When approached to contribute to Wealthmanagement.com on a weekly basis almost exactly one year ago, I was concerned with the amount of content that would have to be produced. Not because we are complacent creators of information or casual market observers, but because we recognize the importance of honoring communication channels with timely and relevant content. Nevertheless, if you are just “tuning in” now, the question is why someone should read this blog instead of the many other choices out there. Here is my pitch:
Our firm does not follow a strict top-down approach to questions of investing, but rather a collaborative one: As financial advisors, we are constantly engaged, exchanging and “competing” for the best ideas and relevant investment practices—very much in contrast to many traditional firms that constitute a binding house view. More importantly, as we have demonstrated with our recent Collective Wisdom Scorecard, we are willing to take ourselves to “judgment” by retrospectively assessing the quality of commentary and ideas produced.
Over the last 52 weeks of our Wealthmanagement.com blog, readers have not only been able to enjoy a multitude of music references (mainly ‘80s), of which seven (1, 2, 3, 4, 5, 6, 7) even made the title, but have also learned that I am a fan of animated films (or Pedro, more specifically), Monopoly, and (debatably) decidedly socialistic. More importantly, however, we quite vividly argued for those centers of concern and related opportunities identified within the current investment environment:
When understanding the dichotomy of current market developments, we found obvious misfits. Whereas cheaper oil and energy have often been regarded as “good for the consumer,” price trends have fundamentally changed the geopolitical setup and exposed the world to risk (The End of Oil … and Other Things). Then there is the inflation “ghost,” and why we should like inflation (or not). Related and also not intuitive is our argument that, at times, it is necessary to spend a nation's excess savings, particularly to stabilize economic and financial systems, even though measures of austerity would make the argument to the contrary.
We dedicated a few blog entries to exploring socioeconomic developments, including the emergence of the super-wealthy, their asset allocation and consumption choices, and, somewhat painfully, their rich kids (of Instagram). One of the more concerning points discussed, in this respect, is also the widening gap between the “haves” and far less fortunate, especially linked to asset-price inflation occurring in both financial assets and non-financial illiquid assets (including real estate and art). Low interest rates have benefited those with investable assets, while distorting the sense of “real” value for all of us.
As we continue to believe that global central banks have changed the process of natural price formation, compressing volatility as a result, investors are cautioned to be far more diligent in their approach to investing. In our view, the most important aspect is to follow a guided financial planning-based process that leads to relevant asset allocation choices (A Contract with Myself); accomplishing individual financial goals is far more important than “beating the market.”
Furthermore, we believe value will prevail, and inflated assets driven by ample liquidity and mainstream media promotion will not produce desired results—just as interventions by U.S. policymakers (and consequent increased debt burdens) have not delivered economic perseverance. With this in mind, investors are advised to focus and identify where growth will truly take place, likely driven by (demographically) young and emerging societies. Ditching emerging markets, which are not winning the current popularity test, is likely a mistake in the long run. Lastly, we believe the “next big themes,” are here to stay: water shortages and cybersecurity remain two of our favorites.
Given all that we have discussed so far, hopefully our readers do not feel that we have “held back” too much over the past year…and we’ll “keep holding on,” if you will (officially our 8th music reference, making its way into today’s title). As we continue to challenge ourselves to uncover relevant and interesting content, we will mark the month of August with “Summer Charts”—noteworthy developments related to our field, but explained primarily in dots and lines, with only a few words. Happy summer.
Matthias Paul Kuhlmey is a Partner and Head of Global Investment Solutions (GIS) at HighTower Advisors. He serves as wealth manager to High Net Worth and Ultra-High Net Worth Individuals, Family Offices, and Institutions.