February 13, 2014

February 13, 2014

Guild Investment Management Market Summary 

Have emerging markets reached a bottom?  In our premium commentary we discuss the U.S. and European stocks.  We also discuss the commodities we see as attractive.  We make one new buy recommendation for our Gold Subscribers.  Upgrade your subscription today to read our full analysis. 

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New Analysis Shows More Unintended Consequences of the Affordable Care Act

As investors, we are always alert to the effects of government policy on the economy and on the markets.  And the larger the policy, the larger those effects will probably be.  People change their behavior in response to incentives, and any complex piece of legislation will create many different incentives and change peoples’ behavior in many different ways.

When the law is as sweeping and influential as the Affordable Care Act (ACA), economists and market analysts immediately begin trying to figure out what those changes are going to be.

There are many unknowns.  In any law as complex as the ACA, we can bet that there will be a host of unpredictable consequences.  Nevertheless, it’s important for investors to educate themselves with the most insightful analysis they can find.  For example, since we have often been investors in pharma and biotech equities, we have been concerned about the potential effects of the ACA on research and development in those industries — since reduced R & D today would lead to less innovation and lower profits in the future.  By studying the law’s possible impacts, we are more likely to have a correct investment strategy as those impacts unfold. 

Why Will the ACA Shrink the Labor Force?  Why It Matters?

Germany Energy Policy:  Destructive to the Economy?

Germany is facing an energy crisis.  Its middle class has been at the forefront of the demand for renewable energy and carbon emissions reductions for a long time.  Over the past few years, they’ve gotten their wish with the “energy revolution” embraced by Prime Minister Angela Merkel.  That includes huge subsidies for wind and solar power generation, as well as the accelerated shutdown of Germany’s nuclear industry.

The results have been bad for the German economy.  One of the ministers in Merkel’s cabinet, a “super-minister” responsible for both energy and the economy, is Sigmar Gabriel.  Even though he belongs to the traditionally green-leaning Social Democrats, he has warned that the present course could lead to the “de-industrialization of Germany.”

With such language, there may be hope that a more balanced energy policy is in the cards for Germany and for the rest of Europe — something that would improve our view of the prospects for the European economy.

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The Chinese Banking System — Fragile? 

China fears are still taking up space in the airwaves and unnerving investors.  But further research we read last week from Jonathan Anderson at Emerging Advisors Group gave us some more support for our opinion that China may be facing some near term challenges — but its financial system is not about to blow up the world.  In fact, done correctly, the present tightening and reform of shadow banking in China (together with progress in anti-corruption efforts) might make us look at some Chinese equities…

Will there be a financial meltdown in China?

Guild Basic Needs IndexTM

Since 2000, prices of essential needs in the GBNI have increased over twice the pace of CPI.  Don’t dismiss the gyrations in the prices of basic needs.  The gyrations affect behaviors.

GBNI<br /><br /><br />
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Track our analysis in these letters at www.gbni.info.

A Note on Solar Energy Economics

Solar panel makers experienced a brutally competitive and oversupplied market over the past few years.  Now they have begun to realize the benefits of building solar power plants to secure a constant, lucrative stream of revenue from long-term contracts for the power — at rates above what’s paid for electricity from other sources.  Creative financing — such as spinning the power generation assets off into a separate company — could make these companies attractive to investors.

In Last Week’s Global Market Commentary, We Also Discuss:

  • Are Stocks In a Bubble?  Social, Mobile, Big Data, and Cloud — Beloved, But Bubblicious?
  • Coals to Newcastle, Gas to the Gulf
  • It’s Not Rocket Science… the U.S. Public Wants Jobs

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