Category: Stefan’s Weekly

Good Morning Ladies and Gentlemen

””Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

John D. Rockefeller

Becoming socially acceptable historically involved adapting one’s behaviour to fit various settings, particularly when sharing those spaces with others. For instance, if you enjoyed putting your feet up on the sofa at home, you understood that such behaviour would be inappropriate on a train. Listening to music in a waiting room was typically done with headphones to respect those around you. However, with the rise of remote work, the use of noise-cancelling headphones, and a reduction in social interactions, leading to less time spent with others, including strangers, many seem to have developed heightened sensitivity to noise. A crying toddler can become distressing, and the sound of someone smacking their food can feel intrusive. This heightened sensitivity now has a formal designation: Misophonia. Some individuals are so acutely attuned to the presence of others that it becomes nearly unbearable for them.

In contrast, others may seem oblivious to the needs and existence of those around them. This dynamic presents a stark contrast in sensitivities, a phenomenon that can be frequently observed, read about, and experienced across all platforms, particularly social media. Now, why would I mention this? I believe these perceived sensitivities influence our thinking and behaviour in many aspects, including investing.

Fed’s Not Moving

Federal Reserve Chair Jerome Powell emphasised that inflation remains far from the target. He noted that a rate cut in September could be considered only if there are signs of an economic slowdown, which would include a weakening labour market emerging before that time. Interestingly, and perhaps not widely recognised by the general public, two members of the Fed’s board (Fed governors Christopher Waller and Michelle Bowman) voted against keeping rates at their current levels. This marks the first instance of such divergence with two dissenting votes in 32 years.

U.S. Car Makers as a Proxy

Following General Motors, Ford stands as another iconic U.S. automaker that was significantly affected by discussions around the introduction of tariffs, which have significantly impacted the manufacturing costs of their vehicles. Thus far, they have only experienced a portion of this effect. In the coming quarters, we will better understand the actual impact on costs, likely leading to price increases and subsequent inflation. I think price hikes will be inevitable, as the net margins on cars are not high enough to absorb such additional cost. The principles applicable to the automotive sector will likely extend to a broad spectrum of industrial goods. Although the imposition of applied tariffs may generate revenue for the U.S. government, it is essential to consider that these tariffs are also likely to result in price increases, exacerbating the financial burden on consumers.

Conclusion

Ladies and Gentlemen, as it was mentioned on Bloomberg, “while the economic growth has moderated, as the Fed statement said, the stock market is pricing in growth acceleration. Lately, the surge of cyclical/defensive stocks may reflect the stimulative part of the Big Beautiful Bill. That’s the risk for a Fed looking to resume the policy easing.” So, if you seek my two cents on the matter, I believe it is reasonable to expect that the Federal Reserve will make no policy changes for the remainder of the year, and therefore, interest rates will remain unchanged during this period. In a time characterised by sensitivities, staying focused on long-term investing is increasingly crucial rather than seeking short-term gains through speculation and being swayed by the constant noise around us.

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

””Wall Street will sell shit as long as shit can be sold”

Charlie Munger

Navigating U.S. interest rates can often feel like a rollercoaster ride in the unpredictable realm of finance. While investors seek that perfect win, it is important to recognise that not every decision will succeed. Embrace the journey, learn from both the highs and lows, and maintain your focus on the long-term goals!

U.S. Inflation

According to the latest consumer price index, U.S. inflation increased by 0.3% in June compared to the previous month, surpassing economists’ consensus expectation of a 0.27% rise. The annual inflation rate stood at 2.7%, again exceeding the anticipated 2.6%. The yearly rate of core inflation was reported at 2.9%. This, Ladies and Gentlemen, indicates that US inflation continues to exceed the Federal Reserve’s target of 2.0%.

Tariffs and Their Potential Impact on Inflation I

In April, US President Donald Trump announced substantial special tariffs on imports from numerous countries. Though some of these tariffs were later suspended, new agreements with various trade partners were reached and are in the process of being reached, and a base tariff rate of 10% remains in effect. US Federal Reserve Chairman Jerome Powell has already cautioned on multiple occasions that any tariff increases this year will likely elevate prices and strain the economy.

Tariffs and Their Potential Impact on Inflation II

No wonder the question of whether tariffs contribute to rising inflation rates has garnered considerable attention in recent economic discourse. Notably, June’s above-mentioned consumer price index demonstrated a marginal increase that exceeded initial expectations. This raises the question of whether implementing tariffs is beginning to exert upward pressure on prices. While a definitive correlation is difficult to establish at this juncture, it is essential to consider the probability of tariffs influencing inflationary trends. Future analyses will be necessary to illustrate the relationship between these economic factors more conclusively. In an initial statement on this year’s half-year figures, Paul Jacobson, General Motors Co.’s CFO, said in an interview on Bloomberg TV that President Donald Trump’s tariffs cost the automaker $1.1 billion in profits. However, GM has not yet increased its retail prices.

Tariffs and Their Potential Impact on Inflation III

So far, none of this definitively indicates that tariffs will lead to another price spike. However, it does imply that the progress made on inflation has stalled without ever reaching the Federal Reserve’s target. Furthermore, concerning the cost of living for the working class, a central issue in last year’s presidential election, the trend is again heading in the wrong direction.

