According to Ronald-Peter Stoeferle, central bank buying has helped “strengthen gold from a weak hand to a strong hand” and supported gold prices in recent years.
Month: March 2019
Environmental, Social and Governance friendly (Part one)
Dear Ladies and Gentlemen
Once every few weeks I receive messages by readers that ask me about Environmental, Social and Governance (ESG) friendly investments. I think it is about time to take up this topic.
This week, in part one, I would like to share some basic information and explain some of the terminology used in connection with ESG friendly investments. Next week I would like to offer my point of view on the difficulties arising when trying to choose ESG friendly investments.
Let’s start with ESG. ESG stands for Environmental, Social and Governance and defines certain standards used to screen investments. You may have read or heard of the following terms, like SRI and/or CSR. SRI (Socially Responsible Investments). SRI basically covers as the name would suggest the field of socially responsible investing and looks for investments that are considered socially conscious because of the nature of the business the company conducts, while CSR (Corporate Social Responsibility) is a business model that may help companies be socially somewhat accountable to it its stakeholders and the general public.
When looking for an investment, one my come across the terms of “Impact Investing” and/or “Green Fund”. Impact investing aims to generate specific beneficial social or environmental effects in addition to financial gains and green funds should invest only in sustainable or socially conscious companies, avoiding the rest of the investment universe.
When looking at ESG investments, statistics on CO2 (carbon dioxide) emission are probably one of the most common denominators used to explain negative environmental effects. However, I prefer statistical data on so called “greenhouse gases” as such statistics offer a wider, more complete picture. The most commonly known greenhouse gases are water vapor, carbon dioxide, methane, nitrous oxide and ozone.
Ladies and Gentlemen the above basics are needed for my next weekly, which I promise will be somewhat more spicy.
As always, I encourage you to send me your feedback and/or questions but please don’t forget (instead of hitting the reply button) to send your messages to:
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
The Good News about the Next Recession
The Federal Reserve is switching gears and halting interest-rate hikes for the near future, amid fears of another global crisis.
The United States is entering a recession and there will be quantitative easing again, predicts Ronald Stöferle. He argues that the worst is over for mining stocks and the gold price, as they stand to gain enormously from sliding faith in fiat currencies.
Low inflation is going to stay for some time! Readers feedback
Dear Ladies and Gentlemen
My last weekly mail on Japanese conditions in global government bond markets triggered a few messages by readers. Unfortunately the format of my weekly mail doesn’t allow me to publish all of the answers in full length but as usual I am very happy to include some of the ideas and comments I have received. In general everyone seemed to agree that there were no signs of higher bond yields, nor any sharp inflation increases on the horizon, at least not in advanced economies. My old friend Mark could even imagine negative inflation especially since he strongly believes that borrowing reduces future growth and I wouldn’t argue against that.
Anton added his believes of interest rates remaining under the manipulation of central banks for some time in the future, as to allow continuous debt servicing going forward. However, he sees at least two major issues with this. First artificially low interest rates are bad for efficient capital allocation (i.e. low interest rates in the US have incentivised corporates to lever up, do M&A and share buybacks at the expense of investment spending, including higher wages. Second artificially low interest rates benefit owners of financial assets at the expense of savers. Again, I wouldn’t argue against that.
You know, Ladies and Gentlemen, I am seriously troubled when other people’s ideas become “religion” and whenever this is the case, I think we need to be careful. Anton made an interesting statement in this respect. He mentioned that this is why he valued “so dearly the Enlightenment as a philosophical, theological and scientific movement because it liberated our civilisation from dogmatic thinking…now and again our society falls back into that rigid form of looking at things, but that’s the echo of the cyclical nature of human history…perhaps the future is brighter.” What a statement, I sure like that one and hope for my remaining life span to be long enough to live that bright future!
Last but not least I wanted to share a short statement by Robert, who pointed out to me an important fact in respect to the cash-flow strategies I am so fond of. Fact is that depending on where you are domiciled, cash-flows stemming from investments in financial assets are taxed in different ways and sometimes even in a “prohibitive manner” and thus taxes most probably will have a more or less negative impact on the strategy as such. This is certainly true. However, as I cannot possibly know all the different tax laws, I hope for your understanding.
As always, I encourage you to send me your feedback and/or questions but please don’t forget (instead of hitting the reply button) to send your messages to:
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
Ronald Stöferle at the 2019 Gold Summit
Ronald Stöferle speaks with Boaz Shoshan at Gold Summit about the current world economic situation, as well as the past and current Gold performance.
Japanese conditions – low inflation is going to stay for some time!
Dear Ladies and Gentlemen
Japanese conditions in global government bond markets are more and more likely. But what does it mean for our investors with reference currency Euro or Swiss Francs, if Germany’s 10-year government bond yields 0% or almost 0%, Switzerland’s 10-year government bond even yields -0.75%. What does it mean, if central banks own large portions of their countries’ government bonds (the Bank of Japan owns 49% of Japanese government bonds, the European Central Bank owns 20% of European government bonds and the U.S. Federal Reserve System owns 13% of U.S. government bonds)?
