Autor: Stefan Markus Kremeth

Dear Ladies and Gentlemen

I receive a fair amount of messages from readers puzzled by the performance of equities markets. The arguments are similar, high valuation, Covid-19 crisis not priced in yet, general public suffering from lockdowns, etc. While I understand the arguments, the reality is much more about perception. Let me elaborate quickly:

Financial Markets

Financial Markets do not necessarily move based on what analysts regard as being fairly priced but are mainly driven by supply and demand. If billions of multiple currencies are pumped in financial systems locked into a zero- or negative interest „investment-prison“, investments will seek the seemingly best return for the seemingly lowest risk. However, the seemingly best return for the seemingly lowest risk always remains a question of perception, and that perception may change.

Perception; Definition by Cambridge Dictionary

According to the definition by Cambridge Dictionary, the word „perception“ means: „belief or opinion, often held by many people and based on how things seem„.

The critical words in this definition are „belief“, „opinion“ and „seem“. Perception is not necessarily about reality; it is about what seems to be the reality; it is about opinion and belief.

The market is always right

„The market is always right“ is one of the first things a young investor will learn from older investors. There are thousands of quotes defending but also renouncing to this theory.

I often get the impression that some market participants underestimate the power of perception by large investment cohorts and at the same time are overestimating their own investment knowhow. Investing sometimes also means going with the flow, the so-called market momentum. However, if this means investing against one’s principles, Ladies and Gentlemen, I would always recommend taking money off the table. Gorden Gekko’s „greed is good“ is probably not the right strategy for everyone. Investing has to feel right; otherwise, it will very quickly become a rather stressful exercise.

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 a good start into the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

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

Today I am pleased to share some thoughts from my friend Bob on fossil versus renewable energy with you. Please feel free to write back to me, and I will be happy to forward your comments to Bob. Please enjoy the read:

„Some day soon our rich societies will collapse. 

GDP Gap:

Robert Solow found that „labour + capital“ did not explain GDP growth. It left a gap.  Robert Ayres found the gap – energy consumption.  GDP  correlates perfectly with energy consumption: more energy consumption – more GDP growth, and vice versa.

Where to from here, how do we protect ourselves?  Is a chancy pursuit of high stock returns the answer?  With insider knowledge, supercomputers, and luck, it might be.  For private investors, I would say not.

Isaac Newton:

Isaac Newton was governor of the Bank of England.  He bought South Sea Company shares and got rich selling them before the top. Then he suffered „fear of missing out“ bought back in, the bubble burst, he lost everything and died pennilessly.  Furthermore, Newton was a genius.

Governments and their „renewables“ paymasters are telling you that fossil fuel energy is optional.  Germany’s Energiewende is an experiment currently suggesting that idea is false.

You can live without fossil energy, billions do.  In the UK energy consumption per capita is approx 125 kgoe/a (kilograms of oil equivalent per annum). In Yemen, it is just 13. Yemeni lifestyles are not like the UK’s, for a good reason.

Wealth:

„Wealth“ is not one single thing, and is neither currency nor promissory notes.  Primary wealth is coal in the ground, iron ore, good land.  Secondary wealth is what you can make with them.  Tertiary wealth is currency, which is like a will-o-the-wisp.

Indeed in these times, caution is advisable. Increase resilience, not risk.“

Your Ideas and Thoughts:

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 a good start into the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

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

„Tyrants fear the poet – now that we know it – we cannot blow it – we owe it – to show it – not slow it – although it – hurts to sew it – when the world – skirts below it.“  by Amanda Gorman

Dear Ladies and Gentlemen

After four years of President Donald Trump, I would like to share some economic data with you today. All the numbers I am sharing with you are reflecting the situation as it was at the beginning of Mr Trump’s presidency on January 20, 2017, on January 20, 2020, i.e. before the beginning of the pandemic and at the beginning of Mr Biden’s presidency on January 20, 2021. I hope you will appreciate the comparison.

On January 20, 2017, GDP growth compared to the previous year stood at 1.7%, on January 20, 2020, at 2.2% and January 20, 2021, at -3.5%.

On January 20, 2017, the unemployment rate stood at 4.7%, on January 20, 2020, at 3.6% and on January 20, 2021, at 6.8%.

On January 20, 2017, the base rate (upper bound) stood at 0.75%, on January 20, 2020, at 1.75% and on January 20, 2021, at 0.25%.

On January 20, 2017, the ten-year treasury interest rate stood at 2.5%, on January 20, 2020, at 1.8% and on January 20, 2021at 1.1%.

