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Monthly Markets Update 
 May 10, 2010
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Performance information for asset classes is for total return through April assuming reinvestment of interest and dividends. It excludes management fees, transaction costs and expenses.

Monthly Commentary
What had been a relatively strong month for U.S. markets in April rapidly turned sour last week as sovereign default fears exploded out of Europe.  Worldwide markets experienced deep losses amidst panic-like selling as riskier assets were discarded and money poured into the relative safety of U.S. Treasuries. In response, a massive aid program was announced Sunday by the European Union that will devote nearly $1 trillion to supply liquidity to the EU's weaker members. This appears to be a better aimed course of action than the long delayed and discussed bailout of the Greeks that was unveiled to a complete thud just the weekend before. To prove this point, investors had already begun to bail out on Portuguese and Spanish debt. The EU leaders have established a large program that might act to convince bondholders of its effectiveness rather than having the market chew up and spit out bailouts designed for each country. What is happening here is that the richer countries in the EU are subsidizing the debts of their weaker neighbors. They are doing this to protect the Euro currency and the benefits it provides to all members of the Union. It is still a stopgap measure designed to buy time for the Europeans to repair their fiscal condition.  If individual nations within the European Monetary Union do not radically adjusts their budgets to reduce deficits, they will find themselves in the same situation but without hope for a new aid package. We expect that at least one and probably a few countries will fail that test. If that comes to pass we think the European Union will have to choose between ejecting their more recalcitrant members or having their strongest member, Germany, choose to leave itself.
As has been the case for much of the year, news from international markets has  overshadowed improving economic data in the States. A few important areas have shown some strength, including manufacturing, retail sales and corporate profits. There has been modest job growth over the last couple months for the first time in nearly two years but unemployment and underemployment remain at very elevated levels.  This has not been a strong recovery but it has been going in the right direction for the last few months. The action of the last week shows how easily we can get derailed by both internal or external events. While we are hopeful that the global recovery will continue to strengthen we believe you can expect further shocks, similar to what came out of Europe last week,  as the repercussions of the financial crisis and its aftermath continue for at least the next couple of years.
Please feel free to contact us at any time to discuss some of these issues and how they might apply to you. We welcome your comments and questions.
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