have-originated-china-evidence.

MEMRI has a reputation for scrupulously sourcing and professionally citing each item it publishes. We consider it unfortunate that the organization gave so much play on this occasion to conspiratorial nonsense. But ultimately, the blame for this harmful dose of fake news rests with the Chinese government.

We continue to track the propaganda blame game for a reason. It tells us about rising geopolitical risk and that impacts financial markets. Those risks appear to be rising. We have rebalanced our aerospace/defense overweight position in our US stock market ETF strategy.

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.

Sign up for our FREE Cumberland Market Commentaries

Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.




Cumberland Advisors Week in Review (Apr 20, 2020 – Apr 24, 2020)

The Cumberland Advisors Week in Review is a recap of news, commentary, and opinion from our team.

Week In Review

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.

CUMBERLAND ADVISORS’ WEEKLY RECAP

As part of Cumberland Advisors’ continuous effort to maintain strong customer relationships, we offer this week’s short video discussing current market conditions and how we are positioning portfolios.

Thank you for joining Cumberland Advisors for this end-of-week update on market conditions, bonds & equities with me, Matt McAleer, and John Mousseau.

John Mousseau leads today on this week’s video.He talks about:
-Period of normalcy this week for bonds.
-Key for this week: Deals came to market and got done easily. Most municipal bond deals were oversubscribed and that’s a good sign. We had stability in the markets.
-The real issue this week is Senate Majority Leader Mitch McConnell’s talk of states declaring bankruptcy instead of getting federal aid. There are a number of problems that this scenario raises.
-John wrote a commentary this week about McConnell’s statement and the link is here if you missed it: https://www.cumber.com/cumberland-advisors-market-commentary-mcconnell-as-meredith-whitney/

I’m next with my take on markets this week. My take on a few things:
-Another volatile week.
-What’s positive and negative this week?
-The market was able to price in the volatility in oil.
-Very interesting in what’s going on with transportation. What’s under the hood?
-What are we seeing in biotech? Medical devices?
-What is VIX trying to tell us?

Once again, we shot our own video this week. Thank you for taking the time to join us.

Please reach out with any questions/comments you may have about this week’s
update; we appreciate your calls, comments, and emails.

Watch in the player above or at this link: https://youtu.be/uv59KJMqi_Y

Have a safe weekend,

-Matt McAleer

Matt enjoys your feedback. You can reach him at:
-Link to Matt’s Email: Matthew.McAleer@Cumber.com
-Link to Matt’s Twitter: https://twitter.com/MattMcAleer4
-Link to Matt’s LinkedIn: https://www.linkedin.com/in/matthew-c-mcaleer/
-Call Matt: (800) 257-7013

Other questions or comments? Email us at info@cumber.com or give us a call at (800) 257-7013.

Contact Matt or any one of our advisors by following this link: https://www.cumber.com/our-people/


Money Show Webinar - Bond Markets Through the Coronavirus with John R. Mousseau, CFA

Watch John’s April 23, 2020 presentation,  “Bond Markets Through the Coronavirus” here: https://www.cumber.com/bond-markets-through-the-coronavirus-john-mousseau/


Cumberland Advisors In The News

Fed Following WWII Model to Control Yield Curve

Bloomberg Radio – April 21, 2020

David Kotok, Chairman & Chief Investment Officer at Cumberland Advisors, discusses bond markets, the Fed and current investment outlook. Hosted by Lisa Abramowicz and Paul Sweeney.
Running time 07:36 – Play Episode: https://www.bloomberg.com/news/audio/2020-04-21/fed-following-wwii-model-to-control-yield-curve-kotok-radio


McConnell’s bankruptcy suggestion boomerangs

by Brian Tumulty – The Bond Buyer – April 24, 2020

Critics say Senate Majority Leader Mitch McConnell’s suggestion that Congress should allow states to file for bankruptcy would undermine efforts to quickly restart the economy and could damage the municipal market. John Mousseau, president and chief executive officer and director of fixed income at Cumberland Advisors, likened McConnell’s comment to the 2010 prediction by Meredith Whitney, a noted bank analyst, predicting hundreds of billions of dollars of municipal defaults were coming. They never materialized. She caused lots of market damage and outflows from municipal bond funds before sanity resumed and yields moved lower than they had been before she made her remarks, according to Mousseau. Senate Democratic Minority Leader Chuck Schumer said the backlash “has given even more momentum for state and local assistance,” making McConnell “increasingly isolated.” [Continued behind Paywall at The Bond Buyer…]


Lots of Muni Bonds Are Going to Be Just Fine

by Barry Ritholtz – April 13, 2020

(Bloomberg Opinion) — In an extraordinary attempt to help the economy in the midst of the coronavirus economic downturn, the Federal Reserve’s balance sheet has ballooned to more than $6 trillion.

