Autor: Dr. Stefan M. Kremeth

Good Morning Ladies and Gentlemen

”If a tree falls in the woods and there’s no one around to hear it,
does it still make a sound?”

Jesse Felder

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 third article in this series. In the previous two, we have attempted to define wealth using philosophical insights and to understand its essence by linking it to the nature of the human person.

Thank you all for reading them, submitting your questions, and sharing your points of view.

Today’s article will explore wealth from a cultural perspective through the lens of art and literature, specifically. As with the first two parts, Anton provided the text while I handled the editing.

If we are to take a purely metaphysical position, culture may be defined as what people do in time. However, if we try to be more precise, we will see that it is difficult to determine precisely what culture is. In part, this is because a culture contains tangible elements, such as buildings erected in a particular architectural style, paintings, books and songs, and intangible aspects like philosophical perspectives, political views, and moral considerations. Moreover, some of these aspects change as time passes, while others do not.

Therefore, rather than seeking a definition, it may be helpful to look for a mode of thinking about culture that helps to reveal part of what it is. The sculptor Alexander Stoddart articulated such a perspective well in a Ralston College interview. Stoddart sees culture as communion with the dead.

This is a beautiful way of thinking about culture because it enables us to understand an important truth- namely, that we are all one humanity; history has not ended for those who died long ago, while it keeps going for us today. Instead, history is going on for all – those alive and those resting. As such, culture can be understood to be a bridge between aeons through which generations of men and women lived, leaving – as we are leaving today too – their traces of how they lived and what they believed for posterity to contemplate and, hopefully, to understand. An essential part of this heritage that cultures leave behind is art.

Indeed, a powerful way to understand cultural landscapes is through artworks. Art serves an important function in the lives of individuals and of civilisations. On one hand, artwork enables people to express beliefs, values, aspirations, fears, socio-political relationships, and even economic and military events. In this sense, art’s function is some self-understanding, as the German philosopher Hegel argued in “Lectures on Aesthetics”. However, this is only part of the role that art has.

If they are truly works of art, they must lead us beyond ourselves. We can see this primarily in the sense of awe that they inspire in us: they invite us to meditate upon aspects of life other than ourselves. These different aspects can be a loved one, nature, our family and neighbours, or wealth and how it relates to others.

Of course, the world of art is very diverse. It includes poetry, paintings, music, literature, architecture, cinematography, and perhaps even clothing items. Wealth has been explored and represented in various ways across these art forms from ancient times to the present day. Let us go back to the edge of antiquity and take as an example Homer’s epic poems, “The Iliad” and “The Odyssey.” Both present wealth in multiple forms.

In “The Iliad”, two kingdoms go to war. The entire military and material might of these two realms is on full display, all their material wealth is on the line – and for what? For something of far more value than the Greek or the Trojan kingdom: for human relationships, ultimately for love. In this manner, Homer’s mythological poem tells us much about our understanding of wealth. We value material possessions but are ready to sacrifice them for the real wealth another person can give us through their love.

Moreover, throughout “The Iliad”, other forms of wealth appear. These include particular virtues, like honour, which the warriors significantly value, and that most constant and correct aspiration of all mankind: immortality. These notions do not reach their full philosophical potential because Homer did not have the theological insights or the metaphysical concepts we possess today. However, “The Iliad” contains them, reminding us that, since time immemorial, wealth has meant more than material possessions.

Similarly, in “The Odyssey”, the house of Odysseus is rich in possessions, but his wife and son are mourning because he was thought to be dead after he fought in the Trojan war. Once more, we see that wealth should include something more than material items, prestige, and political power, for Odysseus’ family was reputable and influential. Moreover, Odysseus struggles to return home to his family for a long time because that is what he values most; that is where his heart is and, therefore, where his treasure is.

Suppose we accept Stoddart’s view that culture is communion with the dead. In that case, we can bring forward the observations we have extracted from Homer’s work about wealth and apply them to our present day without losing their colour. Looking at the world around us, do we see anything fundamentally different? I would argue that we do not, yet much – so much – has changed since Homer wrote the poems.

One of the genuinely great insights from reading Proust’s “In Search of Lost Time”, aside from the interesting perspectives on memory and time and aside from the in-depth views of French society of the late 19th century – early 20th century, is the stark realisation that material wealth, even when surrounded by immense aesthetic beauty, is insufficient for the human heart.

In Proust’s work, all the luxury in the world becomes the mere floor of a large ballroom in which generations join in their own social and political dances, all, however, playing after the same tune – that of the pursuit of unchanging happiness, that is, of love. Fundamentally, nothing new was said by Proust other than what Homer said, and yet, how much has the world changed since the ancient Greek poet lived?

Of course, there is no shortage of books that deal with the theme of wealth. Throughout the ages, this subject has fascinated the minds of authors worldwide. Some of the titles that are worth mentioning include “Great Expectations”, “The Great Gatsby”, “War and Peace”, and “Middlemarch”. Nevertheless, the same dynamics will be found everywhere: wealth is never seen as complete or, in fact, beneficial when it is confined to material possessions; there ought to be (and there often is) something more valuable, namely, personal relationships.

