Year End Newsletter – December 2010

December 2010

Dear Friends and Clients,

It has been almost one year since we started operating as Schwaben Capital Group
Limited. As I had mentioned to many of my previous clients and friends, Martin
Häfele, a friend and client had joined me during the starting period of our
firm and I much appreciated and still appreciate his support and help. In
August of this year Bernd Henseler a former investment banking executive from
Deutsche Bank and Morgan Stanley joined us. This has allowed us to advance our
investment counseling and investment banking activities significantly.

As the year 2010 and our first year come to a close I would like to offer some of
my observations and commentaries to offer some perspective for my friends and
clients to reflect on over the holidays. We will have a more extensive
commentary with market performance and analysis as well as our portfolio
analysis in January 2011.

This year has been a fruitful year for many investors. While equity markets have
experienced more volatility and uncertainty than most investors would prefer,
the second half of the year and especially the last quarter have more clearly
defined a market trend. I believe the gains over the past 3 and 4 weeks in the
DOW and NASDAQ respectively are a clear affirmation of this. In Canada equities
have weathered this past downturn much better than the US due to 1.) a much
better banking position and 2.) of course the fact that the Canadian equity
markets has benefited from a strong resource sector. Company earnings have outpaced
expectations in both of the previous quarters. In fact in the last quarter
earnings outpaced earnings expectations in 77% of the earnings releases in the
US. While there are still many skeptics of equity markets, it has always been
my opinion that if earnings outpace expectations by a wide margin equities will
follow. In fact Oracle has released 47% higher revenues than last year this
past week. Although many skeptics still argue that the positive earnings that
the US has experienced were a function of the stimulus packages and may not be
a true recovery, it is my opinion that the stimulus packages in the US have
largely been effective however at the cost of possible significant pending
inflation. Some market observers believe that inflation is more a phenomenon of
the past, however I am very much of the opinion that the ballooning
quantitative easing and printing of money has been the direct cause of the gold
price appreciation and will be the cause of an impending inflationary period.
Even though Gold prices may appreciate further, I believe that with higher bond
yields, gold and other commodity price appreciations may be dampened. I also
feel that as soon as the economy in the US will pick up and the velocity of
money will increase, the US may face very significant inflationary pressures
and as such also higher interest rates. This will very likely not be welcome by
the US real estate market, which still shows difficulties. In fact, the $30
billion real estate support program will only stop approximately 800,000 foreclosures,
which only represent about 20 to 25% of the 3 to 4 million that was the target.
Higher interest rates may also have an adverse consumer impact in Canada as
Canadian consumer debt has reached the highest level in recorded history.

We have also done some number crunching to offer some perspective of equity
markets. Please see the table on the next page.

This is just a brief pre Christmas perspective. We should have more in January. We
will also publish this and future newsletters and other market commentaries also
on our blog. Please mark our blog and follow us there as well. You can also visit our website at for more information on our company, our team and the services we offer.

Until then – Merry Christmas – Happy Holidays and a Happy New Year.

With kind regards,

Albrecht, Martin and Bernd