I recently sat down with long-time friend Monty Guild, a Los Angeles investment analyst, to ask him about current trends in the economy and how they impact retail jewelers. (note: Montague Guild is a recognized expert in the areas of international investing and economics. He has been a writer and speaker on economic issues for 30 plus years and has been widely quoted in the world media.)
Mia: Hi, it’s great to talk with you again. Can you start off by telling us about your company?
Monty: We founded Guild Investment Management in 1971. We specialize in analyzing global social, political, economic and technological trends and how they influence the economy. We focus on areas including consumer spending, availability of credit, the price of gold, inflation and interest rates to make the most informed decisions about investments. Our high net worth clients rely on us for information and strategies to help manage their investment portfolios for maximum return.
Mia: I know many retail jewelers are concerned with these issues. For example, consumer spending. Since the 2008 recession when consumer spending dramatically dropped it seems to be slowly recovering. But customers still seem a bit more wary than before 2008.
Monty: A couple of factors have impacted spending recently, especially for upper middle income consumers - the effects of the Affordable Care Act (“Obamacare”) and 2013 tax increases. Small business owners and entrepreneurs have felt uncertainty in the last couple years about the costs associated with these and how they will influence their businesses. Now that the costs are becoming more visible, a known quantity, confidence is returning. Consumers are feeling more relaxed. We see many new job openings on the horizon.
Mia: And the stock market seems to be doing very well.
Monty: Yes, the market has returned and surpassed pre-2008 levels. GDP is up 3%, corporate profits up 9%, the Standard and Poors index and the stock market are all up. We’ve been bullish on the market last year and this. In our view the stock market is one of the best current avenues for investors. We recommend the market for investors for the next two decades.
Mia: The price of gold is also of great interest to jewelers!
Monty: We see the price of gold rising about 10-20% during the next 1-2 years. It’s impacted by inflation, which will start slowly increasing again, the tax charged by the Indian government for purchases by their citizens and demand from the newly wealthy citizens of the emerging world, especially China. In addition purchases by national central banks should increase now that global economic growth is rebounding. A side effect of higher inflation is that interest rates, which have been low, will start slowly increasing.
Mia: A lot of jewelry store owners are impacted by the availability of credit which has been tight since 2008.
Monty: We see credit starting to ease in the near future. Interest rates on loans will slowly start to rise, but loans will become more available. Because interest rates have been historically low, banks haven’t had much incentive to lend. They’re always balancing risk and potential gain. In addition, banks have been burdened with increased government regulations, a response to the lack of oversight before the 2008 banking crisis. Especially for smaller banks with more limited resources, dealing with burdensome regulation has put a damper on their desire to lend. Higher interest rates with the potential for increased profits will increase their motivation.
Mia: On a practical note, many jewelry store owners wonder about their own retirement and the future of their company they’ve built over many years. What advice can you offer?
Monty: We can be very helpful in this area. Jewelry store owners can create a pension for themselves through their company, a plan for their future retirement. They can create security for their future by setting up a 401K that benefits owners and employees. If owners have passed a certain age their contributions can be larger. The option of an ESOP also exists where an employee stock ownership trust can be set up. This may be interesting to those who have over 50 employees.
Many business owners tend to rely on life insurance and annuities for long term planning, but there are better options available. We can help with that.
Mia: Thanks so much. Jewelers are always interested in trends in the economy which so directly affects them as well as practical advice on money and wealth management. We look forward to talking to you again from time to time for current updates and additional tips on wealth management useful to jewelers.
Mia Katrin is an award-winning jewelry designer featured in over 70 top stores nationally. She is available for lectures and seminars. To add her Collections or book a lecture: www.jeweljewel.com, 877 539-3569, facebook.com/MiaKatrinforJEWELCOUTURELLC.