Kategorie: Stefan’s Weekly

Dear Ladies and Gentlemen

Central Banks are doing everything to avoid economic calamities, and I am not necessarily against it. However, now it seems we are entering an entirely new phase of central bank intervention in financial markets.

Central banks are now buying corporate bonds directly in the markets. While this may seem not worth mentioning to some investors, it is rather noteworthy to me. Why? Is this going to have any sort of impact you may ask? Well, to tell you the truth, to me, this is quite a mind-boggling exercise because market forces are getting subdued more and more and on multiple levels. For example, in today’s ultra-low interest environment, one may find plenty of corporate bonds of fine companies yielding zero or (slightly) negative returns. If central banks are buying those corporate bonds, it is going to be market-distorting and effectively means, interest rates will go down even more, and those companies will not only not have to pay interest on their debt but on the contrary, will receive interest from some friendly central banks for taking up dept.

Moreover, and of course, such market interference favours fine, large, multinational companies with healthy balance sheets, and it will quite likely lead to higher concentration rather than to higher diversification. Smaller players will disappear while more significant players will become even more powerful and more significant, as they may generate interest income for taking up debt, use the money to buy up or squeeze out their competition and increase their (pricing and everything else) power.

Eventually, this increasing power may be felt by consumers and employees alike „Amazon“-like business behaviour creates wealth for a very few and not necessarily for the masses.

Ladies and Gentlemen, wealth for some very few and nothing for the masses are what in the end led to the (French – but not only) revolution. Can we still control what is happening, or is it spinning out of control? What will the result look like? What is our political leaders‘ vision?

Oscar Wilde once said: „Everything is going to be fine in the end; if it is not fine; it is not the end.“  Is what is happening today fine for large parts of our global population?

Ladies and Gentlemen, I am looking forward to your comments! But please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Furthermore, 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

Some new participants joined our year-end competition last week. This is perfect. Thank you very much.

After the massive rally, we have seen since the March lows, many of my readers ask me what I am expecting for the next months. Those who read my weeklies for a longer time know that I’m not particularly eager to make predictions, and yet, I get involved in a year-end competition you may think. Well, the year-end competition is for fun, and I am happy to distribute a silver coin once a year. Market predictions are a different ball game.

I cannot foresee the future, nor can anybody else. However, anyone working in the financial industry and managing assets must have at least a loose idea of where markets could be heading, and this is why I am in general, working with scenarios.

Now, what I find quite extraordinary during this crisis is the fact that market direction may change very rapidly and extensively. Two months ago, only very few people could imagine markets going up to current levels in such a short time frame. There was hardly any expert who was not seriously concerned, not to mention the media. Interestingly enough, in the last two weeks or so all of a sudden, some experts turned positive, and the press started to come up with positive market news.

But why can stock markets go up while there are increasing numbers of people losing their jobs and queuing for food?

Let me give you what I think could be a possible explanation. While average citizens may experience negative economic impacts in their life at this very moment, many institutional investors, i.e., institutional (professional) stock market participants, are already looking into 2021. Now those institutional investors see the world from a slightly different perspective. They acknowledge that politics and central banks have tied up rescue packages as quickly and comprehensively as never before, they are seeing lockdowns being lifted, consumption rebounding very slowly and yet surely, travel restarting very slowly and yet surely as well and a recession that is going to be over eventually and at the same time, they see remaining stimuli for years to come, leading to an overflow of liquidity.

…or as the CIO of a global financial institution casually mentioned this week: „the world is swimming in cash!“

That sort of liquidity will seek its way to the highest proposed returns, which due to low-interest rates, most probably will be found in equities rather than in bonds.

Ladies and Gentlemen, this is highly simplified, and of course, I don’t have a crystal ball, and of course, I can’t foresee the future, but to me, this seems like a valid explanation for what we have seen in the markets ever since March and what we might experience in the months to come.