Our culture today has nuances and, therefore, is somewhat different from what people have left behind. However, at its core, because what men and women seek does not change, our art will tell the same human story. If it is authentic art that we shall leave to posterity, it will place wealth within the same dynamics we have from Homer to Proust.

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

”Nvidia and Microsoft account for 15% of the S&P 500’s market capitalisation.”

Common Knowledge

When a government prioritises avoiding austerity measures over managing fiscal deficits, state expansion and the resultant increase in state deficits may become one-way streets. Nonetheless, Ladies and Gentlemen, it is essential to recognise that time is an expert at changing things, i.e. temporal dynamics can significantly alter any such trajectories.

To Make A Point

Perhaps it’s due to our work on the “In Gold We Trust” report, or perhaps it’s our general skepticism towards the ever-increasing government debt (to put it mildly), or simply our commitment to safeguarding our investors‘ purchasing power through various but coherent investment strategies, but I sometimes receive a range of intriguing messages about the “real facts” concerning the U.S. Federal Reserve System (and many other topics). Ladies and Gentlemen, we are neither flat-earthers nor pizza-gaters; we are a group of serious asset managers and economists dedicated to comprehending the global economic landscape and financial markets. For this reason, I feel compelled to share some clarifying information about the Federal Reserve System today, as there appear to be some misconceptions among some readers. What better time than now, during the ongoing Jackson Hole Economic Policy Symposium 2025 (taking place from August 21 to 23), which focuses on „Labour Markets in Transition: Demographics, Productivity, and Macroeconomic Policy“?

The Federal Reserve System

The Federal Reserve System serves as the central bank of the United States and is tasked with formulating and implementing monetary policy, consisting of the dual mandate of price stability and maximum employment. It is important to note that the Federal Reserve is not „owned“ by any individual or entity. Established in 1913 through the Federal Reserve Act, it was designed to function as the nation’s central banking authority. Its Board of Governors, located in Washington, D.C., operates as an agency of the federal government, reporting directly to and being accountable to Congress.

The Main Aspects of the Federal Reserve System

The Federal Reserve plays a crucial role in stabilising the U.S. economy by influencing money supply, interest rates, and inflation. The U.S. central banking structure has three key features.

Feature Number One

The first feature is its central governing board, the Federal Reserve Board of Governors, which establishes monetary policy, and the Federal Open Market Committee (FOMC), which manages open market operations and sets interest rates.

Feature Number Two

The second aspect is its decentralised network of 12 Federal Reserve Banks. I believe this is where some observers find confusion, as they mistakenly perceive the Federal Reserve as a private organisation. Each of the 12 reserve banks operates within its geographical area, or district, implements policies and provides financial services, and is incorporated as a separate entity with its own board of directors. Commercial banks that are members of the Federal Reserve System own shares solely in the reserve bank of their district and are subject to its regulations. It is important to note that holding shares in a reserve bank differs significantly from owning shares in a private company. Reserve banks do not operate for profit, and possessing a certain number of shares is, by law, a requirement for membership in the system. Furthermore, the reserve banks are obligated by law to transfer their net profits to the U.S. Treasury.

Feature Number Three

The third feature combines public and private elements because the Board of Governors, appointed by the American President and confirmed by the Senate, provides overarching guidance for the Federal Reserve System and supervises the 12 Reserve Banks. While the Board is accountable to Congress and testifies before it regularly, it is uniquely funded outside of congressional appropriations. Additionally, the Board submits a comprehensive report, i.e. the Monetary Policy Report, twice a year, detailing recent economic developments and outlining its plans for monetary policy.

Conclusion

I hope this simple explanation provides some clarity and facilitates a deeper understanding of the American central banking system. Oh yes, and I almost forgot today’s quote. How does it make you feel when you see that two companies account for 15% of the 500 companies‘ market cap that make up the S&P 500?

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

”Don’t gamble; take all your savings and buy some good stock, hold it until it goes up, then sell it. If it doesn’t go up, don’t buy it.”

Will Rogers

Europe’s difficult situation is home-made, and I think humanity is currently engaged in a significant experiment. Because in the Western world, particularly within “reasonably” liberal democracies, we lack a scientific control group. This absence stems from our collective deference to the directives of the American government, given its economic and military power, which is a somewhat understandable situation. Nevertheless, it leaves us without a means to discern our circumstances if we do not submit to these influences. However, at some point, I believe, Europe must cultivate a culture of debate that allows individuals to express opinions that may not align with the prevailing and often left-wing mainstream. The ongoing moralising and emotionalising of discussions is detrimental to the political discourse and seriously represents one of many fundamental challenges.

The U.S. Labour Market

Overall, tension in the U.S. labour market is rising, although it has not yet indicated a recession. Concurrently, the U.S. economy is experiencing a slowdown, as evidenced by the labour market data for July and the ISM services index. Initial jobless claims in the US increased from 218’000 to 226’000, while continued claims surged to 1.97 million, a new record high.

The Fed – Was I Wrong?

