History’s Clues to What Tomorrow Brings…Are You Prepared for the Next Fifteen Years?
We wrote recently about how Japan’s last two decades can act as a guide for what the United States might expect when looking ahead at its economy. Past economic and market cycles often hold clues as to what the future holds, but we are careful to remember: while it pays to look for parallels, it also pays to contrast.
At Guild Investment Management, we are different from other investors. We believe that holding a fully invested position and ‘white knuckling’ through a series of crises such as those occurring in Europe is an outmoded strategy. This strategy worked up until 2000 but has repeatedly failed in the last 12 years. In terms of formulating an investment strategy, we do not rely on guesses about the next actions that might be taken in Europe or elsewhere. Instead, we have formulated plans and investment strategies to deal with a large variety of outcomes in world events. We do not wait to react to crises. Our proactive approach involves careful planning ahead, and ensures our ability to implement a prepared plan for the eventuality that occurs. This allows us to act with more assurance and focus our investments in those areas where our strategic plan has suggested the greatest opportunities lie, while responding rapidly to the needs of our clients’ portfolios.
1946 to 2000 Was One Era. 2000 to The Present Is Another.
In late 1946, many of the world’s economies were ripe for prosperity, having just endured 17 years of economic hardship and unprecedented human suffering. Cheap valuations for stocks, pent-up demand for a better life, and the willingness to work toward achieving it, created an immense opportunity. War-torn nations spent the next few decades rebuilding their countries, their economies, and their populations. This resulted in over 50 years of economic expansion and bull market — except for those countries living on the other side of the Iron Curtain. Over the next fifty years — with the exception of the 70?s right in the middle — the free world’s investors were paid to buy and hold over the 50-year cycle.
Unlike 1946, the current environment does not suggest that a long cycle of economic expansion is in the cards for the developed world. Our research indicates that there will be a great deal of volatility, a continued unwinding of the excessive bank lending of the last two decades, and a need to get Europe and the rest of the developed world on track toward repaying debt and managing their economies more intelligently.
The environment that we expect is one where investment opportunities will grow and abound at certain times; however the future will require a nimble-footed approach to investing. Frankly, it does not look like an environment where a buy and hold approach will work. We believe that it will be a decent environment in which to make money. However, in order to succeed one must be flexible to own stocks, commodities and currencies when the economic winds are favorable and to be out of these markets during periods of crisis. The keys for investors will be to…
Stocks are Preferred for Growth or Income; Bonds Should be Avoided
A little history: not pretty, but definitely instructive. This is what happened the last time bond yields were as low as they are today…
Global GDP Statistics that May Shock You
This data covers the period from the top of the expansion in late 2007 through its bottom in June 2009, and continues through to the end of 2011. This data is useful because it measures peak to trough and how much the economy has recovered since the trough.
Equity investors seek two things…
Guild Investment Management Market View — the Next 15 Years
Our unique view is based upon thinking ahead, rather than reacting to crises as they develop…
On July 12th, we will be hosting our next conference call for our Investment Management Clients and Gold Subscribers. In this call, we will discuss the investment risks and rewards that one can expect in the near, intermediate, and longer term. The particulars of the call will be announced in the coming days, and official invitations will be sent soon. We hope you will be able to join us!
More Lessons from History: Governments Don’t Always Pay Their Bills
Global government debt is over $45.6 trillion, and growing every day. How many trillions will not be repaid?
May 2012 Inflation Data Gives a Green Light to the Fed
People will realize it takes more notes and coins to secure basic necessities such as food, clothing, shelter, and energy. This is how a cycle of rising inflation becomes imbedded in the economy. To help you identify such changes in the consumption of basic needs, the Guild Basic Needs IndexTM tracks their prices.
Central bankers may have a green light to ease now, but we recommend you look for clues to changes in consumer behaviour. One clue will be prices of basic needs.
Guild’s Weekly Global Market Summary and Recommendation Tracker
This week we had an update to our Recommendations
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