Monty Guild's Contributions

Unsurprisingly, German Chancellor Angela Merkel and French President François Hollande immediately threw their weight behind Draghi's pledge. In effect, they endorsed the ability of the ECB to use the printing press to create money with which to buy the bonds of beleaguered nations.

I have never dreamed that Germans would tolerate inflation anywhere near 4 percent. They are doing no less than reversing a policy that has governed German central banking for almost a century — since the terrifying German Weimar inflation of 1921 - 1924, which impoverished millions and led to a collapse of the German currency...and social fabric.

Some of the U.S.'s most prestigious, established universities are making aggressive inroads into the field of online education. The recent announcements were preceded about a decade ago when University of California Berkeley, Yale, and MIT began to offer free internet access to videos of their courses to the public.

There is a move in Washington to adopt a measure called "chained CPI", which takes into consideration the habit of shoppers to substitute one item for a similar, lower-priced item. The BusinessWeek article states that changing the calculation is "a long-overdue piece of important business that can and should get done". The perspective this article takes is that fixing the CPI would "yield immediate savings" to the government, "and put the economy on firmer ground".

Grocery baskets may have been fuller in 2011 than in 2010, but how long will that last? Food inflation is moderating slightly in China, India, and most other Asian nations, in part due to larger food crops in Asia--but this moderation is nothing huge, and we do not expect it is permanent.

We have mentioned many times that the U.S. Federal Reserve will help bail out Europe. The rescue operation is underway...but oh so quietly. The talking heads on television, perhaps mostly on holiday hibernation, have missed the development thus far, and you may have as well unless you read a December 28 editorial in the Wall Street Journal.

Developments in Europe have dominated the world’s economic headlines in recent days and have obscured some good news from China. In this week’s newsletter, we will cover the background of these important events and their meaning to global investors.

During the last two weeks, global markets have moved their way to higher ground and indications point to a healthier finish than expected to an otherwise sickly 2011. We see several developments supporting a continued equity market rally. They have to do with measures taken in China, Europe, and by central bankers around the globe.

The lack of productive diplomacy between the U.S. and Middle Eastern nations has frightened some former “friends” in the oil-producing world, and turned them at best neutral, and at worst, cold to America.

Banks are supposed to be conservative institutions that do prudent analysis of credit risk, make loans accordingly, and buy government bonds. In the initial years of the 21st century, the banks were far from prudent and conservative.

The Pan Asia Gold Exchange (PAGE), backed by the Chinese Government, opens for business in the next few months and is expected to be fully operational by the end of 2011. This development represents an unprecedented challenge to the entrenched institutions that effect the price of gold...

The Organization of Petroleum Exporting Countries (OPEC) recently announced that Venezuela may have more oil than any country in the world. Good news for Venezuela, you would think, but necessarily so. That’s because the oil is located beneath quite inhospitable jungles.

One way to diminish the attraction of a strong currency is to print more money and buy bonds with the money. Fiscal manipulations of this sort have been commonly applied in the past and sooner or later will also be pursued by Australia, Canada, Brazil, and other countries as their currencies rise in value against the falling U.S. dollar and Euro. These activities will increase world liquidity and cause asset prices to rise.

A mess by all accounts—and seemingly getting messier. As we have been saying for some time, U.S. economic growth is stuck in the slow lane. Very slow lane. There are few signs of any significant lane changing ahead.

Heading into April 2011, we thought it timely to hoist up for consideration a point in stock market lore that says “sell in May and go away.” According to the Stock Trader’s Almanac, the market has been strongest over the years from November 1 to April 30. That stretch of time has seen average returns of 9.2 percent from the Dow Jones Industrial Index since 1950 compared to an average loss of 1.2 percent from May through October. By this standard, the current surge in the markets that took off at the beginning of September 2010 is a good bit ahead of schedule.

The continuing political upheaval in North Africa and the Middle East along with the epic disasters in Japan are sowing chaos and confusion throughout the business world. In this week’s newsletter, we will examine just how all this is playing out.

Economy watchers see its growing presence in official government statistics. Yet you won’t hear government officials admitting it. It’s too politically unpleasant — and threatening — to do so. Official spin and fantasy aside, the reality is that inflation is here and here to stay for quite a while. That means the buying power of the dollar is declining and being experienced on a daily basis.

Nobody can say for sure, but there are no shortages of possibilities, both inside and outside the Arab world. We see change unfolding and accelerating during the next two years. In addition to Tunisia, Egypt, and Jordan, civil uprisings have also occurred in Morocco, Algeria, Albania, and Yemen.

When we attended the Consumer Electronics Show (CES) in Las Vegas earlier this month, it was quite obvious that we were witnessing a genuine global phenomenon playing out — an accelerating worldwide demand for cutting-edge consumer technology. CES’s attendance was up 14 percent over the previous shows in 2010 and 2009. Of this year’s 140,000 attendees, 30,000 of them had come from 80 foreign countries.

Economic growth will be fine. The debt overhang will be handled by continuing and accelerated quantitative easing. Looking ahead, we are quite optimistic about demand for stocks, gold, and commodities in 2011.