We just read our June 2008 newsletter, and are amazed at how the world has changed. A year ago, our country was fully engaged in an unprecedented presidential campaign between Senators Barack Obama and John McCain, who were preaching very different values and priorities their respective presidency would pursue. Of course Senator Obama is now President Obama and is vigorously pursuing the change he promised. We will wait to weigh the evidence of his policies before reaching any conclusions, but have to admit a bit of worry as the US seems likely to accumulate debt at record levels to fund the new President’s agenda. While the actions of permanent bears such as Jim Rogers, who moved to Singapore and liquidated all his dollars based investments, may seem extreme, his warning of coming hyper-inflation is troublesome. Clearly the Fed has dumped an incredible amount of money into the system, and we will have to wait and see if it is capable of a Volcker like tightening as soon as the fear of recession wanes.

The Fed’s action is very important to how we should position ourselves in the market, as increasing inflation will move investor’s pre-tax required rates of return higher, leading to lower market multiples. Further, this will punish growth stock disproportionately, given the longer duration of their underlying cash flows. This may have a negative feedback effect on the overall market as growth stocks are the firms requiring innovating and paving the way forward to a better future.

A year ago it would have been hard to imagine:

1. The price of oil falling below $100 a barrel
2. The government owning GM
3. Citi and BAC almost being nationalized
4. Banks pleading to return money back to the government

The more things change, the more they seem to stay the same. Many of the issues we are debating today were debated in one form or another years ago, and will likely continue to be debated years from now. The access to information through the Internet may make the debates appear sharper or more urgent, but they were likely as passionate years ago. This year’s AFG Research Summit has a special treat for our attendees, as we will have Dr. Victor Davis Hanson as a keynote speaker. Dr. Hanson is a Hoover Institute Fellow, and an expert on Greek history, and he will lead a discussion comparing how many of the issues we are debating today were many of the same questions debated by the ancient Greeks. It should be a very interesting discussion. Also we are pleased to have Dr.