Month: November 2025

Good Morning Ladies and Gentlemen

”All ideologies are inaccurate to varying degrees. More subtly, all are incomplete in various ways; in particular, they fail to anticipate some crucial events.”

Social Philosophy and Policy, Volume 41, Special Issue 1: Ideology

Thank you very much for the generous feedback on my last “Stefan’s Weekly.” I was particularly pleased by the many, many positive messages about my daughter’s song that was included. Thank you very much!

Thanksgiving

The shortened Thanksgiving week lived up to its reputation as a statistically positive week. There was significant upward momentum, with the trend pointing higher. We continue to expect follow-up buying for the time being. However, it would not be unusual for a corrective movement to take place in the week after Thanksgiving.

Today’s Stefan’s Weekly

Today, I would like to address a topic that is frequently overlooked in analysing the factors influencing fluctuations in equity prices over time. To begin, however, let us first examine the landscape of Japanese interest rates.

Japanese Interest Rates

In the weeks before Thanksgiving, a wave of selling has swept across global markets, with the leading stock exchange in New York experiencing significant declines. Interest-rate-sensitive stocks, particularly those of major tech companies, have been especially affected. Contrary to popular belief, the recent price declines cannot be attributed solely to concerns over the AI boom. Instead, the sharp increase in interest rates in Japan has been a source of anxiety. Many large investors previously borrowed money at low rates in Japan, which on April 7, 2025, stood at 1.07% to invest profitably in other regions. However, this favourable scenario may be nearing its end, as the yield on ten-year Japanese government bonds has risen to over 1.8%, the highest level since just before the 2007/08 financial crisis. Furthermore, 20-year government bonds are now yielding 2.82, up from 1.89% in April of this year. It will be interesting to see if this rise in Japanese interest rates quietly undermines the ongoing stock market boom.

The Predictive Power of Forward-Looking Earnings Revisions

Systematic analysis of earnings forecast adjustments plays a catalyst for stock price movements. Trading systems that utilise computer-driven AI models systematically analyse both positive and negative earnings revisions, meaning changes in analysts’ or management’s forecasts of a company’s future profits. These models generally employ natural language processing (NLP) to examine earnings reports and guidance, alongside quantitative methods to assess the magnitude and frequency of revisions.

Positive Surprise

Empirical evidence indicates that upward adjustments to forward-looking earnings estimates (such as next quarter’s or next year’s EPS) are statistically linked to abnormal positive returns, particularly when these revisions are unexpected and accompanied by a modest consensus among analysts. This phenomenon occurs because positive earnings surprises often signal improved fundamentals, attracting institutional investors and, very importantly, stimulating algorithmic buying. The resultant order flow generates price momentum, reinforcing the initial price movement and elevating valuations.

Negative Surprise

Conversely, companies that consistently lower their earnings forecasts over multiple quarters tend to experience a negative price drift. AI-driven trading systems may identify such stocks for short-selling or portfolio underweighting, as ongoing negative revisions often precede deteriorating fundamentals or sector underperformance.

Conclusion

In summary, the direction, magnitude, and persistence of earnings revisions serve as crucial inputs for AI-based trading systems, which leverage these factors to forecast price trends and optimise portfolio allocations, thereby driving trading volumes on the upside or downside, creating a sort of self-fulfilling prophecy.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and 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 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

”Minds, like parachutes, only function when they are open.”

Thomas Dewar

At the conclusion of today’s “Stefan’s Weekly,” you will have the opportunity to click on buttons leading to a song produced by my daughter. I hope you understand my desire to share this with you, even though it may not align perfectly with the theme and concept of “Stefan’s Weekly.”

Argentina

Last week, I mentioned the Argentinian President, Javier Milei, as a leader willing to step outside of traditional political comfort zones to fulfil the commitments made during his election campaign. Today, he is implementing these proposals with notable rigour. While one can certainly debate his style and economic policy agenda, it is evident that President Milei is sticking to what he promised during his election campaign: doing the job he was elected to do. Eventually, he will need to facilitate the social reintegration of disadvantaged groups, not just for ideological reasons, but primarily for pragmatic economic ones. Neglecting this issue could lead to the further collapse of the domestic market, which is essential to achieving a sustainable economic recovery in Argentina. Diane Swonk (Diane Swonk – Wikipedia) highlighted in a recent report that such situations can lead to dissatisfaction and social unrest, ultimately proving more detrimental than beneficial to economic growth.

