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Jeffrey Sweeney is an investment banker with years of experience in direct lending and corporate finance for small- to middle-market companies. He is the chairman and CEO of US Capital Partners, an innovator in small- to middle-market business lending. US Capital Partners has been providing prompt, innovative, and reliable financing solutions across the United States and abroad for more than a decade.

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Friday
Mar242017

Indications of a Positive Stock Market Future

The stock market is forward looking.  While the past can shape how we discount the future, stock valuations are theoretically the present values of future cash flows discounted back to today.
 
There are relationships between economic activity today and probable economic activity in the future.  Rather than guess what is likely to happen in the future, disciplined investors use statistically relevant relationships between today’s events and probable future outcomes to make educated forecasts of what might happen next.
 
We have found the Leading Economic Index (LEI) and Treasury Yield Curve to be robust, reliable forward looking indicators of recessions.  History tells us that extreme bear markets occur during recessionary times.  Being able to forecast recessions is useful for avoiding major bear stock markets.  This week, the LEI and Yield Curve are indicating a very low probability of recession anytime during the next six months.  The LEI was updated late last week and has had three consecutive positive month-over-month gains of 0.6%.  This is bullish for stocks.
 
While we have high confidence in the LEI and Yield Curve as standalone indicators, it is confidence boosting when other indicators point in the same direction.  This week, we highlight the Chemical Activity Barometer (CAB) and the Pickup Truck Sales (PTS) Indicator.  Chemicals and pickup trucks are closely associated with a significant amount of economic activity in the U.S.
 
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted its strongest year-over-year gain in nearly seven years. The 5.5 percent increase over this time last year reflects elevated consumer and business confidence and an overall rising optimism in the U.S. economy.

 

Pickup trucks are often sold to small, independent business people.  Many pickup trucks are used in the construction industry.  In the past week, we saw the highest home builder sentiment in twelve years.  The chart below shows pickup truck sales from 1980 through 2016.

 

On the chart above, recessions are marked with vertical dark grey bars.  Before all recessions during this time period, pick-up truck sales either leveled off or declined.  Today, pickup truck sales are showing a steady, positive upward trajectory.  No sign of impending recession and stock market stress.
 
Positive indicators do not alleviate investors from day-to-day volatility caused by an uncertain world.  This week, concerns about the probability of Trump’s lower taxes, scaled back Affordable Care Act and reduction of regulation agenda would become a reality caused the banking and healthcare sectors to pull-back especially hard relative to the broader indexes.
 
Reliable, time-tested indicators help keep emotions out of the investment decision process.  Short-term volatility can cause investors to make emotional, sub-optimal investment decisions.   Although the S&P 500 incurred its first greater than 1% daily decline this week since October 11, 2016 (roughly six months ago), our indicators remain bullish.

One of the keys to investing is sifting through all available information and sticking to a plan.  Somehow, we need to control our emotions about something that is very important to each of us. We invite you to call or email anytime if you have questions about how we can help you with your wealth management.  Please give us a call at (415) 249-6337 or email us at info@uscapitalwm.com  to learn more.



Stock Market Dashboard



US Capital Wealth Management is your investment solutions partner. 

Listed below are some of the investment strategies we offer. 
We are eager to speak with investors and investment advisors looking for a new trusted partner.
Please give us a call at 415-249-6337 if you would like to talk.

  

  



 


This commentary and a sampling of previous editions are available as PDFs:

3/24/2017: Indications of a Positive Stock Market Future
3/17/2017: Hallelujah, Reflation!
3/10/2017: Small Cap Stock Divergence
3/3/2017: Velocity Pivot Good for Stocks
2/24/2017: How Safe Are The Banks
2/17/2017: Climbing A Wall of Worry
2/10/2017: Value Shopper - Europe on Sale
2/3/2017: What, Me Worry
1/27/2017: Extraordinary Earnings Louder Than Trump
1/20/2017: It's Not All About Trump
12/30/2016: Predicting the Future -2017
12/2/2016: 
Trade What Is, Not What You Think It Should Be – 2017 Outlook