On January 20, 2017, inflation compared to the previous year was at 2.1%, on January 20, 2020, at 2.3% and on January 20, 2021, at 1.4%.

On January 20, 2017, government debt stood at USD 19.9 trillion, on January 20, 2020, at USD 25.4 trillion and on January 20, 2021, at USD 27.7 trillion.

On January 20, 2017 trade deficit (numbers from November of the previous year) stood at USD 45.2 trillion, on January 20, 2020, at USD 43.1 trillion and on January 20, 2021, at USD 68.1 trillion.

On January 20, 2017, income tax (highest income class) compared to the previous year stood at 39.6%, on January 20, 2020, at 37% and on January 20, 2021, at 37%.

…and just for the fun of it; on January 20, 2017, the oil price stood at USD 52.42, on January 20, 2020, at 58.34 and on January 20, 2021, at 52.36.

I think everyone can draw their conclusions from these figures, and I do not want to judge, but, indeed, the economic growth of the first three years of the last administration was massively financed by debt accumulation, which seems to be an everyday thing ever since the Great Financial Crisis and unfortunately not only limited to the U.S.

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 a good start into the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

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

Dear Ladies and Gentlemen

I receive many emails from readers who ask me why gold is not going up, but equities are. The question goes along the lines that amid a pandemic, politically unstable times in the U.S. and global lockdowns, the economy will be hurt and central banks are printing and will print like there was no tomorrow, which eventually should lead to inflation.

Gold did perform relatively well in 2020; therefore, I do not see why people would be unhappy.  Moreover, yes, some equities performed well, but many did not. The fact is that investors were panicking in spring but got accustomed to the situation of the pandemic and today we see that global economies did far better than initially expected during the first wave of the covid-19 pandemic. The question remains, though, if, in the upcoming months, the opposite effect will occur. Investors seem almost careless these days and may somewhat underestimate the current third wave and its economic consequences.

However, one essential factor for the boom in risk assets so far was the central banks‘ money printing and most G-20 governments massive economic stimulus packages. The introduction of such monetary base expenditures favours what we would call an asset price inflation, especially in risk assets. If you look at the price of cryptocurrencies, you will immediately see what I am talking about. If we take bitcoin as a proxy for risk assets in general or some of the Nasdaq highflyers, we can make out a little frenzy; some would even call it a big frenzy. How else would you justify that a company selling 500’000 cars per year would have a market cap higher than all other car manufacturers on this planet together?

Ladies and Gentlemen, I would not be surprised to see weaker markets in the days and/or weeks after Mister Bidens‘ inauguration. Not because of Mr Biden but because I have the impression there is some hot air in the markets. Well, and who knows, maybe we will finally see, after predicting it for 12 years now, some consumer price inflation (a weakening U.S. dollar may help).  And yes, I know what you are thinking, eventually, even a broken analogue watch will show the correct time twice a day. Ashes over our heads…

One thing I would like to add though, those who predict the U.S. government to go belly up will be disappointed also in 2021. Never forget what the former and iconic Fed’s chairman Alan Greenspan used to say: „the United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.“

Zero probability seems somewhat low, and out of principle, I can not agree to such an absolute statement; nevertheless, I too regard the probability of a U.S. default as very low.

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 a good start into the day a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

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

Dear Ladies and Gentlemen

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

The data stems from: Finanz und Wirtschaft (fuw.ch).

Gold:
According to to the above source, Gold closed the year at USD 1’898.75. A few of my readers were hoovering around USD 1’800 and USD 2’000, But only John’s estimate came in at USD 1’900 and therefore was the closest of all.

Silver :
According to to the above source, Silver closed the year at USD at 26.34. People were relatively bullish on Silver with estimates going up to USD 45. The closet call in Silver came from David with USD 26.91.

S&P 500:
According to the above source, the S&P closed the year at 3’756.07. People were quite bearish on the S&P, with most of my readers‘ estimates hovering around 2’000, 2’500. However, there were a few bullish ones with estimates between 4’000 and 4’500. The closet call in the S&P came from Felix with 3’750.

The winner of the competition and thus of the one-ounce Silver coin is Felix (nomen est omen). Congratulations! Felix won because he was one of the only ones foreseeing higher prices in Gold, Silver and in the equity markets. Most of the participants in this competition were bullish on Gold and maybe Silver but negative on equities as if it had to be an either-or, whereas Felix anticipated price increases in precious metals and the S&P. Well done!

Most probably there will be another competition in 2021.

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 a good start into the year, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

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