Resilience instead of Perfection

The energy crisis in Europe has also arrived in Switzerland. Private customers will have to reckon with average price increases of 30% next year. Households and smaller companies are so-called "bound customers". This means that they are forced to obtain electricity from their local supplier. The electricity tariff for "bound customers" is made up of the energy price, transport costs and various taxes and levies. The bill varies from municipality to municipality, depending on the level of local taxes and the procurement strategy of the local electricity supplier. Some companies produce a large part of the electricity themselves, while others buy it. Some have already signed contracts several years in advance, while others plan in the short term.

Companies in the free market that have not already purchased electricity through long-term contracts are likely to be hit hard. For the year 2023, they will have to pay up to ten times more for their electricity than for the current year. Because in 2009, the Swiss market was partially liberalized: companies with a consumption of more than 100,000 kWh per year can freely choose their electricity supplier. Rising electricity costs are likely to become a real burden for many companies and put pressure on margins if the higher prices cannot be passed on to customers.

This development is undoubtedly inflationary.

Perfection in supply chains is not always desirable

Just-in-time manufacturing - where companies do not stock the parts they need to build their products, but rely on the delivery of components at the last minute - has been the epitome of efficient and cost-effective operations over the last 20 years. However, COVID has shown that this calculation is not quite so simple. Super-efficient supply chains increase vulnerability to disruptions, and a small disturbance can cause immense damage. This delays deliveries and sends prices skyrocketing.

We are in the midst of the biggest post-war consumption boom, and companies are halting their production because they lack certain parts for further processing.

This development is undoubtedly inflationary.

Perfection is not necessarily desirable in investments either

Perfection can also be a disadvantage in investing: cash is an inefficient drag in bull markets and as valuable as oxygen in bear markets, either because you need it to survive a recession or because it is the raw material for new opportunities. Debt financing is the most efficient way to maximize your balance sheet and the easiest way to lose everything. Concentration is the best way to maximize returns, but diversification is the best way to increase the chances of owning a company that is capable of generating returns. If you are honest with yourself, you will find that a little inefficiency is the ideal place to be.

As in evolution, the key lies in the realization that the more you try to become perfect, the more vulnerable you are.

In the stock markets, there are regular significant setbacks or even "crashes". This happened during the dot-com era after the turn of the millennium, in the 2008 financial crisis or after the outbreak of the corona pandemic. The broad mass of investors then falls into a kind of shock paralysis and stays away from the markets. A phenomenon that can also be observed this year with the Ukraine war and the interest rate turnaround. Trading volumes are currently around 40% below the previous year's values. An ideal entry point is awaited in order to avoid losses. The behavior of major investors and so-called stock market gurus is different in such situations. They grab courageously. Because they have time and make purchases with a view to the next ten or 20 years. And they also know full well: even as stock market professionals, they cannot catch the right moment. But their liberation from shock paralysis pays off in the long term. Because in a long-term investment, the ideal time is statistically speaking always now.

The cold wind is not coming, it is already blowing in your face. A marmot strategy helps to keep emotions in check: into the burrow and wait. Have patience. Times will get better again. The state of facts can change rapidly, as stock markets are forward-looking.

We are not perfectly positioned at the moment: increased cash ratio, no debt financing & broadly diversified

As always, thank you for the trust placed in us!