Month: January 2022

Dear Ladies and Gentlemen,

Many thanks for your feedback on my last weekly mail. I received many messages from concerned investors and emails from “opportunity hunters” as well, happy to buy into stocks that were trading on unattractive price levels for a long time and that suddenly seem attractive after the recent correction.

Stats

It is always interesting to look at some statistics. Stats may offer a slightly different perspective to what we see when looking at the screens and reading research. For example, the bullish expectations of U.S. private investors rose slightly to 23.1% in Wednesday’s survey from 21.0% in the previous week. This is still a very low number, and sentiment among private investors in the U.S. remains palpably pessimistic. According to this number, fear was only higher during the GFC and the bear markets of 2002/03 and 1990/91. In other words, looking at that very number, a lot of fear is priced in. I would never base my investment decisions on only one number and yet it is an interesting one to me.

Intrinsic Auto-Correction

In an email conversation with one of my readers over the weekend, I mentioned that I believed that financial markets have an intrinsic auto-correction feature. Unfortunately, that auto-correction quality was halted for some time thanks to the massive government or central bank interventions ever since the GFC. Still, it seems that at least for a short moment, the auto-correction feature will do its job again, and this will undoubtedly cause pain to some market participants, especially to investors working with leverage. Nevertheless, it also offers excellent opportunities to others, especially those with cash at hand, to invest in great quality stocks that have been hammered down in recent days and weeks.

Fascinating

I have been looking at financial markets for over 35 years and am still fascinated to see that a comment by a central banker and/or a politician can cause financial markets to move more than a few percentage points in one or the other direction. The cumulated productivity, work, successes, failures, etc. of billions of workers and hundreds of thousands of companies globally may be getting blown out of the investment equation because of a simple statement. This, Ladies and Gentlemen, is fascinating and, at least to me, too often out of proportion.

Calm

If you hold a diversified basket of quality investments and stick to your investment principles, and your investment goal lies not necessarily in instant gratification, you probably do not have to worry too much. The economy and financial markets come and go in cycles; maybe unpleasant at times but nothing to worry too much about; it is an integral part of it, whether we like it or not. A little calm may do wonders.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Dear Ladies and Gentlemen,

Many thanks for all the feedback I received for my last weekly mail. There were a few typos for which I apologize. It seems I was rather tired when I went through my notes.

Short-term thinking or long-term investing

Ladies and Gentlemen, from time to time, I get the impression that some of my readers and probably many, many investors who are not or not yet part of my readers are somewhat uncertain about the time horizon of their investments. However, I believe one of the most crucial factors for investors is to have a clear picture of the time horizon of their investments. It is utterly important not to make the mistake of mixing timeframes. Investing in value, harvesting dividends, and exploiting compounding effects need time, usually much time. On the other hand, investing in aggressive growth companies needs nerves of steel and sometimes selling quickly and taking profits. These are two different approaches. Neither is good or bad, right or wrong; they are just different.

What is the issue, then?

The issue starts when investors expect short-term returns from long-term strategies. Or low volatility from short-term opportunistic trading approaches. This is not easy to achieve, and I highly recommend that every investor have a clear picture of any investment’s time horizon.
Of course, one may have a somewhat mixed approach, as long as the investor does not expect a low volatility global food producer to show the same short-term spectacular returns the stocks of, for example, game stop at times delivered last year. Alternatively, on the other hand, if one invests in game stop stocks and expects the same low volatility features as in Nestle, disappointment will probably arrive without delay.

Precious Metals Mining Stocks

Let me quickly share something with you before we close today’s weekly.

We hold a small position in a precious metals mining ETF listed in Canada for our private clients. Now, the ETF is distributing regular dividends (you remember, I just cannot get enough cash flows) and looking at the dividend for the last quarter of 2021; I was impressed to see it going up nicely. So I suppose mining precious metals is currently a reasonably good business even if gold’s performance disappointed last year. Just imagine what would happen if the gold price went up by 10% or 20% and looking at the present political tension we experience, I can fantasize (even if my preferred scenario is quite a different one) inflation to increase further. Because never forget; wars and disputes have always been inflationary price drivers in the past.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Dear Ladies and Gentlemen

The other day I read: «the transition from enlightenment to radiation is probably fluid».

