Autor: Stefan Markus Kremeth

Good Morning Ladies and Gentlemen,

My job is to make money for our clients. I do this by investing in capital markets, i.e. managing our clients‘ capital in a volatile environment and in line with our clients‘ mandates. I love managing assets. It is an exciting job that allows me to read books, research, newspapers, etc. and listen, and talk to interesting people.

Just another Job; no Art

However, Ladies and Gentlemen, managing assets is just another job; no art, just another job. A job that demands considering many different factors, acknowledging that the picture will never be complete and still having the guts of taking investment decisions for other people’s wealth.

Today’s Challenges for Asset Managers

Exogenous factors are increasingly determining stock market activity. While a relatively stable political environment and a stable (albeit escalating) monetary policy have boosted the economic prospects of private households and companies in recent years, political and monetary policy disagreements are now increasingly influencing financial markets. Moreover, next to the war in Ukraine, Central Banks seem less and less able to fulfil their mandate of maintaining purchasing power. As a result, I think we are entering a period of less return with more risk. Due to the mentioned political and monetary policy disagreements, I expect inflation to remain above the central banks‘ targets for somewhat longer than anticipated.

Today’s Chances for Asset Managers

Where there are challenges, there are chances. I think it is fair enough to assume that Central Banks will only approach inflation with significant interest rate hikes as long as homeowners, pension funds- and financial market participants do not come under massive pressure. This, I think, is especially true for the U.S. because otherwise, consumption and therefore the economy will suffer big time. Classically balanced portfolios between bonds and equities are not good enough to bring positive returns in an environment like that. If low, if not negative real interest rates remain, portfolio structures will have to be aligned accordingly. The question is, how? That, Ladies and Gentlemen, depends on the personal perception of risk, personal risk appetite and personal risk capacity. I have always liked investing in production factors and positive cash flows. Therefore equities have always made up the bulk of my investments, and today, I would add cash and precious metals (preferably in the form of cashflow-positive miners).

Never forget

Investing, by definition, is for the long term. Therefore, do not try to find the right timing; very few people are good at this and can thus do it successfully in the long run. I know I keep repeating myself; please accept my apologies for it.

One last thing

If you are investing and want to continue investing but can barely handle the current, primarily negative, newsflow, you may want to stop reading newspapers too often, stop watching the news too often, and stop paying too much attention to the negative newsflow on your social media accounts.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li

Many thanks, indeed!

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

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,

Many thanks to all who have participated in last week’s quick competition. I received many answers, and most participants guessed Hobbes‘ „Leviathan“; one reader mentioned Nietzsche’s „On the Genealogy of Morality“, another one „Jenseits von gut und böse“ by the same author and another one Arthur Schopenhauer’s „Die beiden Grundprobleme der Ethik“. Those are great books, however, were not the names I was looking for, but now I do not want to keep you in suspense any longer and reveal the solution to the riddle.

…and the Winner is:

So the correct answer is: „Der Schwarze Obelisk“ from Erich Maria Remarque, and the winner of the one-ounce silver coin is Rainer. The book is worth reading, and it sort of fits into today’s geopolitical and geoeconomic setting. Thanks again for participating, and congrats to Rainer; the coin was posted on Wednesday.

This Time is Different

Very bluntly, Ladies and Gentlemen, if this time is no different to other times, stock markets need to go up eventually again. Market participants can not handle uncertainty; that is why markets are volatile and in negative territory this year.

Excerpt from a Message to our Private Clients

Have a look at an excerpt from a message to our private clients: «War in real-time also leads to nervousness among investors. The SMI stands at -13%, the DAX at -18% and the Euro Stoxx 50 at -19%. However, the fear of an overheating economy has faded with the war. Currently, it looks more like a recession and a so-called bear market. In a bear market, indices fall or no longer rise sustainably. The average bear market lasts between 12 and 15 months (depending on the source).»

«Therefore, the conclusion would be to sell all shares and wait for the end of the bear market and then get back in. The problem with such a strategy is that events like an end to the war in Ukraine, a possible overthrow of the government in Russia, a diplomatic solution with both warring parties saving face are difficult to predict. Moreover, even during the horrible war in Ukraine, as during the pandemic of the past two years, the companies in your portfolios are paying regular dividends, some of them even higher than a year ago, none of the companies has announced a dividend cut and this even though many sectors of the economy have suffered due to the pandemic. The past 120 years have impressively proven that equities have been the best investment instrument over the various cycles and that a sustainable return could be generated with them. Unfortunately, this sustainable return came at a price in enduring volatility. Against the backdrop of dividends flowing even in crises (and the resulting compound interest effect), I tend to hold positions, but understand if investors no longer like to endure the pressure of volatility.»