As always, please feel free to share your ideas and thoughts to me, but please don’t forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

And now, 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

Time for an update on our year-end competition. The estimates are wide-spread; this is great and makes it more fun than if everybody is around the same numbers.

Gold:

The highest estimate comes from Hannes. His estimate for the 2020 year-end price stands at USD 2’000. The lowest estimate comes from myself, and I know this is rather provocative, but it is just for fun, after all. My estimate is a year-end price of USD 1’280.

Silver:

The highest estimate comes from Barbara. Her estimate for the 2020 year-end price stands at USD 45. The lowest estimate comes from Mark, and his estimate is a year-end price of USD 14.50.

S&P 500:

The highest estimate comes from Barbara again. She seems slightly bullish; her estimate for the 2020 year-end price stands at 4’500. The lowest estimate comes from John, and he estimates a year-end price of 2’100.

Currently (at the time when I was writing this message) Gold stands at USD 1’720, Silver at USD 17.76, and the S&P at 3’107.

If there are still readers out there who would like to participate, please feel free to send me a quick email and I will be happy to take you on the list. Don’t forget, you may win a one-ounce Silver coin.

Moreover, now, 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

Dear Ladies and Gentlemen

„Beware of false knowledge, it’s more dangerous than ignorance.“ (George Bernard Shaw)

More and more angry people are leading to an increasingly hostile society cultivated by ruthless heads of states. Is this fiction?

Ladies and Gentlemen, I am fully aware of the significant location advantage I was born into, I am reasonably humble, and I am also of a rather liberal spirit. Is this combination fiction?

Open borders, free markets, access to education for everyone, the best should succeed, a global safety net for less fortunate ones, respect for different perspectives, and beliefs. Is this fiction?

In the summer of 1931, the global economic crisis hit large parts of the population hard. The Bank of England was forced to borrow USD 650 million from the Federal Reserve Bank of New York and the Bank de France to stay solvent. That year in August, the Bank of England’s governor was unable to cope with the exceptional strain by the crisis and had abandoned his work and gone for a cruise and a change of scenery. Today central banks work together more and better than ever. This was and is no fiction.

Today, the Swiss government is blasting well over 100 billion (this is far more than the EU or the US or any other nation is injecting in their economies on a per capita basis) into a by a Covit-19 weakened economy, leading to the fact that entrepreneurial risks and losses are socialized, while profits stay private. This is no fiction.

So-called real assets or tangible assets favor low-interest rates. Low-interest rates are here to stay for some time. While many of those proposing real (tangible) assets are taking advantage of higher asset prices thanks to these low-interest rates, they still bash central bankers for keeping interest rates low. This is no fiction.

…and it is hypocrite!

Ladies and Gentlemen, stay woke, keep your eyes open and do not get your vision blurred by cheap cynicism from people with doubtful academic credentials, change your perspective, try to get the fullest picture possible, talk to people who are of a different opinion and try to find out why they think the way they think.

And now, 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

Many thanks for your great help to our former assistant Cristian. He was delighted with many of you answering to his questionnaire, many thanks indeed!

I was pondering about my conviction and our conviction, i.e., the „Incrementum conviction,“ i.e., the joint cutting surface of the Incrementum partners. We have many common universal principals and ideas, but as we are human beings of a rather liberal spirit, they are by no means congruent. I think this is fantastic, and it makes our asset management meetings lively and exciting, and it leads to different approaches and products for various clients‘ needs. Some people do not understand that we can be of a different opinion and still share a respect for views; we do not share. The advantage of our free-thinking is that the chance of falling into an „effectiveness trap“ is reduced.

„Effectiveness trap,“ you may ask?

In 1968, James C. Thomson, a former Asia expert in the Kennedy and Johnson administrations, published an essay „how could Vietnam happen? An Autopsy'“ Among the reasons Thomson gave for the war was „the ‚effectiveness‘ trap“—the belief among officials that it is usually wisest to accept the status quo. „The inclination to remain silent or to acquiesce in the presence of the great men—to live to fight another day, to give on this issue so that you can be ‚effective‘ on later issues—is overwhelming,“ he wrote. The trap is seductive because it carries an impression of principled tough-mindedness, not cowardice. Remaining „effective“ also becomes a reason never to quit.

