June 2010
L a n e A s s e t M a n age m e n t
Welcome to my new,
shortened format for the
Stock Market Commen-
tary. While I love this
stuff and can go on for
hours, I understand that
many of you prefer a
shorter presentation. Fair
enough.
In the future I will present
one or two pages of high-
lights of the past month
along with my views of
where I believe the mar-
ket is headed. Technical
analysis and charts that
inform my outlook will be
provided.
I hope you find this new
format helpful. As always,
I welcome your comments
and suggestions.
— Ed Lane
Stock Market Commentary
Have the Chickens Come Home
to Roost (or to Roast)?
In case you’ve had better things to do lately and
have missed the news, in the month of May, the
Dow and the S&P 500 dropped about 8%, emerg-
ing markets over 11% and Europe by over 13%.
As I’ve noted in recent Commentaries, technical
indicators have been flashing yellow, indicating a
likely market reversal and investing caution. The
weakening process began over the last several
months when Brazil, China and India among
other developing economies, introduced policy
measures to slow inflation as their economies
have been doing quite well. Such tightening meas-
ures depress growth in those regions and profits
from companies previously benefiting (think U.S.
companies).
The larger – and more intractable – issue is the
one of sovereign debt and related fallout. The
potential consequences of sovereign debt over-
load are severe, inevitably resulting in inflation,
higher interest rates and economic contraction,
not to mention the impact of bond defaults on
banks and institutional investment funds. And
these consequences are appearing more and
more likely as the debt levels of the southern tier
of Europe, the U.K. and even the U.S. become
closer and closer to 100% of GDP.
As a result of these issues, equity prices collapsed
with lower earnings outlook while lower quality
and international bond prices collapsed as risk
premiums have risen.
Meanwhile, concern over the strength of the
Euro and the Pound has resulted in a ―flight to
safety‖ that drove up the price of U.S. govern-
ment bonds resulting in a decrease in short term
U.S. interest rates by 10-20%(!) taking high quality,
floating rate loan funds down with them.
All of this added up to there being very few
places to hide in May. All major segments of equi-
ties collapsed, preferred stocks collapsed, floating
rate corporate debt collapsed and so on.
Now what?
On a macroeconomic basis, I believe the struc-
tural problems of sovereign debt, extensive un-
deremployment and limited credit availability and
utilization in the developed economies, along with
the deflationary tactics being taken in the emerg-
ing economies, all add up to depressed corporate
earnings and a struggling stock market over at
least the intermediate term, maybe longer. Given
the globalization of trade, these things have a way
of feeding on one another, so it may be very diffi-
cult to find a safe haven until the market finds
new equilibrium relative to expected earnings.
But, don’t take my word for it. While the more
bearish outlook resonates with me, there are
plenty of analysts who see things more positively.
While some say this could be a buying opportu-
nity, I continue to rely on technical analysis to
guide my investment decisions. In general, while
such reliance may lead to my coming late to a
party that has already begun and leaving late from
one that has already ended (missing market tops
and bottoms), it has been very useful to me in
taking advantage of major swings in the market as
charts on the following pages show.
While comments on each chart speak to a spe-
cific markets, the overall outlook is decidedly
bearish for virtually all broad equity categories.
High yield and international bonds are also under
pressure. While investment grade corporate
bonds are holding steady (for now), the most
strength currently is being shown in U.S. Treasury
bonds, gold and the U.S. dollar. I would have to
say technical indicators are now flashing red, sug-
gesting extreme caution be taken with regard to
any new investments and consideration be given
to transitioning to safer holdings.
Given the bearish technical analysis and the eco-
nomic headwinds, investors should be prepared
for further downside movement and sluggish
growth once markets stabilize. Assuming short
term cash needs are covered, I would dollar aver-
age out of lower quality equity holdings and have
measured movement up the quality ladder until
the market stabilizes, adding to positions in short
term U.S. Treasury bonds, high quality corporate
bonds and preferred stock, and gold.
 Page 2
L a n e A s s e t M a n age m e n t

With price breaking through the 150-day moving average and its newly achieved downward slope, momentum for the S&P
500 has turned decidedly negative. The next line of resistance is around 1050. If the index closes below that level, a further
10% decline to the next line of resistance at 950 would not be out of the question.

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.
 Page 3
L a n e A s s e t M a n age m e n t

This 15-year chart shows that the S&P 500 first crossed its current level in March 1998, thus providing essentially zero return
since then for buy-and-hold investors over that timeframe. Longer term moving averages indicate that the index still has up-
ward momentum (barely), though the MACD is signaling an impending reversal to the downside.
While no “system” is perfect, from a technical perspective, the S&P is in a precarious position. Couple that with what we
know about structural headwinds in developed economies and strong 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.
 Page 4
L a n e A s s e t M a n age m e n t
The emerging markets (EM) index convincingly broke through support at 950 and now looks at 815 as the next line of resis-
tance. The index has now retraced the gains it has made since last September and has provided no return for buy-and-hold
investors since September 2008. Downward momentum is increasing and the EM index finds itself in a precarious place.
While we know the underlying EM economies are currently strong, emerging market countries that depend on exports to
the West may find it challenging to maintain that strength without building a larger domestic consumer base.

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.
 Page 5
L a n e A s s e t M a n age m e n t
This 15-year chart for the EM index shows a slightly more hopeful pattern in that the longer term 75-week moving average
still has positive momentum. On the other hand, the faster 30-week moving average and, especially, the MACD show signifi-
cant risk to the downside.
Technically speaking, EM looks as nearly precarious as the S&P 500. Strong risk management is advised until a reversal is
clearly indicated.

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.
 Page 6
L a n e A s s e t M a n age m e n t
For the last 20 years, the price of gold has been reasonably inversely correlated with the value of the dollar (measured, in this
index, against currencies of selected developed economies). In 2010, that pattern seems to be broken as both gold and the
dollar have advanced.
Today, it appears that both gold and the dollar have become storehouses of value but this could also be a bet on a decline in
the future value of the dollar — or simply a decoupling to reflect the difficulty of matching the supply of gold with increasing
demand.
Regardless of the underlying rationale and despite the potential for a profit-taking correction, given what’s going on in tradi-
tional markets, some exposure to gold appears to be warranted.

The gold and U.S. dollar indexes are unmanaged indexes which cannot be invested into directly. Past performance is no guarantee of future results.
 Page 7
L a n e A s s e t M a n age m e n t
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 7-10 year Treasury bonds
has been on a slow but steady upward climb. Notice the recent increase in volume as well as the emerging strength of the
MACD technical indicator.
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 again when the U.S. embarks on a path of fiscal
and monetary tightening).

The iShares Barclays 7-10 Year Treasury bond ETF prospectus can be found at www.us.ishares.com.
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 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