| Fellow Investor, The European Central Bank raised interest rates by a quarter-point to 1.25% overnight. Interestingly, ECB President Jean-Claude Trichet said the move was "certainly not the start of a series" of rate hikes. The move is overdo, but the ECB's hands have been somewhat tied by slow growth and debt problems. Higher interest rates make it more expensive for indebted countries to raise money to pay debts. This leaves the U.S. as the last major country (besides the U.K.) to raise interest rates. European stocks didn't mind the hike much, all European stock indices traded higher after the move. *****I doubt the move by the ECB will actually put pressure on Bernanke to begin to normalize U.S. interest rates, but it should. Of course, a rate hike now would be a highly conflicted move if it came alongside QE2. But I will continue to say that a show of confidence in the U.S. economy by the Fed -- an early end to QE2 and a quarter-point hike -- could be a good thing for the economy. Let's never forget an economy is a belief system. One could certainly argue that the Fed's QE2 has provided a confidence backstop. But it could also instill confidence by acknowledging that the U.S. economy is strong and poised for increased growth. Employment is improving and new unemployment claims are on a downward trajectory. It should also be clear that low rates are not helping the housing market, and I would argue that the only thing that will help housing is time. | Special opportunity, article continues below.
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| *****I want to clarify my remarks yesterday about Medicaid/Medicare and the U.S. budget. It's not that I oppose any changes to Medicaid. It's clearly a "black hole" of spending, as the Resource Prospector, Kevin McElroy said to me. Health care costs are rising, and more and more people are getting Medicaid/Medicare benefits. Costs are already overwhelming and are expected to triple by 2040. In my opinion, one of the chief problems with health care is that the distribution of benefits is a for-profit industry. Yes, I'm talking about health insurance. The Obama Administration failed miserably on health care reform by not addressing the insurance issue. It simply opted to shift the cost onto business, which is the wrong way to go. Why is the health insurance sector an unassailable sacred cow? Is it campaign contributions? I wish I knew. But so long as insurance companies can continue to raise rates unchecked, we will never resolve health care and Medicare issues. OK, I'm climbing down of my soapbox. For now... *****Oil prices continue to push toward $110 a barrel, but oil stocks aren't acting in a particularly bullish manner. I suspect that a correction for oil prices is near. Keep an eye ion the U.S. dollar. A rally for the buck could be the downside catalyst for oil prices. Bloomberg reports that the Nymex may change its specs for oil covered by the West Texas Intermediate crude oil futures contract. Refiners are complaining that the oil they get is blended with lower quality oil that's affecting yields so much that profit margins are virtually wipe out. It would seem that increased quality standards for West Texas Intermediate crude would make it more expensive. *****For all the concern that rising oil prices would hurt demand and slow spending, retail spending was surprisingly strong in March. Several retailers, including Costco (Nasdaq:COST), Limited (NYSE:LTD) and Macy's (NYSE:M) reported same-store sales growth. Some are speculating that the recent improvement in the labor market is helping spending. But let's keep an eye on credit numbers due this afternoon and see if consumers have more money from earnings, or if they are taking on debt. Until tomorrow,  | Ian Wyatt
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