Meanwhile, at the ECB

The eurozone’s key interest rate remains at 2%, as the European Central Bank (ECB) has opted for a pause in interest rates after seven consecutive cuts. This decision marks a pivotal moment for the ECB, as it navigates a challenging economic landscape. Under the leadership of President Christine Lagarde, the Governing Council of the ECB has lowered the key interest rate seven times in succession. During a meeting in Frankfurt am Main on Thursday, they resolved to maintain the benchmark deposit rate at 2%, the rate at which banks earn interest on funds held at the central bank. Most market analysts anticipated this decision. Lagarde had previously indicated that we might witness the “end of a monetary policy cycle” after the last meeting in June. She has successfully achieved the inflation target of 2% for the eurozone, which very recently ticked up from 1.9% in May to 2% in June.

Tariffs and Their Potential Impact on Inflation IV

What is true for the U.S. is certainly also true for the countries at the other end of the “deals”. All the central banks must contend with a challenging environment marked by economic uncertainty, largely driven by developments in the United States. For example, we all witnessed President Donald Trump’s recent announcement of a 30% tariff on EU goods, set to take effect on August 1. In response, the European Union is now preparing countermeasures. EU Commission President Ursula von der Leyen has proposed a package with up to 30% counter-tariffs on US products worth approximately EUR 90 billion, targeting iconic American items such as jeans, whiskey, cars, and aeroplanes. Hopefully, there will be a deal soon for both sides.

Conclusion

As the title of today’s “Stefan’s Weekly” indicates, central banks occasionally find themselves in a tough position! While lower interest rates would certainly benefit consumers with mortgages and personal credit, as well as assist governments in managing their substantial debt, we must not underestimate the potential risk of igniting rampant inflation.

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

”…what is there in the whole world worth more than a peaceful family life and work?.”

Doctor Zhivago, by Boris Pasternak

In a series of four articles unfolding over the summer, my friend Anton, who lives in Oxford (UK) and works in the financial services sector, and I will examine the familiar term “wealth” and aim to gain a deeper understanding of its meaning. Below is the second article in this series. It analyses wealth from a metaphysical perspective, but as in the first article, which was published on June 13, 2025, with a philosophical bent. Just as with the first part, Anton provided the text while I handled the editing.

Wealth and Metaphysics

Ladies and Gentlemen, thank you for reading this series’ previous article on wealth. In it, we explored a philosophical perspective to deepen our understanding of this concept.
We have received thoughtful feedback that has been truly humbling. One reader pointed out an essential dimension of wealth that transcends the monetary realm: personal wealth. In today’s article, we will delve into this aspect, drawing upon metaphysical insights to further illuminate our notion of wealth.

What Metaphysics Is (and What It Is Not)

The Stanford Encyclopedia of Philosophy notes, “Metaphysics’ is notoriously hard to define.” I concur. Capturing the essence of the question, “What is metaphysics?” in just a few lines is a daunting task that could occupy a lifetime or even several lifetimes.
Nevertheless, we should strive for a brief definition to ground our discussion in something tangible. The term traces back to Aristotle’s work of the same name, which addresses the principles of things, seeking to understand “being as such,” the “first causes of things,” and “that which does not change.”

In the context of our exploration of wealth, a metaphysical inquiry prompts us to ask: “What is the first cause or ultimate principle of wealth?” Before we seek to answer this question, a few preliminary observations about metaphysics are necessary.

It has often been claimed that metaphysics primarily (or solely) concerns itself with the unseen and immaterial aspects of our existence, leading some to conflate it with theology. While there are significant connections between theology and metaphysics, this view is misleading and does not accurately represent the discipline. Theology engages with the supernatural order of reality or revealed truths. In contrast, as the foundation of philosophical inquiry, metaphysics investigates the natural order of reality, striving to uncover its most profound core to achieve a more comprehensive and precise understanding of existence.

The key distinction is that metaphysics concerns something that the human mind does (e.g., philosophy), whereas theology deals with something that the human mind receives, namely, revelation. What we are doing here is the former: we are applying our cognitive faculties to explore the concept of wealth.

The natural order of reality encompasses material elements, such as stones, trees, and gold, and immaterial aspects, including knowledge, love, and ideas. Accordingly, an accurate engagement with metaphysics necessitates considering this natural order’s visible and invisible dimensions. Wealth exemplifies this duality; it manifests in tangible forms (land, gold, property, art) and intangible constructs (value, perception, relationships, knowledge).

Given the expansive nature of metaphysical inquiry, it is essential to establish a conceptual framework for our exploration. To this end, I would like to draw upon the insights of 20th-century Romanian philosopher Nae Ionescu. Ionescu articulates metaphysics as a constellation of distinct, albeit interrelated, perspectives on existence that historians of ideas, such as Frederick Copleston, meticulously document in comprehensive multi-volume works.

For Ionescu, each metaphysical position represents an absolute, forever unique, due to the individuality of the inquirer. This assertion is grounded in the premise that each person who contemplates these profound questions is distinctive; there will never be another individual precisely like you, esteemed reader.

In our initial discourse, we invoked Heraclitus’s thoughts to underscore the dynamic nature of the world and humanity. Yet, despite this flux, one constant remains: the enduring questions posed by the human condition. The constancy of human nature ensures that texts from antiquity, such as Homer’s “Iliad” and “Odyssey” and Sophocles’ Theban plays, retain their relevance as sources of inspiration across the ages.

