In evaluating one's investments, it is useful to remember the market adage: "Bull markets climb a wall of worry, while bear markets flow down a river of hope". From where I sit, it looks as if we are climbing a wall of worry; the performance of the Dow Jones Industrial Average this week (down 3.39%) and the NASDAQ (down 2.83%) indicate that is the case. While it may be that growth will be sluggish, it seems that it will be somewhat positive and that markets will respond although certainly less than vigorously. So, my feeling is that we'll see slightly better market growth in the short term than consensus predictions.

Looking at the big "picture", there is little doubt that some investments will suffer. Specifically, investments in bonds (fixed interest holdings) will not fare well. Inflation is upon us which means that bonds cannot provide returns that will keep up. Further, bond valuations relate to general interest rate levels. With very probable increases in nominal interest rates ahead, my expectation is for bond values to slump along with decreasing purchasing power of their interest payments. That's why I have put some money into the Rydex Inverse Government Long Bond (RYJUX). RYJUX has produced negative returns during the past several years when interest rates have been declining, but interest rates will probably increase over the next few years with a correlative increase in the value of RYJUX. All in all, bond returns, when related to current levels of inflation, are negative.

O.K., what is the current rate of inflation? Actually, it depends upon whom you ask. The official USA government figures put the current "core" rate at about 2% (annualized). There is some criticism of official figures because not only do the official figure neglect food and energy (fuel) costs, but there is contention that the figures are "massaged". An inflation rate of about double official rates is more realistically accepted (http://www.inflationdata.com/). That is about 4% rather than the official rate of slightly over 2%. Also, the rate of inflation is predicted to get much worse (reference: http://www.weedenco.com/welling/Downloads/2006/0804welling022106.pdf). No question; we need to brace ourselves for significantly more inflationary pressures.

The question is what can an individual investor do? The first thing is to evaluate the real valuations of one's investments in terms of actual inflationary pressures. If the markets made realistic valuations for actual inflationary effects on some investments (bonds, stocks, and real estate), a downward adjustment in prices would follow. If you're invested in such categories as noted above, it may be appropriate to readjusting your concept of valuations. And it might be better to do that prior to everyone trying to get through the "sell" door at one time.That said, there are still foreign investors seeking safety in US Treasury bonds, buying USA companies' stocks because they are cheap (in terms of foreign currencies) and considering USA real estate purchases.

The second thing to do is to make a survey to find investments that are compatible with trends and that provide some better potential than do run-of-the-mill investments. Sure, "telephone" and government bonds were great for "widows and orphans" a century ago, but as is said, this is not your grandfather's market. In my opinion, we are witness to a near destruction of the US dollar, so it behooves us to look beyond both typical investment vehicles and beyond national borders. As inflation shows up throughout the world economy, US treasuries and domestic consumer-related stocks, tech stocks, and financial stocks will perform negatively while investments in booming economies overseas and in tangible assets will see gains accelerating.

Although the USA economy may be currently weak, there are overseas markets which are doing very well. There is a lot of talk about the success of the "BRIC" economies (Russia, Brazil, India and China). Consider what these BRIC economies are based on. Brazil's and Russia's economies are based upon natural resources; India's and China's economies are based upon low cost labor. Question: Which base will turn out to be more viable? With the resources sectors getting more interest, that's an easy question to answer. The Brazilian and Russian economies are increasing because of world (global) demand for resources, so investments in resource suppliers in those two countries should see healthy gains. To resource suppliers in Brazil and Russia, add suppliers in the friendly neighbor to the north of the world's largest economy; that's Canadian suppliers.

My list of favorite investments to consider includes Petrolea Brasilerio ADR (PBR), the Eastern European Fund (EUROX), and EnCana (ECA). To those investments, I have added some precious metals holdings. My favorite PM investment to ride probable inflationary storms is Central Fund of Canada (CEF). Now with recent corrections in precious metals drawing to an end, it appears near certain (near certain, not positively certain) that CEF which holds gold and silver bullion will enjoy an excellent upward price run. I expect that it will be a run for a year or so and I expect a near 50% appreciation over that time. But, if just holding gold and silver is a bit prosaic for the more adventuresome, latch onto some Impala Platinum (IMPUY). As I have already made a few dollars in African Platinum, I can provide surety that there's platinum in south east Africa. As a "kicker" to the current value of IMPUY, there is the possibility that their properties in Zimbabwe will enjoy better regulations if and when the Zimbabwean government administration changes.

Regarding other inflation protection investments, this week Barrons financial newspaper had a good overview of oil. The conclusion is that we will probably see near term increase in the price of oil, but as the coming decade unfolds, oil prices will soften. However, in the meantime, Conoco-Philips (COP) is mentioned as a good investment. Even better may be pipeline companies whose valuations tend to relate to natural gas prices. El Paso (EP) and Oneok (OKE) are suggested in the Barrons overview. I tend to like TransCanada (TRC) which is filling their pipelines with natural gas and petroleum, on the way from Canada to consumers in the USA. TransCanada as well as the other pipelines will probably enjoy good business prospects as their businesses continue growing.

So far so good, but what about investors that need income? As I mentioned in my report on the Las Vegas Money Show, Roger Conrad had suggestions regarding Canadian trusts. I probably need to revisit those comments in order to more fully evaluate typical returns in these growing companies. At any rate, dividends from Canadian trusts range from 8% to 16% Thus a mix of these companies' stocks can be very attractive both from an income viewpoint and from an inflation protection perspective.

At this point, it appears that the world is fracturing into spheres of influence. Russia, France and Germany are competing for control of Europe. The three biggest Asian economies, China, Japan and India, contend for control of the Far East. Brazil has become the dominate economy in South America, having large oil reserves, a first class weapons industry plus a sophisticated ethanol program. The USA still has control of North America, but the USA is no longer the big gorilla on the world stage. At this point in time, utilizing a global investment outlook is undoubtedly the way to go.

This positioning will affect us, but so far "Joe Sixpack" is unaware that anything is changing. Not only Joe, but most of the "movers and shakers" of the USA government don't have a coherent clue as to what is happening. It's business as usual with new spending programs popping up in congress like popcorn and with candidates vying with each other in bidding for votes. In light of such spending proposals without much thought of from where the wherewithal will be coming, a quote from a lawyer who works with legislators on their financial disclosures (as quoted in "Roll Call") may be of interest to investors, "Frankly...these people are economically illiterate".

As a full disclosure, I have interests in most of the investments mentioned above. If I didn't, I probably wouldn't think they were all that great. The above outlines my thoughts and feelings of current market conditions but because I am not paid to advise anyone (except my wife), these comments are merely my observations. I can't complain because the markets have been good. Although one never knows the future because markets move in mysterious ways, investors who follow trends are usually correct. The important thing is to exit trends before that "river of hope" starts flowing.