Autor: Stefan Markus Kremeth

Good Morning Ladies and Gentlemen

On Tuesday, I looked at the 10-year performance of various asset classes. Today I want to share them with you. Again the numbers stem from Tuesday, but even if they should have changed slightly over the last few days, I do not think this will significantly change the performance over the entire 10-year period.

Silver

The 10-year performance of silver was negative and comes in with a big minus of  25.43%.

Gold

Gold did better. The 10-year performance comes in with a plus of 15.8%.

EuroSroxx 50

Let us look at some equities; the 10-year performance of the EuroSroxx 50 stands at plus 52.6%.

SMI

Next is the SMI, with a 10-year performance of plus 52.8%.

U.S. Stoxx 500

The U.S. Stoxx 500 10-year performance comes in with a plus of 62.9%.

DAX

The 10-year performance of the DAX stands at plus 94.46%.

Dow Jones

Furthermore, the Dow Jones Industrial, probably one of the best-known indices globally, 10-year performance stands at plus 143.7%.

Nasdaq Composite

Last but not least, the 10-year performance of the Nasdaq Composite comes in with a plus of 262.3%.

Style versus theme

What can we learn from this? A style-based or theme-based approach may make sense, depending on your investment goals. What else can we learn from this? Theme-based methods may yield extraordinary results at times. However, if you are invested in a theme during the wrong cycle, performance can be meagre and lead to frustration.

The example of silver

If you had acquired your silver investment ten years ago and did not change it, it lost roughly 25% in value. Over the same time, you had opportunity costs of over 50% versus an investor who had invested in a EuroSroxx 50 ETF.

…but who knows, after ten years of underperformance, silver may be ripe for serious outperformance?
Please feel free to share your ideas and thoughts with me, but please remember (instead of hitting the reply button) to send your messages to smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, joy

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

„The end of the world is the delusion of grandeur of the depressed“.
Matthias Horx

Since you asked

I received an intriguing question about the likelihood of a disappearance of the Euro or U.S. dollar, and I am happy to give you my take on it.

All about trust?

In the end, many things are based on trust, including the global monetary system. If people no longer have confidence in their currency or the currencies of other economies, then the corresponding currency disintegrates.

What do you expect from money?

Let us say goodbye to the idea that money is a store of value. There are investments for this purpose in companies, commodities, real estate, art, collector cars, precious metals, etc. In my opinion, and I did mention this many times before, money should primarily be understood as the lubricant of an economy. It ensures that the economy’s engine is not stalling even during difficult times. This is important insofar as the economy in which the money circulates also determines the intrinsic value of the corresponding money to a certain extent.

I am not afraid

I am not afraid, not even concerned about a possible collapse of the global monetary system. However, I know, and this is a little unfortunate, these thoughts have been around since the hyperinflation in Germany one hundred years ago. The topic and the fears arising from it are played repeatedly from different sides in never-ending catastrophe rhetoric. Last year, global concerns about the crisis were rife even in the reasonably sensible media. War, inflation, stock market collapses, recession, lockdowns in China, supply chain problems, etc., were too much for the beleaguered journalists and were seen as reasons for a total and all-doom mega polycrisis. However, for now, it seems such a crisis has been cancelled. At least, I do not recognise it.

Facts

The fact is, the companies we invest in have delivered reasonable numbers under the circumstances and over the whole year of 2022. Dividends on average across the portfolios are very likely to be higher than last year and the year before, and a recession in many G20 countries will not be as severe (if it happens at all) as analysts predicted. Patience, serenity and confidence have helped those who have not allowed themselves to be driven crazy.

Karl Popper

Karl Popper pointed out more than 80 years ago that science can never produce absolute truths but rather approaches the truth in constant processes (also thanks to trials and errors), i.e. every theory is only considered good until it can be replaced by a new and better and tested one. Why do I mention Karl Popper, firstly because I see him as a great thinker and secondly also because I have the feeling that many people would like to see a fully insured society in total equilibrium, which on top of everything, is tailored to the individual needs, fears, etc. of each individual? But, unfortunately, this, Ladies and Gentlemen, is not realistic. Just as we cannot always expect perfect solutions from science, we cannot expect our society, the state, monetary policy, individual politicians, fellow human beings, doctors, teachers, gurus, family members, friends, and acquaintances always to have the adequate and tailor-made solution ready for any individual problem of each individual.

