Hi Dan Sorry if I'm labouring this, but it's an important point, I think. You said who trusts a news source that only provides good news? My point is that we don't. Those six locations I mention DO count because we are all about explaining why we do deals where we do and why we don't do them in other places. By definition this means that we're going to have more positives to report on those locations where we do deals. The Bulgarian coast was super hot - we said No and we also said why. Berlin was hyped, we said no. We said no to coastal investing (excepting Cyprus where we saw a different market). There are more examples. That's all 'bad' news in the sense it's negative and we hope it's useful. (Plus, I might add that we DID do deals in Riga. And we explained why we stopped.) I do take your point, though, that more warning signs of cyclical negatives - interest rates and over-supply in certain sectors - are useful. We have tried to provide that - faux luxury in Warsaw, too many investors in the centre of Krakow, weaker than we would like finance in Romania, a weaker than elsewhere rental market in Bucharest, slowing price growth in Warsaw, the potential risks of foreign currency mortages in Romania and Poland, and many many more examples. But, it's important to also point out the other side of the coin - when we see that there is one. Slower growth in Warsaw indicates a strengthening rental market, for example, weak rental in Romania, but compensated for by accelerated growth. We DO say these things and it's for you to make your mind up. But at the end of the day we are not about sitting on the fence, offering 'on the one hand, on the other hand' assessments. We say what we think, what we've concluded and we say why. We'll try and provide more of this insight going forward and will always try and tackle members' questions and areas of interests when we can. So, don't stop the feedback, even if it's sometimes negative! But, please, only good news? I don't think that's fair. It may be a perception, but the reality is somewhat different. Best regards

Hi, So it seems I provoked an interesting debate on the current economic situation in Romania. Now I am back amongst the reality of it all let me post a few comments from Cluj Napoca. First I would like to deal with the suggestion from some that PS should be more upfront about the downside and context of certain investments. I will do that by reminding you of the three Ls – location, location and location again. Location is not just about a green view or south west facing apartment with good infrastructure and foreign investment on the doorstep. Location is also about knowing your own back yard and the alleyways and unpaved streets that lead beyond it – in short, the political and economic environment of the country into which you have or propose to invest your money. In the context of Romania the very least you, as individual investors, could do would be to keep your finger on the pulse and spend 10 minutes each day skimming, for example, www.nineoclock.ro , the English language newspaper in Bucharest. Last year the Romanian RON performed better than any other currency in the world against the US dollar and did incredibly well against the Euro…a position that only dreamers would have thought could be sustained. The RON has fallen by about 15 per cent following the start of the crisis in the world credit market in August and registered it’s lowest rate against the Euro for 16 months on Thursday last. Any astute investor (in any country) would have monitored currency fluctuations such as this like a Romanian eagle. From the point of view of the domestic property market this is not good news for first time buyers. Prices and rents are quoted in Euros but paid in RON so prices (but not rents) are likely to stagnate a little over winter which is quite a normal phenomenon in Romania. New builds for this market may be priced even more competitively. Developers make huge profits in this country and have substantial leeway to drop prices to get a new build project stated and sold. The FT article I originally posted made note of the fact that significant income increases had been awarded in respect of the minimum wage and pensions. Both were long overdue the increase in the minimum wage also having something to do with EU compliance. These two moves will both help sustain the first time buyer property market. Pensioners will be less dependant upon money sent home from children working abroad and hopefully a raise in the minimum wage will push up incomes for the very many who work for only slightly more than it. On this note you might want to go into a Job Centre in the UK - South Wales for sure - where you will see most jobs advertised as being paid at the minimum wage or slightly above it. Unlike South Wales a number of cities in Romania no longer have high unemployment…they have minimal unemployment…many people having undeclared jobs and others having second jobs. Some jobs have an official salary for taxation purposes topped up by an undeclared amount which reflects the value of a particukar employee in the context of skills and abilities and market forces. Competition for limited labour should see the real value of incomes maintained thereby sustaining the emergence of the middle class in Romania. The most significant contribution to inflation in this country (and I am not an economist and am only giving my impression) are prices. Romanian business philosophy over recent years has consistently been to keep the prices (and the profits) high. The recently introduced import culture in this country is giving people what they think they want and they (stupidly) will pay the price that is asked. On the day to day market place what Romania needs is more genuine competition and not a cartel mentality. Go to the two new malls here in town featuring Carefour and Auchan (as well as God knows how many designer shops) and you will see what I mean. Even better go to the very same stores across the border in Hungary (where an increasing number of Romanians do their shopping) and don’t forget to drop into a Tesco where I do a bulk shop once every six weeks or so. Romanian business interests have been greedy and those with political clout have resisted market forces. The Governor of the National Bank of Romania, Mugor Isarescu, recently stated that the current tendency to increase consumer prices in Romania will end in the spring 2008. I and many Romanians hope he is right. The key would seem to be in the final paragraph of the FT article: “With parliamentary elections due next year, politicians are already focused on the polls. Liviu Voinea, director of the GEA think-tank, says: "What is needed is decisive fiscal reform. But the government can get through next year without it. Then we will have the election - and the politicians don't care what happens after the election." If this statement is right then rich Romanians fit very well with Thorstein Veblen’s theories of conspicuous consumption on which much of modern advertising is based ( go to http: / /en .wikipedia .org /wiki /Conspicuous _consumption because it sums up modern day Romanians so well). Such persons, and there are many, will continue pay the price for the biggest, trendiest and the best (imported and adding to foreign debt…bring in a luxury tax?) and thus increases in the top end of the property market are likely to be sustained. But the key for me to Romania’s future is in establishing once and for all the new emerging middle class and this will only be achieved if fiscal policies can be developed and applied in the best interests of the nation as a whole (and foreign investors) rather than in the interests of a few who maintain a dominant profile on the political and economic agendas of this country. And just to end with a constructive contribution to solving Romania’s potential difficulties domestic wine production in Romania for this year is expected to exceed that for 2006 by 20%. Now the quality of Romanian wine REALLY is Europe’s best kept secret it having been suppressed by the French in particular. So I suggest that PS subscribers do their very best to ensure that demand keeps up with supply thereby promoting Romanian exports. It’s in your own interests to fill your cellars for Christmas with Cotnari, Tarnave and Murfatlar to suggest just a few of many. I shall be contributing to Romania’s economic destiny tonight by breaking open probably several 1993 Cricova cabernets from the Moldova region…a delicious dry red but a mere 11%. For my guest it will be a demi-sec 1992 Traminer also from Moldova. Investment in Romanian vineyards…now that’s an idea PS might wish to explore….agricultural land very cheap (vineyards $100,000 a hectare in France); labour cheap; and a relatively unexploited export market… probably with a castle or country house thrown in for renovation. Cheers!! Charles Bell