Month: March 2018

Dear Ladies and Gentlemen

Investors don’t like uncertainty.

Yesterday’s financial markets plunge, triggered primarily (but not only) by fears of a global trade war, marked the fifth-largest point decline in the Dow’s history. CNN’s fear and greed index, measuring seven different market indicators, currently shows extreme fear. A potential trade war leads to uncertainty, uncertainty is fuel for bad performing markets.

I am often being asked by friends and investors what would be best to do, and I keep repeating the same over and over again and I believe it really seems fairly simple and usually works fine for me:

1. Don’t leverage your portfolio.
2. Do the nitty, gritty work and analyse potential investments.
3. Buy mainly (or even only) into net cashflow producing companies.
4. Keep the bulk of your assets in the currency of your expenses.
5. Keep a fair amount of cash so that you can invest (buy more) when others need to sell.
6. Buy on weak days.
7. Sell on strong days, take profits. Taking profits is wonderful. Don’t get too greedy!
8. Invest in companies distributing stable dividends, interests, capital reductions, etc. The cashflow from such investments will keep you afloat during difficult market times and there will always be difficult market times, like the one we are experiencing so far this year or maybe even worse!
9. Don’t try to time markets, it is very difficult to time markets because you will most probably not be able to foresee the future.

Ladies and Gentlemen, this is only a selection of investment principals I am living after. Obviously, they do not represent a recipe for the construction of an all-weather proof portfolio. Portfolios need to be custom tailored according to clients’ needs, age, risk awareness, etc. If you think about what is important to you, you may come up with your very own list of investment principles.

In any case, investing is not speculating. It is not playing around with financial instruments either in search/hope of a quick buck. It is a serious exercise and it is by definition: long-term.

Please share your thoughts, ideas, fears and questions with me. Let us put together a great list to look at during difficult market conditions. Many thanks!

…and therefore, Ladies and Gentlemen, if you are happy to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

Thanks to the ACQ5 award we received some weeks back, I have been interviewed and am happy to share with you the final text that was published, as it shows well our way of thinking:

“At Incrementum AG we genuinely believe in tangible assets and we are modest enough to accept the fact that we cannot foresee the future and thus, where markets are heading. Our investment team has a serious interest in and a profound understanding of monetary history. In combination with out-of-the-box reasoning and prudent fundamental financial research, purposely avoiding daily chatter and noise, this offers a distinct skill set that has proven to be utterly valuable for our private clients and investment fund investors alike.

Participations in listed companies are very tangible to us and equities therefore belong to our core investments. We are building truly customised client portfolios according to our clients’ requirements, needs and willingness to accept risk. As long-term investors we invest solely in equities of listed companies with a proven track record of producing net free cashflows over years, happy to share those cashflows at least partially with investors in the form of dividends and/or capital reductions. On the other hand, and after many years of extraordinary money supply and ultra-low interest rates, we do not invest in government bonds as we do not feel comfortable with the current risk reward profile offered by those.

Large scale monetary policies are difficult to judge and while we are not entirely certain that the increase in global debt will be sustainable, we are humble enough to recognise that so far, the leading central banks seem to have mastered the 2007/2008 financial crisis rather well. Either way at Incrementum we see money only as means for facilitating global trade, consumption, maybe storing value very short term and thus as a lubricant for the global economy.

Our independence and short lines of communication are helping us to respond to evolving markets rapidly, to communicate freely and to act without any bias for our clients which as a result is helping them to prosper long term even in challenging market environments.

Ultimately, we believe in our independent and flexible boutique approach as it combines unconventional thinking with state of the art asset management know-how. We are convinced that the assets we manage will offer our investors the growth element that our company name Incrementum stands for.”

Ladies and Gentlemen, I am very happy to receive your feedback and if you want to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

We are launching the second edition of our Incrementum Crypto Research Report. I highly recommend you to have a look at our dedicated crypto research website and to register to receive your free copy either in German or English:

http://cryptoresearch.report/downloads/.

In this brand-new edition, we are looking at the following topics:

• Is Bitcoin a bursting bubble or the first case of hyper-deflation in history? A checklist on financial bubbles and a comparison of bear and bull markets sheds light on the issue.
• The recent crash in the crypto market has been accompanied by a surge in scams and fraudulent activities. Regulation is getting tighter, yet further growth can be expected.
• Trading cryptocurrencies can be rewarding but tough – especially in bear markets. Many aspects should be considered, and Technical Analysis can help.
• Hard forks are on the rise as ICOs are becoming increasingly regulated in places like China or South Korea. This has multiple implications for investors in cryptocurrencies.

…and for those who have asked me in the recent past about Incrementum’s motivation for researching this very topic, there is an interview with me in the back of the report giving some background information. Please let me know your thoughts!

Therefore, Ladies and Gentlemen, if you want to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

My friend Andy replied to my last weekly mail, agreeing basically with what I wrote. However, he was mentioning that currently only the U.S offered decent interest rates on their government bonds, while Europe’s government bond yields were still mostly close to zero and therefore offered no real alternative to equities. He also mentioned that investing in U.S. debt and hedging the USD currency risk would probably eat up most of the interest for Swiss Francs or Euros investors. I couldn’t agree more. Nonetheless, interest rates in Europe may stay close to zero for a while and therefore European equities should still perform well for some time. Yet, European equities markets will follow American equities markets and thus may be more affected (at least short to mid-term) by the performance of the Dow Jones Industrial Average Index than by low base rates in Europe.
Now, going back to equities investments in an environment of uncertainty brings me to one of my favourite topics. Nassim Taleb mentioned in his book “Antifragility” the concepts of fragility, robustness, and antifragility.

If we take Taleb’s concepts into consideration while thinking of equities investments, we can maybe identify three types of companies.

Number one, the (rather) fragile one (that may offer superior returns during booming markets) typically is a company with a leveraged or even highly leveraged balance sheet, producing products and services in a competitive environment without being market leader in its sector, thus occupying a peripheral market position. (Logics of Organization Theory by M. T. Hannan, L. Pólos, G. R. Carroll). As long as interest rates decline or stay low, the leveraged balance sheet may lead to decent margins, maybe even margins above the industry average. Now, if interest rates start to increase margins decline because of higher financing costs. In a recession the company may even go belly up because of failure of debt servicing. Equities of such a company are under heavy pressure during difficult market conditions and recover only very slowly if at all. Fragile companies may pay dividends during boom cycles, but regular dividends are not part of the investment concept.

For number two we look at a (rather) robust company, we see a stable business model, near-centre market positions (Logics of Organization Theory by M. T. Hannan, L. Pólos, G. R. Carroll) with limited amount of debt that could easily be serviced or even redeemed with current cash flows. Increasing interest rates have only a limited influence on such a company’s margins and profitability. Its equities will also come under pressure during difficult market conditions but usually tend to recover reasonably quickly once markets stabilize. Robust companies typically pay dividends even during difficult market conditions, regular dividends are part of the investment concept.

Number three, the antifragile company, shares many of the qualities of a robust company. The company generally operates with no debt at the market centre (Logics of Organization Theory by M. T. Hannan, L. Pólos, G. R. Carroll), during a crisis it will have the financial power to acquire companies or parts of companies that are under financial strain. Antifragile companies usually emerge stronger from a crisis. Its equities will also come under pressure during difficult market conditions, but they usually recover quickly and may even reach new highs once the crisis is over. Like robust companies, antifragile ones typically pay dividends even during difficult market conditions, regular and very often increasing dividends are part of the investment concept.

And as always, Ladies and Gentlemen, if you want to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth