The following is a special addition to this week’s newsletter, available only to our Gold Subscribers.

As investors know, this week will see the high profile initial public offering (IPO) of Facebook.  A long-time friend of Guild’s, and famous analyst on initial public offerings, Francis Gaskins of IPO Desktop (www.ipopremium.com) shares his views on the much-hyped Facebook IPO.

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Is Germany Preparing to Accept Higher Inflation as the Price of Rebalancing the Economies of the Eurozone?  Yes!

I . . .
Continue Reading: May 17th, 2012]]> Guest Commentary:
Facebook – U.S. Stock Investors Welcome a Notable Newcomer

The following is a special addition to this week’s newsletter, available only to our Gold Subscribers.

As investors know, this week will see the high profile initial public offering (IPO) of Facebook.  A long-time friend of Guild’s, and famous analyst on initial public offerings, Francis Gaskins of IPO Desktop (www.ipopremium.com) shares his views on the much-hyped Facebook IPO.

To learn more about Gold Subscription, please click Gold Subscription

Is Germany Preparing to Accept Higher Inflation as the Price of Rebalancing the Economies of the Eurozone?  Yes!

I have been closely watching the economics of these markets since 1970, and I have never dreamed that Germans would tolerate inflation anywhere near 4 percent.  They are doing no less than reversing a policy that has governed German central banking for almost a century — since the terrifying German Weimar inflation of 1921 – 1924, which impoverished millions and led to a collapse of the German currency…and social fabric.

In related news, the International Monetary Fund (IMF) is recommending specifically that Germany tolerate higher prices, higher wages, and higher asset prices.  The IMF’s goal is to generate economic growth.  It wants to pump up the German economy, as well as that of other European economies, along with the prices of real estate, stocks, and commodities, as it will help stimulate economic growth.  The IMF knows it is the only way to decrease the burden of indebtedness.

Why is the fear of a collapse of the Eurozone so great that it has supplanted the fear of a catastrophic inflation in German hearts and minds?  Because Germany now fears a major depression caused by the collapse of the European banking system more than it fears higher inflation.

Our view is that while Germany may deeply fear depression, it should also fear the return of big inflation.  While inflation may not be evident now, monetary debasements will undoubtedly drive long-term prices higher.  As the famous physicist Richard Feynman said, ‘We must not fool ourselves, and we are the easiest to fool’.

Germany may be fooling itself that an inflation rate of 4 percent will not become 6, 8, 10, or even 12 percent.  History argues that inflation in Germany, and all of Europe, is heading much higher.

European Officials Change Their Attitude & Give Greece Free Reign to Leave the Euro

Economies such as Germany’s — that took the bitter medicine of intensely unpopular labor market reforms in 2003 and are now reaping the benefits — show what structural reform can achieve.  Should they choose to leave the Eurozone, the Greeks would not be choosing a path that will devastate Europe, in our opinion.  They would be choosing a path that will devastate their own standard of living, at least until a devalued new drachma makes Greek goods and services competitive in the world market.  The lessons are unavoidable.  The intransigence of Greece’s political elite and entitled citizens is just determining how the lessons will be delivered.  While this harder fall is proving to be Greece’s unfortunate decision, we are happy to hear the European leaders speak more realistically about Europe’s capacity to handle Greece’s exit.

FDIC Exhibits Wisdom in its Approach to Handling the Next Big Bank Bailouts — Taxpayers Could Be Off the Hook

Today, the FDIC will outline a new strategy speech in Chicago.  It will introduce a new plan called the “dismantlement” plan for banks, a plan which pleases us.

According to the Wall Street Journal, the plan would work as follows.  If the U.S. Treasury Department and other departments decide to seize a firm that is deemed insolvent, “the FDIC will unwind the parent bank holding company of the faltering firm, placing it in receivership and revoking its charter.  The firm’s subsidiaries around the world would continue to operate, supported with liquidity.  The FDIC-held parent company can borrow from the government under the Dodd-Frank financial overhaul.  Next, the FDIC would transfer most of the firm’s assets and some of its liabilities into a new company called a bridge company.”  Their equity shareholders would be wiped out and lose all of their equity, just like in a similar corporate bankruptcy.  Creditors would receive equity as happens in corporate bankruptcies, and the bank’s debt to creditors would be wiped out.  Creditors would receive equity in return, as happens in corporate bankruptcies.

The taxpayer would not be responsible to bail out more banks who have over-speculated, and this would give shareholders the losses they would experience in any bankruptcy.  Their stakes would be wiped out.

We support this idea for many reasons.  Here are the main ones:
1)  It does more to halt taxpayer responsibility for banks’ speculation
2)  It reduces the moral hazard that bankers will speculate and then hide behind a corporate parent
3)  It punishes bankers who fail by having them lose their jobs and seeing their personal equity in the stock of their bank employer disappears.

For more on the Eurozone and many other topics,  please click here to learn about Gold Subscription.

In this week’s premium global market commentary, we also discuss:

• Increased Calls for a Lower Euro to Solve the Eurozone’s Problems

• Current Fears About Europe & China Have Forced North American Energy-Related Income Shares Down to Very Attractive Levels Given Their High-Dividend Payouts

1. We look at companies that produce oil, natural gas and ferilizer from natural gas.
2. We believe that Europe will avoid an economic collapse in 2012.
3. Take a serious look at these stocks.
4. We may recommend them or others in these pages in coming weeks.

• Big Government in the U.S. is Losing Employee Count…But Still Adding Rapidly to Imposed Regulations

• Smaller Local Governments Will Have a Harder Time Raising Money in the Bond Markets

• Guild Investment Management global market summary

1. Recommendation Tracker

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Two major announcements in the last month showed online higher education moving decisively beyond for-profit institutions such as the University of Phoenix, Kaplan, Walden, and DeVry.

Some of the U.S.’s most prestigious, established universities are making aggressive inroads into the field of online education.  The recent announcements were preceded about a decade ago when University of California Berkeley, Yale, and MIT began to offer free internet access to videos of their courses to the public.  Video footage of classes received some acknowledgment for providing excellent knowledge from top universities for free, even though . . .
Continue Reading: May 10th, 2012]]> University 2.0 — Revolution in Education

Two major announcements in the last month showed online higher education moving decisively beyond for-profit institutions such as the University of Phoenix, Kaplan, Walden, and DeVry.

Some of the U.S.’s most prestigious, established universities are making aggressive inroads into the field of online education.  The recent announcements were preceded about a decade ago when University of California Berkeley, Yale, and MIT began to offer free internet access to videos of their courses to the public.  Video footage of classes received some acknowledgment for providing excellent knowledge from top universities for free, even though they offered no grade or certification of completion.  However, in the last month a new company, Coursera, was launched.  Coursera will be partnering with some top universities — Princeton, University of Pennsylvania, Stanford (the home of the two professors at the helm of the startup), and the University of Michigan (the only non-Private University in this group) — to provide free online courses.

Then, just last week, Harvard joined MIT in announcing their new joint e-learning platform, edX.  Both online learning platforms go far beyond the simplicity of video lectures, and incorporate a variety of interactive learning tools.  The entrance of such storied institutions has the potential to radically reshape the landscape of higher education worldwide.

With these universities typically admitting only about one applicant in fifteen — and with those lucky few staring down a four-year bill of $200,000 or more — such moves by the two universities raise a number of questions.  Since the online courses will be free, what’s their strategy?

