Oliver "Daddy" Warbucks lost his place from the top of "The Forbes Fictional Fifteen" list. Warbucks was top for 2006. Now Santa Claus is on top in the 2007 list. Mr. Claus probably moved up when his organization moved most of their toy production to China.

As we see the numerous changes in trends and financial valuations, we need to be aware of how and when such changes will affect our financial health. I thought that as 2007 ended, we'd see an end of the year rally. We did enjoy a couple of days of significant increases in market valuations, but things change. The attempt at an end of the year rally was interrupted by the shocking assassination of Pakistani opposition leader Benazir Bhutto. As markets slumped, gold, true to form as a safe repository for wealth in times of crisis, increased in price. Further, as data from November came in, it showed that wholesale prices rose 3.2 percent in November. That increase in the Producer Price Index (PPI) was the biggest monthly increase since August 1973. The increase in the early 1970s was the forerunner to the major inflation of the late 1970s. Also, at this point, the money supply of US dollars has increased to an 18% year over year rate; that's a rate which is ten times that of new economic output. There are many indications that we'll see a replay of big inflation.

Now, as 2008 opens, a major change is investors' realizations that the USA economy is no longer simply that of fifty states but is truly a global economy. Some estimates are that about 45% of major companies' profits are from business done overseas. Companies which are not doing business overseas will lose out while companies actively pursuing overseas business will generally succeed. This is simply because the USA has become an importer of energy, manufactured goods and capital, and there is a continuing need for this to not only be maintained but to expand. Thus, it is to be expected that globally oriented companies will enjoy increased valuations.

Indeed they might. Most professional analysts expect market valuations to increase by almost 10%. Actually, these people may be right in the short run as, in an election year, market valuations trend up. My feeling is that we will see short term increases, then a lot of weakness in all markets and then selected strength as 2008 ends. At this point, I might consider purchasing stock in companies which have viable overseas business, such as Coca Cola (KO), 3M (MMM),Weatherford International (WFT) and Colgate-Palmolive (CL). However, I will stay clear of small caps including most stocks in the Russell 5000 index.

I do not agree much further with the professional analysts; I cannot see smooth sailing much past January or mid-February. These markets may be "oversold" at this point so could have a nice move up. However, they are vulnerable to any bad news, and that includes probable fall-out from sub-prime loans and housing prices and any "hiccup" in the derivatives markets. The equity markets are not low risk areas; caution is the watchword as 2008 unfolds.

As noted above, it is almost certain is that inflation will increase. Or perhaps deflation will show up? Probably both inflation and deflation will become more obvious; that's termed "stagflation". The US Federal Reserve has indicated that interest rates will be cut in order to keep the economy moving. Time will tell whether this has the intended effect; in all probability, interest rate cuts will merely chip away at the purchasing power of the US dollar. One effect of this dollar depreciation: gold and other precious metals prices have responded with big price increases. One year ago, the price of gold was at US$635; now it is at US$898. That is over a 40% increase in a year. Incidentally, the return from January 2005 to January 2006 was about 25%, so gold's increase is not just a "one-shot" move. There are not a lot of investments that provide such returns; so again, I will be continuing to hold my investment in Central Fund (CEF) and in both the gold ETF (GLD) and the Silver ETF (SLV). Also, a number of gold mining companies appear to be potentially profitable; they include, but are certainly not limited to, Kinross Gold (KGC), Yamana Gold (AUY), and Agnico-Eagle Mines (AEM).

I share my concern. The USA financial system and hence global financial systems are navigating through extremely difficult times. Not only have many financial institutions suffered major losses, but it may be that there is no realistic means of avoiding further collapse of a boom brought on by excessive credit expansion. Such a financial crisis could come later because there will be every effort by central banks to patch cracks in the system during 2008. But sooner or later, debts need to be repaid, either by the borrower or the lender. That payback will not be salubrious to institutional wealth nor to individual wealth. It may be too early to run for cover, but there may be a few safe harbors like the Prudent Gl Inc fund (PSAFX). And although It may be better have just plain cash in some foreign currencies, don't reckon that the US dollar will depreciate against all other currencies. In foreign currencies, I like the Japanese Yen and the Swiss Franc. Thus at this point I'm considering Currency Shares Trusts, available as ETFs for Japanese Yen (FXY) and Swiss Francs (FXF).

The above comments are my observations; they are not recommendations or even suggestions. They are here only for information regarding my own thoughts and considerations.