Waiting for a Crash

Dear Ladies and Gentlemen

I received many emails from readers feeling the same as me regarding the comments I made in my prior weeklies on assets with no intrinsic value. So far, some of those assets have shown genuinely outstanding performance, and I am happy for everyone who made money with it! Well done!

Where is it?

Here I am, sitting in my office at home on Thursday evening after 8 pm, and still no crash anywhere to be seen. (Due to the covid-19 pandemic, we have reduced physical presence in our offices in Schaan, Liechtenstein and, we often work from our individual homes).

A Question of Liquidity

How come this crash does not materialize. So many analysts, bankers, brokers, journalists, social media people are expecting a crash for months, and it just does not happen. Well, I believe that we will not see a significant crash in equities markets as long as central banks keep injecting liquidity into the system. Valuation in some stocks seem stretched; personally, I think that, especially in some Nasdaq stocks, a correction would probably not be a surprise and yet, here I sit and wait, and stocks are trading within normal boundaries after yesterday’s Fed meeting.

Expectation

Fed Chairman Jerome Powell was very clear about it yesterday and does not seem intrigued by the temporary inflationary pressure we currently experience. However, if towards the end of summer, inflationary pressure has not ceased, central banks may feel urged to counteract and interfere verbally or act by reducing their asset purchasing program, by suspending their asset purchasing program, or even by increasing interest rates. Such measures could lead to an adverse reaction in equity markets. As I have mentioned before, I still believe that the current inflationary pressure is temporary, but I obviously may be wrong.

Positioning

Quite some people are contacting me regularly asking for advice. Ladies and Gentlemen, it would be not very sensible to advise people I hardly know. Investing depends on total wealth, age, risk tolerance, cash flow needs, etc., and this is why at Incrementum, we invest much time in filling in risk- and client profiles for our private clients before accepting a mandate. Furthermore, and for regulatory reasons, I am not allowed to give any advice just like this. Therefore, please do not take it personally if I cannot answer your questions the way you may expect them to be answered. Thanks for your understanding.

Please do not hesitate to write back to me and please let me know your views!

… but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

Ladies and Gentlemen, I wish you an excellent start to the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth