Hall Capital “Market Views” Newsletter April 2011

This is the 4th edition of Market Views from HALL CAPITAL. Our aim is to provide concise views of where we see risk and opportunity for investors.

Shallow Pull Back Demonstrates Investor Confidence in Stocks
- And waning confidence in bonds

As mentioned in our last two updates, favorable seasonal tailwinds will exist for stocks until May. We did see our expected 5% pullback following the disaster in Japan. However, this dip had less to do with the negatives of the disaster on the world economy than the fact that investors were due for a reminder that much is random in the world. Other than the horrific loss of life, the main economic negative to the world longer term is the slow down, if not outright halting, of the building of new nuclear power plants. A single nuclear plant can produce more power in a year than all the wind and solar facilities have produced in the last decade. Clearly, we will be dependent on fossil fuels for several more decades and the curtailment of nuclear programs only exacerbates the problem. Thus, the rise in fossil fuel prices is likely to continue.

U.S. Treasury Bonds are at High Risk
- not of default but of providing low returns

Long U.S. T-bonds have enjoyed a 20 year bull market which is ending. The 10 year has a current yield of barely 3.5%. For investors needing bonds, the municipal bond market, though not without "headline risk" offers more value, especially after tax.

Quality Large Cap Global Stocks
- remain attractive despite recent rally

We have updated data on some examples. The average dividend yield of this group is 2.3%; the average Earnings Yield is 9%. This is a high quality list, with stronger competitive positions and balance sheets than the average company. The 9% earnings yield could provide a somewhat greater total return than 9% over the long term if these companies are able to reinvest their earnings for growth, which seems likely. Complimenting these would be exposure to emerging market equities.

For individual stocks as well as selection strategies, past performance is not necessarily indicative of the future.

Hall Capital Focus List

The Real Risks in the Outlook
- are longer term issues

The adverse impact of natural disasters and the threatened shut down of the U.S. government tend to be shortlived and would not be a reason to sell stocks in our view. If anything, over reactions to such events would be a buying opportunity. The key risks that have longer term implications are higher energy prices and higher interest rates. Hedges for both are recommended.

NOTE: Now in addition to ALL our quarterly letters, on our website is a tab with just the Follow Ups.

About HALL CAPITAL

HALL CAPITAL, LLC is a registered investment advisor and was formed by Principals from Arcturus Capital in 2010.
For more information, contact Donald Hall 626 578 5700 x101 dhall@hallcapitalmanagement.com