Month: May 2022

Good Morning Ladies and Gentlemen

Last week my partners Ronni and Mark, together with their team of roughly 20 people, published the latest version of the annual iconic Incrementum «In Gold We Trust» report. The enormous work of the team culminated again in a comprehensive, easy to understand and highly entertaining report. You may download the report in five versions for free via the following links.

Please enjoy the read:

In Gold We Trust report – English (390 pages)

Compact Version – English (26 pages)

In Gold We Trust-Report – Deutsch (420 Seiten)

Compact Version – Deutsch (26 Seiten)

Compact Version – Spanish (26 Pages)

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 week, 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

Good Morning Ladies and Gentlemen

Everyone is talking about de-dollarisation, de-globalisation and de-carbonisation, especially financial mass- and alternative media and analysts across the range. For the moment, it seems any topic that catches the attention of potential readers or listeners even in the slightest way is trashed, reproduced and exploited to the max, and this repeatedly. However, disappointingly, most opinions are more or less in line with the consensus.

Series

Two weeks after my weekly on de-dollarisation, I take the opportunity to share my thoughts on de-globalisation today. My third Stefan’s weekly in this series on «de-carbonisation» will be published in the following weeks.

What are the odds?

Ladies and Gentlemen, I do not believe in de-globalisation. Even if, for the time being, some idealists believe and perhaps even secretly hope that global sourcing has passed its zenith and that a time of local sourcing has now dawned again, I do not believe it has. Global affluent consumers are used to purchasing almost anything at almost any time and at the best price. Such is only possible because of economies of scale and because goods can be sourced from low labour costs countries. Therefore, even if we assume that consumers are willing to pay a premium for goods produced in their home country during particular situations (times of war, etc.), most of those consumers would eventually be reluctant to pay a premium for goods produced in their home country if they were available from somewhere else at a discount. This is why I believe the odds are small.

Diversification

Instead of large-scale de-globalisation effects, I think we will experience large-scale diversification effects. Soon enough, we will see international companies sourcing from many more different suppliers producing in many more different locations than so far. This may lead to minor initial price increases, on the one hand, making companies massively less fragile on the other hand. Furthermore, it opens opportunities for flexible, smaller suppliers in the shade of super-large ones.

Transition

The chances are high that there will be a transition phase, yet I do not think it will take all that long because markets, producers, and suppliers tend to adapt quickly to new situations and changes.

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, 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

Good Morning Ladies and Gentlemen

Since the beginning of the year, almost all asset classes have been deeply in the red. By spreading investments across different asset classes, investors can usually spread their risks. Unfortunately, this does not seem to be working correctly at the moment.

DAX: -12.94%, Euro Stoxx 50: -15.13%, SMI: -10.27%; Nasdaq: -26.67%, Dow Jones: -12.4%, Gold +1.51%, Bitcoin: -40.69%.

Equities

It was a sell-off across the board. April was the second-worst month for equity investments since 1976. Furthermore, this time the losses were not compensated with gains on bonds. On the contrary, the bond markets were hit even harder. As a general rule, stocks gain when bonds lose – and vice versa. Since 1976, this rule has been confirmed in 84% of all stock market months, writes Burkhard Varnholt, head of investment strategy at Credit Suisse Switzerland, in one of his latest weekly report. “Only once, in May 1994, was the combined loss from equities and bonds greater than in the last month of April.”

Government Bonds

Since the beginning of the year, long-dated US government bonds have lost almost 30 per cent in value, even more than the index of the technology exchange Nasdaq. It was the worst start to the year for US government bonds in more than 200 years, according to asset manager DWS. Swiss government bonds, the epitome of security, have lost 12 per cent since the beginning of the year, more than Swiss equities.

Gold

As some of my readers keep pointing out, one big disappointment in the environment of rising inflation was undoubtedly the development of the gold price so far. With a modest gain of 1.5% this year, one cannot speak of excellent inflation protection, and I must say, I am surprised myself. Nevertheless, physical gold is my ultimate protection, and I would not think about selling any of it.

