September 4, 2010
L a n e A s s e t M a n age m e n t
For the first three days of
September, the Dow ad-
vanced over 433 points or
about 4.3%. If you were fully
invested, you probably feel
pretty good and, if you were
not, you probably wish you
were.
Well, it might be a little early
to make such judgments. If
you measure your starting
point from the beginning of
August, or even from the
beginning of the year, the
Dow has gone absolutely
nowhere. This level of vola-
tility with little to show for it
can discourage investors.
In this Commentary, I’ll sug-
gest investment strategies
that I believe will produce a
reasonable rate of return
without taking on excessive
risk.
As always, I welcome your
comments and suggestions.
— Ed Lane
Stock Market Commentary
Market Recap
Before addressing investment strategies for those ap-
proaching or now in retirement, let’s first recap the market
for August and the beginning of September. This past
month was the worst August performance for the Dow in
9 years dropping 4.3% on the heels of the 7.1% gain in July.
No sooner was August over than in the first three days of
September the Dow took another U-turn rising 4.3%
(how’s that for a roller coaster!).
As I’ve mentioned on prior occasions, this can’t be a reflec-
tion of changes in the true underlying value of the market.
Rather, it’s more likely the result of fear and greed driven
by alternating good and bad economic news along with re-
action to overbought and oversold conditions that tend to
arise when the market makes sharp moves in one direction
or the other.
Indeed, there was bad news in August (for example, weak
employment and lowered estimates for GDP growth) fol-
lowed by good news in the first three days of September (a
manufacturing index showing surprising growth and private
sector employment exceeding expectations).
Rather than being whipsawed by contradictory news (for
fun, see this clip on YouTube http://www.youtube.com/
watch?v=ktKNEGSqLB4), the chart patterns shown in last
month’s Stock Market Commentary were signaling a cau-
tionary investment stance, a “yellow flag.” As it turns out,
this suggestion turned out to have been a useful guide for
the month as the market did indeed turn down in August
but reversed (so far) in September.
Looking ahead, the charts on the following pages are, if any-
thing, a bit more pessimistic than last month, despite the
gain of the last few days of the month. This more pessimis-
tic outlook is a result of the poor results in the entire
month of August offset by only a few days of reversal in
September. To me, the negative technical outlook ties into
my downbeat view of the economy. Since I see the funda-
mental problem one of high unemployment in the U.S. and
little hope for a turnaround in the near future, I believe the
market senses this, as well. I wouldn’t suggest an outright
red flag at this point, but caution and remaining nimble is
definitely advised. See the comments at the top of the
charts on the following pages for more information.
Investment Strategies for Retire-
ment: The Search for Yield
Most of the investors nearing or in re-
tirement that I come into contact with,
regardless of the extent of their financial
assets, dedicate all or a large portion of their investments
to a conservative strategy intended to deliver the highest
possible return while taking the least amount of risk possi-
ble, ideally preserving principal. For many, shell-shocked by
the current recession and with vivid memories of the tech
bubble only 10 years ago, this has meant extremely low
interest returns achieved through CDs and bank savings
accounts.
In the limited space that follows, here is a brief and neces-
sarily incomplete summary of alternative conservative in-
vestment strategies.
Individual bonds: Bonds have the advantage of producing a
known stream of income and maturity value but are sub-
ject to potential default. Yields typically increase with dura-
tion and/or lower credit quality. For investment grade cor-
porate bonds, current yields range from about 2% to 4.5%.
Municipal bond yields (federally and potentially state tax
free) range from about 0.25% to about 3%. Purchases and
sales of individual bonds can be tricky due to thin markets
and other factors.
Bond funds: For most individual investors, bond funds are
preferable to individual bonds due to professional manage-
ment and diversification. Bond funds also make it much
easier to invest in foreign bonds on both a dollar-hedged
and unhedged basis. Certain bond funds may also employ
leverage that enables them to achieve higher yields, but this
adds a layer of risk. Since there is no specific maturity date
for bond funds, interest rate risk is a larger factor than for
individual bonds held to maturity. Bond funds have done
especially well in recent years as prevailing interest rates
have declined, thus producing capital gains. It is widely held
that interest rates will rise in coming years, though esti-
mates of timing and the extent of the increase vary. When
this happens, yields on bond funds (and other interest sensi-
tive investments) may be adversely affected.
Bank loan funds: Some funds invest in floating rate corpo-
rate bank loans. The advantage of these funds is that they
tend to do well in a rising interest rate environment, unlike
conventional bonds.
Preferred stocks and preferred stock funds: Preferred
stocks can be thought of as perpetual bonds and may carry a
bit more risk than a conventional bond from the same is-
suer. The additional risk is compensated for by a higher
yield. Current yields on decent quality preferred stocks
may be in the range of 3% to 7%.
Equity options: Requiring more work, but with a potential
for greater returns, are certain equity option strategies.
One such strategy, referred to as “covered calls,” is gener-
ally considered a conservative option strategy in investment
literature and may have a place in some portfolios.
Variable annuities: This subject is too complex to address in
this Commentary. Please see my article here: http://
www.laneassetmanagement.com/Variable%20Annuities%
20Common%20Mistakes.pdf.
** *** **
Income-based investments offer distinct advantages to equi-
ties, especially in today’s more volatile and questionable eq-
uity investing environment (see the chart on page 8). Inves-
tors should discuss these and other income-based strategies
with their investment advisor to determine what is appro-
priate in their specific situation.
 Page 2
L a n e A s s e t M a n age m e n t
S&P 500 Index — Short Term
The weight of the decline in August has turned both the 75– and 150-day moving averages downward sloping, if only barely.
That, along with weakness in the MACD increases the market risk for the S&P. A 400+ point gain in the Dow for the first 3
days of September offered some hope that a reversal was in the offing but, looking at the chart below, such a short term gain
is neither unusual nor necessarily predictive of good things to come. At this point, the index has been basically flat for the
year and within a 20% trading range for 11 months. With the moving averages showing a slight negative tilt, caution is ad-
vised in taking on additional risk. If the market has, in fact, begun a new upward trend, there will be plenty of time to take
advantage with greater confidence. The yellow flag is out.