How this has affected fixed-income pricing, yield, risk and even trading is the subject of this week’s Masters in Business interview with John R. Mousseau, president, chief executive officer and director of fixed income at Cumberland Advisors. Mousseau also is the co-author of the book “Adventures in Muniland: A Guide to Municipal Bond Investing in the Post-Crisis Era.”

He notes the current slump is very different from the 2008-09 financial crisis. That event was driven by credit deterioration and mortgage defaults. Things only came to a head only after defaults soared and bond markets developed liquidity problems after the collapse of Lehman Brothers. In the fixed-income world today, the coronavirus pandemic is characterized mostly by economic paralysis, but so far not mass defaults.

Full story at Yahoo Finance: https://finance.yahoo.com/news/lots-muni-bonds-going-just-153254865.html

More News About Cumberland Advisors Here: https://www.cumber.com/news


Cumberland Advisors Market Commentary

Cumberland Advisors Market Commentary offers insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies. Our readers appreciate its timeliness, depth of analysis, and quality of research.

To read current and past commentaries, visit www.cumber.com/category/market-commentary/

 


 

Cumberland Advisors Market Commentary – The UK Economy Falls Off the Cliff; Brexit Negotiations Resume

Author: William Witherell, Ph.D., Post Date: April 24, 2020

Market Commentary - Cumberland Advisors - The UK Economy Falls Off the Cliff; Brexit Negotiations ResumeThe economic situation in the UK has worsened dramatically in just the month and a half since our March 4th commentary on the subject. Last week, the Bank of England’s (BOE) governor, Andrew Bailey, told journalists that he did not disagree with the Office for Budget Responsibility’s forecast of a 35% decline in the UK’s [Continued…]

Cumberland Advisors Market Commentary – McConnell as Meredith Whitney

Author: John R. Mousseau, CFA, Post Date: April 23, 2020

Market Commentary - Cumberland Advisors -McConnell as Meredith Whitney (Mousseau)Senate Majority Leader McConnell yesterday was reported by Bloomberg News as saying that he “would certainly be in favor of allowing states to use the bankruptcy route” rather than giving them a Federal bailout. This reminded us of 2010 when Meredith Whitney, a noted bank analyst, predicted that there would be hundreds of billions of [Continued…]

Cumberland Advisors Market Commentary – About Masks – (Plus a personal note)

Author: David R. Kotok, Post Date: April 22, 2020

David Kotok - About MasksStraight Talk on Masks from Anthony Fauci – In a widely shared YouTube interview with Lilly Singh, Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases (NIAID) and a member of the White House coronavirus task force, explained the rationale for wearing face masks. He also explained why the CDC didn’t initially suggest [Continued…]

Cumberland Advisors Market Commentary – COVID – 19: Health Recovery and Economic Recovery Go Hand in Hand

Author: Peter A. Gold, Esquire & Jeffrey P. Gold, MD, Post Date: April 20, 2020

COVID - 19: Health Recovery and Economic Recovery Go Hand in Hand There is a lot of competing information in circulation relating to the current coronavirus pandemic and there is now a rush to offer opinion on how to best reopen economies and communities in a safe manner. It is our honor and privilege to introduce you to the following authors who also happen to be brothers. [Continued…]

Cumberland Advisors Market Commentary – Sturm und Drang & Beethoven’s Pastoral

Author: David R. Kotok, Post Date: April 19, 2020

Sturm und Drang & Beethoven’s PastoralSurprisingly, the German term Sturm und Drang originated with the American Revolution in 1776. The term first appeared as the title of a play by Friedrich Maximilian Klinger. The setting of the play is the unfolding American Revolution, in which, says Wikipedia, “the author gives violent expression to difficult emotions and extols individuality and subjectivity [Continued…]