Whatever their strategies are, the edX collaboration of Harvard and MIT will be different than Coursera’s.  The former is non-profit, and run on open-source software, while the latter is a for-profit startup.  edX will generate enormous amounts of data on the processes of student learning, which the sponsors will be able to leverage to improve the provision of services for their paying students.  Coursera, for its part, will probably be able to charge for the provision of premium services — and given the huge user base it may develop, that could be very lucrative indeed.  Or, they may choose to charge low fees.  When their pricing policies are published, we will know more.

It’s also important to note that these courses will not provide credit towards formal degrees; instead (for now, anyway) students that complete courses will receive a grade and certificates of completion.  So it’s a fair bet that all of these prestigious schools will be banking heavily on two things that only actual graduates receive — the brand recognition of their degrees, and the networking opportunities provided by professors and alums.

Ultimately, the revolutionary effect of University 2.0 may usher in a wave of online learning of such a high caliber that it throws the doors open to a world of students.  For many disciplines, educational foundations can be provided more effectively and more efficiently, in terms of cost and outcome, through an online vehicle.  This must be part of what’s on the mind of these prestigious schools: exploring a better way to deliver education than a lecture in front of hundreds of students in an auditorium.  There will still be a place for career scholars in the humanities (a few of them, anyway), but already many CEOs in business and technology value knowledge and experience over formal degrees.  Couple free online education with social media, and the possibilities available to hungry young entrepreneurs seem limitless — whether they live in Dhaka or San Diego.

A relevant parallel may be the effect that the web has had on journalism.  Yes, the first wave of online news media was convulsively democratic, laying low the honored bastions of print journalism; but increasingly we’ve seen a “flight to quality,” with consumers demanding not just freedom and choice, but excellence and value.  Likewise, the entry of  prestigious institutions into online education shows that it’s coming of age, and presages not just a democracy of mediocrity, but a move out of the brick and mortar educational model into online learning on a global basis for even the most prestigious universities.  We think it’s a winning proposition for all.

The institutions will win.  The non-profits will hone their skills, amass their data, and provide their brick-and-mortar students with better education.  The for-profits who partner with the institutions will build huge user bases and exploit them for data and fees.  The fees for online education at the top universities will be a great deal lower than for in-residence education at the same universities.  Talented teachers will have the opportunity to be heard by hundreds of thousands of students, and perhaps attain even more reward and recognition.  Students everywhere seeking education on their own terms and to fit their own time, cost, and location needs will have access to the best foundational knowledge available at low fees or free of charge.

Source: www.princeton.edu and www.berkeley.edu

Tremendous achievements are seen at America’s best universities…but do they really need all that brick and mortar?

We are of the opinion that education builds opportunity, and is a powerful foundation for success.  When citizens of developing and developed nations alike grasp these opportunities, they strive to become educated and their life prospects will be enhanced.  Historically, education has been a doorway to higher success and personal wealth and has indirectly assisted people in creating the success of their future employers, their nation, and the world.

What will be the long term effects of the growing opportunities in online education?

We see this as chapter two of a move from brick and mortar education to online education for much of the world.  It is early to say, but we can see global education and global success enhances a new productivity driving intelligence that is being awakened for millions of people.  This should stimulate global creativity, invention, innovation, and scientific, educational, social scientific and business success, and create millions of newly-educated citizens.  These educated people will take their place in all aspects of commercial, scientific, educational and social life and bring more knowledge and success to many industries in the U.S. and the world.

In Other Words, it Has the Power to Revolutionize the Future

Here’s our vision:

Higher education — even the highest levels — will be widely available, as knowledge is more easily shared and everyone with internet access can communicate.  Employees will be located everywhere, but the best companies and the economic growth will be in those nations where six principles for success, which noted historian Niall Ferguson calls “the 6 killer apps of prosperity”, are prevalent.  The six killer apps are: competition, science, rule of law, modern medicine, consumerism, and work ethic.  The reason the developed world is developed is because of these six principles have been adhered to.  In the future, it will be those countries which adopt “the 6 killer apps of prosperity” that will be the world leaders.

Free, Internet-Based, High Quality Primary & Secondary Education Already Exists

This service has been has been pioneered by the brilliant Salman Khan who created the Khan Academy (www.khanacademy.org).   Khan Academy presently offers over 3,200 free educational video courses, and has delivered 100 million video lessons to the public via YouTube.  The courses available range from basic first grade through early college level math, basic and more advanced physics, chemistry, biology, history, astronomy, economics, finance, banking, and college test preparation.  We have previously mentioned this service in our letter and we heartily endorse it.  These free online courses are presented in intelligible, 12-minute segments that students can use to learn subjects or brush up on previously learned content.  Being free and of excellent quality, Khan Academy lectures represent a stunning example of accessible, high level education that is available to everyone.

We Applaud the SEC & California Treasurer Bill Lockyear for their Crackdown on Abuses by Municipal Bond Underwriters

This long-overdue motion by the SEC proves that regulators do actually know which parties and behaviors really need to be regulated.  This time they’re really on the right track.

The SEC has been concerned and criticized for not stopping investment banks who participated in municipal bonds and derivatives sale for Jefferson County, Alabama.  Jefferson County officials bought instruments that they did not understand and they had to declare bankruptcy when the county’s losses piled up.  This more recent scandal follows the big scandal of 2008, when it became common knowledge that investment banks were selling complicated bond and derivative combinations to unsophisticated municipal officials.

The SEC introduced new rules last Friday dealing with such abuses by investment banks, as well as other abuses that we mention below.  Some of the new rules are meant to correct the egregious behaviors of 2008 and previous years.  Rules against deceptive practice have long existed, but these new rules expand them.

During and after the banking crisis of 2008, many municipalities were stuck with very costly and hard-to-restructure bond arrangements.  These financing arrangements had been sold to naïve municipalities by bankers who took advantage of them in order to line their own pockets.

California Treasurer Bill Lockyear gets big-time kudos for pushing the SEC to address another issue.  California has been a huge bond issuer.  In 2008, when California was having a hard time selling bonds, Lockyear discovered that many of the underwriters of the state’s bonds were also selling credit default swaps betting against them.  Then, the same underwriters were writing reports to clients which criticized California’s and other states’ bonds.

We realize that many states overspend and make unwise financial commitments.  They run deficits and have to sell bonds to close them.  Of course, we do not condone irresponsible state government, but this is a separate and important issue.  It is deceptive for an investment bank to recommend and underwrite a bond to one group, while simultaneously panning the bond and attempting to decrease its value to another group.  The investment bank is making money both ways.  While not illegal, many would argue it represents poor business ethics on the part of the investment banks.  This double-dealing has a cost — often to the taxpayers.

The new rules do not end risky and complicated bond deals — but they require a complete disclosure of risks and conflicts of interest that the banks may have.  Although a step in the right direction, these new rules are still much watered-down from what Treasurer Lockyear had requested.  They do not outlaw the practice of selling an investor a bond and simultaneously helping other customers trade against the very bonds they have just sold.  Such behavior continues to be permitted.  However, states must be informed by potential underwriters of their activities in selling credit default swaps against that state’s bonds from time to time.  This way, the state can find another underwriter if necessary.