The S&P 500 and the MSCI Emerging Markets indexes are unmanaged indexes 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
S&P 500 Index — Long Term
While the short term perspective shown on the preceding page has moved slightly more negative, the longer term perspective
in this 15-year chart is providing more mixed signals. While the moving averages have lost upward momentum, the damage
done in August was not enough to produce a clear downward signal. On the other hand, the MACD has extended its down-
ward outlook from last month. Investors that rely on the longer term chart should see this as a yellow flag. In light of the
somewhat more positive short term momentum, the longer term chart should not be seen as a signal to exit the market.
Rather, new risk positions should be avoided or entered into on a highly selective basis. While no “system” is perfect, from a
technical perspective, the longer term view of the S&P remains in a precarious position. Couple that with wide spread opinion
about a slowing U.S. economy in the second half of 2010 and aggressive risk management is advised.

The S&P 500 and the MSCI Emerging Markets indexes are unmanaged indexes 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
Morgan Stanley Emerging Market Index
This short term daily chart for the MS Emerging Market index is giving mixed signals. On the one hand, the moving aver-
ages are continuing a weak positive move up while, on the other hand, the MACD has turned negative on the strength of
the August downturn. Given the range bound nature of the index and the mixed signals, selectivity with EM investments is
advised and the yellow flag is out.

The S&P 500 and the MSCI Emerging Markets indexes are unmanaged indexes 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
Morgan Stanley Emerging Market Index
On the weekly 15-year view, the moving averages are basically unchanged from last month and have a bullish tilt. On the
other hand, as with last month, the MACD is continuing to show a bearish outlook. As with the short term chart on the pre-
ceding page, the mixed signals suggest caution in adding to positions until a more clear outlook emerges.

The S&P 500 and the MSCI Emerging Markets indexes are unmanaged indexes 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 6
Gold
The performance of gold was positive in August while the dollar vacillated. For the last 20 years, the price of gold has been
closely inversely correlated with the value of the dollar (measured in this index against currencies of selected developed
economies). In 2010, that pattern seemed to break down as both gold and the dollar have advanced. Since March 2009, the
dollar has been quite volatile and has now resumed a downward trajectory while gold has resumed advancing after a recent
short term decline. Investors in gold should be prepared for pullbacks, such as occurred in 2008, if for no other reason than
profit-taking. Depending on conditions at the time, any pullback over 10% could represent a wonderful buying opportunity,
especially if gold resumes its positive momentum while the dollar continues to fall.

The gold and U.S. dollar indexes are unmanaged indexes 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 7
20+ Year Treasury Bond
Reflecting the “flight to safety” as investors seek the safety of U.S.Treasury bonds, and also reflecting the corresponding de-
cline in U.S.Treasury bond rates over, at least, the last 20 years, this exchange-traded fund holding 20+ year Treasury bonds
has been on a slow but steady upward climb. The yield on 20-year Treasury bonds recently reached a relative low of 3.23%
before rebounding to 3.49% at the beginning of September. The low point for the 20-year yield in the last 20 years was 2.86%
in December 2008 with a corresponding impact on TLT as shown below.
Funds of this type appear to be a safe haven for now, but will be damaged if and when U.S.Treasury rates reverse their down-
ward trend as they did sharply in the first half of 2009 (and are expected to do so again when the U.S. embarks on a path of
monetary tightening). New investments in Treasury bonds should be taken with an awareness that recent capital gains are
unlikely to be sustainable over the longer term.

The iShares Barclays 20+ Year Treasury bond ETF prospectus can be found at www.us.ishares.com.
 L a n e A s s e t M a n age m e n t Page 8
Global Bond Index vs. S&P 500
The chart below compares the performance of the Barclay’s Global Bond index to the S&P 500 over a period of over 30
years. While the bond index has outperformed the S&P for the period shown, be aware that different starting and ending
points may produce different results. That said, several points can be made:
 The bond index represents a mixture of global government and corporate bonds. Therefore, it is a widely diversified index
which is critical to achieving its relative stability.
 The 20-year Treasury bond yield has been declining over at least the last 20 years contributing to the relative out-performance of the global
bond index. When U.S. and international interest rates begin to rise, as many expect they will when government deficits are addressed, the
relative performance of bonds and equities could very well change.
 Periods of relative performance tend to sustain themselves over several years.
 Past performance does not guarantee future results.
Page 9
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 cur-
rency fluctuation and political instability. Investing in small-cap stocks
includes specific risks such as greater volatility and potentially less li-
quidity. Small-cap stocks may be subject to higher degree of risk than
more established 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