Deal Done!
David R. Kotok
October 16, 2013

 

 

Deal done!

Lesson 1. There will be no default. Disgraceful, divisive Democrats and ridiculed, repugnant Republicans, who share blame equally for this horrendous example of poor governance, are aware that the country must not default. They agree on that. So, no default!

Lesson 2. Government must operate. Defense, healthcare as in CDC flu shots and the control of tuberculosis and salmonella outbreaks are essential services, too. So are the disbursal of disabled veterans’ benefits and the provision of public education and a million other things. Enough of this crap. The country has had it with failed governance. If our memories don’t get hijacked by the issues and diversions that intervene, we are going to be angry next year at the polls and throw out a few Democrats and a few Republicans and replace them. Will we remember? When people think back, will they recall this fall’s political debacle – or the baseball playoffs? We shall see.

Lesson 3. Listening to the political rhetoric from the Senate is enough to make me puke. They made this mess. They haven’t passed a budget in five years. They set the stage for this debacle two years ago with the Budget Control Act. Now they are claiming credit for resolving a mess they created. Damn.

Lesson 4. One Senator who filibustered for 21 hours succumbed to criticism. He also raised an enormous amount of money during his day of fame. He may have put his political party in the hole for next year’s elections. Time will tell. Senator Ted Cruz, the Tea Party candidate for president, has done a huge disservice to the country and his political party, while serving his own interests. Think about it. The party that sought Obama’s birth certificate now wants to amend the constitution so a Canadian-born citizen can be president. Do you smell an inconsistency there?

Lesson 5. Markets are willing to look across the valley of the shadow of default and see that the fundamental fabric of our great America remains intact. We are still the best place to be on this planet – although sometimes we are the least worst. This is our system. We own it. We also own our complacency, because more folks will watch the baseball playoffs than will focus on shenanigans in Washington. Can we get angry and stay angry enough to throw many of these bums out? Time will tell.

At Cumberland Advisors, we are fully invested and expect the S&P to cross 1800 before spring. We expect the Fed to put tapering on hold until they see recovery from this setback that Washington created. These are our assumptions.

We also expect another round of reprehensible behavior from the miscreants in Congress in the coming months. So be it. That is our American way.

Lastly, allow me to share my favorite fantasy with regard to the political madness we just endured. It was that the idiots on the Hill completely failed, and then Social Security payments didn’t go out. Then millions of grey panthers stormed congressional offices and got up from their wheel chairs and beat the living ____ out of their congressmen and -women with their canes, in the same way that they beat Congressman Rostenkowski in 1979. I fantasize a 75 year-old’s breaking a cane over the head of a member of Congress while shouting, “You are supposed to work for me and you failed me and I have had enough!” Somehow that is an image that warms the cockles of my heart.

We will not see that happen. But we can know that the fear of a backlash is something that motivates these characters we elect to our government. Dems and Repubs, thanks a lot for dragging our nation through this crisis. Shame on you.

