Happy 50th Birthday, Guild Investment Management!

On October 16, 1971, after years of investing for himself and working as an analyst at a hedge fund and in bank management, our founder, Monty Guild, established his own private investment portfolio management practice.  That practice continues today as Guild Investment Management, Inc.  For 50 years, Monty, and all the professionals working at Guild, have been dedicated to doing what we believe is best for our clients and their families — navigating investment portfolios through many wars, crises, and widely varying economic and market conditions and investing environments.

While it seems that a lot has changed in fifty years, our dedication to serve clients has been a constant — considering what is in the best interests of our clients first by acting as a fiduciary (long before it was a cool buzzword); employing a staff of client-centric real human beings who will quickly and accurately respond to clients’ needs; spending countless hours analyzing investment opportunities; being open-minded enough to go wherever we see opportunity; reducing risk to preserve capital in rocky times; and never relying on fixed models or computer generated algorithms that are designed to make a money manager’s job easier… often at clients’ expense.

Profound Changes Have Taken Place, But Looking Back, We Can See Similarities

While it is natural that we tend to focus on current events and whatever is happening in the present moment (especially thanks to social media, the 24/7 outrage cycle, rapid technological innovation, and the short-termism of many corporate economic models), it’s easy to overlook the value that can come from reflecting on history.  As we start a sixth decade devoted to navigating markets for our clients, and we reflect back, we are struck by how much the current period sounds like it could “rhyme” with the times in which our firm was born. 

In many ways, the challenges we observe around us now — social, political, and economic — just seem like developments and amplifications of what was then erupting into the consciousness of the nation.  The countercultural experimenters who hung up their bell-bottoms in the mid 70s, and embraced family life and careers, might be surprised to see their grandchildren cancelling controversial campus speakers, changing their pronouns, decrying the racist character of American society and history, and embracing gerontocratic socialists… but perhaps they shouldn’t be so surprised.  (Many of the ideas being deployed by the “woke” today have their roots in ideas that originated in the American academy in the 1960s.)

Then, as now, the country was in the midst of a deeply divisive cultural revolution.  50 years ago, cultural battles were rooted in the rejection of traditional mores, as represented most of all by cultural norms surrounding gender roles, marriage, and sexuality.  Today’s transformations and paroxysms make the sexual revolutionaries of the 1960s seem like tame conservatives — although they share most of the same ideological roots.

50 years ago, the country was yearning for the end of a long, largely unpopular war; now, we are in the aftermath of a chaotic exit from a long, largely unpopular war.  These long wars led, then and now, to an erosion of international esteem for U.S. leadership, and emboldened the major adversaries of the U.S. and its allies — adversaries who wanted to use that erosion of status to overtly increase their own spheres of influence.  Then, it was the Soviet communists, today it is Chinese communists.

Then, society was on the cusp of transformation by the arrival of the microprocessor, although that transformation would take more than a further decade to unfold.  Now, we are in the midst of an even deeper wave of technological transformation, as 5G networking, the internet of things, automation, and artificial intelligence silently saturate the economy and people’s lives — although here, too, it’s likely to be further into this next decade before the consequences of this transformation become fully visible.

Then, the U.S. was undergoing an energy transformation; domestic energy production had peaked in 1969, forcing the U.S. to rely on imported energy to meet its needs.  Import supplies soon proved unreliable, prices rose, President Nixon capped prices in 1971, and 1973 would bring the first of the 1970s oil crises. 

Today, an energy transformation is also underway.  Global forces are pushing for rapid decarbonization — and it seems like premature efforts in that direction have had an impact on energy supplies to the point that might cause energy shortages in several large global markets this winter.  Then as now, environmental rhetoric permeated public consciousness, and influenced political appeals for new mandates and government interventions to stave off predicted environmental catastrophes.

And of course, we saved the best for last: in August, 1971, President Nixon ended the convertibility of the U.S. dollar into gold and severed the last links to the post-war monetary pax Americana agreed on at Bretton Woods 25 years earlier.  This launched the global financial system into the uncharted waters that resulted in free-floating fiat currencies, financial deregulation, and ever-rising indebtedness on the part of nations, corporations, and consumers.

Once again it looks like the financial and economic system is being pulled from its moorings.  Since the Covid pandemic, we have seen truly unprecedented monetary experimentation, with the Federal Reserve monetizing a supernova of U.S. government debt, single-handedly underwriting the U.S. bond market, and facilitating the first experiments with “helicopter money” through emergency pandemic payments direct to U.S. citizens.  This has created a massive growth in M2 money supply and has stimulated inflation.

In 1971 no one knew what the ultimate ramifications of Nixon’s actions would be — but they could guess with fair accuracy that untethered money could lead to untethered prices.  The effect on the value of money (prices) looks to be as true today as it was then.

In the 70s, there was an obvious refuge where many discerning investors found shelter from perceived government mismanagement and the stagflationary storm — gold.  Today, many investors and speculators are also looking for refuge, but because of technology, many are turning to another, less tangible asset class as they seek to avoid the ravages of inflation — decentralized digital cryptocurrencies.  We note that both then and now, while there is certainly a role for alternatives such as cryptos and precious metals, it’s investment in stocks of growing businesses that will likely provide the real meat of increasing one’s wealth through appreciation.  (And we don’t mean plant-based “meat,” either — which many in the 70s would have loved to see.).

And finally, then as now, a huge demographic shift was underway, with a big new generational population entering its prime years of workplace and wider social influence.  Whatever cultural changes they bring, they will, on the whole, be producing and creating, and not merely consuming.  We suspect that just like the generation that came of age in the early 70s, their attitudes will mellow and mature and they will begin to be more concerned about building new things — businesses, technologies, homes, communities, and families — than about criticizing and burning down the old ones. 

Of course, it’s not the 70s, particularly where it comes to inflation; in this respect and others, we don’t believe the same exact script will play out.  Technological innovation today is capable of solving many of our besetting problems; even with profligate government spending at a fever pitch, the tide beneath the surface waves is the disinflationary influence of technology.  In the 70s, most problems were more effectively dealt with by industry and private initiative than by government fiat, and when government began to get out of the way with the Reagan administration, a new prosperity and optimism began to flourish.  Indeed, it was that shift that laid the business groundwork for the eventual creation of the internet.  Policy matters — and policy is never written in stone.

We thank all of our clients for the last 50 years, and we look forward to delivering another 50 better than the last.  Call our office anytime, so Monty, Tony, Rudi, Aubrey, Kaley, Bronwyn, or Barbara can put their combined experience of more than 120 years at Guild Investment Management to work for you.