Monetary U-Turn – When Will the Fed Start Easing Again? Incrementum Advisory Board Q1/2019 – feat. Special Guest Trey Reik (Sprott USA)

Dear investors, friends and clients,

Are we at the cusp of a Monetary U-Turn? What will the Fed do next; hike, ease, or keep their hand on the pause button?
During this quarter’s advisory board call we had a lively discussion between Jim Rickards, and special guest Trey Reik, about the Fed’s likely next move.

Trey works at Sprott USA, and has deep knowledge about gold, gold mining stocks, and monetary policy.

During the call we also talked about:

• What sort of chairman is Powell showing himself to be?
• Is institutional interest for gold finally coming back?
• How is the fed using balance sheet normalization in conjunction with interest rate policy?
• What is central bank purchasing of gold signalling to the market?

We hope that you will find our discussion insightful and inspiring!

Have a great week!

Kind regards from Liechtenstein,
Mark J. Valek & Ronald-Peter Stoeferle
Incrementum AG

Investing like the ultimative pros

Dear Ladies and Gentlemen

Many thanks for all the replies I received to my last weekly. I collected some pretty detailed answers and it seems there are some well-informed people among my readers. Thank you very much!

Let me give you a somewhat different perspective on what may signify long-term investing. I am deliberately simplifying wherever possible to make this easy to read..

Now, the biggest challenge in answering my last week’s question seemed to be the definition of „long-term“, which I believe represents one of the most important factors in managing pension fund assets.

One may argue that as a cohort, pension fund managers can probably be considered the ultimate pros, at least that is what they ought to be and a pension fund – by definition – needs to be invested very, very long-term which means pension fund managers need to find and concentrate on very long-term investments.

Here in Liechtenstein, same is true for Switzerland, employees usually follow a three-pillar pension saving scheme. Let me elaborate quickly:

Pillar one is a compulsory and defined benefit pension scheme by the government. Contributions are taken off any salary at any time during an employee’s working life. Employees know exactly what they are getting according to the number of years contributing. Pillar one only covers basic living costs it is capped but also has a floor in order to assure that every citizen, no matter of his/her contribution can rely on a minimal pension income after retirement. Investment risk is born by the government, i.e. tax payer.
Pillar two is in most cases structured as a defined benefit pension scheme. It is compulsory as well, however not organised by the government but rather by employers. Depending on how much an employee can contribute during his/her working life and depending on the investment style and long-term performance of the pension fund manager, the final pension income may vary, and it does – even big time. Investment risk is born by employees (policy holders),
Pillar three is discretionary and may be organised by employees themselves. Up to a certain amount there are tax benefits for contributors.

The by far largest part of pension scheme money is invested in pillar number one and two. This money is being invested globally and at least sometimes in accordance with the latest academic notion of modern investment principals. The investing process is supervised by local authorities/regulators.

So far so good.

If an employee starts working at the age of 20 and works until the age of 65, which is currently the regular retirement age for male employees in Liechtenstein and Switzerland, the employee contributes 45 years of monthly pension fund premiums or “savings”. The savings need to be invested and allocated in a way to keep returns as high as possible and volatility over the entire investment period as low as possible. The investment period is defined by the years any employee contributes, i.e. in our example 45 years plus the years the employee lives after retirement and receives his/her pension income. If a male employee lives until the age of 85, hence the investment period amounts to 45 years plus 20 years and therefore 65 years in total. In our example after retirement and during the last 20 years of the employee’s life, the employee now starts consuming the accumulated returns and savings.

Most of the answers I have received to my last weekly were not taking that sort of ultra long-term investment horizon into consideration. From a behavioural investment point of view this is totally understandable as our mind weighs short-term news and noise higher than long-term considerations. This can be explained psychologically, and research in this field has led to many academic papers and even a Nobel Prize in economics.

However, the quality of a pension fund manager is also (but not only) defined by how strongly he can resist short-term speculation and thus his ability to blank out anything keeping him off the track generating truly tong-term returns for his clients, i.e. pension fund policy holders.

Accordingly, quarterly earnings reports, political turmoil, tweeting politicians and trade wars can not be taken into the equation. A pension fund portfolio needs to be invested in a way that focuses on cash-flow generation over decades. Anything else would be speculation.

Just think about it, a pension fund manager can of course not foresee the future and can neither invest with the current partial U.S. government shut-down, the next financial crisis an equity bull market nor the next recession in mind. The only thing a pension fund manager can do is to use models that calculate potential return needs over the entire investment period taking underlying inflation estimates and development of demographics into the equation and than start to look for investment opportunities that match such return needs, if possible over the entire investment life cycle.

Therefore the positive side of investing really long-term is that pension fund managers don’t really need to consider daily, weekly and quarterly earnings estimates and even micro- and macro-economic comments by analysts. They don’t care about the “longest” U.S. government shut-down because even if it lasts for another few months it is just not long enough to be considered in the investment process. Any equity market crash is only a down-tick on a 65-year chart. Recession-, inflation-, deflation-fears never last 65 years, elected political leaders come and go, regulation and deregulation cycles are shorter than a 65 years investment horizon and thus even trade wars dwindle down to non-events.

Interesting perspective, no?

