Schlagwort: Incrementum

Dear Ladies and Gentlemen

Many thanks for the many and very positive comments I received to my “China-weekly”. Maybe I should start writing travel reports rather than trying to explain topics in connection with macro-economics, global exchanges and investments. I had quite a few of my readers sharing their experiences while travelling in China and the feedback I received confirmed my view. China is just a great place to see and experience and thus well worthwhile visiting.

Now and back in Liechtenstein/Switzerland and because of this very positive feedback, I would like to do another and final round of “China potpourri”.

Opera: We had organised tickets for Nabucco at the Shanghai Grand Theater. The Shanghai Grand Theater is a reasonably modern building, immaculate, with comfortable seats and very good acoustics. We had perfect seats, fifth row in the stalls and spent a wonderful time listening to the beautiful voices, the impressive choir and the harmonic music. It was just great! We were somewhat surprised about the casual dress code of our fellow spectators (which suit us well as we didn’t bring along very formal clothing) and the low ticket prices. We payed roughly 20% of what we would have had to pay for such tickets in Zürich. Fantastic value for money!

Mobile Phones: Mobile phones are omnipresent. People use it, at least this was my impression, even more extensively than here in Europe. Younger people watch TV on their mobile phones in the subway, on the bus and even walking in the streets, they listen to music, pay their bills, shop groceries. book tickets and call for taxies, they communicate through their social media accounts, take pictures (especially in restaurants) and just seem to love selfies. My mobile phone is important to me but from what I have seen in the large cities we visited in China, mobile phones are even more important to people in China.

Apps: There seems to be an App for just about everything, on just about every mobile phone in China. What impressed me were the restaurant apps. Clients may pre-order their food in restaurants and when arriving at the restaurant (in the morning before work or during work or at lunch time) hold their mobile phone against a reader and receive their pre-ordered drinks and/or food immediately. There are also taxi apps that pay a bonus to the taxi driver and/or the customer when ordering a taxi via the app. This leads of course to terrible consequences during rush hour and/or other times of high demand for taxis, as taxi drivers will not pick up customers in the streets if not necessary in order not to miss out on the bonus offered when being hired via app.

Tips: As an experienced traveller and just being on a great trip to new places in China I felt like wanting to tip the people that offered services to us. Only, this is not at all standard everywhere in China. In the large hotels and sometimes taxis it is no problem and tips are appreciated but in many restaurants service staff is not used to tips. At one time a waitress did not want to take the tip we offered and gave it back to us with a mile, thanking us, explaining that this was not necessary.

Marriage Market: This marriage market thing, Ladies and Gentlemen, may seem somewhat strange to people not used to all the cultural peculiarities. Marriage markets are events, usually happening on weekends in local parks. The idea is that parents advertise with small posters their adult daughters and/or sons to find a partner for them. I asked Laura from Fudan University if she could give us an explanation. She told us that the idea was for parents that their children would go to school, study hard, go to University, finish their bachelor and master’s degrees and spend time rather behind books and in libraries than in bars and clubs. Like this it is very difficult to find a partner. At the end of their studies and in the eyes of their parents, the children would need a partner to form a family and get children of their own. You know, those parents take great pride in talking about their children and in seeking a perfect match for them. The parents, born during communism, where everything was planned and organised for them, want to help organising the life of their children. Laura told us that this was somewhat embarrassing for the children but out of respect for the parents, children would usually go on a first date with a potential candidate and at worst would spend half an hour talking to someone. This is of course not binding for the children and once the children have found a partner in their own ways and present their partner to their parents, the parents will stop the advertising and spend their time travelling, playing cards, dancing and singing karaoke.

Interesting, no?

Please share your thoughts and ideas with me. Please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

Many thanks for the many comments I received to my last “weekly”. It seems I am not the only one concerned. It is important for each one of us to start as early as possible to work on a strategy that ensures financial security besides or in addition to what governments may offer or not.

But now, I would like to switch to today’s topic, China.

As some of you may know, I am currently travelling in China. So far, I was in Shanghai, Xi’an, Beijing and just arrived in Shanghai again, before heading back to Europe next week.

This is my first visit to Mainland China and it is a short one (18 days) and I am only receiving a superficial first impression of this enormous country and still from what I am seeing, I am truly fascinated. Let me share some impressions in potpourri style with you.

People: I saw a lot of people; the cities are huge and there are people everywhere. The people I saw were mostly friendly and seemed happy. I saw families, grandparents, parents and children, spending time together in parks, restaurants at markets, visiting sites. I saw people of all ages and all styles and a lot of them. Very few of the people I met spoke proper English or any other foreign language, this makes conversations sometimes difficult.

