First Quarter 2011 Performance Report Cover Letter

Dear Investor:

If someone had told you on January 1st 2011 in the next 90 days there would be several political uprisings, some in geographically important oil regions, a major Japanese earthquake with a nuclear disaster threat and $3.50 to $4.00 a gallon gas at the pump; Would you have guessed most global capital markets would have been up dramatically? We sure would not have!

The economic mending continues especially in areas of importance such as Unemployment, with the headline employment number falling into the high 8% level from the stubborn 9%, giving consumers a slowly positive longer term economic view.

Interest Rates have stayed low even as the saber rattling of Federal Reserve members has begun. One member was recently quoted saying rates will need to begin their ascent later this year. We suspect the Federal Reserve will warn us, warn us again, then warn us a final time and finally commence raising rates, but not in the next quarter or two and not without an ample heads up.

Our codependent, rising in strength and superiority neighbor, China, continues to raise their interest rates to thwart inflation and attempt a slowdown rather than a recession, with much success up to this point as well.  Remember from our own experiences here in the US, this is easier said than done.

With all of this in mind our favorite Domestic index, the S&P 500 finished the quarter with a gain of over 5%. Interestingly, if the quarter had ended a mere two weeks earlier, our favorite index would have been down for the quarter, but the calendar and positive money flows continued in favorable time  and direction.

We are sticking to our thoughts of this year being a good, but not great year. If our expectations are met, we would expect our next quarterly cover letter to be of a more conservative sideways update. However, we are happy to be incorrect, but suspicious of the overly positive tone in the current markets.

In closing, you will find your 2011 Quarterly Performance update which tracks the last quarter and summarizes your monthly reports. We will be offering a new compliance report to you soon which was the product of Dodd-Frank Rules.

Have a Super Spring !

JK

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