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I could cite a lot of statistics but suffice it
to say Asia is booming. Europe is growing and so
are Latin America, Australia and Canada. Of the
major countries only the U.S. is sluggish.
The world economy is growing and growing very
fast. In our opinion it is not time to fear. It
is time to "seize the day", "make hay when the
sun shines" and all of those trite but true
sayings that have persisted because they
correctly describe an era of opportunity. If
there is a cloud on the horizon it is the
potential for inflation, not the problem of
slowing growth.
THE CONVENTIONAL WISDOM
The conventional wisdom is that the U.S. will be
unattractive for investment during the summer due
to rising interest rates, the subprime mortgage
crisis and the fact that the stocks have risen
enough in the last few years. Many in the U.S.
think that if the U.S. market is unattractive,
then the world must be unattractive.
NOTHING COULD BE FARTHER FROM THE TRUTH
We do not watch markets per se but rather we
watch economies and the growth of sectors of the
world and national economies.
It is clear that globally, many economic sectors
are in stunningly good shape. Basic materials,
energy, industrial products, farm products,
commodities, transportation products and defense
products are in demand worldwide.
There are many opportunities in the countries
that are growing rapidly throughout Asia,
Australia, Canada and Eastern Europe.
CURRENCIES
The dollar is going to start to decline in the
not too distant future and we continue to favor
other currencies than the U.S. dollar.
ENERGY
A FEW OBVIOUS POINTS ON ENERGY
1. OIL WILL NEVER BE CHEAP AGAIN.
2. GLOBAL DEMAND increases about 2 per year. Non OPEC
suppliers make up the difference. The question
is how much do non OPEC suppliers have and how
much are they willing to sell to others? We
believe they will hoard more and more of their
production, further exacerbating the oil price
increase.
3. ETHANOL WILL NOT HELP IN A BIG WAY.
Ethanol is a political carrot thrown to the farm
lobby. Ethanol will increase farmers? income by
transferring money from all the other citizens to
the farmers? pockets. As we have written in the
past, it will be ineffectual and very costly on
several levels. For ethanol to have any impact
on oil demand and help lower energy prices, the
amount of corn and other materials required for
cellulosic production would cause food prices to
rise.
4. SOLAR AND WIND WILL PROVIDE SOME ENERGY SUPPLY.
However, believe it or not, most of our power
when the oil runs out will come from nuclear and
coal.
5. There is the possibility that solar panels
can be made more effective allowing solar to play
a bigger role.
OIL AT $100
1. We still believe that oil will go to $100 over
time. If we get some explosion in the Middle
East or an expansion of the continued problems in
Nigeria, it could be at $100 in 2008.
2. Today, oil is harder to find, demand is
increasing and supply is diminishing; thus, the
price is rising.
OIL SERVICE COMPANIES
We favor those companies who are OUTSIDE THE U.S.
AND IN DEEP WATER, where the biggest demand will
be in coming years.
We own deep water drillers, floating production,
storage and offloading companies who operate
offshore facilities and we own high tech seismic
companies serving the deep water market.
Recent declines in the price of some oil service
companies and deep drillers are a good buying
opportunity in our opinion.
METALS
Fear has spread that a slower U.S. economy will
cause demand for gold and base metals to diminish.
We could not disagree more. The dominant
variable impacting the price of gold and base
metals is global economic growth. Gold goes up
when the global economy grows because more people
get wealthy and use gold in jewelry and for
hoarding (to protect themselves from the
insecurity presented by certain government
behaviors). Confiscation of assets, uncertain
economic outlook and weak currencies are among
the many potential government created problems.
IN OUR OPINION....OPPORTUNITIES ABOUND
We see many opportunities in the areas of our
focus. We will use all declines as buying
opportunities, and we believe that the next few
years will continue to provide good profits in
these areas just as the last few years have.
We are concerned about inflation over the longer
term. Historically, inflation is good for metals,
energy and also for foreign nations that have low
production costs and can pass along price
increases.
Therefore, most of our favorites benefit today
and will continue to benefit if inflation arises.
For More information on global investing visit
http://www.howtoinvestglobally.com
For More information on Guild Investment
Management Services visit http://www.
guildinvestment.com
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