Monat: April 2024

Good Morning Ladies and Gentlemen

„I’m afraid the masquerade is over…“

From the song “The Masquerade is Over” by Allie Wrubel & Herb Magidson

What if China

What if China, as suggested in a recent article in a biweekly Swiss financial newspaper, exports goods at subsidised prices to markets outside China due to sluggish domestic market activity just to keep Chinese GDP growth up?

Inflationary trends

While, as I did write in my “Stefan’s Weekly” for the last few months on several occasions, I was very cautious about the overconfidence in the markets about forecasted, or should I write hoped for, multiple interest rate cuts by Western central banks, today I feel the opposite. I now believe there is too much pessimism in the market. When I now read the first news coverage mentioning that the U.S. Fed will not reduce its base rates in 2024, I feel confident they will.

Chinese impact on global trade

One sign of the unloading of overcapacity is the marked increase in China’s export share of the global market. Compared to 2019, the eurozone recorded a significant decline in industrial exports in relation to global industrial production, while China achieved a considerable increase. U.S. Treasury Secretary Janet Yellen explained in an interview after her visit to China last week that new tariffs against China are possible because: „we are concerned about a possible increase in Chinese exports in sectors with large overcapacity.“ Western consumers may welcome the low prices of Chinese products, but domestic companies and concerns about economic growth will pressure governments in industrialized nations. Tensions in global trade are, therefore, likely to escalate further. What would that mean for Western (and other) economies?

One simple conclusion

While inflation in many Western countries still exceeds central banks‘ targets, China is currently threatened by deflation. A straightforward conclusion could, therefore, be that deflation will turn on stage again in Europe and the U.S.. If subsidised inexpensive products of relatively good quality from China enter global markets, they will displace more expensive products from Western manufacturers. The US and Western countries are criticizing „unfair trade practices“ by the People’s Republic. It seems no measure is ruled out to combat the Chinese government’s „unfair practices“ in international trade.

Second simple conclusion

And yet, I would not rule out economic growth in Western economies may stall, which could rein in inflation and lead to a reduction in base interest rates. We will see soon enough, Ladies and Gentlemen.

Sarah Vaughan

And now let’s listen to „I’m afraid the masquerade is over“ interpreted by wonderful Sarah Vaughan: Sarah Vaughan – (I’m Afraid) The Masquerade Is Over (youtube.com).

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

Good Morning Ladies and Gentlemen

„The stock market is a device for transferring money from the impatient to the patient“
by Warren Buffett

Inflationary trends

Inflationary trends are usually never just a monetary problem but an expression of long-term structural transformation processes. US central banker John Williams, head of the New York Fed, believes the Fed has made considerable progress in lowering inflation in the US. However, the uncertain outlook means that the central bank must monitor incoming data to determine its interest rate policy. I believe over the next ten years, we will see immense demand for investments in some very particular areas:

Investing in tangible assets

Well, Ladies and Gentlemen, this is nothing new to my “older” readers, of course. I still firmly believe in investing in tangible assets as they remain the best protection against inflationary trends. So, quite frankly, I remain optimistic about investing in equities in the long term. The question remains: What sectors should you invest in? Where can we find value?

Pharmaceutical, Biocare and more

Everything relating to longer and healthier lives will be essential, i.e., areas of biotechnology, life science, medicine, and pharmacy. I believe safety and security will also boom, from cyber security to security of supply with, for example, new storage technologies. Another major topic will most probably remain the data economy and digitalization, with artificial intelligence in, for example, so-called “clean” energy and mobility.

Challenges to the “old economy”

Therefore, ongoing changes seem imminent. They will continue challenging almost all “old” business models and simultaneously help many new ideas break through.

Very long trends

Trends are usually lasting deceades. When looking back over the last 200 years, we can see decade-long trends for sectors like finance and real estate, transportation, energy, natural resources and materials, information technology and communication and maybe soon enough, biotechnology, life science, medicine, and pharmacy. Looking at current demographic trends and at valuations, I would not be surprised to see such a shift.

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

Good Morning Ladies and Gentlemen

„Hedonistic societies do not endure.“
by George Orwell

Extract from the quarterly reporting for our private customers

Today, I want to share some extracts from our quarterly report to Incrementum’s private clients.

Comparison of returns

What return would you have generated if you had invested in standard asset classes from 1900 onwards, i.e. in the S&P 500, in 10-year US government bonds and in gold? Interesting question, no? Well, there is no magic, Ladies and Gentlemen, just stats. Let us dig in:

S&P 500

The S&P 500 Total Return Index has generated an average annual return of 9.8% since 1900. This comprises price gains (5.5%) and dividends (4.3%).

US government bonds

With an average total return of 4.6%, 10-year US government bonds remain well below the S&P 500 mark. The best period for US government bonds was from 1980 to 2010. Falling yields in a disinflationary environment ensured high bond yields, averaging 8.9% annually during that time.

Gold

The price of gold only marginally changed until the end of the Bretton Woods system in 1971. As a result, gold is on the books, with an annual increase of only 3.8%. After the end of Bretton Woods (dissolution of the USD gold price peg), the performance was significantly stronger; since then, it has been 5.4% per year. Gold’s average total return has, therefore, also remained well below that of the S&P 500.

Dividends

For a few of our investments, I have compiled the number of years for which the respective companies have not lowered their dividends. For Nestlé, this has been the case for 38 years, for Novartis for 27 years and for Roche for 32 years. Rubis has also not lowered its dividends for over 20 years and, on the contrary, has increased its payout yearly for the past 13 years. Enel has been paying regular dividends for over 25 years and has increased them continuously since 2013. BMW has paid regular dividends for over 25 years but has adjusted them to fit its business performance. BASF has been paying regular dividends for over 25 years and, despite all the crises, has never reduced them since 2008 but has increased them a total of 12 times since then.

Hand on heart

I like companies that provide employment for their employees even during challenging economic, political and social periods (9/11, Asian crisis, financial crisis, bank collapse, Covid crisis, Russian invasion of Crimea and a few years later of other areas of Ukraine, energy crisis, elections of increasingly ideological political representatives, etc.), remain profitable and thus fulfil an essential economic task. If such companies are then able to generate positive cash flows with their intrinsic business and are also willing to share these positive cash flows with their investors, we tend to use them as part of our investment strategy for private clients in their portfolios.

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