Money Clip

Blog by Matthias Paul Kuhlmey


Matthias Paul Kuhlmey is a Managing Director & Partner at HighTower Advisors, where he serves as wealth manager to High Net Worth and Ultra-High Net Worth Individuals, Family Offices, and Institutions.

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  • Rewind

    Friday, October 31, 2014

    Posted By: Avita Sukhram

    Deep into that darkness peering, long I stood there wondering, fearing, Doubting, dreaming dreams no mortal ever dared to dream before; But the silence was unbroken, and the darkness gave no token …-“The Raven”, Edgar Allen Poe

    Usually around this time of year, Edgar Allen Poe’s most popular poem always comes to mind (he was definitely on Boston’s mind).  Generally speaking, Poe’s writing takes us through a journey of the darkest parts of human passion, and that’s when things get weird. 

    This week didn’t shed much light into anything: Ebola extends its reach to Maine, Virgin Galactic crashes during its flight test, the sugar industry tells us some sweet little lies, everyone’s tracking the midterm money, gas falls below $3/gallon (and Goldman has something to say about it!), Andy Rubin moves on, Hungarians say no to internet tax, Gold is having a meltdown, Japan goes to QE-finity while the US says good-bye to the fairy dust, a big clue to Amelia Earheart’s disappearance, the midterm elections carry on (don’t forget to vote on Tuesday!) ,  the Kim Jong-Un mystery finally revealed itself (spoiler alert: not that interesting), Starbucks delivers in 2015, we all get know Brittany Maynard’s heart-wrenching story,  and net neutrality gets a revamp while Apple CEO Tim Cook came out of the proverbial closet (Although this wasn’t a secret to many, kudos to you Mr. Cook!)

    And so to end this 10th month of the year  and only 8 weeks to go and 54 shopping days until Christmas

    Once upon a midnight dreary, while I pondered, weak and weary; Over many a quaint and curious volume of forgotten lore – While I nodded, nearly napping, suddenly there came a tapping, As of someone gently rapping, rapping at my chamber door. ‘Tis some visitor’, I muttered, ‘tapping at my chamber door – only this and nothing more’” Quoth me, “shhhhh, no candy here, turn off the lights and ignore!”

    Love it or hate it… Happy Halloween!  We hope you had a great week and have a great (and safe) weekend ahead! Don’t forget Daylight Savings Time ends this weekend (so don’t be late on Monday)!

    ICYMI (Read: In Case You Missed It!)

    Millennials: Investing for Teens by Teens: FoxonStocks!

    Time’s 2014 Influential Teens

    A Halloween Indicator

    No Halloween Here

    Money and Happiness

    Would you like Fries with your Option Swaps?

    We The Economy

    Midterm Focus

    Best Costume: Ruth Baby (Ginsburg)

    The Devastating History of Midterm Elections

    The dangers of a Taylor Swift high

    HP Sprout

    Cellular Census

    US Candy Trends

    No Last Minute Deals here!

    The Science of Air Travel

    Talent Retention

    The View From Above

    Meet n Greet in France: Corporate Kiss Etiquette

    Evernote “Work Chat” 

     

  • Stressed Out

    Thursday, October 30, 2014

    Posted by: Matthias Paul Kuhlmey

    As featured on WealthManagement.com:

    http://wealthmanagement.com/viewpoints/stressed-out

    A quite picturesque landing at Frankfurt airport on my route from Berlin to New York this past Saturday – the mist of the early morning fog barely revealed the silhouettes of the distant skyscrapers. Part of this ever-dynamic skyline is a massive construction site for the new and elaborate home of the European Central Bank (ECB). The gray sky likely reflected the mood of policymakers that morning, with news surfacing that results of the (still) secret stress test to assess the strength of European banks had been leaked. Fast forward, the (now official) data was not much better than the previously revealed information: 25 major European banks could not meet requirements and face a shortfall of about EUR24 billion ($31 billion) in capital requirements.