What to expect in 2022

Most of the time, most forecasters are exceptionally wrong! This is why I do not want to forecast what may happen in 2022. I just hate to be mistaken with all my readers noticing. But, maybe we can draw some conclusions from last year.

2021

In 2021 some technology and commodity companies delivered dizzying returns. But, to everyone’s disappointment, precious metals have performed poorly, despite inflation rates rising to multi-decade highs in most G20 nations.

Cash Flow

Our conservative cash flow-focused, low-tech and value-based strategy for private client mandates again delivered a solid performance but lagged far behind highrent tech and commodity stocks. In the long-term, i.e. ten-year, the performance of our portfolios is nevertheless around 7% net per year. These returns, however, are not evenly distributed because even with our cash flow approach, we cannot wholly escape the volatility of the market.

2022

So what can we expect from the current year? I don’t know! However, I still recommend a very long-term and considered approach and personally try to implement this through our cash flow strategy. Because, in my opinion, investing is about sowing seeds cultivating them and skimming the profits that come from them. I get the impression of often exaggerated, unreal expectations, and I firmly believe “instant gratification” does not lead to sustainable returns, neither in portfolios, companies, or interpersonal relationships.

Where is the risk no one expects?

Covid, inflation and supply chain bottlenecks are omnipresent. And yet, Ladies and Gentlemen, risks that everyone expects usually do not hold any surprise potential. Therefore, I do not expect those issues to impact financial markets in 2022 negatively. I expect inflation rates to decline after world trade recovers from the negative impact of the covid crisis, which I believe will happen this year. I also do not expect stagflation; productivity rates in the G20 are far too appealing for that. The risks I see stem from an escalation of the current geopolitical situation, a further tendency to divide our society into several levels and a worsening of the energy crisis in (mainly) western industrialised countries.
To me, a strategy geared to positive cash flows offers the advantage that in the event of price setbacks, positive cash flows generated can be reinvested and thus purchases can be made selectively at lower prices.

Conclusion

I am not too negative for 2022 but setbacks can never be excluded, they are part of the game or as Kevin Muir (Macro Tourist) put it the other day; «When markets are allowed to take things too far, they often do. It’s almost a feature rather than a bug.» A crash may represent a great opportunity!

Think about it!

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Dear Ladies and Gentlemen

Finally, the sleepless nights are over, time to declare our year-end competition winner. Many thanks to all of you for participating. The bulk of the estimates came in within a decent range of the closing prices. I am truly impressed! Congrats to all of you!

Now, as every year I have sourced the data from: Finanz und Wirtschaft (fuw.ch).

Gold:

According to the above source, Gold closed the year at USD 1’829.50, somewhat below last year’s price. However, more than 50% of my readers were too optimistic and forecasted higher prices. Mark’s estimate came in at USD 1’830.00 and therefore was the closest. Mark won the competition before and is a highly regarded investment professional. Thanks for participating, Mark!

Bitcoin:

According to the above source, Bitcoin closed the year at USD 46’322.70. People were relatively bullish on Bitcoin with estimates going up as high as USD 123’500.00. The closest call in Bitcoin came from Waldemar with USD 47’000.00. Waldemar is a lawyer and apparently gifted in foreseeing the future (certainly also assisted by his lovely wife), congrats Waldemar!

S&P 500:

According to the above source, the S&P closed the year at 4’766.18. Most of you were reasonably optimistic and estimated the S&P 500 to go up versus last year, and it did. The closet call in the S&P came from Rainer with 4’750.00. Rainer is a professional wealth planner, congrats Rainer!

The winner of the entire competition and thus of the one-ounce Silver coin is Waldemar. Congratulations! Waldemar won because he was one of the only ones foreseeing lower prices in Gold and, at the same time, higher prices in Bitcoin and the equity markets and his calls were very, very close. Well done! I will hand over the Silver coin to Waldemar when I will see him at the end of January, beginning of February. I hope this is fine for you, Waldemar?

Most probably, there will be another competition in 2022 and I hope you will keep participating.

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li
Many thanks, indeed!

I wish you an excellent start to the day and the year, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li