Like the tall-fish-stories exist also many investor’s stories, i.e. hindsight everybody knew. To avoid this reproach, you find below excerpts from our publication
“Briefe an Kapitalanleger” (“Letters to Investors”) in crucial capital market periods (please click on the number and the corresponding citation will be displayed):
No. 1/1976, p. 6: „The prices of US stocks almost doubled since their low in 1974. The extraordinary stock price rally since December 1974
is mainly due to the fact that most stocks at that time were heavily undervalued and, therefore, a correction was needed. This happened now, and the future development will depend
mainly on the macroeconomic development which - in view of the facts described above - we see with caution. … Overall, we have difficulties to enter the new year with great
No. 2/1978, p. 5: „After the decline in the last couple of weeks, the US stock market is heavily oversold, i.e. a technical rebound is overdue.”
No. 3/1980, p. 1 (26.2.1980): „Therefore, we expect a RENAISSANCE OF STOCKS as investment instrument.”
No. 3/1982, p. 1 (23.2.1982): „If we recommend today - after having advised caution for more than one year - selected purchases in Switzerland and
Wall Street, this in not because we disregard the current political and economic problems, but precisely therefore, i.e. because due to these problems stock prices are so low.”
No. 8/1984, p. 1 (26.7.1984): „Essential for successful stock investments is therefore foresight, a considerable amount of courage and a lot of
perseverance. - In practice this means today that you should not let yourself become infected by the current pessimistic sentiment, but rather use the actual weakness for selected stock
No. 9/1987, p. 1 (26.8.1987): „Although today’s situation cannot be compared with the twenties, the almost ballistic rise of stock prices is reminiscent
of the ’blow-off’ in the years 1928/29. Even at the risk of missing something, we warn of new investments (a missed profit hurts less than a loss!) and recommend protecting existing positions
No. 10/1987, p. 1 (23.9.1987): „Conclusion: After 5 years of bull market a cautious investment policy is appropriate. Equity investments require
persistent monitoring and it is recommended to protect the profits with tight ’stop-loss-orders’.”
No. 11/1987, p. 1 (28.10.1987): „For months we warned that most stocks are overvalued and thus the risk/reward-ratio unfavourable. In the penultimate
edition we displayed with a chart the parallelism of the stock price development in the twenties and the eighties. Therefore, you should not have been surprised by the recent crash.
Due to this constellation we recommend to (re)purchase again attractively valued blue-chip stocks."
No. 4/1990, p. 1 (28.3.1990): „Conclusion: Due to historically high money and capital market rates as well as an overheated economy, we continue to
regard the risk of equities as high. We expect that the nervousness of investors will rise further and that stocks can be bought at lower prices later this year.”
No. 1/1991, p. 1 (19.12.1990): „As soon as all fears are reflected in the prices and the stocks passed from weak in strong hands, the trend will turn
up again. Decreasing interest rates will play the appropriate back-ground music.
In summary, we expect for 1991 the following developments:
1. Rising stock markets
2. Lower money market and bond yields
3. Weaker Swiss franc”
No. 3/1995, p. 1 (1.3.1995): „The overdue correction / consolidation of the 1993 bull market put a damper on investors. The uncertainty about the interest
rate development caused further sales. The Mexican crisis worsened the mood further and the bankruptcy of Baring convinced the last sceptics that money market investments and bonds are the only
reasonable investments. This capitulation of many investors created in our view an extremely interesting situation, i.e. the risk/reward-ratio has never been so positive in the last one and a
half years. Therefore, don’t let yourself become infected by the current very pessimistic sentiment, but be courageous and act anti-cyclically - it will be rewarding!”
No. 4/1998, p. 6 (24.3.1998): „The above long-term chart is showing very well the ‘flagpole’. Nobody knows how long the liquidity driven bull market will
last. But the ‘fair value model' of the Federal Reserve (earnings estimate divided by 10-year T-Bond yield) confirms that the US stock market is overvalued.”
No. 3/2000, p. 1 (21.2.2000): „This has led to valuations which from a business and commercial perspective are not comprehensible and can only be compared
with the ‘bubble’ in Japan at the end of the eighties. Back then, investors’ psychology (herd instinct) determined the stock market development.”
No. 4/2000, p. 1 (27.3.2000): „Today’s valuations of NASDAQ, “New Market” etc. are economically incomprehensible respectively can only be explained by the ever
growing stock market euphoria.”
No. 3/2003, p. 1f. (24.2.2003): „We hope that you have the required nerves of steel and cool head to not get infected by the current very pessimistic sentiment,
but instead anti-cyclically buy stocks at today’s very attractive prices. Who considers the risk of equity investments as too high should never buy stocks because today the risk is a fraction
of what it was early 2000 when everyone was holding and buying equities.
These stocks suffer today from the political and economic uncertainty. When it comes to a military intervention in Iraq, stock prices will once more be under pressure in the first days but then sharply
turn up. Therefore, you have to be ready to fill up completely your equity quota at the first rumbling of cannons."
No. 9/2006, p. 1 (28.8.2006): „For months we are following the development of the US real estate market with increasing concern and have pointed out several times
that a correction of the real estate boom in the US will lead to a collapse of consumer spending and thus the economy. The last statistical data re building permits, housing starts, number of houses
put for sale, etc. is indicating that this scenario is becoming more and more likely.”