Complex systems

Societies are pretty complex systems, and complex systems are, unfortunately, only sometimes in balance. I think it is even the case that societies in their normal state tend to be in disequilibrium, and any equilibrium is the exception.

Gloomy pictures

In the 1970s, the members of the Club of Rome painted a very gloomy picture for the next 50 years. However, I believe that not a single one of the horror scenarios of that time has come true. So much for people’s ability to forecast.

Conclusion

Long story short, do not let yourself go crazy, enjoy life and do not be afraid. Patience, serenity and trust are essential companions in life, and I would venture to say that during our lifetimes, we will not have to experience the demise of the Euro, the U.S. dollar and, if you want, the Swiss franc.

Please feel free to share your ideas and thoughts with me, but please remember (instead of hitting the reply button) to send your messages to smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, joy!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

Last week I did send you a quote from Burkhard Varnholt. The quote was, «Stamina is the hidden secret of successful long-term investors».

18% of Germans wear bicycle helmets

Investment Principle

I speak to investors a lot, which is what I appreciate most about my job. Because investors often show me different perspectives, which teaches me to respect their views and not underestimate their emotions, and quite frankly, they are forcing me to question our investment styles and stay reasonably humble. However, because complex systems (financial markets are complex systems) behave non-linearly, counterintuitively and are difficult to control, some investors tend to throw their initial investment principles overboard in situations of stress. This amazes me because it is far from being rational.

Psychology

Our brain resolves an inner contradiction by somehow convincing ourselves out of the unpleasant situation. This is a protective measure because we do not like to see ourselves as idiots. Nevertheless, this is unfortunately not always the best solution. For this reason, many smart people use coaches, consultants and investment advisors (yesssss, Ladies and Gentlemen like us), i.e. people they trust, people offering comfort and help during challenging moments.

91% of Germans use a protective cover for their mobile phone

Heads versus mobile phones

If 18% of Germans wear helmets while riding a bicycle but 91% of Germans use protection for their mobile phones, one could argue that mobile phones are more important to the German population than their brains. I know this is bold, but it also shows that people do not always behave rationally. I like to think of my partners and myself belonging to both cohorts, the ones wearing a helmet on the bicycle and seeking protection for their mobile phones. I am convinced many of the non-helmet-wearing cyclists would change their behaviour if they knew about this comparison. (By the way, the behaviour is probably the norm also in other Central European societies. As it happens, I just had the statistical data for Germany at hand).

Strategy; a piece of advice or two

Now, when you follow a strategy, especially if it is someone else’s strategy, i.e. your coaches‘, consultants‘ and investment advisors‘, ensure you thoroughly understand it. If markets move in the right direction and the strategy works, start questioning it (ex-ante), imagining a potential turn in the market and how your strategy would work long-term. If you feel uncomfortable with it after that, you may want to change it. Most people start questioning their investment strategy once the market has already moved against them for some time (ex-post). If you think about changing the strategy, once the market has moved against you, you have probably already paid the price. At that moment, you would rather have to think about a potential rebound; you may, of course, still want to ask yourself if your strategy is the right one to take advantage of a rebound.

Critical success factors

So what are the critical success factors, you may ask? There are probably many; however, at Incrementum, we only offer one type of mandate for our private clients. We are entirely geared to cashflows. You know, Ladies and Gentlemen, if you ask successful entrepreneurs and private investors about their secrets of success, they will all mention at some point that they look very closely at net free cashflows, which is precisely the principle we follow with our private clients. Short-term volatility is much less critical and scary if the portfolio yields regular cashflows that can be reinvested, regardless of the performance of the underlying stocks. Warren Buffett loves value and cashflows. This may be boring but very effective in the long run. Why would anyone choose a different strategy since it has proven to be successful for such a long time? Anyway, besides finding the right companies to invest in, investors must stay invested. Because If one is not invested, one is, of course, not subject to short-term volatility, but this comes at the price of not receiving any cashflows and not taking advantage of any potential price appreciation.