Some two weeks ago, I wrote: “So, if you seek my two cents on the matter, I believe it is reasonable to expect that the Federal Reserve will make no policy changes for the remainder of the year. As a result, I would not be surprised if interest rates remain unchanged during this period.” Given the context of the U.S. labour market and the Fed’s dual mandate addressing inflation and employment, I must admit that the likelihood of interest rate cuts is rising. The current US key interest rate range lies between  4.25% to 4.5%. Until yesterday morning, there was a strong possibility that the Fed would decrease its key interest rate by 25 basis points in September and even at the following meetings in October and December. Futures traders anticipated more key interest rate cuts by the end of 2026, namely in September, October and December 2025, and two more in April and July 2026. The latest numbers clearly show that the tariff war’s impact on the consumer side of inflation remains limited in July, with US inflation remaining at 2.7%. However, core CPI inflation rises to 3.1%. It is essential to acknowledge, Ladies and Gentlemen, that we are not exempt from the possibility of forecasting inaccuracies, i.e. (and it is not that I like to admit it) we are also prone to prediction errors.

Prediction Error: A Quick Definition

Prediction error is the difference between expected outcomes and real events. This process acts as a mechanism by which the brain maintains a cognitive record, constantly comparing its predictions with incoming sensory information. Consequently, it enables the ongoing improvement of internal models, supporting adaptive responses to the environment.

Not So Fast, Look At The PPI

However, yesterday’s unexpectedly substantial price increases among U.S. producers may indicate the tariff war’s initial effects on inflation. In July, producer prices in the United States surged by 3.3% year-on-year, following a 2.3% increase in June; economists had only anticipated a 2.5% rise for July. This development immediately tempered expectations for a swift interest rate cut in the world’s largest economy, which had previously been supported by the above-mentioned subdued consumer price inflation data released earlier in the week. Now, the latest and higher producer prices may lead to higher consumer price inflation, and higher consumer price inflation limits the possibility of interest rate reductions that the stock market had been speculating about recently. In short, it will stay interesting and higher market volatility may be expected.

Reduced Growth Prospects Using Germany as an Example

The outlook seems quite bleak when assessing European growth prospects through the lens of Germany. The ZEW Index highlights a troubling economic situation for Germany in August, with a significant drop from -59.5 to -68.6 points. This decline has effectively interrupted the tentative recovery that had been underway. Additionally, economic expectations have sharply fallen, plummeting from 57.7 to 34.7 points. After several months of improvement, it is clear that the 15% import tariff imposed by the U.S. on EU countries is beginning to affect the economy. Excluding the recovery following the coronavirus crisis in 2021, the German economic landscape has been negative since 2019, reaching a record low that surpasses 2002 to 2006, when Germany was often referred to as the ‘sick man of Europe.’ Overall, the prospects emerging from the world’s third-largest economy are not particularly encouraging.

Conclusion

We are now entering a critical phase regarding the initial effects of the tariffs imposed by the Trump administration on global trade. This situation extends beyond merely the absolute level of tariffs; it also encompasses the non-binding nature of agreements and arrangements, along with a noticeable departure from established global trade norms. Without passing any judgments, we will be able to assess the implications for the United States and other nations within the next few quarters, or at most, in a few years. It is important to note that during uncertain times like these, businesses and individuals tend to trim investments, which will likely negatively affect global growth and employment rates.

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

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

John D. Rockefeller

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

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

Fed’s Not Moving

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

U.S. Car Makers as a Proxy

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

Conclusion

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

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

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

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

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

Charlie Munger

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

U.S. Inflation

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

Tariffs and Their Potential Impact on Inflation I

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

Tariffs and Their Potential Impact on Inflation II

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

Tariffs and Their Potential Impact on Inflation III

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

Meanwhile, at the ECB

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

Tariffs and Their Potential Impact on Inflation IV

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

Conclusion

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

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

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

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

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

Doctor Zhivago, by Boris Pasternak

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

Wealth and Metaphysics

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

What Metaphysics Is (and What It Is Not)

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

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

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

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

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

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

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

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

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

The Dimensions of the Human Person

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

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

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

Wealth and the Human Person(s)

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

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

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

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

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

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

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

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

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

Jesse Felder

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

How Should We Define Value Stocks?

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

How Can We Identify Value Stocks?

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

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

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

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

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

Price/Earnings Growth Ratio (PEG) 

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

Liquidity Ratio (Current Ratio)

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

Debt-Equity Ratio

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

Return on Equity (ROE)

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

Earnings Yield or Inverse P/E Ratio

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

Dividend Yield

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

Conclusion

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

Next Week

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

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

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

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

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

Jim Grant

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

What is Value Investing?

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

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

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

Investing in Value Stocks: What’s Next?

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

What are the Risks?

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

Are Value Stocks Currently Attractive?

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

Conclusion

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

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

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

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

”The level of immaturity is beyond words.”

Sen. Rand Paul

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

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

The Swiss National Bank

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

Federal Reserve / Sensual Economics

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

Crude Oil

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

Political Views and Seductive Misconceptions in the Markets

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

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

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

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li