The argument about the true cost of the health care bill is not being fought in Congress or by the CBO. Instead, it is being fought in the US Treasury market. The Treasury market auction last week had long- term yields moving higher and was met with less enthusiasm than past months. The bond market’s reaction is telling us that investors – especially international investors – believe the true cost of the plan is higher than what we are being told. Investors are sending a signal to the government that they will not fund deficits forever. We hope Congress heeds this message and picks up on something the rest of America already knows – you can’t continue to spend like drunken sailors (no offense to drunken sailors intended).

The stock market has had a nice run the past seven to eight weeks as corporations have upped earnings estimates. This was reflected in higher stock prices. We are, however, seeing some short-term signs of an overbought market. If corporate earnings coming out over the next few weeks are not at the high end of expectations, we could see a short-term pull back. We believe any such pull back would be short-term, as long-term trends still look good. We continue to watch the direction of interest rates as they may impact the long-term trend. If they continue to creep higher, they will at some point compete with stocks for investor dollars. We believe we are not at that point yet, but are watching.

Many of you are concerned about inflation. We have addressed this topic in our newsletter that we are sending out today. If there is a topic that you would like to hear our thoughts on, please let us know.

Sincerely,

Your THOR Team