If I have to listen to any more hysteria about the "Yuro", I’m going to scream. Today an "expert" emotes: "Imagine waking up and finding that you no longer know how much money you have or the price of anything". But how many times in history have currencies "disappeared"? Governments, yes, politicians, yes, even economic systems "disappear". But rarely currencies. Let’s consider a real country, part of a sprawling federation, where public servants say "they pretend to pay us and we pretend to work", where economic numbers are cooked, where 70% of economic activity is chain-ganged to one unproductive activity, where a pampered urban elite is excused taxes, where economic stagnation and loss of external confidence have closed the debt markets. Greece or Europe in 2011? No, Russia in 1989 (Yuri not Yuro was the whipping boy then). And what currency did Yuri have in his pocket? The Rouble. Now? The Rouble. Has the Rouble been a store of value? Hardly. Did the Rouble survive? Absolutely. My partner Bruce thinks the "Yuro" crisis has 3 scenarios in 2012. "The No-Bazooka Outcome"; the Yuro drifts down by about 10-15%. "The Bazooka Outcome" (ECB backed Yurobonds, QE etc); the Yuro rises by 5-10%. "The Strong Get Stronger Outcome" (Greeks or Portuguese leave); the Yuro rises by 10-15%. In 2 out of 3 scenarios, the Yuro strengthens. But what probability to assign to each? I wrote recently: "The surprise survivor of the Euro Crisis may be the Euro and the surprise casualty its strongest member." I’m sticking to this, but also hedging some Yuros.

PwC says shale gas will generate USD12bn of annualized cost savings and 1.1mn jobs in the USA by 2025, producing a "Renaissance in manufacturing" in an energy-self-sufficient USA. At a time when the Chinese have +10-20% annual wage rises, and wages for the USA’s "squeezed middle" are flat, this forecast isn’t far-fetched. But what will be the effect on our holding in Gazprom (OGZPY: US / Energy and Alternative Energy theme), now on a PER of 3x and supplying 25% of Europe’s gas? And what is the long term effect on Eco-Conscious Europeans now agonizing over environmental impacts? And is the shale gas bonanza big enough to endanger the very attraction of our Energy theme? One thing is clear. At this rate, America and Asia will win again and Europe –green but insolvent- will lose.

Always invest in industries where "errors" make money. Stanley Gibbons (SGI: LN / Ageing Population theme) have auctioned a sheet of 20 1982 British Motor Cars 19½p stamps that bore an unrecorded ‘double grey’ printing error. The stamps sold for GBP 10,925; nearly 3,000 times face value and 700 times catalogue price. Chinese buyers pounced on the 1980 Year of the Monkey lots and Indian buyers fought to the death over the 1948 First Anniversary of Independence stamps. The world may be moving East but "East" finds the best bargains in the West.

Back from the Arisaig India Fund board meeting in Mauritius, where I learn that our Developing China theme noodle, RTD tea and water company, Tingyi (322:HK) is dwarfing Nestlé’s advertising spend in China. I suspect that Nestlé, whose Asian revenues are only 16% of total, has woken up to the fact that it is running a year late and a renmimbi short in China. This explains their bold acquisition of our Developing China theme candy-maker, Hsu Fu Chi (HFCI: SP). On 23rd December, Nestlé’s cash will arrive and we’ll have to redeploy 7% of equity assets. Hmmm.

An open letter from Frederick Forsyth to Merkel in the UK’s Daily Express is going the rounds. Forsyth explains that Cameron’s line in the sand over The City is as vital to Britain as the car industry is to Germany or its farmers to France. A seductive but dangerous counter-opinion suggests that The City should be cut down to size, graduates forced to become engineers, high rollers taxed till the pips squeak etc. The thinking is naive. A reading of history teaches that finance has always been a morally hazardous occupation and has inevitably attracted sleazy types. The cure for this is not to tax or socially engineer it (see what happened to the Soviets) but to regulate it properly. Adam Smith explained why comparative, or competitive, advantage has moral as well as practical merit and should be encouraged. The City is nothing if not competitive and Smith’s Invisible Hand –the market- is already reaping grimly (listen to the media’s daily count of those leaving The City, perhaps forever). All men of good will must wish that these refugees find occupations best matching their skills and ambitions, for those will be the ones that best serve them, their families and -now also with its begging hand out- The Wealth of Nations. Maybe that’s a suitable note upon which to wish my readers The Happiest of Christmases and Holidays...and hope for a better year than 2011.


This diary (the "diary") is published by Global Thematic Investors Limited, a company domiciled in Hong Kong and incorporated under the Hong Kong Companies’ Ordinance on the 15th September, 2005. The diary is not intended for private customers and is written to be read solely by sophisticated investors, such as family offices, business corporations, banks and financial intermediaries. Statements are completely personal and may change without notice, are often forward-looking and therefore subject to uncertainty and risk. The predictions and forecasts implied may not subsequently be achieved. The diary is composed of information and opinion believed to be accurate, though this information may not have been verified. Funds or collective vehicles may only be open to certain persons in certain jurisdictions and may follow strategies that are speculative and involve a high risk of loss and may go up as well as down (a favorable performance record is no indication of future performance).