US Capital Partners

Pursuant to the provisions of Rule 206(4)-1 of the Investment Advisors Act of 1940, we advise all readers to recognize that they should not assume that recommendations made in the future will be profitable or will equal the performance of past recommendations. This publication is not a solicitation to buy or offer to sell any of the securities listed or reviewed herein. The contents of this letter have been compiled from original and published sources believed to be reliable, but are not guaranteed as to accuracy or completeness. Nicholas Atkeson and Andrew Houghton are also principals of US Capital Wealth Management, a registered investment advisor. Clients of US Capital Wealth Management and individuals associated with US Capital Wealth Management may have positions in and may from time to time make purchases or sales of securities mentioned herein.

THIS NEWSLETTER IS PROTECTED BY COPYRIGHT LAW. UNAUTHORIZED DISTRIBUTION AND/OR REPRODUCTION BY PHOTOCOPY OR ANY OTHER MEANS IS STRICTLY PROHIBITED AND PUNISHABLE BY A FINE OF UP TO $25,000.

Tuesday
Mar212017

How to Secure Higher Returns in Exchange for a Little Less Liquidity, Not Increased Risk

Jeffrey Sweeney, Chairman and CEO at US Capital Partners, shares the firm’s unique investment perspective on “investment-grade” credit alternatives.

The current economic landscape is marked by long-term low returns, negative interest rates, and increased market volatility. In this landscape, focusing on best practices in credit alternatives has the potential to deliver higher returns in exchange for a little less liquidity, not increased risk.

Sharp Growth in Alternative Securities

We have been witnessing an explosion in private investment capital. As more money has accumulated in private-equity firms and sovereign-wealth funds, companies are tapping them for capital and delaying going public, sometimes delivering sizable early investment gains to private rather than public investors.

WSJ Chart

Defining Risk Factors of Alternatives

There is often a misconception that alternatives are inherently risky. This is usually the result of a failure to differentiate between different kinds of alternatives. At US Capital Partners, we distinguish between “investment-grade” and “non-investment-grade” alternatives.

Investment-grade credit alternatives, for example, typically have the following characteristics:
• Performing companies with mature products and services
• Strong, competitive position in their industry with diversified customer base
• Debt service cash-flow coverage and asset coverage as a secondary form of repayment

By contrast, non-investment-grade credit alternatives have the following features:
• Angel round, venture round, or seed round
• No substantive product sales or market penetration
• Regulatory uncertainty and other significant risks
• Lack of debt service coverage and only asset-backed sale for repayment

Some Benefits of Investment-Grade Credit Alternatives

Investment-grade credit alternatives combine low principal volatility with superior, risk-adjusted net returns of 6–15%. They also usually offer distributable realized interest income. While non-investment-grade credit alternatives have the potential for higher returns, they also have a far higher risk profile.

Focus on Best Practices in Credit Alternatives

To achieve optimal results, US Capital Partners focuses on investment-grade credit alternatives, applying the following best practices:
1. Allocate 15-20% of one's investable assets to investment-grade alternatives to boost total AUM returns by several hundred basis points annually.
2. Do careful due diligence on the fund manager or use only broker-dealer underwritten securities or fund placement agents.
3. Mitigate the risk of size through diversification, collateral management, and careful oversight.
4. For more widely diversified portfolio risk, use funds and experienced fund managers.

To learn more about US Capital Partners, email Jeffrey Sweeney, Chairman and CEO, at jsweeney@uscapitalpartners.net or call (415) 889-1010.

This short article shares US Capital Partners' opinions and best practices at the firm, and should not be regarded as financial advice or a recommendation to invest in any particular security or class of securities. This article is not a solicitation to buy or an offer to sell any security and may not be relied upon in connection with the purchase or sale of any security. The contents of this article have been compiled using original and published sources believed to be reliable, but are not guaranteed as to accuracy or completeness. Any investment in securities involves significant risk, including the loss of principal. As such, investors should seek investment advice from a registered investment adviser before investing. Investment advice by US Capital Partners is provided by affiliated firm US Capital Wealth Management, LLC, a registered investment adviser.

Monday
Mar202017

Hallelujah, Reflation!

