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THE WORLD’S NEXT MAJOR HURDLE WILL BE INFLATION

THE WORLD’S NEXT MAJOR HURDLE WILL BE INFLATION

India and China, with their educated and hard working people have kept inflation down in the developed world for years.  Cheap high tech skills from India and cheap labor intensive products from China have been enjoyed in the developed nations.  This has kept the world from experiencing the kind of inflation one would have expected.  We will now see inflation rising due to the big increases for base metals, energy and luxury goods prices.

The period of low costs of goods and services from the above countries is now over.  China and India are experiencing wage inflation as the pool of skilled English speakers has been employed.  For example, India now imports experienced managers from the U.S. and Indian CEO’s make as much as many CEO’s in the U.S.

To sum it up, the pool of qualified labor is now employed and new hires can only be made by paying more to someone who already has a job.  This will create inflationary problems in the world as a whole and in the U.S. especially.

MARKET CORRECTION
We anticipate that periodic market corrections will be experienced in all world markets during the summer and autumn months.  We believe that these will create buying opportunities for good quality stocks which benefit from the themes that we continue to favor.  Those themes are:
• Growth of China, India and the Asian region creates investment opportunity in these markets.
• Energy demand will continue to grow; supply is not growing hence energy prices will rise.
• Non U.S. dollar based currencies will continue to appreciate.
• Demand for global financial services will grow rapidly.
• Industrial metals and precious metals will be needed to further global growth.  Supply is stagnant and demand is rising, hence prices will rise.
• Transportation equipment is important for this growth to continue.


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