Illusion of US and Japanese prosperity - By: Monty Guild

I suggest a reality check is needed to open their
eyes about the buying power of their debased
currencies. A reality check can often be provided
by doing some foreign travel, especially to
Europe, but also to the Middle East or developed
Asia. The reality is that the buying power of
these two groups outside of the U.S. or Japan has
fallen by over 25% in the last few years.

THE RISING COSTS OF LIVING

Food, shelter and the basic necessities of life
have gotten very expensive. While they have not
been noticing, the U.S. and Japanese citizen’s
buying power has eroded on a global basis over
the last four years. During those four years, the
Yen and U.S. dollar have been about flat in value
versus one another. Over the same period the Euro,
British Pound, Swedish Krona, Swiss Franc, and
during the last year or two, even the Indian
Rupee and Chinese Yuan, have risen substantially
versus the Dollar and Yen. U.S. dollar-based
investors and Yen-based investors need to expose
their portfolios to assets where the prices are
rising, or to stocks in those geographies where
the standard of living is rising. This simple
theme is behind most of our investment opinions.
Our strategy simply put, is to invest in the
countries and industries which are growing.

GOLD AND BASE METALS ARE OBVIOUS EXAMPLES

Gold is in demand as a hedge against devaluing
currencies, and it is in demand for hoarding and
protecting wealth, and as a store of value. As
nations and individuals become wealthier, they
hold more gold. This is especially true in India,
China and East Asia, where gold has long held a
position as a safe and secure alternative to
paper currencies.

Base metals are in demand due to the
infrastructure building that is taking place in
the developing countries around the globe.
Economic growth is the model that these countries
are following, and sustainable economic growth is
based on a stable and growing infrastructure
including physical, economic, educational, legal,
financial and social infrastructure.

Because this global trend towards infrastructure
building is not likely to abate in the near
future, prices of materials will stay high, and
the buying power of the citizens in the slow-
growth countries will continue to erode.

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offering or recommendation of any security. Guild
Investment Management does not represent that the
securities, products, or services discussed in
this web site are suitable or appropriate for all
investors. Any market analysis constitutes an
opinion that may not be correct. Readers must
make their own independent investment decisions.

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Investment Management to any registration
requirement within such jurisdiction or country.

Any opinions expressed herein, are subject to
change without notice. In addition, there are
many market, currency, economic, political,
business, technological and other risks that are
beyond our control. We make reasonable efforts to
provide accurate content in these articles;
however, some content and some of the assumptions,
formulas, algorithms and other data that impact
the content may be inaccurate, outdated, or
otherwise inappropriate. In addition, we may have
conflicts of interest with respect to any
investments mentioned. Our principals and our
clients may hold positions in investments
mentioned on the site or we may take positions
contrary to investments mentioned.

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About the Author

Monty Guild founded Guild Investment Management in 1971. Prior to founding the company he was an analyst at a bank and a hedge fund.
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