 

Cumberland Advisors Market Commentary – Narrow Banks

Author: Robert Eisenbeis, Ph.D., Post Date: April 17, 2020

Narrow Banks

In a move largely overlooked due to the virus pandemic, on March 25, Judge Andrew L. Carter, Jr., of the United States District Court for the Southern District of New York dismissed a case filed by principals of The Narrow Bank (TNB) against the Federal Reserve Bank of New York (https://www.tnbusa.com/wp-content/uploads/2020/03/2020.03.25-TNB-Order.pdf). What is The Narrow [Continued…]

Cumberland Advisors Market Commentary – Fed Goes to War

Author: David R. Kotok, Post Date: April 16, 2020

Fed Goes to War

The April 12, 2020, posting on the Money, Banking and Financial Markets site, entitled “The Fed Goes to War: Part 3,” expands on the discussion of the extraordinary measures taken recently by the Federal Reserve. Let me offer a personal endorsement: I find the site consistently and exceptionally helpful. Much has already been written about about this expansion of the Fed’s arsenal and the list of new facilities. Essentially, the playbook for last decade’s Great Financial Crisis has been reopened, and a whole new set of tools has been added. [Continued…]

 

The CDC Foundation

Author: David R. Kotok, Post Date: March 23, 2020

CDC Foundation Dr Judy Monroe & David KotokDear readers. The CDC Foundation is not widely known. It’s a 501(c)3 that was created by Congress as a special charitable agency. The Foundation works right alongside the CDC and other national health agencies but is an independent charity. It has a special-purpose charter. Its purpose is to respond rapidly to threats like COVID-19 or [Continued…]


 


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.

Sign up for our FREE Cumberland Market Commentaries

Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.




Cumberland Advisors Week in Review (Apr 13, 2020 – Apr 17, 2020)

The Cumberland Advisors Week in Review is a recap of news, commentary, and opinion from our team.

Week In Review

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.

CUMBERLAND ADVISORS’ WEEKLY RECAP

As part of Cumberland Advisors’ continuous effort to maintain strong customer relationships, we offer this week’s short video discussing current market conditions and how we are positioning portfolios.

Thank you for joining Cumberland Advisors for this end-of-week update on market conditions, bonds & equities with me, Matt McAleer, and John Mousseau.

David Kotok also shot a video to accompany his commentary this week which you can see below.

I’m first up with my take on markets this week. I made it into the office with John Mousseau today though we sit about 50ft apart. We remain cautious and shoot our videos separately.

Next, John tackles the bond market. We’re still getting great feedback about the Federal Reserve’s unprecedented action last week. If you haven’t read it, Cumberland Advisors preceded their move with a public commentary and call to action entitled, “A Proposal for the Coronavirus Anticipation Note (CAN)” on April 01, 2020. Let us know what you think: https://www.cumber.com/cumberland-advisors-market-commentary-a-proposal-for-the-coronavirus-anticipation-note-can/

We all shot our own video this week and we appreciate you taking the time to join us.

Please reach out with any questions/comments you may have about this update, we always appreciate your calls, comments, and emails.

Watch in the player above or at this link: https://youtu.be/dkV9PjXfR6U

Have a safe weekend and thank you for joining us at Cumberland Advisors.

-Matt McAleer

Matt enjoys your feedback. You can reach him at:
-Link to Matt’s Email: Matthew.McAleer@Cumber.com
-Link to Matt’s Twitter: https://twitter.com/MattMcAleer4
-Link to Matt’s LinkedIn: https://www.linkedin.com/in/matthew-c-mcaleer/
-Call Matt: (800) 257-7013

Other questions or comments? Email us at info@cumber.com or give us a call at (800) 257-7013.

Contact Matt or any one of our advisors by following this link: https://www.cumber.com/our-people/

 


Cumberland Advisors In The News

Lots of Muni Bonds Are Going to Be Just Fine

by Barry Ritholtz – April 13, 2020

(Bloomberg Opinion) — In an extraordinary attempt to help the economy in the midst of the coronavirus economic downturn, the Federal Reserve’s balance sheet has ballooned to more than $6 trillion.

