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International Investments - Quality Control

By Gary Scott

Inflation is here and this brings even more silliness.

Inflation could ruin those on fixed incomes, cheat salaried workers and make the rich richer while most people become poor. I do not like this fact but know how to profit from it. Invest in either the best or the cheapest. The middle road will suffer the most.

We can see signs of this diversion between the ‘haves’ and ‘have nots’ everywhere. Bugatti just introduced a 1001 horse power car selling for $1.3 million. Cheap Kia sales are on the rise and the Oldsmobile is gone. Soon it could be good bye Chevy good bye! We can see signs of this everywhere.

Warren Buffet gave away $31 billion … to Bill Gates! This is a real ‘haves’ deal.

Motorcycle sales are rising for example now, not because they are a rich man’s toy. A June 6 USA Today article by William Welsh says that rising gas prices are pushing rising motorcycles sales. The article begins:

“Vincent Stone, 36, of Los Angeles, shopping at L.A. Cycle Sports in Inglewood, is among those switching. He garaged his van and bought a 25-year-old motorcycle. ‘It cost me $85 to fill up the van. Man, it's been killing me,’ he says. ‘My motorcycle only costs $13 to fill up.’

“At Coleman Powersports in Falls Church, Va., general sales manager Greg Keoho says the store sold 109 motorcycles last month, up from 76 in May 2005. Scooter sales were up to 44 from 35 a year ago.”

The article sales that these increased sales are fueled by expensive gas., You can find the article in the USA Today archives at

Here is a great entry into the books of human silliness. The very same people who bought Hummers and huge SUVs for protection now buy motorcycles to save on gas. I road a motor bike on the freeway just once, when I was about 16 or 17. Even then I had enough sense to say, “I’m not doing this again”.

Yet the economic pinch is already pushing people to do dangerous things just to survive. It’s bad enough to get people to ride their hogs and such on the road rage filled highways along side the in a hurry - talking on the cell phone -drinking Starbucks - worrying about getting there on time - drivers in really big, fast cars.

Look for businesses that help the middle class survive. Wal Mart and Dollar Stores are great examples. Many middle class consumers may not like their tactics, but they have great futures because US consumers must cope with inflation.

Industry has already figured out about the disappearing middle class. Take for example an article in the Market View section of “The disappearing middle class - You may need to learn how to market food to the ‘have-nots’ by John L. Stanton, Contributing Editor. The article begins:

“About 25 years ago I lived in Brazil. One of the things that made it such an experience was there was no real middle class. There were the ‘haves’ and the ‘have nots’. The problem with marketing food there or almost any product was the bulk of the market was the ‘have nots.’

“I thought how different this was from the U.S., where we have a huge middle class with a fair amount of disposable income. Our marketing practices are geared to a large middle class.

“However, there are some harbingers that might make the U.S. more like the underdeveloped Brazil than the U.S. of the past. The Dept. of Education reports the number of people who will not graduate from high school is getting larger every year. And it might actually be worse than the DOE portrays. For example, the ‘official’ drop-out rate starts at 9th grade, so kids who drop out before 9th grade are not reported as drop-outs. Or if you fail to come back to school in the beginning of the year, you are not a drop out, etc.

“Our problem as food marketers is that income correlates with education. The lower the educational levels in the U.S., the more people there will be in the low-income groups. One estimate is that by 2025, about 50 percent of the population will be in the day-to-day income class.

“Since I don’t write social commentaries, my concern is the disappearing middle class will significantly change the way we market food. It already is changing. Look at the growth of dollar stores, the Sav-a-Lots, etc. They are becoming the store of choice for that lower 50 percent, with that group “splurging” at Wal-Mart. Even the next 40 percent will be very price-conscious and probably mass merchant-loyal; they’ll only splurge at today’s traditional grocery stores. The top 10 percent will shop wherever they want.” You can read the whole article at

Not getting enough kids through school? How could this be?

Whenever I visit Portland I get some keen insights because when I left there and did not return for decades. Often we miss seeing things because they creep up on us minute by minute. However when you are away a long time and then come back Wow! You see a lot of change. There are a number of silly things I saw this trip.

First, is the education problem. When I was growing up people were poorer (in dollar terms) than now and they were building schools like mad. Now they are shutting down the schools because they cannot afford to operate them.

This creates extra crime not having more kids in school so the county there, Multnomah, built a spanking new jail. Only…it has remained empty because they cannot afford to open it.

Could any of this be because taxpayers are spending all their money on debt, bombs and soldiers to protect us against terror? Frankly this would be very silly to worry about terror on the outside when the real terror is having a poor, unschooled criminal population that you cannot even jail!

Inflation? I drove by the house where I was raised in Rockwood Oregon. My folks bought it for $2,700 in 1947. They sold it in 1960 for $14,000. The house is back on the market, two bedrooms, one bath, a bit over 800 square feet in a so-so neighborhood. The price? $184,500!

Perhaps we can learn from the past. A big chunk of the debt that the US owes was created in the war against the Soviet Union. We spent lots of money on bombs and rockets because we feared that the Russians would take over. We won. Right? Maybe not. In the wasp suburbs of Rockwood, Oregon the neighborhood has been taken over by Russian immigrants! They know what inflation will do and have come to America (along with lots of Vietnamese) to work hard.

So there you have it. The one saving grace that might boost our flagging economy from the debt that we created to stop the Russians from coming may be the hard working Russians who have come. Is this silly or what?

But this is the way it is. The good part is that many people will become even richer and how about we all can be among them! One way to do so is invest in businesses and countries that are especially suited for either the very rich or the poor.

Learn more about fighting inflation by investing in emerging currencies, gold, silver, Ecuador, import-export, overseas markets and more. Join Merri, Thomas Fischer from Jyske Bank Copenhagen and Steve Marchant from Ecuador and me at our September 15-16-17, 2006 International Business and Investing Made EZ course in North Carolina. Review where to invest and do business now and learn which markets and currencies may be strong in the year ahead. Learn more about Ecuador import and export from Steve. Our May course was overbooked and the September course is filling up quickly. Our free accommodations here on the farm are reserved on a first come first served basis so do not delay! Go to


June, 2006


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