Germany

Germany, on the other hand, has enjoyed remarkable growth for many decades but is now finding it increasingly challenging to step out of its comfort zone and implement necessary structural changes. Politicians seem reluctant to confront the issues at hand, fearing they might jeopardise their comfortable, well-compensated positions and the privileges that accompany them. The reality is that without substantial adjustments to regulations, particularly in labour-market laws, significant job cuts in the public sector, and painful pension reforms, Germany risks a prolonged decline in prosperity, similar to Argentina’s. The German populace may be too comfortable and may need to face greater hardships before drawing the correct economic conclusions. Notably, more individuals in Germany receive welfare payments than work in the automotive industry. Production in Germany becomes increasingly unprofitable. German companies are drastically reducing jobs in the country while relocating them to more favourable locations. Over the past year, over 100,000 jobs in the industrial sector have been lost as conditions have deteriorated significantly. It raises the question of why German politicians and trade unionists fail to see that this trend is not an attack on employees but rather an indication that Germany is becoming less attractive as a production hub due to excessive political regulations and their resulting costs.

Ambiguity Tolerance

The apparent tolerance for ambiguity is astonishing. Both voters and politicians appear to manoeuvre through the current situation without any signs of stress or discomfort. As I mentioned recently, we often make grave errors when circumstances are favourable. However, at this moment, conditions are not even particularly advantageous, and yet we continue to engage in excessive spending, the most significant mistake of all.

U.S. September Nonfarm Payrolls Release

The U.S. September nonfarm payrolls report, released nearly seven weeks late, indicated a strengthening job market following several months of decline. Nonfarm payrolls increased by 119,000, surpassing all forecasts in Bloomberg’s survey and marking the most significant rise since April. The three-month average payroll gain improved to 62,000, up from just 18,000 for the preceding three months through August. However, the unemployment rate unexpectedly rose to 4.4%. Growth in payroll numbers for September was primarily driven by the leisure, education, and health services sectors, while manufacturing jobs, a focal point of the Trump administration, fell for the fifth consecutive month. The overall payroll level in manufacturing has now reached its lowest point since 2022. In the upcoming weeks, further economic data releases are expected following the recent government shutdown.

Market Outlook and Thanksgiving

Next week marks Thanksgiving, and historically, there is a noticeable seasonal uptrend during this period. The increase in nonfarm payrolls should help as well. Besides that, thanks to this week’s optimistic numbers from Nvidia, many market participants may feel comfortable in building up risk assets. In this respect, I enjoy observing the evolution of Bitcoin because, in my view, it has provided a clear picture of market liquidity over time. This observation suggests that in constrained liquidity environments, Bitcoin frequently depreciates as market participants liquidate positions to raise cash. I think it is advisable to examine Bitcoin’s trajectory over the coming days and weeks to assess its continued role as a reliable indicator of market trends.

Conclusion

We require political conditions in Europe that allow local businesses to thrive once more. This includes reducing the regulatory burden. An increase in trust towards citizens and businesses would be entirely appropriate. Politicians should prioritise serving citizens’ interests rather than focusing primarily on restrictions, monitoring, and control.

Song

I hope you will forgive my sentimentality, but as a proud father, I cannot resist sharing a new song my daughter, Lucie, has produced. It is an emotional, beautiful, and lyrical piece that you will appreciate. There are three different ways to enjoy the song, and I hope you find it as delightful as I do. Thank you for understanding my desire to share this with you.

Enjoy the song on Spotify.

Enjoy the song on Apple Music.

Enjoy the song on YouTube.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and 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 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

”The ideological positioning of the individual holds significant importance, as it fundamentally shapes the foundational basis of their perspective.”

me, when I talk to our children about education, politics

If the political pendulum in the US swings back due to widespread dissatisfaction among diverse segments of the population regarding unmet promises about living standards, America could shift to a more left-leaning stance in the future than during the Democratic administrations of Obama and Biden. The election of the charismatic and youthful immigrant Zohran Mamdani could catalyse such a change. This scenario could emerge as an unintended consequence of excessive austerity measures and erratic tariff policies implemented by the current US government, leading to job losses and increased consumer prices. During election campaigns, politicians often engage in vigorous debates; however, once they are elected or re-elected, many tend to revert to familiar patterns that restrict them to their political comfort zones, frequently failing to deliver on the promises made during their campaigns. In this context, the American president, to some extent, and especially the Argentine president, stand out as notable exceptions, regardless of one’s opinion on their actions. In contrast, the newly elected German chancellor has thus far implemented few, if any, of his election commitments.

