A Registered Investment Advisory Firm
Update on the Economy March 23, 2018
David R. Kotok Chairman & Chief Investment Officer david.kotok@cumber.com
ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
Rise and Fall of Famous Bubbles
Source: Convoy Investments, Coindesk, Concept: The Gartman Letter ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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©Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.
Dec-17
May-17
Oct-16
Mar-16
Aug-15
Jan-15
Jun-14
Nov-13
Apr-13
Sep-12
Feb-12
Jul-11
Dec-10
May-10
Oct-09
Mar-09
Aug-08
Jan-08
Jun-07
Nov-06
Apr-06
Sep-05
Feb-05
Jul-04
Dec-03
May-03
Oct-02
Mar-02
Aug-01
Jan-01
Jun-00
Nov-99
Apr-99
Sep-98
Feb-98
Jul-97
Dec-96
1
May-96
Oct-95
Mar-95
Trillions
Total Assets: Fed 5
4
3
2
Pre-Tarp Average: $678 Billion
0
Source: Bloomberg
3
Fed Maturity Structure: Assets Less Than One Year
One To Ten Year
Over Ten Years
$5.0
QE3 $4.5
$4.0
$3.5
QE2
Trillions
$3.0
QE1 $2.5
$2.0
$1.5
$1.0
$0.5
$0.0 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Bloomberg ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Factors Using Reserves
Deposits Not Reserve Balances
Reverse RPs Foreign Official & International Accts
Reserve Balances
TSLF-3/11/08
$5,200 $5,000 $4,800 $4,600 $4,400 $4,200 $4,000 $3,800 $3,600 $3,400 $3,200 $3,000 $2,800 $2,600 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0
Series Break PDCF-3/16/08 TSLF-3/11/08, 950 TAF-12/12/07 Series Break
$ Billions
Factors Using Reserves on Federal Reserve's Balance Sheet (Liabilities) from 8/8/2007 to 3/14/2018
Currency in Circulation Treasury Cash Holdings Reserve Balances TAF-12/12/07
Currency in Circulation
Reverse RPs: Foreign Official and International Accounts Deposits - Not Reserve Balances TSLF-3/11/08 PDCF-3/16/08
Reverse-RPs with Dealers Other Liabilities and Capital "TDWP - 8/17/07" Series Break
Source: Bloomberg ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Peak Quantitative Easing Behind Us
Source: Torsten Sløk, Deutsche Bank Research ©Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.
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Federal Deficit Nixon 300
Ford Carter
Reagan
G.H. Bush
Clinton
G.W. Bush
Obama
Trump
100
-100
Annual Federal Deficit 2017 -$665.7
-300
OMB Estimate -500
Surplus/Deficit
-700
-900
-1100
-1300
Bloomberg Estimate 2018: -$832.6 Billion
-1500
Source: Bloomberg ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Interest Expense: Debt Outstanding 1,400.00
1,200.00
1,000.00
2028 $761
Billions
800.00
600.00
We have changed our past data source to be consistent with our projection data
400.00
2008 $252
2018 $310 2017 $262
200.00
-
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028
Interest Expense
OMB Estimate
Source: Whitehouse.gov, OMB ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Historical Debt Outstanding 35
2027 $29.9
30
25 2017 $20.2
2018 $21.5
Trillions
20
15
10
We have changed our past data source to be consistent with our projection data
2008 $10.7
5
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Debt Outstanding
OMB Estimate
Source: Whitehouse.gov, OMB ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Interest Expense: Debt Outstanding 2018 Estimate $21.49
1,000
900
25,000
2017 $20.6 20,000
800
700
600
Billions
Billions
15,000 2008 $10.7
500
400
10,000
We have changed our past data source to be consistent with our projection data
300
2008 $252
2017 $262
5,000
200
100
0
Interest Expense (left)
Debt Outstanding (right)
Source: Whitehouse.gov, OMB ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Fear & Greed Index
Source: CNN Money ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Fear & Greed Over Time
Source: CNN Money ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18
CNN Money's Fear & Greed Index 100 34
90 32
80 30
70 28
60 26
50 24
40 22
30 20
20 18
10 16
0 14
Fear Greed Index
©Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.
Open Interest Options SPY ETF S&P 500 Index
Millions
Fear & Greed Index with Open Interest Options of SPY S&P 500 Index
SPY ETF (Right Axis)
Source: CNN Money, Bloomberg
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Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18
CNN Money's Fear & Greed Index 50.00
90.00
22
40.00 20
0.00
Fear Greed Index
©Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.
Open Interest Options SPY ETF S&P 500 Index
Millions
Fear Greed w/ Open Interest Options S&P Smoothed 28
80.00 26
70.00 24
60.00
30.00 18
20.00
10.00 16
14
SPY ETF (Right Axis)
Source: CNN Money, Bloomberg
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Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18
CNN Money's Fear & Greed Index 50
100
70
60 7
40 6
30
0
Fear Greed Index
©Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.
Open Interest Options Russell 2000 Index
Millions
Fear & Greed Index with Open Interest Options of IWM ETF (Russell 2000 Index) 10
90 9
80
8
5
20 4
10
3
IWM ETF (Right Axis)
Source: CNN Money, Bloomberg
15
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18
CNN Money's Fear & Greed Index 60.00
50.00 6
40.00
30.00
0.00
Fear Greed Index
©Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.
Open Interest Options Russell 2000 Index
90.00
Millions
Fear Greed w/ Open Interest Options Russell 2000 Smoothed 9
80.00 8
70.00
7
5
20.00 4
10.00
3
IWM ETF (Right Axis)
Source: CNN Money, Bloomberg
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Consumer Price Index 15
CPI Year Over Year
13
11
9
7
5
3
1
-1
-3 67 69 70 71 72 73 74 76 77 78 79 80 81 83 84 85 86 87 88 90 91 92 93 94 95 97 98 99 00 01 02 04 05 06 07 08 09 11 12 13 14 15 16 18
Source: Bloomberg ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Consumer Price Index & Personal Consumption Expenditures 15
CPI & PCE Year Over Year
13
11
9
7
5
3
1
CPI
-1
PCE
-3 67 69 70 71 72 73 74 76 77 78 79 80 81 83 84 85 86 87 88 90 91 92 93 94 95 97 98 99 00 01 02 04 05 06 07 08 09 11 12 13 14 15 16 18
Source: Bloomberg ©Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.
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Unemployment 11
U3 Unemployment
10
9
8
7
6
5
4
3 67 69 70 71 72 73 74 76 77 78 79 80 81 83 84 85 86 87 88 90 91 92 93 94 95 97 98 99 00 01 02 04 05 06 07 08 09 11 12 13 14 15 16 18
Source: Bloomberg ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Consumer Price Index Phillips Curve 15
Martin 79
Burns 13
Miller
74
80
Volcker Greenspan 11
Bernanke Yellen 81
Consumer Price Index Year Over Year
9
78
73
7
75 69
77
90 70
5
68 00
3
67
99
1
76 87
05
17
88
89
07
06
96 95
16 01 97 98
82
04 72 71
85
11
92 94 02
83 09
93
13
03 14
15
We are here
91
84
12
10
86
08
-1 3
4
5
6 7 U3 Unemployment
8
9
10
Source: Bloomberg ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Personal Consumption Expenditure Phillips Curve 13
Martin
74
Burns
11
80
Miller
79
Volcker Greenspan
Personal Consumption Expenditure Year over Year Deflator
9
Bernanke Yellen
73
81
78
7 75
77
69
5
90 88
70 68 89 07
05
3 00
67
99
04 96 95
170116
1
94
03
97
93
86
83 11
92
09
12 13
10
14
98
We are here
85 91
02
82
84
71 87
72
06
76
15
08
-1 3
4
5
6 7 U3 Unemployment
8
9
10
Source: Bloomberg ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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Disclosure All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed. Past performance is no guarantee of future results. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk.
ŠCopyright 2018 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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