Prior to these rules, banks were only required to charge buyers of municipal bonds a fair and disclosed price.  As a result of the new rules they now are responsible to charge the municipality itself a fair price.  This change came about because it has become eminently clear that municipal officials in many cases are not fully informed about the bond market and how it works, and therefore are not capable of negotiating a fair price for their municipality.  In addition, the rules will crack down on the practice of taking municipal officials on lavish trips and billing the costs to uninformed local taxpayers.

The tragedy is that it’s no longer a cynical question for citizens to ask, “Would my municipal officials engage in such a conflict of interest that takes advantage of me — and their other taxpayers?”  It’s a practical question, since in recent years there have been so many news reports of municipal officials cheating taxpayers that the public now sees that it is an all-too-common occurrence.  In our view, cleaning up of municipal government should be a high priority for the governor of every state and mayor of every municipality.

In this week’s premium global market commentary, we also discuss:

• France Elects Hollande, Creating Problems for the Euro & European Banks…& Even More Problems for Hollande & His Electorate

1. Talk is cheap.  Francois Hollande has promised to end austerity — but can he sell bonds?

• Argentina May Offer Clues

1. A historical analysis

• Buenos Aires on the Seine?

• In Europe, All Roads Lead to QE — Either Immediately or After a Period of Experimentation with Unwise Taxation Programs

• Summary

1. Guild Investment Management weekly summary on markets and investments

• Recommendation Tracker  Click Here

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Reformers in the Chinese Communist party are taking advantage of the scandal surrounding Bo Xilai.  They are pushing for changes in the Chinese constitution and aim to implement numerous additional political changes within the country’s political infrastructure.  The scandal has been in the news worldwide and has led to Mr. Bo’s suspension from the politburo and his wife’s arrest for suspicion of murder.

Yet the really big event in China this year is the 18th Party Congress of the Chinese Communist party, to be held in Beijing this autumn.  At this event, current paramount . . .
Continue Reading: May 3rd, 2012]]> China – Big Change Afoot?

Reformers in the Chinese Communist party are taking advantage of the scandal surrounding Bo Xilai.  They are pushing for changes in the Chinese constitution and aim to implement numerous additional political changes within the country’s political infrastructure.  The scandal has been in the news worldwide and has led to Mr. Bo’s suspension from the politburo and his wife’s arrest for suspicion of murder.

Yet the really big event in China this year is the 18th Party Congress of the Chinese Communist party, to be held in Beijing this autumn.  At this event, current paramount leader Hu Jintao, the General Secretary, and most of the party leaders will step down from office due to term limits, and be replaced by new members who are to be elected by the congress.  This is also the time when changes in the constitution will be considered.  It is expected by many observers that Xi Jinping will succeed Hu Jintao as President, and Li Keqiang will succeed Wen Jiabao as Premier.  The makeup of the rest of the politburo will determine the extent of political reform that takes place.

Mr. Bo was part of a hard-line faction on the politburo that resisted political or judicial reform.  Now that he and some of his allies are weakened, Premier Wen Jiabao and his allies are pushing for political and judicial change.  As we mentioned last week, this is an interesting and engaging power struggle to watch.  Many reforms have happened in China over the last thirty years and if Wen is successful, many more will happen over the next decade.  Today, the Communist Party is exempt from constitutional oversight it is currently separate and above the constitution – but it is not an exaggeration to say that the results of this struggle in China over the next few months will have a great impact on world social, political and economic trends in coming years.

For more on China, inquire about Gold Subscription…

Policymakers Claim Inflation Has Been Overstated

A week ago it was reported that the U.S. Social Security Fund was destined to run out of money sooner than anticipated.  The reports cited several contributing factors, such as lower employment levels, payroll tax cuts, increased disability claims (which we discussed in last week’s commentary – April 26th), and inflation.  So, what shows up in Bloomberg BusinessWeek this past weekend?  An article saying that lawmakers from both sides of the aisle believe that inflation is overstated, and that a move to further change the Consumer Price Index (CPI) is in the works.

This is typical behavior by government, and such a change would mean yet another major adjustment to add to those already made in the CPI over the last few decades.  Just like the previous changes that have been made to the way inflation is computed, the desired effect of this one would be to try to hoodwink the public into believing that inflation is lower than it is.  If you didn’t think statistical analysis was subject to magical alteration, please read on.

First, let’s review the situation.  The CPI’s importance to the economy cannot be over emphasized.  It’s the benchmark that determines the cost of living adjustments for pensions, tax policy, and many government programs.  It also represents a benchmark used in utility price setting, real estate contracts, and many other business dealings throughout the private sector.

There is a move in Washington to adopt a measure called “chained CPI”, which takes into consideration the habit of shoppers to substitute one item for a similar, lower-priced item.  The BusinessWeek article states that changing the calculation is “a long-overdue piece of important business that can and should get done”.  The perspective this article takes is that fixing the CPI would “yield immediate savings” to the government, “and put the economy on firmer ground”.

We say: Let’s tell the truth.  The real-life effects of this change would be a hard slap in the face to savers and retirees.

It is a fact that a lower CPI figure helps the government in many ways.  It is also a fact that an artificially lower CPI penalizes savers, and those whose income depends upon inflation indexing, employees and businesses that get cost-of-living adjustments, and retirees living on social security or other programs that are indexed to CPI.
Over the past thirty years, the CPI inflation calculation has been modified several times, and it almost always results in an understatement of what we believe to be realistic price increases.  Why does it almost always indicate a lower rate of inflation?  It seems that this is done to help the government, and ends up penalizing others.  Draw your own conclusions from these facts.  We have reached ours.

In recent years, when government reports GDP growth, the inflation figure is backed out.  GDP is reported after inflation.  This way, if someone wanted to exaggerate the growth of the economy–let’s say, for political reasons–they might look for ways to reduce the official inflation rate.  Of course, when policymakers want to justify future rounds of QE, a lower inflation rate is always helpful in making their case that inflation is low, so money printing is needed to stimulate the economy.

The current CPI basket is highly complex.  The proposed changes will make it even more complex.  This proposed manipulation or adjustment will make the CPI altogether more arbitrary, and give more power to government statisticians.  If an item that is rising in price can be removed, and an item falling in price can be substituted for it, one can easily see how inflation data can be manipulated.  Some would argue it will give government statisticians more leeway to show a CPI figure that politicians like. We call foul on this behavior.

Today’s CPI basket includes about 80,000 items in total.  Many of them would be considered luxuries, which provide little utility to large segments of the population.  At Guild Investment Management, we dispute the need for the proposed adjustments.  We believe that this is yet another ploy to make the government look better and has the effect of penalizing citizens.  Our view is that, looking ahead, the path of least resistance for prices — especially the prices of basic, essential needs like food, clothing, shelter, and energy — is up.  This is the case, regardless of what the proposed new adjustments to CPI may tell you.

It is because of the need for an unbiased view of the cost of basic needs that we created The Guild Basic Needs IndexTM. The GBNITM tracks the prices of a basket of items in the category of true needs for all of us: food, clothing, shelter, and energy.  The price changes of underlying basic needs can take time to trickle through the economy, but eventually they pervade all prices.  Regardless of what is done to adjust the CPI, any American who eats, wears clothes, drives, cooks, pays rent, or owns a home is likely to experience rising prices in the years to come.  You can track the changing prices here in our letters.

Even though they may be more volatile than CPI, the prices of basic needs should be tracked as their impact will trickle through the economy.

Please click the image to enlarge.

