Looking at The World Outside our Reefs. Cheap food sources are a diminishing supply.

Food across the globe is becoming more expensive to produce. Many vegetable products are now being deployed as alternative energy sources. Corn, soybean and wheat prices are expected to continue to accelerate due to strong industrial demand, giving a further push to increases pressure on food budgets.

In the Western world, bees are disappearing at rapid rates, leaving bee scientists and bee keepers concerned and ill-equipped to cope. With more than 40 percent of food production in the United States dependent upon pollination of crops by bees, having to seek artificial pollination will also impact food costs beyond normal inflationary indexes.

For every action there is the opposite reaction; perhaps, food budgetary strains will drive down the portion sizes and weight levels of Western world consumption.

Oil and Transportation: Analysts predict crude oil five year energy futures up to $150 a barrel, with little easing, not much consolation to consumers personally trying to cope with current market spikes of up to $100 per barrel, and a winter with a 50 year Bear Frost.

Toyota, now the second largest auto producer in the world, plans to produce more than 200,000 Prius Hybrid cars in 2007-2008. With spiraling cost of oil, that target could easily escalate upwards. Already, the Prius is the number one selling car in California.

Smaller homes may come back into vogue as new homes are downsized in scale for heat efficiency and affordability.

Global Capital Markets: The United States, UK, and Euroland subprime mess. How many more writedowns will we see in the next few weeks? Only those sascrosanct auditors, at this point, know for sure. Financial news continues to grind out news of larger firm writedowns along with imminent CEO departures (and their guaranteed payouts). Why is it that bad managers continue to be rewarded inversely in proportion to good ones?

Continued Sovereign Wealth Bailouts. Any bets on how many more investment firms will sell parts of their capitalist souls (and how much) to Sovereign Wealth funds in the 'name of free world commerce?'

By any other name, this free commerce is really a game called we pay tremendously over-inflated prices for oil so we can drive around in our big cars, then we allow them to use our money to own us, in part, or in whole. What a price for free choice consumerism!

American Capitalist Domination Dimming. Daniel Gross, writing for the New York Times, "The Capital of Capital No More", about innovative hard driving centre of the investment universe of New York suggests that world markets no longer view New York that way.

In fact, according to Mr. Gross in his research, evidence suggests that the United States is losing its leading competitive position as compared to stock markets and financial centers abroad."

In January, 2007 Mayor Michael Bloomberg and Senator Charles Schumer of New York released a report from McKinsey & Company that diagnosed the malady in detail. "Today, in addition to London," the report's authors intoned, "we're increasingly competing with cities like Dubai, Hong Kong and Tokyo."

Currencies:

US Dollar. The US dollar may actually appreciate against other major currencies next year, according to Euro banker projections on www.gtnews.com. This may not be welcomed by most of the offsetting rising currency countries. American goods, vacations, and real estate have become cheaper. You should have heard the foreign languages at Disneyworld at Christmas 2007, but American consumers are loathe to spend abroad, placing pressure on country economies such as euroland and Canada.

Loonies. Futures analysts predict the Canadian dollars fall to about 95 cents US by the fourth quarter of 2008.

Euro. Currency futures on the FX CME exchange project around 1.44 by March of 2009.

British Pound appears to be priced relatively flat on the futures exchange well into late 2008. What happens after that is anyone's guess.

Bill Gross of PIMCO predicts that US interest rates will continue to drop as far down as 3.25 percent by end of 2008, not good news for depositors.

Will the US slide into recession? Warren Buffet was quoted as saying during his recent trip to Korea that the underlying US economy was strong, and while the pace might slow for a while, it will be back in one to two years.

Personal Investing. Small investors are increasingly choosing asset allocation and life cycle funds because of their simplicity and ease of management. There are akin to placing your investments on cruise control, checking the speed once in a while.

Health Lifestyles. US companies are opting to use carrot and stick approaches to contain the cost of health insurance. Those employees who do not meet guidelines mandated by health prevention company programs will be penalised on their health insurance costs. Healthier lifestyles advocates will pay lower health care premiums and rewarded for health club initiatives.

In Our Bermudian World, (some opinions, and some pure personal conjecture).

The Bermuda government will continue to grow in size and influence as we look to it to solve our problems.

Energy efficient cars in Bermuda just won't happen until the cost of fuel causes severe heartburn and budget disasters. Ditto, riding the bus.

Budget buzz word. The old fashioned word budget is going to come back in style as cost of living continues to escalate on a daily basis. Simple clean fashion lines, less stuff in homes, less food consumption, more recycling, more sharing - will become in thing to do and cheaper, too. Rat Cheese escalation factor still going up - now at 6.00 per pound. For those of you who don't know me, low cost, actually the cheapest, Australian yellow cheese (rat cheese) at 3.00 per pound was the staple of our childhood home. In the last three years, it has doubled in price.

Retirees will find it increasingly difficult to consider remaining in Bermuda, and will seek to reside elsewhere for part year, anyway. This will increase the number of rental units on the market as well; good news for the lessee, possibly not so good for the lessor.

Mandated day care operations will be subsised by government to allow employees working two or more jobs relief from the high cost of child care. This has happened since this article was written.

Casinos, as a venue for job growth for Bermudians wanting stable employment in the workforce now, will be permitted sooner rather than later in Bermuda as employment opportunities continue to narrow in other fields, due to the complexity and intense educational demands assessed of each job applicant along with preference for cost containment in other domiciles.

An interest, dividend and possibly rental income tax will be instituted as companies decline to support further increases of their payroll assessments for social programs. This will become an administrative nightmare as monitoring and enforcing these new taxes increases the employment numbers in government.

Tax assessments across borders will increase as the G7 nations, OECD and other financial taxing authorities seek to collect what is rightfully theirs from their citizens, or so they think. Border control may become more complex for Bermudian residents travelling as more countries impose visit day-counting, qualifying domicile and taxable residencies.

Recycling in earnest will only happen when it becomes too expensive to purchase new stuff. More cottage industries may proliferate to provide efficient repair services. Otherwise, Bermuda will continue to be big litterbugs of our world.

Inflation, like our Lord, is with us always, but Bermuda has survived for 400 years and will continue on in his Grace.

Martha Harris Myron CPA -NH1929, CFP® -67184 (US licenses) is a dual citizen (US and Bermuda). She is a Senior Wealth Manager at Argus Financial Limited, specializing in comprehensive financial solutions and investment advisory services for individual private clients and their families, business owners, endowments and trusts. DirectLine: 294 5709 Confidential email can be directed to mmyron@argusfinancial.bm

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.