How this has affected fixed-income pricing, yield, risk and even trading is the subject of this week’s Masters in Business interview with John R. Mousseau, president, chief executive officer and director of fixed income at Cumberland Advisors. Mousseau also is the co-author of the book “Adventures in Muniland: A Guide to Municipal Bond Investing in the Post-Crisis Era.”

He notes the current slump is very different from the 2008-09 financial crisis. That event was driven by credit deterioration and mortgage defaults. Things only came to a head only after defaults soared and bond markets developed liquidity problems after the collapse of Lehman Brothers. In the fixed-income world today, the coronavirus pandemic is characterized mostly by economic paralysis, but so far not mass defaults.

Full story at Yahoo Finance: https://finance.yahoo.com/news/lots-muni-bonds-going-just-153254865.html

Court rules Puerto Rico residents eligible for SSI program

by Robert Slavin – April 14, 2020

A federal appeals court has upheld a decision that people in Puerto Rico are eligible for the Supplemental Security Income program.

As many as 700,000 people may be impacted by Friday’s ruling from the U.S. Court of Appeals for the First Circuit. The Social Security Administration runs SSI, which provides money to low-income people who are disabled, blind, or over 65. It also provides money to families with disabled children.
The appeals court ruling may impact as many as 700,000 people in Puerto Rico.Bloomberg News

Puerto Rico currently has a program jointly funded with the federal government that provides funds to these groups.

According to Jenniffer González-Colon, Puerto Rico’s non-voting representative in Congress, the average SSI beneficiary receives $553 monthly, whereas the average beneficiary under the Puerto Rico program receives $77 monthly. The maximum income permitted for an individual to qualify for SSI is $750 per month, compared to a maximum of $65 per month for the Puerto Rico program.

Cumberland Advisors Portfolio Manager Shaun Burgess said that he expected SSI to have more impact by allowing the local government to save money on the existing program than as a stimulus on the local economy. Cumberland owns insured Puerto Rico bonds.

Read the full story at The Bond Buyer: https://www.bondbuyer.com/news/court-rules-puerto-rico-residents-eligible-for-ssi-program

More News About Cumberland Advisors Here: https://www.cumber.com/news


Cumberland Advisors Market Commentary

Cumberland Advisors Market Commentary offers insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies. Our readers appreciate its timeliness, depth of analysis, and quality of research.

To read current and past commentaries, visit www.cumber.com/category/market-commentary/

 


Cumberland Advisors Market Commentary – Narrow Banks

Author: Robert Eisenbeis, Ph.D., Post Date: April 17, 2020

Narrow Banks

In a move largely overlooked due to the virus pandemic, on March 25, Judge Andrew L. Carter, Jr., of the United States District Court for the Southern District of New York dismissed a case filed by principals of The Narrow Bank (TNB) against the Federal Reserve Bank of New York (https://www.tnbusa.com/wp-content/uploads/2020/03/2020.03.25-TNB-Order.pdf). What is The Narrow [Continued…]

Cumberland Advisors Market Commentary – Fed Goes to War

Author: David R. Kotok, Post Date: April 16, 2020

Fed Goes to War

The April 12, 2020, posting on the Money, Banking and Financial Markets site, entitled “The Fed Goes to War: Part 3,” expands on the discussion of the extraordinary measures taken recently by the Federal Reserve. Let me offer a personal endorsement: I find the site consistently and exceptionally helpful. Much has already been written about about this expansion of the Fed’s arsenal and the list of new facilities. Essentially, the playbook for last decade’s Great Financial Crisis has been reopened, and a whole new set of tools has been added. [Continued…]

Cumberland Advisors Market Commentary – A Very British Affair — Living with COVID-19 in the UK

Author: Kevin Humphreys, Post Date: April 15, 2020

A Very British Affair — Living with COVID-19 in the UK

Kevin Humphreys is a long-time commentary subscriber from the other side of the pond. He is a London-based independent financial market analyst and commentator with 23 years of trading and management in tier 1 UK banks followed by another 10 years in broking, management and market analysis roles, specializing in Eurozone and UK markets. Kevin [Continued…]