What Else Are Our Gold Subscribers Receiving?

Conference Call Announcement For Gold Subscribers:
Guild Investment Management will be hosting our conference call for Gold Subscribers.  The call is scheduled on May 4, 2012 at 10:00AM (PST) / 1:00PM (EST). Space is limited. Join the event today, become a Gold Subscriber.

For details on the conference call, please click the following link Conference Call

To learn more about Gold Subscription and participate in the event, please click the following link: Gold Subscription or email guild@guildinvestment.com

In this week’s premium global market commentary, we also discuss:

•  A New Buy and Sell Recommendation

• Europe — What Do We Expect if Hollande Wins the French Presidency?

1. Guild Investment Management analysis on the French election and what it means for Europe

• Think the Playing Field in U.S. Banking is More Level?  Note the Following:

1. Guild Investment Management goes into a in-depth analysis on TARP

• Swaps & Derivatives — The Big Time Bomb

1. Guild Investment Management analysis on swaps and derivatives and what are politicians doing and where investors can invest and benefit

• It’s Good to Regulate Dangerous Behaviors — but Too Often, Regulators Know Not What They Do

1. Guild Investment Management timely analysis on regulation and its regulators

• Recommendation Tracker Below

1. Recommendation Tracker Click Here

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The information and analysis you get in our commentaries is not obvious.  It’s the knowledge and research of seasoned investors.

This is Guild’s Complimentary Global Market Commentary.  It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary.

This is Guild’s Complimentary Global Market Commentary.  It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary.

In this week’s Premium Global Market Commentary we have one new buy recommendation, we discuss our current open recommendations, and we review our two recent sale recommendations.

U.S. Congress & Obama Administration Move to Stimulate Job Creation

We are encouraged by some of the provisions in the bipartisan JOBS (Jumpstart Our Business Startups) act . . .
Continue Reading: April 26th, 2012]]> The information and analysis you get in our commentaries is not obvious.  It’s the knowledge and research of seasoned investors.

This is Guild’s Complimentary Global Market Commentary.  It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary.

In this week’s Premium Global Market Commentary we have one new buy recommendation, we discuss our current open recommendations, and we review our two recent sale recommendations.

U.S. Congress & Obama Administration Move to Stimulate Job Creation

We are encouraged by some of the provisions in the bipartisan JOBS (Jumpstart Our Business Startups) act signed into law by President Obama earlier this month.  The new act should make it easier for smaller companies to raise money.  This law specifically reigns in some of the existing regulation and decreases the cost of raising capital in the U.S. stock market.  This act will allow small and large companies to more easily and less expensively raise capital by selling shares, growing, and hiring more people.  Simultaneously, it cuts some of the unwanted regulatory burdens that have fallen on businesses in the last decade.

Small businesses have been the engines of job growth for the past 20 years, according to the U.S. Bureau of Labor Statistics (see chart below).  A 2010 report by the St. Louis Federal Reserve credits small businesses for three out of four jobs created over the past 20 years.

Source: Wall Street Journal

Recent ADP data suggests that small businesses are even more important to job creation in the current environment.  ADP’s March employment report said that in the six months ended March 31, 2012, businesses with fewer than 500 employees created over 10 times the number of jobs as businesses with more than 500 employees.

The JOBS act is far from perfect.  Some believe reducing the regulations on companies that raise money from the public will increase stock fraud.  This forces investors to do their own research, and brings back the age old “Buyers Beware” reality.  This is true, and brings out our long-held view that investors should always do research and know what they are buying.  Informed buyers will decide when the reward/risk is suitable for investment, and the companies who sell stock will experience reduced costs due to decreased government bureaucracy.  That’s why we see the JOBS act as positive for new business formation, employment, and national economic growth.  It puts an end to the assumption that investors are incompetents who cannot do research and analysis for themselves, and that they need the government to ‘protect’ them.  We also believe it will help create more opportunity for investors as younger, faster-growing firms can more easily access the stock market to raise capital.

Unemployed in the U.S. More Frequently Opting to Declare Permanent Disability…as They Lose Hope of Finding Work

The following data is another example of why the number of people seeing work in the U.S. continues to fall

In 1984, eligibility rules to declare for permanent U.S. disability were eased.  The number of people claiming disability grew throughout the 1990′s, but has skyrocketed recently as the rules have eased and the benefits have grown.  In recent years, disability pay has approached the pay one would receive for working.  Since January 2009, the Federal disability roles have doubled.  About 5.4 million new individuals have been granted steady checks from the federal government for permanent disability, and now 10.8 million Americans are drawing federal disability checks.

This phenomenon is part of the reason that the number of job seekers among the unemployed is falling.  Statistics show that once on disability, people rarely re-enter the work force.  This suggests that in the past three years, 5.4 million more people are no longer trying to find work.  The most discouraging thing is that many of these people are able to work.

The surge of disability recipients is putting pressure on Social Security funds, of which it is a growing portion.  Disability now makes up about 15 percent of the total Medicare expenditures, after two years on federal disability, people can qualify for Medicare benefits, regardless of their age.  Via disability, people in their 30s, 40s, and 50s are joining the growing ranks of Medicare recipients.

So while capable people are lost to productive employment, the number of Medicare and Social Security recipients is rising, both of which lead to a high cost outcome.  This is not a constructive trend.

Christine Lagarde Has Been Successful in Increasing the IMF War Chest

The IMF raises 430 billion USD…Bullish for World Stocks?

The International Monetary Fund (IMF) is an international organization with stated objectives to promote international economic cooperation, international trade, employment, and exchange rate stability, including making loans to member countries to meet financial needs.  Ms. Lagarde, the ex-finance minister of France, is the current President of the (IMF)…

The developing countries that gave money want a seat at the table to determine the policies of the IMF.  They want to contribute to making and the rules that will be applied to any country that comes to the IMF requesting money, whether it’s to solve an urgent crisis, or to gain long-term IMF financial support.  This is yet another of the dozens of indications of growing power for the emerging world.  It will boost the power of emerging countries over the activities of other governments.  It gives them the power to support, punish or control those countries in need of financial help.

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In this week’s premium global market commentary, we also discuss:

• Gold: More Important to Your Survival than Ever

• Banks are Building a Mount Everest of Derivatives Exposure

• Will the Chinese Stock Market Bottom?
  We Analyze Chinese Politics, The Chinese Economy, And Provide Guidance On Chinese Stocks

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If your firm uses soft dollar arrangements to pay for research, please contact us to discuss how to soft dollar your Gold Subscription.

Conference Call Announcement:

Guild Investment Management will be hosting our first conference call for Gold Subscribers.  Monty Guild and Anthony Danaher will discuss the current global macro and investing environment, and highlight the sectors, industries, and companies that will benefit from the current trends.

Some topics we will be highlighting are:

Conference Call Announcement For Gold Subscribers:

Guild will be hosting our first conference call for Gold Subscribers.  The call is scheduled on May 4, 2012 at 10:00AM (PST).

Space is limited. Join the event today, become a Gold Subscriber.

To learn more about Gold Subscription and participate in the event, please click the following link:  Gold Subscription or email guild@guildinvestment.com.

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On Gold

Central banks are managed by economic and financial professionals.  For this reason, we regard . . .
Continue Reading: April 19th, 2012]]> The information and analysis you get in our commentaries is not obvious.  It’s the knowledge and research of seasoned investors.

