Posts filed under “Think Tank”


David R. Kotok
October 07, 2014


“The practice of quarantine, as we know it, began during the 14th century in an effort to protect coastal cities from plague epidemics. Ships arriving in Venice from infected ports were required to sit at anchor for 40 days before landing. This practice, called quarantine, was derived from the Italian words quaranta giorni, which mean 40 days.” (Centers for Disease Control and Prevention)

The modern world is now moving toward a full Ebola quarantine. I personally recall flying home from Europe in the 1960s while I was in the US Army. The plane was diverted to the Azores, and while it was refueled, the military passengers (mostly US Navy submariners) were released into the Azores for a few hours of shore leave. The commanders were not aware that a virus was loose in the Azores. When we reboarded the plane and subsequently learned of the virus, we also learned that we would be diverted once we reached the US. We had to sit on a runway in Rhode Island and wait for the US health authorities to inspect the plane. They tested everyone on it and held us while they observed whether the virus had run its course.

Quarantines are a pain in the neck. They are also necessary to isolate viruses and break the chain of transmission. We see in modern countries with mature economies and functioning health systems that the use of quarantine is understood and is being implemented now in response to Ebola. The scares in Spain and Texas will ratchet up the level of quarantine. The period of 21 days will become a well-known time measurement.

In this morning’s edition of The Gartman Letter, Dennis Gartman listed the assorted plagues that have claimed countless lives during the last many centuries. It is a terrific summary and helps develop perspective. We tend to focus on the isolated case and not think about the system. It is scary to watch modern media portray viral spread and resultant death. We are concerned for good reason.

Smallpox, for example, ran rampant many times over the ages, and the groups above believe that perhaps several hundred million people have been killed over the eons by smallpox, with 300 million killed in the 20th century alone. In 1967, 15 million had the disease and 2 million were killed. However, effectively since 1979 there have been no outbreaks of smallpox and the disease is all but eliminated.

In 1918-1919 Influenza, and specifically H1N1, commonly referred to as Spanish flu, killed 50 million people. 675,000 Americans were killed during that period.

The Plague … Bubonic Plague … killed 20 million Europeans between 1340-1771, with the majority of those who died having done so between 1345-1350, with approximately one of three Europeans alive during that period having died due to the Plague.

Malaria has been around for thousands of years, and only two years ago Malaria killed 1.2 million people, primarily in equatorial climates. The WHO believes that 1.8 million died during a particularly malevolent outbreak of Malaria in ’04, and we are told that 60 thousand US soldiers died of malaria in World War II.

Choleraaffects 3-5 million people every year according to the WHO, of which 100-120 thousand die… every year! The WHO counts seven cholera pandemics since the first in the very early 19th century.

AIDShas killed 25 million people since 1981 and it killed 3.1 million in ’05 alone. The WHO estimates that there are 40.3 million people alive today suffering from HIV.

Tuberculosishas been around for nearly five thousand years, and as recently as ’12 there were 8.6 million people infected with TB and 1.1 million who died from the disease in that year alone. TB raged through Europe in the 1600s, killing one of every seven people alive at the time.

Typhushas been extant for nearly three thousand years, and it killed approximately 3 million people between 1918-1922 [Ed. Note: Remember, the Spanish flu was extant at that time, killing 50 million people, so between typhus and influenza, 53 million people died of diseases in those five years alone!]

Here in southeastern Virginia, 3,200 people died of yellow fever in 1855, and that was of a population then of only 15,000, so 1 of every 5 people living in Norfolk, Portsmouth and Hampton died from the disease. In all, yellow fever killed 100,000 people here in the US at the time.

Dennis Gartman, The Gartman Letter, 7 Oct. 2014

A historical perspective is necessary as we consider how best to address the Ebola threat. Quarantine in St. Louis, Missouri, prevented the spread of Asian Flu (H1N1) during the 1918 epidemic. In Philadelphia, Pennsylvania, there was no quarantine in effect, and the virus was deadly and spread quickly there. People felt healthy on their way into work in the morning and were dead by afternoon.

We are worried about Ebola and how it will impact economic activity. It is human nature to defend ourselves and our loved ones, and quarantine is a form of self-defense. Defense against any illness, especially one that is viral, requires putting up barriers between yourself and others. Governments and businesses that have the ability to institute rules and barriers in response to Ebola will do so.

At Cumberland Advisors, we ask our staff not to come to the office if they have any symptoms of illness. We install electronic equipment so that they can work from home while maintaining a personal quarantine. We believe millions of other business enterprises do the same.

Ebola will shrink economic activity to some extent. The impact could be major or it could be minor, but there will be a price to pay for this virus, as there is for every natural phenomenon that has destructive characteristics.

We thank Dennis Gartman for giving us permission this morning to reproduce his viral history for all to consider. We agree with Dennis: concern, caution, and quarantine are warranted. Hysteria is not.