Current Valuations for the Swiss Equity Markets

Since mid-2020, valuations have tended to decline. According to Bloomberg data, the SPI P/E ratio was around 21 at the end of 2020; at the end of 2021, a figure of 16 was measured, and currently, a level of 13.5 is on the books. This means that the valuation of the SPI is below the long-term average of 16. At the end of 2022, the analyst’s consensus expects an average P/E of almost 18. Whether this will come to pass remains to be seen, and we all know that most analysts do a terrible job at forecasting, not that I would be any better at it. However, long-term data shows clearly that equities outperform about every other asset class on the planet in the long run.

Warren Buffet

In May 2018, Warren Buffet told in a CNBC interview: “The best single thing you could have done on March 11, 1942 — when I bought my first stock — was buy an index fund,” if someone invested $10,000 in an index fund back in 1942, it would be worth $51 million today. 1942 was in the middle of WWII, Ladies and Gentlemen.

Clooney and Kremeth

„Equities. What else?“ (I admit; I borrowed from George and enhanced),

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li

Many thanks, indeed!

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

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,

«Human beings are only there to live the short period between birth and death with as much egoism as possible.»  Do you know the author of this sentence and the respective book, and the book’s name?

Intriguing thoughts

In order to prevent more significant harm to the people of Ukraine, the neighbouring countries and even the rest of the world’s population, I think it is worthwhile for global leaders to put their egos aside. I do not think many people want this war; let us end it.

Limited Benefits of Sanctions

Multiple studies show that the benefits of economic sanctions are elusive; the costs mostly are not. Furthermore, I believe that sanctions levied against a state with limited democratic processes usually affect less the ruling upper class than large parts of the population already suffering from repression, which in addition has to bear the economic consequences of the sanctions.

Lose-Lose Situation

Ladies and Gentlemen, we are in a lose-lose situation. Further escalation of the situation can not be in the interest of the world population.

Saving Face

If the political nomenklatura in Russia is not offered the possibility of saving face in the event of an exit from belligerent actions, then at present, I cannot imagine why they would be inclined to end the war. I hope the political elite of the West will consider this.

Next week

Next week I would like to look at the meaning of «this time is different» in the context of financial markets.

Competition

To end today’s Stefans’s weekly on a slightly positive note, I am happy to offer a one-ounce silver coin to the first reader writing back to me the correct answer to the question mentioned at the beginning of today’s Stefan’s weekly.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

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

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 Prussian general and military theorist Carl von Clausewitz once said:  „The greatest enemy of a good plan is the dream of a perfect plan.“

Your Thoughts

In my last weekly, I asked you to share your thoughts on the current political crisis, and I also asked how you would invest your money in a situation of such great political tension. I received many emails. Thank you very much for all your messages, comments, charts, videos and links.

Many people rightly pointed out that gold was doing its job as a hedge against a crisis. This is true; gold performed very well and decorrelated against the large indices this year, and as one would expect, yesterday during the bounce in the U.S. markets, profit-taking in gold was setting in. On the other side of the spectrum, we had Bitcoin disappointing. No decorrelation to the large indices whatsoever. On the contrary, Bitcoin correlates strongly with the S&P; instead of a hedge, it looks more like a proxy, a proxy on steroids, I would say.

I very much liked a short and snappy comment by Adrian, who wrote: «keep it simple, invest in value». Yes, I agree, I think, value, regular dividends and time can do wonders.

My View

What do you expect? Ladies and Gentlemen, the price you pay for return is volatility; if you want to receive a return, you have to accept paying the price. Nevertheless, time usually helps. Volatility curves tend to flatten out over time. Of course, at the time of a crash, of a market setback, volatility still leads to sorrow, but it may offer some comfort to look at very long charts and see that even high short-term volatility loses its significance in the long term. This most probably means in reverse that If you want or need a low volatility investment, the price you pay for it is a somewhat lower return.

If you have an investment plan, question it regularly; no matter if markets are going up or down, question it and if you are happy with your investment plan, stick to it because as Carl von Clausewitz probably correctly said: „The greatest enemy of a good plan is the dream of a perfect plan.“

One Last Comment

Looking at the news and listening to the global political elite, I get the impression to see a fair amount of stupidity coupled with ideology. A mix I cannot think much of. Who elected those guys? Next time when voting, please ask yourself how the person you are to elect will represent your ideas during a crisis.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, 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 great Wayne Gretzky once said: «I skate to where the puck is going to be, not to where it has been.»

U.S. Private Investors

Some weeks ago, I pointed out that U.S. private investors‘ bullish expectations were on low levels. Guess what? This Wednesday, that number dropped again. The number now stands at 19.2% versus 24.4% in the previous week. 19.2% represents a new trend low. Readings below 20 are rare. This was only the case at the beginning of the 2015/2016 bear market in the past five years.

