Posts filed under “Politics”

Senator Vol Wins

Senator Vol Wins
November 4, 2014
David R. Kotok




The winner of today’s election is volatility. In fact, “Senator Vol” had already won four months ago.

Some quick bullets to consider:

• US stock markets tend to rise after midterm elections. We expect new highs in stock prices in the United States and an upward trend for months to come.

• Monetary policy of central banks operates on a different timetable than midterm elections do. The Fed’s policy is at neutral with rolling maturities of existing central bank holdings. The European Central Bank is trying to figure out how to do more QE. Japan is now on steroids.

• The Japanese stock market is on fire. Remember, there is high correlation among most global stock markets due to “spillover” effects. There has been a particularly high correlation between the Japan and US markets the last few years. And Japan’s market has a bullish seasonal bias between now and March. Note that Japan is (and has been) the largest weight (currency-hedged) in Cumberland’s International ETF strategy.

• Watch the US lame-duck session for winners and losers. Especially watch the details of any “tax extender” bill. And watch the sectors if Republicans take control of the Senate. The stock market goes up regardless of who wins the Senate majority, but the sectors may change.

• Also watch Europe. They have elections coming, as do we. (We start the next US presidential election season in earnest tonight.) In Germany, the debate over policy is intense. Note the German 10-year benchmark sovereign bond is yielding around 0.8%. After the US Treasury 10-year note, the “bund” is the most important bond reference in the world. US at 2.2% yield, Germany at 0.8% yield! The overwhelming majority of the world’s currency reserves are denominated in US dollars and euros. The weighted average of the world’s reserve bond holdings is close to 1% yield. The weighted average of the world’s short-term reserve interest rates is near zero.

• Another election on the horizon is the Swiss referendum on gold reserves. Switzerland maintains a floor peg of the Swiss franc to the euro (1.2 to 1). It will continue to do that regardless of the gold referendum outcome on November 30. The Swiss may buy more gold if the referendum passes and they are required to raise their gold holdings to 20%. Or they may spin out a sovereign wealth fund and thereby shrink the central bank balance sheet in order to reach the 20% limit without unleashing the force of their gold purchases onto the market. No matter the outcome of the gold vote, the euro is likely to weaken; the Swiss franc will follow; and both central banks will be easing and adding more stimulus.

• Elections are important. We are not the only ones having them. A US-centric view misses outside influences.

Meanwhile, our US ETF accounts remain fully invested.


David R. Kotok, Chairman and Chief Investment Officer

Category: Politics, Think Tank

Fill in the blank: Today’s midterm elections are about _____.

Fill in the blank: Today’s midterm elections are about _____. Most people won’t be able to answer that question. Obamacare? It’s the law of the land. Quantitative easing? Its over, and besides, Congress didn’t control that. Go down the list of hot button issues — ISIS, Ebola, voter ID laws, deficits, tax policy, immigration, abortion…Read More

Category: Politics

John Oliver: State Legislatures and ALEC

While midterm coverage is largely focused on the parts of Congress that do very little, vital (and bizarre) midterm elections are going unexamined. State legislators pass a lot of bills, and some of that efficiency is thanks to a group called ALEC that writes legislation for them. It’s as shady as it sounds!



via John Oliver, HBO



Category: Legal, Politics, Really, really bad calls, Video

Morgan the Fifth

Prophetic? “2012,” he shrilled, and then fell to cackling grotesquely. “That was the year Morgan the Fifth was appointed President of the United States by the Board of Magnates. It must have been one of the last coins minted, for the Scarlet Death came in 2013.” -Jack London, The Scarlet Plague   Enjoy your mid…Read More

Category: Politics

Economics Advances One Funeral at a Time . . .

Quantitative easing over. It is a good occasion to consider what we know about central bank intervention, when it is appropriate and when it isn’t. We have a century of broad and deep central bank history and data upon which to make our assessment. Yet we seem to ignore much of what has been learned…Read More

Category: Economy, Politics, Really, really bad calls, Taxes and Policy

Exporting Corruption

From Transparency International: The OECD Anti-Bribery Convention, adopted in 1997, requires each signatory country to make foreign bribery a crime for which individuals and enterprises are responsible. The Convention is a key instrument for curbing the export of corruption globally because the 41 signatory countries are responsible for approximately two-thirds of world exports and almost…Read More

Category: Corporate Management, Legal, Politics

Foreign fighters flow to Syria

Source: Washington Post

Category: Digital Media, Politics, Really, really bad calls, War/Defense

You Are Worrying About the Wrong Things

o, you are not going to die from Ebola. To quote a wag on Twitter, “More Americans have been married to Kim Kardashian than have died from Ebola.” But the latest scare does have a small positive: It provides me with yet another opportunity to lecture you about how incredibly dumb your lizard brain is. (It’s…Read More

Category: Investing, Politics, Psychology, Really, really bad calls

Zombie Ideas? Blame the Billionaires…

  “We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.” -Ned Davis   I began my career in finance on a trading desk. You learn some things very early on in that sort of…Read More

Category: Bad Math, Philosophy, Politics, Really, really bad calls, Regulation

King Dollar vs Euro, Yen Renminbi

click for giant graphic Source: FT   The U.S. dollar is still king of global currencies. The dollar made up 60.9 percent of foreign exchange reserves and was used in 42.1 percent of global payments. Some countries, though, contest how much influence the U.S. dollar really has. The term “exorbitant privilege,” coined by former French…Read More

Category: Currency, Digital Media, Politics