If there is one thing I've learned from more than four decades of studying credit and financial markets, it's that research counts. There's no substitute for doing your own discovery, seeking out relevant facts and creating a frame of reference to analyze and interpret them. This is a goal of each year's Milken Institute Global Conference, where we bring together the world's leading investors with senior executives, scientists and policy makers to address a wide range of global issues. Our goal is to convey a more-realistic view of the world. For example:

	In recent years, U.S. media have consistently depicted events in Latin America and the Middle East negatively, masking the fact that these regions have some of the 21st century's best-performing stock markets and currencies. Brazil – a nation where investors for decades were forced to hedge because of constant devaluation – has seen its currency appreciate 40% against the U.S. dollar and its stock market rise by more than 300% since 2004. Brazil is now home to many of the world's most-valuable companies and is a net creditor nation for the first time in centuries.
	At one time, the U.S. share of world equity market valuations approached 60%. But that dominance is ceding to European markets, and to emerging markets, each of which as a group now has a larger market capitalization than the United States. The great growth story of this century, emerging economies saw their collective market value increase from $2.2 trillion in 2000 to $17.8 trillion at year-end 2007, exceeding the corresponding U.S. stock-market capitalization of $17.5 trillion.
	A powerful misconception was a major focus of discussion among attendees of our 1998 conference. The Asian and Russian financial crises were the center of media attention, which depicted them as either insurmountable or a decade from resolution. However this was the opposite of our findings at the Milken Institute. Our research indicated that problems of the moment – underscored by the evacuation of Americans from Indonesia – were obscuring the real long-term picture of Asia: a growing middle class in a region that we projected would represent nearly 60% of the world's economy as early as 2040.

In preparing for the Global Conference, Milken Institute researchers and I made the decision to spend as much time as possible in Latin America, the Middle East and Asia. What we learned in our recent visits to 21 countries has influenced the topics of this year's conference. In addition to regions and demographics, we'll examine the major themes of finance (including credit, currencies, commodity pricing, mortgage and capital markets), education (including dramatic changes in human-capital development around the world), energy (including emerging technologies and environmental issues), health (including medical research, the economic burden of chronic disease, regulation, nutrition and prevention), industries (including geographical comparisons and trends by such sectors as media, finance, real estate, natural resources, technology, telecommunications and hospitality) and philanthropy.

Among specific emphases are:

	Understanding credit. Attendees at the 2005 Global Conference heard warnings about risks in the mortgage market a full two years before the sub-prime situation made headlines. Given subsequent developments, we'll focus on several areas of credit this year:
	Ratings: It's clear that high credit ratings are no guarantee against defaults. In the first 70 years of the 20th century, debt of AA-rated railroads had defaults 200% higher than B-rated industrial companies. In the past year alone, more than $100 billion in losses and write-downs have occurred in AA and AAA securities and their derivatives.
	Real-estate lending: The false belief that any loan based on real estate is a good loan has caused recurring problems. It led to major losses in the 1960s, and again in the 1980s, when it contributed to the failure of almost every highly rated financial institution in Texas. Today's problems in the mortgage market are primarily in the U.S., the U.K. and Germany since fewer than 20% of homeowners carry any mortgage in most of Latin America, the Middle East and Asia.
	Government debt: Although recently there have been few losses attributed to investments in sovereign debt and government agencies, 150 years of financial history show that these loans traditionally have the highest default rates. The belief that sovereign debt was riskless led to losses of approximately $1 trillion on loans made in the 1970s and '80s. It was only a few years ago that Argentina, for the third time in a century, settled its debt obligations (this time around, more than $70 billion) for pennies on the dollar.
	Education. We've focused on education every year, but more so this year because of major changes in emerging nations. If the future of a country is found in its classrooms, a great shift is occurring in Asia and the Middle East. A decade ago at the Global Conference, we asserted that economies which would flourish the most would be those that did the best job developing their human capital. South Korea, for one, has done that, becoming one of the most-educated countries on earth. Their families spend more – on an absolute and percentage basis – for K-12 supplementary education and tutoring than any other country. In fact that spending is twice as much as government outlays for public K-12 education.

In order to better understand the changes in Asia, I took part in a Hong Kong conference last September.  Its host, CLSA, had recently commissioned interviews with 35,000 middle-class families in 11 Asian nations.  The result is a remarkable book, "Mr & Mrs Asia," which includes hundreds of facts and insights, broken down by nation – on credit use, per-capita income, homeownership, dwelling sizes, consumer spending, savings patterns, demand for services, education levels, fertility rates, communication advances, typical aspirations, and more. (People wishing to purchase the book or for more information can e-mail clsabooks@clsa.com.) Consider this fact: near-universal English instruction in China means that in less than 20 years more Chinese citizens should be able to read books in English than people from all other English-speaking nations combined. 

The Global Conference brings together 475 panelists and 3000 attendees from 60 nations, including asset managers, Nobel laureates, investment bank and corporate CEOs, leading medical researchers and scientists, senior government policymakers, philanthropists and journalists from major news organizations worldwide. We convene April 28th-30th at the Beverly Hilton in Los Angeles, with special activities the preceding weekend, on the 26th and 27th. You can learn more about the conference and register at www.milkeninstitute.org.

I certainly hope you will join us, and I look forward to seeing you there.

Sincerely,

Michael Milken
Chairman