Cumberland Advisors Market Commentary – Governors and the States

Author: David R. Kotok, Post Date: April 13, 2020

Market Commentary - Cumberland Advisors - Governors and the States“Governor Gavin Newsom said that he would use the bulk purchasing power of California ‘as a nation-state’ to acquire the hospital supplies that the federal government has failed to provide. If all goes according to plan, Newsom said, California might even ‘export some of those supplies to states in need.’ “‘Nation-state.’ ‘Export.’ “Newsom is accomplishing [Continued…]

Cumberland Advisors Commentary – The Biblical Rembrandt

Author: David R. Kotok, Post Date: April 12, 2020

Rembrandt - Christ Before Pilate

In Amsterdam in 1632 , a talented young artist, Rembrandt Harmenszoon van Rijn, was commissioned to produce five etchings of biblical scenes. Rembrandt was born in 1606 and this was his breakthrough engagement, at age 26. His patron was Stadtholder Frederik Hendrik, Prince of Orange, the Dutch sovereign. Rembrandt was inspired by Rubens’s altarpiece in [Continued…]

Cumberland Advisors Market Commentary – Repos Revisited

Author: Robert Eisenbeis, Ph.D., Post Date: April 9, 2020

Market Commentary - Cumberland Advisors - Repos RevisitedOn March 12, a Wall Street Journal headline announced, “Fed to Inject $1.5 Trillion in Bid to Prevent ‘Unusual Disruptions’ in Markets” (https://www.wsj.com/articles/fed-to-inject-1-5-trillion-in-bid-to-prevent-unusual-disruptions-in-markets-11584033537). The inference was that the Fed was embarking upon a massive injection of funds into short-term money markets. That is, the first three offerings of $500 billion each were but the first [Continued…]

Cumberland Advisors Guest Commentary – Timely Data Matters

Author: Samuel E. Rines, Post Date: April 8, 2020

Guest Commentary - Timely Data MattersMy friend and Camp K veteran, Sam Rines ( Chief Economist at Avalon Investment and Advisory), has an excellent discussion on high frequency data and how critical it is in the current environment. He is kind enough to give us permission to share the entire piece entitled, “Timely Data Matters,” with our readers. Thank you, [Continued…]

Cumberland Advisors Market Commentary – WW2 versus WWC: The Doolittle Moment

Author: David R. Kotok, Post Date: April 7, 2020

WW2 versus WWC - The Doolittle Moment 1280x720

We’re going to look at World War 2 (WW2) versus the World War COVID-19 (WWC) events now unfolding and see what we can glean about markets, economies, interest rates, inflation rates, and the overall outlook. Let’s start with the stock market. We expect this will be a multi-part series. Below is a chart that shows [Continued…]

The War in Europe

Author: William Witherell, Ph.D., Post Date: April 3, 2020

The War in EuropeDuring the first quarter of 2020, Europe once again found itself to be in the center of a global war, this time against an invisible, very deadly enemy, the virus SARS-CoV-2, which causes COVID-19. At the end of the quarter, on March 31, the 19 countries of the Eurozone had 359,296 confirmed cases of the [Continued…]

The CDC Foundation

Author: David R. Kotok, Post Date: March 23, 2020

CDC Foundation Dr Judy Monroe & David KotokDear readers. The CDC Foundation is not widely known. It’s a 501(c)3 that was created by Congress as a special charitable agency. The Foundation works right alongside the CDC and other national health agencies but is an independent charity. It has a special-purpose charter. Its purpose is to respond rapidly to threats like COVID-19 or [Continued…]


John Mousseau will be part of a MoneyShow presentation next week (Apr 23, 2020 1:00 PM – 7:30 PM EDT) and his talk will be Bond Markets Through the Coronavirus. He’ll cover analysis of treasury, taxable, and municipal markets, federal monetary policy, and administration of fiscal policy. More info, talks by other speakers, and registration can be found here: Resetting Your Portfolio in a Changing World


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.

Sign up for our FREE Cumberland Market Commentaries

Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.




Cumberland Advisors Week in Review (Mar 30, 2020 – Apr 03, 2020)

The Cumberland Advisors Week in Review is a recap of news, commentary, and opinion from our team.

Week In Review

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.

CUMBERLAND ADVISORS’ WEEKLY RECAP

As part of Cumberland Advisors’ continuous effort to maintain strong customer relationships, we offer this week’s short video discussing current market conditions and how we are positioning portfolios.

