Everything is going to be fine

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
Web: www.incrementum.li