May 4, 2011
L a n e A s s e t M a n age m e n t
The world economy is
clearly on the mend.
Since the end of the first
quarter of 2009, the S&P
500 has increased nearly
70%, emerging markets
by over 100%. That said,
the S&P is still 10% below
its October 2007 level
and emerging markets
are just back to even.
Yet, employment and
housing are serious prob-
lems in the U.S., the sov-
ereign debt crisis persists
in the U.S. and Europe,
and inflation is high in
emerging economies.
The post-2008 pace can-
not be continued indefi-
nitely. While the market
trends are positive, in-
vestors should anticipate
a slowdown if not a more
serious correction.
As always, I welcome
your comments and sug-
gestions.
Stock Market Commentary
Market Recap
Despite a downgrade in U.S. outlook by Stan-
dard & Poor’s, stubbornly high unemployment,
continued weakness in housing, soaring gas
prices, and anemic first quarter GDP growth,
the stock market didn’t do too badly after all.
Why? Because, in the end of the day, all that
counts is corporate earnings — not the abso-
lute level as you might think, but the outcomes
relative to market consensus expectations.
And here, according to CNBC, over 75% of
companies reporting first quarter earnings ex-
ceeded expectations.
 The S&P 500 put in a very respectable
2.85% gain, recovering from an almost 2%
slide in the first half of the month culmi-
nated by the S&P downgrade of the U.S.
outlook. Emerging markets ended simi-
larly, though with less drama.
 Global bonds continue to defy expectations
of rising interest rates by turning in an al-
most 2% gain themselves.
 Commodities did well with oil fighting off a
bubble scare and precious metals going
gang busters with gold climbing 9% and sil-
ver over 27% (sic). See Page 5 for more on
gold and silver.
Economic Outlook
Despite strong corporate earnings, I have to
say that economic headwinds (high unemploy-
ment, anemic housing, and strong political
pressure to reduce spending to name a few)
and the potential for adverse geopolitical
events still leave me cautious about the sus-
tainability of the strength of the recovery.
Interestingly, the wind down of QE2 in June
that has worried some of my favorite analysts
(and me) does not seem to be of major concern
in the market as 10-year Treasury yields have
stabilized this entire year (so far). Either Mr.
Market feels the end of QE2 will be a non-event
or that the Fed will introduce QE3 if the econ-
omy (read: market) falters. Bond vigilantes are
still keeping their powder dry.
Investment Outlook
Looking at the charts on the following pages, as
we stand today, I have to be cautiously optimis-
tic about the longer term prospects for the
market. While blips can and do occur, positive
momentum continues. My greatest concern is
that the market has come so far, so fast since
last September and over the last 24 months,
that a 10-20% correction cannot be ruled out.
That said, having faith in technical analysis, but
with awareness of the challenging macroeco-
nomic outlook, I’m going to lean positive for
both domestic and emerging equity markets
with an emphasis on basic materials, industrials
and health care, also smaller and mid cap sec-
tors. I also expect commodities to do well in
the balance of the year, especially energy and
precious metals (more gold than silver at this
point), though it may be wise to wait for a cor-
rection (as may be happening at this writing).
Less exciting, perhaps, but steady performance
can be expected to continue from dividend-
paying stocks. For taxable accounts looking for
income, I believe municipal bond funds offer
great value — high after-tax yield and an oppor-
tunity for long term price appreciation.
 Page 2
L a n e A s s e t M a n age m e n t
S&P 500 Index
The S&P 500 index experienced a minor correction in November at its previous line of resistance, but
bounced back strongly since partly as a result of a reallocation of funds from emerging to the developed mar-
kets. On a technical basis, the 75– and 150-day moving averages remain positive. On the other hand, the
MACD (another moving average-based momentum indicator) weakened in March, and is now drifting without
clear direction. The index has made a good move above its new technical line of support of about 1300 which
gives some reason for optimism. At this point, giving due regard to the economic headwinds in the U.S. and other developed economies, but
also keeping in mind the stronger, but overheating, economies in the emerging markets, it is difficult to be too enthusiastic about the sustain-
ability of the current uptrend in the S&P 500. The caution light is out and any additional exposure to U.S. equities should be entered into
slowly and carefully with the understanding that a pullback of 10-20% or so would be consistent with the pattern established over the last 18
months.

