July 2012 Index August 30, 2012 As we wrote two weeks ago, warning signs of coming inflation are more evident. The most obvious canary in the coal mine for upcoming price increases is commodity prices. Global energy prices are elevated as a result of supply concerns and continued growth in demand. Food prices are rising due to marginal-to-poor crop production around the globe. Real estate prices appear to have bottomed in many developed markets and remain elevated in some emerging markets. There are those who are convinced that inflation will not be a problem for a long time. They point to slack in labor markets, stagnant consumer demand, and deleveraging in the developed economies. Our view is that the same items they cite indicate that governments will respond by introduced more monetary system stimulus. The printing of money continues to provide wind to the sails of asset prices around the globe. When prices rise, not all assets rise commensurately. Assets that are more likely to rise in price include those that are either in limited supply, or that represent basic, essential needs. These are the prices that our Guild Basic Needs IndexTM tracks. We believe that the world will experience price rises in the future as increased global money supply and liquidity find their way into commodities which are fungible and which represent a store of value for the citizenry. If a commodity can be eaten, used for apparel, shelter or as a means of adornment people will acquire
June 2012 Index August 2, 2012 Important Note: Over the long term, the actuality is that the price of gold is not rising after considering inflation. We anticipate that over the long term gold will rise at rate of inflation. Data shows that, over the long run, the buying power of the currencies of all countries are falling when adjusted for inflation. Since the buying power of your home currency is falling, your buying power is falling — and this has been going on for decades. For several years, we have been writing up the GBNI every two weeks in this letter. We suggest that you pay close attention the GBNI in coming weeks and months. There are many factors that point to a rise in the GBNI in coming months, including: the major changes in world food commodity prices; stable world energy prices; the fact that cotton and other apparel component prices appear to be bottoming; and the fact that shelter prices in the U.S. appear to have bottomed. This, of course, means the cost of your basic needs: food, clothing, shelter, and energy for heating, cooling and transportation will begin to rise. It is important to remember how much the buying power of all major currencies has shrunk. Although we have been watching global economics for 50 years, we constantly have to remind ourselves of this fact. According to U.S. government statistics, CPI has risen from 30 to about 229.5 — about 600 percent — in 50
May 2012 Index May 24, 2012 Global Deflationary & Inflationary Crosscurrents — Yes — But in the U.S. Inflation is Stronger In our opinion, a necessary step for navigating in this environment is to be aware of what is happening underneath the surface. Rather than rely solely on the official data about the state of the economy (which in the developed world may sound bleak at times), we prefer to dig a little deeper. There is more going on than one can glean from official reports. A case in point is inflation in the U.S. The most recent April data from the U.S. Bureau of Labor Statistics said that U.S. consumer prices rose 2.3 percent during the previous 12 months, which is lower than March’s 2.7 percent 12-month increase. Recent rumblings from Federal Reserve members suggest that this subdued inflation leaves the door open to more stimulus (QE). We know that Chairman Bernanke has said that he wants to see higher asset prices. Many economists believe that housing prices are one key to the U.S. economic recovery. April’s housing data showed some life in the U.S. housing market. The average price of existing homes rose about 10 percent — the biggest monthly increase in years. In our quest to understand what is really happening, where the opportunities are, and identify which trends are likely to last, we have created the Guild Basic Needs IndexTM (GBNI). Each month, the GBNITM tracks the price movements of basic, essential needs in the
April 2012 Index April 19, 2012 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 IndexTM shows an uptick in the cost of basic essential goods. April 5, 2012 We are tracking the cost components of basic, essential needs in our Guild Basic Needs IndexTM (GBNI), and
March 2012 Index March 22, 2012 The Guild Basic Needs Index GBNI was created by us to track the prices of these basic components whose price changes affect virtually all sectors of the economy. Since January 2000, the prices of basic needs have risen more than twice the government’s CPI Index. Investors should keep this on their radar, and invest accordingly.