Since our last market update on Greece, the market took a nose dive as
Greece’s deficit problems got worse and the yield on the Greek 2-year note
shot up to 19%. Greek bonds were downgraded to junk status. Both Spain’s
and Portugal’s bonds were downgraded as well. The vultures see wounded meat
in Europe and are starting to put major pressure on the PIIGS (Portugal,
Ireland, Italy, Greece and Spain). Even if Germany and the IMF save Greece,
are they willing to save the other PIIGS? This is a difficult spot for the
Merkel government to be in. Germans were never truly supportive of the
Euro – polling shows 55% of Germans were against joining the EU. Now they
are being asked to bail out their spendthrift neighbors. This could be the
start of the collapse of the EU.

We have been here before. In May of 1997, the Asian collapse began with
Thailand and Singapore spending millions of dollars to defend the Thai baht
against speculative attacks by the vultures (this is why George Soros was
given a death sentence in Thailand in abstentia). Over the next several
months, the vultures continued to attack the currency systems throughout
Asia, which ended in a worldwide financial meltdown in the 3rd quarter of
1998 (14 months after it originally started). Could the same scenario
materialize in Europe? Yes, especially if bond rates continue to remain at
current levels. As you are aware, we have the lowest exposure to
international investments in our firm’s history. We are reviewing the
day-by-day blows of the Asian collapse and comparing it to the EU problem.
There may be some great buying opportunities in the months ahead. When Asia
collapsed, we raised our international exposure significantly in our
client’s accounts. Our worst performing international fund in 1999 was up
55%. The key is to have some powder dry in order to take advantage of the
potential opportunity. Other advisers and individuals that currently have
40% or more in international stocks will suffer as foreign money rushes into
US Dollars for protection of principal and they will probably panic and sell
these funds. It is at that time that we believe we will be able to buy
great foreign companies at rock bottom prices.

Our biggest hope relative to the recent events in Europe is that it becomes
a wake-up call to our government to truly get their hands on cutting the
budgets. Both Bush and Obama promised to cut the budget and it has only
grown exponentially throughout both administrations. If they don’t stop
spending, the next currency collapse may be in the US.

Firm Notes

Mary Ann Ries will be leaving us on May 14th. With the passing of her
father a few months ago, Mary Ann will be working at the family’s fencing
business – EME Fence Company in Anderson Township. We are sad to see her
go, but wish her the best of luck.

Congratulations to Jim for passing the 2nd level of testing on his way to
becoming a Chartered Market Technician (CMT). Jim has only one more exam to
take in October.

Sincerely,

Your THOR Team