To view the Indian Market Index graph (Bombay



Sensitive 30 Index, July 9, 2007) please click on

the hyperlink given below

http://www.guildinvestment.com/ARhome.asp?VAfg=1&

RQ=EDL,1&AR_T=1&GID=0&linkid=224&T_ARID=187



These rallies are due to the decline of the U.S.

dollar and the outperforming economic growth in

these nations versus the more developed nations.

Those events are sending ever more investors into

the global markets. Our U.S. centric money

manager friends often call us for ideas of how to

invest in these markets. The calls are becoming

more frequent as foreign markets continue to

attract more money which had been previously

focused in bigger, more established markets.

To view the Hong Kong Market Index graph (Hang

Seng Index, July 9, 2007) please click on the

hyperlink given below

http://www.guildinvestment.com/ARhome.asp?VAfg=1&

RQ=EDL,1&AR_T=1&GID=0&linkid=224&T_ARID=187



Remember that these emerging or newly emerged

markets can be volatile. We do not like to chase

stocks in these markets, but we do like to buy on

dips.



BASE METALS GETTING GOING AGAIN

After resting for a few months, base metals

stocks are once again moving upward. The

investment world is realizing that the demand for

base metals is a multi decade demand cycle. Rome

was not built in a day and neither will the

Chinese and Indian infrastructures.



GOLD IS READY FOR ITS SEASONAL BOUNCE

Gold often bottoms in late July or August, and

moves up into the fall and winter. Two major

stock brokerage firms wrote large institutional

reports about this phenomenon in the past week.



"CHINA SOVEREIGN INVESTMENT BODY TO GET FIRST

FUNDS"

This was the headline reported Friday June 29th

the Financial Times. It is very important for

global markets as the Chinese are seeking more

return on this pool. A pool which could

eventually be worth trillions of dollars. China

had a total surplus of about $1.2 trillion at the

end of March 2007. Not all will be invested in

this fund, but the fund will start with $200

billion.

They are moving from low yielding treasury bonds

and other fixed income investments into global

stocks, bonds and maybe commodities. Their first

investment was $3 billion into Blackstone, the

large investment group which just went public in

the U.S. After the Chinese invested, the IPO

created a substantial paper profit for the

Chinese.

We expect the Chinese sovereign fund to be

aggressive, and this will lead to a more

aggressive outlook for global markets. Many

other countries already have sovereign investment

funds, and they are generally responsible global

stock and bond investors. Of course, these

investment funds are held by those countries with

surpluses, countries with deficits like the US,

do not have such funds.

INFLATION - THE NEXT BIG THING.....HOW TO

CAPITALIZE UPON IT AND PROTECT YOURSELF FROM IT

Inflation will be the world's next big economic

problem, and the inflation of the coming years

will cause many to seek shelter in stocks and

commodities to protect oneself from the inflation.

Whenever inflation exists, the prices of goods

and services rise as people begin hoarding.

CHINESE INFLATION WILL LEAD TO HIGHER PRICES

WORLDWIDE ....WHEREVER CHINA EXPORTS

Chinese inflation is heating up to about 3%.

According to the Financial Times Lex Column on

Saturday June 30, 2007. "...including negative

real interest rates (after tax) which have helped

fuel the Shanghai stock market bubble. Higher

prices have also led to a series of modest

tightening measures, with more likely to come."

Negative real interest rates mean the cost to

borrow after tax is less than the rate of

inflation. This creates incentive for

speculation to keep ahead of inflation.

Like most managed economies, the leaders of China

do not want to admit that inflation can happen,

so they ignore it and end up reacting to it late.

This feeds inflationary psychology if not

handled promptly, and the inflationary psychology

manifests itself in speculation in stocks, real

estate and other assets in order to keep ahead of

rising prices.

China is the world's largest exporter, and most

of its exports go to Asia; secondly to Europe,

then the U.S. and Latin America. Since China's

low prices will have to rise to maintain profit

margins, and since Chinese prices are lower than

most other countries anyway, everyone can expect

Chinese goods to pressure prices higher in their

country. Global inflation is a feedback loop and

complicated to explain. Suffice it to say that

inflation in a major producing country can easily

spread to all of their customers.

China is a repository of world growth, and it

will be a continued presence for the better (and

maybe a little for the worse) for the foreseeable

future.

BRAZIL

Brazil is a growing and fast developing a major

economy that is often forgotten.

Currently they are in better shape with

commodities and manufacturing booming, plus home

ownership is taking off. They are a power in the

manufacturing of aircraft, steel, computers and

many other machines.



INDIA.....THE THEME IS STRONG AND ACCELERATING

GROWTH

The Indian stock market is doing very well.

There we have been focusing on capital goods,

machinery and equipment suppliers. Indian

economic growth is heading higher. Today it is

only slightly below China, and is second fastest

in the world for a large country. India will

continue to grow fast.

The Indian monsoon which is very important to

rural income is normal thus far. We are about

one third of the way through monsoon season. If

the monsoon continues normal, India will continue

its rapid growth rate. If the monsoon is poor,

then the political forces will demand handouts to

farmers and slow the growth rate. In either case

Indian growth will be rapid.

We are finding opportunities, and we believe our

themes are in sync with what is happening in the

global markets. If you are interested in hiring

Guild Investment Management to manage your

portfolio, please contact us. Thanks for

listening.

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