I suggest a reality check is needed to open their



eyes about the buying power of their debased

currencies. A reality check can often be provided

by doing some foreign travel, especially to

Europe, but also to the Middle East or developed

Asia. The reality is that the buying power of

these two groups outside of the U.S. or Japan has

fallen by over 25% in the last few years.

THE RISING COSTS OF LIVING

Food, shelter and the basic necessities of life

have gotten very expensive. While they have not

been noticing, the U.S. and Japanese citizen's

buying power has eroded on a global basis over

the last four years. During those four years, the

Yen and U.S. dollar have been about flat in value

versus one another. Over the same period the Euro,

British Pound, Swedish Krona, Swiss Franc, and

during the last year or two, even the Indian

Rupee and Chinese Yuan, have risen substantially

versus the Dollar and Yen. U.S. dollar-based

investors and Yen-based investors need to expose

their portfolios to assets where the prices are

rising, or to stocks in those geographies where

the standard of living is rising. This simple

theme is behind most of our investment opinions.

Our strategy simply put, is to invest in the

countries and industries which are growing.

GOLD AND BASE METALS ARE OBVIOUS EXAMPLES

Gold is in demand as a hedge against devaluing

currencies, and it is in demand for hoarding and

protecting wealth, and as a store of value. As

nations and individuals become wealthier, they

hold more gold. This is especially true in India,

China and East Asia, where gold has long held a

position as a safe and secure alternative to

paper currencies.

Base metals are in demand due to the

infrastructure building that is taking place in

the developing countries around the globe.

Economic growth is the model that these countries

are following, and sustainable economic growth is

based on a stable and growing infrastructure

including physical, economic, educational, legal,

financial and social infrastructure.

Because this global trend towards infrastructure

building is not likely to abate in the near

future, prices of materials will stay high, and

the buying power of the citizens in the slow-

growth countries will continue to erode.

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