Ambition, Inflation, and Century Bonds: A Modern Tragedy in Four Acts

Good Morning Ladies and Gentlemen

”How quickly arrives suddenly?”

Pete Doherty (during his concert in Zürich in February 2026)

Richard III is a historical tragedy that explores themes of unchecked ambition, political manipulation, and the corrupting influence of power, centred around one of Shakespeare’s most notorious villains. Reading the news about today’s social and political leaders, I often find myself experiencing a flashback to this narrative. Although I struggled with the linguistic complexities of Shakespeare’s tale about a corrupt and abusive king and ultimately did not finish it, I am nonetheless familiar with the drama’s content and seem to recognise striking parallels with the current social and political elite.

First Act: Eurozone Inflation

The eurozone’s inflation rate was 1.7% in January. Starting in February 2026, the base effect is expected to increase. In February, the eurozone inflation rate may drop to 1.5%, and it could subsequently fall below 1.2% through April. The strengthening euro is exerting downward pressure on commodity prices, helping to mitigate their rise and, in turn, the overall inflation rate. European Central Bank officials currently see no justification for further interest rate cuts or hikes. From today’s perspective, this outlook appears well-founded.

Second Act: U.S. Inflation

The US Bureau of Labour Statistics (BLS) reported January inflation at 2.4%, a decrease from December’s rate of 2.7%. In January and February, a base effect reduces inflation. Starting in March, however, this base effect should become less pronounced. While not all factors can be attributed solely to the base effect, I would still not be surprised to see the U.S. inflation rate in February to be lower than January’s (or remain stable). For March and the following months, I then expect an average monthly increase of 0.2%, resulting in an inflation rate comparable to that of the same month in the previous year. If we did consider only the base effect, the U.S. inflation rate would be expected to decline steadily through 2026. Yet, because of a weakening dollar and rising commodity prices, inflationary pressures are mounting. Should WTI crude reach USD 70 and stay around or even above it, that alone could drive inflation higher. Taking this into consideration, I believe the U.S. inflation rate will likely increase by more than 0.2% per month in the upcoming months.

Third Act: How to Measure Inflation?

In a recent article in the Swiss financial newspaper “Finanz und Wirtschaft”, I read about a well-known fact that seems to be challenged. It states that, for over forty years, American economists have advocated using the productivity argument to measure inflation in the United States. Michael Boskin, a professor at Stanford University’s Hoover Institution and a visiting scholar alongside the future Fed Chair Kevin Warsh, was one of the pioneers in this regard. In the 1990s, Boskin showed that when measuring prices, it is essential to account for quality improvements in products like PCs and cars; failing to do so risks overestimating inflation. His research was groundbreaking and led to the regular and meticulous revision of the baskets of goods that underpin consumer price indices worldwide. This process includes incorporating quality improvements, a method known as hedonic price calculation. (Understanding Hedonic Pricing: Definition, Uses, and Real Estate Examples).
However, three researchers from distinct universities have now conducted a study that challenges the prevailing understanding of inflation measurement. Their findings indicate that the current methodology for assessing inflation using microdata may understate the actual inflation rate in the United States, with discrepancies ranging from 0.3 to 1 percentage points annually.
The study calls into question the reliability of existing inflation metrics and suggests a need for revised approaches to accurately reflect economic conditions (https://www.nber.org/papers/w34803).
I find this study very interesting because it may explain the gap between official inflation data and the inflation consumers feel in daily life.

Fourth Act: Finally, a Curious Fact

As my partner Ronni Stöferle pointed out in a private email to friends, Google is set to launch Century Bonds, which feature a remarkable 100-year maturity. This development speaks volumes: firstly, it demonstrates Big Tech’s confidence in maintaining its dominance for generations to come. Secondly, it reveals that institutional investors are so keen on ‘security’ that they are planning as far ahead as 2126. Historically, such long-term commitments have often indicated the final peak of a market cycle.

Ladies and Gentlemen

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I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

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