Cryptocurrencies

The youngest of these asset classes still have a long way to go. Bitcoin is called “digital gold” by its supporters. According to the narrative that dominates the internet and social media, Bitcoin will replace gold as a hedge against inflation (thesis number one) and provide refuge when governments confiscate private assets (thesis number two). However, one thing is clear for the time being: cryptocurrencies are not yet the promised “digital gold”. The bitcoin price runs more or less parallel to the US technology exchange Nasdaq as I have pointed out on multiple occasions. Analysts at the US investment bank J. P. Morgan already noted last year that the correlation, i.e. the statistical connection between Bitcoin and stocks, was becoming stronger: “Cryptocurrencies continue to be the worst hedge against sharp downturns in the stock market.” The more popular Bitcoin becomes, the more it becomes a cyclical financial product and the less suitable it is for diversification. Maybe this means that its great success until the summer of 2021 has to some extent, negatively impacted its formerly positive diversification features, at least temporarily.

Commodities

Only commodity investments are firmly up. A formerly unloved sector by many investors that had been hammered down and suffered during a difficult time for years and years is outperforming during one of the most challenging market environments ever since the Great Financial Crisis. This is fantastic, Ladies and Gentlemen, please do not forget that commodities are tangible.

What does all of this tell us

There are no 100% certainties to rules in financial markets. But, eventually, the most unloved asset may become the outperformer of the year or even decade and do not get carried away by greed and not by fear either, and, the darkest moment of the night comes shortly before dawn.

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, 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

Good Morning Ladies and Gentlemen

On Saturdays, I like going to the gym. So I did last Saturday, and it was past lunchtime when my partner, Maria, picked me up after doing our grocery shopping. Now, past lunchtime and after my gym session, I was hungry. I suggested having lunch at an Asian place not far from the gym. So we went there for lunch, and before leaving the restaurant, we were offered a fortune cookie each. The following was written on the small paper clipping in mine:

«Happiness is contagious; spread it.»

De-dollarization

The global trend toward de-dollarization has been ongoing for over a decade, and it risks getting a massive push forward by the United States’ attempts to remove and exclude Russia from the SWIFT system of international financial settlements. Furthermore, in 2017, SPFS, a Russian equivalent of the SWIFT financial transfer system, was developed by the Central Bank of Russia due to worsening relations with the West, an important move and yet largely unnoticed by the media at the time.

Will the US Dollar disappear?

Not quite yet, I believe. On the contrary, the current sanctions on Russia, Belarus, and other states can actually even strengthen the importance of the US Dollar, at least for some time. In addition and for the time being, no other currency system can offer the liquidity needed to assure global trade on the one hand and act as the global reserve currency for numerous governments and central banks on the other hand. Nevertheless, trade is increasingly performed in alternative currencies, at least between some countries, i.e. in trade between India and Russia, the Rubel has overtaken the US Dollar already, and this was well before Russia’s war on Ukraine. Overall, however, the US Dollar share of global trade has decreased only marginally in recent years. (The Fed – The International Role of the U.S. Dollar (federalreserve.gov)).

All fine then?

Probably not entirely, I would say. Look, Russia’s exclusion from the SWIFT system of international financial settlements must have sent a message to some of the large non-western economies within the G20. If I were in charge of a non-western country’s treasury department, I would probably seek diversification from the US Dollar in fear of being suddenly excluded from the SWIFT system of international financial settlements once the US government could become unhappy with political decisions taken by my government. You may claim that Russia’s war on Ukraine is an extreme event, and right you are; it truly is. Nevertheless and without judging, until a very short time ago, it was unthinkable to exclude a member-state from the SWIFT system of international financial settlements due to sanctions. This exclusion truly represents a paradigm shift, which may accelerate de-dollarization to some extent.

Conclusion

De-dollarization is happening but at a very, very low pace. Therefore, I believe the US Dollar will stay the major currency used for global trade and reserve currency still for the next decades.

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, 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