Yes, Ladies and Gentlemen, investing needs a small quantity of stamina.

Please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, joy!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

Year-end competition

Ben asked me about Incrementum’s partners‘ positions in the year-end competition. I finished second and had my numbers published last spring; there is complete transparency. However, my partners did not participate. The year before, my partner Hans participated, but in 2022 he was too busy making money for our investors and this he did! Now back to the competition. I usually finish more or less among the first three. This year as mentioned, I finished second. When I was in the first place, I sent the silver coin to the person in second place. This happened roughly four or five years ago when my friend from University, Andreas, received the coin.

Little secret

The question is, how do I finish within more or less the first three regularly? Ok, let me tell you a little secret. It is because I orient myself at the futures prices and keep away from speculation and daily noise at the start of the year-end competition.

Futures prices

All the buy- and sell-side participants‘ know-how of an entire market is reflected in those futures prices. So, for example, Brent crude oil was trading at 125 in March 2022, but the futures contract for December stood at 86, which meant that even producers, the largest oil companies on the planet, did not believe that oil would finish the year at 150. Otherwise, they would not sell their products at a much lower price in a forward market. Alternatively, while I am writing this, the price for one ounce of gold in December 2023 is trading at 1’977. So what is the rationale for coming up with a price estimate of, let us say, 2’463.29? It does not make sense when currently, even the largest gold miners are happy to sell their production forward in December 2023 for 1’977. Of course, futures prices fluctuate heavily, a little less at the long-, yet more at the short end. Still, they are always worth looking at as one indication of several.

Psychology

Humans have a bias toward overweighting short-term events. When investing, this is not always very helpful. Moreover, we are awful at admitting mistakes. We absolutely hate being caught wrong. Even after years of underperformance, we keep holding on to our views because our ego wants us to be right more than anything else, even more than make money. Lastly, we love being told what we want to hear. This is why we prefer to read what confirms our view rather than reading stuff challenging it. You know what? That makes me happy because it offers opportunities. I am always trying to challenge my views, which is hard, and I admit I am not very good at it. Nevertheless, it sometimes works, and I hope to improve with age.

Interview

The following link leads to an interview I gave to «Executive Global» I thought you might like it:

The Swiss Banker – Incrementum

Enjoy the read, Ladies and Gentlemen!

Please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, joy!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

Finally, and once again, the sleepless nights are over; time to declare our year-end competition winner.

Like every year, the data stems from Finanz und Wirtschaft (fuw.ch).

Gold

According to the above source, Gold closed the year at USD 1’824.56, in negative territory for the second consecutive year, despite spiking inflation. A few of my readers were hoovering around USD 1’850; however, most were far too optimistic. Dario’s estimate came in at USD 1’834 and therefore was the closest. Well done, Dario and many thanks for participating!

Brent Crude Oil    

According to the above source, Brent Crude Oil closed the year at USD 83.09. However, the participants were too bullish on Brent Crude Oil, with estimates going up to USD 160. The closest call in Brent Crude Oil came from Mark with USD 84. Well done, Mark and many thanks for participating!

S&P 500:         

According to the above source, the S&P 500 closed the year at 3’849.28. Almost every year, my readers are far too negative for equity markets; I wonder why this is the case because, statistically, there is no better way to invest than in equities. Anyway, the lowest bid for the 2022 year-end competition for the S&P 500 came in at 1’881. The closest call in the S&P 500 came from Marius with 3’812 points. Well done, Marius and many thanks for participating!

The Winner 

The winner of the Incrementum 2022 year-end competition and thus of the one-ounce Silver coin is John. John is a long-term reader of Stefan’s weekly, writing back to me regularly and sharing interesting views and knowledge! Congrats, dear John, well done!

Most probably, there will be another competition in 2023.

