1st Quarter 2010

April 1, 2010

Dear Clients,

As we end the first quarter many new and important changes have come out of Washington that will have long and lasting effects on the stock markets and credit markets.

As expected, and as we predicted in our last quarterly letter, the first quarter of 2010 was very good for stocks. We believe this trend will continue into the second quarter. Earning reports coming in April and May should be better than originally anticipated.

What will happen in the latter part of the year is still our concern. Although the economy is healing and the worst part of the recession seems to be behind us, new legislation may not be market friendly. The Bush tax cuts are scheduled to sunset at the end of 2010, which will raise dividend and capital gains taxes from 15% to 20%. The health care bill signed into law recently, when fully implemented, will further increase taxes on dividends and capital gains an additional 3.8% for households with income over $250,000. Markets tend to like low interest rates and low taxes. One concern of ours is traders (perhaps even buy & hold investors) may sell appreciated assets in 2010 vs. 2011 to save taxes. This would create unhealthy selling in the markets at the end of the year.

In taking a look at the credit markets there are areas of optimism and concern. Although States are in financial distress, municipal bonds will benefit from the new health care law. Municipal bond interest is not taxed by the Federal government; therefore it will not be includible in your income. Income over the $250,000 threshold per household will incur the healthcare surcharge tax.

One thing we must monitor is interest rates. Currently interest rates appear to be rising gradually, but if the Federal government continues to borrow more and more to support all the new programs, this could create a less suitable environment for investing in bonds and bond funds.

So what to do? Our answer is DIVERSIFY, DIVERSIFY, and DIVERSIFY. Have a plan and talk to us frequently about your situation. We will try our best everyday to help you navigate this world of finance and reach your goals.

Please notify us if you would prefer to receive our quarterly letters via e-mail.

Sincerely,

Financial Advisor Financial Advisor