    When I think of stress testing, it is a gut-wrenching “all-out” run on a treadmill, pushing myself to new limits and leaving my body begging for a break and a breath; it is difficult, to say the least. The “fitness assessment” for European Banks was not that “stressful,” after all. With the ECB assuming the role of European banking oversight, effective on November 4, 2014, it is clearly better to start off “clean” by providing confidence to the marketplace and, at the same time, not preventing banks from effectively managing operating requirements or lending activities – a more than delicate balance to achieve. It is likely for this reason that regulations governing the stress test have not been fully phased-in, as otherwise 34 of the 130 banks tested would have failed. The lax standard continues to be a concern, since banks that were originally cleared in previous 2010 and 2011 versions of European stress testing failed only months later.

    It may not be a coincidence that the ECB has been anchored deep within Frankfurt, which is home to Germany’s national and global banking sector, as well as the Deutsche Bundesbank, the domestic and historically powerful central bank. Whereas Mr. Mario Draghi, President of the ECB, still embraces an all-encompassing “whatever it takes” approach (the stress test is yet another example), it is here in Frankfurt where German influence, as measured by economic standards and with respect to monetary policy, is centered. It has become public knowledge that Mr. Draghi has not only been clashing with Jens Weidmann, head of the Bundesbank, but also with German Finance Minister, Schäuble. At the end of the day, Draghi may get he wants, given the dire economic conditions in Europe, but each attempt will become increasingly more difficult.

    The new ECB building, a recently estimated EUR1.3 billion construction project, is running far beyond the original schedule and budget, and may be symbolic of the European Union (EU) build itself – a possibly flawed design. The majority of the 28 EU member nations have entered a monetary union (EMU) with the adoption of a single currency. However, a comprehensive fiscal union that allows for the integration of national fiscal treaties under a federal framework was never established. In consequence, European policymakers lack the ability to make decisions about the collection and expenditure of taxes on a European level and, thus, the unified ability to mutually support each nation’s debt. On the surface, EMU member nations are “connected” through the single currency, but continue to remain truly disconnected in many other respects.

    Current conditions in Europe are a harsh reminder of 2011, and may lead the world’s financial system to its very own stress test – not only limited to the European banking sector. Global investors will have to adhere to a high standard with respect to their asset selection, acknowledging that most of Europe continues to suffer from a sovereign debt and/or banking crisis, rather than a lack of good businesses with attractive valuations. On balance, uncertainty and related volatility will remain an integral part of the “European story” until there is political consent and intention to address not only the inherent design flaw of the Union, but also to find ways of dealing with the growing legacy cost within the financial system.

  • Collective Wisdom – MoneyLife Radio Show

    Wednesday, October 29, 2014

    Posted by: Matthias Paul Kuhlmey

    How should investors view the current global environment for oil? This morning, it was a great pleasure to make an appearance on Chuck Jaffe’s MoneyLife Show, along with my colleagues, Matt Harris and Maja Janko, to discuss opportunities presented by lower oil prices, risks associated with oil-price volatility, and the technical outlook for equities related to oil and gas. Please click here to listen.

    HighTower was designed specifically not to follow a single viewpoint, or “house view,” in Wall Street jargon. Consequently, as we do not have to sell product, but rather provide advice, our business model allows us to reduce or avoid many conflicts we may have faced earlier in our careers as financial advisors. As partners in our business, we take great pride and responsibility in sharing best practices and ideas to deliver excellence to our clients.

  • Rewind

    Friday, October 24, 2014

    Posted By: Avita Sukhram

    Here, There, and Everywhere- Tom Sawyer, The Beatles, (or just commonly used phrases carried forward over time)

    As someone that actively reads and follows the news on a constant basis (hello Tweetdeck), I am really confused about what’s going with Ebola.  You see, earlier in the week, we were told not to worry as there were “no new cases” and that some countries were being declared “Ebola free”.   Obviously this “optimism” didn’t last long and by Thursday evening, Ebola made its way to the “Big Apple” (because it’s where dreams are made…right?) and we were told (again) not to worry, that it’s just “fearbola”, (it’s a week before Halloween, in case you needed any “clever” costume ideas!), and to be long hazmat suits (not really).