Traffic: I used the high-speed rail between Xi’an and Beijing, which is perfect (average speed 300 km/h). Not only was it super easy to use but very punctual and clean. During one week of Beijing I used the subway system multiple times every day and I was impressed by the cleanliness and punctual and efficient service of this public transport system. On the other hand, the streets are almost all day long full of cars and it needs time and nerves to cope with such intense traffic. Scooters and small bikes in cities are all electric, which could lead to reasonably calm and silent traffic. However, in Xi’an and Beijing drivers are honking all the time, trying to squeeze themselves in front of others. This is not so much the case in Shanghai.

Culture: Very rich and old cultural heritage, plenty of sites dating back thousands of years, thus older than Europe. Mostly underestimated by non-Chinese and reduced to some stereotypes of rich emperors enjoying life with their concubines.

Food: You can get anything you like. From Swiss chocolate, fondue, veal sausage to German Schweinshaxe, Japanese Sushi and all sorts of Chinese dishes. This all comes in different price and quality ranges. I am loving it! We mainly ate Chinese food and Asian fusion (my favourite) and even on domestic flights in economy class the food was of surprisingly good quality.

Shopping: As for the food anything also goes for shopping. I have never seen such a concentration of upper level brand stores than in the large cities of China. However, they are very expensive, more expensive than in Switzerland as I noticed. On the other side you can buy non-branded articles at minimal cost. The range of the offer is huge.

Politics/economics: I also had the possibility to meet with people at Shanghai Fudan University and speak about current global political and economic issues and consensus was that (at least amongst the people I met) they didn’t seem too concerned by this “talk” of a global trade war. First it seems mainly the United States wanted to adjust tariffs to what seems fair to them, but no other country is following and second even if Chinese exports to the U.S. will decrease, they should be mostly compensated by exports to other regions/countries over time. Not to forget that if the United States increases tariffs on Chinese products, China will not hold back but do the same for products exported to China by the United States and according to an article in the Global Times over 900,000 U.S. jobs are supported by exports to China and thus would be at risk. Furthermore, and unlike in the U.S., the Chinese political leaders are not facing elections every four years and can therefore take decisions that may seem unpopular at short term without baring the risk of being taken out of office and therefore can easily stand up to President Trump’s threats.

Interesting, no?

Please share your thoughts and ideas with me. Please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

Zero or close to zero percent Interest rates, equities markets going down, decreasing gross yields on real estate investments and longevity.

Ladies and Gentlemen, baby boomers may have to rethink their retirement plans.

You may think we know all that, but this is really important, now! Because knowing alone doesn’t help, it just doesn’t do the job considering most of us will agree upon the fact that knowledge that doesn’t change behaviour is useless and therefore we may need to change our behaviour or in this case investment behaviour. I have received so many mails from concerned readers of my weekly mails during the last three months, some were worried to lose their wealth, some questioned their investments and almost all were emotionally affected.

This, Ladies and Gentlemen, is normal human behaviour, nothing to worry about. Our ancestors needed such pronounced emotions to survive. It helped them not to become a snack for some hungry, ferocious animal. But today we don’t need these emotions to be as pronounced as 100’000 years ago and to see a personal portfolio go down by 10% or even 20% is in most cases, as unpleasant as it may feel, not a life-threatening experience. Volatility is just part of the game of investing and if you want to take out all volatility of your portfolio your return will most probably be negative as the cost of reducing risk down to zero is higher than the expected return from your investments may be. Therefore, especially during difficult times, i.e. very volatile markets, you should not lose focus and maybe avoid listening to all the negative voices around you, because they are either a) wrong for years or follow some b) unproven or c) outdated theory (most of the time a combination of all three of them).

Keep in mind what your investment goal is and if your investment goal is capital preservation over centuries, invest in assets that have a proven track record of keeping their value over the very long term like for example gold. But gold may be very, very volatile in the short to medium term and your life expectancy may be too short for you to appreciate the positive effects of gold. If you want to achieve very high investment returns in the short term, you will need to speculate and put (I deliberately avoid using the term “invest”) your money into highly volatile and risky equities, private equities, crypto currencies, etc., facing the risk to lose the entire “invested” capital. If you are willing not to be affected by the volatility of your portfolio but are happy to receive a cash return on your investments, you may want to consider a balanced equities portfolio of companies with a proven track record of being able of producing free cash flows even during not so perfect market conditions.
If you don’t want to see negative signs in front of your performance at any time, please do not invest whatsoever, rather spend your money or you will become your banker’s nightmare.

However, Ladies and Gentlemen, if you want to live through a long and healthy retirement age with some regular income stemming from your wealth and if you want to be avoiding eating up day by day more and more of that wealth, you may need to get accustomed to the idea of accepting volatility as an unavoidable variable.

All of us, Ladies and Gentlemen, must make sure not to overweight short term thinking too much and to let it influence our long-term investment strategies. It is always good to question investment strategies, but sudden changes and fear mostly lead to worse than expected results.

