June 2nd, 2020
Dear Friends, Partners & interested Investors!
My investments & private equity group founded a good 15 years ago and successfully developing since, has taken the decision to increasingly focus on sustainable businesses that deliver a clear contribution to the needs of future generations. In the process, we are gradually restructuring our portfolio of companies and resources we invest in. Ultimately, we will become an investment group that focuses to a large part on sustainable resources – besides some additional businesses and exclusive niche pearls with attractive growth rates.
Oil & Gas will, despite all predictions for a fast demise, remain for a rather long time one of the main sources of energy and of economic activities worldwide. Investors are at the moment on a roller-coaster ride with these assets, but demand will pick-up again eventually because still, no other means of energy is more flexible to react to changing demands. It is however clear that the importance and attractiveness for investors of this sector is gradually decreasing, while other energy resources and methods of production and storing are becoming more relevant.
We have built up substantial interests in Gold and gold mining. Quite a while before the appearance of the COVID-19 pandemic we felt that the lingering dangers in the markets will support a bounce-back by this precious metal, which has always been a reserve asset in troubled times. We were proven right and are expanding our investments.
Water is increasingly recognized to be one of the very core items on the life-agenda of this planet. While it seems that we have water in abundance, the sobering reality is that only 0.007 % of all available water can be used by humans and animals. The climate change adds conflict-prone developments to the problem as more and more areas of our world are subject to droughts and prolonged periods of lack of water. Therefore, preservation, guarding natural quality (or re-cleaning waste-water), as, in particular, efficiency and fairness of distribution, will increasingly be core areas of attention, efforts, organizational and commercial activities in the future.
And we are looking at other areas too, where investments in conscientious business can make a difference in the future: the sustainable care of forests and scientifically controlled harvesting of quality Wood can not only create jobs and incomes locally but is also makes sense economically as many architects and developers are increasingly relying on natural building materials.
Another area of significant growth is Agriculture and Food: It was long considered to be unattractive for investments, a choice between ecologically problematic giant-farming business – or a losing game with traditional methods. Yet this business sector is now growing fast, gaining prestige and growing attention by investors. Modern technology, digitalized methods and machinery have fostered this positive development. But most of all it is a pure necessity, as the population of this planet is growing fast, posing a real challenge to produce enough food for all. This is creating a constant increase in demand in large parts of the world. At the same time habits in the more developed regions are changing and new needs arise – like the plant-based production of meat-like vegetarian food, the use of high-protein carrying insects etc.
We are looking at all (or many) of these fascinating areas of development in various regions of the world, from the United States to Europe, Eastern Europe and Russia, through the old, now restored and invigorated routes of the historic Silk Road to China and into the lively heart beatings of the huge population’s centres in Asia. In all these regions with their different needs and levels of development, we see numerous business opportunities, smaller and larger. So strategically we are VERY OPTIMISTIC!
Despite the severe threat posed by the COVID-19 pandemic at present – as well as the on-going climate change –, our world and its people will not stop looking ahead, thinking about how best to manage the future. We already participate and support with our know-how. And with a growing number of followers, over time becoming our shareholders and dedicated investors, we can make a difference!
From this number, our valued Newsletter comes in a bit different format, with more and partly longer contributions. From now on, we keep you informed on a regular base about what we do, what we are looking at and what chances we see for mutually profitable investments in various regions. We will also include on-site reports by our partners and project managers, as well as contributions by external, renowned specialists, on global economic and geopolitical topics that might define in what environment we can likely conduct our business and how we can stay ahead of problems.
Anyway, I hope you follow us on our website, where you can learn more about our various companies and projects. If you are interested in more detail get in contact on the communications channel or platform that is most convenient for you, be it on Instagram, Facebook or Twitter, or via LinkedIn. And give us your feedback!
Founder & Chairman
Past and future milestones:
- As our Founder & Chairman has expressed our sentiments in his introduction, despite the enormous challenges posed by the COVID-19 pandemic, WE look quite optimistically onto this year and further ahead.
- We have used 2019 as an intermediate year before we take bigger leaps in the years to come. Just as the French proverb goes: «Recouler pour mieux sauter!» freely translated: “Do a few steps back, organize yourself so you’re better prepared to jump ahead – further”.
- This year is, on the one hand, dedicated to the task of defining new strategic goals & projects, on the other hand – primarily – to bring our well-groomed pearl United Global Water Holdings to the market.
- In this context, we will start, in this Newsletter, a series of informative pieces on the topic of water, its importance for the people and the economy of our world. In this issue we include a video that we have produced on this topic, also to show the contribution via our group of companies of UGWH. It’s a moving, informative, hands-on start into our series and we hope you enjoy it.
Our View: In what direction is the Economy going?
More troubles or an improvement ahead?
I am sure that our followers and readers are pretty well informed about the state of the world economy and the markets. We do not need to duplicate much here. Still, the question of where markets will go from now, is, of course, one that moves us all – and I have no doubts that many of you are just as puzzled as we are.
On the one hand, the overall situation is nothing short of catastrophic due to the impact of the COVID-19 pandemic, with manifold disruptions in national economies as well as world trade, damaged chains of supply, drastic fall of demand from consumers (nowhere nearly compensated by increased online-shopping) and a yet uneven but without doubt steadily growing unemployment in most economies. In some, like the US, unemployment is already at a dramatic level, last seen in the big depression of the late 20ies of the last century. Finally, at the end of the line of consequences from COVID-19, a HUGE increase of debts by states and market participants alike will await us and future generations.
On the other hand, the stock-markets are playing a happy fiddle at his moment. As if all this overwhelmingly negative news has already been priced in, the steep fall in the value of shares, after the anyway inevitable correction of inflated prices, has stopped and quite a number of bullish market participants and prophets trumpet that this is THE big buying opportunity. In my opinion, this is pretty far off reality. Without a doubt the situation on the stock-exchanges in 2008 and 2009, after the banking & financial crisis, posed indeed a buying opportunity of a lifetime. (Not only in hindsight, one could clearly sense it already than with the Dow Jones hovering below 7000, so one could be sure about recovery from such a low level in any comparison). Yet this time we have a different situation: For one, despite the dramatic drop in values at the beginning of the COVID-19 pandemic, in fact, a much smaller price-correction has occurred at the stock-markets with many titles still (or again) trading at inflated prices, in particular at US-exchanges, above all on the NASDAQ. Even more importantly, much broader damage has been done already by this pandemic across the board, in fact paralyzing many sectors of the world economy. For this reason, it is highly doubtful that there will be many success-stories in a likely depressed, difficult economic environment ahead. This apart from a few sectors and specific companies that can profit from the situation (like on-line traders, food-delivering companies or, evidently and above all, the successful few companies in the pharmaceutical sector that are at the forefront of developing testing methods and, above all, vaccines against the SARS COVID-2 virus).
The question is whether the financial stimulus packages that most countries have put up, supporting companies, employment and the capital markets, have formed a strong enough and durable safety-net to allow sound market participants to survive the prolonged period of foreseeably lower market activities. And whether demand, industrial and consumer-driven, will pick up quick enough, too!
The answer is anybody’s guess today; I personally remain rather sceptical. But because of the extraordinarily strong financial and thus psychological support by most central banks, in particular the Fed in the US (about the detrimental long-term effects we do not want to discuss now), it could well be that the capital markets can keep up the spirits. One would be daring to really hope on a whopping upside again, but if the stock-exchanges can at least hold territory and not panic it would indeed be helpful for all participants and the economy as a whole.
However, there is no guarantee for such a scenario. It will strongly and primarily depend on whether there will be a second wave of infections and high death rates in fall again. This could kill the easing and opening-up of economic activities that are at present starting to pick up pace in many affected countries. I kind of have the hope that there will be no such second wave. But maybe this is just like a Trumpian “I have a good feeling…”-reflex to safeguard ourselves from imaging ourselves worse scenarios still. The fact is, we just do not know, yet.
There is, unfortunately, another factor, economical as well as political, that still kind of limits too much optimism: this is looming the Sino-US (or USA-China – who started first and who blinks first…?) conflict. This is of course first and foremost an issue of competition between the two biggest economies of this world; that one day it would break out it is both natural as it was inevitable. At it has become more and more politicized in the last two years it poses an inherent danger to any improvement of markets and, in particular, trade True, there are still signs that on the economic and business level an agreement could be possible. Not least for expediency reasons as a worsening relationship between China and the US will hurt the US economy further, which might have a detrimental effect on President Trump’s re-election.
In fact, an agreement between China and the US was hurriedly signed in January. But most observers agree that this was more done for political and face-saving reasons than that it will really relax the economic and legal confrontations in a wide array of issues. President Trump will have to decide whether a conflict with China will help him more with his hawkish electorate – or a relaxing of trade barriers, tariffs, sanctions in order to revive trade and economic activity. At this point we don’t know yet what decisions will be taken – and whether Trump’s Chinese counterparts will lend hand to a serious solution of the many open issues.
We will come back to this matter again in the next issue of the Newsletter. Because this issue will certainly not vanish from the top of the agenda in the coming months!
So while it is yet an open issue which impact the Sino-US conflict will have on market sentiments, even more, decisive for the direction in which the stock-markets will head later this year is the corporate reporting season. We will see, whether, or how well, investors can digest the inevitable wave of bad company results that will roll in from summer, second to the third quarter of 2020. Maybe the bad news we expect on a broad front is indeed already priced in by investors. And if market participants are ready to swallow a lost year, in return for the comforting fact that they can continue to rely on high market liquidity, guaranteed by the national banks, then they could see the hope at the end of the tunnel and stick to their investments and plans. In this case, we could still look ahead at a mildly optimistic fall season on the markets.
This would certainly be a good scenario for us as well, as – you have already read it in this Newsletter – we firmly plan to list our water-company United Global Water (UGWH) on the market. True, Private Equity investments, as a rule, do not correlate (strongly) with traditional equity markets – which was the case this spring too when the crash at the stock-exchanges had only marginal effects on P/E and none on our offers. In the case of UGWH investors paid even higher prices as we move closer to a listing, trusting in the long-term success of our broadly diversified business. But it is, of course, true too that the closer we get to step onto the trading floor, an overall positive, optimistic investment sentiment would help, too. Hopefully, it will!
I hope some of these insights have proven to be interesting for you to read. We plan to continue presenting OUR VIEW on markets and global political developments. In the process, we always look forward to hearing your feedback. Until next time, yours, Martin.
Editor & Executive Business Development
For more information, please visit our social media channel – @hessgroupinternational
For more information, please contact
Media / Investor Relations
Hess Group International
Address: J/F Kennedy Street 6
3106 Limassol, Cyprus