Thus, it is reasonable to anticipate a connection among the various responses to metaphysical inquiries, even amidst their apparent disparities. This connection is underscored by a shared objective: the quest to understand existence. Although the contemporary milieu may differ significantly from that of ancient Greece, fundamental human experiences, suffering, love, aspiration, disappointment, life cycle and ageing remain constant. The essence of existence persists, manifesting in diverse contexts, technologies, and governance structures.
In its most profound sense, wealth is intimately tied to the nature of the human person, who continues to grapple with the same metaphysical questions across time. Accordingly, we will aim to deepen our understanding of wealth through its intrinsic relationship with the human experience.

The Dimensions of the Human Person

In his work “I and Thou,” the Jewish philosopher Martin Buber posits that each individual is profoundly interconnected with others. If I recall correctly, Buber asserts that there is never simply an “I,” but always an “I-and-thou.” This perspective, with which I align, starkly contrasts with that of Jean-Paul Sartre, who famously claimed in his play “No Exit” that “hell is other people.” Sartre did not intend to demonise humanity but rather articulated, in very forceful terms, the notion that the individual exists solely as such. I find myself in disagreement with this view.

Yes, ontologically, a person is defined as “an individual substance (of a rational nature),” as Boethius stated. However, this definition implies that each individual possesses intrinsic and inalienable worth simply by being unique. Furthermore, this “individual substance” is not “thrown into existence,” as Martin Heidegger suggested, a notion Sartre endorsed.

Instead, every person is situated within a moral universe, and because this universe is ethical, it is inherently social. This is why Aristotle, in “Politics,” referred to the human being as a “political animal” by nature. Notably, the term “political,” as a friend of mine who specialises in Latin pointed out, translates to “social.” Thus, the “individual substance” is never solitary but is always part of a community: “I-and-thou.”
Wealth illustrates this multi-dimensional aspect of the human experience.

Wealth and the Human Person(s)

In discussing the concept of asset possession, one must acknowledge that the expression “I possess this asset” is, in essence, a collective assertion, wherein “we possess this asset” more accurately reflects the relational nature of ownership. This “we” encompasses not only the individual but also extends to the familial, social, and communal context in which one exists. The assets in question can manifest as material entities, such as gold, or as immaterial resources, such as knowledge.

This discourse transcends legal definitions of ownership; it delves into the implications of asset utilisation, particularly as it relates to our overarching definition of wealth, as introduced in prior discussions. Wealth is inherently a collective construct; it is inaccessible without the support and involvement of others. As such, the distribution of one’s financial or intellectual resources must account for the contributions of familial and communal ties. The question arises: what value does knowledge or material wealth hold if not shared with one’s spouse, children, family, and broader community?

Practical applications of this sharing philosophy are evident in using material wealth, such as establishing educational funds for children, assisting the impoverished, and contributing to charitable organisations or local religious institutions. These avenues illustrate the acknowledgement of our interconnectedness and the responsibility to use our wealth in ways that honour and empower our relationships with others.

Furthermore, it is imperative to recognise that the human experience encompasses more than mere material accumulation. Throughout history, figures such as King Solomon have exemplified the prioritisation of wisdom over tangible riches, with the biblical narrative illustrating a request for discernment rather than conventional assets. This philosophical inquiry resonates with the ancient Greeks, notably Socrates, who advocated for a deeper understanding of wealth as an internal virtue rather than external accumulation.

Returning to the principal inquiry of this exploration, “What is the primal cause, or the ultimate principle, of wealth?” We elucidate that the foundational principle of wealth is rooted in our relational dynamics. This intrinsic bond enriches our existence in multifaceted ways. Metaphysically, one could argue that wealth is inextricably intertwined with the essence of humanity itself, emerging from the complex interplay between individuals. Future discussions in this series will further examine wealth through a cultural lens, drawing upon prominent literary works to enhance our understanding of this multifaceted concept.

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

”Most investors steer their portfolios with only the benefit of the rear view mirror.”

Jesse Felder

In last week’s edition of Stefan’s Weekly, “Embrace the Power of Value Investing,” we explored various facets of value investing. Today, I want to share some key metrics you can utilise when adopting this investment approach.

How Should We Define Value Stocks?

To begin with, let’s clarify the definition. In simple terms, value stocks trade on the stock exchange at prices lower than their intrinsic worth. These stocks typically exhibit strong financial fundamentals, such as low debt levels, stable profits, a reliable business model, and a lengthy company history. Investors who follow a value investing approach seek out and purchase undervalued shares that presently underperform in the market and do not show immediate growth potential. The hope is that growth will eventually return, the market will recognise the “true” value, and the stock price will rise to align with its fair value.

How Can We Identify Value Stocks?

Having established a definition of value stocks, the next important question is identifying these potentially undervalued investments. The process of pinpointing value stocks necessitates a thorough fundamental analysis of companies, with time being a crucial factor. To assist in this identification process, analysts typically utilise several key metrics to uncover stocks that may be undervalued. While no single metric is deemed the ultimate indicator, their combined use strengthens the analysis and supports a more accurate company evaluation. These metrics’ preference for and weighting often come down to personal judgment. It can lead to slightly differing company assessments, varying from sector to sector or company to another. While this subjectivity can complicate the task for asset managers, it also reflects the nuanced nature of investment analysis. Now, let us explore some of these key metrics.