Conference Call Announcement For Gold Subscribers:

Guild will be hosting our first conference call for Gold Subscribers.  The call is scheduled on May 4, 2012 at 10:00AM (PST).

Space is limited. Join the event today, become a Gold Subscriber.

To learn more about Gold Subscription and participate in the event, please click the following link:  Gold Subscription or email guild@guildinvestment.com.

_________________________________________________

On Gold

Central banks are managed by economic and financial professionals.  For this reason, we regard the buying of gold by central banks as a commitment and a statement of special importance.  Central bankers are very knowledgeable about monetary history, and the fact that central banks from various countries are consistently adding to their gold reserves means that they have understood and been dismayed by the growth to money supply and liquidity in the developed world over the past three years.

The U.S., Europe, Japan, the U.K., Switzerland and many other nations have been providing liquidity, inspiring central bankers in China, Russia, India, Sri Lanka, South Korea, and many others to buy more gold for their national reserves.  Even if some politicians who manage the national budgets are too unwise to heed the writing on the wall, the central bankers see it clearly and are preparing for the tough times ahead by adding gold to their reserves.

Social Media and Governments: Something to Ponder

Facebook, Google, and other social media companies know a lot about people who use their services.  This has been one of the things that have made their franchises so valuable.  However, that fact may cause them great difficulty in the future.  This is because they possess the kind of complete and exclusive information about their users — who are citizens, taxpayers, income earners, voters, immigrants, asset holders, etc. — that is deemed most important by governmental authorities.

We know that these stocks may grow very rapidly and move up smartly in the short and long term.  It’s not that we doubt that they can grow very nicely.  However, we have noticed that historically, non-governmental organizations that gain too much knowledge about a country’s citizenry have been looked upon with disfavor.

How long will it be before many governments start to take offense to the information that Google, Facebook, and others have about the populace?  And how long until governments believe that they are the only ones entitled to possess that knowledge?  We aren’t making any claims here, but we are suggesting that this is something to think about.

The U.S. Commercial and Industrial Real Estate Market

Commercial & Industrial Real Estate is Doing Better in Large Cities; Not So in Small Ones

According to information we’re gathering from our real estate industry sources in and around big cities across the country, Class A office buildings and industrial buildings in easy access areas are strongly in demand.   In fact, Class A rents in such locations have bottomed and are beginning to rise.  Well-located warehouse space is being snatched up by lessors, and the top of the quality list is doing fine.

However, second-tier buildings in large cities, or poorly-located industrial buildings in outlining and suburban areas — even in the major real estate markets — are not.  The knowledgeable real estate professionals we’ve spoken to do not know how long it will take for market strength to spread to mid-size and smaller markets.

In strong markets, as is usual, investor optimism is outrunning retail demand fundamentals.  There is an excess of capital chasing even vacant buildings, with the assumption that they can be quickly rented at current or higher market rates.  Our contacts tell us that this enthusiasm is misplaced and is occurring because investors earn little or nothing on cash balances; this pressures them to make purchases before the market warrants buying solely based upon fundamentals.

Another fundamental change in the real estate financing market is that the competition for mortgage loans is heating up.  We can measure this by the continued growth of the commercial mortgage packaging market.  A syndication is when loans are pooled together and then split into tranches of varying risk.  The most recent syndication of commercial loans by Deutsche Bank and Ladder Capital, was oversubscribed 16 to 1 for the most conservative tranches.  This compares to an average oversubscription of 2 or 3 times.

Institutional investors raise capital from the other institutions or individual investors who want to earn interest by investing in pools of mortgages.  Once the money is raised, the organizers of the pools are under pressure to start earning interest by investing their newly raised cash rapidly.  We are encouraged by the fact that they presently prefer to invest in the more conservative and well-covered mortgages, rather than the speculative dregs that investors were buying in 2004 to 2007.  Another byproduct of this conservatism in the business is that buyers and owners of commercial real estate can finance or refinance their properties at reasonable rates.  This, in turn, frees up cash for investors and helps build longer-term wealth rather than inspires short-term leveraged speculation.

Was March 2012 U.S. Year-Over-Year Inflation Down, or Up?

The U.S. Bureau of Labor Statistics report said that year over year inflation slowed to 2.7 percent in March, from February’s reading of 2.9 percent.  In their Core inflation data (where they take out food and energy components), the BLS report said the annual price change was actually higher in March, rising 2.3 percent from March to March versus up 2.2 percent from February to February.  Either way you look at it, American workers took it on the chin, just as they have been since 2000.

Wages, yet again, did not keep up with price increases.  After accounting for rising prices, the BLS says that earnings of workers fell 0.4 percent in March.  As we have been saying in these commentaries, the U.S. wage earners’ standard of living is being squeezed by higher prices, and is about to get squeezed by higher taxes as well.

The methods and debate about how to parse inflation statistics are not really important.  If wages are not keeping up with prices of imported goods, luxury items, or elastic demand items, people can change their consumption patterns.  However, if their wages are not keeping up with the cost of basic necessities, then what?

March Guild Basic Needs Index^TM shows an uptick in the cost of basic essential goods.

This is Guild’s Complimentary Global Market Commentary. It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary.

To learn about Gold Subscription, please click the following link click here.

In this week’s premium global market commentary, we also discuss:

One New Stock Recommendations

First Quarter 2012: Growth Stocks Charge Ahead

A detailed discussion on Growth Stocks

Strong Groups & Weak Group

Growth Stock Investing

Why Have Growth Stocks Excelled in 2012? And Why Have U.S., Chinese, & Russian Growth Companies Outperformed European Ones?

There are several reasons for this…

On China

A Rebuttal to the Misguided Pessimism about China: There Will Be No Hard Landing — Just Good Growth in 2012

Contrary to Popular Belief, Manufacturing Costs Have Risen

Striving for Raw Material Self-Sufficiency

Chinese Banks Won’t Collapse, but They Must Reform Lending

Improved Chinese Liquidity & Bond Market Sure Signs of Steady Movement Towards a More Powerful Role in Global Finance Markets

China Plans Payment System as a Step Towards Yuan Convertibility

How Chinese Currency Moves Impact U.S. Prices

Recommendation Tracker

Get your latest updates on Guild’s Recommendations by clicking here.

Conference Call Announcement For Gold Subscribers:

Guild will be hosting our first conference call for Gold Subscribers.  The call will be scheduled for the first week of May 2012.  We will be sending Gold Subscribers the conference call details and log-in information two weeks prior to the event.

For a chance to have your questions addressed in the conference call, please submit your questions to tshirata@guildinvestment.com by April 27, 2012.  Participants . . .
Continue Reading: April 12th, 2012]]> The information and analysis you get in our commentaries is not obvious.  It’s the knowledge and research of seasoned investors.

Conference Call Announcement For Gold Subscribers:

Guild will be hosting our first conference call for Gold Subscribers.  The call will be scheduled for the first week of May 2012.  We will be sending Gold Subscribers the conference call details and log-in information two weeks prior to the event.

For a chance to have your questions addressed in the conference call, please submit your questions to tshirata@guildinvestment.com by April 27, 2012.  Participants in the call will be able to join a Q&A session with Monty Guild and Anthony Danaher.  

Space is limited.  Registration details will be sent to Gold Subscribers via email two weeks prior to the event.

