Month: February 2024

Good Morning Ladies and Gentlemen

“Art is making something out of nothing and selling it.”

by Frank Zappa

First-timers

For those who have joined our readers recently, every year, I organise a year-end competition in guess, for example, the price of gold, silver, crude oil, the SMI, a cryptocurrency or the S&P 500 Index.

Predictions

Regularly, I receive emails from readers asking me where I think the price of gold would be at the end of the year, the SMI, interest rates, or the price of silver. Those who follow my weekly emails frequently will know that I would not say I like making predictions.

Invitation

However, occasionally, I am happy to tell you what I think may happen just for fun, and since we are at the end of February already, it is time for our traditional year-end competition. As I did in the past, I invite you to compete with all the other readers, my partners Christian, Mark, Hans, Ronni and myself, and as always, the winner will receive one ounce of silver in the form of a silver coin. Suppose the winner stems from within Incrementum or my family, I am also happy to send a one-ounce silver coin to the official winner, i.e., ex Incrementum and/or my family. As your bets will be coming in, I will publish ours.

Former Winners       

The list of former winners includes an old friend from university, two clients, a former fund manager and value specialist from London and some regular readers. So far, none of my family members were close enough to be called a winner. However, my partner Ronni won the competition last year, right before Dario, the official winner (who received an extraordinary silver coin), followed by my partner Mark and me. Three out of five Incrementum partners among the first four. This was quite something and exceptional.

Obviously

Obviously, Ladies and Gentlemen, it is impossible to guess the future, yet I look forward to receiving your bets! Please do not forget that it is all about fun!

Gold, Silver, NVIDIA           

Now, Ladies and Gentlemen, I suppose we try to guess the year-end price for one ounce of Gold in USD, the S&P 500 and the NVIDIA share price. The closest one wins the silver coin. The year-end prices will be taken from this page: https://marktdaten.fuw.ch/.

Ladies and Gentlemen, what do you think? What are your best guesses? 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 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

“It is frightful that people who are so ignorant should have so much influence.”
by George Orwell

Last week

Many thanks for all the messages and comments I received for last week’s «Stefan’s Weekly». I want to share some excerpts from my email conversations with Shauna and with John, a former winner of the year-end competition.

«Countries have interests, not friends. Eventually, Germany’s high energy costs can cause a shift in the political landscape. It is the Wild West in terms of countries interacting with one another. Rules are thrown aside or rewritten if they benefit the more powerful entity. The concept of rules or freedom is irrelevant at a high political level. It is who is more powerful.» 

Wow, what a comment; I agree, and it reminds me of a quote by Henry Kissinger.

«Is it power? Is it greed? Is it insanity to kill fellow humans and sleep well after those decisions?»

I do not know and am as puzzled.

«People will give up their freedom for security when times get tough (citizens are more open to authoritarianism). However, yearn for more freedom when times are more prosperous (less regulation).»

Yes, at least to me, understandable everyday human behaviour.

«Another point is accountability. Some people do not make good decisions. What happens when their choices lead to poor outcomes? Is there a push for a rule that allows for a bailout?» 

Accountability

The general population pays the price for the risks politicians and authorities take. Yes, Ladies and Gentlemen, citizens pay the price for all the risks and incompetent decisions made by politicians and authorities. Under normal circumstances, politicians and authorities are not held accountable for their mistakes. In some instances and only in reasonably functioning democracies, politicians risk not being reelected. That is it.

Serve the people

The primary goal of politicians and authorities should be to serve their people. I am not sure if this is fully understood by politicians and authorities, and quite frankly, I am not sure if voters fully understand this either.

Germany, IFO Institute in January

On January 17, the IFO Institute estimated that Germany’s GDP would fall by 0.3 % in 2023. Due to persistently high inflation and falling purchasing power, it anticipated a mild economic recession. However, according to the Economic Institute, GDP is expected to grow slightly again in 2024.

Germany, ZEW Centre in February

This week, ZEW (LEIBNIZ CENTRE FOR EUROPEAN ECONOMIC RESEARCH) President Professor Achim Wambach commented on the latest survey results: «The German economy is in a bad place. The respondents’ assessment of the current economic situation has decreased since June 2020. In contrast, economic expectations for Germany have improved again. Accordingly, more than two-thirds of the respondents expect the ECB to make interest rate cuts over the next six months in light of falling inflation rates. Almost three-quarters of respondents expect imminent interest rate cuts by the American central bank.»

Interest rates expectations

Once more, it seems to all come down to interest rate expectations. Better economic outlook thanks to falling interest rates. If most market participants expect lower interest rates, the effect will be priced in by market participants well before the final announcement, which bears a certain risk of disappointment, no?

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 and the 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

“Regularities are characterised by the fact that they are stable over time; otherwise, they would not be regularities.”

by Dr. Philipp Sterzer

John Locke

John Locke, the great pioneer of liberalism, described freedom as freedom from the coercion and violence of others. However, freedom does not mean that everyone can do whatever they want. Who can be free if the whims of others can tyrannise them?

