June 5, 2011
L a n e A s s e t M a n age m e n t
Well, it finally happened.
The long awaited correc-
tion began at the begin-
ning of May triggered, it
seems, by increasing con-
cerns about the Greek
debt crisis. While there
was a brief reprieve at
the end of the month
when it seemed the crisis
was abated, depressing
employment and housing
news in the U.S. in early
June sent the market
back down.
If you look back over the
last 12 months, the cor-
rection, so far, looks not
unlike several that oc-
curred before, only for
the market to resume
advancing not long after.
I’m sure that will happen
again, but I’m not so con-
fident that this correc-
tion will be as short lived
as the recent prior ones.
Comments and sugges-
tions are welcome.
— Ed Lane
Stock Market Commentary
Market Recap
The market’s discounting mechanism came
into full play in May with the world’s economic
outlook becoming more grim — debt crisis and
increasing austerity in Europe; housing, manu-
facturing, employment, declining vehicle sales
and consumer confidence, the coming end of
QE2, lowered GDP estimates and political
gridlock in the U.S.; and emerging market in-
flation along with a challenged export cus-
tomer base — all came into full view with little
good news to offset.
 The S&P 500 improved at the end of the
month to lose only 1.3% for the month but,
as we now know, lost another 3% in the first
3 days of June. Emerging markets lost 3% in
May (and less than 1% in early June) to stay
on par with the S&P.
 Global bonds continue to defy expectations
of rising interest rates by turning in a re-
spectable 0.6% gain.
 Commodities got crushed in May with an
increase in margin requirements from the
Chicago Mercantile Exchange triggering a
major selloff. Profit-taking hit silver par-
ticularly hard with a near 20% decline; gold
and oil fared better but still lost ground
with dollar strength. See Page 5 for more
on gold and silver.
Economic Outlook
What more can I say? Almost everywhere I
look, the economic (and political) news is de-
pressing. About the only thing that can bring
us out of this funk in the short term is strong
corporate earnings and that is looking less
likely with each passing day. By my sights,
there is little risk to the upside and consider-
able risk to the downside.
Investment Outlook
While I’m still optimistic about the market long
term (sort of an obvious conclusion), I believe it
is now time to take some risk off the table. I’m
well aware of the resurgence of the markets fol-
lowing dips that occurred over the last 24
months. From that, you could take it that a
long term investor would be fine, and that’s
probably true. From my standpoint, however,
looking at the weakness in the charts on the fol-
lowing pages, I prefer to take some risk off the
table, though not all at once (remember the
benefits of ―dollar averaging‖). By increasing
cash (or more stable investments), a lower
market, if it occurs, will represent a better buy-
ing opportunity at a later date. If I’m wrong
and the market turns back up sooner than I
think or the decline is more shallow, dollar av-
eraging will preserve some value and I’ll still
have slept better over the coming weeks.
So, in addition to cash, here are some immedi-
ate investing ideas:
 High quality, dividend paying common or
preferred stocks
 High grade corporate or municipal/
government bond funds, both domestic and
global; also select high yield bond funds
 Gold, yes, gold
 Inverse stock equity funds (for the more so-
phisticated investor).
In any event, be careful out there.
Be sure to check out my new page 7.
 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. Now, there seems to be a new challenge escaping the last line of resistance/support at 1300. On
a technical basis, the 75– and 150-day moving averages remain positive., though less convincingly so. On the
other hand, the MACD (another moving average-based momentum indicator) weakened in March and became
decidedly bearish in May. At this point, giving due regard to the economic and political challenges in the U.S.
and other developed economies (see page 1), it is difficult to be enthusiastic about the near term prospects for the S&P 500. I
have now shifted from a yellow to a red light and believe the chances have improved for a significant pullback having already lost about 4%
from the recent high of 1363. While no one can be sure of the extent of the pullback, another 10-15% as was experienced a year ago should
not come as a total shock. And, frankly, if that should occur, I would be hesitant to jump back in with both feet unless firmly supported on the
technical side as was the case back then.

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 continues to be range bound between 1050 and 1200, unable to bust
through the upper bound resistance. Meanwhile, the 75– and 150-day moving averages, which became posi-
tive during April, flat-lined again in May as they did mid-February. The top MACD came off the flat line in
April and moved decidedly bearish in May while the newly added longer term MACD in the bottom graph is
noncommittal. Given the generally positive fundamental long term outlook, this may be an opportunity to
add to a position for more aggressive investors. On the other hand, the EM customer base in Europe and America is becom-
ing increasingly strained suggesting more cautious investors may want to wait a bit longer for a confirmed move upwards. At this time, I sug-
gest 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. Even though today’s evidence is to the contrary, 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. On a technical basis, the 75-day moving average continues to be very positive (and effective as a line of support over the
charted period) as does the MACD shorter term indicator. For that reason, I have moved from a yellow to a green light. As it is, this could be
a good place to park money peeled off the developed market sector. In that case, I would keep a sharp eye on interest rate movements from
here.

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 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 a generally inverse correlation in the price of the met-
als against the value of the dollar except for the period November 2009 through May 2010 when the dollar ad-
vanced 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 geopolitical 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 again last month, the value of the metals can be quite volatile and can contract rapidly. In fact, that did occur
in silver during May as the CME’s raising the margin requirements triggered a selloff in the metal. Meanwhile, gold continues its more meas-
ured track upward.

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
12-month 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.
 Surprising (to me, anyway) is the outperformance of the European stocks. Apparently, news of the European credit crisis
hasn’t yet hit the local equity markets.
 After an initial spurt, emerging markets have gone essentially nowhere in the last 7 months and have shown greater vola-
tility than either the S&P 500 or European stocks.
 While oil still out ranks the other indexes for the period shown, the chart clearly shows a more substantial decline over the last 5 weeks.
Even so, this did not seem to help the S&P or the other equity indexes.
 Global bonds have turned in a respectable performance with low volatility, with a clear pick up in the last two months.
 After an initial dip in the period shown, gold has shown rather steady improvement. Interestingly, it has fully recovered from the CME margin
increase shock at the beginning of May, outperforming both oil and silver (see the prior page).

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
Technical Indicators
The following chart from stockcharts.com as of June 3rd shows a variety of technical indicators of bullish and bearish out-
look. In brief, this chart shows the number of stocks on each exchange and the number of mutual funds that achieve a bull-
ish or bearish signal according to the rule of the specific indicator. Stocks and funds can appear under more than one techni-
cal indicator. (Note that exchange-traded and closed-end funds are characterized as stocks and are traded mainly on the
NYSE, though some trade elsewhere.) Red bars in the bullish scans and green bars in the bearish scans imply the market is
moving lower and vice versa. The main ―takeaway‖ from this chart today is the preponderance of stocks and funds that are
showing bearish technical signals.

Past performance is no guarantee of future results.

Page 8 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