To learn more about Gold Subscription and participate in the event, please click the following link: Gold Subsciption or email guild@guildinvestment.com  
_________________________________________________

This Week’s Global Market Commentary Is An Important One

At Guild Investment Management, it is our job to see potential future outcomes as a result of new trends.  A major new trend over the last few years has been the implementation of more controls on the flow of capital in the developed nations.  There are key decisions that have to be made in an environment where capital or currency controls are more likely to be installed.  We see signs that more capital or currency controls may be instituted in the developed world in the coming years.

Developed countries have been implementing more controls on the distribution of their taxpayers’ capital abroad. In several countries, requirements to announce and enumerate the extent of foreign-held assets and bank accounts have been implemented.  It has become increasingly difficult for residents of developed world countries to open investment or bank accounts in foreign countries without the approval of their own government and/or the government of the foreign country.  Should this trend continue, the same type of currency controls that we have witnessed in Venezuela since 2000 may occur in the developed world.  A wise investor must know how to manage investments in an environment of currency controls.

In this week’s Global Market Commentary we discuss a few examples on how to protect your assets and your financial future from the implementation of a regime of currency controls and other governmental edicts.  A few of these are contained in this complimentary version of our Global Market Commentary, but more are discussed in our Premium Global Market Commentary.  This is a theme we will continue to elaborate on in future premium letters.

Both In Concept & Experience, Retirement Is Radically Changing

Look To Guild Investment For Knowledge On How To Protect And Prepare Yourself.

This week we are writing on retirement and how the current financial crises in Europe, Japan, the U.S. will impact retirement for hundreds of millions of people in the developed world…

From Where We’ve Come

The industrial revolution transformed patterns of human life, setting longevity trends in motion that continue today.  Even before the advent of 20th-century medical treatments which drastically reduced the incidence of communicable diseases, the real wealth created by industrialism sharply boosted longevity through improved sanitation and a new abundance of cheaper foodstuffs.

Statisticians distinguish between two forms of life expectancy: life expectancy at birth, and conditional life expectancy, i.e., how much longer you can expect to live once you have reached a certain age.  The greatest change in life expectancy over the past century and a half came from an increased likelihood of surviving infancy — in 1850, while life expectancy at birth was only about 35 years, residual life expectancy if you survived to age 5 was about another 50 years.  This implies a very high infant mortality rate.  A century and a half later, that gap had almost disappeared in the developed world.  This represents a radical transformation unprecedented in the whole of human history.  It opened the door to a human population landscape, in terms of numbers and age structures, which we had never seen before.

Further changes in the 20th century have been equally dramatic, yet subtler.  Over the past two generations, life expectancy at birth has increased by only about 12 years in the developed world, from about 66 to about 78.  But conditional life expectancy at the ages of 65 and 80 has climbed dramatically.  Today, a Japanese citizen who survives to 65 can most likely look forward to another 22 years of life — and if they make it to 80, another 11!  In the developing world, the same arc is occurring that was followed by the developed world a century ago — declining infant mortality due primarily to gradual improvements in sanitation and nutrition.

We are grappling with the consequences of these changes now, and will be grappling with them for several generations yet.  If we don’t react to them wisely, we may end up becoming victims of our own social and technical success.

Where We’re Going

Of course, it’s much easier to look at the past than it is to predict the future. in the case of longevity, prediction of the future is of critical importance:

To individuals – How long will I live?  How long will my retirement last?  How can I make plans to finance it?
To employers – Who will comprise my workforce?  Can older workers transfer their “know how” to younger workers as they retire?  Will new workers have sufficient education?
To financial managers – What risks will unexpected changes in longevity expose me to?  If I administer a pension, are my liabilities funded?  Are they sustainable?
To governments – Are pension and health commitments realistic?

Prediction of longevity trends is notoriously difficult.  The recent nature of the dramatic changes discussed above means that there is less data than we’d like, and academics predictably differ rancorously among themselves about the best methods of predicting future longevity trends.  Some favor predictions based on epidemiology — “disintegrating” causes of death into known factors and examining them.  Some favor predictions based on extrapolations of past trends.  Some academics are optimistic, seeing no theoretical limits to human life spans.  Some are pessimistic, seeing hard-wired biological limits — a “longevity ceiling” which has remained more or less the same for most of recorded history even while average life expectancy has improved.  Some see coming trends — climate changes or resource limitations — which will cancel out the benefits bestowed by technology.  The fact of the matter, as an actuary could tell you, is that none o f the models and theories has proved to be a very useful predictor.  In other words, as important as longevity trends are for planning by individuals, businesses, and governments, these trends involve a large amount of risk and uncertainty…

We’re Not All The Same…

These differentiated shifts have profound implications for individuals, businesses, and governments:

•    Choosing lifestyles to avoid chronic illness that have become more prevalent as lifespan has increased, and making financial decisions to support likely increases in healthcare
spending
•    Certain demographic groups, must be prepared to shoulder much of the financial burden (In the U.S., raising a child to the age of 17 increased in cost by 50 percent just between
2000 and 2010).
•    Certain demographic groups, may decide (or be forced) to lengthen their career or seek continuing education to remain competitive in the job force with younger workers.  They
also have to consider their own health, and move towards lifestyles which will allow them to work longer if they need to or wish to.
•    Certain entities must evaluate certain demographic trends and purchase behavior.  This includes different financial services, shifting real estate requirements for new work patterns,
different technological services, and new healthcare technologies.  This could be a source of opportunity, or of grave risk for businesses that fail to adapt.

Contact Guild Investment Management for information on how to solve these problems.  In the first week of May, Guild Investment Management will be hosting its first conference call.  Gold Subscribers can access a conference call with Monty Guild & Anthony Danaher.

Bankrupting the State

The risks for government are particularly grave and complex.  The period of new industrialization and the 20th century grew a large industrial working class, which, first through militant labor organization, and later through more cooperative political engagement, established broad and deep social pension and healthcare systems throughout the developed world.  These generous systems functioned as defined benefit pensions — a form of social insurance in which benefits at a certain level were guaranteed from retirement until death.  These liabilities contracted by the governments of the developed world were generally unfunded — that is, payments to beneficiaries would be financed not by the deferred enjoyment of invested assets, but by the current contribution into the system by adults in the workforce.  All well and good, based on one critical ratio — the dependency ratio of retirees to working adults.  Here is where the risky character of longevity changes begins to show itself.

Two factors emerge here to conspire against such generous social welfare systems, and show that they were inadequately hedged against longevity risk:

•    Life expectancy at birth is increasing, but the retirement age is not.  This means that the dependency ratio has been getting more and more unfavorable, with fewer and fewer current
workers supporting more and more pensioners.
•    Conditional life expectancy is increasing for the oldest citizens, who, as a population with costly chronic conditions, have health care expenditures that are disproportionately
increasing.

 In the developed world, aging populations are starting to stress the social welfare systems currently in place

Click image to enlarge

As if these problems were not enough, there is another way in which changes in longevity are maddeningly unpredictable.  The size of the various groups is variable, so that governments which established pension and healthcare benefit systems in the early 20th century failed to foresee a time of grave imbalance between the sizes of the working and retired populations.  Think “baby boomers.”  Complex and non-deterministic historical phenomena have played out so that a huge group is entering retirement, just as in the developed world the growth rate of the working population has been declining  (In some Eastern European countries, population has been in absolute decline, and without the contribution of immigrant populations, the same would be true for much of Western Europe.  This generates its own problems as native European populations with their traditional ethic are slowly displaced by immigrants with sometimes questionable commitment to that ethic).