The Classic: Price/Earnings Ratio (P/E Ratio)

The P/E ratio is one of the most recognised indicators of stock valuation. It is calculated by dividing the share price by the earnings per share. Generally, a lower P/E ratio may indicate that a stock is undervalued. However, it is crucial to consider these ratios in the context of different sectors, as various industries tend to have distinct P/E ratios. The classic P/E ratio is the first metric I examine when evaluating a potential investment. Additionally, I assess the company’s P/E ratio trend over the past few years, determining whether it has risen, fallen, or remained stable, and I compare it to its peers within the sector.

For Deep Value Seekers: Price-to-Book Ratio (P/B Ratio)

The price-to-book (P/B) ratio compares a company’s share price to its book value per share, which is calculated by dividing the company’s equity by the total number of shares outstanding. A P/B ratio of less than 1.0 may indicate that the stock is undervalued, suggesting that the market price is below the estimated net asset value. However, the challenge with this metric lies in the reliability of the equity valuation. It raises questions about how and by whom this calculation is performed. Analysts often lack direct access to a company’s assets and base their assessments on annual reports and their assumptions. Additionally, a company might trade below its book value if it consistently incurs losses from its operations. While the P/B ratio can be a factor to consider, it should not be the sole determinant of an investment decision.

Price/Earnings Growth Ratio (PEG) 

My partner, Dr. Christian Schärer, advocates for the PEG, which relates the P/E ratio to anticipated earnings growth. This metric is calculated by dividing the P/E ratio by the earnings growth rate. A PEG value under 1.0 is typically viewed as favourable, indicating a potential undervaluation of the shares.

Liquidity Ratio (Current Ratio)

During my early career, I worked in the staff unit supporting the CEO of UBS. My superior, who served as chief of staff to the CEO, frequently emphasised the importance of liquidity and the Current Ratio. A company’s liquidity ratio evaluates its capacity to fulfil its debt obligations, calculated by dividing fixed assets by liabilities. A liquidity ratio below 100% suggests that available fixed assets are inadequate to cover the liabilities. The lower the liquidity ratio, the higher the risk that the share price will continue to decline, potentially leading to the stock being undervalued.

Debt-Equity Ratio

Another essential ratio for deep value seekers is the debt-equity ratio, which assesses the proportion of total debt relative to equity. Generally, a low gearing ratio (below 1.0) is seen positively, as it suggests that the company relies less on debt financing and can adapt more readily during times of crisis. However, this ratio’s importance is diminished in a zero-interest-rate environment like Switzerland.

Return on Equity (ROE)

Return on equity (ROE) is another key financial metric that assesses the efficiency with which a company employs its shareholders’ equity to generate profits. It is computed by dividing the annual net profit by the total equity possessed by shareholders. A high ROE indicates a robust and profitable business model, reflecting the ability of the management to maximise returns on equity investments. This measure is essential for investors and analysts in evaluating financial performance and determining the potential for capital growth within an organisation.

Earnings Yield or Inverse P/E Ratio

The earnings yield represents the inverse relationship of the P/E ratio and is computed by dividing earnings per share by the prevailing share price. A share is deemed attractive when its earnings yield exceeds the yield offered by risk-free government bonds, indicating a potentially higher return on investment than a virtually riskless asset.

Dividend Yield

Lastly, dividend yield serves as a crucial financial metric that quantifies the proportion of a company’s share price that is allocated to annual dividend distributions. A robust and sustainable dividend yield possesses the capacity to significantly augment total returns, particularly in contexts where the underlying asset is perceived to be undervalued. This correlation emphasises the critical role of dividend yield within the framework of investment strategy and valuation assessment in equity markets. Personal investment analysis often prioritises the long-term trajectory of the dividend itself, as this metric can provide deeper insights compared to dividend yield, which is inherently influenced by fluctuations in share price.

Conclusion

In a 2016 OECD survey, it was revealed that many individuals struggle to grasp even basic financial concepts, such as compound interest. Given its slightly more complex nature, value investing is likely understood by even fewer. Through “Stefan’s Weekly,” my aim is to assist readers in making informed investment choices. However, I urge you not to underestimate the intricate dynamics of financial markets, where capital intersects with risk and opportunity. As asset managers, we delve into the captivating ideologies that shape our aspirations and decisions. Each investment presents an enticing yet unpredictable encounter. Beneath the surface, misunderstandings linger like echoes in a dimly lit room, prompting us to reevaluate our perceptions. An approach like value investing provides a clearer perspective on our investments, even if we ultimately gravitate towards a different investment style or a hybrid variation of it.

Next Week

Next week’s edition of “Stefan’s Weekly” will explore “A Deeper Look at Wealth / Part II.” Just as with the first part, Anton will provide the text while I handle the editing. Hopefully, some of your questions from part one will be addressed, and perhaps new inquiries will emerge.

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 key to successful investing is having everyone agree with you — LATER.”

Jim Grant

I would like to share one final thought regarding the numerous messages I have received in response to the “Political Views and Seductive Misconceptions” in last week’s “Stefan’s Weekly.” I firmly believe that in a democracy, free dialogue should not devolve into anarchy. Public discourse must adhere to recognised principles when addressing urgent and significant issues. There should be a legitimate mechanism, such as elections or voting, which embodies majority decisions, to arrive at a conclusion, even if it may not satisfy everyone. This requires respect for the thoughts of others and should not be a reason for rancour or hatred, and we must remain cautious about censoring human perspectives.

What is Value Investing?

Summarised in just a few words, value investing is not just a strategy but a profound philosophy seeking to uncover hidden market gems. Investors can seize opportunities that others overlook by focusing on a company’s intrinsic value rather than its current market price. This approach requires patience, discipline, and a deep understanding of financial fundamentals.

