From the June 2010 Letter to Tarpon Folio investors by portfolio manager Cale Smith. The rest of this series can be found here.

Five Crises At a Time, Please

The long-term economic threats this country faces – from our federal deficit to inflation to the rise of China – concern me both as an investor and an American. We unequivocally need to get thrifty again. High inflation should be avoided at all costs. And I find it unsettling that the Chinese government is run by driven engineers, while ours is run by bickering lawyers.

But those threats are better discussed another day. If the markets aren’t concerned about them, then it seems more appropriate for me to stay focused on what is more immediately in front of us – our portfolio.

I know. Some portfolio manager in Greece probably wrote the same thing to his investors six months ago. The difference, though, is that our country actually has time to solve these issues.

I say that because right now the bond markets are not at all worried about U.S. deficits. The rates on U.S. bonds have dropped through the floor, meaning bond traders are remarkably unconcerned about our spending. The Greek government makes ours look Amish, I suppose. The spread between inflation protected Treasury bonds and regular bonds is currently low, too, implying that inflation is not a serious risk to be concerned about yet, either. Far be it from me to speak for bond traders – do you all still eat onion cheeseburgers for breakfast? – but my point is that the bond market is not telling me to figure out how to fix social security prior to buying more shares of Google.