A few years ago, we were asked by concerned clients if the U.S. was slipping into a deflationary cycle somewhat like what Japan has experienced for the past 28 years.  Like Japan, we have aging demographics, a mature economy and our government is overburdened by debt.  The Japanese example is disconcerting as the Nikkei 225 peaked in December 1989 and still has to double before reaching a new high.

 

A few years ago, the S&P 500 was mired in a 13-year bear market that extended from 2000 to 2013.  The Fed Funds rate was zero.  Deflationary concerns were justified.

 

The S&P 500 reached new highs in 2013.  The Dow Jones Industrial Average achieved this milestone in 2012 and the NASDAQ definitively surpassed its 2000 high in 2016.  On price action alone, measured from 1989 or since 2000, we are not Japan.
 
Fed Raising Rates
 
The Fed raised the Fed Funds rate (overnight lending rate between banks) by 0.25% to a range of 0.75%-1.00% this week.  This is further compelling evidence we are not Japan.

  1. The Fed is raising the short-term interest rate to curb inflation which by a variety of measures is at or near its 2% target rate.  The worry is inflation, not deflation.
  2. The Fed is reiterating its intent to raise rates three times this year and three times next year.  They have confidence this rate hike schedule will not derail U.S. economic expansion.  From an economic cycle point of view, we have moved from the recovery phase to the expansion phase.  Given that interest rates are still near historic lows, the economy may expand for several more years before we peak and contract again.

To highlight how different our overall economic condition is from Japan’s  (growth versus deflation), the U.S. ten-year treasury interest rate is roughly 2.5% while the Japanese rate is roughly 0.07%.  The Japanese government 2-year and 5-year interest rates are negative -0.27% and -0.14%, respectively.  Negative interest rates are rudimentary and emblematic of deflation.  U.S. rates are among the highest in the developed economy world and rising.
 
As long as inflation and interest rates are not too high, stocks generally do well during inflationary periods.  Bonds often don’t.  JP Morgan Asset Management calculates that the correlation between rising rates and rising stocks is positive until the 10-year treasury rate surpasses roughly 5%.  At 2.5%, we are only half way there.
 
Think Global
 
Europe appears to be earlier in the expansion cycle and is coming off of lower interest rates than in the U.S. On February 10, our newsletter was titled “Value Shopper, Europe on Sale.”  We believe adding international stock exposure to your U.S. equity exposure is a good idea today.
 
This week, we rebalanced our Multi-Fund Diversified strategy to increase our international exposure.  This strategy offers a balanced, agile approach to owning many of the top performing markets globally.  Importantly, the strategy has a rules-based mechanism for selling stocks and moving to defensive assets when the bull cycle eventually reaches it end.  It seeks to offer the growth of the stock market with bear-market protection.  Give us a call or email if you would like to learn more about how to capture the expansion while maintaining downside protection.
 
One of the keys to investing is sifting through all available information and sticking to a plan.  Somehow, we need to control our emotions about something that is very important to each of us. We invite you to call or email anytime if you have questions about how we can help you with your wealth management.  Please give us a call at (415) 249-6337 or email us at info@uscapitalwm.com  to learn more.

Erin Go Bragh!
 



Stock Market Dashboard



US Capital Wealth Management is your investment solutions partner. 

Listed below are some of the investment strategies we offer. 
We are eager to speak with investors and investment advisors looking for a new trusted partner.
Please give us a call at 415-249-6337 if you would like to talk.

  

  



 


This commentary and a sampling of previous editions are available as PDFs:

3/17/2017: Hallelujah, Reflation!
3/10/2017: Small Cap Stock Divergence
3/3/2017: Velocity Pivot Good for Stocks
2/24/2017: How Safe Are The Banks
2/17/2017: Climbing A Wall of Worry
2/10/2017: Value Shopper - Europe on Sale
2/3/2017: What, Me Worry
1/27/2017: Extraordinary Earnings Louder Than Trump
1/20/2017: It's Not All About Trump
12/30/2016: Predicting the Future -2017
12/2/2016: 
Trade What Is, Not What You Think It Should Be – 2017 Outlook