Unlocking the Secret: How Can You Identify a True Value Stock?

The essence of the matter is that valuation ratios differ significantly by sector. For instance, a P/E ratio ranging from 8 to 15 in the insurance sector may indicate an undervaluation, whereas in the technology sector, shares with a P/E ratio between 20 and 30 are often considered favourable. Successful value investors, therefore, employ a multifaceted approach: they compare key metrics like P/E (price/earnings) ratios, P/B (price/book) ratios, and dividend yields against industry averages, assess the company’s performance over recent years, and evaluate its future prospects.

Investing in Value Stocks: What’s Next?

According to the value investment principles, the fundamental objective of every value investor is to identify opportunities for entry at levels of undervaluation and to execute an exit strategy during periods of maximal overvaluation. Nonetheless, it is imperative to divest as soon as an equity ceases to be classified as a value stock.

What are the Risks?

A significant challenge associated with value stocks is the risk of encountering a value trap, where a seemingly cheap company is not genuinely undervalued. A company may exhibit an attractive valuation for valid reasons, such as structural issues within the sector, outdated business models, or ineffective management. Classic examples include newspaper publishers and retailers that have struggled due to digitalisation; their low valuations often reflect justified concerns about their future rather than true undervalued opportunities. Furthermore, many investors were misled for an extended period by Credit Suisse’s low price-to-book ratio, which plummeted to 0.06 prior to the bank’s downfall, appearing to indicate undervaluation.
Another complicating factor is timing. Even when fundamental analysis suggests a stock is undervalued, it can often take years for the market to acknowledge this discrepancy. This gap between recognition and realisation demands considerable patience from investors and can lead to increased opportunity costs. Consequently, many successful value investors combine quantitative metrics with qualitative assessments, such as evaluating management quality, competitive positioning, and industry trends. They also seek out catalysts that could prompt revaluation, including spin-offs, share buybacks, or strategic shifts.

Are Value Stocks Currently Attractive?

Value stocks have underperformed compared to growth stocks since 2007. However, after a brief resurgence in 2022 and 2023 during which value stocks outperformed, growth stocks have once again taken the lead. According to the US financial information service provider Morningstar, “value does not run the stock market,” yet they regard value stocks as a promising strategy in capital markets. Currently, the opportunities to identify undervalued stocks are substantial. As reported by “cash.ch”, Swiss companies such as telecommunications provider Sunrise, food conglomerate Nestlé, and speciality chemicals firm Clariant have been highlighted as appealing options for value investors in recent months. However, it is advised that patience may be necessary.

Conclusion

If you are considering investing in value stocks, embrace the challenge of value investing to unlock the potential for exceptional returns while cultivating a deeper connection to the companies and assets you choose to invest in. Your journey to financial success starts with recognising the immense power contained within sound investment strategies. In the forthcoming edition of “Stefan’s Weekly,” I will present a curated selection of crucial financial metrics aimed at identifying undervalued stocks.

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 level of immaturity is beyond words.”

Sen. Rand Paul

A Deeper Look at Wealth / Part I: A Philosophical Approach to Wealth

I sincerely appreciate your thoughtful messages and generous compliments regarding last week’s “Stefan’s Weekly.” I shared your feedback with Anton, who was truly honoured by your kind words.
@ Adrian: During the summer, you will receive responses to your inquiries.
Thank you, Ladies and Gentlemen, once again!

The Swiss National Bank

The Swiss National Bank (SNB) has reduced its key interest rate by 0.25 percentage points, bringing it to 0%. This decision is a response to the uncertain economic landscape, the strong Swiss franc, and the persistently low inflation rate, which dipped slightly into negative territory in May. The appreciation of the Swiss Franc is a burden on exports, tourism, and, among others, Swiss pension schemes.

Federal Reserve / Sensual Economics

On Wednesday, the Federal Reserve signalled its intention to adopt a wait-and-see approach regarding future developments. Chair Jerome Powell and his colleagues in monetary policy decided to maintain interest rates within a range of 4.25% to 4.5% for the fourth consecutive meeting, citing a high level of uncertainty surrounding the economic outlook, though noting that it has lessened somewhat. Additionally, officials revised their projections for economic growth this year downward, while simultaneously raising their forecasts for unemployment and inflation.
The pivotal excerpt from the remarks made by Powell that contributed to the subsequent elevation in bond yields was the following:”Ultimately, the cost of the tariff must be paid, and some of it will be passed on to the end consumer. We know that’s coming, and we want to see a little bit of that before we make judgments prematurely.”
Ladies and Gentlemen, this perspective makes a lot of sense to me! The Federal Reserve maintains its independence and does not yield to political pressure, while it appears to be taking its mandate very seriously.

Crude Oil

The interplay between geopolitical conflicts and fluctuations in food prices may significantly intensify economic pressures faced by Federal Reserve Chair Jerome Powell during the summer months. An increase in oil prices is also indeed correlated with elevated inflationary expectations within the economy.

Political Views and Seductive Misconceptions in the Markets

Finally, I often receive emails from readers seeking clarification on my political views. At my core, I am a freedom-loving individual who supports a limited role for the state. However, I strive to remain open-minded and avoid rigid ideologies, as my primary focus is as an asset manager. My main objective is to identify opportunities within the financial markets. Over the years, I have come to recognise that some of the most lucrative deals arise when widespread beliefs are based on seductive misconceptions or ideologies.

