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Basic Service = Only the Signal Timing Indicator Information

Professional Service = The Basic Service + Commentary by Incrementum

 

INCREMENTUM'S INFLATION-DEFLATION SIGNAL INDICATOR:

A "Risk-On" "Risk-Off" Financial Markets Timing Indicator

What is the “Incrementum Inflation Signal”?


This proprietary trading indicator serves as the crucial input factor for the investment process at Incrementum. The fund managers at Incrementum time the exposure of the asset allocation of inflation sensitive assets like gold, silver, commodities, mining equities and energy equities according to the output of the inflation signal. The signal can be of great value to anybody, who is interested in inflation protection or trades inflation sensitive assets.

“Not only were we able to avoid the mayor drawdown in the commodity related assets of 2014, we actually were able to gain from the move on the short side.” Ronald Stöferle

Inflation is definitely a monetary phenomenon. Because of the dynamics of “monetary tectonics”, inflationary and deflationary phases can alternate. To measure how much monetary inflation actually reaches the real economy, Incrementum utilize a number of market-based indicators - a combination of various quantitative factors including the Gold-Silver Ratio - which result in a proprietary signal. This method of measurement can be compared to a “monetary seismograph”, which they call the “Incrementum Inflation Signal”.

NOW AVAILABLE ON A SUBSCRIPTION BASIS

In the fund we manage, our Incrementum Inflation Signal gauges the inflation trend and we position the fund accordingly.

Historically, we observed periods of between 6 and 24 months during which disinflationary forces were dominant. These phases were particularly painful for the holders of inflation sensitive assets. Since August 2014, our model is showing “disinflation”. This trend has stabilized somewhat recently and the model switched to “neutral”.

Example Below - Not Current

 

DOWNLOAD INCREMENTUM'S "PRIMER ON INFLATION" which gives key insights into the value of their INFLATION SIGNAL INDICATOR

"Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves."

 
The monetary experiments currently underway resemble a walk on a knife's edge. A low rate of inflation can be driven up by brute force through decisive central bank action. Whether the flood of liquidity that is currently put at the banking system's disposal can really be removed in time is more than questionable. In a worst-case scenario, a loss of confidence in the currency may occur that can no longer be reversed. It was said in the 1920s that central bankers were like ships captains who not only refused to learn the basic rules of navigation, but even asserted that they were superfluous. At the moment the impression is that central bankers are attempting to cross the Pacific using a map of the Atlantic. From our perspective it cannot be stated a priori whether inflationary forces will prevail in this power struggle. However, due to existing socio-economic incentive structures, when in doubt, higher price inflation will definitely be preferred over a deflationary adjustment. However, disinflationary forces should not be underestimated. The southern European banking system has not yet been sufficiently recapitalized in the wake of the credit bust and is very reluctant to extend new loans. The preceding credit boom has left a palpable deflationary echo behind.

It cannot be ruled out that deflationary effects will intermittently prevail, e.g. due to another banking crisis or a government bankruptcy. A temporary deflationary episode similar to that of 2008, on the road to greater inflation, could well be a realistic scenario.

Since the autumn of 2011, when inflation rates in the US stood at an annual rate of change of more than 4%, we have seen a strong disinflation trend. Since the inflation rate has in the meantime fallen significantly below the official 2-2.5% target, and the trend continues to point down, the Federal Reserve and the ECB have leeway to take countermeasures against the disinflation trend. Should the trend of price inflation reverse, excellent opportunities in inflation-proof investments would present themselves.

“At first, the pendulum was swinging towards infinite interest, threatening the dollar with hyperinflation. Right now the pendulum is swinging to the other extreme, to zero interest, spelling hyper-deflation. This is just as damaging to producers as the swing towards infinite interest was in the early 1980's. It is impossible to predict whether one or the other extreme in the swinging of the wrecking ball will bring about the world economy's collapse. Hyperinflation and hyper-deflation are just two different forms of the same phenomenon: credit collapse. Arguing which of the two forms will dominate is futile: it blurs the focus of inquiry and frustrates efforts to avoid disaster.”

Prof. Antal Fekete

 

Some Background On the Incrementum Signal Indicator:

Incrementum believes that the inflation momentum currently represents perhaps the most important macroeconomic metric for the financial markets. Therefore Incrementum wants to introduce a new service, that gauges the direction of inflation.

Why is this so important now?

In 2008 the global debt based monetary system has entered an instable phase. The everlasting credit- and debt expansion cannot anymore be orchestrated via conventional central banking policy tools. Financial markets have become highly dependent on these central bank policies. Unconventional monetary policy measures are still on the agenda of every major central bank. In the world of financial markets, Incrementum believes this balancing act between inflation and deflation will become increasingly difficult to manage. Incrementum is convinced that investors should prepare for both scenarios: inflationary periods and deflationary busts.

