Good Morning Ladies and Gentlemen,
My job is to make money for our clients. I do this by investing in capital markets, i.e. managing our clients’ capital in a volatile environment and in line with our clients’ mandates. I love managing assets. It is an exciting job that allows me to read books, research, newspapers, etc. and listen, and talk to interesting people.
However, Ladies and Gentlemen, managing assets is just another job; no art, just another job. A job that demands considering many different factors, acknowledging that the picture will never be complete and still having the guts of taking investment decisions for other people’s wealth.
Exogenous factors are increasingly determining stock market activity. While a relatively stable political environment and a stable (albeit escalating) monetary policy have boosted the economic prospects of private households and companies in recent years, political and monetary policy disagreements are now increasingly influencing financial markets. Moreover, next to the war in Ukraine, Central Banks seem less and less able to fulfil their mandate of maintaining purchasing power. As a result, I think we are entering a period of less return with more risk. Due to the mentioned political and monetary policy disagreements, I expect inflation to remain above the central banks’ targets for somewhat longer than anticipated.
Where there are challenges, there are chances. I think it is fair enough to assume that Central Banks will only approach inflation with significant interest rate hikes as long as homeowners, pension funds- and financial market participants do not come under massive pressure. This, I think, is especially true for the U.S. because otherwise, consumption and therefore the economy will suffer big time. Classically balanced portfolios between bonds and equities are not good enough to bring positive returns in an environment like that. If low, if not negative real interest rates remain, portfolio structures will have to be aligned accordingly. The question is, how? That, Ladies and Gentlemen, depends on the personal perception of risk, personal risk appetite and personal risk capacity. I have always liked investing in production factors and positive cash flows. Therefore equities have always made up the bulk of my investments, and today, I would add cash and precious metals (preferably in the form of cashflow-positive miners).
Investing, by definition, is for the long term. Therefore, do not try to find the right timing; very few people are good at this and can thus do it successfully in the long run. I know I keep repeating myself; please accept my apologies for it.
If you are investing and want to continue investing but can barely handle the current, primarily negative, newsflow, you may want to stop reading newspapers too often, stop watching the news too often, and stop paying too much attention to the negative newsflow on your social media accounts.
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, peace!
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
We are working hard on this year’s addition if the In Gold We Trust Report. to get everybody in the right mood we present our preview Chartbook for the IGWT 2022 which contains some of the important charts which we will present in the report. By the way the launch is in 64 days (May 24th)!
Good Morning Ladies and Gentlemen,
Many thanks to all who have participated in last week’s quick competition. I received many answers, and most participants guessed Hobbes’ “Leviathan”; one reader mentioned Nietzsche’s “On the Genealogy of Morality”, another one “Jenseits von gut und böse” by the same author and another one Arthur Schopenhauer’s “Die beiden Grundprobleme der Ethik“. Those are great books, however, were not the names I was looking for, but now I do not want to keep you in suspense any longer and reveal the solution to the riddle.
So the correct answer is: “Der Schwarze Obelisk” from Erich Maria Remarque, and the winner of the one-ounce silver coin is Rainer. The book is worth reading, and it sort of fits into today’s geopolitical and geoeconomic setting. Thanks again for participating, and congrats to Rainer; the coin was posted on Wednesday.
Very bluntly, Ladies and Gentlemen, if this time is no different to other times, stock markets need to go up eventually again. Market participants can not handle uncertainty; that is why markets are volatile and in negative territory this year.
Have a look at an excerpt from a message to our private clients: «War in real-time also leads to nervousness among investors. The SMI stands at -13%, the DAX at -18% and the Euro Stoxx 50 at -19%. However, the fear of an overheating economy has faded with the war. Currently, it looks more like a recession and a so-called bear market. In a bear market, indices fall or no longer rise sustainably. The average bear market lasts between 12 and 15 months (depending on the source).»
«Therefore, the conclusion would be to sell all shares and wait for the end of the bear market and then get back in. The problem with such a strategy is that events like an end to the war in Ukraine, a possible overthrow of the government in Russia, a diplomatic solution with both warring parties saving face are difficult to predict. Moreover, even during the horrible war in Ukraine, as during the pandemic of the past two years, the companies in your portfolios are paying regular dividends, some of them even higher than a year ago, none of the companies has announced a dividend cut and this even though many sectors of the economy have suffered due to the pandemic. The past 120 years have impressively proven that equities have been the best investment instrument over the various cycles and that a sustainable return could be generated with them. Unfortunately, this sustainable return came at a price in enduring volatility. Against the backdrop of dividends flowing even in crises (and the resulting compound interest effect), I tend to hold positions, but understand if investors no longer like to endure the pressure of volatility.»
Since mid-2020, valuations have tended to decline. According to Bloomberg data, the SPI P/E ratio was around 21 at the end of 2020; at the end of 2021, a figure of 16 was measured, and currently, a level of 13.5 is on the books. This means that the valuation of the SPI is below the long-term average of 16. At the end of 2022, the analyst’s consensus expects an average P/E of almost 18. Whether this will come to pass remains to be seen, and we all know that most analysts do a terrible job at forecasting, not that I would be any better at it. However, long-term data shows clearly that equities outperform about every other asset class on the planet in the long run.
In May 2018, Warren Buffet told in a CNBC interview: “The best single thing you could have done on March 11, 1942 — when I bought my first stock — was buy an index fund,” if someone invested $10,000 in an index fund back in 1942, it would be worth $51 million today. 1942 was in the middle of WWII, Ladies and Gentlemen.
“Equities. What else?” (I admit; I borrowed from George and enhanced),
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, peace!
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
The fund manager’s reflections on relevant political and macro-economic topics and how they affect his management of the Incrementum All Seasons Fund.
Good Morning Ladies and Gentlemen,
«Human beings are only there to live the short period between birth and death with as much egoism as possible.» Do you know the author of this sentence and the respective book, and the book’s name?
In order to prevent more significant harm to the people of Ukraine, the neighbouring countries and even the rest of the world’s population, I think it is worthwhile for global leaders to put their egos aside. I do not think many people want this war; let us end it.
Multiple studies show that the benefits of economic sanctions are elusive; the costs mostly are not. Furthermore, I believe that sanctions levied against a state with limited democratic processes usually affect less the ruling upper class than large parts of the population already suffering from repression, which in addition has to bear the economic consequences of the sanctions.
Ladies and Gentlemen, we are in a lose-lose situation. Further escalation of the situation can not be in the interest of the world population.
If the political nomenklatura in Russia is not offered the possibility of saving face in the event of an exit from belligerent actions, then at present, I cannot imagine why they would be inclined to end the war. I hope the political elite of the West will consider this.
Next week I would like to look at the meaning of «this time is different» in the context of financial markets.
To end today’s Stefans’s weekly on a slightly positive note, I am happy to offer a one-ounce silver coin to the first reader writing back to me the correct answer to the question mentioned at the beginning of today’s Stefan’s weekly.
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, peace!
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
We are happy to present our Monthly Gold Compass chartbook for March 2022. It is packed full of our usual charts but also contains a special part about the Russian economy since we have seen the start of the Russia & Ukraine war at the latter end of the last week.