Now, Ladies and Gentlemen, I will try to find a pension fund manager to discuss my views on pension fund investing and hope to be able to publish a short interview within the upcoming weeks, and I encourage you to send me your feedback as always 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.
Kind regards.
Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

Incrementum Inflation Signal: Reversal To „Rising Inflation“ – Interpretation and Investment Impact

Dear investors, advisory board members and friends,

We hereby want to inform you that as of the beginning of January, our proprietary inflation indicator has switched from “FALLING INFLATION” to a full blown “RISING INFLATION” signal.

In the following please find a detailed analysis and interpretation of the Inflation Signal and our current macro thoughts, as well as the impact on the investment process.

Ladies and gentlemen, we believe that current valuations in inflation sensitive assets are a tremendous buying opportunity which we want to utilize.

Best regards,

Mark J. Valek & Ronald-Peter Stoeferle
Incrementum AG

Ronald-Peter Stöferle in einem Interview mit FOCUS-MONEY

Ronald-Peter Stöferle diskutiert in einem Interview mit FOCUS-MONEY die aktuelle und prognostizierte Entwicklung von Gold. Er konstatiert, dass Gold am Anfang eines neuen Bullenmarkts steht. Darüber hinaus wird das Phänomen der voranschreitenden De-Dollarization diskutiert.

Ronald Stöferle auf der Metallwoche zu China, Gold, Minen, Aktien und Cryptos

Ronald Stöferle kommt geradewegs zurück aus China, wo er in Shanghai einer 2-tägigen Goldkonferenz beiwohnte. Er erzählt von seinen Eindrücken dort, aber auch von seiner Einschätzung zur weiteren Enwicklung der Edelmetall- Aktien- und Finanzmärkte.

Im weiteren Verlauf wendet man sich der Frage zu: Warum bringt die Incrementum AG nach dem brutalen Crash von BitCoin & Co. in diesem Jahr einen Cryptofunds an den Markt? Sehen die Profis hier etwa wieder mehr Chancen, als Risiken..?

Themen der Sendung China:

Wie war die Goldkonferenz in Shanghai?

China und die Goldreserven: Was hört man im Land?

China – USA – USA – China: Der Handelsstreit

De-Dollarization: Was gibt es hier Neues?

China und das Sozialkredit-System: Alles ganz prima..?!

Der „In Gold We Trust“ – Report: 2019 neben Englisch und Deutsch auch in Mandarin

Gold: War denn nun „unten“ unten?

Silber: Noch mit quietschender Handbremse unterwegs

Minen: Darf man darüber überhaupt noch reden?

Inflation, Deflation oder Disinflation: Wo steht das Incrementum Signal aktuell?

Welche „Hürde“ muss der Goldpreis überwinden?

BitCoin &Co. nach dem Crash: Risiko oder Chance?

Video Interview with Demelza Hays

Dear Ladies and Gentlemen

My colleague, Demelza Hays, has been interviewed by Chris Marcus from Stockpulse https://www.stockpulse.com/. I think the interview was well conducted and answers some of the questions in regard to blockchain or crypto currencies. Please feel free to enjoy the video below.

If you are interested in Incrementum’s blockchain and crypto research, please feel free to register yourself under:

https://cryptoresearch.report/downloads/

to receive your free copy of our quarterly research report.

Please do not hesitate to share your thoughts with me on the interview with Demelza or on whatever seems interesting to you or is bothering you. Please feel encouraged to do so 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.

Kind regards.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

Winter

Dear Ladies and Gentlemen

The SMI is down 7.7% so far this year, the Euro Stoxx 50 is down 13.09% so far this year, the Daxx is down 16.31% so far this year, Gold is down 4.79% so far this year, Silver is down 14.33% so far this year, Brent Crude Oil is down 10.91% so far this year and theses are by far not the worst samples. This looks like winter to me.

Ladies and Gentlemen, often I get asked why I would not mention any of the American indices. The reason for this is that we (for some years already) do not invest in American equities for our private clients and the reason we do not invest in American equities for our private clients is risk management or to some extent lack of trust. Investing always involves a risk management component and while we are fully aware of the fact that without taking risk, we cannot expect return, we still try to manage that risk according to our believes. Now, the U.S. has been acting (and not only very recently) with business partners and governments globally in a not always very trust inspiring way that has on one side been very efficient to the American authorities but on the other side been between difficult and maybe even devastating to some of those other nations and/or business partners around the globe and this is why we are of the opinion that our private clients should have the smallest exposure possible to the risk of changes of laws and/or common practices by the American government, tax authorities, Securities and Exchange Commission, etc. By investing in global enterprises incorporated outside of the U.S. our private clients already take an indirect risk of such changes and to us this is already plenty.

Now, if I use the “farming” metaphor of my last week’s weekly mail, please allow me to stretch it just a little more and add the four seasons into it and if I do that, I think we have approached the end of fall and/or the beginning of winter.

As I mentioned many times before, volatility is nothing unusual, just normal market behaviour and an unpleasant part of investment risk any investor has to live with.

Now, winter is also the time to repair your tools, check your crop, prepare the grounds so that you are ready for the planting/seeding season.

If I convert this thought into portfolio management you want to ask yourself if you still have the portfolio you want/need and if not, you want to take action and make some adjustments. There are good investment opportunities out there, the difficult part is to pick them and to pick them at the right time.

Please do not hesitate to share your thoughts with me on the interview or on whatever seems interesting or bothering to you. Please feel encouraged to do so 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.

Kind regards.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG