Korea, China, Interest, Exit

The speed is increasing. Asia, long since a pivot and focal point, continues to gain political and economic significance. There are not only bad news–like those from Korea–but also good news from China.


Kim Jong-un, as I have learned this week, apparently has lived in Switzerland for 11 years. He speaks Berner Dütsch [a form of Swiss German spoken in the city of Bern], can sing songs from the Swiss capital, and is probably considerably more intelligent than his father. In any case he has managed to create conditions for himself that equate to those between the West and the East at the times of the Cold War, before the fall of the Berlin Wall.

Naturally, administrations can make mistakes, and the rhetoric from Washington sounds much like Cuba before Kennedy’s failed Bay of Pigs invasion. But Trump’s tweet “without words” doesn’t necessarily mean there will be shooting–South Korea’s arms buildup is another option that has nothing to do with talking.

The whole thing may still develop in a constructive direction, as soon as there’s a sense in North Korea that the fate of the despots Saddam in Iraq and Gaddafi in Libya, who both relinquished their nuclear weapons before they were overthrown, will not repeat itself.


More important for the worldwide events at the stock exchange markets is probably China’s surprisingly positive development this year. The economy is going full speed, which is visible in the rising prices for raw materials for manufacturing metals such as copper and zinc.

As we have learned from a usually well-informed source, Peking is serious about preventing capital flight to other countries. Acquisitions of companies such as Kuka still get approved, but Chinese buying condos in London so that their daughters can live in their own place while going to school there is apparently a thing of the past. The “HNA-Wanda-Fosun&Co” buying spree is coming to an end, and this will not be without impact on one or the other overheated market.

The goal of the Chinese is to raise monetary reserves, which have declined in the past years, and to force people to spend their money for consumption and investments at home.

The consistent halt of the capital export isn’t good news for the supporters of cryptocurrencies. These are now consistently banned in China. Part of the reason for their boom was that Bitcoin & Co. worked so well for a capital flight from China. Will the Chinese now invest their excess cash more in watches again–it’s not out of the question. Sellers of Swiss luxury goods stocks shouldn’t get too excited: when the sea gets rougher, the windfall profits of a weak Swiss franc will disappear as quickly as the last sun rays of the summer. Macao too may profit if the drainage wells for cash, which have worked for years, are closed. The halted capital export, in any case, is already showing in the price increase of the Chinese currency. More on this topic as soon as my colleague Daniel Flag is back from China. But be patient: he’s not flying out to China until next week.


The reversal in interest rates certainly was a foregone conclusion and its rise only a question of range, not a question of whether or not. This suddenly looks different now. A regress of interest isn’t definite yet, but it’s suddenly moving within reach.

The stock exchange is a mechanism of anticipation. The things that may come–war, out-of-control debt, or a recession. We just don’t know. Especially uncomfortable would be a re-entry into deflationary conditions, which no one has been talking about for a while. Such a development would certainly also produce buying rates at the stock exchange but only after “buy the dip,” which is almost considered a rule of the stock exchange, has mutated into a disaster.

Deflation, in plain words, means ”I’ll buy next month because it’ll be cheaper then.“ Tight is right, but such a development is the nightmare of all traders. Then, the central banks too will be at the end of their rope, and the countries’ burden of debt is not getting any less but rather heavier and heavier.

But enough of these nightmarish scenarios for today. Let’s hope that the decrease in interest rates is a temporary market phenomenon that will soon no longer preoccupy us.

TIME Magazine Cover: Rubin, Greenspan & Summers - Feb. 15, 1999
The Committee to Save the World–cover of TIME magazine from February 15, 1999.


Do you remember Robert Rubin? Yes, the Goldman executive that became Secretary of the Treasury under Bill Clinton, member of the “Committee to Save the World” together with Alan Greenspan and Lawrence Summers. On the very day he was sworn into office, he had to save Mexico from its national debt crisis, numerous other countries followed during the Asia Crisis in the late nineties of the last century, the latest one being Russia. In his memoirs with the title “In an Uncertain World: Tough Choices from Wall Street to Washington” he’s writing on the first pages:


”… but the psychology of markets is that investors who are far too complacent one day may quickly change and become a stampeding herd the next. In a world of instantaneous reactions, the tendency to react rather than to think is not necessarily irrational. In the race to an exit that not all will fit through, speed can be lifesaving.”



The fund is currently engaged with exit topics, too. We are step by step retiring from industries and subjects that did very well–including technology and in this area especially semiconductor suppliers. In contrast, the area materials & energy has gained significance. In addition to manufacturing metals (Glencore and Teck), soft commodities are now amongst the late-cycle raw materials that, in our opinion, are interesting. The worldwide operating manufacturer of agricultural machinery Bucher is promising not least because a new management is consistently airing out the conglomerate, which will certainly uncover potential for revenue.

As of today, we have increased the cash ratio to over 15%. Stocks in currencies other than the euro (Switzerland, Great Britain, and the U.S.) are in big parts covered in order to not lose again in foreign currencies in light of the rising euro stock price gains. The share in the currency euro of over 80% is on a very high level for us as a result.

The sales we performed in the past days and weeks for an increase in cash focused on the area of small and micro caps. We found it very attractive to sell the more illiquid stocks at good prices. As a result, the focus of the portfolio has shifted significantly toward large caps. We are still holding back with new engagements, but the well-performing consumption and tourism sector in Europe holds attractive companies that we will certainly find in the next weeks. Maybe there are even some that stand out with a booming China business.

Georg Oehm

Georg Oehm founded Mellinckrodt & Cie, in Zug, Switzerland, in 2008. He served as general manager and partner in a financial communications boutique in Frankfurt am Main, founded the CFD Association e.V. and served as its first general manager. He worked in business development and in the M&A business at the Metallgesellschaft AG for five years, followed by a five-year tenure in the field of special restructuring projects. From 2011, he was a member of the administrative board at the Zenergy Power Plc and at the Synety Group Plc from April 2011 to January 2016. Dr. Oehm serves as chairman of the advisory board at InCity Immobilien AG. He completed his Ph.D. at the University of Kiel, department of economics and social sciences. He started his career as a banking apprentice at the Dresdner Bank in Frankfurt am Main. Subsequently, he earned a degree in business administration in Mainz and Kiel.

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