US Capital Partners

Pursuant to the provisions of Rule 206(4)-1 of the Investment Advisors Act of 1940, we advise all readers to recognize that they should not assume that recommendations made in the future will be profitable or will equal the performance of past recommendations. This publication is not a solicitation to buy or offer to sell any of the securities listed or reviewed herein. The contents of this letter have been compiled from original and published sources believed to be reliable, but are not guaranteed as to accuracy or completeness. Nicholas Atkeson and Andrew Houghton are also principals of US Capital Wealth Management, a registered investment advisor. Clients of US Capital Wealth Management and individuals associated with US Capital Wealth Management may have positions in and may from time to time make purchases or sales of securities mentioned herein.

THIS NEWSLETTER IS PROTECTED BY COPYRIGHT LAW. UNAUTHORIZED DISTRIBUTION AND/OR REPRODUCTION BY PHOTOCOPY OR ANY OTHER MEANS IS STRICTLY PROHIBITED AND PUNISHABLE BY A FINE OF UP TO $25,000.

Tuesday
Mar142017

US Capital Advises on $5 Million Equity Raise for Illuminergy, Inc.

Alternative Lender

US Capital Partners Inc. supports the continued expansion of a developer and distributor of innovative, high-value LED lighting products.

SAN FRANCISCO, MARCH 2017 – US Capital Partners Inc. has advised on an equity raise of up to $5 million for Illuminergy, Inc. (dba “Illuminer”), an expanding developer of LED lighting products. Illuminer is preparing to launch its innovative LED street and parking light system called Cobratech in the United States.

Headquartered in San Francisco, US Capital Partners is a full-service private investment bank that provides private placement services and has wide distribution for debt and equity private placements.

Michael Ernst, Chief Executive Officer at Illuminer, said: “We approached US Capital Partners to complete some due diligence work in preparation for a future equity raise, to create an overall capital formation plan, as well as to provide introductions to strategic investors and other potential partners. We were extremely pleased with the first-class service, process, and results.”

“We are extremely pleased to have advised on this capital raise for Illuminer,” said Jeffrey Sweeney, Chairman and CEO at US Capital Partners. “It’s a pleasure to work with an innovative company such as Illuminer, which is at the cusp of expansion. US Capital Partners completed due diligence and provided strategic advisory for Illuminer, to support the company in its product development and expansion in the United States.”

About Illuminergy, Inc.

Illuminergy, Inc. is a privately owned company that designs, produces, and distributes innovative, high-value LED lighting products manufactured in China. Illuminer’s products are used for the interior and exterior illumination of residential, office, and commercial facilities, as well as of industrial, outdoor, and architecture facilities across the United States. The company’s LED products result in significantly lower facility energy costs, while meeting the expectations of environmentally conscientious purchasers. For more information, visit www.illuminerinc.com.

About US Capital Partners Inc.

Since 1998, US Capital Partners (www.uscapitalpartners.net) has been providing well-structured, custom finance solutions to private and public companies in the United States and abroad. Headquartered in San Francisco, US Capital Partners, operating with its affiliate US Capital Global Securities, LLC, is a full-service private investment bank with a wide distribution for debt and equity private placements. The group makes debt investments between $500,000 and $100 million, participates in debt facilities, and offers asset management, financial advisory services for buy-side and sell-side engagements, and capital formation, including early-stage financings requiring equity or debt. For more information, visit www.uscapitalpartners.net.

Monday
Mar132017

Small Cap Divergence

 
The S&P 500 Index and the Dow Jones Industrial Average, two groupings of large cap stocks, are not far from their March 1st all-time highs following Trump’s calming speech to Congress.  The Russell 2000 Small Cap Index (IWM) has lost momentum and has drifted sideways to down from early December 2016 through today  - the Russell Midcap Index (IWR) is splitting the uprights. 

One way to interpret this is smaller cap stocks are consolidating gains after running 20%+ since the US presidential election.  Another way to interpret this is as an indication that the risk appetite of investors in waning.  Small companies are considered riskier investments than large cap companies.  When small cap stocks under perform large cap stock on a relative basis, many market analysts believe the risk premium of the market is rising and investors are becoming increasingly cautious.
 