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

”It Ain’t What You Don’t Know That Gets You Into Trouble. It’s What You Know for Sure That Just Ain’t So.”

Mark Twain

In May, I had several conversations with my friend Anton, who lives in Oxford (UK) and works in the financial services sector. He is interested in literature, philosophy, and theology. We were discussing finance and wealth, and the idea emerged to publish a series of texts over the summer on the topic of wealth. Anton authored the texts while I assisted with the editing.

In that series of articles, we will examine the familiar term “wealth” and aim to gain a deeper understanding of its meaning. Below is the first article in this series. It analyses wealth from a financial perspective but with a philosophical bent.

The article that follows will explore wealth from a metaphysical perspective, examining what wealth is, how it comes into being, and its connection to related concepts, such as knowledge. Then, a cultural perspective will be offered in a third article, examining the concept of wealth through the lens of human relationships. Finally, we will conclude with the fourth article that will bring all of this together, offering, hopefully, a richer understanding of the concept of wealth.

Part I: A Philosophical Approach to Wealth 

The geopolitical and financial events of the last five years have changed how many investors and market commentators perceive wealth. Phrases like “long-term,” “capital allocation,” and “risk mitigation” often revolve around the concept of wealth, which remains somewhat elusive.

This ambiguity is understandable. While the notion of risk has become more tangible, the definition of wealth remains vague. Traditionally, volatility, market concentration, and the correlation among asset prices were the primary concerns. However, following the Global Financial Crisis, liquidity risks were added to this list. Since 2020, geopolitical tensions have become more pressing, and numerous other developments have contributed to the ever-expanding concept of risk.

In light of the evolving understanding of risk, what does wealth mean? Does the concept of wealth expand alongside our definitions of risk? How much does wealth relate to money, and what kind of money? How does it connect to other assets? What is the relationship between wealth and luxury? Are these terms synonymous or not? Ultimately, what do we truly mean by wealth?

We could attempt to answer these questions using a conventional approach, which might involve consulting well-known reports on global wealth produced annually by firms like UBS, Allianz, or Knight Frank. These reports typically define wealth as the total value of assets. However, the circumstances we face today necessitate a shift or change in our approach.

There are different types of change, but the most impactful ones can be categorised as either revolutionary or renewing. J.R.R. Tolkien, the beloved English author, articulated this distinction brilliantly. He argued that revolution represents a forceful break from the past, discarding old methods and traditions. We have witnessed this in historic events such as the French Revolution of 1789, as well as during the tragic upheavals of the 20th century in Russia, China, Iran, and elsewhere.

Conversely, Tolkien described renewal as the old reimagined, previous understandings and methods enriched for a world that is in constant flux. As the pre-Socratic philosopher Heraclitus observed, “No man ever steps in the same river twice; for it’s not the same river, and he’s not the same man.” Just as a river changes, so does our world.

**The Notion of Renewal in the Concept of Wealth**

When we apply the idea of renewal to the concept of wealth, we combine conventional methods of evaluating wealth with a philosophical perspective. This approach aims to provide a more dynamic understanding of wealth.

Why use philosophy as the lens through which to examine wealth? The term “wealth” often brings to mind various concepts: money, effort, time, risk, politics, luxury, value, and knowledge. To understand whether these concepts are genuinely connected to wealth, we first need to define what we mean by “wealth.” Moreover, to achieve a comprehensive understanding, we must not only describe each of these concepts but also explore their precise relationship to wealth if such a relationship exists. This task is fundamentally philosophical, although it may exceed the scope of our current discussion. Nonetheless, it is worthwhile to make a brave attempt at redefining wealth.

Searching for definitions of concepts was one of Socrates’ primary intellectual pursuits. In many of Plato’s dialogues, Socrates employs questioning to clarify notions by arriving at their definitions. However, as shown in Plato’s dialogues, this method is not always productive. A potentially better, though still imperfect, approach is found in Aristotle’s theory of causes, which he elaborates in his works “Physics” and “Metaphysics.”

Before we proceed, it is important to define a key term that will frequently appear in our exploration of wealth: “object.” In philosophy, an “object” refers to anything we examine. For instance, knowledge can be an object of philosophical inquiry, known as epistemology. Knowledge is abstract and intangible, while the object of examination can also be a material entity, like a bronze statue, which Aristotle exemplifies. The crucial point is that “object” denotes what we focus our thoughts on, which, in this case, is the concept of wealth.

We begin with the material cause, which answers the question, “What is it made of?” UBS distinguishes between financial and non-financial wealth. When combined, these two categories yield total wealth. Financial wealth consists of “assets that can easily be converted to cash,” including equities, bonds, mutual funds, savings accounts, and other securities traded in financial markets.

Non-financial wealth, on the other hand, comprises “land, real estate, and other tangible assets” that cannot be readily traded on financial markets and are recommended as long-term investments, unlike financial assets, which may not be perceived similarly. Therefore, wealth consists of different types of assets. This traditional definition of wealth is not particularly novel.