…and this brings me to the answer of the question in the title: “will we have enough to retire?”

Well, it entirely depends on you!

Please share your thoughts and ideas with me. Please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

Investors don’t like uncertainty.

Yesterday’s financial markets plunge, triggered primarily (but not only) by fears of a global trade war, marked the fifth-largest point decline in the Dow’s history. CNN’s fear and greed index, measuring seven different market indicators, currently shows extreme fear. A potential trade war leads to uncertainty, uncertainty is fuel for bad performing markets.

I am often being asked by friends and investors what would be best to do, and I keep repeating the same over and over again and I believe it really seems fairly simple and usually works fine for me:

1. Don’t leverage your portfolio.
2. Do the nitty, gritty work and analyse potential investments.
3. Buy mainly (or even only) into net cashflow producing companies.
4. Keep the bulk of your assets in the currency of your expenses.
5. Keep a fair amount of cash so that you can invest (buy more) when others need to sell.
6. Buy on weak days.
7. Sell on strong days, take profits. Taking profits is wonderful. Don’t get too greedy!
8. Invest in companies distributing stable dividends, interests, capital reductions, etc. The cashflow from such investments will keep you afloat during difficult market times and there will always be difficult market times, like the one we are experiencing so far this year or maybe even worse!
9. Don’t try to time markets, it is very difficult to time markets because you will most probably not be able to foresee the future.

Ladies and Gentlemen, this is only a selection of investment principals I am living after. Obviously, they do not represent a recipe for the construction of an all-weather proof portfolio. Portfolios need to be custom tailored according to clients’ needs, age, risk awareness, etc. If you think about what is important to you, you may come up with your very own list of investment principles.

In any case, investing is not speculating. It is not playing around with financial instruments either in search/hope of a quick buck. It is a serious exercise and it is by definition: long-term.

Please share your thoughts, ideas, fears and questions with me. Let us put together a great list to look at during difficult market conditions. Many thanks!

…and therefore, Ladies and Gentlemen, if you are happy to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

Thanks to the ACQ5 award we received some weeks back, I have been interviewed and am happy to share with you the final text that was published, as it shows well our way of thinking:

“At Incrementum AG we genuinely believe in tangible assets and we are modest enough to accept the fact that we cannot foresee the future and thus, where markets are heading. Our investment team has a serious interest in and a profound understanding of monetary history. In combination with out-of-the-box reasoning and prudent fundamental financial research, purposely avoiding daily chatter and noise, this offers a distinct skill set that has proven to be utterly valuable for our private clients and investment fund investors alike.

Participations in listed companies are very tangible to us and equities therefore belong to our core investments. We are building truly customised client portfolios according to our clients’ requirements, needs and willingness to accept risk. As long-term investors we invest solely in equities of listed companies with a proven track record of producing net free cashflows over years, happy to share those cashflows at least partially with investors in the form of dividends and/or capital reductions. On the other hand, and after many years of extraordinary money supply and ultra-low interest rates, we do not invest in government bonds as we do not feel comfortable with the current risk reward profile offered by those.

Large scale monetary policies are difficult to judge and while we are not entirely certain that the increase in global debt will be sustainable, we are humble enough to recognise that so far, the leading central banks seem to have mastered the 2007/2008 financial crisis rather well. Either way at Incrementum we see money only as means for facilitating global trade, consumption, maybe storing value very short term and thus as a lubricant for the global economy.

Our independence and short lines of communication are helping us to respond to evolving markets rapidly, to communicate freely and to act without any bias for our clients which as a result is helping them to prosper long term even in challenging market environments.

Ultimately, we believe in our independent and flexible boutique approach as it combines unconventional thinking with state of the art asset management know-how. We are convinced that the assets we manage will offer our investors the growth element that our company name Incrementum stands for.”

Ladies and Gentlemen, I am very happy to receive your feedback and if you want to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

We are launching the second edition of our Incrementum Crypto Research Report. I highly recommend you to have a look at our dedicated crypto research website and to register to receive your free copy either in German or English:

http://cryptoresearch.report/downloads/.

In this brand-new edition, we are looking at the following topics:

• Is Bitcoin a bursting bubble or the first case of hyper-deflation in history? A checklist on financial bubbles and a comparison of bear and bull markets sheds light on the issue.
• The recent crash in the crypto market has been accompanied by a surge in scams and fraudulent activities. Regulation is getting tighter, yet further growth can be expected.
• Trading cryptocurrencies can be rewarding but tough – especially in bear markets. Many aspects should be considered, and Technical Analysis can help.
• Hard forks are on the rise as ICOs are becoming increasingly regulated in places like China or South Korea. This has multiple implications for investors in cryptocurrencies.

…and for those who have asked me in the recent past about Incrementum’s motivation for researching this very topic, there is an interview with me in the back of the report giving some background information. Please let me know your thoughts!

