Dear Reader, this is a snippet out of my latest DINL Newsletter. Please visit the site for a free subscription.

Going into 2005, I'm pulling out my largest "wide angle" lens to try and capture the big picture. Often this is the best way to now observe the globalized and interconnected world in which we live. Many people still live in their myopic world and see things nationalistically, but I believe those days are rapidly closing and one needs to keep a broad macro roadmap. The markets operate globally and so should your investments and political acumen. On a micro level of course national policy plays a role, but with technology now offering instant (investment) access across the globe, foreign investments and politics will play more important roles, I believe.

The year end press conference held by President Bush a week or so ago and televised on CNN / BBC was an interesting show. I think the most telling thing about that whole event was this: almost at every reporters question, Bush stated more or less: "That is an important question (fill in subject) - we are working on it and we need to do more" On the face of it, fairly straightforward. But, unfortunately for him, the subject list was horrendous and telling (see list below).

Right now the US, the Empire, the reserve currency of the world, is facing some of its biggest and most prescient challenges. The outcome of those challenges might very well determine the fate of many currencies and investment vehicles we choose. Needless to say, we must be very prudent in these times as to what we choose to invest in and why and what are the associated risks.

The Subject List contained most of these items :

• US Social Security reforms & demographics

• US tax reform

• US triple deficits and personal household debt / savings deficiency

• US energy consumption

• US Iraq adventure, defence spending, etc.

• US housing looking top bubbly

Today, just after Christmas, the markets are telling us the following: "Mr. Bush we don't really believe you can handle all this on your plate at the same time." The dollar fell to 1,36 against the Euro, Gold & Silver are creeping upwards again. Bonds are looking benign so far - more on that later.

The most incredible thing about this, to my mind, is the high-stakes poker game which is currently being played by the US administration with its trading partners (financiers). In fact, it boils down to the foreign poker players not calling the US administration's bluff. Maybe the markets are slowly discounting the fact that they eventually will. The US literally would have to borrow even more to buy a few more poker chips. That's how bad it has become. But being the reserve currency, they simply print more. Where will this game of bluff end? That is what all are pondering at this moment.

Let's digress back a few months: In the September DINL issue, I stated in my BIG PICTURE list the

DINL 21^st Century House of Cards ™. This list was forward looking for the next 10 years. It consists of :

• Commodity Scarcity (and the effects thereof)

• Demographic & population development

• Alternative Energy Sources

• Climate changes

• Fractional Banking & Debt management

• Tech Privacy & Security

• Genetics

So, taking the Bush Subject List and that above, I came up with a cross-functional matrix. This is what Bush and his team and the United States are faced with going into the next Bush term.

Not surprisingly, the biggest burden falls on the banking and debt management entry. Of course, things like the Iraq War were likely triggered by the need to capture and secure oil - hence the demarcation on both commodity scarcity and the debts its running to fund that war. Likewise multiple demarcations for the other entries. Unfortunately for Bush and Co. within this Matrix no Keanu Reaves will save the day with double back flips and kung fu chops while avoiding 3-dimensional sprays of gunfire. The first victim is looking to be the US Dollar.

These are, in my opinion, some but not all of the largest macro drivers of markets and investments for the next 10-15 years, at least from a US Dollar perspective.

Are we about to witness over this time an unwinding of the world's reserve currency? I think we are. It's only that people and governments are afraid of what the consequences of that will be. Warren Buffett is and has been betting on a continued and marked decline in the US Dollar value. A fundamental shift is now taking place between West and East. The power base is slowly shifting and the West is not sufficiently ready, i.e. they are mostly debt ridden and are borrowing to meet expenditures. The East, mainly China, are gathering strength and securing global resources to fund their continued growth. And they are doing it, to a large degree, on the backs of the US consumers, who continue to buy China's imports. Likewise, from a pure demographic perspective, they are achieving it via sheer numbers. India and China, each with over a billion inhabitants, are some of the biggest deflationary forces for the West since cheaper labor and less restrictive business environments are providing a large incentive for West businesses to relocate there.

In a nutshell, I'd say : learn Chinese and learn the customs. By the way, that is what Dr. Marc Faber also recommends. The future is going eastwards. Of course skilled western people can act as go-betweens and conduits for businesses, but those jobs will be few and far between. Some fairly loud music will soon be played in Shanghai, Bejing, Hong Kong, Bangalore, Tokyo, Mumbai, etc. Of course the western epicenters of business will not disappear but a lot of manufacturing and service business might very well be relocated. Thus a deceleration in the West and an acceleration to the East. This is simply the ebb and flow of economies and currencies.

Happy New Year 2005 and keep your eye on the big picture.