Camp Kotok Asks: Does The Fed Matter?

August 06, 2017

Sen. Susan Collins

R – Maine

 

 

 

Camp Kotok, Maine – Each year, David Kotok of Cumberland Advisors gathers 50 or so people in the deep woods of Northeast Maine to discuss the state of the global economy and catch the occasional fish.

The gathering has often been called a shadow-Fed meeting, or perhaps a micro-“Davos,” and the description is appropriate. The attendees are incredibly sharp and diverse, including economists both public and private, wealth managers, pundits, CIOs, a handful of journalists and, and for some inexplicable reason, me.

The discussions are held under Chatham House Rules, a depression-era conceit that says attendees can report out about the “sense of the room” but that the identities of attendees and their specific statements can only be cited with their express permission.

Last year, the discussion was predictably about the upcoming election, with a side order of China. Even at that contentious moment in history, the discussion was erudite and respectful, despite wildly different and strongly held opinions.

This year was equally respectful, but the topics were different. Here are my takeaways.

Is This Market Long In The Tooth?

If there was a single question that kept coming up, it was whether global asset markets were overvalued. “This bull market is tired,” was a common refrain.

The counterarguments were many and vigorous. Barry Ritholtz of Ritholtz Wealth Management was quick to point out that measuring bull markets from the lowest-lows—March 2009—is essentially a mental error—by that measure, the 1980s bull market started in the 1970s.

Instead, measuring from the “higher highs,” the current bull market is essentially a toddler:

 

ETFExplainerXLB

For a larger view, please click on the image above.

 

Further on the bull side, there was broad dismissal of the current chaos in Washington, and a strong focus on fundamentals that still look strong: Corporate earnings are at all-time highs, and that should remain the driver of at least the U.S. equity markets.

 

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