Therefore, Ladies and Gentlemen, if you want to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen

My friend Andy replied to my last weekly mail, agreeing basically with what I wrote. However, he was mentioning that currently only the U.S offered decent interest rates on their government bonds, while Europe’s government bond yields were still mostly close to zero and therefore offered no real alternative to equities. He also mentioned that investing in U.S. debt and hedging the USD currency risk would probably eat up most of the interest for Swiss Francs or Euros investors. I couldn’t agree more. Nonetheless, interest rates in Europe may stay close to zero for a while and therefore European equities should still perform well for some time. Yet, European equities markets will follow American equities markets and thus may be more affected (at least short to mid-term) by the performance of the Dow Jones Industrial Average Index than by low base rates in Europe.
Now, going back to equities investments in an environment of uncertainty brings me to one of my favourite topics. Nassim Taleb mentioned in his book “Antifragility” the concepts of fragility, robustness, and antifragility.

If we take Taleb’s concepts into consideration while thinking of equities investments, we can maybe identify three types of companies.

Number one, the (rather) fragile one (that may offer superior returns during booming markets) typically is a company with a leveraged or even highly leveraged balance sheet, producing products and services in a competitive environment without being market leader in its sector, thus occupying a peripheral market position. (Logics of Organization Theory by M. T. Hannan, L. Pólos, G. R. Carroll). As long as interest rates decline or stay low, the leveraged balance sheet may lead to decent margins, maybe even margins above the industry average. Now, if interest rates start to increase margins decline because of higher financing costs. In a recession the company may even go belly up because of failure of debt servicing. Equities of such a company are under heavy pressure during difficult market conditions and recover only very slowly if at all. Fragile companies may pay dividends during boom cycles, but regular dividends are not part of the investment concept.

For number two we look at a (rather) robust company, we see a stable business model, near-centre market positions (Logics of Organization Theory by M. T. Hannan, L. Pólos, G. R. Carroll) with limited amount of debt that could easily be serviced or even redeemed with current cash flows. Increasing interest rates have only a limited influence on such a company’s margins and profitability. Its equities will also come under pressure during difficult market conditions but usually tend to recover reasonably quickly once markets stabilize. Robust companies typically pay dividends even during difficult market conditions, regular dividends are part of the investment concept.

Number three, the antifragile company, shares many of the qualities of a robust company. The company generally operates with no debt at the market centre (Logics of Organization Theory by M. T. Hannan, L. Pólos, G. R. Carroll), during a crisis it will have the financial power to acquire companies or parts of companies that are under financial strain. Antifragile companies usually emerge stronger from a crisis. Its equities will also come under pressure during difficult market conditions, but they usually recover quickly and may even reach new highs once the crisis is over. Like robust companies, antifragile ones typically pay dividends even during difficult market conditions, regular and very often increasing dividends are part of the investment concept.

And as always, Ladies and Gentlemen, if you want to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth

Dear Ladies and Gentlemen,

Many thanks for the kind messages I received on the award we obtained. Many thanks indeed!

The last weeks were rather nerve wrecking for one or the other investor. I received some messages by concerned readers asking me if this was “the crash” and if it was over now and what I did think of the markets in general. First, I would like to thank you for your great confidence and trust in my capabilities in foreseeing the future. However, and as unfortunate as it may seem, I do not know where the markets are heading. The only thing I know is that if you invest in companies with solid underlying business models, producing solid net free cash-flows, you will most probably be compensated with dividends during good and bad times for the risk you are taking, and this may be comforting for you as an investor. If you keep in addition some cash and precious metals in your portfolio, it will most probably also get hammered in a crash but should recover eventually and maybe even quickly.

Mister Warren Buffett, probably the best known and most successful fund manager in the world, having been asked the same question came up with an easy answer. He said that if something he liked was on sale he would buy more of it, same was true for equities. If equities he liked were traded at low prices, he just buys more of them and eventually they will go up again. He also said: “don’t watch the markets closely”. This is a very valid advice by Mister Warren Buffett as these markets may make investors nervous and lead to fear and fear usually does not necessarily lead to the best investment decisions and therefore returns.

Now, coming back to the question of how I am seeing markets, I can only say that we should not forget the fact that in the past, increasing interest rates always lead to decreasing appetite for equities and in the U.S. interest rates are on the rise. If investors receive decent and more normalized cash returns on fixed incomes (than during the last decade), they will switch equities into fixed incomes. Where the level of such “normalized cash returns” starts is anybody’s guess but I think investors will want to see interest levels in the range of dividend yields of solid companies. Thus, a little caution probably doesn’t hurt.

Ladies and Gentlemen, what is your opinion?

Please share your thoughts with me, please feel encouraged to do so and please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!

Yours truly,

Stefan M. Kremeth