September 05, 2013

September 05, 2013

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Europe’s Natural Gas Leader Prepares to Lead in Shale Development As Well

The Netherlands is Europe’s largest producer of natural gas.  Development of its large conventional reserves — centered in the giant Groningen gas field in the country’s far northwest corner — took off in 1959.  The country also has smaller conventional and offshore fields, but Groningen accounts for fully half of the Netherlands’ production.  The abundance of gas has led the Dutch to rely on it extensively for heating, cooking, and power generation.  It is the Netherlands’ most important energy resource:

Dutch Energy Consumption.jpg
Source: Gas Transport Services Risk Assessment — The Netherlands

Peaking Conventional Production

However, the government recognizes that the Groningen field has passed its peak, with more than 60 percent of its recoverable reserves being exhausted.  Although risk assessments from the Dutch government do not address the issue explicitly, there is clearly geopolitical writing on the wall… 

What measures are the Dutch government implementing to meet these concerns? 

What approach will the Dutch take compared to other European countries? 

What does this mean for neighboring European countries?

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China Widens the Scope of Anti-Corruption Efforts

This year, we have made several notes in this letter about Xi Jinping’s family pedigree in the fight of reformers against corruption.  Shortly after his accession as President in March, he made pointed public observations about the risk posed by endemic corruption to the stability of Party rule, and has painted himself as a vigorous anti-corruption reformer.  This emphasis has marked his political career and probably derives in part from his late father’s experience as a reformer who was twice purged and rehabilitated for his views. Iti s also a convenient way to get rid of rivals.

We noted last year that the regime was stuck between a rock and a hard place.  It knows that public outrage over official corruption brought on the 1989 crisis that culminated in the Tiananmen Square massacre.  While it recognizes corruption as an existential threat, it also can’t afford the instability that goes along with acknowledging it too publicly.  So far, under the new regime, the tactic has been to allow moderate exposure of corruption.  It has made judicious use of microblogging as a pressure-valve to allow the public to feel their concerns are being addressed — while shutting down discussions about corruption in the upper echelons of state and corporate power.  In the first wave of public censure of corruption through services like Sina Weibo, it was petty local officials who felt most of the heat.  Even the recent high-publicity trial of disgraced Party boss Bo Xilai seemed to revolve primarily around Bo’s inability to keep his family under control, and sidestepped what some reformers hoped would be a wider-ranging exposé of corruption at high levels of Party power.

How is the Chinese Government cracking down on corruption and who are they targeting?  What does this mean for China’s? 

Peer-to-Peer Lending: Reaching for Yield Hits its Final Frontier?

Peer-to-peer lending has hit the big time.  It started just before the financial crisis as a fresh idea among Silicon Valley entrepreneurs to connect lenders directly with borrowers — to have “the little guys helping the little guys” as one borrower has described it.  But now, under relatively stringent SEC regulation, it has changed its face entirely — and is attracting big money from institutional investors hungry for yield.  And as you can imagine, it has also attracted leverage.  Borrowing at 4.5 percent and investing for a 10 percent return of course seems like easy money — until the risk analysis proves inadequate.

The largest U.S. peer-to-peer lenders are Prosper Marketplace and LendingClub.  The former boasts John Mack (former CEO of Morgan Stanley) and Larry Summers as board members.

The model is fairly simple.  Individuals sign up to borrow money for a given purpose — often the consolidation of credit-card debt.  The platform vets them and assigns an interest rate (more on this process below).  Then lenders who log in can choose loans to fund — from lower-rate, safer loans, to higher-rate riskier ones.  Their returns currently average 9 to 10 percent according to company prospecti.

Is it time to invest in Peer-to-Peer lending?

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Guild Basic Needs IndexTM

Since 2000, the cost of basic, essential needs in our GBNI have risen over 87%, while the consumer prices (CPI) are up less than 39%.

July GBNI.jpg

Track our analysis in these letters and at

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


  • Healthcare: More Evidence That Price Transparency is the Problem

  •  More Chinese Reforms: Creating “Free Trade Zones”What cities in China are participating and what does this mean for China’s growth prospects (Negative or Positive)?
  • Guild’s Premium Global Market Summary

    We review the U.S. and global markets and provide some commentary on the markets that we think are attractive and unattractive.

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