Thank you for joining Cumberland Advisors for this end-of-week update on market conditions, bonds & equities with Matt McAleer and John Mousseau.

We’re in full social distancing mode this week, doing our part to combat COVID-19/Coronavirus.

First up is Matt McAleer with his thoughts on equities.

Next up is John Mousseau and his analysis of the fixed income / bond market.

Both gentlemen shot their own video this week and we expect to build upon this experience and get even better at producing our updates in a distributed fashion for you. Thanks for joining us.

Please reach out to Matt or John with any questions/comments you may have about this video, we always appreciate your calls, comments, and emails.

Watch this week’s update in the player above or at this link: https://youtu.be/7EabFgH8BYw

Have a safe weekend and thank you for joining us at Cumberland Advisors.

-Matt McAleer

Matt enjoys your feedback. You can reach him at:
-Link to Matt’s Email: Matthew.McAleer@Cumber.com
-Link to Matt’s Twitter: https://twitter.com/MattMcAleer4
-Link to Matt’s LinkedIn: https://www.linkedin.com/in/matthew-c-mcaleer/
-Call Matt: (800) 257-7013

Other questions or comments? Email us at info@cumber.com or give us a call at (800) 257-7013.

Contact Matt or any one of our advisors by following this link: https://www.cumber.com/our-people/

 


Cumberland Advisors In The News

Cumberland proposes new cash-flow anticipation note to help issuers fight coronavirus

State and local governments are facing a cash-flow crunch under the present emergency conditions, which limit or eliminate many reveue streams. Cumberland argues that this type of short-term security would help alleviate the problem and let municipalities recover more quickly once the danger had passed and things return to normal.

Full story at The Bond Buyer (paywall): https://www.bondbuyer.com/news/cumberland-proposes-new-cash-flow-anticipation-note-to-help-issuers-fight-coronavirus

More News About Cumberland Advisors Here: https://www.cumber.com/news


Cumberland Advisors Market Commentary

Cumberland Advisors Market Commentary offers insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies. Our readers appreciate its timeliness, depth of analysis, and quality of research.

To read current and past commentaries, visit www.cumber.com/category/market-commentary/


The War in Europe

Author: William Witherell, Ph.D., Post Date: April 3, 2020

The War in Europe During the first quarter of 2020, Europe once again found itself to be in the center of a global war, this time against an invisible, very deadly enemy, the virus SARS-CoV-2, which causes COVID-19. At the end of the quarter, on March 31, the 19 countries of the Eurozone had 359,296 confirmed cases of the [Continued…]

China’s Healthcare & Economy in the Aftermath of COVID-19

Author: David R. Kotok, Post Date: April 2, 2020

China’s Healthcare & Economy in the Aftermath of COVID-19 Dear Readers, While the United States and much of the world outside of Asia is still trying to “flatten the curve” in response to the coronavirus pandemic, China is posturing itself for a quick comeback. Can we believe their numbers and agree that their virus-response methodology was effective? USA Today along with Andy Mok, a [Continued…]

A Proposal for the Coronavirus Anticipation Note (CAN)

Author: David R. Kotok & John R. Mousseau, Post Date: April 1, 2020

A Proposal for the Corona Anticipation Note (CAN) John Mousseau and I have combined our professional experience with our views of the municipal finance market. With the help of our Cumberland staff, we want to offer a format for immediate assistance designed to address urgent state and local government financing problems. This proposal is only a framework. There are many skilled professionals who [Continued…]

One Less Worry?

Author: Robert Eisenbeis, Ph.D., Post Date: March 31, 2020

Cumberland Advisors Market Commentary - One Less Worry (Eisenbeis) It is tempting to focus on the here and now, especially when we are worrying about the economic fallout from the coronavirus pandemic and its impact on the nation. We are withdrawing from social contact and are concerned about all sources of risks. We have seen reports of people sanitizing cash as one way of [Continued…]

Cumberland Advisors Guest Commentary – Maybe the World is not Ending!

