David R. Kotok
Cumberland Advisors
April 6, 2011 Wednesday, 1:30 PM (Rome Time)


The Forum Hotel in Rome is a magnificent spot, with a rooftop restaurant on the fifth floor. From it, you can see antiquity. At your far right, the columns attack the sky, and the ancient markings go to the time of Emperor Julius Caesar. On your left is the Coliseum. In between are tons of rocks. If rocks could tell stories, they would talk about the decline and fall of this empire. They would talk about the period in which Rome dominated the world in commerce, in which its military might was unchallenged, and in which its currency was respected. The rocks would also talk about the debasement of the currency, the demise of the society, and the way in which Rome ultimately met its end.

Professor Paul Kennedy at Yale University wrote a book entitled The Decline and Fall of the Great Powers. In it he describes what happens to societies over time. How they arise, have their fabric rent, and end in tatters. Kennedy’s book is a historical perspective. It doesn’t have to be a forecast for our future, but many think it is.

We meet here in Rome; the first Global Interdependence Center event is a dinner this evening. We assemble tomorrow and Friday in conferences and discussions. We will talk about sovereign debt and how it should be handled. What are the implications? How do you assess and rate it? On the plane, Sean Egan and I had a brief discussion about the rating agencies and their pitfalls. Sean was one of the early independent parties to warn about European sovereign debt. He has made his reputation by sponsoring the notion that rating authorities should not be paid by the issuers of bonds. He believes some other method is needed to accomplish the independent perspective that credit research requires.

In the lobby of the hotel, we conversed with Timo Tyrväinen, Chief Economist at Aktia Savings Bank in Finland, and Paul McCulley, now Chairman of the Society of Fellows of the Global Interdependence Center, and formerly a substantial and accomplished portfolio manager and economist with PIMCO. With us also was Michael Drury, Chief Economist of McVean Trading, a commodities firm located in Memphis. Michael and I discussed how his firm’s view of the commodities world is requiring him to be intensely involved globally. Adolfo Laurenti, Deputy Chief Economist with Mesirow Financial in Chicago, walked through the lobby. We exchanged a quick hello and talked briefly about the world, as Adolfo was running off to a meeting.

Many others are here; the discussions tomorrow will involve over one hundred people in presentations and panels. We will examine what Libya, oil, and $120 Brent crude mean for the Eurozone and Italy. We will talk about business opportunities in Italy. We will consider the interface between independent businesses in the US and their counterparts in Europe. We will discuss central banking policies. Cleveland Federal Reserve Bank President Sandy Pianalto is here as a member of our delegation. We look forward to her remarks. We will also hear from a counterparty from the Bank of Italy.

It’s beautiful in Rome today. The temperature is in the low 70s, partly cloudy with a slight breeze. The lunch on the roof of the Forum Hotel is delicious and pleasant. A local red wine accompanies the wonderful repast.

The global problems are huge. The complexity is enormous. They run from Japan to Libya to Bahrain to Rome, and for us in the investment advisory business they are very much dominated by the circus we watch in Washington. Ciao!


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

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