Endgame Price Inflation?

On the last page of the playbook it is very likely, that there will be significant price inflation. If that happens, investors who are preparing and for instance are staking silver will most probably be in a good position financially. However, due to the monetary tectonics the volatility of inflation sensitive assets has increased significantly and it is due to become an even bumpier ride. You can ride the waves of the inflationary and deflationary tides. The core tool for that can be this proprietary inflation signal. 

In the long run, inflation is always a monetary phenomenon. Because of the dynamics of “monetary tectonics”, inflationary and deflationary phases can alternate. To measure how much monetary inflation actually reaches the real economy, Incrementum utilizes a number of market-based indicators, which result in a proprietary signal. This method of measurement can be compared to a “monetary seismograph”, which Incrementum refers to as the “Incrementum Inflation Signal”.

Incrementum's Company Profile

Incrementum AG is an owner-managed and fully licensed asset manager & wealth manager based in the Principality of Liechtenstein. Our business focus is the management of investment funds that we believe to be unique.

What makes us exceptional in the traditional asset management space? We evaluate all our investments not only from a global economy perspective but taking the current state of the global monetary regime into account. This analysis produces what we consider a truly holistic view of the state of financial markets. We believe our profound understanding of monetary history, out-of-the-box reasoning and prudent research allows our clients to prosper in this challenging market environment.

We believe our investment team offers a distinct skillset that has proven to be extremely valuable for us as investors in these uncertain markets. Our partners have expertise in the fields of:

    • Austrian Investing
    • Absolute Return
    • Fundamental Bottom Up Research
    • Precious Metals

Our boutique approach combines unconventional thinking with state of the art asset management wisdom. Ourindependence allows us to communicate without bias and our flexibility enables us to respond to evolving markets rapidly. Our intention is to deliver a select range of investment funds, which we believe will grow incrementally during stable as well as during challenging economic times.

Incrementum AG Liechtenstein was founded in 2013 in Vaduz, Liechtenstein. As independence is a cornerstone of our philosophy, the company is one hundred percent owned by its partners. We have no affiliations with any banking institutions, which enables us to implement our investment strategies autonomously. As a boutique player with lean hierarchies, we are able to execute our strategies and respond to regime changes swiftly. Our partners practice what they preach – all our partners are invested in the funds they manageIncrementum AG’s partners are highly qualified and have over 140 years of combined banking experience. Prior to joining the company, the partners held positions at UBS, Dresdner Bank, Lombard Odier, Darier Hentsch & Cie., Cantrade Private Bank, PBS Private Bank, Bank Leu, Pictet & Cie., Bank Sal. Oppenheim, Merrill Lynch, Raiffeisen Capital Management, Erste Group and Société Générale. 

Fund Management

During the past three decades, while interest rates were trending lower, easy monetary policy was a dominant factor in creating several successive bubbles of increasing magnitude (S&L, Japanese equities, dot-com, real estate,…). As central banks are engaged in the greatest monetary experiment in the history of finance, the current bubble dwarfs all previous financial bubbles by far. We believe that there are unmistakable signs of anenormous debt bubble – or bond bubble. Despite this, government bonds are still considered to be ‘risk-free’ assets in private and institutional portfolios as well as foreign reserves. This dominant paradigm is absurd, especially in times of structural over-indebtedness and negative real interest rates. Our intention is to deliver a selected range of investment funds, which we believe will grow incrementallyespecially in these ‘new investment paradigm’ times. We are currently offering three funds, which are authorized for public distribution in various countries in Europe.

 

In Gold we Trust 2014 – Extended Version

Attached please find our 8th annual – “In GOLD we TRUST” report:

In Gold we Trust 2014 – Incrementum Extended Version – English

Our last gold report was published on 27 June 2013, just as the anxiety over the metal’s declining price trend reached its peak. In hindsight, this date turned out to coincide with a multi-year low. Last year, we came to the conclusion that massive technical damage had been inflicted and that it would take some time to repair the technical picture. The past months have seen a significant decline in speculative activity in the sector. The majority of bulls appear to have thrown in the towel. We like the fact that consensus considers the gold bull market over. Gold is now a contrarian investment.

The tug-of-war between a deflationary debt liquidation and politically- induced price inflation is well and alive. Last year we coined the term ”monetary tectonics” which describes the battle between these powerful forces.Recent developments may be the beginning of a reassessment by market participants regarding the risk of price inflation. Should the price inflation trend reverse, there would be excellent opportunities in inflation sensitive assets like gold, silver and mining equities.

