Month: November 2018

What we can learn from farming

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

Many thanks for your feedback to my last weekly mail. Some of my readers came up with great thoughts and I will most probably use one or the other in future weeklies. I would like to thank especially Madeleine, Thomas, Robert, Scott and Anton for their inspiring reflections. Many thanks!

As some of you know, I live on a small hill in the country side of Zürich and when I look out of the window, I see cows and horses and only a few houses. Seeing farmers at work is part of every day life up here and talking to them from time to time made me think about investment processes.

Nowadays, most of us living in developed countries are used to instant gratification. People are posting pictures of their food and hope to receive likes, they are posting pictures of their cars and hope to receive likes, they are posting comments on Twitter and hope to receive likes. Instant gratification. You want a coffee, you get it immediately, you want something to eat, you get it right away, a new I-phone you get it, whatever we want we can get most of it at any moment. Instant gratification.

However, when it comes to investing, instant gratification is not all that easy to achieve.

Investing needs a strategy and it needs time, patience.

I think investing is actually a lot like farming. Before investing my clients’ money, I have to prepare the grounds. Ground preparing in my business is for example research and research is very time consuming and at times even boring and it is ongoing, it never stops but it needs to be done.

After preparing the grounds I sow the seeds, which means I make some first investments.  Afterwards I nourish and cater for the investments, I add positions or let go of some. When I think the time is right, I harvest, I take profits, rake in dividends or write calls (covered only) on long positions to increase to cashflow on the portfolio.

I am fully aware that a storm can take away a part of my clients’ harvest, this is why I am only on very, very rare occasions fully invested. Like this I always have some cash at hand to increase positions when markets are down.

That is what I am doing, not more and not less, and I keep on doing this over and over and over and over again.

And you know, Ladies and Gentlemen, I don’t think much of preparing and building up protection for this one and only very bad mega storm, almost hoping for it to arrive so that my protection works and (not to forget) my ego gets pampered. I think the opportunity cost of such a (rather risky) strategy is very high. Partial protection on the other side makes a lot of sense to me and I would highly recommend that in any sort of balanced portfolio.

Please do not hesitate to share your thoughts with me on whatever seems interesting  to you or on whatever is bothering you. 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
Wealth Management
Incrementum AG

Moralizing and Polarizing News Flow

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

This is a slightly more intense weekly than usual and I recommend you only read it if you really are up for it and can spare a moment to think about it.

You know, Ladies and Gentlemen, I ask myself if I am the only one or if there are others out there, who like me seem to have detected an unhealthy development of black or white thinking and/or black or white reporting on just about any important and even unimportant topic in politics and/or financial markets and many other things.

I do get the impression we are constantly being pulled or pushed into one or the other camp, black or white, by influencers of any sort moralizing and polarizing with at times very week arguments.

I really can’t think much of this and it bothers me big time. I don’t think moralizing and polarizing; black or white thinking is helping the knowledge building process of voters and financial investors in any positive way. Why can’t we accept different shades of grey or even colours and have a debate on viewpoints without having to fiercely defend the moralizing and polarizing viewpoints of pseudo gurus?

Is it really impossible to see something (anything really) good in a political candidate, who’s face, style, political program you dislike? Is it really impossible to see something (anything really) good in an asset class you generally dislike? Isn’t it the mix that proposes the best results?

Look, Ladies and Gentlemen, in a very simplified illustration what would you think if a cook was only offering dishes with one ingredient? Don’t you think this would be slightly boring over time and that he would maybe soon be out of business? While and thanks to a mix of ingredients he may were to achieve balanced and interesting menus?

Same is obviously true for politics. I personally think President Donald Trump is not a very elegant person, however I cannot imagine that everything he does is bad. The new Italian government does not want to stick to agreements signed with the EU by their predecessors long time ago, true and yet, there are arguments I understand even if I don’t like them.

Now, when it comes to financial markets, the sometimes-fierce fight between defenders of one or the other asset class is truly surprising as it leads to more restrictions instead of more freedom and flexibility. Why would someone be happy to give up freedom or flexibility?

You know, Ladies and Gentlemen, this phenomenon you can also find in religion and while we finally seem to understand that religion was man made, we almost seem to seek restrictions outside religion. Again, this is very surprising to me as it makes our thinking and acting more rigid and thus fragile instead of flexible and antifragile.

What is your opinion, Ladies and Gentlemen?

Please do not hesitate to share your thoughts with me on whatever seems interesting or bothering to you. 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
Wealth Management
Incrementum AG

European General Data Protection Regulation (GPDR)

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

 

Wow!

 

Many thanks for the positive feedback to my last weekly mail!

I have rarely received more feedback than last week. Thank you very much indeed! Robert even offered me a bottle of wine (alternative currency as we have learned).

Now, today I must inform you once more about the new European General Data Protection Regulation (GDPR). This regulation offers an increased level of privacy protection and became effective on May 25, 2018. In Liechtenstein data regulation was always rather strict, especially in the financial industry. Still, to comply with the new GDPR standard, we’ve updated our privacy policy. The extensive information can be found on our webpage.

In addition we will have to delete all the email addresses of our readers for all products, if we cannot prove that the reader really wants to receiver our messages. Therefore, I ask you to please register yourself under:

https://www.incrementum.li/en/incrementum-newsletter/

if you haven’t done so since May 2018 and if you want to receive my weekly mails or any other publication by Incrementum also in the future.

Please accept my apologies for this inconvenience.