Next, we examine the formal cause, which addresses the question, “What is it?” This inquiry is the most complex in philosophy, as it relates to the core of metaphysical thought. As the German thinker Martin Heidegger would argue, it concerns the question of Being or existence. However, for our purposes, we need to simplify the matter. We should ask: What kind of object is wealth, simple or complex? The UBS report informs us that wealth is a complex entity comprising various components known as assets. At first glance, this answer appears straightforward, but it conceals significant complexity. Consider two individuals, A and B, both possessing equal wealth of $100 million. Person A’s wealth comprises 20% cash and 80% land, while Person B’s wealth consists of 80% cash and 20% land. Despite both being labelled as “wealth,” is there truly no distinction between tangible and intangible assets, such as meadows, woods, gold, and the trust in government that underpins fiat money? I would contend, perhaps without causing too much controversy, that there is indeed a distinction, and our understanding of what we term “wealth” requires deeper consideration.

Meanwhile, we have the efficient cause, which addresses the question, “Where does change come from?” The simple answer, in this context, is that changes in wealth arise from fluctuations in the value of the assets that constitute that wealth. In other words, this is a matter of value. What determines the value of something? What influences its value, either increasing or decreasing it, so that a particular asset, be it precious metal, a painting, a plot of land, cash, or claims to future cash flows, can be regarded as part of the intricate entity we call wealth? How should we understand value as it relates to wealth?

Value is intrinsically linked to human psychology, economic activity, and legal systems. This philosophical perspective highlights how the term “wealth” is interconnected with various concepts that need to be considered independently and then in relation to wealth itself.

Finally, we arrive at the final cause, which answers the question, “What is its purpose?” We can outline three primary aims of wealth. First, wealth offers a sense of security, acting as a safety net against the uncertainties of nations and economies. It serves as an anchor in the turbulent river of our ever-evolving world. Second, wealth acts as a source of daily income. Third, it provides resources necessary for maintaining a specific standard of living, which can vary in luxury not solely based on the changing value of the assets themselves but also on the behaviours of those who claim ownership of these assets at any given time.

In conclusion, we can define wealth as a complex object comprising various components collectively referred to as assets. These assets can be tangible or intangible, liquid or illiquid, and their value can fluctuate based on a combination of cultural, economic, and legal factors. Wealth serves to provide security in an uncertain world, to generate income, and ultimately to act as a resource for sustaining a particular standard of living, which depends on individuals’ spending habits. This definition refines the traditional understanding of wealth through philosophical inquiry.

In the following article, we will look at wealth from a metaphysical perspective. This will require us to delve even deeper into the realm of philosophy, but it will ultimately enable us to extract a richer understanding of what wealth truly is.

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 USA is responsible for less than 15% of world trade. What happens to the world trading system now will be decided by the other 85 per cent.”

Professor Richard Baldwin

Elon Musk’s statement, “I think a bill can be big or beautiful. I don’t know if it can be both”, a bill he described as a “disgusting abomination”, and especially his tweet “without me, Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate”, makes me wonder if they are still best friends, and if not, what will be the consequences?

Update

Anyway, before all my readers head off on vacation, I thought it would be fitting to provide an update on the Incrementum 2025 Year-End Competition. As I write this edition of “Stefan’s Weekly,” the prices stand as follows: Silver at USD 35.62, the Shanghai Composite at 3,376.20 points, and the 10-year U.S. Treasury yields 4.37%.

Silver

No modifications have been made to our “betting landscape” thus far. Hans continues to hold the highest bid at USD 47.80, while Mark, a former fund manager and client, has submitted the lowest bid at USD 35.77. I think this disparity in bid amounts highlights the varying levels of engagement and risk tolerance among participants in this betting scenario.
                   

Shanghai Composite

The same principle applies to the Shanghai Composite Index, where my associate, Hans, submitted the highest bid at 3’980 points, which is marginally higher, approximately five points, than the corresponding bid submitted by Mark. In stark contrast, Niklas’s lowest recorded bid stands at 2’950 points.
 

10-Year U.S. Treasury

In the 10-year U.S. Treasury securities market, Mike has the highest recorded bet at 5.55%, while Hans maintains the lowest at 3.8%. Again, this disparity highlights a significant divergence in the gentlemen’s expectations regarding future interest rates and, thus, economic conditions. To me, this is the most interesting bet.

Closed Competition       

The competition has officially closed, and I appreciate your understanding. As mentioned in my previous update, I intend to add an additional silver coin if Dario emerges victorious once again. Dario seems to be in a league of his own; therefore, if he secures a win, I will send a silver coin to him as well as to the runner-up. This also applies if a partner of Incrementum takes home the prize.
Data will be sourced from https://marktdaten.fuw.ch/.

Fingers Crossed

I keep my fingers crossed for all participants and look forward to sending this one-ounce silver coin to the winner at the end of the year.

Addendum

Overnight, the feud between President Trump and Mr Musk has escalated; on one hand, I am surprised, and on the other, I am not. I have serious doubts that this is for the greater good of the American people.

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 magnitude and speed at which these prices are coming to us are somewhat unprecedented in history.”

John David Rainey, Walmart’s CFO

In the realm of financial investments, it is essential to recognise that fear can be an inadequate guide for decision-making. Historically, evidence suggests that a long-term investment strategy, particularly one that includes allocations in robust dividend-paying equities coupled with a measured approach to market volatility, has yielded favourable outcomes.

Debt Delinquencies

According to recent data from the Federal Reserve Bank of New York, an increasing number of Americans are struggling to keep up with their debt payments. The percentage of credit card balances at least three months overdue has risen to its highest level in 14 years. While overall credit card balances have decreased, the share of individuals unable to meet their payment obligations has risen. In other words, US households collectively borrow less on their credit cards, yet the proportion of borrowers experiencing difficulty repaying their debts is increasing.