Further highlights of the report:

-       1971: Monetary Paradigm Change

–       Systemic inflation addiction

–       The gold price and the rate of price inflation

–       The consequences of the global zero interest rate policy

–       Gold and the international financial order

–       The International Monetary Fund and Special Drawing Rights

–       Stock-to-flow: the special anomaly of gold stocks

–       Quantitative valuation model: scenario analysis

–       The great fallacy of „high gold demand“

An Introduction to the Austrian School of Economics
‘An economic school of thought that originated in Vienna during the late 19th century with the works of Carl Menger. The Austrian school is set apart by its belief that the workings of the broad economy are the sum of smaller individual decisions and actions, which are based on laws that can be deduced by rational logical methods, unlike the Chicago school and other theories that look to surmise the future from historical abstracts, often using broad statistical aggregates.’
Investopedia on the Austrian School of Economics

A (very) short History of the Austrian School and its most important protagonists

The Austrian School of Economics is not some teaching institution in Vienna, nor is it concerned with the economy of Austria. Rather, the term refers to a particular approach to economics, and to the economists around the world who subscribe to it1.

Carl Menger’s 1871 book ‘Principles of Economics’ is generally considered the work that founded the Austrian School. The book was one of the first modern treatises to advance the theory of marginal utility. Carl Menger’s contributions to economic theory were highly admired by his followers at the University of Vienna Eugen Böhm-Bawerk and Friedrich von Wieser. These three economists are the ‘first wave’ of the Austrian School2..

The ‘second wave’ was led by Ludwig von Mises and Friedrich August von Hayek, who collaborated in the 1930’s to explain business cycles – the periodic booms and busts that seem to be a permanent fixture of the economy. They argued that these cycles are the result of the expansion of bank credit3.. Austrian economics after 1940 can be divided into two schools of economic thought, and the school ‘split’ to some degree. One camp of Austrians, exemplified by Mises, regarded neoclassical methodology to be irredeemably flawed; the other camp, exemplified by Hayek, accepted a large part of neoclassical methodology more government intervention in the economy4..

The ‘third wave’ of Austrians has come mostly from America. Among the most prominent is Murray Rothbard, who pinned the blame for business cycles squarely on central banks, and developed a rigorous libertarian critique of the state. Rothbard’s approach to the Austrian School followed directly in the line of Late Scholastic thought by applying economic science within a framework of a natural-rights theory of property.

Among the most important living representatives of the Austrian school are Hans- Hermann Hoppe, Joseph Salerno, Jesus Huerta de Soto, Lew Rockwell, Walter Block, Roger Garrison, Israel Kirzner, Robert Murphy, Gary North, Mark Thornton, Jörg Guido Hülsmann and Thorsten Polleit.

Central view points of the Austrian School of Economics:

  • Money is not neutral
  • Inflation is the increase in the supply of money and credit
  • Inflation is a harmful policy and causes a transfer of wealth (Cantillon Effect)
  • Private ownership and property rights are essential
  • Economics is all about individuals (subjectivism, methodological individualism)
  • Actions have consequences – good and bad
  • Bailout policies lead to moral hazards
  • Prices signal scarcity and abundance and are essential for allocating resources efficiently
  • Erroneous price signals set by central banks are the cause of boom and bust cycles
  • Lowering interest rates leads to distortions in the economy by altering relative prices, which results in an artificial boom. Eventually, misallocations and malinvestment can no longer be supported and a ‘bust’ ensues in which these misallocations are worked out
  • A return to sound money is necessary and advocated

‘The repeated occurrences of boom periods followed by periods of depression is the necessary result of the recurring attempts to lower the market rate of interest by means of credit expansion. There is no possibility of preventing the ultimate collapse of a boom that has been driven by credit expansion. There is only one alternative: Either the crisis sets in earlier, with the voluntary termination of the expansion of credit—or it occurs later, as an ultimate and total catastrophe for the currency system.’

Ludwig von Mises, The Theory of Money and Credit

Go to next chapter: Main Tenets of Austrian Economics

 

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Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

THE CONTENT OF ALL MATERIALS:  SLIDE PRESENTATION AND THEIR ACCOMPANYING RECORDED AUDIO DISCUSSIONS, VIDEO PRESENTATIONS, NARRATED SLIDE PRESENTATIONS AND WEBZINES (hereinafter "The Media") ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY.

The Media is not a solicitation to trade or invest, and any analysis is the opinion of the author and is not to be used or relied upon as investment advice. Trading and investing  can involve substantial risk of loss. Past performance is no guarantee of future returns/results. Commentary is only the opinions of the authors and should not to be used for investment decisions. You must carefully examine the risks associated with investing of any sort and whether investment programs are suitable for you. You should never invest or consider investments without a complete set of disclosure documents, and should consider the risks prior to investing. The Media is not in any way a substitution for disclosure. Suitability of investing decisions rests solely with the investor. Your acknowledgement of this Disclosure and Terms of Use Statement is a condition of access to it.  Furthermore, any investments you may make are your sole responsibility. 