    Either way, I don’t know what to think because this disease has killed nearly 5,000 people across west Africa and it makes for an awkward (more so than usual) day for NYC commuters.   Since Ebola is popping up in the US, I’m going to say it is game on for the pharma companies to come up with a cure (sans the ice buckets this time please, it’s getting cold out there!)

    Okay, I’m moving on.  There was a shooting at the Canadian Parliament, the EU takes a stand against greenhouse gas emissions but the banks fail stress tests, Amazon disappoints, a plot twist in Ferguson, Mo., US strikes against ISIS are still ongoing, North Korea frees an American and encounters some other troubles (and yet still no one knows where he’s been!), Wyoming is the 32nd state to legalize gay marriage (18 to go!) while 31 states see falling unemployment rates, Pope Paul VI is one step closer to sainthood and finally, the Queen tweeteth herself (just like us, they are real people too!).

    We hope you had a great week and have a great weekend ahead!

    Other Interesting Links:

  • What Color is Your Gold?

    Friday, October 24, 2014

    GOLD

    Posted by: Matthias Paul Kuhlmey

    As featured on WealthManagement.com: 

    http://wealthmanagement.com/viewpoints/what-color-your-gold

    To set the record straight, I am not a gold bug. At the same time, I have little tolerance for the “bashing crowd” criticizing the yellow metal as a non-productive asset with no ability to earn income. Given that gold has maintained its character as a store of value over centuries and is regarded as commonly accepted tender, and, more importantly, with recognized global businesses engaged in heavy mining for precious metals, there are at least a few reasons for us to pay attention.

    Like it or not, “shunned” gold bugs may actually have interesting points to contribute to a value investment discussion. Whereas shares of mining companies are trading substantially higher compared to the lows seen during the financial crisis, the historic valuation gap has reached extreme levels: when measured by price-to-book ratios, most gold-mining stocks are more than 50% lower over the five-year period and yield about three times as much as in 2009. Further, the relationship between the prices of gold and gold mining stocks is significantly “tilted” in favor of the metal, set at a ratio not seen since 2000, and potentially the basis for mining stocks to mean-revert to the upside.

    The gold story appears to have an “echo:” given the recent sharp decline in the price of “black gold,” or oil, investors also have an opportunity to identify attractive opportunities in energy names. On an index basis, allowing for the same five-year comparison as with gold, oil stocks are trading at a 13% discount in their price-to-book relationship, and about a 30% discount with respect to prices paid for earnings. In addition, the pick-up of 15% in yield vs. 2009 is still attractive, given the notorious zero-interest-rate policy (aka “ZIRP”) maintained by the Fed.

    With China and other emerging market economies slowing, the pressure on the price of oil may build in the near term, making an investment in select energy names a matter of strategic allocation choice, rather than a tactical “bargain-hunt.” Yet, there are related opportunities with energy prices declining further. Our friends at Cornerstone Macro estimate that every cent saved on gasoline at the pump will free up approximately $1.2 billion for U.S. consumers, in addition to helping fuel-dependent transportation businesses.

    The push and pull between inflation and deflation is yet another interesting dimension of our analysis. While gold is commonly accepted as an inflation hedge, and prudent to consider in a world of expanding central bank liquidity, it is clear that the current price of energy supports non-inflationary outcomes, benefiting consumers and corporations. However, the impact of cheaper energy on a sovereign level is not as clear: Although some nations can benefit because of their economic structures, other economies that are heavily dependent on revenues of commodity production, especially oil, will suffer—some to a degree that their entire population may become negatively impacted (think of the Middle East).

