Inflation ?

Dear Ladies and Gentlemen

Thank you very much for all your positive feedback on the Oscar Wilde quote. I am happy you liked it.

Today I am asking myself: Are there any signs of inflation?

Currently, we cannot say so.

We do not see any significant increase in commodity futures prices. Especially on the energy front, it even looks as if energy will be produced at ever-lower prices in the coming years. And you know what, household incomes do not reflect any sharp increase in the price of goods as of yet either.

Ladies and Gentlemen, I know some of you might not like this, but since the 1980s, the relationship between monetary developments and inflation rate does no longer seem to show statistical significance. A correlation is not recognizable. Even if one were to argue with a shadow inflation rate, there would be no positive correlation. The deflationary pressures of globalization, due to technical progress and age-related demographics, have not dissolved. Moreover, I believe these factors will remain for some time, still.

Besides, the composition of the shopping basket used for statistical purposes has continuously changed over the past 50 years. While the share of services was increased, the share of goods was decreased. Therefore, rises in wages and salaries in the service sector should lead to a more significant impact on the inflation rate than before, and yet, we can not see that. Anyway, I think you would agree an increase in inflation rates in the course of economic recovery would be somewhat healthy.

Today we do not assume hyperinflation, especially not in the case of a recession and not on a global basis.

I am interested in getting to know your views, Ladies, and Gentlemen!

Every week I am receiving emails from readers asking me about our portfolio mix. It is still the same, roughly 50% in equities and roughly 30% in cash. We are considering an increase in the equity portion over summer. Interestingly, I just read in a research paper that the bullish expectations of U.S. private investors (measured by AAII) fell from 24.4% to 24.1%. This shows that private investors remain very cautious. I keep telling our investors that as a rule of thumb, a rise in the markets only ends when private investors have also returned to the markets and become bullish. For this, we would have to see significantly more than 50% of private investors turning bullish.

Ladies and Gentlemen, I am looking forward to your comments! But please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li

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

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li