Ukraine Crisis

The Ukraine crisis is determining the current price trend on the stock exchanges. Almost all other developments are being pushed into the background. Among traders, a famous saying goes: «political markets have short legs». „Short legs“ may mean, in the event of an actual outbreak of war, that the adjustment to the new circumstances would take place quickly, in the form of significantly falling prices. However, the first buying opportunity would occur within a few days. If, on the other hand, a conflict can be avoided, at least for the time being, there would be a relief rally due to an already built-in war premium. A positive diplomatic solution would come as a surprise, be unexpected, provide relief, and lead to higher prices.

Wayne Gretzky

In that situation, what would Wayne Gretzky do? Would he buy into the market, expecting it to go up, assuming a diplomatic solution to be reached? Or, would he reduce his holdings, assuming further tensions escalating into a war and thus falling markets?

What do you think?

Do you think global leaders are capable of finding a diplomatic solution, or are they sacrificing the Ukrainian people to their unclear visions? Furthermore, how do you invest your money in a situation of such great political tension? Please let me know, because I would love to be able to do it the Wayne Gretzky way and skate to where the puck is going to be!

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, 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,

When everything seems so obvious, you want to reconsider.

Potentially Crowded Trade

Sometimes things seem so obvious, «the really smart» people point in one direction, media and social media confirm the view, the trade looks very promising, you are convinced to outsmart the market. Ladies and Gentlemen, a good trade may begin like this, a bad trade as well.

Base Effect

Over the last twelve months, inflation increased steeply, driven by a base effect of higher commodity and energy prices. While I believe a similar increase cannot be expected for this year, a look at the long-term charts, including the core rate (excluding food and energy), shows clearly that U.S. inflation has reached the breadth of the U.S. economy. On the other side, inflation has not (maybe not yet) reached the core area in the Eurozone. Moreover, although energy prices were rising, the core inflation rate even fell slightly in the Eurozone.

Crude Oil

Crude oil plays a significant part in the energy price equation. Yesterday, the WTI spot price hit USD 91.64; this morning, March futures are trading slightly below USD 90. As a trader, whose market comments we follow regularly, pointed out to us, looking at August delivery, prices go down to USD 83.24 already, and whoever can wait until December buys the barrel at USD 79.90. The point I want to make is that if crude oil plays a significant part in the energy price equation and the rise in energy prices led to a base effect that fuelled inflation; the opposite may come true as well.

What if

What if, in the same time frame, supply chain problems recede somewhat and freight rate prices for container ships ease similarly to those for bulk container ships? Would we not see inflation rates come back?

Bond Short

Moreover, if inflation rates come back slightly, maybe the Federal Reserve would refrain from increasing the U.S. base rate six times by 0.25% in 2022 as it is currently priced in by the market, and this Ladies and Gentlemen would be a surprise to market participants. Today’s speculation still goes as far as 12 increases.

Now, to me, «short bonds» is a crowded trade, and I would keep my fingers off! Currently, the trade looks still so obvious. Too obvious, I think, this is why one wants to reconsider. Once market participants change their inflation outlook slightly and predict a minor lower inflation picture for the end of the year, a forced covering of a short position in the bond market (in any market really) may lead to losses.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, 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

Dear Ladies and Gentlemen,

Once again I would like to thank you for all your comments, and as I did answer to Bob, who asked me if I was referring to the «calm» in my last weekly as the calm before the storm, I, unfortunately, do not know. How should I? I cannot foresee the future. But, as an investor, it helps to stay calm; at least, that is what I believe in.

January

January 2022 was not necessarily a good month for investors. Most traditional asset classes finished the month in the red and looking at the level of uncertainty in various fields, I can easily imagine the remainder of 2022 to offer a very bumpy ride, and yet, and as I have pointed out in my last weekly, it is all part of the game.

Catastrophe or the End of the World

Look, Ladies and Gentlemen, even if one wants to conjure up the ultimate crash, the collapse of the financial system, some other catastrophe or the end of the world, so often, these things do not take place. Yet, the doomsday scenarios come up all the time, again and again with rewarmed arguments.

Trading successfully

If you are a gifted trader, you may use volatility in your favour and buy at low prices and sell at high ones and trade your portfolio successfully. Trading news-flow, market-noise, fear and/or greed can be a strategy; however, very few people are successful at trading in the long run. On the other hand, substantial investors like pension funds are very often successful in the long run by buying and simply holding on to their positions very, very long-term. They rake in dividends and reinvest and thanks to the effect of compounding their returns grow exponentially. For the average investor, long-term investing beats market timing. Therefore, most successful investors pursue a long investment horizon, even if this means holding on to your positions during tough market conditions.