The S&P 500 index is an unmanaged index which cannot be invested into directly. Past performance is no guarantee of future results.
 L a n e A s s e t M a n age m e n t Page 3
Morgan Stanley Emerging Market Index
The MSCI Emerging Market Index had a setback in November and again in January as a result of concerns of
overheating economies and government policy actions to control rising inflation. The 75– and 150-day mov-
ing averages have become positive during April. The MACD, a shorter term indicator, is showing some sign
potential improvement, but it is too early to hang one’s hat on this. A positive sign is the retention of the
breakout above the last support line at 1050 while, on the other hand, 1200 remains a difficult resistance line
to break through (we’re now at our third attempt). Given the generally positive fundamental long term outlook, this may be
an opportunity to add to a position for more aggressive investors. Others may want to wait a bit longer for a confirmed move upwards. Per-
formance over the next couple of weeks will be telling as the index reacts to the resistance line. At this time, I suggest investors be cautious of
the ―risk-on‖ trade in emerging markets.

The MSCI Emerging Markets index is an unmanaged index which cannot be invested into directly. Past performance is no guarantee of future results.
 L a n e A s s e t M a n age m e n t Page 4
Barclays Capital Global Bond Index
The Barclays Capital Global Bond Index represents the total return (capital gains and interest income) of a
composite of domestic and international government and corporate bonds and similar instruments. As such,
it blends bond yields available globally along with the impact of currency fluctuations. As shown in the chart
below, this index has a steady upward momentum with very low volatility. It should be noted that the per-
formance of the securities in this index has been a beneficiary of declining interest rates and decline in the value of the dollar,
producing capital gains along with interest income. With the expectation that interest rates will be rising in the future, that component of the
total returns in this index will be harder to achieve in the future. On the other hand, there are other components of total return including
higher interest rates abroad and currency movement that can prove beneficial. For the portion of a portfolio where capital preservation has a
high degree of importance and also to provide diversification, an allocation to a global bond portfolio may be appropriate. While a stable or
declining interest rate environment would be positive for this index, the current upward pressure on rates in both developed and emerging
markets does not bode well for this index at the current time. On the other hand, the MACD appears poised for an upward movement in total
return and the next few weeks or months will be quite interesting. (Note, this message is unchanged from last month.)

The Barclays Capital Bond—Global Index is an unmanaged index which cannot be invested into directly. Past performance is no guarantee of future results.
 L a n e A s s e t M a n age m e n t Page 5
Gold and Silver
The chart below (updated to May 3rd) shows the 5-year monthly performance of gold and silver indexes, along
with a comparison of the performance of a U.S. dollar index. The chart shows an inverse correlation in the
price of the metals against the value of the dollar except for the period November 2009 through May 2010
when the dollar advanced as did the price of the precious metals. The inverse correlation is understandable as
the metals can be seen as an alternative to fiat currency. But other factors are clearly at play as the metal prices have advanced far more than
the value of the dollar has declined. The primary answer, I believe, has to do with supply and demand imbalances caused by market and geopo-
litical uncertainty. If that’s the case, then a good argument can be made for continuation of strong performance in these (and other) precious
metals as long as governments (and others) around the world stockpile these metals as a hedge against future inflation or as an alternative to
holding dollars. That said, as shown in 2008 and as suspected by some today, the value of the metals can be quite volatile and can contract rap-
idly. In fact, that did occur during the first few days of May in the case of silver. An interruption in the pace of price advance should not come
as a surprise and might be taken as a buying opportunity. Therefore, caution is advised when investing in precious metals.

