Monat: Januar 2023

Good Morning Ladies and Gentlemen

„The end of the world is the delusion of grandeur of the depressed“.
Matthias Horx

Since you asked

I received an intriguing question about the likelihood of a disappearance of the Euro or U.S. dollar, and I am happy to give you my take on it.

All about trust?

In the end, many things are based on trust, including the global monetary system. If people no longer have confidence in their currency or the currencies of other economies, then the corresponding currency disintegrates.

What do you expect from money?

Let us say goodbye to the idea that money is a store of value. There are investments for this purpose in companies, commodities, real estate, art, collector cars, precious metals, etc. In my opinion, and I did mention this many times before, money should primarily be understood as the lubricant of an economy. It ensures that the economy’s engine is not stalling even during difficult times. This is important insofar as the economy in which the money circulates also determines the intrinsic value of the corresponding money to a certain extent.

I am not afraid

I am not afraid, not even concerned about a possible collapse of the global monetary system. However, I know, and this is a little unfortunate, these thoughts have been around since the hyperinflation in Germany one hundred years ago. The topic and the fears arising from it are played repeatedly from different sides in never-ending catastrophe rhetoric. Last year, global concerns about the crisis were rife even in the reasonably sensible media. War, inflation, stock market collapses, recession, lockdowns in China, supply chain problems, etc., were too much for the beleaguered journalists and were seen as reasons for a total and all-doom mega polycrisis. However, for now, it seems such a crisis has been cancelled. At least, I do not recognise it.

Facts

The fact is, the companies we invest in have delivered reasonable numbers under the circumstances and over the whole year of 2022. Dividends on average across the portfolios are very likely to be higher than last year and the year before, and a recession in many G20 countries will not be as severe (if it happens at all) as analysts predicted. Patience, serenity and confidence have helped those who have not allowed themselves to be driven crazy.

Karl Popper

Karl Popper pointed out more than 80 years ago that science can never produce absolute truths but rather approaches the truth in constant processes (also thanks to trials and errors), i.e. every theory is only considered good until it can be replaced by a new and better and tested one. Why do I mention Karl Popper, firstly because I see him as a great thinker and secondly also because I have the feeling that many people would like to see a fully insured society in total equilibrium, which on top of everything, is tailored to the individual needs, fears, etc. of each individual? But, unfortunately, this, Ladies and Gentlemen, is not realistic. Just as we cannot always expect perfect solutions from science, we cannot expect our society, the state, monetary policy, individual politicians, fellow human beings, doctors, teachers, gurus, family members, friends, and acquaintances always to have the adequate and tailor-made solution ready for any individual problem of each individual.

Complex systems

Societies are pretty complex systems, and complex systems are, unfortunately, only sometimes in balance. I think it is even the case that societies in their normal state tend to be in disequilibrium, and any equilibrium is the exception.

Gloomy pictures

In the 1970s, the members of the Club of Rome painted a very gloomy picture for the next 50 years. However, I believe that not a single one of the horror scenarios of that time has come true. So much for people’s ability to forecast.

Conclusion

Long story short, do not let yourself go crazy, enjoy life and do not be afraid. Patience, serenity and trust are essential companions in life, and I would venture to say that during our lifetimes, we will not have to experience the demise of the Euro, the U.S. dollar and, if you want, the Swiss franc.

Please feel free to share your ideas and thoughts with me, but please remember (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, joy!

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 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

Last week I did send you a quote from Burkhard Varnholt. The quote was, «Stamina is the hidden secret of successful long-term investors».

18% of Germans wear bicycle helmets

Investment Principle

I speak to investors a lot, which is what I appreciate most about my job. Because investors often show me different perspectives, which teaches me to respect their views and not underestimate their emotions, and quite frankly, they are forcing me to question our investment styles and stay reasonably humble. However, because complex systems (financial markets are complex systems) behave non-linearly, counterintuitively and are difficult to control, some investors tend to throw their initial investment principles overboard in situations of stress. This amazes me because it is far from being rational.

Psychology

Our brain resolves an inner contradiction by somehow convincing ourselves out of the unpleasant situation. This is a protective measure because we do not like to see ourselves as idiots. Nevertheless, this is unfortunately not always the best solution. For this reason, many smart people use coaches, consultants and investment advisors (yesssss, Ladies and Gentlemen like us), i.e. people they trust, people offering comfort and help during challenging moments.