Author: Michael Drury, Post Date: March 30, 2020

Michael-Drury-McVean-Trading-Header Dear Readers: Mike Drury is past chair of the Global Interdependence Center, a skilled economist and a personal friend. He is not in the “world is coming to the end” camp. He has given me permission to run his entire weekend piece. Enjoy! -David Kotok Will second quarter NOMINAL GDP be positive? (Yes, that is [Continued…]

The Ringling Bridge

Author: David R. Kotok, Post Date: March 29, 2020

Dear Readers, In Sarasota, when twilight comes to Sarasota Bay, the lighting under the Ringling Bridge is usually rotating and alternating colors. The light used to be too bright, and the glare invaded the night sky. But now, and after enough complaints from locals, the powers that decide these things adopted a less glaring and [Continued…]

Why States Are Not Going to Default from the Coronavirus Fallout

Author: Patricia Healy, CFA, Post Date: March 27, 2020

Market Commentary - Cumberland Advisors - Why States Are Not Going to Default from the Coronavirus Fallout In our opinion this is a short-term shock, although it will likely change some behaviors for the long term that will need to be monitored. The initial concern is liquidity, not just in the bond market but also at the state level, where tax payment dates have been extended and economically sensitive revenues such as [Continued…]

 

The Muni Meltdown Timeline (and the Opportunity It Presents)

Author: John R. Mousseau, CFA, Post Date: March 26, 2020 CA-Market-Commentary-The Muni Meltdown Timeline (and the Opportunity It Presents) The Municipal Bond Market has suffered one of the most dramatic back-offs it has ever seen; and it was accomplished in about nine business days. The rise in yields has been dramatic and fierce and had lots of elements to it. This is a quick synopsis of some of the muni meltdown. As of Monday [Continued…]

The CDC Foundation

Author: David R. Kotok, Post Date: March 23, 2020

CDC Foundation Dr Judy Monroe & David Kotok Dear readers. The CDC Foundation is not widely known. It’s a 501(c)3 that was created by Congress as a special charitable agency. The Foundation works right alongside the CDC and other national health agencies but is an independent charity. It has a special-purpose charter. Its purpose is to respond rapidly to threats like COVID-19 or [Continued…]

 

Cumberland Advisors Guest Commentary – Is There A COVID-19 Signal in Climate Data & Is It Potential Good News for Florida?

Author: Bob Bunting, Post Date: March 20, 2020

Is There A COVID-19 Signal in Climate Data & Is It Potential Good News for Florida - Bunting Our colleague Bob Bunting, meteorologist, professor, and former executive at both the National Oceanic and Atmospheric Administration (NOAA) and the National Center for Atmospheric Research (NCAR), is CEO of the Climate Adaptation Center (CAC) here in Sarasota, Florida. Bob has contributed several guest commentaries to Cumberland in recent years, including “It’s Hot and Getting Hotter [Continued…]


Cumberland Advisors - Camp Kotok China Panel DiscussionNo lectern, no PowerPoint. The China Panel is public and in the public domain. The press and public are free to use the video footage and quote the speakers across social media and elsewhere.

The August 2019 China panel held at Camp Kotok packed an extraordinary amount of valuable information into a half hour and is well worth the time you’ll spend to view it: https://youtu.be/Sff0AGPrIJQ

This Camp Kotok talk session features panelists Michael Drury (Chief Economist for McVean Trading & Investments, LLC.), Jonathan D. T. Ward (Founder of Atlas Organization), & Leland Miller (CEO China Beige Book), all offering their take on U.S.-China relations. The panel and audience Q&A are guided by moderator, Lisa McIntire Shaw. <More…>


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.

Sign up for our FREE Cumberland Market Commentaries

Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.




Cumberland Advisors Week in Review (Mar 23, 2020 – Mar 27, 2020)

The Cumberland Advisors Week in Review is a recap of news, commentary, and opinion from our team.

Week In Review

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.

CUMBERLAND ADVISORS’ WEEKLY RECAP

As part of Cumberland Advisors’ continuous effort to maintain strong customer relationships, we offer this week’s short video discussing current market conditions and how we are positioning portfolios.

 

Thank you for joining Cumberland Advisors for this end-of-week update on market conditions, bonds & equities with Matt McAleer and John Mousseau.
First up: Matt McAleer, Cumberland Advisors’ Director of Equity Strategies. I’ll give you a view of what happened in the stock market this week and what I think might be on the horizon. Keep in mind, there are no fixed scripts for the market.
Next up is John Mousseau, Cumberland Advisors’ CEO & Director of Fixed Income. Quite a week in the bond market. John also wrote a commentary this week, titled, “The Muni Meltdown Timeline (and the Opportunity It Presents).” If you haven’t read it already, here’s the link: https://www.cumber.com/cumberland-advisors-market-commentary-the-muni-meltdown-timeline-and-the-opportunity-it-presents/
Please reach out to me (or John) with any questions/comments you may have about this video, I always appreciate your calls, comments, and emails.

