2014 Guild Basic Needs Index

July 2014 Index

July 2014 Index August 21, 2014 What Is the Bond Market Telling Us? Interest rate levels have been confounding many professional investors around the globe. U.S. government benchmark 10-year interest rates began 2014 near 3.00 percent, but they have been sliding back to about 2.40 percent recently. The rally in bond markets and corresponding declines in yields are even more pronounced in Europe, where benchmark interest rates are actually at multi-century lows — even in the economically troubled southern periphery. In Japan, despite the central banks’ and governments’ massive effort to reflate the economy, bond yields haven’t budged. The developed market economies are having a hard time sustaining growth, in part due to structural issues like demographics and high regulatory burdens. However, lower expected potential economic growth is just one reason why the prices of the debt issued by deficit-happy, heavily indebted governments keep going up. These countries can continue to borrow money without offering investors a real return as long as: • Depositors don’t trust banks and fear bail-ins (this is especially the case in Europe, where many large depositors prefer government debt over large cash balances) • Geopolitical instability remains in the headlines • Banking executives prepare for more frequent stress tests • Investors remember being caught in illiquid investments in 2008 and 2009 • Asset allocators with strict mandates crowd into high-rated investments • There is desperation for yield and/or perceived safety • There remain limited alternatives for acceptable collateral • Bank lending remains constrained; banks’ coffers

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April 2014 Index

April 2014 Index May 29, 2014 Is Rising Inflation the Next Inflector? As we have discussed over the years, through our Guild Basic Needs IndexTM (GBNI), we are watching for inflation trends beyond the officially reported numbers. As we have said often, inflation may well be the inflector that signals tactical caution for us. We regard the prices of basic essential needs as tracked in our GBNI as a potential leading indicator of inflation before it appears in the headline CPI numbers. We notice that GBNI has crossed the 100 percent threshold, meaning that the basket of food, clothing, shelter, and energy components in our index have doubled in price since January 2000. Meanwhile, over the same period the government’s Consumer Price Index (CPI) is up just a little over 40 percent. Inflation data has been running at relatively low levels in the developed economies these past few years. Could this be about to change? Central bankers in the U.S., Europe, Japan, and elsewhere hope so as they have been trying to “get the inflation numbers up.” Perhaps their efforts are working. The recent acceleration in our GBNI which tracks the prices of basic, essential needs is something investors should follow.

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January 2014 Index

January 2014 Index February 27, 2014 Higher Inflation Expectations May Start With Breakfast Much has been reported about the recent surge in coffee prices… but sugar prices have also risen to multi-month highs due to drought conditions in Brazil, the world’s number one exporter of these commodities. Brazilian coffee and sugar producers and analysts have been slashing their production estimates as hot, dry weather threatens 2014′s crops. According Somar Meteorologia, a Brazilian weather service, January and February have been the driest months in Brazil in 30 years. Source: Finviz.com Not Just Coffee and Sugar… and Not Just Brazilian Farmers Experiencing Challenging Weather Some global agribusiness analysts are looking at the impact of too much rain in Indonesia as damaging that country’s large cocoa harvest, and in North America, brutally cold winter may have damaged the wheat crop. With respect to other grains, in the U.S, farmers are expected to plant less corn in 2014 and more soybeans to take advantage of already high soybean prices…which is bullish for corn. While soybean prices may have been strong for some time, corn and wheat prices turned higher in recent weeks after prolonged declines. In fact, after a rough 2013 — in which the GSCI Agriculture Index suffered its biggest decline since 1981 at down 22 percent — the index has rebounded about 6 percent in the first two months of 2014. Corn beginning to firm up after a weak 2013. Source: Bloomberg Wheat, too, is starting to bounce off of multi-year lows.

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