Stephen Leeb is worried about inflation, but not the way you or I or Ben Bernanke worries about inflation. He views escalating prices as the inevitable consequence of an oncoming clash of civilizations.

“I’m not very bullish on the world,” Mr. Leeb says, “but I hope I’m wrong.”

Mr. Leeb heads up the Leeb Group, which manages money for high net worth clients and which publishes a newsletter called the Complete Investor. Since Mr. Leeb was early — too early, according to his publisher — in popping the tech bubble in 1999 in a book called “Defying the Market: Profiting in the Turbulent Post-Technology Market,” and also in loading up on energy stocks a few years ago, his views are of interest. That, certainly, is the opinion of the 60,000 people who subscribe to his newsletter, and presumably the reason he has successfully published several books.

His current theme is that growth in the Third World is irreversible and that it is creating an uncontrollable inflationary spiral. He is recommending that clients buy gold or gold mining stocks, as well as other companies that benefit from a gradual tightening of resources, including food and water.

This notion follows naturally from his iconoclastic writings on the dot-com boom. “The tech boom was all about how fast computers can solve equations,” Mr. Leeb says. “Who cares? The world needs more energy, and more food. How do faster computers solve these problems?”

He has a point. His new theme is that since most developing nations are politically unstable, there is no going back once the people in these countries begin to enjoy some improvement in their standard of living. Most visibly today, rising demand from countries like China and India has stretched energy supplies and pushed up oil prices. Other commodities have followed a similar path. Mr. Leeb thinks this is just the beginning.

Mr. Leeb is not optimistic that free markets will successfully balance supply and demand any time soon. In past cycles, rising consumption of copper, for instance, drove prices higher, encouraging new investments in mines, and increasing supply.

In the 1970s, the rapid increase in oil prices eventually resulted in lower consumption and increased supplies, bringing prices back down.

This is not going to play out again, Mr. Leeb says, as those forces were buttressed by a major American recession, an unpalatable choice today.

“There’s too much debt. We can’t afford a recession,” he concludes. “In any case, all the conservation at that time took place in the developed world. There’s no evidence that the developing world can conserve.”

Again, he has a point.

Though Mr. Leeb’s pessimism extends to a wide range of commodities, he is especially concerned about energy supplies. “One thing that distresses me the most is that all of the oil exported to the U.S., with the exception of Canada, comes from underdeveloped countries, which are also politically volatile. Both these things are relevant. If a country like Nigeria, where half the population lives on $2 a day, begins to develop, any increase in their oil production will be needed internally.”

“We should be spending trillions on developing alternative energy,” Mr. Leeb says. “We do have the technology. Wind power is real, electric storage is real, it can be done. These things would create huge supplements to our energy output, as opposed to the pointless production of ethanol.”

Such thoughts have made Mr. Leeb a fan of FPL Group (FPL $63), a major player in alternative energy. He is also still a buyer of oil and oilfield shares.

His main message, however, is that investors should buy gold. In his most recent newsletter, he lays out the history of gold as an inflation hedge. He argues that gold performs best when inflation is accelerating. The rapid rise in commodities prices in recent years almost surely will lead to increasing inflation as they work through the production process.

Mr. Leeb compares the current decade to the 1970s, when gold prices increased 33% a year. The early 1970s saw a sharp increase in commodities prices, a pause, and then another increase. Recently, we have seen a similar pattern.

As oil prices strengthened earlier this year, inflation expectations increased. The Federal Reserve, which had appeared ready to put the brakes on the economy to slow the upward creep of prices, instead has had to lower rates to avert a meltdown in the capital markets, all but ensuring a renewal of inflation.

Mr. Leeb would advocate that investors put as much as 10% of their holdings into gold, either through ETFs or through the purchase of mining shares. Singled out in his newsletter are streetTracks Gold Shares (GLD $73), and mining stocks Barrick Gold (ABX $42) or Kinross Gold (KGC $16).

Elsewhere, Mr. Leeb is enthusiastic about ITT Corporation (ITT $67), which is a world leader in treating wastewater, and Deere & Company (DE $153), which of course is benefiting from the growing demand for food.

Otherwise, Mr. Leeb finds few investments that will do well in a period of rising inflation. “If you asked most Americans which was the worst decade for investing, they would say the 1930s. They would be wrong. The worst decade was the 1970s, when high inflation caused negative returns on stocks, bonds, and even cash. In terms of purchasing power, between 1965 and 1980, a $100,000 bond investment dropped in value to $43,000.”

So how has Mr. Leeb done as an investor? He claims that his firm has ranked in the top third percentile of large cap growth managers since its inception in early 1999. Over that period, returns have averaged 6.9% net of fees, compared to 3.6% for the S&P 500 and a loss of 1.5% for the Russell 1000 Growth index.

Given the firm’s successful performance, he is embarrassed that it has only $150 million under management. It has not, in other words, capitalized on its success. “I’m a terrible CEO!” he says. “I’m a good CIO, and a good researcher, but I’m a terrible CEO.” This could be his most important research insight yet.

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