    Whatever the color of your gold, the current value proposition is very compelling, but complexly interrelated. Select mining and energy names will likely produce attractive long-term results, but investing globally at the country-level should involve careful acknowledgement of the structural differences of given economies. Also keep in mind that the U.S. consumer has received a significant spending boost, potentially a bullish formation in the short run that could relieve policymakers from the immediate pressure of fiscal adjustments and political gridlock. If the above arguments are not convincing, there remains the opportunity to invest in “liquid gold,” or water, as I recently discussed in Glass Half Full

  • Collective Wisdom – MoneyLife Radio Show

    Wednesday, October 22, 2014

    Posted by: Matthias Paul Kuhlmey

    How should investors view the recent volatility in global markets? This morning, it was a great pleasure to make an appearance on Chuck Jaffe’s MoneyLife Show, along with my partners, Jeff Leventhal and David Molnar, to discuss investor complacency, the importance of a long-term investment perspective, and potential opportunities amid uncertainty and the “noise” of mainstream media. Please click here to listen.

    HighTower was designed specifically not to follow a single viewpoint, or “house view,” in Wall Street jargon. Consequently, as we do not have to sell product, but rather provide advice, our business model allows us to reduce or avoid many conflicts we may have faced earlier in our careers as financial advisors. As partners in our business, we take great pride and responsibility in sharing best practices and ideas to deliver excellence to our client

  • Rewind

    Friday, October 17, 2014

    Posted By: Avita Sukhram

    There is no great genius without a mixture of madness. – Aristotle 

    With unemployment at its lowest point in quite some time, this week I realized there are few jobs that still need to be filled that could help the continuing rate decline (and yes, we maintain our stance on equal pay for equal work!):

    Medical Genius Wanted: As Ebola makes it way west, right about now this would be greatly appreciated. And for the added importance effect, we will title it “Czar” (so as to not compete with Dame Jolie).

    Technology Genius Wanted:  Apple released the latest “what I didn’t know I needed to live” device, but as it turns out, I already have it. While Apple is a money-making machine, maybe they could lend a little help to SnapChat who’s still trying to figure it all out.

    Diplomatic Genius Wanted: Boko Haram (remember them?) has finally agreed to release the 200+ schoolgirls kidnapped back in April.  As of today, there isn’t much information as to how this sudden change of heart came about or even why.  We will keep an eye on this story to see how it all pans out.  The concerning part is the PTSD these young girls may suffer.  (And, I mean, who will play them & the hero in the movie?)

    Hacking Genius Wanted: Speaking of movies, remember “Catch Me If You Can” where a serial forger became integral to the FBI to combat counterfeiting? Well, if you are a hacker on the run, here’s opportunity knocking. Consumer security breaches are happening so often and it doesn’t seem likely to stop.  So until we can get some serious tech geniuses to get ahead of the game and help design relevant security, well…happy shopping.

    Policy Genius/Rockstar Wanted: I’m beginning to think that somewhere over the last few election cycles, politics reached a high point of ridiculousness and now we are all desensitized.  I mean really, how are we 3 weeks away from a potential political party shift  in the midterm elections and there are no standout stars going into the 2016 Presidential elections?? I mean, not even Joe Biden’s gaffes are making headlines.  All I’ve got is the Florida Governor’s race and what surmounted to “fanpocalypse” or “FanYourGround”.  (Sigh… okay those were pretty funny!)

    For many that don’t know, Rewind got started here at HighTower 2 years ago (Happy 2ndAnniversary!) on the craziness that was the October 2012 debates starring Mitt “binders full of women” Romney, Joe Biden, Paul Ryan (ha!) and President Obama (those really were the best of times).  So I hope it’s just me expecting just a little more madness from everyone (except the markets – talk about volatility!) and that it’s just the usual midterm doldrums.   At least there’s always a sports star to keep us entertained!

    We hope you had a great week and have a great weekend ahead!

