As the chart below shows, the economic problems in Spain are wreaking havoc on the financial markets.  With the 12%+ drop in the value of their stock market this month, Spain’s stock market will close at the lowest monthly close since 2003.   What is more disconcerting is that their market is lower than what it was at the end of March of 2009.  The crisis is far from over, that is what the Spanish market is telling us.

What does this mean for our market?  It still means that there is much risk in the financial markets, even though at times it may appear to be calm.  The one thing most investors forget is that the market moves up like a tortoise, but down like a rabbit.  For example, when the Asian markets crashed in 1998 due to currency problems, the market fell much more severely and swifter than most pundits were espousing.  That same scenario could unfold in Europe.

A 20th Anniversary Thank You

An idea (THOR’s investment process) was hatched more than 20 years ago from many late night hours on a Radio Shack 286 computer.  Officially, THOR opened for business 20 years ago today on a shoe string budget and support from a loving family.  We have since grown to a family of nine employees and almost $300 million in assets under management.  We want to thank all of our clients for their support and the trust they have placed in us throughout the years.  We especially want to thank those that joined us shortly after our doors opened – John & Sue in Maryland, Lorraine in Chicago, Ted & Pia in Syracuse, Ron & Tanya in Indiana, Mary & Frank in South Carolina and those in Ohio – Geof, Mary & Jack, Donnie, Bob & Dianne, Mark & Kathy, Judy & Tom and Ollie.  We understand that we would not be around without the opportunity you gave us.  We look forward to the next 20+ years with a renewed focus on providing the best investment management and wealth services to you – our clients.  Thank you for a great 20 years!

Sincerely,

Your THOR Team

The Euro Crisis is ready to show its ugly head again.  The short-term fix for Europe, which included the ECB dramatically expanding their balance sheet and banks buying sovereign debt, is starting to wear off.  Over the next few weeks, there are some major European events that might spark a more significant European crisis:

1) The French election this Sunday and run-off on May 6th.   Polls consistently show President Sarkozy losing to Francois Hollande.  The ramifications of this could be enormous.   Hollande espouses two main themes: increase spending by roughly 20% and raise taxes on those making more than a million Euros to 75%.  If Sarkozy loses, Merkel will be losing her number one friend in Europe.

2) Greece also has an election on May 6th.  This is important because the two Greek parties that signed off on the bailout promising to keep austerity measures in place are both doing poorly in the polls – Democracy 18.2% and PASOK 14.2%.  Greeks are angry with six years of austerity and the entire EU package may unravel with this election.

3) Spain is in trouble as bond rates have rocketed higher in the last few weeks.  The Spanish economy is as bad as Greece was two years ago.  Austerity and high unemployment is not a recipe for success.

The complacency in the markets over the past few months might once again be taken over by “Euro Crisis Fear”.   It’s Ground Hog Day in Euroland.

Sincerely,

Your THOR Team

As we look out of our office at the BP station, we see the rapidly changing numbers as the price of gas continues higher.   Not only is gasoline high, but diesel fuel is at a 31 month high.  The impact of rising gas prices is as follows: 1) every one penny increase in retail gasoline costs American households over a billion dollars; and 2) every $10 rise in oil prices reduces real annual GDP growth by 0.2%.  Almost all the goods you buy at the store are shipped and as shipping costs increase, the final cost to the consumer increases.  We just met with a mutual fund representative from Chicago last week who drove down to see us because the cost for a flight from Chicago to Cincinnati was over $800.  The bad news is prices will probably go higher over the next few months.

The easy excuse for higher oil prices is unrest in the Middle East – especially in Iran.  Yes, the reduction in supply from Iran is putting a squeeze on prices, but there are other factors as well.   One of the biggest reasons is refineries are closing down because they are losing money.  Sunoco is closing its largest refinery on the east coast in July.  Valero is closing its refinery in Aruba.  In the Pacific Northwest, union workers at the Tasero Anacortes refinery in Washington rejected a new contract and are expected to strike in the weeks ahead.  The law of supply and demand will cause gas prices to rise as the supply of refined oil drops.  Any bad news from the Middle East will just compound the pain at the pump.

Sincerely,

Your THOR Team