This Time is Different

Good Morning Ladies and Gentlemen,

Many thanks to all who have participated in last week’s quick competition. I received many answers, and most participants guessed Hobbes‘ „Leviathan“; one reader mentioned Nietzsche’s „On the Genealogy of Morality“, another one „Jenseits von gut und böse“ by the same author and another one Arthur Schopenhauer’s „Die beiden Grundprobleme der Ethik“. Those are great books, however, were not the names I was looking for, but now I do not want to keep you in suspense any longer and reveal the solution to the riddle.

…and the Winner is:

So the correct answer is: „Der Schwarze Obelisk“ from Erich Maria Remarque, and the winner of the one-ounce silver coin is Rainer. The book is worth reading, and it sort of fits into today’s geopolitical and geoeconomic setting. Thanks again for participating, and congrats to Rainer; the coin was posted on Wednesday.

This Time is Different

Very bluntly, Ladies and Gentlemen, if this time is no different to other times, stock markets need to go up eventually again. Market participants can not handle uncertainty; that is why markets are volatile and in negative territory this year.

Excerpt from a Message to our Private Clients

Have a look at an excerpt from a message to our private clients: «War in real-time also leads to nervousness among investors. The SMI stands at -13%, the DAX at -18% and the Euro Stoxx 50 at -19%. However, the fear of an overheating economy has faded with the war. Currently, it looks more like a recession and a so-called bear market. In a bear market, indices fall or no longer rise sustainably. The average bear market lasts between 12 and 15 months (depending on the source).»

«Therefore, the conclusion would be to sell all shares and wait for the end of the bear market and then get back in. The problem with such a strategy is that events like an end to the war in Ukraine, a possible overthrow of the government in Russia, a diplomatic solution with both warring parties saving face are difficult to predict. Moreover, even during the horrible war in Ukraine, as during the pandemic of the past two years, the companies in your portfolios are paying regular dividends, some of them even higher than a year ago, none of the companies has announced a dividend cut and this even though many sectors of the economy have suffered due to the pandemic. The past 120 years have impressively proven that equities have been the best investment instrument over the various cycles and that a sustainable return could be generated with them. Unfortunately, this sustainable return came at a price in enduring volatility. Against the backdrop of dividends flowing even in crises (and the resulting compound interest effect), I tend to hold positions, but understand if investors no longer like to endure the pressure of volatility.»

Current Valuations for the Swiss Equity Markets

Since mid-2020, valuations have tended to decline. According to Bloomberg data, the SPI P/E ratio was around 21 at the end of 2020; at the end of 2021, a figure of 16 was measured, and currently, a level of 13.5 is on the books. This means that the valuation of the SPI is below the long-term average of 16. At the end of 2022, the analyst’s consensus expects an average P/E of almost 18. Whether this will come to pass remains to be seen, and we all know that most analysts do a terrible job at forecasting, not that I would be any better at it. However, long-term data shows clearly that equities outperform about every other asset class on the planet in the long run.

Warren Buffet

In May 2018, Warren Buffet told in a CNBC interview: “The best single thing you could have done on March 11, 1942 — when I bought my first stock — was buy an index fund,” if someone invested $10,000 in an index fund back in 1942, it would be worth $51 million today. 1942 was in the middle of WWII, Ladies and Gentlemen.

Clooney and Kremeth

„Equities. What else?“ (I admit; I borrowed from George and enhanced),

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, peace!

Yours truly,

Stefan M. Kremeth

Wealth Management
Incrementum AG – we love managing assets

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