Please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

Ladies and Gentlemen, I wish you an excellent start to the year, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

The final days of December have arrived; in Liechtenstein and Switzerland, the cold and some snow has covered the countryside and mountains. Therefore, this is the time for me to thank you for your thoughts, insides and challenging conversations.

Merry Christmas

I wish a merry Christmas to all of you and your loved ones and a happy and prosperous and, to some extent, exciting New Year! I will send out the result of our year-end competition at the beginning of 2023 and have the one-ounce silver coin delivered to the winner.

Ladies and Gentlemen, take care, stay healthy and enjoy a calm and peaceful year-end.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

My last Stefan’s weekly on cryptocurrencies versus fiat currencies led to questions, suggestions and speculations. Many thanks, Ladies and Gentlemen, for your active participation in this.

Cryptocurrencies

One question that came up many times was if I could imagine Bitcoin going up to its former highs again. Quite frankly, I can imagine many things, also that the price for Bitcoin and other cryptos increases to or even above its former highs. Generally, the networks created over the blockchain can be of great use not only for transferring money and/or alternative currencies. However, as I mentioned last week, there are significant risks in the crypto space, which is why I do not invest in it for the time being.

Precious metals

Precious metals are, of course, and like cryptocurrencies, another non-productive asset class not producing any cashflows. Nevertheless, I feel much more comfortable holding gold and silver than cryptocurrencies. First of all, they are tangible and second of all, the concept of storing value in them, with all the sometimes extreme volatility we have experienced over the last decades, has been proven for thousands of years.
Maybe it is because of my age, or maybe it is because of «In Gold We Trust».

In gold we trust

Admittedly, Ladies and Gentlemen, I have a bias regarding precious metals. After all, we are the producers of the «In Gold We Trust» report, which is much more than a study about gold. It explains economic contexts and offers reasonably independent opinions on today’s economic and monetary policy facts. Thanks to the many graphic representations, complex issues can sometimes be conveyed uncomplicated, straightforwardly, and concisely. For our long-time readers, it builds on existing knowledge and develops it further. Nevertheless, the individual chapters are self-contained and can thus also provide new readers with a relatively easy introduction to the respective topic, and best of all, it can be downloaded for free directly from ingoldwetrust.report – Incrementum. For those who have not so far, check it out.

What I do not hope for

I was asked the following: «When the dust has settled, the smoke has cleared, all the asset bubbles burst, the U.S. and World Debt Clocks explode, gold prices finally reach $50,000 per OZ, and silver reaches $5,000 per OZ, what does that world look like?» I receive similar questions from different people from time to time, and my answer to those is always the same: «Not a very friendly environment. Large-scale civil unrest would probably be a consequence. Let us hope this will never happen. Not an environment I would like to live in.»

Ladies and Gentlemen

As always, please share your opinion with me, but please remember (instead of hitting the reply button) to send your messages to: smk@incrementum.li.
Many thanks, indeed!

I wish you an excellent start to the day, a great weekend, and a wonderful Advent season.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

Last week I wrote that I would come back to the beautiful quote in Ernest Hemingway’s  iconic book «The Sun Also Rises» or «Fiesta» in which his character Mike Campbell is asked how he went bankrupt, and his answer is:

«Two ways. Gradually, then suddenly.»

Fiat Currencies

Often I am asked why fiat currencies are called fiat currencies. I found this relatively concise definition by Investopedia (Investopedia: Sharper insight, better investing.). Fiat money is a government-issued currency not backed or only partially backed by a physical commodity, such as gold or silver, but rather by the government that issued it. Thus the value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government. Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, and other major global ones. The term „fiat“ is a Latin word that is often translated as „it shall be“ or „let it be done.“ Thus fiat currencies only have value because the government maintains that value. The national economy of the issuing country backs them.

