Economic Presentation: Today’s Business Landscape and What’s on the Other Side Vistage-Austin, Texas January 15 h , 2009

THE ECONOMY

Gross Domestic Product 2001Q1 - 2008Q3 Source: Bureau of Economic Analysis

Contributions to GDP Growth by Component 2007 Q3-2008 Q3 Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Corporate Profits (before tax) 2003Q1 - 2008Q3 Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Industrial Production January 2007-November 2008 Source: Federal Reserve

Source: Federal Reserve

Net Change in U.S. Jobs June 2005 – December 2008 Source: Bureau of Labor and Statistics

Source: Bureau of Labor and Statistics

National Nonfarm Employment by Industry Sector Groups December 2007 – December 2008 Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

National Nonfarm Employment by Industry Sector Groups January 2007 - December 2007 Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

Continued Unemployment Claims January 2006 - December 27 th , 2008 Source: Department of Labor

Source: Department of Labor

Source: (Left) Census Bureau (Right) Federal Reserve Retail Sales Less Food and Fuel April 2007- November 2008 Consumer Credit Q4 2005 – November 2008

Retail Sales Less Food and Fuel April 2007- November 2008

Consumer Credit Q4 2005 – November 2008

Existing Home Sales October 2001-November 2008 Source: (Left) National Association of Realtors, (Right) Census Bureau New Home Sales Units Sold vs. Length on Market February 2006-November 2008

Existing Home Sales October 2001-November 2008

S&P/Case-Shiller Home Price Index 2006 – October 2008 Source: Standard and Poors

Source: Standard and Poors

Value of the Dollar (Broad Dollar Index) January 2000 – January 2009 Broad Dollar Index: a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners. Source: Federal Reserve Board

Broad Dollar Index: a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.

Source: Federal Reserve Board

Commercial Mortgage Delinquency Rates among Major Investor Groups 2005 Q4-2008 Q3 Source: Mortgage Bankers Association

Consumer Confidence Survey and Consumer Sentiment Index 2005-December 2008 Source: Reuters and Polling Report

Source: Bureau of Labor and Statistics Changes in Consumer Price Index in Percentage Terms 2006 v. 2005 2007 v. 2006 6 months ended in Sep. 2008 6 months ended in Nov. 2008 All items 2.5% 4.1% 5.2% -1.9% Food at Home 1.4% 5.6% 8.6% 7.5% Food Away Home 3.2% 4.0% 5.4% 5.8% Rent of Primary Res 4.3% 4.0% 3.5% 3.9% Owners Equiv of Rent of Prim Res 4.3% 2.8% 2.0% 2.3% Household Energy 2.4% 5.3% 12.7% -4.4% Water/Sewer/Trash 4.8% 5.4% 7.1% 8.5% Houshold Ops 4.4% 2.2% 7.2% 2.1% Car Repair 3.8% 3.3% 6.8% 6.1% Pub. Transp 0.1% 7.2% 13.8% -3.0% Medical 3.6% 5.2% 2.3% 2.5% Education 6.3% 5.6% 6.1% 5.6% Energy 2.9% 17.4% 20.9% -36.1%

Source: Energy Information Administration NYMEX Crude Oil Future Prices in U.S. Dollars February 2001 – January 6 th 2009

Source: Energy Information Administration

THE GOVERNMENT’S RESPONSE

Money Supply (M2): August 2007- November 2008 Source: Federal Reserve System

Source: Federal Reserve System

Source: Federal Reserve Federal Reserve Balance Sheet: Reserve Bank Credit January 2008 – January 7 th 2009

Source: Federal Reserve

Source: (Left) Federal Reserve, (Right) British Banker’s Associations Federal Fund Rates, January 2008- January 6 th , 2009 3-month LIBOR rates lent in US dollars, January 2008-December 31 st , 2008

Federal Fund Rates,

January 2008-

January 6 th , 2009

3-month LIBOR rates lent in US dollars, January 2008-December 31 st , 2008

How do I get through it? Manage business on cash flow basis Increase efficiency of asset turnover; increase liquidity Intensify customer service initiatives Become innovative in controlling costs Outsource where appropriate Join Co-ops to spread costs over larger group Look for new ways to leverage existing employees and infrastructure by investigating new sources of revenue from new products and markets. BE A SOLUTIONS PROVIDER Secure access to bank credit; firm up bank lines

Manage business on cash flow basis

Increase efficiency of asset turnover; increase liquidity

Intensify customer service initiatives

Become innovative in controlling costs

Outsource where appropriate

Join Co-ops to spread costs over larger group

Look for new ways to leverage existing employees and infrastructure by investigating new sources of revenue from new products and markets. BE A SOLUTIONS PROVIDER

Secure access to bank credit; firm up bank lines

How do I get through it? (cont.) Spend to increase productivity and market share Take advantage of accelerated equipment write offs as part of government’s economic stimulus package Take advantage of soft demand in economy to build for future by aggressive bargain purchasing If access to capital and liquidity are not detriments, look to acquire troubled companies and/or strategic assets of other companies Train employees to be more productive and increase their value by enabling them to do more tasks Increase networking and take advantage of trade associations for additional contacts and leads Partner with other firms