David R. Kotok, Chairman and Chief Investment Officer, Cumberland Advisors

Category: Science, Think Tank

Income Inequality and Income-Class Consumption Patterns

Economic Commentary Income Inequality and Income-Class Consumption Patterns LaVaughn M. Henry Federal Reserve Bank of Cleveland, 10.06.2014   As income inequality has increased in the United States, researchers have rightfully asked whether it has also led to inequality in relative consumption. This is an important question because consumption is clearly a better measure of an…Read More

Category: Think Tank, Wages & Income


Volatility David R. Kotok October 5, 2014     An era is ending: for over half a decade, nearly worldwide, zero interest rates suppressed volatilities. That is over. The first sign of this evolution came over a year ago when the bond market experienced the “taper tantrum” as then Fed Chairman Ben Bernanke alluded to…Read More

Category: Think Tank, Trading

The Wayback Machine Birthday Tour

The Wayback Machine Birthday Tour
By John Mauldin
October 3, 2014




“That men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach.”
Aldous Huxley, Collected Essays

“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where –” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“– so long as I get somewhere,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
– Lewis Carroll, Alice in Wonderland, 1865


Today, in the spirit of the wisdom the Cheshire Cat offers Alice, I would ask how you can know where you are now and where you’re going if you don’t know where you came from. You and I have lived through the first nearly 14 years of this topsy-turvy new century together, and many of its details as well as its overarching themes deserve to be recalled. But rather than offering you a dry, plodding recap of recent history, I’ve come up with a different and hopefully more fun way to revisit the past decade and a half.

I’ve been writing this letter for some 15 birthdays now, well over 10,000 pages of collected work. Every word is still at my website – a history, if you will, of what I was thinking at the time. I asked my longtime (and long-suffering) editor, Charley Sweet, to go back over this past decade and a half and give us a review of what I was saying my birthday week. When I perused what he came up with, a few things leapt out at me.

First, it turns out to be quite lucky that I was born in October, because when we assembled all the letters for the first week of that month, it turned out we hit on most of the big issues that came along in the first 15 years of the century: the tech-bubble collapse and ensuing recession; the actions of the Fed in the early ’00s, especially with regard to the housing bubble; the fundamental challenge – and promise – of accelerating change; the subprime collapse and Great Recession (including “the bailout”); the problems with Keynesian excesses at the Fed and other major central banks; the crisis in the Eurozone; and the healthcare crisis (and Obamacare).

Second, I could see my own thought process evolving and realized again how truly important it is to continually test your ideas in the marketplace.

The plan was to take a short stroll through the history of my letters to get a feel for how our world and my thinking about it have changed over time. As it developed, Charley presented me with a rather voluminous package of excerpts, one far too long to send out as a Thoughts from the Frontline letter. So I will have to viciously edit myself to make the retrospective more consumer-friendly for TFTF readers. But for those who are interested, we are posting the entire summary here (and it will remain available there).

As you read the entry for each year, think back on your own thought process and actions at the time. Surprisingly, as I did the same, it appeared to me that, more often than not, I “got it right” (even if I got it early). So let’s climb into the Wayback Machine and take a spin through the last 15 tumultuous years. We will begin with my call in October 2000 for a recession in 2001.

[Note: comments in brackets were written as we edited this. Everything else is verbatim from the original letters.]

The Probability of a Recession Grows
October 20, 2000

I get lots of mail from readers asking me to tell them if I think we will have a recession next year. I think I can say with some authority that making predictions can get you out on a limb. There are scores of variables that affect our economy. At any given time you can find trends that will seem to be pointing us to one conclusion, and other trends that might yield the opposite conclusion. It is only in hindsight that the pundits will tell us that we should have seen the most important trend all along. So instead of predicting a flat yes or no, I am going to assign some probability to the potential for a recession, and then as we go along I will either increase the probability or decrease it….

[If the yield curve is functioning as an accurate predictor of recession] we should be looking to see a recession next summer at the earliest and probably next fall. As I think back over the last few recessions, there were very few signs one year ahead that a recession was coming. For most economists and analysts, the recession was a surprise even one quarter out!…

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Category: Think Tank

More Amateurs/Professionals

AMATEURS Ask permission. PROFESSIONALS Do. Amateurs are afraid they’re going to ruffle feathers, they’re afraid they won’t have success, they want everyone to feel good about them. Professionals know this is an impossibility. Sure, there are amateurs who don’t ask and do heinous things, but they usually don’t even see the landscape to begin with….Read More

Category: Music, Think Tank

Kiron Sarkar’s Weekly Report 10.4.14

The outlook components of the Japanese Tankan survey declined materially and may imply that the economy contracted in Q3 this year. Furthermore, the weak August output data also suggests that Japan could be facing a recession. As the data continues to worsen, further monetary and fiscal stimulus becomes more likely, which will result in a…Read More

Category: Think Tank

Deindustrialization Redeploys Workers to Growing Service Sector

Category: Think Tank

Why the Fed Is So Wimpy

Why the Fed Is So Wimpy John Mauldin October 1, 2014     Another in what seems to be a small parade of scandals involving secretly recorded tapes of Federal Reserve regulators emerged last week. What a number of writers (including me) have written about regulatory capture over the past decade was brought out into…Read More

Category: Federal Reserve, Think Tank

Category: Real Estate, Think Tank

What younger renters want & their financial constraints

Category: Real Estate, Think Tank