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Buckle up – Q3 & Q4 2010 might be a bumpy ride Amir Homayoun Rafizadeh the “Network Sommelier” How to reduce income tax's ...
Capital Goods Orders <ul><li>Steep decline in 08 </li></ul><ul><li>Capital goods orders have bounced back </li></ul>
Private Inventories Big drop in private inventories <ul><li>American consumer changing? </li></ul><ul><li>Made early 2000 ...
Housing Starts Steep decline <ul><li>Did we build too many houses in the  </li></ul><ul><li>90’s and 2000 decade? </li></u...
Light Vehicle Sales How many more cars can we buy? <ul><li>Car makers are focusing on quality of cars rather than number o...
Drag on Earnings Cost of Capital > Cash return <ul><li>Forced to seek better rates of return </li></ul><ul><li>Deploy cash...
S&P Dividends per Share Drop since 08 peak <ul><li>Carefully watch going forward </li></ul><ul><li>Interesting results whe...
Corporate Cash as a % of Current Assets Sitting on lot’s of cash <ul><li>Make strategic acquisitions </li></ul><ul><li>Pur...
M&A Activity Small signs of activity <ul><li>Capital expenditure rising but slowly </li></ul><ul><li>M&A rising but still ...
Consumer Balance Sheet <ul><li>A lot of mortgage (credit card and other) debt </li></ul><ul><li>Lots of unfunded pension l...
Personal Savings Rate <ul><li>Savings rate growing in the right direction but obviously not enough </li></ul><ul><li>A lon...
Household Debt <ul><li>Personal income is currently flat </li></ul><ul><li>More people are saving (or are trying to save) ...
Asset Allocation Differences <ul><ul><li>Huge difference between the way a corporation invests vs. an endowment </li></ul>...
Funding for Defined Benefit Plans <ul><ul><li>Huge difference what 10 years can do between 1999 and 2009 </li></ul></ul><u...
Pension Return Assumptions <ul><ul><li>Pension average returns reduced significantly for S&P companies since recession </l...
Lending Standards 2008 recession was  the peak  <ul><li>Too early to tell if recovery is happening; mixed message about ba...
Delinquency Rates Delinquency rates reported  from all banks <ul><li>Residential mortgage defaults still on the rise </li>...
LIBOR Spread over Treasuries (known as the “TED Spread”) <ul><li>Ted Spread ratio during 2008 broke the record set back du...
LIBOR Spread over Treasuries (known as the “TED Spread”) <ul><li>TED spread typically decreases when the risk of bank defa...
Comparing this last recession with the great depression <ul><ul><li>A lot of talk from economists that this last recession...
GDP Decline and Recovery <ul><ul><li>With a -3.8% decline in real GDP we yet have some time before we really know what the...
% of US Treasuries Owned by Foreigners <ul><li>Between 2001 and 2009 the 2 terms of President Bush in office, the % of for...
% of US Treasuries Owned by Foreigners <ul><li>The spending for wars in Iraq and Afghanistan after the attacks of Septembe...
Foreign Holders of US Treasuries <ul><li>China is number 1 followed by Japan (a close number 2) purchaser of our treasurie...
Mutual Fund Flows Big numbers in  comparison  to this last decade <ul><li>Both taxable & tax-exempt bonds </li></ul><ul><l...
Net Fund Flows Equity Flows <ul><li>Lots of money leaving equity funds </li></ul><ul><li>Specially since September 2008 </...
Net Fund Flows Fixed Income Flows <ul><li>Some money leaving equity funds </li></ul><ul><li>Lots of money going into fixed...
Comparing Stock & Bond Flows <ul><li>Since March 2008 bond flows have exceeded equity flows </li></ul><ul><li>Clearly inve...
So what on earth do you do? <ul><li>Individuals(where possible): </li></ul><ul><ul><li>Defer taxes </li></ul></ul><ul><ul>...
 
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Latest Status of the US Private Business Market Interview with Rob Slee by 678 Partners Network Sommelier

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Half way point through 2010 when we discuss what the future of the US private business market holds for our economy. Listen to this interview where Rob Slee and I (Network Sommelier) talk about the importance of the private business owner market and its relevance to the broader US economy. What the next 1,3 and 5 years could bring for us all? If you own a private business there are many things you can do to grow your business such as selling your products globally, multiple niche building and lots of strategies to leverage your intellectual capital(instead of being frozen and not know what to do). Its a global fight so better be ready otherwise loosing revenue and customers to competition might be your only other choice.