Many thanks for your understanding and please do not hesitate to share your thoughts with me on whatever seems interesting to you or is bothering you. 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
Wealth Management
Incrementum AG

Zuri Invest Gala Dinner November 2018: “In Gold We Trust” With Ronald Stöferle

Posted on by Ronald Stöferle

Ronald Stöferle gives a speech ” In Gold we Trust” at Zuri Invest Gala Dinner.

He is discussing the following:
1) Status Quo
2) A turn of Tide in Monetary Policy
3) A turn of Tode in the Global Monetary Architecture
4 ) Gold Stocks
5) Conclusion: Quo Vadis, Aurum?

What can be expected?

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

I was asked by one of my readers to elaborate my view on what can be expected by financial markets until year end? I am happy to do so, but please keep in mind that this is my very personal view and that I can’t foresee the future.

Statistically the best two quarters of the year just started. Additionally, in years of mid-term elections in the U.S. the chances of a yearend rally are fairly good. Moreover, after the recent market slide followed by an impressive rise, the chart technics all of a sudden show some potential for further improvements.

Does this mean everything is fine? No, of course it doesn’t, but for the time being interest rate increases seem to be priced in, trade war fears seem to be priced in, political changes in Germany (CDU/CSU’s and SPD’s massive losses) and in the U.S. (democrats take control of the house) seem to be priced in.

I personally believe we will still see volatility but I would be surprised not to see markets moving higher in the weeks to come. I first expect a short consolidation during the next days and thereafter further increases.
Now, what does this situation teach us? I think that some scare tactics by media and so-called “financial experts” have led to some very unpleasant situations during the last weeks. Panicking investors have sold their equities at the bottom of the market just to see them going up, in the last few days.
Look, Ladies and Gentlemen, 2018 so far is a very special year, we had two 10% crashes in the Standard & Poor’s Index within the past 10 months and we are still not in what is called a bear market, this didn’t happen since the mid 50ties.
But even if we eventually enter a bear market, which we will as bear markets just happen from time to time, this may be seen as normal market behaviour. You know, bear markets happen in average every 3.5 years and last for approximately one year. That is – I admit an unpleasant – part of investing, but so what. If you stick to your investments (as long as they are solid and net free cashflow producing) and if your investments pay dividends, you can always collect the dividends, spend the money or reinvest and wait until your stocks go up again. Just don’t let yourself get too excited.

Please never forget, investing is a long-term exercise and please never forget market corrections are normal, a common thing to happen. The link below shows you a table published by Wikipedia with stock market crashes and bear markets and as you will see, there were many and nevertheless we are still alive and kicking:

https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

Please do not hesitate to share your thoughts with me on the interview or on whatever seems interesting or bothering to you. 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
Wealth Management
Incrementum AG

Peter and the Wolf

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

Thank you very much for all your feedback to the video interview. My friend Robert made me laugh when he wrote in response to my quote that wine may become currency, that he just invested in some excellent “currency” during his recent trip to Slovenia and is enjoying it very much.

I also received some feedback to my views on equities and on gold and this is why today I would like to look at a phenomenon which is bothering me to some extent.

Do you know the story of Peter and the Wolf? I guess you do.

As most of you know, I am a reasonably humble investor. I am aware of the fact that sometimes I make mistakes when investing and I am also aware of the fact that we live in a world of increasing government debt and I can’t say I like it and on top of that I am also a humble gold bug, knowing about the positive and specific core features of gold as a means for very long-term value, i.e. capital preservation.

However, I also really don’t want to pay the opportunity cost of only investing in one asset class and I really like cashflows and gold doesn’t deliver those. Now, since I want cashflows but can’t find them on the fixed income (bonds, etc) side, I am constantly forced to screen the markets for equities of cashflow producing companies with solid and sustainable business models, whose valuations are not too stretched. Clients sometimes ask me why I would buy equities of companies when they just had missed their quarterly results. Well, Ladies and Gentlemen, to explain this in a very simplified manner, if the underlying business of such a company is solid and the cashflows are even coming in during difficult market periods and the company gets hit because it missed quarterly results estimates produced by some financial analysts, I usually look at it as a gift by the market and buy into the company at somewhat lower prices, wait, see and collect dividends for my clients and if over time market participants start to forget the fact that the company had missed their targets or the company even beats some quarters down the road unexpectedly analyst’s forecasts, the stock usually starts climbing again and the investment delivers a capital gain next to the dividends. It is not always that simple, but I think you get the idea.

But now you may ask, what this has to do with Peter and the wolf? The thing is that I share some of the views of gold bugs but unfortunately many gold bugs are behaving like Peter, they are shouting “wolf”, “wolf”, “wolf”, a little louder year after year, but there is no wolf coming. In the beginning people (investors) are concerned and are (still) listening but over time less and less people are concerned and at the end no one believes in the wolf anymore, they begin neglecting protection – and that may be the moment the wolf is arriving.
The phenomenon I see is that some gold bugs have the right intention but instead of staying humble, they do get bored or even frustrated because the wolf is not quite arriving yet and so they start shouting louder and louder. At Incrementum AG we try to avoid this by producing the Incrementum “In Gold We Trust” gold report only once a year because in the end any very long-term “protection” shouldn’t be influenced by monthly or quarterly market noise and/or chatter.

To sum it up, Ladies and Gentlemen, I believe the wolf will be coming one day and this is why my tool box approach offering a combination of various asset classes makes so much sense to me. But paying the opportunity cost of a dogmatic investment style doesn’t make sense whatsoever.

Please do not hesitate to share your thoughts with me on the interview or on whatever seems interesting or bothering to you. 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
Wealth Management
Incrementum AG