The answer is not so trivial and since we do not have any long-lasting experience in this, we cannot really know where the situation is heading. One thing is certain though, as long as central banks are buying government bonds in the primary (direct at source) or secondary (at exchanges) markets at current or even increased rate, government bond markets will not become free markets (free in an economic sense) but stay manipulated. Manipulated may be a strong word for one or the other of you and I am not judging, but let’s face it if in any market of any product in the world one single buyer buys all the “leftovers” there will never be a fair price defined by offer and demand for that very product. In the case of government bonds one would assume that a country as over-indebted as Japan would have to pay much higher interest rates to sell their government bonds to investors than for example Germany a country running on a much, much lower debt to GDP ratio than Japan, only that this is not the case. The reason for this is central bank intervention.
Personally I believe Japan is indicating a direction in this respect as Japan is somewhat running ahead of us sitting here in Europe. Japan is running on low or ultra-low interest rates for decades already and Japan is in a situation of constantly increasing government debt levels that have reached roughly 250% of GDP. What we can learn from Japan and what we can expect to experience in Europe including Switzerland (at least partially and maybe to some lesser extent) is the following:
- Debt to GDP ratios will rise.
- Interest rates will stay low due to central bank interaction.
- Government spending discipline is not going to increase.
- Government bond markets stay manipulated by central bank interaction.
- Government bond markets’ liquidity problem is going to stay due to central bank interaction.
- Inflation will stay low.
- Central bank status quo for decades.
This list is by all means not complete. But it shows why I believe there will not be either a quick fix or hyper-inflation anywhere soon.
Therefore, ask yourself if you really want to invest your money following an unlikely scenario? Because maybe it makes sense to invest in cashflow returning strategies and keep some precious metals for the ultimate worst-case scenario, no?
What is your opinion?
As always, I encourage you to send me your feedback and/or questions but please don’t forget (instead of hitting the reply button) to send your messages to:
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
Thursday (Monday) Conversation – Ronald-Peter Stoeferle
Ronni Stoeferle is discussing the current happenings in gold and if/how this year’s IGWT will jibe with our theme of 2010+9.
This discussion primarily focuses upon three, key points:
1) The rally in gold from late 2018 that ended with a thud last week.
2) Ongoing developments in gold and the mining shares that likely indicate higher prices are coming in the months ahead.
3) A preview of IGMT 2019 and a discussion of the primary themes of the report.
Monetary U-Turn – When Will the Fed Start Easing Again? Incrementum Advisory Board Q1/2019 – feat. Special Guest Trey Reik (Sprott USA)
Dear investors, friends and clients,
Are we at the cusp of a Monetary U-Turn? What will the Fed do next; hike, ease, or keep their hand on the pause button?
During this quarter’s advisory board call we had a lively discussion between Jim Rickards, and special guest Trey Reik, about the Fed’s likely next move.
Trey works at Sprott USA, and has deep knowledge about gold, gold mining stocks, and monetary policy.
During the call we also talked about:
• What sort of chairman is Powell showing himself to be?
• Is institutional interest for gold finally coming back?
• How is the fed using balance sheet normalization in conjunction with interest rate policy?
• What is central bank purchasing of gold signalling to the market?
We hope that you will find our discussion insightful and inspiring!
Have a great week!
Kind regards from Liechtenstein,
Mark J. Valek & Ronald-Peter Stoeferle
Incrementum AG
A simple calculation
Dear Ladies and Gentlemen
If you belong to the people who pay their bills primarily in Swiss Francs and/or Euros you belong to a rather large cohort of a few hundred million people living most probably somewhere on the European continent.
Today, I would like to show you with a simple calculation why I prefer equities over bonds.
If you keep your money as liquid and as safe as possible in a bank savings-account (hopefully with a bank offering some sort of government guarantee or at least a bank not getting involved in investment banking and/or corporate debt) or you have it invested in Swiss and/or German government bonds, you, Ladies and Gentlemen, will most probably receive 0% interest. Maybe you will even have to pay a small interest for depositing your money at the bank or for investing it in government bonds of short maturity and in any case, you will have to pay some small banking fees here and there on a regular basis.
This means, in the case of you wanting to invest your money in a Swiss and/or German government bond for 10 years because of its relatively low volatility, you will have to accept 0% interest or in other words no income whatsoever from such an investment and even worse, you will actually lose small bits and pieces of your money (fees) over the entire 10-year period. This truly means that at the end of a 10-year period you have less money than when you started and in real money terms, which means adjusted to purchasing power, you may have lost 10% – 20% due to inflation over that period.
To me this seems not a very attractive investment.
On the other hand, if you invest your money over 10 years in some solid listed company that pays regular annual dividends of 4.5%, thanks to the effect of compounding you will receive some 50% return over the same period. True, you will most probably have to accept higher volatility, but doesn’t the proposed return deliver an incentive high enough to accept such volatility?
Ladies and Gentlemen, to me it does!
Now, I know this is a very simplified calculation but both examples are real and possible in today’s market environment. Solid company delivering 4.5% dividend yield on one side and 0% 10-year government bond on the other side.
Think about it!
As always, I encourage you to send me your feedback and/or questions but please don’t forget (instead of hitting the reply button) to send your messages to:
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