"Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'."

"The Times They Are A-Changin'"- by Bob Dylan

All chronic borrowers know how critical it is to keep a good working relationship with your banker. So it is no surprise that President Obama, winner of the Nobel Peace Prize, spent nary a moment letting pesky human rights issues get in the way of securing our next round of deficit financing, from our lead banker China. President Obama's first trip to China was a clear sign that "the times they are a-changin". We are at a turning point in relations between a weakening U.S. power and a China that senses its time has come. Unlike his trips to Europe where he was wildly embraced by the populace the Chinese authorities detained dissidents and stopped the wide broadcast of a town-hall meeting with students in Shanghai. Mr. Obama tried to argue that the Chinese need to allow the Yuan to strengthen, which would make China's exports more expensive, hence U.S. exports would be more affordable. This was met with a barrage of criticism from the Chinese that the U.S. was threatening the global recovery with its zero interest rate policy, which was leading to speculative bubbles around the world. He was also scolded to get his fiscal house in order and bring down the massive deficits. 

Asia, and China in particular are rapidly changing. Asia has accounted for about 50% of world GDP for most of human history. It dipped down to only 10% over the last couple of hundred years but has been rising quickly of late. China has grown recently via exports, (intra Asian trade actually exceeds trade with the West), but it is working rapidly on creating a domestic demand driven economy. The result will be 900 million Asians joining the global middle class, moving to big cities, eating more protein, and buying everything from cell phones to cars to computers. There are now 310,000 households in China with investible assets of at least $1 million. That ranks China just behind the top four — U.S., Japan, Britain and Germany. What’s startling, though, is the growth: China’s millionaire population has more than doubled since 2001. The Boston Consulting Group expects the number to double again in four years. China also has 106 billionaires, second only to the U.S. 
Demographically Asia has a huge edge over the West with it's much younger population (excluding Japan of course). This growth will continue to drive demand for nearly all commodities (energy, metals, and grains). China is growing weary of having most of it's currency holdings denominated in dollars. They're not about to make any big changes, but we should all expect them to gradually, incrementally, move away from the dollar. 

Of course they will have issues arise as they grow; pollution, protectionism, food and water shortages, and income inequality, just to name the obvious. But this is a society that is hell bent on improving the welfare of their citizens at any cost. This is a country that is spending $2 trillion on infrastructure, and building a new 75 story skyscraper every 3 hours! They will not be denied. 

The biggest threat to the United States is not military but economic. As we go begging, head bowed, for continued deficit funding, we lose control of our future and we lose some dignity. 

From an investment perspective we continue to have rather heavy exposure to emerging markets, commodities, and gold.