Schlagwort: Investment

Michael J. Burry

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen
 
Michael J. Burry is an American, physician, investor, and hedge fund manager. He was founder of the hedge fund Scion Capital, which he ran from 2000 until 2008. Burry was one of the first investors to recognize and profit from the subprime mortgage crisis and became famous when he was portrayed in the biographical drama “the big short”.
 
Why would I dedicate my weekly mail to Michael J. Burry you may ask?
 
I got the idea when communicating with Robert, one of my regular readers after my last weekly mail on my personal investment style. The conversation went very much into the direction of the difficulties I am facing when managing my clients’ assets. Prior to the conversation with Robert I have had a similar conversation with David from Australia.
 
What I wrote to them was that the difficulty for me as a money manager is to see and recognise facts that make an investment an interesting one or a not so interesting one. This may seem obvious but with the amount of information available today, I still want to stress the fact that sometimes it is very hard to see the obvious because our mind gets distracted by market “noise” and headlines and maybe colleagues and/or a client who calls and tells me what he just had learned from a friend, etc.. Thus to recognise the obvious and if possible to recognise it ex ante, is not such an apparent thing. Also, and this is utterly important, it is vital not only to see the risks of an investment but potential chances of it as well. As you know, I am getting paid for investing my clients’ assets and for achieving positive results. Looking at the risk side for too long keeps me from seeing chances.
 
I try very hard to stick to my investment principles and to keep all the noise outside of my focus. I do not read investment-advise from banks and brokers and don’t go to their investment meetings. Most of my investment decisions I take on weekends, as I don’t want to be influenced by prices going up and down and I usually inform my partners during our weekly asset allocation meetings on Monday afternoon about my ideas, which I generally implement afterwards. In this respect I am rather focused and structured.
 
…and still, I do make mistakes and I am really not very good at timing the market. But the long-term results nevertheless are rather inspiring. My client’s portfolios show less volatility and better performance in the long run than any of the markets I am investing in. I am only able to capture a part of the gains on the upside (in average roughly 65%) but during difficult periods, downswings, etc. our portfolios are mainly very stable and, in the past, only lost roughly 15% – 35% of what the markets would lose.
 
You know, I think it is important to question one’s investment approach from time to time and make sure that one’s expertise (especially strong expertise) is not holding one back of seeing chances outside the field of expertise. Michael J. Burry was very successful with sticking to his principles and with seeking chances and exploiting opportunities. The mix was perfect at the time.
 
What is your opinion, Ladies and Gentlemen, I am asking you again, will we see a major market correction or soaring markets? Let me know about your investment style and please share your investment experiences with me and my readers, 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

Yield or how to receive cashflows in a negative yield environment

Posted on by Stefan Markus Kremeth
Dear Ladies and Gentlemen I received a few mails on my very provocative statement that house pets, farming and children produce an enormous amount of greenhouse gases. I was provocative on purpose. It was my intention to trigger some reactions. I received two mails on the indirect financing of (nuclear) weapons via government bonds. It seemed most of my readers were never really looking at it that way. Fact is that you will never know what a government is doing with the money you pass on to them when subscribing to one of their bonds. They may buy weapons or build a children’s hospital with it – it is entirely up to them. I generally receive several mails per month from readers asking me how they should invest their money to achieve the best possible results. As always, I can’t tell you and I am not allowed to give any advice to you just like that, but I am happy to elaborate quickly on what I think seems a decent strategy to still get some yield in a negative yield environment. You know, Ladies and Gentlemen, my goal always is to receive cashflow with limited volatility. Some of my readers already know about my investment style. My investment style is real asset based and enjoys a rather large equity portion. However, the equity portion is limited to equities of companies producing positive net free cashflows and I like rebalancing the position in my clients’ portfolios from time to time. This means I define a “normal” weighting, i.e. around 5% for any equity position in a portfolio and harvest the dividends or capital reductions the underlying company shares with its investors. If the price of an equities-position appreciates over time and thus the weighting within the client’s portfolio goes up, I will start cutting back the position down to its initial 5% weighting. If, however, the price of an investment goes down and I can’t find any dramatic change in the strategic and/or earnings perspective and the company still produces positive net free cashflows, I harvest the cashflows and increase the position until it reaches its intended weighting of 5%. The result of this strategy is astonishing. Volatility decreases massively and performance increases. When markets are moving up, we only capture a part of the positive performance, because we like to keep a large cash position at hand. But when markets are going down, we usually only lose a fraction of what the market loses. It is during the down moves that we generate alpha. You can have a look at the monthly development of one of our portfolios on our website. https://www.incrementum.li/en/wealth-management/ It still needs the “right” equities and this is probably the most difficult part. Please let me know about your investment style and please share your investment experiences with me and my readers, 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,Stefan M. Kremeth
Wealth Management
Incrementum AG

Environmental, Social and Governance friendly (Part one)

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

Once every few weeks I receive messages by readers that ask me about Environmental, Social and Governance (ESG) friendly investments. I think it is about time to take up this topic.
 