A declining risk appetite generally equates to a declining stock market.  A negative divergence between small and large cap stocks is often an early warning signal.  On the other hand, there are times when the market pushes through a period of investor anxiety measured by small cap under performance without incurring much damage.
 
In 2014, the S&P 500 Index appreciated 13.5% while the Russell 2000 small cap index advanced only 5%.  The following year, the S&P 500 traded sideways making a small gain with dividends of about 1.3% while the Russell 2000 lost -4.5%.  

What has not been featured in the headline news is the loss of momentum over the past several months of smaller stocks.  This development is of note and causes us to even more closely stick to our discipline of using non-emotional, time-tested measures to make investment allocation decisions including the Leading Economic Index and Treasury Yield Curve.  We end this week with a continued bullish stance but respectful that market conditions may be entering a transition period.
 
Now More Than Ever
 
The bull market is eight years old.  In 2016, $625 billion was invested in passive index funds.  $92 billion was withdrawn from actively managed funds.  There has been a mega-trend away from actively managed funds into indexed, passive type funds. When anything gets this one-sided, one has to start thinking about taking the other side, going against the herd.

We are in the second longest bull market in history.  There is a rising probability that the crowd has arrived to the party late.  The purchase of S&P 500 and other major index funds works well when stocks are rising.  This approach does not offer protection during bear market periods.
 
Now, more than ever you need a money manager equipped with disciplined, non-emotional tools to reduce equity exposure when the risk of a bear market rises.  The day that you want to greatly reduce your equity holdings and be protective of your wealth is nearing the longer the bull market extends.
 
The truth is, most actively managed funds do not significantly reduce equity exposure during bear markets.  Many actively managed funds were down as much if not more than the S&P 500 in 2008.
  
If having a plan to protect your wealth from the next major bear market is important to you, give us a call or send us and email to discuss how we can be of service.
 
One of the keys to investing is sifting through all available information and sticking to a plan.  Somehow, we need to control our emotions about something that is very important to each of us. We invite you to call or email anytime if you have questions about how we can help you with your wealth management.  Please give us a call at (415) 249-6337 or email us at info@uscapitalwm.com  to learn more..

 



Stock Market Dashboard



US Capital Wealth Management is your investment solutions partner. 

Listed below are some of the investment strategies we offer. 
We are eager to speak with investors and investment advisors looking for a new trusted partner.
Please give us a call at 415-249-6337 if you would like to talk.

  

  



 


This commentary and a sampling of previous editions are available as PDFs:

3/10/2017: Small Cap Divergence
3/3/2017: Velocity Pivot Good for Stocks
2/24/2017: How Safe Are The Banks
2/17/2017: Climbing A Wall of Worry
2/10/2017: Value Shopper - Europe on Sale
2/3/2017: What, Me Worry
1/27/2017: Extraordinary Earnings Louder Than Trump
1/20/2017: It's Not All About Trump
12/30/2016: Predicting the Future -2017
12/2/2016: 
Trade What Is, Not What You Think It Should Be – 2017 Outlook
 

US Capital Partners

Pursuant to the provisions of Rule 206(4)-1 of the Investment Advisors Act of 1940, we advise all readers to recognize that they should not assume that recommendations made in the future will be profitable or will equal the performance of past recommendations. This publication is not a solicitation to buy or offer to sell any of the securities listed or reviewed herein. The contents of this letter have been compiled from original and published sources believed to be reliable, but are not guaranteed as to accuracy or completeness. Nicholas Atkeson and Andrew Houghton are also principals of US Capital Wealth Management, a registered investment advisor. Clients of US Capital Wealth Management and individuals associated with US Capital Wealth Management may have positions in and may from time to time make purchases or sales of securities mentioned herein.

THIS NEWSLETTER IS PROTECTED BY COPYRIGHT LAW. UNAUTHORIZED DISTRIBUTION AND/OR REPRODUCTION BY PHOTOCOPY OR ANY OTHER MEANS IS STRICTLY PROHIBITED AND PUNISHABLE BY A FINE OF UP TO $25,000.