Absolute Return Portfolio Management LLC

The outlook for the global equity markets has turned negative. Tremendous technical damage has occurred in the past two weeks.

Given the 10-15% declines in most indexes it is probable that some relief rally may occur in the coming days/weeks. However, it will take significant positive evidence in the form of improving market internals and extreme bearish sentiment before an "all clear" can be given again.

While the decline of the past few weeks is approaching the size of the decline that occurred in April-July of last year, what is different is the amount of technical damage that has occurred during this correction. During last year's decline, for example, the number of 52 Week New Lows remained relatively contained. In this recent decline, however, the number of New Lows has exploded; showing an underlying weakness to the broad market.

Additionally, measures of investor sentiment have not yet reached levels of anxiety commensurate with the size of the decline. Sentiment measures may quickly "catch up" in the coming days but higher levels of bearish sentiment would be a prerequisite for a significant bottom.

Our Domestic Equity model is in a defensive (100% cash) position at this time.

Our International Equity model has moved to a significant cash position.

We continue to be long International investment Grade Bonds.

We continue to be long High Yield Bonds.

The model is long Gold Bullion and REITs.

We continue to be long the Swiss Franc.

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