The populations of these states (including, to a lesser extent, the U.S.) have come to expect a level of social benefits predicated on a demographic structure which no longer exists.  Their governments are faced with controlling costs, and the politically unpalatable job of raising the retirement age — perhaps even of indexing it to life expectancy.  Many are examining the prospects for moving from defined benefit plans to defined contribution plans.  While the outcome is unpredictable — any political establishment beholden to a mob bent on getting its way is not likely to act rationally — individuals can carry one lesson away:  No matter where you live, to depend on state pension benefits for retirement or healthcare is extremely unwise.

Some of the promises made by governments will be broken, and some will be renegotiated.  This does not mean, however, that government has no role to play; it has a crucial role to play in setting a regulatory framework to encourage, rather than discourage, individually responsible strategies and behaviors when the direct provision of state benefits proves to be demographically impractical.

Strategies for Private Citizens

Faced with the likely failure of the state to provide sufficient benefits to support a lifestyle to which they are accustomed, individuals still have the capacity to make their own risk-mitigation decisions:

•    Health care – The old and the young are facing new, chronic health problems derived from their lifestyle choices.  The oldest group now demonstrates unprecedented levels of
diseases such as MS, Parkinson’s, and Alzheimer’s.  For biotech and pharmaceutical companies and their investors, these illnesses represent great opportunities to reduce human
suffering and generate profits.  However, even for conditions currently lacking decisive treatments, lifestyle choices can be made to mitigate risks.  These choices are beginning to be
preferred by individuals and by governments and insurance companies, since they are much more cost-effective than medical interventions, including, stopping smoking,
improving diet and exercise programs, among others.  Younger individuals are facing a corresponding explosion of lifestyle-related conditions, including diabetes, respiratory
conditions, obesity, and orthopedic problems.

•    Education – Lengthening working lives are changing education patterns.  Younger people are staying longer in formal education, and mid-career and older workers are returning to
continuing education to extend their working lives and to stay current with rapidly-changing technologies.  Any individual can mitigate longevity risk by acquiring education to
make his or her skills more relevant and valuable, or even to acquire a new skill set and move into an encore career.  The variety of venues has increased as well, with online
opportunities for formal and informal education being offered even by the most traditional and high-status institutions.

•    Family – The flush of industrial wealth in the 20th century, coupled with the rise of the social welfare state, served to weaken family ties and patterns of intergenerational solidarity
and mutual reliance.  In 1965, 23 percent of households consisted of five persons or more; by 2010 that was down to 10 percent.  Families have become smaller and more
fragmented.  With the real possibility/probability of the failure or scaling back of state systems, the family needs to regain its significance as a main source for the provision of
support to older individuals.  (In many developing countries, these ties have not yet been lost, since social spending on health and pensions has been relatively sparse, and the
developed world will in this case have to take a page from their book.)

•    Working Life – Already in many developed countries, the average age of actual retirement is creeping past the official retirement age.  Individual workers are facing the possibility
that their accumulated assets will be insufficient to last for the likely duration of their post-retirement life, and responding by lengthening their working career.  This process leads to
interesting cultural shifts as well.  The very notion of “retirement” itself, as a lengthy period of total leisure at the end of life, is more or less a product of the industrial era.  For most of
human history, what we call “leisure” would probably have been called “idleness.”  The shift in longevity, and the elongation of each life-stage, may prompt a cultural reassessment of
work among older individuals, and we may see more and more people seeking to stay productive in the workforce later and later in life, especially those who are careful to make
lifestyle decisions that help them maintain good health, and education decisions that help them remain skillful and competitive.  This trend will form a feedback loop with changing
educational trends and business hiring decisions (as noted below).

•    Investments and financial education…

Strategies for Businesses: A Landscape of Diversification

•    Hiring practices – The expansion of the number of working-age individuals will present business owners with a richer palette of human capital.  Older workers who stay current with
their skills, and are willing to pursue further education, will bring a set of interpersonal connections and intangible know-how to their employers.  Of course, there is also the
likelihood that an increasingly vital and educated population of older workers will opt for entrepreneurial self-employment.

•    Meeting consumer demands – Shifts in longevity will drive differentiation in consumer demand across a wide variety of sectors.  The decline of state-sponsored pensions will create a
need for financial services products tailored for various ages: consumer banking, investment management, etc.  Longer working lives will shift real estate demands for housing and
office space.  Health care especially, both biotech and traditional pharmaceuticals, will be a field that rewards innovation in providing products to populations facing new chronic
health threats.  Since education of every kind will be of increasing importance, providers of academic, technical, health and lifestyle, and financial education will have new
opportunities as well.

Summary

Spain has a double edged problem.  They have a deficit sovereign debt problems — much like Greece — and their banks are burdened with bad real estate debt — much like the U.S.  Currently, real estate prices in Spain have declined, but not enough to clear out the overleveraged players and reestablish home buying by Spaniards and vacationers from the colder countries of northern Europe.  Why?  Because the banks have not forced the issue and they will have to.  So we can expect lower prices for real estate in Spain.

We think the U.S. could experience a stock market correction, and will continue as fear rises about the status of European banks as a result of the Spanish debt problem.  Europe will deal with the current problem with spending and loans to banks and nations. This will be more QE.  After the new wave of QE is introduced, the markets will provide a buying opportunity, and a chance for more U.S. appreciation.  We have been surprised that emerging Asia has not risen more in price during the first quarter of 2012, and we suspect that this is because of fear about a hard landing in China and the lack of imports to a slowing Europe.  Based upon long observation and contact with many in China, we see a Chinese hard landing as very unlikely this year.  Europe is another matter, we see months or years before European import demand begins to strengthen.

As fear about Spain rises, gold will be bought, as will Swiss francs.  Nobody will want Euros.

This is Guild’s Complimentary Global Market Commentary.  It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary.  

To learn about Gold Subscription, please click the following link click here

In this week’s premium global market commentary, we also discuss:

•    Current Global Backdrop
      What do we expect?

•    Venezuela
A recent case study on how to protect yourself from a mismanaged economy and a declining currency

•    U.S. Government Bonds Have Very Low Yields & Will Seem Even Riskier As Interest Rates Rise
While we are aware that many are invested in bonds, at current prices we see the reward in U.S. government bonds as tiny – especially compared to the substantial risk to investors
holding them.  We suggest that investors who need income focus on equity income as an approach.  Holding high-yielding stocks in the energy and commodities area is an attractive
alternative to bonds.

•    The Bottom Line: Self-Responsibility Presents Unprecedented Opportunity
o    A longer span of healthy and unimpaired life, if they work to educate themselves and make healthy lifestyle choices.
o    A longer and more productive working life, if they pursue and acquire continuing training and education to stay current with a rapidly-changing technological landscape;
o    Greater business opportunity, if they stay abreast of the shifting opportunities presented by the lengthening and diversification of the population and its various demands;
o    Financial stability, if they reduce reliance on likely-to-fail state pension systems and educate themselves about private investment strategies that are available to them;
o    A longer period of greater social satisfaction; if they make personal decisions to reverse social trends towards atomization and the shrinking of the family and loss of
intergenerational sociality and solidarity.

•    We are Optimistic About the Opportunities that our Demographic Situation has Created
Find out why…

•    Recommendation Tracker
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U.S. Manufacturing: Here Comes the Sun

U.S. manufacturing looks increasingly primed for better times after a few long, cold, lonely decades.  We’re not the only ones who have repeatedly noted the painful decline . . .
Continue Reading: April 5th, 2012]]> The information and analysis you get in our commentaries is not obvious.  It’s the knowledge and research of seasoned investors.

If you don’t get it here, where else will you find it?

Guild Investment Management is now offering one complimentary back dated issue of it’s Premium Global Market Commentary to all our readers.  Request your copy of Guild’s Premium Global Market Commentary by calling (310) 826-8600.

U.S. Manufacturing: Here Comes the Sun

U.S. manufacturing looks increasingly primed for better times after a few long, cold, lonely decades.  We’re not the only ones who have repeatedly noted the painful decline of U.S. mojo, which has been unmistakable in some major economic areas: elementary and secondary education, steel production, ship building, apparel manufacturing, and automobile production, just to name a handful.  The U.S. is no longer the ‘big fish’ in global exports.  Anyone who looks can see that since the early sixties, services have replaced manufacturing as the backbone of the U.S. economy.  But we see a change taking place.  Despite some evidence that the U.S. is past its prime as the world economic power, we think manufacturing will continue to grow as an important sector of the U.S. economy.  Current data indicates that U.S. exports of manufactured goods have risen in the last several years, and this trend will continue to improve — as long as government takes appropriate action.

U.S. manufacturing has grown in dollar terms, and there are reasons to conclude that its percent of GDP will also grow.

For the U.S., third-place status in global exports is a positive surprise.  Despite the long decline of recent years, we believe that this upward export trend will continue.  Here are some of the reasons why:

1) Rising U.S. innovation

Not all manufacturing is about doing work to produce goods.  Some manufacturing can be tied to the production of high tech products that may be part goods and part service and that require intelligence and innovation to create.  Obvious examples are applications for mobile phones or tablet devices, movies, TV, and video games, as well as marketing companies all create and provide innovative products or services.  Their skill is not found on the factory floor but in the minds of well-educated and creative employees.  A better-educated workforce supports the rise of high-tech manufacturing.  Software, electronics, pharmaceuticals, defense, and biotechnology are a few of the industries that require more educated employees.  Higher education levels and the government’s implementation of an enlightened visa policy for high-tech workers are keys to the growing this sector of manufacturing high-value-added technology.

Some other reasons are:

• Rising Wages Abroad

• A Falling U.S. Dollar

• Increased Resource Efficiency in the U.S.

• Investment in U.S. Infrastructure is Picking Up

• The Multiplier Effect of Manufacturing

• U.S. Remains a Destination for Foreign Direct Investment (FDI)

• U.S. Energy Self-Sufficiency is Coming

We are tracking the cost components of basic, essential needs in our Guild Basic Needs IndexTM (GBNI), and energy (for transportation, cooking, and heating) is a key component that we track, along with food, clothing, and shelter components.  The GBNI gives us and our readers a picture of the cost inflation that underlies the economy, so stay tuned for our periodic updates on this important data point.

As the U.S. industrial machine regains momentum, we expect basic needs will once again accelerate in price, and dwarf the price increases shown in the government’s CPI, which tracks consumer spending.

This is Guild’s Complimentary Global Market Commentary.  It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary.  

To read the full content, click here

In this week’s premium global market commentary, we also discuss:

• U.S. Exports Remain an Important and Growing Force in the Global Economy

U.S. manufacturing exports have been growing at a faster pace than the overall industrial economy.
Find out what the strongest U.S. export industries are…

• Energy Imports Dwarf Exports — For Now

• Small Business is Contributing, but Big Business Still Dominates

The landscape is changing, find out what advancements are helping that change…

• Cheaper, Reliable Energy Sources Can Help Keep U.S. Inflation Subdued…for now

• High Frequency Trading (HFT)

We continue our discussion on High Frequency Trading…

•  Low Interest Rates Cause U.S. Money Market Managers to Revert to Some of the Same Low-Rated Paper that Caused Problems in the Past

• Seasonality

• A Change In Recommended Investments

• Guild’s Weekly Global Market Summary

• Recommendation Tracker

Get your latest updates on Guild’s Recommendations, please click here to view more.

If your firm uses soft dollar arrangements to pay for research, please contact us to discuss how to soft dollar your Gold Subscription.

If you don’t get it here, where else will you find it?

This is Guild’s Complimentary Global Market Commentary.  It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary .  

To read the full content, click here.

Investors Should Be Prepared For a Pullback That Can Be Used as a Buying Opportunity

We are cognizant that this is the seasonal time of the year where the markets get a pullback. . . .
Continue Reading: March 29th 2012]]> The information and analysis you get in our commentaries is not obvious.  It’s the knowledge and research of seasoned investors.

If you don’t get it here, where else will you find it?

This is Guild’s Complimentary Global Market Commentary.  It contains a small fraction of the content that Gold Subscribers receive in our Premium Global Market Commentary .  

To read the full content, click here.

Investors Should Be Prepared For a Pullback That Can Be Used as a Buying Opportunity

We are cognizant that this is the seasonal time of the year where the markets get a pullback. We would not be surprised to see a correction, especially in the stocks and sectors that have started the year with big rallies. There is the normal expectation of corrections that occur periodically in a rising market, and/or the Spanish debt problems could trigger a temporary flight out of stocks by traders.  Gold Subscribers stay tuned, as more
investment recommendations may be coming.

A Long-Term theme: Over Coming Years We Expect to See the Shift From U.S. Bonds to Stocks Continue

Interest rates are rising in the U.S. bond market, which is frightening to bond holders.  As we wrote last week, bonds are gradually losing the allure created by their nearly 32-year bull market.  Until another financial crisis shifts investors’ attention towards reducing risk and holding U.S. dollar bonds, both the U.S. dollar and U.S. Treasury bonds may be for sale.  Who will be selling?  Investors who are tired of low yields and realize that rising interest rates pose immense risk to the value of their bond portf o lios.  We expect a continued substitution of income-generating stocks for bonds.  This trend will gradually exert itself and will take years to fully unfold.

In our view, there is also an indisputable trend toward a lower U.S. dollar.

In addition to the topics above, this week’s Premium Global Market Commentary also discusses:

•    OIL
Saudi Arabia is the historical swing producer, but serious problems lurk in its future…
Find out why, and how investors can benefit

•    Income-Producing Stocks
Our Gold Subscribers received their first income-generating stock recommendation on February 22 of this year… 

We revisit our recommendation

•     What’s Happening in Mexico?

•    How To Manage Your Portfolio When Crazy Behavior Dominates The Political & Social Environment

•    China
What some analysts and the media are saying and what they are overlooking… 

•    Gold Won’t Experience Major Price Declines, and Has Longer Term Impetus to Move Higher
Spain has become the new risk focus for global Investors…

•    U.S. Dollar Continues To Lose Status In The World Of International Trade
What are the signs and what countries are getting involved

•    Recommendation Tracker
Get your latest updates on Guild’s Recommendations

Please click here to see our Recommendation Tracker.

Guild Investment Management is now offering a complimentary back dated issue of it’s Premium Global Market Commentary available to Gold Subscribers to all our readers.  Request your copy of Guild’s Premium Global Market Commentary by calling (310) 826-8600.

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