    Other Interesting Links:

  • Pump Up The Vol

    Thursday, October 16, 2014

    494277207

    Posted by: Matthias Paul Kuhlmey

    As featured on WealthManagement.com: 

    http://wealthmanagement.com/viewpoints/pump-vol

    Recently, I was accused that my blogs have a somewhat “bearish undertone.” Whereas a defensive argument could be crafted, it is more important to report on facts and discontinue most of the economic illusion populated by mainstream media. Last week’s sharp increase in “vol” (or volatility, for the casual observer) of U.S. equities was a subtle reminder that financial markets cannot go up in perpetuity. From a global perspective, the reminder was delivered sooner; aside from most U.S. equities, numerous asset classes experienced significant downturns and corrections in the weeks before last – we were warned. There are now risks to monitor and opportunities to be claimed.

    What gets lost in the media’s translation is that our policymakers are worried as well. A distant headline over the long weekend postulated that the U.K and U.S., in a joint effort, will conduct “war games” to test the stability of their respective banking systems. Policymakers from both countries will “test” their responses, in case a U.S. bank with British operations should fail and vice versa. The IMF, in October’s Global Financial Stability Report (a worthwhile read), echoes the need to “game the system,” as global growth continues to rely heavily on accommodative policies that promote excessive economic risk-taking and financial (in)stability overall.

    With the IMF assessment in mind, our fears of (much) higher interest rates may turn out to be an old wives’ tale. Sharp increases in the price of economic financing to governments, businesses, and the consumer would be significantly counterproductive. To this point, we have experienced the slowest recovery on record: global economic performance across the board is at best mediocre, and, consequently, central banks and policymakers will have no choice but to further promote accommodative measures.

    What remains is “American Exceptionalism.” On a relative basis, the U.S. economy is much better positioned compared to other developed and developing nations. Nevertheless, and basis for caution, it may be too early for America to become the “engine” to the rest of the world. Given current status, global policymakers are racing for the same outcome, a concept historically known as “beggar thy neighbor.” Low rates and weak currencies are the “oil” for economic aspirations and competitiveness, but, in a global context, cannot be achieved for all parties involved, thus creating a breeding ground for international disagreement and political conflict.

    There is a silver lining. Recent volatility and economic slowdown have really shaken the commodity sector, especially in agricultural and energy-related goods (oil at 2010 low). Those developments will be highly beneficial to corporations and the consumer. U.S. domestic demand has been strengthening, and solid employment gains seem to have become the norm. Further, according to the IMF’s revisions to its global growth outlook, a significant risk is centered on developments in Europe, which is not exactly a new a story.  Economic soft-patches, especially in the U.S., may just be a function of secular stagnation, rather than a reverse in trend.

    As we recently discussed in “A Contract With Myself,” it is as critical as ever to ground financial decisions in a sound planning-based approach. Increasing volatility is not only a numeric outcome, but more so a psychological one. In the absence of clearly stated financial goals and objectives, clients have the tendency to “bail” on previously embraced investments, often the result of a recency bias (wanting to buy what has performed well). With volatility on the rise, advisors and their clients should prepare a “shopping list” to take advantage of falling prices and increasingly more attractive valuations, as a buying opportunity for long-term thematic investments.

  • COLLECTIVE WISDOM – MONEYLIFE RADIO SHOW

    Wednesday, October 15, 2014

    Posted by: Matthias Paul Kuhlmey

    How is technology impacting the evolution of consumer spending? This morning, it was a great pleasure to make an appearance on Chuck Jaffe’s MoneyLife Show, along with my colleagues, Richard Steinberg and Matt Harris, to discuss “disruptive” technologies, the significant impact such advancements have on our lives, and how to approach investing within the technology sector. Please click here to listen.

    HighTower was designed specifically not to follow a single viewpoint, or “house view,” in Wall Street jargon. Consequently, as we do not have to sell product, but rather provide advice, our business model allows us to reduce or avoid many conflicts we may have faced earlier in our careers as financial advisors. As partners in our business, we take great pride and responsibility in sharing best practices and ideas to deliver excellence to our clients.