91% of Germans use a protective cover for their mobile phone

Heads versus mobile phones

If 18% of Germans wear helmets while riding a bicycle but 91% of Germans use protection for their mobile phones, one could argue that mobile phones are more important to the German population than their brains. I know this is bold, but it also shows that people do not always behave rationally. I like to think of my partners and myself belonging to both cohorts, the ones wearing a helmet on the bicycle and seeking protection for their mobile phones. I am convinced many of the non-helmet-wearing cyclists would change their behaviour if they knew about this comparison. (By the way, the behaviour is probably the norm also in other Central European societies. As it happens, I just had the statistical data for Germany at hand).

Strategy; a piece of advice or two

Now, when you follow a strategy, especially if it is someone else’s strategy, i.e. your coaches‘, consultants‘ and investment advisors‘, ensure you thoroughly understand it. If markets move in the right direction and the strategy works, start questioning it (ex-ante), imagining a potential turn in the market and how your strategy would work long-term. If you feel uncomfortable with it after that, you may want to change it. Most people start questioning their investment strategy once the market has already moved against them for some time (ex-post). If you think about changing the strategy, once the market has moved against you, you have probably already paid the price. At that moment, you would rather have to think about a potential rebound; you may, of course, still want to ask yourself if your strategy is the right one to take advantage of a rebound.

Critical success factors

So what are the critical success factors, you may ask? There are probably many; however, at Incrementum, we only offer one type of mandate for our private clients. We are entirely geared to cashflows. You know, Ladies and Gentlemen, if you ask successful entrepreneurs and private investors about their secrets of success, they will all mention at some point that they look very closely at net free cashflows, which is precisely the principle we follow with our private clients. Short-term volatility is much less critical and scary if the portfolio yields regular cashflows that can be reinvested, regardless of the performance of the underlying stocks. Warren Buffett loves value and cashflows. This may be boring but very effective in the long run. Why would anyone choose a different strategy since it has proven to be successful for such a long time? Anyway, besides finding the right companies to invest in, investors must stay invested. Because If one is not invested, one is, of course, not subject to short-term volatility, but this comes at the price of not receiving any cashflows and not taking advantage of any potential price appreciation.

Yes, Ladies and Gentlemen, investing needs a small quantity of stamina.

Please feel free to share your ideas and thoughts 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, joy!

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 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

Year-end competition

Ben asked me about Incrementum’s partners‘ positions in the year-end competition. I finished second and had my numbers published last spring; there is complete transparency. However, my partners did not participate. The year before, my partner Hans participated, but in 2022 he was too busy making money for our investors and this he did! Now back to the competition. I usually finish more or less among the first three. This year as mentioned, I finished second. When I was in the first place, I sent the silver coin to the person in second place. This happened roughly four or five years ago when my friend from University, Andreas, received the coin.

Little secret

The question is, how do I finish within more or less the first three regularly? Ok, let me tell you a little secret. It is because I orient myself at the futures prices and keep away from speculation and daily noise at the start of the year-end competition.

Futures prices

All the buy- and sell-side participants‘ know-how of an entire market is reflected in those futures prices. So, for example, Brent crude oil was trading at 125 in March 2022, but the futures contract for December stood at 86, which meant that even producers, the largest oil companies on the planet, did not believe that oil would finish the year at 150. Otherwise, they would not sell their products at a much lower price in a forward market. Alternatively, while I am writing this, the price for one ounce of gold in December 2023 is trading at 1’977. So what is the rationale for coming up with a price estimate of, let us say, 2’463.29? It does not make sense when currently, even the largest gold miners are happy to sell their production forward in December 2023 for 1’977. Of course, futures prices fluctuate heavily, a little less at the long-, yet more at the short end. Still, they are always worth looking at as one indication of several.

Psychology

Humans have a bias toward overweighting short-term events. When investing, this is not always very helpful. Moreover, we are awful at admitting mistakes. We absolutely hate being caught wrong. Even after years of underperformance, we keep holding on to our views because our ego wants us to be right more than anything else, even more than make money. Lastly, we love being told what we want to hear. This is why we prefer to read what confirms our view rather than reading stuff challenging it. You know what? That makes me happy because it offers opportunities. I am always trying to challenge my views, which is hard, and I admit I am not very good at it. Nevertheless, it sometimes works, and I hope to improve with age.

Interview

The following link leads to an interview I gave to «Executive Global» I thought you might like it:

The Swiss Banker – Incrementum

Enjoy the read, Ladies and Gentlemen!

Please feel free to share your ideas and thoughts 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, joy!

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