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January 10, 2013

January 10, 2013

The Handheld Device Battle is For “Local Discovery,” 

Tech Giants Apple, Google, Facebook, and Microsoft duke it out.

The venerable yellow pages are not quite dead; believe it or not, local advertising spending in print media will likely not be overtaken by mobile advertising until 2015.  Major tech giants Apple, Google, Facebook, and Microsoft are squaring off — or occasionally ganging up — to carve out this “local discovery” space for themselves…

Location, Location, Location

Maps are the framework for all of these functions, so maps are the backdrop against which the battle is being fought.  This is why the summer’s fiasco with Apple’s Maps application was more significant than just an annoying glitch…

If You Can’t Generate it, Buy it

The other tech giants are following suit, each attempting to leverage its own unique strengths and partner with other providers to make a winning combination for consumers…

The Enemy of My Enemy is My Friend

Further, Facebook and Microsoft have forged a relationship, integrating Facebook’s social connections into Microsoft’s Bing search functionality — this social integration being a potential chink in Google’s invulnerable search armor…   

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Conference Call Announcement Date and Time Coming Soon

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Microblogs Spearhead New Anti-corruption Drive in China

The past year has been one in which Chinese microblogs have come to the fore in the exposure of corruption among Communist Party officials.  Official statistics say China now has 550 million internet users; more than half of those are users of Sina Weibo, China’s Twitter look-alike (Twitter itself is blocked by Chinese net censors).  Over the past year, there have been a slew of sensationalistic cases aired initially online which have brought down mostly low-level and local officials…

Internet censorship in China is robust — Sina Weibo reportedly has 1,000 employees occupied in self-censorship.  Although “Watch Brother” was booted out of his job, censors eventually blocked searches for his case — only after he was removed from his post, however.  Similarly, journalist Rachel Lu noted — at the height of the Bo Xilai scandal last summer — that in one day, the hits returned on Bo’s name declined from 1.2 million to 180,000.  This indicates that the censors were hard at work pulling the plug on posts deemed unacceptable.  Users responded creatively by finding new code-words to use in referring to the case.

The State in Conflict

Several conflicting forces seem to be at work in the current trend…

Having it Both Ways, and Moving Slowly Forward

Chinese leaders are between a rock and a hard place in this respect: they know that corruption is deep and pervasive, and they know that public outrage over it is possibly the most socially destabilizing force at work undermining the esteem in which the Party and the government are held.  Polls have shown steadily declining public trust in the honesty of Party cadres since reforms began in the 80s.  On the other hand, they know that destabilization would also be worsened if criticism were allowed to go too far, or to reach too deeply into the upper echelons of the Party…

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Central Bankers are Being Asked or Told to Tolerate — If Not Engineer — Higher Prices

Around the developed world, central bankers are ratcheting up their tolerable inflation target rates.  Government officials in these countries are worried about the longer-term effects of chronically high unemployment and deflation, and have started to lean heavily on their central banks to spur growth… at the expense of cost of living affordability.

Politicization of Central Banks is a Global
Trend… and Will Lead to Higher Prices

Monetary authorities encouraging higher prices is a relatively new development; one that is likely to accelerate as central bank independence wanes.  The most recent blatant example of government involvement in central bank policy is in Japan, where the newly-elected ruling party has practically given the Bank of Japan (BOJ) marching orders: PRINT, PRINT, PRINT…and get that yen down.  We have to agree that the yen has been too strong and needs to weaken for the Japanese economy to grow, but we also recognize that the party’s efforts will drive up the price of goods that Japanese citizens buy everyday — many of which are imported.

James Bullard, the U.S. Federal Reserve Governor from the Saint Louis Fed, gave a presentation last week about the decline in central bank independence.  In it, he refers to the ‘Fiscalization’ of monetary policy as making a fundamental shift to the macroeconomic environment.

The conventional role of central banks (to act as stabilizing forces, and defend price stability) is being cast aside.  Instead, there have been a lot of central bank policies that seem to prioritize funding their respective governments.  For example, European Central Bank’s Outright Monetary Transactions (OMT) Program, is essentially a promise to buy government bonds of member countries if they meet certain fiscal targets.  In the U.S., the Federal Reserve’s trio of QE programs has resulted in the Fed buying about 80 percent of the U.S. Treasury’s borrowing.  Also, in the UK, the Bank of England’s bond-buying program has certainly helped the government patch revenue shortfalls.

Economic growth could be one of the results of central banks’ fiscalization efforts, but will it be ‘real’ economic growth?

Governments’ Inflation Dichotomy

Even though governments may want a little inflation in the system, we do not expect them to fully own up to it.  On one hand, government officials like to understate the inflation rate; on the other hand they want to boost the level of inflation in the economy to inspire more economic activity.  So, while the official data suggests very slow price increases, other price measures, such as our Guild Basic Needs IndexTM

— which we created to track the prices of basic and essential needs like food, clothing, shelter, and energy — will continue to illustrate the underlying price movements that affect people’s everyday lives.

Guild Basic Needs IndexTM

Don’t expect the CPI to ever match the level of inflation people actually experience when they buy their necessities…

Guild Basic Needs Index (November 2012)

November 2012 GBNI.jpg
  Click to Enlarge

We believe higher prices are on the horizon in the developed world… in fact, they are already evident throughout the developing world.


In this week’s Premium Global Market Commentary available to Gold Subscribers, we discuss:

  • Mexico’s New President Hits the Ground Running — but Has a Tough Race Ahead

    This letter commented positively a few weeks ago on the business-friendly and pro-stability policies enunciated by newly elected Mexican President Enrique Peña Nieto.  His election marks the return of the formerly socialist and now centrist Partido Revolucionario Insitucional (PRI), the political party which ruled Mexico virtually unchallenged from independence until ousted by the more conservative Partido Acción Nacional (PAN) in 2000…

    Dealing with Cartel Violence and Instability

    The decade-long drug war that flared hot under Vincente Fox is estimated to cost Mexico a full percentage point of annual GDP growth.  With the militarization of that conflict, tens of thousands of Mexicans have died in the course of the violence — and hundreds of thousands have been displaced…

    What does this mean for oil in Mexico?

  • U.S. and Australian Rare Earths Production

    Are investments in the exploration of rare earths increasing and who is buying?

  • Guild Investment Management Weekly Global Market Summary

    Read our thoughts on Gold and what we think is attractive for 2013 and long term.

Please click the button below to learn about the benefits of Gold Subscription, or contact our office at (310) 826-8600.

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