Dear All,

I'm not surprised by the news that Reserve Bank of India (RBI)
bought 200 metric tonnes of gold, 50% of gold sold by International
Monetary Fund (IMF). The moves of IMF are being watched closely
for some time by one and all.

I think at this point of time everybody in the world is worried about

impending inflation; debasement of national currencies in several
countries, like, the US, etc; persisting problems in the frozen credit
markets around the world; steep fall in US dollar; countries flooding
the system with currency notes; etc. Their concerns are genuine and
real.

As such, globally, investors have been flocking to gold. Honestly, I'm

not sure whether we should buy gold from an individual point of time.
It depends on one's asset allocation. If one is sufficiently invested in
stocks, bonds, real estate and commodities and are obscenely rich;
then, I think one can increase their asset allocation to gold (in fact,
I'm more bullish on SILVER at this point of time) between 5 to 15 per
cent of their surplues or assets. This is suitable only for the
OBSCENELY RICH guys who don't need to do anything for a living.

I've a basic question for people who buy gold fearing inflation would
go up to 20 or 30 per cent. Suppose imagine you're having a situation
like Zimbabwe had recently. Gallopping Inflation of 3,000 per cent or
3 billion per cent or something like that. Can you exchange your gold
and buy goods for your daily needs while agriculture production has
reached rock bottome levels? Can you eat gold and survive? It may
be a rhetorical question, but in the last one or two years, nobody has
been able to answer my basic question.

If inflation goes up to 100 or 3000 per cent, the best bet would be to
own a field of ten acres of arable land by a family of ten people or
even more near a perennial river. So that all family members can toil
and till the fields with thier own labour and grow crops organically
without depending on outside world for any fertilisers, insecticides,
etc. I think that's the BEST CASE SCENARIO if you want to be
immune from inflation!

Rama Krishna Vadlamudi, BOMBAY, INDIA. Nov. 4, 2009. www.scribd.com/vrk100 Page 1 of 3

From a practical perspective, even owning gold cannot save people
in times of crisis. Crisis times have their own dynamics and material
things like gold can't save you from all-round ruin amidst a sea of
difficulties. People can't imagine the situation of a runway inflation
until it happens! (In a lighter vein, I can tell you that we need to learn
a lot from a guy like, BEAR GRYLLS, my best Television anchor of
late, in times of extreme circumstances. His survival instincts in the
wild are simply superb. You can watch his spectacular survival tactics
on DISCOVERY television channel daily. Discovery Channel also
sells videos of his programmes if you want to watch the programmes
leisurely at your own convenience)

For common people in India, I think the best investments are a

portfolio of shares of stable and growth-oriented companies and
equity mutual funds. What happens in India, people are not
sufficiently invested in stocks and equity mutual funds. As such, I
think people with surplus should invest more in stocks and equity
mutual funds rather than in gold.

What's suitable for Government of India at this point of time may not
be suitable for Indians. What's suitable for China may not be suitable
for India. Perhaps, from a long-term point of time, acquiring gold is
good for India. But, I'm not too sure about India's timing. My wild
guess is that RBI's timing could have been better. But, you can't get
200 metric tonnes of gold without any impact cost. In fact, SS
Tarapore, former RBI Governor, has been actively advocating for
diversifying India's forex reserves into gold for the past two years. We
Indians have ignored him at our own peril while China had been
stocking up tonnes of gold in the last six to seven years. May be, one
can say better late than never!

Last week, our gold reserves stood at USD 10 billion out of USD 285
billion of India's forex reserves. With this buy, our gold reserves are
likely to go up to USD 17 billion roughly. (One can check RBI's data
at the end of this week)

But I think globally gold may come down to USD 950 or 970 levels in
the near future as USD seems to be gaining ground in the short term.

Rama Krishna Vadlamudi, BOMBAY, INDIA. Nov. 4, 2009. www.scribd.com/vrk100 Page 2 of 3

If USD rises, commodities may not surge. Another implication is that
money may move from emerging markets to the US as had
happened last year after Lehman Bros collapse. But the flow may be
slow and steady, may be it would be a two-way movement, unlike
previous time.

The same is happening already as we've seen broad-based selling in

India and other Asian markets in the last six to seven days. But my
gut feeling is that Sensex between 13,000 and 15,000 will be much
more attractive keeping in mind no other country is growing except,
China, India and Indonesia and a few other countries. As such, in
India, we are in a sweet spot as far as stocks are concerned provided
Govt of India does not botch up its finances and concentrates more
on physical as well as social infrastructure.

For the time being with Sensex at 15,400; MY MANTRA is quality

stocks and more quality stocks!

THE BEST ANTIDOTE FOR INFLATION IS STOCKS AND MORE

STOCKS for common people in India!

Please offer your comments.

Happy investing,

with regards,

Rama Krishna V

Rama Krishna Vadlamudi, BOMBAY, INDIA. Nov. 4, 2009. www.scribd.com/vrk100 Page 3 of 3