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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Missing Words … and Numbers

Friday, April 13, 2012

Posted By:  Matthias Paul Kuhlmey

The German magazine, Der Spiegel, is running a very interesting cover story this week, entitled “Heimat.” When I tried to explain to my wife what the article is all about, I l realized that there is no English word to translate Heimat. After doing some research, we acknowledge that Heimat “is a German word that has no simple English translation, denoting the relationship of a human being towards a certain spatial social unit. The term forms a contrast to social alienation and usually carries positive connotations. It is often expressed with terms such as home or homeland, but these English counterparts fail to encapsulate the true meaning of the word.”

With further lack of words, let us attempt to explain the current market or market participants’ behavior — as good as we can (promise). Setting the scene: We have terrible job numbers in the U.S. — meaning terrible(!) — about 50% under expectations, as reported last Friday (known as a “miss” in financial jargon); there is a continuously deteriorating situation in Europe, with our beloved European Central Bank (ECB)  preparing to buy European Sovereign Debt to ease markets; and, last but not least, we have seen a modest increase in Unemployment Claims, here at home. The Conclusion:  It does not matter! The “Solution”:  As soon as bad news “hit the tape,” the Talking Heads of the FED, ECB et al (Central Banks Unite) are not shy of words, even though they should choose them carefully. The “quick fix” is generously promised, and a bit of “hinting here and there” gives investors the confidence needed.

Wait a minute, what is an investor, anyway? You would think a thoughtful person, studying balance sheets, and being in for the long run — but not so fast. Doing some research on this word, even speculators may as well be considered investors. And here is the dilemma: Central Banks, ever since the Credit Crisis of 2008/2009, have been facilitating the most significant liquidity injection ever experienced by modern society. The Bank of Japan (BoJ) and ECB have expanded their balance sheets to about 25% of respective GDPs, while the FED and Bank of England come in at around 20%. On this basis, we are not talking investing, but rather of a massive inflation trade in the making.

Without a more formal approach to investing (and now we are referring to the “real thing”), there will be disappointment over the outcome, sooner than later. However, if you think all is “dandy,” consider another great data point, as observed by Bloomberg:  Apple stock’s price performance has accounted for 8% (!) of the Standard and Poor’s increase from March 2009 to this week. Fortunately, we do have an English word to describe our reaction to this — “Speechless!”

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