Freedom in the market

The market is traditionally hailed as the exemplar of a system under which people enjoy freedom, particularly the negative sort of freedom associated with liberal and libertarian thought: freedom as noninterference. The appeal of the market from within that viewpoint is that it represents a regime of unobstructed consumer choice and, as a bonus, a regime in which consumer options may be expected to increase and diversify under the pressure of competition. (By Philip Pettit, Princeton University).

Carl 1 and free speech?

Carl 1 sits in his favourite, cheap and busy Restaurant in the centre of Moscow and debates over his dinner and lots of alcohol with friends and other guests about the war in Ukraine, sanctions by the West, and their constraints on the everyday life of middle-class Russians. He is critical of Russian policy and the war and would like to see peace talks between Russia and Ukraine. Carl 1 walks home to his wife and wants to tell her about his political discourse. He never reaches home and risks being locked away indefinitely. Carl 1 is not to be seen anymore. Is Carl 1 free, and is he a hero?

Sanctions

So far, it seems, the sanctions on Russia have led to a particular shift in prosperity. While Europe, above all Germany, has been hit by higher energy prices due to the sanctions, India does not comply with them and imports the sanctioned fossil fuels from Russia at discount prices, refines and then exports them worldwide on an unprecedented scale and with high margins. The U.S., at the same time, is fracking as if there was no tomorrow, taking advantage of higher prices on non-sanctioned fossil fuels and exports to Europe, above all to Germany. Germany complies with the sanctions and does not buy cheap gas from Russia anymore but expensive gas from the U.S. and other nations. I imagine the effect of the sanctions must be challenging for the average Russian, and I imagine the effect of the same sanctions must also be challenging for the average German. Are the sanctions hitting the right institutions or people? Is Germany a free country deciding what is best for its citizens?

Carl 2 and free speech!

Carl 2 sits in his favourite and very busy Restaurant in the centre of Berlin and debates over his dinner and lots of alcohol with friends and other guests about the political system in Germany and the incompetence of the country’s political leadership. Representatives of the authorities and members of the Bundestag sit at the surrounding tables. Carl 2 goes home to his wife, has another sip, proudly tells her about his political debates and feels like a hero. The day after, Carl 2 visits his family in Frankfurt. Together, they go for dinner in a bustling Restaurant in the centre of town and debate over food and lots of alcohol with family, friends, and other guests about the political system in Germany and the incompetence of the country’s political leadership. Carl 2 again goes home to his wife, has another sip, proudly tells her again about his political debates and feels like a hero. Nothing happens to Carl 2. Is Carl 2 free, and is he a hero?

Tricky

The tricky thing about these questions is the realisation that there is no freedom without rules, but rules (may) limit freedom and, to some extent, prosperity. Freedom for all also means preventing a group of people from creating a situation through their behaviour – for example, by invading another country – that massively impairs the freedom of all. I firmly believe the principle «where there is no law, there is no freedom» still applies. However, rules (may) limit freedom and, as I have pointed out in the above example, to some extent, prosperity.

Prosperity and Freedom

Sanctions create new opportunities. In this case, for U.S. fracking companies and fossil fuel refiners in India. Yet, as in the above case, they are also a burden for average German and Russian citizens. History shows that free markets lead to prosperity, and prosperity leads to security and peace. And sanctions, what do sanctions lead to?

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 and the 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

“The battle between ‘capitalism’ and ‘communism’ is back.”

by Mr. Thomas Straubhaar,
Professor of International Economic Relations at the University of Hamburg

Last week’s policy meeting vs this week’s inflation numbers

Last week, we were looking at the ECB policy meeting. There has been no change after their first monetary policy meeting this year. They left the key interest rate at 4.5% and the deposit rate at 4%. Yesterday’s Eurozone consumer prices came in at  2.8% higher than in January 2023; however, they were below the 2.9% of December 2023. The price trend is slowly approaching the ECB’s medium-term target of 2%.

This week’s Fed policy meeting

On Wednesday, the U.S. monetary authorities decided to maintain their key interest rate range of 5.25% to 5.5%. At the same time, Fed Chairman Jerome Powell made it clear that the central bank needed more confidence in the downward trend in inflation, even though this had already been underway for the last six months. “Clear signals” were needed that the downward trend towards the Fed’s inflation target of 2% was sustainable.

Same same

So, therefore, both central banks communicated in line and, as far as I am concerned, in line with my expectations.

Change in outlook?

My personal outlook was thus confirmed. There was too much hot air in the markets in the second half of Q4 2023 because of overconfidence concerning interest rate cuts. Now, I still believe in a renewed interest rate cut fantasy after a short period of consolidation in Q1 2024. Furthermore, in January 2024, the Dow Jones Industrial Average Index rose by 1.2 %. Since 1987, 80% of the years in which the Dow was up in January ended with a gain. In addition and, also according to stats, the performance of a president like Joe Biden, who is in his first presidential cycle, initially tends to move sideways in his fourth year in office before gaining ground, leading to a solid yearly performance. But then again, Ladies and Gentlemen, that is only prognostic based on stats.

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 and the 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