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Latest Status of the US Private Business Market Interview with Rob Slee by 678 Partners Network Sommelier

  1. 1. Buckle up – Q3 & Q4 2010 might be a bumpy ride Amir Homayoun Rafizadeh the “Network Sommelier” How to reduce income tax's How to reduce estate tax liability Items not covered by Your current advisor
  2. 2. Capital Goods Orders <ul><li>Steep decline in 08 </li></ul><ul><li>Capital goods orders have bounced back </li></ul>
  3. 3. Private Inventories Big drop in private inventories <ul><li>American consumer changing? </li></ul><ul><li>Made early 2000 look simple </li></ul><ul><li>US economy has not seen anything </li></ul><ul><li>like this since at least 1970! </li></ul>
  4. 4. Housing Starts Steep decline <ul><li>Did we build too many houses in the </li></ul><ul><li>90’s and 2000 decade? </li></ul><ul><li>Have to go far back to 1975 to see anything comparable to the most recent number </li></ul>
  5. 5. Light Vehicle Sales How many more cars can we buy? <ul><li>Car makers are focusing on quality of cars rather than number of models (look at what happened to GM) </li></ul><ul><li>Recent car sales matched 1982 numbers </li></ul><ul><li>New pattern of car buying might change the long time average </li></ul>
  6. 6. Drag on Earnings Cost of Capital > Cash return <ul><li>Forced to seek better rates of return </li></ul><ul><li>Deploy cash in strategic ways </li></ul><ul><li>How long before this actually happens? </li></ul>
  7. 7. S&P Dividends per Share Drop since 08 peak <ul><li>Carefully watch going forward </li></ul><ul><li>Interesting results when you exclude financials </li></ul><ul><li>Never seen a steep drop like this since mid 1995 </li></ul>
  8. 8. Corporate Cash as a % of Current Assets Sitting on lot’s of cash <ul><li>Make strategic acquisitions </li></ul><ul><li>Purchase equipment & Inventory </li></ul><ul><li>Investment back in business </li></ul><ul><li>Buy back company stock </li></ul><ul><li>Other strategic uses of cash </li></ul>
  9. 9. M&A Activity Small signs of activity <ul><li>Capital expenditure rising but slowly </li></ul><ul><li>M&A rising but still at 1997 and 2003 levels? </li></ul>
  10. 10. Consumer Balance Sheet <ul><li>A lot of mortgage (credit card and other) debt </li></ul><ul><li>Lots of unfunded pension liabilities </li></ul><ul><li>Home values could drop further </li></ul><ul><li>Need to make the balance sheet healthy again and maintain frequent check ups </li></ul>
  11. 11. Personal Savings Rate <ul><li>Savings rate growing in the right direction but obviously not enough </li></ul><ul><li>A long way to go before reaching the high rate of 70’s and 80’s savings rate </li></ul><ul><li>We have to make savings a regular habit </li></ul>
  12. 12. Household Debt <ul><li>Personal income is currently flat </li></ul><ul><li>More people are saving (or are trying to save) </li></ul><ul><li>More debt is being paid off </li></ul><ul><li>Household debt service ratio is already reaching 2002 levels (also notice where it was back in 80-84 and also 92-94) </li></ul>
  13. 13. Asset Allocation Differences <ul><ul><li>Huge difference between the way a corporation invests vs. an endowment </li></ul></ul><ul><ul><li>Endowments use more alternative asset classes such as private equity, hedge funds, real estate and other </li></ul></ul><ul><ul><li>Corporations use more traditional equity and fixed income asset classes </li></ul></ul>
  14. 14. Funding for Defined Benefit Plans <ul><ul><li>Huge difference what 10 years can do between 1999 and 2009 </li></ul></ul><ul><ul><li>Currently 92% of S&P companies have under-funded their defined benefit plans </li></ul></ul><ul><ul><li>From most large corporate balance sheets, we know they are sitting on a lot of cash. Should that cash be used for funding these DB plans? </li></ul></ul>
  15. 15. Pension Return Assumptions <ul><ul><li>Pension average returns reduced significantly for S&P companies since recession </li></ul></ul><ul><ul><li>1999 average was around 9.2% vs. 2008 average being 7.8% (these figures do not incorporate fees & expenses) </li></ul></ul><ul><ul><li>During Q4 2009 16% of the S&P companies felt they could achieve 8.5%-9% return vs. Q1 2010 at only 10% of those respondents </li></ul></ul>
