June 2,2010

Much has happened since our last posted comments. The main issue is a loss of confidence investment markets around the world are showing in current events.

Let’s start with Europe. The balance of the world is telling the old socialist countries of Europe they must live within their means and figure out how to produce a product or service to sell the world to sustain their standard of living. Borrowing more and more money to allow the citizenry to live beyond the results of their productive efforts is no longer possible. This is a positive event, not a negative! Yes, the road to change may be bumpy but the direction is correct. The Central Bank of Europe is responding with a massive quantitative easing program. This should help smooth out a few of the hurdles.

The oil spill is a tragedy. The constant media reports predicting the worst, is not helping. This event is not an “economy killer”. The Gulf of Mexico is an important area for energy production. It is also a provider of high paying jobs and economic activity (one third of Louisiana’s economy). It is highly unlikely to result in a complete shutdown of oil drilling in the gulf.

North Korea is a major threat to world peace. But their ability to effectively wage war on South Korea is limited. Their people are starving and their economy is in shambles. Their leaders are despised by the populace. If the recent events could lead to the re-unification of Korea under a free democratic government it would be great. One less irrational dictator threatening world peace is a positive for investment markets.

While the above events make the headlines, the world economic news is good, particularly in the world’s largest economy, the U.S. This morning’s manufacturing report shows the economy growing at an implied rate of 6%. This continues a long string of positive economic reports. Interest rates remain low around the world. Oil prices are down. Employment is returning. This is a positive for economic growth! Most all central banks remain very accommodative in monetary policy. Our point is the current markets are priced on lack of confidence and fear, not the realities of a world wide growing economy. Yes, lack of confidence can and has hurt investment prices. However; we believe the markets will calm. We are in the early stages of a V shaped economic recovery. Inventories are at historical lows. Demand from areas of the world attempting to modernize is unlikely to abate. We interpret the news of the day somewhat differently than the media. We will be buyers on further price drops

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