Cryptocurrencies based on the example of Bitcoin

Like many other cryptocurrencies, the idea behind Bitcoin is that of a currency not linked to the monetary policy of any national economy and with an intrinsic anti-inflation mechanism built into its DNA, in which the maximum number that can be mined is capped at 21 million. Furthermore, transfers from one Bitcoin holder to another are possible at no cost 24/7 as long as there is electricity and internet. Last but not least, the word «crypto», which can be translated as «hidden» or «secret», means that owners of cryptocurrencies can stay anonymous while using them to purchase things or execute transfers for other reasons.
However, like most cryptocurrencies and as mentioned above, Bitcoin is not backed by any issuing government or anything else, really. This means Bitcoin has no intrinsic value in the traditional sense. In addition, until today, we, as the public, still do not know who invented and coded Bitcoin. Satoshi Nakamoto (Satoshi Nakamoto – Wikipedia) is the pseudonym for the person or group behind the development of Bitcoin. Finally, because Bitcoin is not a productive asset, it can only increase in price if someone is willing to pay a higher price than the current owner.

Crypto trading

As Ben Hunt from Epsilon Theory put it the other day, Crypto trading has a much laxer regulatory framework, especially regarding what would be considered insider trading and material, non-public information in the stock and bond markets. There is probably a reason that many of these crypto trading shops are based in Asia and the Caribbean.

Conclusion I

There are some undeniable positive features of cryptocurrencies, and there are risks. I wrote in «Stefan’s weekly» long ago that inflation is limited within many well-known cryptocurrencies because mining is capped. However, the issuance of new cryptocurrencies is not capped and may have an inflationary effect on the entire sector. According to Coin Market Cap (Cryptocurrency Prices, Charts And Market Capitalizations | CoinMarketCap), 21’908 exist today, much more than I would have thought.

Investment decision

Any investment decision comes down to anyone’s personal asset allocation principles and risk appetite. Make sure you know how much risk you want to take and how much risk you can take.

Conclusion II

Suppose you feel like «investing» in Bitcoin, not knowing who is behind the codes, understanding that there is no intrinsic value or tangibility, yet, very high volatility, and you still see enormous upside potential because it represents a limited «good» and is not linked to any national economy’s monetary policy, then maybe you want to take a shot at it.

Conclusion III

The FTX collapse struck many investors. Today they can share Mike Campbell’s experience of going bankrupt in two ways, gradually and suddenly. Greed and fear are part of the game and will always be. Think about it!

Ladies and Gentlemen

As always, please share your opinion with me, but please remember (instead of hitting the reply button) to send your messages to: smk@incrementum.li.
Many thanks, indeed!

I wish you an excellent start to the day, a great weekend, and peace above all!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

In his iconic book «The Sun Also Rises» or «Fiesta», Ernest Hemingway’s character Michael Campbell (Mike) is asked how he went bankrupt, and this is his answer:

«Two ways. Gradually, then suddenly.»

Brexit

In 2018 I was asked to share my view on BREXIT, which led to an article in the summer edition of the magazine « Global Executive ». One of the key messages was the following:

«In my view, one of the biggest risks is that the Bank of England will flood the market with money to offset the effects of an opaque business investment climate that will certainly reign until the negotiations between the U.K. and the E.U. bring clarity and that this flood of money will not only weaken the British currency but will lead to inflation and eventually backfire at British consumers.»

Foreseeing the future

Obviously, I cannot foresee the future; it was just common sense. The sterling lost about 40% of its value, the Bank of England flooded the market, and inflation is staggering; average British consumers are suffering. Nevertheless, I can imagine that there is potential in the U.K. Some great companies have been hammered down, and I would not be surprised to see at least a market rebound.

Link

If you feel like reading the full text, please feel free to click on the link below:

https://www.incrementum.li/wp-content/uploads/2016/08/Life-after-Brexit-Executive-Global.pdf

Next week

Next week, Ladies and Gentlemen, I will come back on Mike Campbell’s quote «two ways. Gradually, then suddenly».

Ladies and Gentlemen

As always, please share your opinion with me, but please remember (instead of hitting the reply button) to send your messages to: smk@incrementum.li.
Many thanks, indeed!

I wish you an excellent start to the day, a great weekend, and peace above all!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li