I believe that in many respects, today’s reality bears traces of the effectiveness trap of the past, and I wonder how politicians but also the electorate will get out of this without losing face. Let us assume a president of a dominant economic and military power lies to the public in an absurdly blunt way and is backed by people of his party and inner circle, who must know he is lying and still do not act in any way and let us briefly think about the public, the people who gave their votes to such a president during his campaign once but maybe will even give it a second time? How will they ever get out of this retrospectively, how will they explain their inertia at times when they should have stood up for the truth?

Stepping into the effectiveness trap is easy.

Anyway, this should not turn out to be a political message but rather show my thoughts on the effectiveness trap and on investment behavior. Currently, it seems to me, many investors have no strategy and switch between one proposed opportunity and another one without having an idea of what the ultimate goal should be and without sticking to any principles whatsoever. I am fully aware that it is easier to stick to s strategy, i.e., a plan when the markets move in favor of that very strategy, but it is probably even more important to stick to a plan when markets dot not move in favor of the approach, always keeping in mind the ultimate goal.

The Crash of 1987, the bursting of the Dotcom Bubble, the Asian Crisis, 911, the Great Financial Crisis, and now Covit-19 show similar patterns. In every crisis, you have the media going crazy, experts giving all sorts of advice, investors losing their confidence in financial markets and opportunity hunters buying into solid companies that are under pressure for a few quarters. One always hears the same mantras. This time is different. This is a real crisis. It is not only a financial crisis, etc. Ladies and Gentlemen, this time is different is a pleonasm. Obviously, no crisis is identical to another crisis. However, so far, I have not seen one example of financial markets not recovering from a crisis.

While we want to avoid the effectiveness trap, we still want to stick to our conviction because we think it makes sense. What do you think?

Please share your 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!

And now, 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 need your help. Please apologize for my being so blunt, but our former assistant, Cristian Ababii, is currently writing his master-theses to receive an MSc in Finance and needs your support.

He created a questionnaire but did not reach answers leading to the necessary sample size to show the statistical significance needed to satisfy his professors. He asked me if I could maybe help him with my network, and I would be delighted to be of help!

Now, Ladies and Gentlemen, this is where you come into play. Please take a little time and help this young man fulfill his task. He wrote a short introduction to the topic, and I am happy to share it with you:

“There is evidence showing a significant difference between assets under management directed to impact investing (investments in companies, organisations and funds with the specific intention of achieving measurable, positive effects on the environment or society in addition to a positive financial return) between the US and EU. The US investors‘ share in the impact investment market counts for 66% and the EU investors‘ share for 28%. For my thesis, I am intrigued to discover the overall investment preferences of US- versus EU investors. The assumption is that US investors are more focused on making an impact, rather than on financial return, contrary to EU investors. If this assumption proves to be wrong, the next assumption is that the governments from either the US or the EU provide investors with different investment-incentives. Accordingly, the US government provides investors with more incentives nudging them to allocate assets towards impact investments.
For my master thesis, I have created a specific questionnaire. I would be very grateful for your participation in the survey. It will take approximately 10 to 12 minutes, and it covers 21 closed questions. The survey responses are strictly confidential and anonymous.”

Please take a moment now, click on the following link and reply to the questions:

https://www.questionpro.com/t/AOzQzZg52z

Thank you very much, indeed!

And now, 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

Many thanks for participating in my year-end competition, I had still received some more bets from here and there. Thanks for this!

