SLG's Market Perspective Update

1. SLG’s Market Perspective Update
Since July 2015, we have repeatedly gone on record voicing concerns over the equity markets
and continue to believe that we are at the beginning stages of a U.S. recession.
The most recent casualties of the market sell-off are the most-loved glamour stocks, (including
FANG) which had appeared to be unaffected by the problems of energy companies, commodity
producers, banks, retailers, etc.
This bifurcation of market values represented an early warning sign in our view.
We believe that a major area of the market such as energy cannot be teetering on collapse
without pulling down the entire market. We saw this with financials in 2008 and technology in
1999.
Another troubling statistic was provided in a recent Bloomberg article showing 394 dividend
cuts in 2015 versus 295 in 2008.
In 2007, the industries that were overvalued included financials, luxury retailers and
homebuilders, with much of the bubble being brought about by no-look mortgages, and a
seemingly insatiable appetite by global investors to invest in these packaged, derivative
instruments.
When investors realized that many people could not afford their no-look mortgages, the bubble
broke and the gravitational pull brought down the entire market. This put the market into a near
death spiral as leveraged investors needed to sell anything that had to a counter party to meet
margin calls.
At the depth of the market sell-off in 2009, certain companies could be bought for the value of
the cash they held on their balance sheets, with no assigned value to their operating businesses.
While the bubble stocks have stayed down and may never come back to 2007 values, the non-
bubble constituents caught in the delivering backwash did come back. The wait, however, was
painful for investors.
While we see some similarities with the current market sell-off, we see major differences:
First: The decline of energy producers was not brought about by the bursting of a bubble. Their
decline is a product of new technology unlocking reserves in the United States and bringing an
abundance of what was once thought to be a scarce and diminishing commodity.

2. Additionally, Russia, Venezuela, Iran and Nigeria, need to sell at virtually any price to avoid
depression.
Second: The collapse of Bear Stearns and Lehman Brothers, the shotgun wedding of Merrill
Lynch and BOA, and the would-be collapse of many other financial institutions, such as AIG,
were able to be fixed or delayed with an injection of cheap cash from the Fed.
The Fed won’t pump cash into Chesapeake Energy, Conoco, or any other energy companies as
they teeter. The energy complex will experience a period of recapitalization with bankruptcies,
loan write-downs, suspended dividends, bond holder defaults, recapitalizations, etc. This distress
will ultimately affect consumer behavior and the broader U.S. economy.
Oilfield, construction and other industrial jobs have been important catalysts for the job market,
employment and wage gains in recent years. These jobs will be soon lost, causing a spillover
effect to other consumer dependent industries.
While investors come to grips with the market volatility and the extent of the economic malaise,
we are beginning to prepare for the next phase, which is taking advantage of the significant
opportunities that we believe will be forthcoming over the next 12 - 24 months.
The preceding represents the views and opinions of The Stanley-Laman Group, Ltd., a
Registered Investment Advisor, and is not intended to be investment advice suitable for all
investment objectives. Investment strategies involve the risk of loss of principal. Investors are
advised to consult with qualified investment professionals relative to their individual
circumstance and objectives.