This week, in part one, I would like to share some basic information and explain some of the terminology used in connection with ESG friendly investments. Next week I would like to offer my point of view on the difficulties arising when trying to choose ESG friendly investments.
 
Let’s start with ESG. ESG stands for Environmental, Social and Governance and defines certain standards used to screen investments.  You may have read or heard of the following terms, like SRI and/or CSR. SRI (Socially Responsible Investments). SRI basically covers as the name would suggest the field of socially responsible investing and looks for investments that are considered socially conscious because of the nature of the business the company conducts, while CSR (Corporate Social Responsibility) is a business model that may help companies be socially somewhat accountable to it its stakeholders and the general public.
 
When looking for an investment, one my come across the terms of “Impact Investing” and/or “Green Fund”. Impact investing aims to generate specific beneficial social or environmental effects in addition to financial gains and green funds should invest only in sustainable or socially conscious companies, avoiding the rest of the investment universe.
 
When looking at ESG investments, statistics on CO2 (carbon dioxide) emission are probably one of the most common denominators used to explain negative environmental effects. However, I prefer statistical data on so called “greenhouse gases” as such statistics offer a wider, more complete picture. The most commonly known greenhouse gases are water vapor, carbon dioxide, methane, nitrous oxide and ozone.
 
Ladies and Gentlemen the above basics are needed for my next weekly, which I promise will be somewhat more spicy.

As always, I encourage you to send me your feedback and/or questions 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

Interview with Mr. Andreas Haeberli, CIO of Profond

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

As announced two weeks ago I was able to interview Mr. Andreas Haeberli, CIO of Profond Collective Foundation. Please find my questions with Andy’s answers for your convenience:

1) What is Profond’s investment goal?
We want to offer sustainably high benefits to our policy holders. When we invest, we therefore focus primarily on real values, i.e. equities and real estate. These asset classes enable us to generate above-average returns in the long term. With optimal diversification, we take risk parameters and financial stability into account.
2) What is your investment horizon?
Pension fund assets are invested over a very long period of around 60 years (40 years of gainful employment and around 20 years of pension entitlement). As a result, short- and medium-term financial markets fluctuations balance each other out well. Therefore, we are not influenced by short-term movements and short-term events in financial markets. We do not engage in any tactical investments or hedges. However, we generally hedge foreign currency risks for nominal values, real estate and infrastructure investments.
2) Where do you see the biggest challenge for a Swiss based pension fund manager today?
The current low level of interest rates presents major challenges to investors. Bonds are traded with a maturity yield of zero and negative interest must be paid on cash holdings. This leads to ever lower investment returns on investment funds. This low compound interest effect has a noticeable negative effect on fixed income investments in the long run.
3) hat are your favourite investments and why?
Long term, equities yield higher returns than bonds. This is shown, among other things, by a much-quoted study by Pictet. That is why we focus on equities and not on bonds. We also invest an above-average proportion in real estate. They are not directly dependent on stock market fluctuations and diversify our overall portfolio well. We also benefit from regular income (rental income). Thanks to these asset classes, we achieve a cash flow return of around 2.5% on the overall portfolio.
4) Are you working with consultants and if, why and if not, why not?
On a case-by-case basis, we draw on the knowledge of advisors in the selection of asset managers. We also call in pension fund experts for certain tasks. 
5) How are you investing your private money?

Basically, my private investment activity does not differ from my professional one. The only difference is that I invest a small part of my personal wealh on a short-term basis.

Many thanks, Andy, for your time and the insight!

As always, I encourage you to send me your feedback and/or questions 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

Sociocultural issues meet economics

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

Did you follow my advice and spend every morning 30 to 60 seconds thinking about something positive? If so, what was the effect?

Now, last week I gave you an insight into some of my global sociocultural points of view and proposed to publish an interview with a pension fund manager for this week. The interview was conducted but the time schedule was a bit aggressive and I am not quite ready to publish the interview yet. Hopefully by the end of next week I will be and may deliver on my promise.

I have been receiving very thoughtful and interesting feedback to my last weekly mail and thus today, would like to pick the feedback of two of my readers and share Masha’s and Anton’s thoughts with you.

When thinking of current global economic policies, Masha has a picture in her mind. It is the picture of a curved (concave and convex) mirror. The sort of thing you would see in amusement parks. When you stand in front of it, reality gets distorted. I quite like that metaphor and I totally see her point, only that instead of the mirror we have some of today’s media channels and research reports by banks and brokers.

Anton’s feedback was touching on three points.