This chart shows the performance of gold and silver indexes created by stockcharts.com that are intended to represent prices of the precious metals and is a very close approximation to the
value of exchange-traded funds that hold these metals. These unmanaged indexes cannot be invested into directly. Past performance is no guarantee of future results.
 L a n e A s s e t M a n age m e n t Page 6
Year-to-Date Index Comparisons
The chart below shows the 12-month performance of selected indexes. Several observations can be made:
 A high degree of correlation can be seen among the equity indices in the U.S., Europe and in the emerging markets.
 After closing the gap with emerging markets and Europe, the S&P 500 has now fallen off the pace.
 After suffering the largest decline in the first 2 months of the period shown, oil has rebounded the most strongly and now
is just shy of gold for the highest total return over the entire period.
 Global bonds have turned in a respectable performance with low volatility but incremental improvement evaporated over the last 7 months.
 Gold performed extremely well for the first 8 months but began a sharp decline in late December. The correction was short-lived as the gold
index shows the strongest return over the period shown.

Past performance is no guarantee of future results.

Page 7 L an e A ss et M an ag em ent
Disclosures
Lane Asset Management is a Registered Investment Advisor with the
States of NY, CT and NJ. Advisory services are only offered to clients
or prospective clients where Lane Asset Management and its represen-
tatives are properly licensed or exempted.
No advice may be rendered by Lane Asset Management unless a client
service agreement is in place.
Investing involves risk including loss of principal. Investing in interna-
tional and emerging markets may entail additional risks such as currency
fluctuation and political instability. Investing in small-cap stocks includes
specific risks such as greater volatility and potentially less liquidity.
Small-cap stocks may be subject to higher degree of risk than more es-
tablished companies’ securities. The illiquidity of the small-cap market
may adversely affect the value of these investments.
Investors should consider the investment objectives, risks, and charges
and expenses of mutual funds and exchange-traded funds carefully for a
full background on the possibility that a more suitable securities trans-
action may exist. The prospectus contains this and other information. A
prospectus for all funds is available from Lane Asset Management or
your financial advisor and should be read carefully before investing.
Note that indexes cannot be invested in directly and their performance
may or may not correspond to securities intended to represent these
sectors.
Investors should carefully review their financial situation, making sure
their cash flow needs for the next 3-5 years are secure with a margin
for error. Beyond that, the degree of risk taken in a portfolio should be
commensurate with one’s overall risk tolerance and financial objectives.
The charts and comments are only the author’s view of market activity
and aren’t recommendations to buy or sell any security. Market sectors
and related exchanged-traded and closed-end funds are selected based on his opinion
as to their usefulness in providing the viewer a comprehensive summary of market
conditions for the featured period. Chart annotations aren’t predictive of any future
market action rather they only demonstrate the author’s opinion as to a range of pos-
sibilities going forward. All material presented herein is believed to be reliable but its
accuracy cannot be guaranteed. The information contained herein (including historical
prices or values) has been obtained from sources that Lane Asset Management (LAM)
considers to be reliable; however, LAM makes no representation as to, or accepts any
responsibility or liability for, the accuracy or completeness of the information con-
tained herein or any decision made or action taken by you or any third party in reli-
ance upon the data. Some results are derived using historical estimations from available
data. Investment recommendations may change without notice and readers are urged
to check with tax advisors before making any investment decisions. Opinions ex-
pressed in these reports may change without prior notice. This memorandum is based
on information available to the public. No representation is made that it is accurate or
complete. This memorandum is not an offer to buy or sell or a solicitation of an offer
to buy or sell the securities mentioned. The investments discussed or recommended in
this report may be unsuitable for investors depending on their specific investment ob-
jectives and financial position. The price or value of the investments to which this re-
port relates, either directly or indirectly, may fall or rise against the interest of inves-
tors. All prices and yields contained in this report are subject to change without notice.
This information is intended for illustrative purposes only. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.
Periodically, I will prepare a Commentary focusing on a specific investment issue.
Please let me know if there is one of interest to you. As always, I appreciate your feed-
back and look forward to addressing any questions you may have. You can find me at :
www.LaneAssetManagement.com
Edward.Lane@LaneAssetManagement.com
Edward Lane
Lane Asset Management
P.O. Box 666
Stone Ridge, NY 12484