Stats show a clear Picture

A look at past returns shows very clearly that the long-term pays off. Those active in the market long enough survive slumps and are compensated with attractive returns. Alternatively, even better, they use a crash to buy up more of the same at favourable prices. As a result, short-term fluctuations degenerate long-term into what they are: unnecessary noise.

Quality

Quality stocks may be boring at times, but they usually keep paying dividends and, most importantly, let you sleep in peace. Long-term investments in quality assets is what I am striving for.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, 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

Dear Ladies and Gentlemen,

Many thanks for your feedback on my last weekly mail. I received many messages from concerned investors and emails from „opportunity hunters“ as well, happy to buy into stocks that were trading on unattractive price levels for a long time and that suddenly seem attractive after the recent correction.

Stats

It is always interesting to look at some statistics. Stats may offer a slightly different perspective to what we see when looking at the screens and reading research. For example, the bullish expectations of U.S. private investors rose slightly to 23.1% in Wednesday’s survey from 21.0% in the previous week. This is still a very low number, and sentiment among private investors in the U.S. remains palpably pessimistic. According to this number, fear was only higher during the GFC and the bear markets of 2002/03 and 1990/91. In other words, looking at that very number, a lot of fear is priced in. I would never base my investment decisions on only one number and yet it is an interesting one to me.

Intrinsic Auto-Correction

In an email conversation with one of my readers over the weekend, I mentioned that I believed that financial markets have an intrinsic auto-correction feature. Unfortunately, that auto-correction quality was halted for some time thanks to the massive government or central bank interventions ever since the GFC. Still, it seems that at least for a short moment, the auto-correction feature will do its job again, and this will undoubtedly cause pain to some market participants, especially to investors working with leverage. Nevertheless, it also offers excellent opportunities to others, especially those with cash at hand, to invest in great quality stocks that have been hammered down in recent days and weeks.

Fascinating

I have been looking at financial markets for over 35 years and am still fascinated to see that a comment by a central banker and/or a politician can cause financial markets to move more than a few percentage points in one or the other direction. The cumulated productivity, work, successes, failures, etc. of billions of workers and hundreds of thousands of companies globally may be getting blown out of the investment equation because of a simple statement. This, Ladies and Gentlemen, is fascinating and, at least to me, too often out of proportion.

Calm

If you hold a diversified basket of quality investments and stick to your investment principles, and your investment goal lies not necessarily in instant gratification, you probably do not have to worry too much. The economy and financial markets come and go in cycles; maybe unpleasant at times but nothing to worry too much about; it is an integral part of it, whether we like it or not. A little calm may do wonders.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, 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

Dear Ladies and Gentlemen,

Many thanks for all the feedback I received for my last weekly mail. There were a few typos for which I apologize. It seems I was rather tired when I went through my notes.

Short-term thinking or long-term investing

Ladies and Gentlemen, from time to time, I get the impression that some of my readers and probably many, many investors who are not or not yet part of my readers are somewhat uncertain about the time horizon of their investments. However, I believe one of the most crucial factors for investors is to have a clear picture of the time horizon of their investments. It is utterly important not to make the mistake of mixing timeframes. Investing in value, harvesting dividends, and exploiting compounding effects need time, usually much time. On the other hand, investing in aggressive growth companies needs nerves of steel and sometimes selling quickly and taking profits. These are two different approaches. Neither is good or bad, right or wrong; they are just different.

What is the issue, then?

The issue starts when investors expect short-term returns from long-term strategies. Or low volatility from short-term opportunistic trading approaches. This is not easy to achieve, and I highly recommend that every investor have a clear picture of any investment’s time horizon.
Of course, one may have a somewhat mixed approach, as long as the investor does not expect a low volatility global food producer to show the same short-term spectacular returns the stocks of, for example, game stop at times delivered last year. Alternatively, on the other hand, if one invests in game stop stocks and expects the same low volatility features as in Nestle, disappointment will probably arrive without delay.

Precious Metals Mining Stocks

Let me quickly share something with you before we close today’s weekly.

We hold a small position in a precious metals mining ETF listed in Canada for our private clients. Now, the ETF is distributing regular dividends (you remember, I just cannot get enough cash flows) and looking at the dividend for the last quarter of 2021; I was impressed to see it going up nicely. So I suppose mining precious metals is currently a reasonably good business even if gold’s performance disappointed last year. Just imagine what would happen if the gold price went up by 10% or 20% and looking at the present political tension we experience, I can fantasize (even if my preferred scenario is quite a different one) inflation to increase further. Because never forget; wars and disputes have always been inflationary price drivers in the past.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day, 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