Those presumed dead live longer

Good Morning Ladies and Gentlemen

Many thanks for your messages and compliments on my last post. Many of you, like myself, seem to have warm memories of watching Groucho Marx and his brothers decades ago.

U.S. Dollar (USD)

Since the great financial crisis about fifteen years ago, I have read one book, some research and many articles about the demise of the American currency. Nevertheless, the U.S. Dollar is still standing and is standing relatively strong! So far, it has proven to be the ideal inflation hedge ever since the current inflation cycle started roughly 18 months ago. The presumed dead still lives happily ever after.

My view eighteen months ago

Ladies and Gentlemen, I was utterly wrong. I believed inflation would not get out of hand and was surprised by the dynamics of rising energy prices, mainly due to Russia’s war on Ukraine. Eighteen months ago, this war was not part of the inflation equation I had in mind. But, nevertheless, I was wrong.

Gold

Gold was not an ideal inflation hedge; we all know that, and gold miners did very poorly as well, we also know that. Lower precious metals and rising energy prices hit miners simultaneously, a blow to any miner’s margin. However, Ladies and Gentlemen, if we take up one idea of my last weekly mail.

Light-grey swan

Let us assume, just for the heck of it, that over the next six to nine months, the U.S. Fed can tame inflation in the U.S. and will therefore refrain from raising interest rates in significant steps of 0.75% or even 1% after every Fed meeting. What would this mean to the USD? I believe this could be the light-grey swan in a cohort of black swans and lead to a weakening of the USD. But, on the other hand, a weakening USD would probably lead to a strengthening of gold and gold miners with some short delay, do you not think so?

Investing / peak fear

Investors are people who are willing to delay gratification and invest for the future because investing is all about rewards that come from planting seeds and seeing them come to fruition over the long term. Now, while I have great sympathy for people’s fears and understand that today investors refrain from buying in these uncertain times, I can nevertheless easily imagine that once we have reached peak fear, the lowest levels in the market will be close. The difficulty is, of course, to know ex-ante when we have reached peak fear. How are you handling the timing of your investments?

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 great weekend, and above all and still, 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