The Tide Comes In

1. The Tide Comes In Market Outlook 2013 New Castle Investment Advisors, LLC Presented April 2, 2013 This presentation is not a recommendation to buy or sell any securities for discussion purposes only

2. 2012 Market Review • Bull Market Continued in 2012 • S&P 500 up 16% • MSCI All Country ex-US Index up 19% • 7-10 Year Treasuries up 3.7% • Real Estate up 17.6% • Gold up 6.9% • Commodities up 3.5%

3. How Did We Do in 2012? • “S&P 500 Up 12-15%, maybe more…” • Overweight Industrials, Health, information Tech—two of the three best sectors. • High Yield and medium grade corporate debt outperformers. • Treasuries—uncertain. 10-Year Treasuries began at 198bps and ended at 178 bps.

4. 2012 In Perspective • More Political Stalemate—fiscal cliff: tax rates basically unchanged, tax code more complicated, Estate and Gift Tax exemption at $5 million; 2011-2012 payroll tax eliminated. • FED Announces it will buy $45 billion in treasuries per month in addition to the $40 billion of mortgage backed securities it already was buying. QE-Infinity? Announces no rate increases until unemployment hits 6.5% and/or inflation above 2.5%.

5. The Globalization of Quantitative Easing • Liquidity Everywhere—Europe still has problems but ECB Mario Draghi announces third q “bazooka,” essentially indicating ECB will buy unlimited sovereign debt and do “whatever it takes” to hold the euro together; • Japan announces its own quantitative easing program--2012; • Bank of England Announces Easing--2009

6. China and the LDM • Hard Landing, asset bubble, inflation—all predicted. Didn’t happen. Leadership transition smooth. Q4 GDP accelerated to 8%, full year growth of almost 8%. • LDM, debt levels lower than DM, greater productivity, limited inflation. Poised again for out-performace in 2013.

7. 2013 Key Themes--US • Continued political two-step—positive for market; • Interest Rates stay low; • Benign inflation; • Continued FED accommodation; • Housing Market continues upward; • Corporate balance sheets strong, profitability high • Consumer balance sheet very good and improving.

8. 2013 Key Global Trends • Fear of Eurozone disintegration continues but it holds—pockets of strength. • China does well. GDP 7.5%, reforms implemented. • Japan still problematic but recent monetary moves from Bank of Japan depressing Yen will mean better economy and stock market. • Emerging markets continue to shine.

9. US Stock Market in 2013Key Drivers for Upward Movement • Improving Employment Numbers. • GDP Growth Estimates likely low. • Stabile Energy Prices—likely going lower. • FED Ease Continues. • Improving Housing Market. • No Major Economic Policy Changes.

10. US Market Valuation—Is it Overvalued? • Dividend Discount Model says No. • P/E Multiple Says No. • E/P Multiple Says No. • Options Market Says No. • Conclusion: Market Has Room to Grow—But Expect Increased Volatility and Correction(s).

11. The Trend is Your Friend • US Corporate Profits—all time high. • Cash on Corporate Balance Sheets—all time high. • Business Investment, accelerating since 2009. • Share Buybacks—increasing. • Loan Growth—in last 50 years, never has been a recession when loan growth is expanding.

12. General Market Overview • Overweight equities--also look beyond US. • Weight Mega-Stocks more. • Key Sectors: Tech, Health, Energy. • Start paring Duration on Fixed Income holdings. • Gold—probably flat. • Commodities—could surprise. • REITS/Timber—good. • Prediction on S&P 500: up 20%-plus year-over-year. • But VIX, or market volatility will pick up and at least one market pull-back of 10% or more.