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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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Tuesday
Apr252017

US Capital Business Credit Income Fund Electronically Available on Leading Public Brokerage Platforms

Private credit fund targeting highly promising growth-orientated smaller businesses has been publicly assigned a CUSIP number, opening the door to North America’s largest brokerage platforms.

Click Tombstone Below for Offering Details

Business Credit Income Fund

SAN FRANCISCO, MARCH 2017 – US Capital Investment Management, LLC is pleased to announce it is now able to offer its US Capital Business Credit Income Fund, LP (the “Credit Fund”) to accredited investors on leading public brokerage platforms in North America. Fund balances and activity are reported in monthly account statements and fund income distributions accumulate in client brokerage platform accounts.

Founder and Managing Partner Jeffrey Sweeney’s aim in creating the Credit Fund was to deliver attractive risk-adjusted returns to its Limited Partner investors, redeemable in cash every quarter, primarily by providing direct senior loans to highly promising small and medium-sized businesses (SMBs). The Credit Fund is managed by the firm’s private investment and asset management division, US Capital Investment Management, LLC.

Charles and Jeff

“The Credit Fund especially targets SMBs in excellent financial condition that regulated lenders are unable to finance, primarily because of regulatory banking constraints,” said Sweeney. “I am delighted that the opportunity to participate in the Credit Fund is now open widely to eligible investors and to RIAs acting on behalf of their clients not only through our own digital investment platform at www.uscgs.com, but through leading public brokerage platforms.”

“The first series of investments into the Credit Fund have just been made through one of the largest brokerage platforms in the United States,” added Charles Towle, principal of US Capital Global Securities, LLC, the Credit Fund’s registered distributor. “We are proud to be making this private investment opportunity available electronically to our wide network of accredited investors, RIAs, and affiliate broker dealers.”

To learn more about the Credit Fund or to get started, call Pat Steele on (415) 889-1025.

About the Fund

US Capital Business Credit Income Fund, LP targets established businesses with annual revenues of up to $100 million and with EBITDA of $500,000 to $10 million. The General Partner believes that this segment continues to be underserved by traditional lending sources. The Credit Fund aims to capitalize on what it believes is a very strong lending opportunity by making short to medium-term direct senior debt investments, with the average lifetime of loans expected to be 36 months. The Credit Fund’s asset-based collateral management approach and in-depth underwriting analysis allow it to offer “middle market” customized financing solutions to smaller businesses, thereby providing creative capital to propel these businesses into their growth curve.

To learn more about US Capital Investment Management, LLC or this investment opportunity, email Pat Steele at psteele@uscgs.com or call +1 (415) 889-1025.

Saturday
Apr222017

Low Fees and Diversification Do Not Protect from Major Loss

We believe traditional wealth management services are often expensive for the service provided.  Historically, wealth managers have invested client money in a diversified portfolio of stocks and bonds using a buy-and-hold approach.  Apart from periodic rebalancing and an occasional position change, client portfolios are held through bull and bear market cycles. 
 
The popularity of low-fee index funds and the rise of the robo-advisor (computer based advisor) evolved from the traditional wealth management model.  A buy-and-hold approach to investing is relatively simple and tax efficient.  The strategy is easy to implement and manage.  Many investors feel comfortable managing their own money with a buy-and-hold approach using low fee funds such as Vanguard or using the allocation advice of a simple robo-advisor Internet interface.
 
With the buy-and-hold approach, one of the few variables the investor can control is the fee level.  Hence the increasing popularity of low-cost alternatives such as indexed funds and robo-advisor created exchange traded fund (ETF) portfolios.
 
What investors struggle to control are their emotions, especially during periods of euphoria and duress.
 
Two Major Problems with Buy-and-Hold
 
There are two significant problems with buy-and-hold.  The first is it presumes an investor has a long-term investment horizon (20+ years).  A buy-and-hold asset allocation plan takes no action to avoid an upcoming bear market.  Let’s not forget that low-cost S&P 500 index funds lost 55% of their value in the last bear market and a 60/40 diversified stock/bond portfolio lost 41% of its value.  The corrective action of buy-and-hold is to wait it out.  Unfortunately, this can take years.  Waiting to recover may not overlay well with life events including college tuition, home purchase, retirement, etc.
 