Interest Rates Must Go Down

Lower interest rates are crucial for governments of heavily indebted countries. Lower interest rates are also vital for consumers in countries that heavily rely on domestic consumption, as well as for homeowners relying on mortgages. As we have learned above, the proportion of U.S. borrowers experiencing difficulty repaying their debts is rising. This is particularly important because the United States benefits from robust domestic demand, with consumption accounting for approximately 70% of its GDP. If consumption increases steadily at a rate of 2%, it can contribute approximately 1.4 percentage points to GDP growth. Conversely, sluggish consumption could significantly impact the country’s overall economic performance. At the same time, the U.S. government is spending roughly 20% of its entire income on interest payments on its debt. What exacerbates the situation is that Japan, the largest creditor of the United States, and the Japanese government, which is even more indebted than the U.S. government, are currently facing significant upward pressure on long-term JPY-debt interest rates. As Albert Edwards, strategist at Société Générale, points out, “if sharply higher JGB yields entice Japanese investors to return home, the unwinding of the carry trade could cause a loud sucking sound in US financial assets.”

Carry Trade

What is the carry trade, some readers might wonder. The carry trade can be illustrated through the example of Japan and the U.S. In this scenario, investors borrow funds in a low-interest currency from a highly indebted country like Japan and then invest that money in high-interest, fixed-income products in a country with lower government debt, such as the U.S. (lower government debt is a very relative term in this example, as the effective government debt is still very high). Why is the debt situation significant? Generally, over time, the currency of a country with higher debt, such as Japan, tends to depreciate relative to the currency of a country with lower debt, like the U.S. This creates a dual benefit for investors. They not only capitalise on the interest rate differential between Japan’s low rates and the U.S.’s higher rates, but they also stand to gain from the favourable currency exchange as the USD appreciates against the JPY due to Japan’s higher government debt.

The Reverse Of The Carry Trade

What Albert Edwards, strategist at Société Générale, has attempted to explain in his FT interview is that rising yields in Japan may lead to a lower interest differential between the USD and JPY and, at the same time, may lead to a strengthening of the JPY, consequently and also driven by an unwinding of the carry trade. This makes the carry trade less profitable, if not risky.

Consequences of a Reverse of the Carry Trade

The repercussions of the unwinding of the carry trade between the Japanese Yen (JPY) and the U.S. Dollar (USD) may manifest as significant challenges in refinancing U.S. government debt. This situation could subsequently lead to elevated interest rates on U.S. government bonds, contributing to an increase in inflation and potentially precipitating an economic recession in the United States.

Expectations

What can we, therefore, expect on the interest front in the upcoming months?

European Central Bank

The ECB key interest rate (deposit rate) has been 2.25% since the meeting on 17 April. At the meeting on 5 June, it looks as though interest rates will be cut again by 25 basis points. The ECB’s target range for the deposit rate (key interest rate) is 1.54% in March 2026, meaning that the 1-month euro futures give the ECB three interest rate cuts of 25 basis points each until spring 2026.

Federal Reserve System

As of the present date, the United States’ key interest rate is positioned within a range of 4.25% to 4.5%. The Federal Reserve refrained from altering this rate during its most recent policy meeting. As indicated by futures traders, market expectations suggest the anticipation of four potential interest rate reductions over the forthcoming twelve months. Specifically, these reductions are projected to occur in September and December 2025, as well as in January and June 2026, with each cut of 25 basis points.
Additionally, analysis of Fed funds futures reveals that market participants assign a very low likelihood of any change in interest rates at the upcoming meeting scheduled for June 18.

Conclusion

It is essential to acknowledge the significance of President Trump’s actions. While he has been vocal in his appeals for Federal Reserve Chair Jerome Powell to reduce interest rates, his emphasis on tariff policies and recent tax cuts may have undermined the justification for future rate reductions. The Fed, concerned about the potential for another inflationary shock, has indicated its intention to maintain restrictive rates as a safeguard against allowing inflation to spiral out of control once again. After all, maybe “TACO” is not that bad, or at least better than unintended far-reaching economic consequences.

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

”There is frustration with a state growing while the infrastructure is rotting.”

A quote by a journalist about the situation in Germany

The current fiscal policy of the United States administration, the big and beautiful bill, characterised by a combination of tax reductions and inadequate efforts at expenditure reductions, is projected to result in an exacerbated deficit. Over the past two years, the Biden administration avoided a forecasted recession by employing expansionary fiscal measures, already paying a high price. Notably, the federal deficit has thus reached unprecedented levels outside of a recessionary context. Historical comparisons reveal that the current fiscal challenges surpass those experienced during the economic downturns of the 1970s and 1980s, underscoring the severity of the present situation.

In Gold We Trust

This, Ladies and Gentlemen, is exactly why we thought it was high time to publish another edition of the Incrementum “In Gold We Trust” Report. I have included the links to the various versions of it, and for the first time, it is also available in Japanese. You know, Ronni will spend his family’s summer vacation in Japan and figured investing in his language skills would be beneficial. Therefore, why not use those newly acquired language skills for the report, right?

Links and Enjoy the Read

As every year, the report comes in various formats. I have included all of them for your convenience. Feel free to download, print and distribute them among friends and family:
English
German
Compact version – English
Compact version – German
Compact version – Spanish
Compact version – Japanese

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