Warren Buffett

You know, Ladies and Gentlemen, Warren Buffett reportedly proposed that nations could effectively mitigate their budget deficits by implementing a legislative framework whereby elected officials whose policy decisions result in a deficit exceeding three per cent of Gross Domestic Product (GDP) would face immediate dismissal from office. This assertion underscores the potential for accountability mechanisms within political systems to enhance fiscal responsibility.

Tesla

Tesla shareholders have approved a $1 trillion compensation package for CEO Elon Musk, the highest compensation package ever granted. The vote paves the way for Musk to become the first trillionaire and increase his stake in Tesla to 25% or more over the next decade. Elon Musk is offered the prospect of a trillion-dollar stock package because Tesla shareholders have voted in favour of this unprecedented compensation plan for him. However, he must achieve ambitious goals to receive it. This enormous bonus is inappropriate for several reasons.

Why might it be seen as Inappropriate?

I suppose this is a matter of perspective, yet the excessive size of the CEO pay package, the most extensive ever, far surpasses typical executive compensation.
While Tesla’s board has been criticised for lacking independence and failing to scrutinise the deal adequately, it has exhibited somewhat weak oversight, as the package could significantly dilute the stakes of existing shareholders. Then, some performance goals are seen as either unattainable or encouraging risky, short-term behaviour by Tesla insiders. I cannot judge them, as I lack that specific knowledge. Whether the targets are realistic or not remains to be seen; in any sense, the package increases Tesla’s reliance on Elon Musk, raising concerns about “key person” risk and leading to overdependence. Finally, the scale of the award has drawn criticism amid broader concerns about income inequality and corporate governance and could trigger public backlash, eventually leading to stricter regulation.

Stats

A week ago, the Challenger Report unveiled a notable decline in the labour market. October witnessed the highest number of layoffs in 21 years, while hiring reached its lowest level in 14 years. Consumer confidence, as measured by the University of Michigan, is now at the second-lowest point since 1980. Following the release of the Challenger Report, a risk-off sentiment spread through the capital markets last Thursday. However, markets rebounded on Friday as buying activity resumed. The pressing question remains: when, if ever, will this downward trend gain further momentum? With the U.S. government shutdown now resolved, at least until the end of January 2026, employees at statistical offices will soon return to work, meaning official statistical data will start flowing into the financial markets once again.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and 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 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

”Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership.”

Deng Xiaoping

Entrepreneurs, organisations, and politicians often make significant errors during periods of notable success. Such advantageous phases can lead to complacency and overconfidence, which may obscure potential risks and foster an environment where critical decision-making processes are compromised. This phenomenon suggests that a heightened sense of achievement may inadvertently trigger detrimental decision-making practices, ultimately affecting the sustainability of any organisation’s success.

Capital Returns

The core theory of capital returns suggests that capital tends to flow toward businesses that generate high returns and retreat when returns fall below the cost of capital. This process is not static but cyclical and marked by continuous fluctuations. The influx of capital encourages new investments, which, over time, expand capacity within the sector and eventually cause a decline in returns. Conversely, when returns are low, capital exits, leading to a decrease in capacity. This reduction eventually paves the way for a rebound in profitability, which in turn attracts capital once again, restarting the cycle.

Periods of Pronounced Success

Reflecting on the introductory text and evaluating which companies are presently thriving and how they are likely to utilise the funds they receive, I cannot help but feel that, given the massive investments in AI, a few companies might be overstepping their bounds. Additionally, recalling our discussion on capital returns theory from the previous section, I conclude that we may wish to avoid companies that currently seem invincible and are at the height of their success. Conversely, there may be promising opportunities among companies undergoing challenging phases, experiencing declining margins, and in need of restructuring or streamlining their business operations, i.e., entities that may not yet be on the radar of analysts and asset managers. What is your point of view?

Food for Thought

With today’s quote, Deng Xiaoping once advised: to observe calmly; secure one’s position; manage affairs with composure; conceal one’s abilities and bide one’s time; excel at maintaining a low profile; and never to seek leadership. This philosophy wasn’t just rhetoric; it was the blueprint for China’s remarkable transformation. Under Deng’s steady hand, China shifted toward capitalism and, in doing so, lifted an astonishing 500 million people out of poverty.

Yet, this long-term, strategic vision stands in stark contrast to the short-term, reactive tactics often seen in countries that have already reached their peak. Where some leaders chase quick wins and make frequent course corrections, Deng’s approach was characterised by patience, discipline, and a relentless focus on the bigger picture.

But such a strategy is not without its price. The Chinese model’s success came at the cost of limited political participation; a reminder that every path to prosperity involves trade-offs. As always, there is no free lunch, Ladies and Gentlemen.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and 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 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li