The second problem is investors have emotions.  When we see our life savings cut in half, we can become scared that we are going to lose it all.  When investors are unable to tolerate the discomfort of extreme paper loss, they often sell at the low.  Conversely, when the market is in a strong bull trend, we tend to work up the courage to buy closer to the top than the bottom.  For many, our emotions prevent us from being true to a long-term buy-and-hold approach.
 
The chart below shows the annualized returns of the average investor compared to stocks, bonds, REITs, a 60/40 equity/bond portfolio, a 40/60 equity bond portfolio, gold and inflation.  Over the twenty-year period from 1996 – 2015, the average investor underperformed all of these asset classes and inflation.  It is likely emotions played a significant part in the underperformance of the average investor.
  
The chart shows the average investor is not following a buy-and-hold plan either because of time or emotions or both.  If they were on plan, their returns would fall in the range of bonds to stocks (i.e., 5.3% to 8.2% annually versus 2.1% realized).
 
What Do You Believe?
 
Do you believe the markets are perfectly efficient?  Do you believe it is impossible to time the market?  Do you believe stocks are equally attractive when the Price/Earnings (P/E) multiple of the market is 30 versus 10?  Do you believe stocks are equally attractive when the economy is entering a recession versus emerging from a recession? 
 
If your intuition says that owning stocks no matter what is probably not the optimal way to invest, we agree with you.  So do the people who award the Nobel Prize.  Robert Shiller won the prize in 2013 for showing that the price of stocks does matter and can be used to predict future stock action.  History also agrees with you as we have never experienced a greater than -40% stock market drawdown in the past century without a simultaneous economic recession.
 
A Better Way
 
Even at a low fee and using diversified index securities, buy-and-hold is not working for the average investor.  Potentially in the late innings of a multi-year bull run, adopting a buy-and-hold approach for the next eight years may prove to be a significant source of emotional and financial stress.
 
It makes sense to have at least some of your money managed by experienced market professionals who specialize in non-emotions based risk mitigation to reduce your exposures to avoid major loss during bearish periods.  The preservation of capital and the avoidance of loss is often well worth the fee.  A good investment advisor may lower your expense of investing with reduced commission rates and institutional share class funds which offer the industry’s lowest possible costs.  As Vanguard states in their Advisor’s Alpha report, advisor’s most significant opportunity to add value may present themselves intermittently over the years, and often during periods of either market duress or euphoria.
 
In a complex, constantly evolving world, avoiding major bear market periods is a complex task.  At some level, all information inputs must be considered and run through a filter of decades of experience.  Financial and economic mathematical relationships need to be understood in an applied manner.  The nuts and bolts of how markets work needs to be understood.  Often, taking no action can be just as valuable as taking action.  Emotions must be kept in check.  It is a full-time endeavor.
 
This newsletter and our wealth management services are devoted to the task of building and protecting client wealth using rules-based, non-emotional tools and our experience.  As the bull market extends and stock valuations rise, the importance of being prepared for the eventual negative trend change also rises.  Please give us a call if you would like to have a free consultation with a principal of our firm.
 
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
 




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

4/21/2017: Low Fees and Diversification Do Not Protect from Major Loss
4/14/2017: "Housing IS the Business Cycle"
4/7/2017: Bond Risk Rising with Rates
3/31/2017:
 
Exclusive Stock Market, Higher Stock Price
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

Tuesday
Apr182017

Leveraging Your Intellectual Property to Secure Debt Financing

US Capital Partners recognizes the value of IP assets, and helps lower middle market businesses leverage their patents, trademarks, and brands to secure well-structured debt financing.

Why should CEOs and business owners care about IP assets? Because they cannot afford to do otherwise. Not only are IP rights valuable assets, but they can facilitate access to credit, or help in negotiating greater availability and lower interest rates on credits.

Can You Bank on Your IP?

Tangible and intangible assets

Intangible assets are now estimated to represent at least 84% of the market value of S&P 500 companies. Today’s most promising companies are built on intangible assets, especially their patents, trademarks, and brands. In many cases there is more value in the IP of a business than in its tangible assets.

Nonetheless, commercial lending practices still favor businesses rich in tangible assets (such as machinery, raw materials, land, and buildings) to use as security. This is gradually changing. Increasingly, alternative lenders are willing to use IP assets as collateral for loans. The collateralization of IP often also helps increase the amount of credit available.

One Reason Many Smaller Businesses Remain “Underbanked”

Many smaller entrepreneurial companies struggle to secure the financing they need to grow. According to the 2017 Pepperdine Private Capital Markets Report, nearly 88% of privately owned businesses report having the enthusiasm to execute growth strategies; yet just 51% report having the necessary financial resources to successfully execute growth strategies.

