Posts filed under “Think Tank”


Treasuries reversed to the downside at about 11am after the results of today’s Federal Reserve purchase details of US Treasuries hit the NY Fed’s website. While the absolute amount of treasuries purchased was similar to yesterday at $7.4b, the amount offered to them was $45.7b up from $37.2b yesterday and it was the supply on the part of the dealers that resulted in the negative reaction in bonds.

Category: Think Tank

Philly Fed

The May Philly Fed survey came in at -22.6, 4.6 pts weaker than expected but is a slight improvement from April’s reading of -24.4 and is the 3th month in a row of less negative #’s. New Orders weakened a touch to -25.9 from -24.3 but Backlogs rose a touch to the highest since Sept….Read More

Category: Think Tank

Morning Note: Bitch Slapped

It never matters until it does. I’m referring to the ever growing burden of debt. It’s ok for a while as long as lenders continue to go along and then a point is reached where enough is enough and it turns into an ever tightening noose and lenders balk. Her Majesty’s Throne in the UK…Read More

Category: MacroNotes

Smarter Regulation Should Precede TARP Repayments

Good Evening: A rally on Wednesday morning gave way to a sell-off in the afternoon that left the major averages with modest losses. Hewlett-Packard, Bank of America, TARP repayments, and the Fed minutes all vied for investor attention during a session which saw reflation-oriented investments benefit the most. I will cover the topic of TARP…Read More

Category: Markets, Think Tank

How The Bank Stress Tests Were Done

Category: Bailouts, Credit, Think Tank

Ben and the Boys

While the minutes from the April FOMC meeting mentioned that some members raised the possibility of an increase in the total amount of asset purchases, one has to wonder what they may be thinking now with the US$ index lower by almost 6% since the day before the April meeting, the CRB higher by 12%…Read More

Category: MacroNotes

FOMC minutes

The minutes from the last FOMC meeting gave its economic forecast for growth, unemployment and inflation. They modestly raised its 2nd half ’09 GDP estimate but trimmed its ’10 GDP range. They expect the unemployment rate to reach above 9% from below 8% previously. Their inflation forecasts were little changed. The rest of the minutes…Read More

Category: MacroNotes

The stock market is differentiating

This pullback in the market off the morning’s highs is again being led by the three most important groups in my opinion when analyzing the state of the US economy, retail, housing and financials. The weakness last week was also led by these three groups while at the same time the reflation trade outperforms, helped…Read More

Category: MacroNotes

Where are the natural buyers?

While some recent housing data has shown some signs that the housing market is close to a bottom, the purchase component of the weekly MBA data still is evidence that natural buyers are not responding to historically low interest rates. Mortgage applications for purchases fell 4.4% for the week and are only 7.6% above the…Read More

Category: MacroNotes

Strategy Update plus Victoria Falls

David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. Mr. Kotok’s articles and financial market commentary have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to CNBC programs. Mr. Kotok is also a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE), and the Philadelphia Financial Economists Group (PFEG).


May 20, 2009

Some bullets on different asset classes follow.

US Stocks

It appears that the March 9 low is seriously established. Since then, the market has powered higher with broadened participation. The market has confirmed a determined upward bias. We can see evidence of this broadening by examining the S&P 500 Index and its component parts four different ways. Let’s look at four ETFs to support this view.

RSP is the stellar performer among them; it is the equal-weighted version of the S&P 500 stocks. From March 9 through May 18 it delivered a total return of 50%. Compare this with RWL, the revenue-weighted version of the same S&P 500 index; it delivered a total return of 43.5% for the same period. SPY is the ETF that tracks the cap-weighted S&P 500 index; it was up 35%. OEF is the cap-weighted largest 100 stocks within the S&P 500 index; it was up 32.7%. Conclusion: market leadership has been broadening, which is why the specially designed ETFs are outperforming the standard cap-weighted ETF. Disclosure: RSP is Cumberland’s largest ETF position and a current core holding in US ETF portfolios.

Contrast the above with the performance of these same four ETFs during the period of January 1, 2009 through March 9. Then the market was in steep decline. Selling was uniform and impacted all four ETFs nearly equally. RSP declined 28.4%, RWL was off 29.3%, SPY fell 26.7%, and OEF declined 26.8%. Conclusion: during the sell-off nearly all stocks fell; after the bottom was formed on March 9 the market leadership changed, which is why the highly correlated performance during the decline morphed into the diverse and less-correlated outcome of the recovery.

International Stocks

Emerging markets have been the stellar performers in the rally since March. Brazil and China have been leaders among them. Many believe that China’s stimulus response to the global financial crisis has been and remains more effective than that in the US. Cumberland has been overweight China and overweight the emerging markets in international ETF accounts. Bill Witherell will be writing about the details. Cumberland continues to overweight this sector.

Tax-Free Bonds

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Category: Think Tank