1. 2011 Mid-Year Economic Update and Investment Outlook

6. The Economy Is Improving…slowly Source: U.S. Department of Commerce Bureau of Economic Analysis

7. Broad Signals Look Positive LEADING AND COINCIDENT ECONOMIC INDICATORS Source: The Conference Board

8. Consumption Continues To Increase Source: U.S. Department of Commerce Bureau of Economic Analysis

9. And Retail Sales Are Almost Back To Pre-Recession Levels Source: U.S. Census Bureau

10. Stimulus and QE2 May Not Have Been Perfect - But Appear To Have Helped Bond and Stock Markets! Source: Homrich Berg Analysis

11. But this recovery doesn’t “feel” very good Source: The Chart Store S&P 500 in Secular Decline vs. Gold

12. Other Bad News… Deep Job Losses = Slow Road To Recovery Source: U.S. Department of Labor Bureau of Labor Statistics

13. No Quick Rebound This Time For Jobs Source: U.S. Department of Labor Bureau of Labor Statistics

14. High Long Term Unemployed Could Create Negative Consumption Impact (Eventually?) Source: U.S. Department of Labor Bureau of Labor Statistics

15. Unlike Past Recoveries, Interest Rates Can’t Really Go Lower To Help This Recovery! Source: Board of Governors of U.S. Federal Reserve System

16. New Housing Starts Not Leading Recovery This Time Source: U.S. Census Bureau

17. Home Prices Were Starting To Improve – But Watch Out For Housing Price Double Dip in 2011 Source: S&P Case Shiller Home Price Index

18. Inflation In General Looms As A Potential New Challenge That Will Test The Fed’s Policies Source: U.S. Department of Labor Bureau of Labor Statistics

19. And Oil Prices Could Have An Unpleasant Impact On Growth If They and Gas Prices Continue To Rise Source: Doug Short, dshort.com

20. The Ugly - Excessive Government Debt Is A Bearish Concern That Could Impact Long Term GDP Growth Source: February 2010 Pimco Investment Outlook

21. When Fannie/Freddie Debt Is Included, We Feel Like Greece! Source: Ned Davis Research Greece is “only” 120%

22. The Forecast For Now Is Not Improving Unless We Tackle The Major Retirement/Medical Benefits Programs Source: Congressional Budget Office, Office of Management and Budget, Data as of 8/3/10

23. Excessive Overall Debt Is A Bearish Concern Even Beyond Government Debt – We Still Have To Deleverage TOTAL GOVERNMENT, CORPORATE, AND HOUSEHOLD DEBT Source: U.S. Bureau of Census, Federal Reserve Flow of Funds Reports

25. INVESTMENT OUTLOOK

26. Market Indicators We Monitor Are Mixed Technical Momentum and Breadth indicators are both trending negative for market performance to continue to improve Sentiment indicators are the opposite – high pessimism typically leads towards a reboun Interest rate indicators are mixed, with the much uncertainly around the end of QE2 Valuation metrics are mostly neutral or slightly bearish, with one concern being revenue growth in 2011 continuing to support the earnings growth (is it sustainable?) Source: January 2011 HB Analysis

27. Valuations: US Corporate Bonds vs. S&P 500

28. Demographic Trends Point To Extended Secular Bear Market Despite The Current Optimism

29. Long Term Demographics – a U.S. positive

30. Investment Trends To Watch For Rest of 2011 Rosier forecasts of moving towards 4% annualized GDP growth came from many analysts earlier, but expect only slightly better housing and jobs stories in 2011 as that depressing overhang continues – this is the big caution sign for rosy growth and stock market predictions. Bumpy up and down stock market ride ahead even though overall trend likely upward with many analysts predicting 10%-20% S&P 500 growth for 2011 (we thought first half of 2011 might do well, but have been worried about second half). Bond market potentially goes in reverse as rates start to rise eventually and investors flood back out – we have seen some of this retail investor move already GDP U.S. Equities Fixed Income

31. Investment Trends To Watch For 2011 Real estate still not out of the woods despite massive REIT stock uptick – debt maturity rollover issue not done yet and commercial space inventory still high. Commodities should continue to grind higher pushed by eventual modest inflation and continued emerging market demand. Emerging market equities and debt attractive – but everyone is chasing it, so buyer beware…volatility ahead, and emerging market governments will want to cool down inflation. Some European countries potentially stronger growth than USA – but euro debt crisis looms over that story no matter what. Real Estate Commodities International Markets