Monat: Juli 2025

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