There are a number of challenges that face our economy that don’t get a lot of press attention.  We have been worrying so much about the financial meltdown that we have not paid enough attention to some longer term issues and opportunities. Once we take the time to think about these, we will realize that we need to make fundamental changes in the ways that we invest.

Inflation is inevitable. It may be more subdued than we expect, but it is going to be with us. The Federal Reserve is pumping billions into our economy, so are many other central banks. Our national debt is exploding, states are running huge deficits, and higher interest rates are coming.

Natural Resources are being depleted as mature economies continue to use them and developing economies need to have more to continue their growth. The cost of these resources will increase.

Infrastructure in developed economies is in need of repair and in emerging markets there is a need for development. Countries all over the world have committed billions to infrastructure.

Healthcare costs are going up. No matter what U.S. health reform measures are taken, we have an aging population and more and more pressure will be exerted on our healthcare delivery capabilities.  This is equally true in Europe, and other developed economies. In growing economies, the pressure is to deliver better healthcare to a demanding population.

The United States’ economy is mature, growth will be slow. Outside the U.S., particularly in Asia, growth will be much faster. Companies that serve markets internationally will grow faster than those who derive their income domestically.

Our investments need to express an understanding of factors like those listed above. We need to re-think asset allocation and diversification.  We need to be wary of getting trapped in fixed income investments that will decline in value as interest rates rise. If we ignore the inevitable change, and we leave investments as they are, we will see our holdings lose value even faster than they did in late 2008. We have a list of investment options that address these changes. We are happy to send it on request.