No. 3/2008, p. 1 (25.2.2008): „The crisis in the building and real estate sector is continuing and will cause further victims (write-offs) in the banking sector.
Also insurance companies will be caught in the mess, especially those who sold credit default coverage. And all these problems are weighting on the US-Dollar which is deprived of the ‘interest corset’
and thus will weaken further. This is the bad news for us investors.
The good news is that as a countermove to the weakness of the Dollar the gold price will shoot up. If you followed our urgent
warning and recommendation (the August 2006 edition e.g. was titled: ‘Last call for gold investors!’) you can watch the collapse in value of the US-Dollar and the turbulences in the financial markets
No. 3/2009, p. 10 (23.2.2009): „Once more, the stock markets proved to be a good economic barometer. Already in summer 2008, i.e. long before the financial crisis
reached its climax, the stock markets started to discount a recession. Without the mentioned fire sales of hedge funds, the bottom through would have been reached already; so the sell-off will continue for
some time. Some leading indicators … are suggesting that the economy will reach the bottom in the 2nd/3rd quarter and a slow recovery will begin in the 4th quarter. As stock markets begin to discount
such developments 6 to 9 months in advance, in spring the Asian and later also the European and US markets will anticipate the economic recovery. Therefore, you should use the present capitulation phase
for selective purchases. When the economic recovery is showing up in the statistics, stock prices will have gone up already 50 %!”
No. 9/2010, p. 10 (23.8.2010): „… conclusions: ... Invest in real assets, namely gold and gold mining stocks and platinum. With indirect real estate investments and
stocks of crisis-resistant companies you can protect your wealth also from the debt and currency crisis. These asset classes will experience strong volatility but the purchasing power can be protected.
Hybrid products (combination of nominal and real values, e.g. convertible bonds) are also advisable and less of a strain for the nerves as they are less volatile.
Equities are in comparison to bonds attractively valued. This is evidenced e.g. by the fact that a lot of stocks have a higher dividend yield than bonds (IBM e.g. raised early August USD 1.5 bn at 1 %
for 2 years, the stock is yielding 2.6 %, Pfizer even 4.5 %).
The USD is high risk and should be hedged (best against CHF).”
No. 9/2011, p. 9 (22.8.2011): „But often the phenomenon can be observed that the stock markets are rallying when the economy is weak and are declining in boom
periods. … Because liquidity is the life blood of stock markets, we see often this apparently illogical behaviour. Because there has been never before such a lot of liquidity in the system of Western
industrialized countries and also valuations are attractive, the prospects for rising stock prices are good.”
No. 6/2012, p. 8 (29.5.2012): „Despite massive budget deficits of almost 10 % of GDP, economic growth in the USA remains weak at 2 %, i.e. USD 5 new debt is
required to generate 1 % economic growth! This is evidence that infrastructure investments hardly create sustainable growth. Therefore, the USA will not succeed to boost organic growth with deficit
spending. Because the treasury is empty and investors less and less willing to finance this debt economy, the Federal Reserve has no option than to buy more government bonds. QE1 and QE2 and the
‘operation twist’ will be followed by QE3 and QE4…”
The consequences of the above-mentioned policy on both sides of the Atlantic Ocean and in Japan is a monetization of the public debt and an accelerating decline in value of the currencies what is
evidenced by rising prices for real assets (‘asset price inflation’).”
No. 10/2012, p. 1 (25.9.2012): „As has been seen already with QE2 and QE2.5, an expensive monetary policy cannot boost the economy and create new jobs to
reduce the unemployment rate from more than 8 % to 6 %. Because unemployed people are also voters, the timing for QE3 two months before the presidential election is not coincidental. Bernanke is
certainly aware of the limited (direct) impact on the economy. But he is counting on an indirect effect: The excess liquidity lets stock and real estate prices rise. The ‘wealth effect’ created
this way should boost consumer spending what would lead to investments and new jobs. If this were to work out, we investors will be very happy.”
No. 6/2013, p. 1 (28.5.2013): „The stock market rally prescribed by the central banks is continuing and begins to develop momentum on its own: Because stock
prices are rising, more and more institutional investors (among them many hedge funds which have missed the bull market completely) are forced to invest their liquidity into stocks. Because it is
momentum investing, the purchases concentrate on the super-large-caps included in the S&P 500 and ETFs on this index. As a consequence, we have a division of the market: On the one hand these
super-large-caps which are bought because they seem to go up indefinitely although they have reached already princely valuations; ’The bull market is feeding the bull market’.”
No. 6/2014, p. 1 (27.5.2014): „The Federal Reserve ... is still pouring liquidity into the system, although the US economy is in a confirmed growth trend.
Because this liquidity is not flowing into ’main street’, its effect on the economy is minimal and indirect (more consumer spending thanks do the ’wealth effect’). Raghuram Rajan, former chief
economist of the IMF and today governor of the Indian central bank, summed it up very well at the St. Gall Symposium: ,The QE is leading first of all to a global overshooting of asset prices and
is weakening the respective currency.' In view of this excess liquidity, investors and also many stock market experts don't see an end of the bull market. The confidence that the central banks will
prevent a stock market crash is reflected in the record low volatility of the S&P 500 of only 11 - 12 %. This is a dangerously low and not sustainable level and thus turbulences inevitable.
Therefore, we recommend a ’spring cleaning’ in your portfolio: All stocks with a negative risk/reward-ratio should be eliminated and the several times presented hedging strategy with volatility