Value of the Non-Intrinsic / Merry Christmas

Good Morning Ladies and Gentlemen

”It is ideas, not vested interests, which are dangerous for good or evil.”

John Maynard Keynes

Non-Intrinsic

It is in the nature of things and a well-documented phenomenon that individuals tend to overestimate the validity of their personal analyses and perspectives and underestimate those of others. I am aware of this cognitive bias, and yet I remain convinced that my observation regarding the perception of a growing dominance of the non-intrinsic gaining influences in various domains, including investment decisions, the announcement of political initiatives, and interpersonal interactions, cannot be entirely unfounded.
Why am I discussing this topic? Perhaps it’s due to frustration, a lack of understanding, or a combination of both. Let me clarify my thoughts further and, hopefully, by doing so, uncover the things that seem incomprehensible to me.

Non-intrinsic in Asset Management

What are the underlying factors that contribute to momentum-driven investments in equities associated with companies trading at price-to-earnings multiples exceeding 100? This phenomenon appears perplexing.
How is it feasible to obtain SEC approval for financial products based on unknown issuers with little to no established reputation? Additionally, how do so-called “meme stocks” (Meme stock – Wikipedia) attract investors, while companies that have consistently produced cashflows and distributed dividends for years or even decades are largely neglected?

Reality?

I believe that excessive valuations in certain asset classes are largely due to narratives that create shared perceptions, even when those narratives may not be entirely grounded in reality. I sometimes have the feeling that many investors these days are unaware of what key valuation figures are all about and, therefore, get carried away in intersubjective realities of non or little intrinsic value.
So-called intersubjective realities refer to the shared understanding and mutual experiences that are constructed through social interactions among individuals. This concept highlights the significance of collective perception and the ways in which individuals co-create meaning within their social contexts. It emphasises that realities are not solely individual constructs but are significantly influenced by the interpersonal dynamics and cultural frameworks that shape human experience. The exploration of intersubjective realities is vital for understanding how knowledge, beliefs, and social norms are established and perpetuated within different communities.
For example, a well-known saying attributed to political figures like Lenin, Goebbels, and Hitler suggests that if something is repeated often enough, people will come to believe it is true. There exists scientific evidence to substantiate this thesis, which underscores the importance of critically evaluating sources of investment advice. Accordingly, I frequently highlight that banks, brokers, analysts, investment advisors, local shamans, religious leaders, and participants in online forums may not always provide the most reliable guidance. Without a comprehensive understanding of the rationale underlying their recommendations, often driven by financial motivations, individuals are ill-equipped to assess whether such advice is appropriate for their specific circumstances.

Above the Law

Historically, the principle of equality before the law has not been universally upheld. This disparity can, I believe,  be traced back to our Christian heritage, in which, for over two millennia, common individuals have generally been treated with relative equality among themselves; however, aristocrats and ecclesiastical authorities have often been granted exemptions from legal accountability. In the contexts of entrepreneurship and politics, this unequal treatment tends to be more nuanced and less overt, complicating the discourse surrounding the application of justice. However, today, we face a new dimension in this regard. But so pronounced and unrestrained is somewhat difficult to understand, isn’t it? Some political and/or economic leaders can seemingly post whatever they want on social media platforms without having to fear any consequences.

Aftermath of Euphoria  

The excitement surrounding the U.S. Presidential election has already faded quickly in the utilities and transportation sectors of the Dow. Stocks in utilities, oil, chemicals, and telecommunications have fallen below their pre-election lows. On a positive note, enthusiasm for technology and cryptocurrencies remains strong despite questions regarding valuation. Will eventually intrinsic value prevail?

Merry Christmas

Ladies and Gentlemen, thank you all for your inspiring feedback and comments throughout the year. I have been writing “Stefan’s Weekly” for many years now, and I always appreciate receiving your messages. On certain topics, I may occasionally feel a bit overwhelmed, which can lead to delays in my responses. However, I strive to reply to every message I receive and will continue to do so in the future.
Merry Christmas to you and your loved ones, and a happy and prosperous 2025.

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 and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li