This time, our American societal and institutional fabric withstood the shock and now moves on. That is what we do.

~~~

David R. Kotok, Chairman and Chief Investment Officer

Category: Politics, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

28 Responses to “Deal Done!”

  1. larrr1 says:

    Two days ago: Stock market entry points for a fully invested position are best found either when cheap pricing and high negative sentiment combine or when there is clarity of policy. Right now, neither of these exists.

  2. ilsm says:

    Not issue SS checks!!

    SS trust fund took in cash and interest during FY 2012 $87B more than it disbursed. The fed in QE III would have bought some of its $2587B in special treasuries to provide a tiny bit of cash for SS checks without affecting the balance of the US debt.

  3. Scot says:

    The assertions on this post are pretty amazing.

    Lesson 1: “Disgraceful, divisive Democrats and ridiculed, repugnant Republicans, who share blame equally for this horrendous example of poor governance…” Really? Divisive Democrats? Equally to blame? This is the first time the Democrats have been unified about much of anything: no giving in to extortion by the Republicans. Hold the country hostage so Obamacare is defunded and Democrats refusing to go along with it is equally bad? That’s not divisive Democrats. And it is putting the country in a hostage situation unless the minority’s position is approved. Wrong way to run the constitution. Try winning elections instead.

    Lesson 3: “Listening to the political rhetoric from the Senate is enough to make me puke. They made this mess. They haven’t passed a budget in five years.” The truth is the Senate did pass a budget for this year — and then had to beg the House to go into conference to get to an agreement on the bill. Did the Republicans do this? No.

    And both parties agreed to the infamous Budget Control Act (that’s how it becomes a law, don’t you know…) — and the Democrats agreed to a sequester number in this agreement that is only $20 billion more than Paul Ryan’s ridiculous budget. Remember, the Budget Control Act was done because it was so distasteful to both parties that an agreement would be reached. So much for that. The next budget fight from now until January will be all about the sequester. Let’s see how willing the Republicans will compromise on that through raising taxes. Yeah. Not.

    I’d suggest that the next round of reprehensible behavior from the Congress will be an awful lot like this one: Republicans expecting huge concessions from Democrats while Democrats — as shown this time — get nothing in return except what should be what this rant from David is all about: Congress staying open serving people and not worrying about the debt ceiling. It’s not a fair trade: your hostage gets killed unless Republicans get our policy whether or not we won the election. You can’t give in to a bully. Let’s get ticked off about the bully, not the group trying to stop the bully from doing bad things.

    Let’s call the Republicans extreme and attempting to work around the constitution to get what they want, legislative process and elections be damned. Now that we have that cleared up, what are we going to do about it?

  4. swag says:

    Nice false equivalence in your “Lesson 1″. Keep up the good work!

  5. martin66 says:

    Please spare me the holier than thou. A nation gets the government it deserves I recall someone saying once. These predictable polemics against the “miscreants in Congress” are becoming pretty tiresome. If you are really concerned, stop complaining and do something to help fix what is very clearly a corrupted system.

    Our elected representatives, no matter how much or how little integrity they may have, spend the vast majority of their time seeking money for their next election. We fostered the creation of this system. If we truly wanted better government, we would put our collective minds to it and make it happen.

  6. Sorenson says:

    Mr. Kotok,

    Would care to explain why is you think that both parties should equally share blame for this?

    I will not say that Democrats are entirely blameless, but I would say that the bulk of the blame for this fiasco lies with Republicans.

  7. intlacct says:

    great analyst of municipal credits. looney tunes on politics.

  8. rp says:

    “…we are in a secular bear market after all.”
    http://www.thereformedbroker.com/2011/08/04/think-1938-not-2008/

    Just curious what Josh thinks these days.

  9. relleum01 says:

    Totally agree – your “favourite fantasy” is the perfect script for a movie (maybe with J. Nicholson as the guy for the cane scene) lol

  10. george lomost says:

    Completely agree with Scot.

    Furthermore: I have listened to you and and Wall St. cronies celebrate gov. gridlock as good for [your] business for years now. Well, you got it. You sir are the worst kind of hypocrite. It is your money that has created these monsters on the Right. BTW, if my tea-bagger father-in-law (93 yrs old) is at all representative, the guys whom you have been funding hate your guts even more than semi libs like me.

  11. ami_in_deutschland says:

    Another correction is due: Senator Cruz’s marathon speech was not a filibuster, but rather, in the most charitable possible terms, a “space filler,” since it in no way affected the timing of the scheduled vote. More accurately, however, it should be called a “waste of breath.”

  12. Moss says:

    I realize you are writing for your paid audience and that you are a Republican but please don’t use partisan misinformation to pander. Elections and polls matter as they measure opinions and ideology.

  13. louiswi says:

    Not issue SS checks.??
    My SS is electronically deposited to my bank normally on the 20th. Sometimes a day or two early. I received the October deposit on the morning of the 16th. Congress didn’t act until the evening of the 16th.

    There wouldn’t be a reason the checks would not go out even if there wasn’t a debt deal.
    This was just fear mongering at its finest.

    • DeDude says:

      The “checking” account that backs up your electronic payment has to have money in it. If government is forced to use all its incoming cash to pay other essential bills (avoid actual default on actual debt -which is illegal), then they cannot put enough cash into the account that gives you your monthly SS payment. The big payment/deposit from government to the account that pay your SS is due on the first day of every month. Had the circus continued until next month then SS recipients would have seen direct effects.