THERE IS RISK OF LOSS IN TRADING AND INVESTING OF ANY KIND. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

Gordon emperically recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, he  encourages you confirm the facts on your own before making important investment commitments.
  

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Information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities.

Please note that Mr. Long may already have invested or may from time to time invest in securities that are discussed or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

 

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If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.   

COPYRIGHT  © Copyright 2010-2011 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

 

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Financial Repression describes an economic policy in which capital controls and regulations are implemented by governments and central banks, the aim of which is to reduce public debt burdens through the distortion of financial market pricing.
"When things get bad enough, governments will do anything." – Jim Rickards

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HOW IT HAPPENS

"People ask if we'll have a 'bail-in' in the United States .. Given ATM limits, foreign wire limits and Federal Reserve exit fees on bond funds, I'd say it's already here." - Jim Rickards

1- Negative Real Rates
2- Disruption of Price Discovery
3- Mispricing of Risk
4- Sustained Financial Distortions
5- Restrictive Financial Choices
6-Confiscation of Wealth Through Inflation
Financial Repression always means a combination of measures that lead to a notable narrowing of the investment universe for investors. Money is thus channeled into specific directions to create a ‘home bias.
TOOLS USED

The next bailout will be the U.S. government. They will seize all pension funds and 401Ks to absorb the debt. They are realizing that as the war cycle turns up, less and less foreigners will buy U.S. debt ... The solution – forced loans." - Martin Armstrong

1- Monetary Policy
2- Distortions - Statistics, Reporting
3- Fiscal Policy - Budget Deficits
4- Moral Suasion - Political Pressures
5- Taxation - ROE, ROI
6-Regulators - Financial Requirements & Enforcement
7- Stealth Credit Spreads
8- Capital Account & Financial Excahnge Controls
PILLARS OF FINANCIAL REPRESSION

"We’re going to take your pension plan and give you government bonds so that you have a guaranteed return .. That’s how they’ll rationalize taking our money. They know where all the pension plans are because we have to report it, so they’re easily accessible by governments. They know where they are, what they are, and they’ll be able to snatch them away. Who knows what they’ll do, but they’ll certainly find some way to take our money when things get worse, they always have." – Jim Rogers

1- Strict investment regulations (Solvency II, Basel III)
2- Negative real interest rates g
3- Interest rate ceilings s
4- Open credit dirigisme
5- Nationalizations
6-Regulation of cross-border capital movementst
7- Prohibition of unwanted trading practices such as naked short selling
8- Compulsory loans
9- Prohibition of certain investment assets (e.g. gold)
10- Special taxes (e.g. securities taxes, financial transaction taxes, wealth taxes, higher value added tax on silver, import duties on gold etc.)
11- Direct interventions, such as government intervention in pension funds (Portugal, Ireland, France, Hungary) and subsequent redeployment of investments in favor of government bonds.
12-Growing discrepancy between financing costs of private sector participants versus governments.

13- Haircuts on deposits (e.g. Cyprus)

OUR COMMENTARY

"This manipulation of the yield on government debt is the answer for the government, and socially, it is so much more acceptable than the alternatives. Whatever you think of the history of hyperinflation, austerity, default and deflation, they are socially incredibly disruptive, incredibly socially dangerous, and many of those market-driven events have led to warfare or massive domestic social unrest. I think in the grand scheme of things when the government sits down and decides which avenue to pursue, this avenue of repression .. will always be more socially acceptable than the market-driven events of austerity, hyperinflation, deflation, devaluation." - Russell Napier, CLSA

 

 

From the U.S. standpoint, it’s now a case of 'inflate or die,' and much of the world knows this. Thus if the U.S. decides not to default on its massive debts, it will have to resort to hyperinflation. If this happens, the U.S. will single-handedly tear the world monetary system apart. What worries me is that governments will do whatever they have to in order to remain in power. This can result in confiscation of the assets of U.S. citizens .. America's massive debts will ultimately upset the world’s monetary system." - Richard Russell

 

The term ‘Financial Repression’ was first employed by McKinnon and Shaw in 1973 and has been rediscovered in the course of the current crisis by Reinhart and Sbrancia in their paper “The Liquidation of Government Debt.”

Federal Reserve Must Print Money To Keep Interest Rates Low - Cliff Küle 05 June 2021

Financial Repression To Accelerate With Increased Desperation - KWN 24 March 2021

Monetary Policy Under Financial Repression: China's Long-Term Outlook Financial Sense 20 Dec 2021