  16. 16. Lending Standards 2008 recession was the peak <ul><li>Too early to tell if recovery is happening; mixed message about bank lending </li></ul><ul><li>FDIC still taking over many small to mid sized banks </li></ul><ul><li>Lending is much better than a year ago but still not happening across the board </li></ul><ul><li>Both commercial & consumer loan lending standards have improved during Q1 2010 vs. Q4 2009 </li></ul>
  17. 17. Delinquency Rates Delinquency rates reported from all banks <ul><li>Residential mortgage defaults still on the rise </li></ul><ul><li>Consumer loan defaults also still on the rise </li></ul><ul><li>Commercial & Industrial loan defaults rising </li></ul><ul><li>Way too early to declare recovery </li></ul><ul><li>Have a to wait a few quarters </li></ul>
  18. 18. LIBOR Spread over Treasuries (known as the “TED Spread”) <ul><li>Ted Spread ratio during 2008 broke the record set back during the Black Monday crash of 1987 </li></ul><ul><li>During 2008 as the TED spread was increasing, banks would ask for a higher rate of interest or accept lower rate of return on safer investments such a T-Bills, this was due to the increasing risk of Interbank loans </li></ul>
  19. 19. LIBOR Spread over Treasuries (known as the “TED Spread”) <ul><li>TED spread typically decreases when the risk of bank defaults is considered to be decreasing </li></ul><ul><li>This only suggests that banks are lending to each other and not necessarily out to business’s or consumers </li></ul><ul><li>Have to watch this closely going forward </li></ul>
  20. 20. Comparing this last recession with the great depression <ul><ul><li>A lot of talk from economists that this last recession was not as bad as others based on a GDP decline (them focusing on numbers) </li></ul></ul><ul><ul><li>The real effect is yet to come as we still don’t know if this last recession has really ended </li></ul></ul>
  21. 21. GDP Decline and Recovery <ul><ul><li>With a -3.8% decline in real GDP we yet have some time before we really know what the recovery would look like </li></ul></ul><ul><ul><li>So far the GDP recovery was around 3.5% (with lots of incentive from the FED) </li></ul></ul><ul><ul><li>Last time we had a -3.8% real GDP decline was back in 1957 when it eventually recovered 9.5%! </li></ul></ul>
  22. 22. % of US Treasuries Owned by Foreigners <ul><li>Between 2001 and 2009 the 2 terms of President Bush in office, the % of foreign ownership in treasuries doubled from 35% (in 2000) to approximately 61% (in 2008). This was as President Clinton left (in 2001) and President Obama arrived in office (2009) </li></ul>
  23. 23. % of US Treasuries Owned by Foreigners <ul><li>The spending for wars in Iraq and Afghanistan after the attacks of September 11 and </li></ul><ul><li>The financial stabilization program that Alan Greenspan implemented to secure the financial sector and revive the economy were a few factors leading to this growth of deficit spending </li></ul>
  24. 24. Foreign Holders of US Treasuries <ul><li>China is number 1 followed by Japan (a close number 2) purchaser of our treasuries </li></ul><ul><li>How long can we borrow money that we don’t have? </li></ul><ul><li>If the US $ defaults we will be owned by Japan, China and other countries unless we address these deficits now </li></ul>
  25. 25. Mutual Fund Flows Big numbers in comparison to this last decade <ul><li>Both taxable & tax-exempt bonds </li></ul><ul><li>3 times more than 2001 recession </li></ul><ul><li>Investors fleeing to safety </li></ul><ul><li>Investors searching for yield </li></ul>
  26. 26. Net Fund Flows Equity Flows <ul><li>Lots of money leaving equity funds </li></ul><ul><li>Specially since September 2008 </li></ul>
  27. 27. Net Fund Flows Fixed Income Flows <ul><li>Some money leaving equity funds </li></ul><ul><li>Lots of money going into fixed income Funds </li></ul><ul><li>Still don’t seem a rush to equities </li></ul>
  28. 28. Comparing Stock & Bond Flows <ul><li>Since March 2008 bond flows have exceeded equity flows </li></ul><ul><li>Clearly investors are fleeing to safety </li></ul><ul><li>$40+ billion flows around September 09 </li></ul>
  29. 29. So what on earth do you do? <ul><li>Individuals(where possible): </li></ul><ul><ul><li>Defer taxes </li></ul></ul><ul><ul><li>Write off taxes </li></ul></ul><ul><ul><li>Remove highly appreciating assets out of your estate </li></ul></ul><ul><li>Business Owners: </li></ul><ul><ul><li>Build new revenue & clients(there is so much cost cutting you can do) </li></ul></ul><ul><ul><li>Build niches & separate yourself from competition </li></ul></ul>

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