Spend to increase productivity and market share

Take advantage of accelerated equipment write offs as part of government’s economic stimulus package

Take advantage of soft demand in economy to build for future by aggressive bargain purchasing

If access to capital and liquidity are not detriments, look to acquire troubled companies and/or strategic assets of other companies

Train employees to be more productive and increase their value by enabling them to do more tasks

Increase networking and take advantage of trade associations for additional contacts and leads

Partner with other firms

What’s on the other side? 2009 - Recession Bottoms with Housing and Unemployment Housing bottoms late this year Bank loan losses abate late this year Unemployment peaks in the second half of this year Lower Energy Prices alleviate pressure on consumer spending – but virtually no economic growth or recovery New Obama Administration Increased economic “bailout” and middle class spending programs. Increased federal budget deficits.

2009 - Recession Bottoms with Housing and Unemployment

Housing bottoms late this year

Bank loan losses abate late this year

Unemployment peaks in the second half of this year

Lower Energy Prices alleviate pressure on consumer spending – but virtually no economic growth or recovery

New Obama Administration

Increased economic “bailout” and middle class spending programs. Increased federal budget deficits.

What’s on the other side? (cont.) 2009 – Business Cost of goods declines from current levels as interest rates, labor costs and commodity prices decline but business is facing zero consumer and business demand. Corporate profits in decline for most of this year despite easy year/year comparisons. Weak consumer spending but pent-up demand building 2010 – Economy Makes Gradual Cyclical Recovery Increased employment = increased consumer spending Increased Corporate Sales = increased corporate profits = increased capital spending Increased interest rates and rising prices from higher demand and continuing federal budget deficits

2009 – Business

Cost of goods declines from current levels as interest rates, labor costs and commodity prices decline but business is facing zero consumer and business demand.

Corporate profits in decline for most of this year despite easy year/year comparisons.

Weak consumer spending but pent-up demand building

2010 – Economy Makes Gradual Cyclical Recovery

Increased employment = increased consumer spending

Increased Corporate Sales = increased corporate profits = increased capital spending

Increased interest rates and rising prices from higher demand and continuing federal budget deficits

Where are the opportunities? Healthcare – National Program Education Agriculture Energy Conservation Environmental Solutions Electric Power Transportation – Increase Mass Transit Exports Water Conservation – New Supplies and Recycling U.S. Government Procurement and Outsourcing – Base Realignment Program (BRAC) Real Estate – Recycle and Rehab Existing Commercial and Residential Property

Healthcare – National Program

Education

Agriculture

Energy Conservation

Environmental Solutions

Electric Power

Transportation – Increase Mass Transit

Exports

Water Conservation – New Supplies and Recycling

U.S. Government Procurement and Outsourcing – Base Realignment Program (BRAC)

Real Estate – Recycle and Rehab Existing Commercial and Residential Property

Conclusions We are in a deep and protracted recession that began in the fourth quarter of 2007. It began in housing and has spread through the entire U.S. and overseas economies. Economic weakness has intensified through 2008 and will worsen through the first half of 2009. Increased near term economic and market pressures include: stubbornly high inflation in food and basic services lower corporate profits increased unemployment continued weak levels of corporate capital and consumer spending

We are in a deep and protracted recession that began in the fourth quarter of 2007. It began in housing and has spread through the entire U.S. and overseas economies. Economic weakness has intensified through 2008 and will worsen through the first half of 2009.

Increased near term economic and market pressures include:

stubbornly high inflation in food and basic services

lower corporate profits

increased unemployment

continued weak levels of corporate capital and consumer spending

Conclusions continued Severe reductions in State and Local Government spending Weak exports as overseas economies fall into recession Continued credit pressures in residential housing and consumer lending spreading to commercial real estate markets and corporate lending

Severe reductions in State and Local Government spending

Weak exports as overseas economies fall into recession

Continued credit pressures in residential housing and consumer lending spreading to commercial real estate markets and corporate lending

Conclusions continued However, a bottoming of the housing cycle and an abatement in bank credit losses in the second half of this year, could set the stage for cyclical capital markets and economic improvements in 2009 and 2010. After an expected cyclical recovery in 2010-2012, we believe the longer term socio-economic issues facing this country will result in slower future economic growth for the United States. The availability and cost of credit, particularly to consumers, will be more restricted and expensive in the future.

However, a bottoming of the housing cycle and an abatement in bank credit losses in the second half of this year, could set the stage for cyclical capital markets and economic improvements in 2009 and 2010.

After an expected cyclical recovery in 2010-2012, we believe the longer term socio-economic issues facing this country will result in slower future economic growth for the United States.

The availability and cost of credit, particularly to consumers, will be more restricted and expensive in the future.

Thank You You can always reach me at [email_address] Also, if you need us in a hurry, we are at 410.522.7243 Please contact us when you require economic and capital markets research & policy analysis. Further information available at www.spgtrend.com

You can always reach me at [email_address]

Also, if you need us in a hurry, we are at 410.522.7243

Please contact us when you require economic and capital markets research & policy analysis.

Further information available at www.spgtrend.com