Month: August 2023

Good Morning Ladies and Gentlemen

«Prosperity is a state of mind. It is your expectation. Expect to expand your wealth, your wealth of knowledge, your relationships, your income and your wisdom.»

Anonymous

What is the best environment for people to prosper? The other day, I was thinking about China and Russia, the U.S. and Europe, and I asked myself in what sort of environment and as a young person I would try to find my way to prosperity today.

Why?

You may ask why I was thinking about that. The thing is that I was asked to write an article about the advantages of Liechtenstein as a centre for financial services and I was thinking about the difference between Liechtenstein and other places. Let me share some of my thoughts.

My basic belief

Any sensible national economy moves in the triad of freedom, peace and prosperity. Freedom and prosperity are closely linked. Freedom in a constitutional state and as a private law society of potential and actual owners is a society that supports its citizens in creating and maintaining prosperity. A society of free people will be a prosperous society in the long run. To me, prosperity means access to material goods and services and human freedom. It includes well-being, peace, security, independence and the chance to participate in society.

Liechtenstein

The Principality of Liechtenstein has created and offered almost ideal conditions to prosper for its population over the past decades. Freedom, peace and prosperity are a cornerstone of these conditions.

Tax and prosperity

The spiritual fathers of modern Liechtenstein realised early that no social safety net could be built without monetary means and that any state has such monetary means only when its economy is functioning. They installed incentives to maintain a flourishing economy, such as competitive tax laws or allowing its communities to secede, thus granting them ultimate self-determination under the country’s constitution. The other day, I read that “no nation ever taxed itself into prosperity.” I could not agree more!

Too much politics

Some short-term political trends may seem very tempting, as they promise votes at least in the short-term, but in the longer term, as can be seen in various examples of Western economies, they usually lead to a reduction in competitiveness and, thus as a result, less prosperity for the country’s population. Looking at long-term cross-border movements of human- and financial capital offers a good insight into any economy as both human- and financial capital go where it pays to invest labour and/or capital. For decades, the tiny principality has attracted human and financial capital and offered by far more jobs than it has inhabitants. Liechtenstein has a healthy social market economy, no government debt, follows a strict budget discipline, and is open for business but not at any price.

Copy paste

Why other countries are not taking the political and economic basics of Liechtenstein, and trying to create a prosperous environment along those is a mystery to me. Obviously, we are talking about a small country with a small population but 120 years ago that population was among the less fortunate in all  Europe.

Your point of view

Ladies and Gentlemen, please share your opinion with me, but please remember (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 a wonderful weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of 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

«I always felt that failure was a completely underrated experience.»

Kevin Kostner

After my last weekly mail, I got involved in exciting conversations with some readers. The recession topic is certainly not off the table, and especially for our friendly northern neighbour, Germany, I believe a shrinking German economy is something we all have to get accustomed to under their current government.

However

I would not be surprised to see attractive returns in the financial market still this year. The adverse reporting by many media, banks, analysts, etc., is quite often a good counter-indicator and yet, any broader recession in the coming year also seems possible to me. Cooling labour markets in Western economies at a time when China cannot pull us out of the muck could have unpleasant consequences for the real economy and, thus, for capital markets, which would probably and traditionally anticipate such.

Do you know what you want?

Today’s «Stefan’s Weekly» runs under the title «Do you know what you want?». I came up with this topic because I am gaining the impression that many market participants do not know what they want or expect from their investments. Making money certainly is one expectation, and low volatility is probably another. Unfortunately (No.1), there is a relation between volatility as a risk measure and return. There is no free lunch, Ladies and Gentlemen, and the price you pay for your return is risk (or volatility). Unfortunately (No.2), by taking on the risk, you cannot expect automatically to receive a return.

I know

This seems utterly unfair, yet this is just how it is. Ladies and Gentlemen, I know of people with millions of cash sitting in their bank accounts. They are losing purchasing power year after year, which they know and readily accept as long as they do not have to accept market volatility. They cannot handle it and know that and are willing to pay the price of a loss of purchasing power in return for their peace of mind. Fair enough; at least they know what they want or do not want.

Tangible and productive

As an owner of equities, you are a co-owner of a business. This seems like a pretty good deal because co-owning a business means you have a somewhat tangible and productive asset in your portfolio. However, it is crucial to choose suitable investments; overpaying on price/earnings ratios and/or book value, etc., never seemed very attractive to me. If you invest in a cash flow-generating business with a proven track record and are not stressed out in the short term, you will probably be compensated for your investment in the long term. You will probably not have the fantastic returns of the (Nasdaq) potential high-growth companies, but you will not have to endure the, at times, nerve-wrecking volatility of such an investment either.

This is why

You need to know what you want, i.e. expect from your investment. If you are clear about that and invest accordingly, your peace of mind will come about.

Your point of view

Ladies and Gentlemen, please share your opinion with me, but please remember (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 a wonderful weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of 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

“Imagination is more important than knowledge. For knowledge is limited to all we know and understand, imagination embraces the entire world, and all there ever will be to know and understand.”

 Albert Einstein

Last “Stefan’s Weekly”

In my last “Stefan’s Weekly”, I claimed that any environment with economic growth exceeding current inflation, i.e. real economic growth, could be described as a goldilocks environment for financial markets. To me, it seems some market participants anticipate goldilocks rather than a recession, at least for some time.

U.S. inflation

Due to base effects, inflation in the USA rises slightly. However, this should not be overinterpreted after the overall inflation rate had declined significantly in the previous months. I believe that developments at the preliminary stages give reason to hope that the downward trend will continue in the coming months. This also applies to core inflation, where the previous month’s increase of 0.2% probably does not pressure the U.S. Fed to further raise interest rates. Since the numbers came in just below expectations, they should rather ensure that interest rate expectations remain subdued for the time being, especially as initial jobless claims, published simultaneously, rose more strongly than expected.

U.S. third-quarter economic growth

The GDPNow forecast for the third quarter of 2023 showed real U.S. growth of 4.1%. In contrast, analysts’ consensus forecast stood at a meagre 0.9%. I would call this a significant discrepancy, showing how negatively inspired most analysts still are. If we recall my last “Stefan’s Weekly”, a goldilocks environment asks for real growth, and this, Ladies and Gentlemen, it seems is where we are. Any further economic growth and/or falling inflation rate would further influence real growth positively and thus may lead to a prolonged goldilocks environment. In addition, Ladies and Gentlemen, U.S. consumer spending has recently remained high.

Minor concern

I believe a possible cause for concern is the increase in inventories. Because inventories have also risen, not dramatically, but still, and let us face it increased inventories could lead to production cuts over time and this of course, would not be positive.

Your point of view

Ladies and Gentlemen, please share your opinion with me, but please remember (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 a wonderful weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of 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