One reason for this shortfall in financing has been ongoing regulatory pressures on banks. Another reason that is often overlooked is that our economy has been gradually shifting to one in which intangible assets represent a greater share of the overall value of job-creating companies. Many lenders are still catching up to this reality.

How US Capital Partners Can Help

US Capital Partners provides IP-backed growth-capital term loans of $5 million upwards to pre-revenue companies and enterprises with negative cash flow, if their IP collateral is sufficient and their projected cash flow can meet debt service in a 12–18 month period.

Valuing IP assets can be a complex, uncertain, and time-consuming task. US Capital Partners is also able to offer insurance on IP defensibility, thereby effectively underwriting the IP valuation. As a result, if patents are held to be invalid or fail to reach a minimum valuation on a sale, the insurer will pay out on a proportion of the valuation. This helps “de-risk” IP assets as collateral.

Unlike many traditional lenders, US Capital Partners recognizes the value of IP assets and will assist IP-rich businesses overcome barriers at all stages of financing, by helping them leverage their IP assets.

Friday
Apr142017

“Housing IS the Business Cycle”

The above is a quote from UCLA economist Ed Leamer.  He wrote a paper in 2007 claiming “residential investment offers by far the best early warning sign of an oncoming recession.”  Shown below is a chart of the cumulative abnormal contribution to GDP growth by residential investment and recessions.
 
When the blue line is moving down, the contributions are less than normal and the economy is headed for a recession (red bar in the graph above).  When the blue line is rising, residential investment is strong and recession risk is remote.
 
Leamer further decomposes the above graph into residential investment the year leading up to a recession and the two year period following the start of recession.  The years shown on the graph below are the year the recession began.
 
 
The graph shows, with few exceptions, that residential investment declines in the year leading up to a recession (top image) and has a “V” shaped recovery sometime during the two years following the start of a recession (bottom image).
 
Leamer’s work only goes through the first quarter of 2007.  We update his analysis with the chart below showing the residential investment picture from 2007 through October, 2016 (most current data available).  If Leamer is right that “housing is the business cycle,” the chart below gives us some confidence the business cycle has a positive trajectory today.
 
 
Residential investment confirms the no-recession outlook we see in the LEI and Yield Curve indicators (shown at the end of this newsletter).  While there appears to be no looming recession, the stock market has lost upward momentum in the past several weeks as tax season and the corporate quiet period (pause in corporate stock buyback programs) is upon us.  Both of these seasonal issues pass next week and our indicators show the long-term bull trend continues.
 
At US Capital Wealth Management, we are seeking to do better than the market.  Our philosophy honed over decades of experience is to avoid major down markets first and then participate in up markets to achieve superior investment returns. We work with clients in navigating the complexities of investing.

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



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

4/13/2017: "Housing IS the Business Cycle"
4/7/2017: Bond Risk Rising with Rates
3/31/2017:
 
Exclusive Stock Market, Higher Stock Price
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
Apr112017

Financing Expanding Businesses in the Technology Industry

US Capital Partners has provided or advised on over $250 million in flexible and scalable financing for technology companies across the United States in the last 24 months.

More than anything, technology companies are associated with innovation and invention. Technology is an industry that generally comes with higher R&D overheads and that can require significant levels of capital expenditure. Structuring and securing the right business financing is therefore essential.

Providing Custom Financing for Technology Companies

US Capital Partners’ technology finance team understands the changing technology marketplace and the challenges owners and CFOs of technology companies face. The firm has deep experience in financing businesses across a wide range of technology sectors, including enterprise and application software, internet content and services, networking and communications technology, electronics manufacturing and distribution, and consumer and industrial electronics.

“US Capital Partners has a reputation for being an innovator in the technology financing space,” said Jeffrey Sweeney, Chairman and CEO at US Capital Partners. “In the last 24 months, the firm has already provided or advised on over $250 million in financing for small and medium-sized businesses serving the US technology industry. Our finance professionals understand the challenges and opportunities in the industry, and can design flexible solutions that fit the specific needs of your business.”

Example Transactions

Click on the tombstones below for further details about these selected transactions.



To learn more about how your business can secure the funding it needs, email Jeffrey Sweeney, Chairman and CEO, at jsweeney@uscapitalpartners.net or call (415) 889-1010.