 

Watch this week’s update in the player above or at this link: https://youtu.be/MzdtUytWcos

Thank you for joining us at Cumberland Advisors. Be safe.

-Matt McAleer

Matt enjoys your feedback. You can reach him at:
-Link to Matt’s Email: Matthew.McAleer@Cumber.com
-Link to Matt’s Twitter: https://twitter.com/MattMcAleer4
-Link to Matt’s LinkedIn: https://www.linkedin.com/in/matthew-c-mcaleer/
-Call Matt: (800) 257-7013

Other questions or comments? Email us at info@cumber.com or give us a call at (800) 257-7013.

Contact Matt or any one of our advisors by following this link: https://www.cumber.com/our-people/

 



Cumberland Advisors Market Commentary

Cumberland Advisors Market Commentary offers insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies. Our readers appreciate its timeliness, depth of analysis, and quality of research.

To read current and past commentaries, visit www.cumber.com/category/market-commentary/


Fed Outstanding Repo Transactions March 2020

Author: Robert Eisenbeis, Ph.D., Post Date: March 27, 2020

Cumberland Advisors' Robert "Bob" Eisenbeis, Ph.D. Fed Outstanding Repo Transactions March 3 – March 27 Today, not only was the daily repo proposal very small, but also there were no proposals for the potential $500 Billion 84 day repos. (Chart Link)

Cumberland Advisors Market Commentary – The CDC Foundation

Author: David R. Kotok, Post Date: March 23, 2020

CDC Foundation Dr Judy Monroe & David Kotok Dear readers. The CDC Foundation is not widely known. It’s a 501(c)3 that was created by Congress as a special charitable agency. The Foundation works right alongside the CDC and other national health agencies but is an independent charity. It has a special-purpose charter. Its purpose is to respond rapidly to threats like COVID-19 or [Continued…]

Cumberland Advisors Market Commentary – International Stock Markets, First Quarter, 2020

Author: William Witherell, Ph.D., Post Date: March 23, 2020

Market Commentary - Cumberland Advisors - 2020 Q1 Strategy ReviewsInternational stock markets, like the US market, started the year on an optimistic note. The global slump in manufacturing appeared to be bottoming, and trade relations were easing. The first quarter is ending, however, with global equities experiencing dramatic losses and volatility surging across all market classes. As this is written (March 20), stocks in [Continued…]

Cumberland Advisors Guest Commentary – Is There A COVID-19 Signal in Climate Data & Is It Potential Good News for Florida?

Author: Bob Bunting, Post Date: March 20, 2020

Is There A COVID-19 Signal in Climate Data & Is It Potential Good News for Florida - Bunting Our colleague Bob Bunting, meteorologist, professor, and former executive at both the National Oceanic and Atmospheric Administration (NOAA) and the National Center for Atmospheric Research (NCAR), is CEO of the Climate Adaptation Center (CAC) here in Sarasota, Florida. Bob has contributed several guest commentaries to Cumberland in recent years, including “It’s Hot and Getting Hotter [Continued…]


Cumberland Advisors - Camp Kotok China Panel DiscussionNo lectern, no PowerPoint. The China Panel is public and in the public domain. The press and public are free to use the video footage and quote the speakers across social media and elsewhere.

The August 2019 China panel held at Camp Kotok packed an extraordinary amount of valuable information into a half hour and is well worth the time you’ll spend to view it: https://youtu.be/Sff0AGPrIJQ

This Camp Kotok talk session features panelists Michael Drury (Chief Economist for McVean Trading & Investments, LLC.), Jonathan D. T. Ward (Founder of Atlas Organization), & Leland Miller (CEO China Beige Book), all offering their take on U.S.-China relations. The panel and audience Q&A are guided by moderator, Lisa McIntire Shaw. <More…>


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.

Sign up for our FREE Cumberland Market Commentaries

Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.