PLEASE ACCEPT OUR WARMEST WISHES FOR A HEALTHY, HAPPY AND FULFILLING 2008

2008 WILL BE A YEAR WHERE FOOD INFLATION MAKES US PROFITS

It is not yet widely in the news in the developed world, but in the developing world and in the energy producing countries of the Mid East, Asia, and Latin America; inflation is beginning to share the headlines with news about rapid economic growth.

Most of the western economic pundits dismiss inflation as a non-problem because it is their view that inflation has been caused by higher food prices, and food prices will move lower once good weather allows more crop production, or once high prices dilute demand as has been the case in the past.

MAY WE RESPECTFULLY SUBMIT THAT THIS IS NOT THE PAST

Presently, as well as in the future, the consumers of food are and will be much richer and more interested in upgrading their diets than they have been in the past. There are also other reasons to suggest that grain prices will rise, like the focus on ethanol production. However, let us just keep it simple and look at how much richer the food consumers of Asia, Russia, Eastern Europe, and Latin America are now than they were just a few short years ago. As they become richer, these consumers demand more food and more animal products, which consume a lot more grain to produce. Grain prices are certainly going to move higher over the long-term. Meat and dairy prices will rise as well.

We strongly believe that demand for food and the products used to grow food including fertilizers, machinery, transportation and processing will be profitable industries in 2008.

This is a theme that we will be participating in more in 2008. Over the past few years, we have owned these types of stocks, and done well in them but they have not been a major theme of ours. We are now initiating them as a major theme.

Some will say that the fertilizer stocks have already risen, food prices have already risen, and grain prices have risen. This is of course true, but may I ask you a question? After Gold had already risen from $250 and ounce, was it a bad buy at $400/ounce? No, because it is currently at $831. Was oil a bad purchase at $50/barrel because it had risen from $20? No, it is currently at about $96.

Corn and soybeans have not risen as much as oil and gold in the last 10-11 years, but they will.

Food has always been a bigger part of the total expenditures for people in poorer countries. If they keep their food expenditures flat as a percentage of their total expenditures, their food consumption grows a lot as their incomes rise.

OUR THEMES FOR 2008

We are sticking with several of our old themes and adding two new ones.

We have reviewed all of our themes in the context of a more inflationary environment expected in 2008. 1. Precious metals and foreign currencies remain a theme, and we continue to believe that both inflation and a weak U.S. dollar will lead to higher gold prices in the coming year.

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