Three Fish Tales

David R. Kotok
Chairman and Chief Investment Officer
Three Fish Tales
August 2, 2010


Three fish tales fit this weekend’s brief writing. The first involves a speech and some magnificent trout.

We are back from the Rocky Mountain Economic Summit held on Friday in Afton, Wyoming. Former St. Louis Fed president Bill Poole, Wells Fargo chief economist John Silvia, and I presented, followed by an interactive discussion with the guests. Investors, CEOs, and financial-market professionals comprised most of the audience.

A quick summary of the publicly presented views follows: Bill Poole talked about the US fiscal policy and described how the US faces an adjustment that will be difficult. He described our current fiscal path as “unsustainable.” He detailed the size of the imbalance. He argued that tax policy cannot overcome the demands on federal fiscal finances, given the promises that politicians have made. Bill’s remarks were sobering.

Then John Silvia outlined his economic outlook. He sees the economy slowing in the second half of this year. He cautioned about the weight of the “unemployment hole.” John is worried about the politics of the country. He described the difficulties within the various demographic cohorts. He noted how important education is when job seeking. He, too, was sobering.

My role was to discuss the narrowing of credit spreads and the risk still priced in the banking sector. We used some forward rate analysis to estimate that risk pricing. We also argued in favor of municipal bonds with good credit characteristics, and we affirmed the need to research them carefully. Our full slide set will be on our website at Email me if you cannot find it and I will send you the link. However, I must warn that the file is huge. Therefore, if you send me a regular mailing address and the actual slides will be snail-mailed to you by the US postal service.

Prior to the conference, we were the guest of Justin and Cody Hyde (Hyde Financial Group) and visited the Star Valley Trout Ranch. We joined the Bronze Buffalo Club fishing derby as a guest fisherperson. This extraordinary fishing resort boasts trout fishing unlike any I have ever seen. My largest caught and immediately released was a 28-inch brown, a new lifetime record trout for me; the previous record was 27 inches in Patagonia on Argentina’s Lago Menendez in Alerces Park. The Trout Ranch resort is very private and secluded; views of the Wyoming countryside are spectacular; the food is excellent and the hospitality is gracious. My personal thanks to Justin Hyde for a warm welcome and to Cody Hyde for very specific advice on which fly to use in the fishing derby. Credit for the derby-winner trout really goes to him; all I had to do is set a hook and land it.

Fish tale two.

Fishing in the Gulf of Mexico has been terribly impacted by the BP spill. We know that from the news. In a few days, we will be examining it in detail along with the economic impact of the oil-drilling moratorium and the environmental damage from the BP disaster. The August 11-12 GIC event in Baton Rouge is nearly full. Two seats remain available right now for the helicopter tour. Briefings by experts have been fully arranged. The opening dinner on August 11 is now confirmed. It will be at the governor’s mansion. Our delegation will hear from Louisiana’s Lt. Governor. The rest of the superb speaker’s lineup may be seen on the GIC website, There are a few seats open for those who want to attend the seminar only and not take the helicopter tour. Call GIC, 215-898-9453, for details and booking.

Fish tale three.

This coming weekend is the annual economic and financial market professional invitational fishing weekend in Maine. This year, our group is the largest in the event’s history: 38 participants are signed up in addition to the media group. We will start with Wednesday night dinner at Leen’s Lodge in Grand Lake Stream, Maine. Most attendees will be in camp by Thursday afternoon. On Friday, August 6, Bloomberg TV and Bloomberg radio will be broadcasting live from Leen’s Lodge. They will be staying with us through Sunday. Discussions and a survey of participants’ views will be conducted.

We expect lots of discussion about the state of the economy and the financial markets. Attendees are traveling from four continents; a diverse set of opinions is likely to be expressed. We expect to summarize those views for our readers when we return.

Tight lines.

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

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