  14. DeDude says:

    I guess for someone who gets his food from, and therefore cannot break away from, the right wing tribe – a false equivalence is about all one can expect. I will continue to listen to your opinions on other items than politics.

  15. jj2me says:

    “Dems and Repubs, thanks a lot for dragging our nation through this crisis.”

    What you think you’re saying: “Look at me, I’m even handed!”

    What you’re really saying: “I don’t care about my credibility.”

  16. 873450 says:

    “Rostenkowski” ???
    — Hilarious !!!

    “Disgraceful, divisive Democrats and ridiculed, repugnant Republicans, who share blame equally for this horrendous example of poor governance, are aware that the country must not default. They agree on that.”
    — 62% GOP House Reps (144/232) still demanding unpaid ransom voted to kill hostages.
    — 39% GOP Senators (18/46) still demanding unpaid ransom voted to kill hostages.

    “Government must operate. Defense, healthcare as in CDC flu shots and the control of tuberculosis and salmonella outbreaks are essential services, too. So are the disbursal of disabled veterans’ benefits and the provision of public education and a million other things.”
    — Aspiring GOP POTUS wannabes Ryan, Cruz, Paul, Rubio, Bachman, … all voted to shove 310 million American citizens together with their nation’s treasure and 225 years accumulated full faith and credit off fiscal cliffs ending where nobody really knows WTF will happen.

    “Markets are willing to look across the valley of the shadow of default and see that the fundamental fabric of our great America remains intact. … This is our system. We own it. … That is our American way. … This time, our American societal and institutional fabric withstood the shock and now moves on. That is what we do.”
    — We are an exceptional bull afflicted with mad cow disease, unstable and repeatedly threatening to recklessly, possibly intentionally, crash the global economy again. Again! Wall Street guaranteed a bailout is complacent making bets. Meanwhile, non-complacent China furiously looks to invest elsewhere. For years thereafter, Americans borrowing to purchase homes, cars, HDTVs, etc. will unnecessarily pay more and consume less.

  17. Kevin Doogan says:

    “Listening to the political rhetoric from the Senate is enough to make me puke. They made this mess. They haven’t passed a budget in five years.” FALSE – THE SENATE DEMOCRATS PASSED A BUDGET ON MARCH 23, 2013. SINCE THEN, HOUSE REPUBLICANS HAVE REFUSED TO APPOINT A CONFERENCE COMMITTEE TO RECONCILE THE HOUSE AND SENATE BUDGETS (IE, REGULAR ORDER). “They set the stage for this debacle two years ago with the Budget Control Act.” DID THIS LEGISLATION NOT PASS THE GOP CONTROLLED HOUSE??? AND TODAY FROM USNEWS.COM: “”I’m also confident that we’ll be able to announce that we’re protecting the government spending reductions that both parties agreed to under the Budget Control Act, and that the president signed into law. That’s been a top priority for me and my Republican colleagues throughout this debate. And it’s been worth the effort,” McConnell said. “Some have suggested that we break that promise as part of the agreement. … But what the BCA showed is that Washington can cut spending. … And we’re not going back on this agreement.” Rep. Jim Jordan, R-Ohio, called sequestration, “one of the good things that has happened” and “an important thing that we have achieved.” Rep. Kevin Brady, R-Texas, even threatened another debt ceiling standoff in the new year should Democrats try to undo the sequester.

    SO KEEP PLAYING THE “BOTH SIDES SHARE THE BLAME” GAME… WE’LL BE RIGHT BACK HERE AGAIN IN A FEW MONTHS. BUFFOONERY.

  18. diogeron says:

    So, Ds and Rs “share the blame equally?” Really? When one begins with this false equivalency premise, it’s difficult to take seriously anything that follows. As that great economic philosopher, Robert Zimmerman said, “You don’t need a weatherman to know which way the wind blows.”

  19. intlacct says:

    Thanks for quoting Sr. Kotok’s buffoonery.

    For the same reason that top athletes are rarely Nobel scientists, rarely do finance guys have a clue about politics: it is not given to people to be excellent at more than one thing and politics isn’t their ken.

    • My attempts to offer different views to avoid my own confirmation bias often lead to places we dont like.

      It is the cost of staying objective.

      • intlacct says:

        Understood, BR, and it’s why I thoroughly enjoy this page.

        I think my statement actually supports your argument to invest irrespective of one’s political inclinations/druthers/fantasies. Never really thought about it but perhaps more of a risk for financial professionals. I think for folks hermetically sealed with a US focus – understandable, sort of, although as a client I would want someone more broadly diversified if only for the more intelligent conversation while my investments imploded – the problem might be magnified.

        I recall even into the 2000s the estimable John Bogle was telling us we didn’t need overseas investments (got enough through the S&P blah blah). Fortunately I didn’t heed that advice. I suppose Fama would say I was just lucky…

  20. panskeptic says:

    Let me add my voice to those who think Lesson One is arrant nonsense. Those poor ridiculed Republicans, awwwwwwww……..

    If some jerk comes up and threatens to burn your house down, is refusing to lend him your lighter divisive? Being divisive apparently is calling Republican extortion by its right name.

    The Tea Party is the most divisive force in American politics since Senator Joseph McCarthy. Let’s embrace the “Culture of Responsibility,” shall we?

    Kotok has been an apologist for the GOP’s flatulent delusions for a long time. This article does nothing to enhance his credibility.

  21. ERISANation says:

    Barry, I pulled out your list of Rhetorical Fallacies even before I got to your remarks. Is this an Appeal to Authority? But isn’t he right to rely on Gambler’s Fallacy, Division and Composition unavoidable?

    • Its written by David Kotok — I dont agree with much of it — but its part of my attemtp to avoid confirmation bias by reading others of differing views . . .