Now, today I have a real treat for you! Today you will not have to read, you may only click on the link below to listen and watch, this is all you’ll have to do, and you will see my friend and partner Ronni Stöferle. Ronni is most probably one of the best known, if not the best-known gold analyst on this planet. Not only is he very knowledgeable and the editor of the most read gold report globally, i.e. Incrementum’s “In Gold we Trust” but furthermore he is charming and fun to listen to. I personally think that many analysts in the space are rather boring and depressing, Ronni is not. Please enjoy his latest video under the following link:

https://www.youtube.com/watch?v=xNRAcw2XSI4

…and please let me know if you liked it and as always feel free to share your ideas and investment experiences and thoughts with me, but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

Dear Ladies and Gentlemen

Thank you very much for the fantastic feedback I received for my friend Anton’s text on the importance of USD liquidity.

Today I would like to come back to the year-end competition and my very own predictions. I have received quite some feedback, as I had purposefully taken an extreme stance. I am delighted to give you my very private and personal opinion; however, please keep in mind that I do not have a crystal ball and can’t foresee the future. Now, why was I going for a new all-time high in the S&P 500, when companies will feel the impact of Covit-19 in their P&Ls and be subject to earnings revisions? The reason is that I think the market will disconnect (even more) from what seemed “fairly” valued in the past. And why would that happen, you may ask? I think it may happen because all the money that is being created right now by governments and central banks will trickle down and find its way right into financial markets. Furthermore, investors are aware of the difficulties corporates may face, and earnings revisions will, therefore, not come as a surprise to them.

Ladies and Gentlemen, I would not be surprised to see an asset price inflation in art, collector cars, rare real estate, scarce luxury goods, equities, etc. Furthermore, interest rates will stay low for a long time, leaving no alternative to pension schemes and other long-term investors as to invest in so-called risk assets.

If a scenario unfolds that seems more or less congruent with my views, it may be that gold moves up as well, you may claim. You are right, as the „cost of carry“ is neglectable at current interest rates, and gold represents a valid hedge against inflation. However, if equity markets move up, greed or, in other words, catch as catch may come into play. Gold could suffer as greed for higher returns may lead to a competition of “potential excessive returns,” where investments that are presumably delivering lower profits be sold for “investments” proposing higher ones.

I could easily imagine exaggerations like we had seen during the Nasdaq tech bubble twenty years ago. In this respect, I would like to draw your attention to the fact that the Nasdaq 100 has already crossed its 50-day moving average. Netflix and Amazon climbed to new all-time highs, and Tesla rose significantly. The charts of these stocks show an intact tech bull market.

Ladies and Gentlemen, all of this is pure speculation, and again none of us will be able to foresee the future, and your guess is as good as mine. Above everything, my year-end competition should be fun for those participating and myself, and if everyone is close to consensus, fun is smaller than if we have a broad set of bets leading to a lively discussion.

And now, Ladies and Gentlemen, I wish you a good start into the day, a wonderful weekend and above all good health!

Please feel free to share your ideas and investment experiences and thoughts to Anton’s article with me, but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend.

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

Many thanks for your kind messages to my last weekly mail “Full Stop or the Road to Zero”.

I think there are some first positive news out there, but they are not yet strong enough to stand up against the bad news.

Still, Apple announced the successful reopening of all of its 42 stores in China. Italy seems to have finally been able to stop growth of new Covit-19 infection cases. A stagnation is already a success and probably proves right the concept of social distancing. China is getting back into production mode and restaurants and bars in Hong Kong are open for business and full of people again.

The U.S. government and the Federal Reserve have taken measures to help the economy and to avoid anything like a liquidity crisis and the European Central Bank has just announced on Wednesday evening the injection of some EUR 750’000’000’000.00 into the system and if necessary, even more.

These are absurd numbers. However, absurd or not this money will eventually find its way into financial markets and guess what I think that will lead to?

Please let me know what you think!

And now as last week – let us again quickly see what has happened to financial markets so far this year? Here are some figures for 2020: Dow Jones: – 29.61%, EuroStoxx 50: – 34.47%, DAX: – 35.01%, SMI: – 17.3%, Crude Oil (Brent) – 56.94%.

Dear Ladies and Gentlemen I wish you a good start into the day and above all good health!

Please feel free to share your ideas and investment experiences with me, but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend.

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