Firstly on his statement that uninterrupted growth is not possible, something I would easily agree to, second he cited a quote by Hannah Arendt: „Politics is the professional representation of vested interests”, again I can’t really argue against that one and thirdly he mentioned that we cannot borrow our way to prosperity (how I love that one!) but rather that prosperity requires sacrifices – more specifically, to get something of value tomorrow (including a better life overall) we need to give up something today (time, sleep, money, etc.). This last statement is so true and the ones who know me well, will know that I have a serious problem with today’s culture of “instant gratification”. It just doesn’t work. I always use the same metaphor. If a farmer wants vegetables, he needs to prepare the grounds, saw the seeds and only after a while will see the first signs of germinating plants.

Same is obviously true for investments. People who expect return without giving the investment time to develop, shouldn’t really invest, at least that is what I think.

As always, I encourage you to send me your feedback 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

Was wir aus der Landwirtschaft lernen können

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

Many thanks for your feedback to my last weekly mail. Some of my readers came up with great thoughts and I will most probably use one or the other in future weeklies. I would like to thank especially Madeleine, Thomas, Robert, Scott and Anton for their inspiring reflections. Many thanks!

As some of you know, I live on a small hill in the country side of Zürich and when I look out of the window, I see cows and horses and only a few houses. Seeing farmers at work is part of every day life up here and talking to them from time to time made me think about investment processes.

Nowadays, most of us living in developed countries are used to instant gratification. People are posting pictures of their food and hope to receive likes, they are posting pictures of their cars and hope to receive likes, they are posting comments on Twitter and hope to receive likes. Instant gratification. You want a coffee, you get it immediately, you want something to eat, you get it right away, a new I-phone you get it, whatever we want we can get most of it at any moment. Instant gratification.

However, when it comes to investing, instant gratification is not all that easy to achieve.

Investing needs a strategy and it needs time, patience.

I think investing is actually a lot like farming. Before investing my clients’ money, I have to prepare the grounds. Ground preparing in my business is for example research and research is very time consuming and at times even boring and it is ongoing, it never stops but it needs to be done.

After preparing the grounds I sow the seeds, which means I make some first investments.  Afterwards I nourish and cater for the investments, I add positions or let go of some. When I think the time is right, I harvest, I take profits, rake in dividends or write calls (covered only) on long positions to increase to cashflow on the portfolio.

I am fully aware that a storm can take away a part of my clients‘ harvest, this is why I am only on very, very rare occasions fully invested. Like this I always have some cash at hand to increase positions when markets are down.

That is what I am doing, not more and not less, and I keep on doing this over and over and over and over again.

And you know, Ladies and Gentlemen, I don’t think much of preparing and building up protection for this one and only very bad mega storm, almost hoping for it to arrive so that my protection works and (not to forget) my ego gets pampered. I think the opportunity cost of such a (rather risky) strategy is very high. Partial protection on the other side makes a lot of sense to me and I would highly recommend that in any sort of balanced portfolio.

Please do not hesitate to share your thoughts with me on whatever seems interesting  to you or on whatever 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

Was kann man erwarten?

Posted on by Stefan Markus Kremeth

Dear Ladies and Gentlemen

I was asked by one of my readers to elaborate my view on what can be expected by financial markets until year end? I am happy to do so, but please keep in mind that this is my very personal view and that I can’t foresee the future.

Statistically the best two quarters of the year just started. Additionally, in years of mid-term elections in the U.S. the chances of a yearend rally are fairly good. Moreover, after the recent market slide followed by an impressive rise, the chart technics all of a sudden show some potential for further improvements.

Does this mean everything is fine? No, of course it doesn’t, but for the time being interest rate increases seem to be priced in, trade war fears seem to be priced in, political changes in Germany (CDU/CSU’s and SPD’s massive losses) and in the U.S. (democrats take control of the house) seem to be priced in.

I personally believe we will still see volatility but I would be surprised not to see markets moving higher in the weeks to come. I first expect a short consolidation during the next days and thereafter further increases.
Now, what does this situation teach us? I think that some scare tactics by media and so-called “financial experts” have led to some very unpleasant situations during the last weeks. Panicking investors have sold their equities at the bottom of the market just to see them going up, in the last few days.
Look, Ladies and Gentlemen, 2018 so far is a very special year, we had two 10% crashes in the Standard & Poor’s Index within the past 10 months and we are still not in what is called a bear market, this didn’t happen since the mid 50ties.
But even if we eventually enter a bear market, which we will as bear markets just happen from time to time, this may be seen as normal market behaviour. You know, bear markets happen in average every 3.5 years and last for approximately one year. That is – I admit an unpleasant – part of investing, but so what. If you stick to your investments (as long as they are solid and net free cashflow producing) and if your investments pay dividends, you can always collect the dividends, spend the money or reinvest and wait until your stocks go up again. Just don’t let yourself get too excited.

Please never forget, investing is a long-term exercise and please never forget market corrections are normal, a common thing to happen. The link below shows you a table published by Wikipedia with stock market crashes and bear markets and as you will see, there were many and nevertheless we are still alive and kicking:

https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

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