| Spreads are the differences that financial | | | | · Availability of low cost labor |
| institutions get between their cost of money | | | | |
| and the price they demand for loans. Spreads | | | | · Availability of raw materials and energy |
| in effect reflect evaluations of current and | | | | |
| expected risk. Clearly, the current bond | | | | · Availability of capital in the local |
| market problems are due to a very | | | | markets |
| over-optimistic evaluation of risk by many | | | | |
| lenders. The lenders have realized their | | | | Those in the positive category are: China, |
| mistakes and are rapidly adjusting their risk | | | | India, Norway, Canada, Brazil, Hong Kong, |
| premiums back to the historical levels of | | | | Singapore, and Korea. Much of Latin America |
| risk premium that have prevailed for the | | | | and Eastern Europe are on the fence with some |
| better part of 30 years. As we wrote | | | | positives, but they also have some negatives. |
| recently, every type of loan from government | | | | |
| paper to all types of mortgages and corporate | | | | NEGATIVES |
| and consumer credit will become more | | | | |
| expensive. This will reverberate through the | | | | SOME COUNTRIES SUFFER FROM: |
| U. S. and global debt markets and raise the | | | | |
| cost of borrowing for everyone. | | | | · Rising interest rates |
| | | | |
| GOOD FOR STOCKS AND COMMODITIES | | | | · Lowering of P/E ratios as interest rates |
| | | | rise |
| This will also make investors more cautious | | | | |
| about future commitments to debt. | | | | · Slower economic growth |
| Historically, when interest rates were | | | | |
| rising, investors shunned long-term debt in | | | | · Weakness of the financial system |
| favor of short-term debt and moved more into | | | | |
| equities (stocks). | | | | · Lack of availability of capital in some |
| | | | markets |
| Many aggressive investors have been using | | | | |
| leveraged debt instead of equities to | | | | · Threats to corporate profits from tax |
| maximize returns..We believe that many of | | | | policy after 2008 [U.S.] |
| those seeking high returns will return to | | | | |
| stocks and commodities in order to maximize | | | | · Increasing restrictions on global trade |
| returns. | | | | (potentially the biggest problem) |
| | | | |
| In this area, there are statistics suggesting | | | | GLOBAL INVESTING EXPERTISE A MUST |
| why base metals and energy remain in demand. | | | | |
| We have stated these things before in | | | | In our opinion investing solely with a U. S. |
| different ways in hopes of capturing your | | | | (or for that matter any one country centric) |
| attention. | | | | strategy will become more difficult in coming |
| | | | years. We further believe that expertise in |
| From an economic point of view, world | | | | global investing will become an important |
| economic growth determines the demand for raw | | | | attribute for investment success in a |
| materials to build economies. | | | | increasingly globalizing world. We have |
| | | | worked very hard over the past few decades |
| The estimated GDP growth for the last four | | | | developing such expertise. We look forward to |
| years and the coming four years is as | | | | the changes taking place in the global |
| follows: | | | | economy as we expect they will create some |
| | | | very profitable opportunities in coming |
| · India 8-9% | | | | years. |
| | | | |
| · China 10 % + | | | | Thanks for listening. |
| | | | |
| · Developing world other than India and | | | | Guild Investment Management, Inc., a |
| China 6-8% | | | | registered investment advisor. All material |
| | | | presented herein is believed to be reliable. |
| · Developed world 2-3% | | | | Investment recommendations and opinions |
| | | | expressed in these reports may change without |
| If the developing world contributes about 40% | | | | prior notice. |
| of the global GDP as many economists think, | | | | |
| and the developed world is contributing about | | | | You can also read our past periodic market |
| 60%, then the blended world growth rate is | | | | and economic commentary articles by going to |
| roughly 5% per annum. | | | | the Commentary Archive on our web site |
| | | | |
| We believe, based upon the research of | | | | These articles are for informational purposes |
| economists from many parts of the world, that | | | | only and are not intended to be a |
| global GDP growth has been about 5% a year | | | | solicitation, offering or recommendation of |
| for the past few years, and will probably | | | | any security. Guild Investment Management |
| continue at about that rate for the next few | | | | does not represent that the securities, |
| years. | | | | products, or services discussed in this web |
| | | | site are suitable or appropriate for all |
| LONGER TERM GLOBAL ECONOMIC GROWTH LIKELY TO | | | | investors. Any market analysis constitutes an |
| BE STRONG | | | | opinion that may not be correct. Readers must |
| | | | make their own independent investment |
| We further believe that world economic growth | | | | decisions. |
| will remain strong for two or more decades as | | | | |
| the current 6.5 billion world population | | | | The information in this article is not |
| grows by more than 50% by 2050. | | | | intended for distribution to, or use by, any |
| | | | person or entity in any jurisdiction or |
| TO GROW A WORLD ECONOMY BY 5% PER YEAR..you | | | | country where such distribution or use would |
| must consume resources at the rate of about | | | | be contrary to law or regulation, or which |
| 3% per year. | | | | would subject Guild Investment Management to |
| | | | any registration requirement within such |
| In today's tight markets for oil and | | | | jurisdiction or country. |
| minerals, the supply of many commodities is | | | | |
| growing at about 1% a year or less. If demand | | | | Any opinions expressed herein, are subject to |
| is growing at 3% per year PRICES MUST RISE | | | | change without notice. In addition, there are |
| SUBSTANTIALLY for energy and for many other | | | | many market, currency, economic, political, |
| commodities. | | | | business, technological and other risks that |
| | | | are beyond our control. We make reasonable |
| AS WE HAVE SAID, WE ARE OPTIMISTIC ABOUT THE | | | | efforts to provide accurate content in these |
| OUTLOOK FOR SOME STOCK MARKETS AND THE | | | | articles; however, some content and some of |
| MARKETS FOR ENERGY, BASE METALS AND PRECIOUS | | | | the assumptions, formulas, algorithms and |
| METALS | | | | other data that impact the content may be |
| | | | inaccurate, outdated, or otherwise |
| LET'S MAKE A LIST OF WORLD NEGATIVES AND | | | | inappropriate. In addition, we may have |
| POSITIVES..THEN LET'S DECIDE WHO IS HURT BY | | | | conflicts of interest with respect to any |
| THE NEGATIVES AND WHO IS HELPED BY THE | | | | investments mentioned. Our principals and our |
| POSITIVES..THIS WAY WE CAN DETERMINE WHERE TO | | | | clients may hold positions in investments |
| INVEST AND WHERE TO AVOID INVESTING. | | | | mentioned on the site or we may take |
| | | | positions contrary to investments mentioned. |
| POSITIVES | | | | |
| | | | Guild's current and past market commentaries |
| SOME COUNTRIES ENJOY: | | | | are protected by copyright. Apart from any |
| | | | use permitted under the Copyright Act, you |
| · Rapid economic growth | | | | must not copy, frame, modify, transmit or |
| | | | distribute the market commentaries, without |
| · Rapid growth in corporate profits | | | | seeking the prior consent of Guild. |
| | | | |