Legends never die

This is to my friend Anton, who not only is a very bright economist but who has a talent for spotting culturally significant pieces of art.

According to data published by the Chinese customs administration, China’s imports grew by 4.5% last month, while exports jumped 21.1% versus November 2019. The increase of 21.1% marks the highest since February 2018. The two numbers result in a trade surplus of USD 75.4 billion for November 2020, which by the way, represents the largest number on record in data going back for at least 30 years. Wow!

Now that, Ladies and Gentlemen, of course, also means that China is sucking up USD liquidity to an inconceivable extent. Keeping that in mind and thinking back to my weekly mail published in the first half of this year on USD liquidity (and here the circle closes; as that very text was submitted by my friend Anton), consumer price inflation can not only be derived from money supply growth. Many economists have done precisely that for the last twelve years, ever since the Great Financial Crisis, predicting exploding consumer price inflation and were caught on the wrong foot as consumer prices did not show any significant increase whatsoever. Governments and central banks in most G20 nations have undertaken significant efforts to get inflation up and so far failed. I get the impression inflation cannot be planned it is developing.

You know, analysts are known for hazy memories when it comes to their predictions that did not turn out to be materialising. Predictions that are not materializing shouldn’t be a problem. As no-one can foresee the future, predictions are nothing more than a very personal interpretation of at the time available data (information) on a given subject and by a given person or an institution at a given moment in time. This is it. People who are taking predictions for more than they are have most probably not understood the concept. How inconvenient it may seem, there is no magic; it is presumably impossible to predict outcomes of any sort, even less, outcomes of complex interrelations with many unknown variables. This is why, when reading research (something I do a lot and truly like doing), I try not to base my investment conclusion on what I have just read but merely look at research as a piece of a puzzle, admittingly not always an easy task.

And now, Ladies and Gentlemen, why did I call this weekly „Legends never die“? Please let me know what you think. Thank you so much for your attention and participation.

As always, 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!

Ladies and Gentlemen, I wish you an excellent start to 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