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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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Monday
May222017

Time to Invest!

This week, investors began to be concerned that President Trump’s pro-growth agenda might become derailed by controversy surrounding possible Russia connections and the firing of the FBI director.  On Wednesday, the stock market depreciated by roughly 2% and the VIX climbed from about 10 to 15.
President Trump has been surrounded by controversies since he began his presidential campaign and took office.  If you are spending your time worrying about Trump, you may be short-changing yourself as an investor.  An investor is a person who buys and owns an appreciating asset over time.  There is no asterisk next to this time because of Trump.  Time is time and is an absolute.
Time for an investor is a doubled edged sword.  Over time, the value of cash is diminished by inflation.  For example, if you have $100,000 in cash today, at a 2.5% inflation rate, you will suffer a -22% loss of buying power over the next ten years.  If inflation were to rise to 4% (expected by many bond experts), a cash portfolio loses approximately -44% of its buying power over ten years.  Cash may be king during certain times, but cash is not riskless.
On the positive side, time allows for compounding of returns.  For example, an investment of $100,000 at a 7% average annual return grows to nearly $200,000 in ten years.  In twenty years, the portfolio grows to $387,000.  Allegedly, Albert Einstein said “the most powerful force in the universe is compound interest.”
You cannot recover lost time.  You can prevent more time from passing without having your money working for you.  Be an investor, now.
Staying focused on your portfolio and on what you can control as an investor is not easy at times.  Trump has been a master of creating headlines that stir emotions.  Effective, long-term investing is based on taking emotions out of the process.  It is the disciplined process of buying attractive assets at attractive prices in a balance that optimizes the risk/reward ratio you are seeking.
Shown below is a chart of returns for the average investor.  It is clear from the results, investing is not easy.
We believe being an excellent, fully informed investor is a full-time job.  It requires having an open mind, experience and access to great investment opportunities.  We regularly perform rigorous reviews of a wide array of investment opportunities.  Recently, we purchased convertible bonds, long-short equity funds, and international equity funds for our clients which we believe will enhance return and add to downside protection.
For accredited fixed income investors, we have been reviewing excellent alternative investments in senior secured lending funds for businesses and real-estate which have a stable net asset value and steady monthly or quarterly income.  Several of these investment opportunities have passed our review process and we are now actively investing in these funds.
Time is a key ingredient to investing which allows for compounding growth.  Time lost is an erosion of value.  Trump or no Trump, it is time to invest.

In this newsletter, we strive to deliver a simple message to help you understand the financial markets and your investments.  We are humble enough to know that the financial markets and investing are extremely complex and prey on emotions. 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 this bull market extends and stock valuations rise, the importance of being prepared and adaptive to negative trends also rises. 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 to learn more.info@uscapitalwm.com.


Summer Reading Suggestions and Gift Ideas for Dads and Grads

Black Flags: The Rise of Isis by Joby Warrick (2015)

Thrilling dramatic narrative of the roots of the Islamic State (ISIS). You fill it hard to put down.  Winner of the Pulitzer Prize.

Season of the Witch: Enchantment, Terror, and Deliverance in the City of Love by David Talbot (2012)

Perfect read as we celebrate the 50th anniversary of the Summer of Love. Talbot recants some defining stories (the good, the bad and the tragic) of San Francisco from the 1960s to the 1980s. 


 

Barbarian Days: A Surfing Life by William Finnegan  (2015)

A great book to read any time of year, but only better in the summer dreaming of being out in the surf. Finnegan's descriptive narrative is breathtaking and his life-long passion takes you around the world to places only a surfboard can go.  Pulitzer Prize winner.

BLUEDRAKE 
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A perfect gift for Dads and Grads.

Andrew's review: The best bathing suit I have ever owned - perfect to wear when surfing or reading a book.. 

Use "USCWM" code and get $25 off and free shipping if you order before Father's Day.

Visit: www.bluedrake.com

Follow BLUEDRAKE on Instagram your Instagram account will automatically be included in BLUEDRAKE's Instagram drawing June 1st. The winner will receive a free BLUEDRAKE swim suit.


Stock Market Dashboard





Tuesday
May162017

Slow Growth in the Age of Acceleration

Market Insights
May 12, 2017

Slow Growth in the Age of Acceleration

The strength of economic expansions has been slowing the past 70 years.  The glory days of 5%-plus growth in the 1950’s and 1960’s are a distant memory. The flattening of the world (read more global competition), slowing productivity growth, and crowding out by the growing share of social benefits and entitlements are just a few of the reasons weighing on the growth rate.   The chart below depicts the volatility of quarterly measurements of Real GDP Growth since 1947 and a downward sloping trend line (orange dotted line): 
The growth rate of real gross domestic product (GDP) measured by the U.S. Bureau of Economic Analysis (BEA) is a key metric of the pace of economic activity. The advance estimate for the annualized growth of Gross Domestic Product (GDP) for 1st Quarter 2017 came in at 0.7%. The growth rate of Real GDP over the past 10 years is 1.3% and off the bottom in the 2nd quarter in 2009, the annualized growth rate is 2% - the slowest rate during expansionary periods (see table below): 
 
Slow growth in the age of acceleration sounds oxymoronic – more incongruous than “airplane food” and “almost pregnant.” Apparently, moving forward at an accelerating rate does not translate into better GDP growth.  Just as we learned early in life from Aesop's Fables not to count out the tortoise, we should give this slow growth "tortoise" economy more credit.  Slow but steady can win the race.
 
Low VIX in a Volatile World 
 
Another seemingly contradiction is the current low VIX in a more volatile world.  As a reminder, the VIX measures implied volatility on S&P 500 options.  Market volatility is greatest in bear markets. Historically, the VIX has had a strong negative correlation to market health. Thus, the VIX is often referred to as the “fear index.” 
 
How low is the VIX? Since 1990 (through May 11, 2017), there have been only 24 days (out of 6,895) when the VIX has traded intra-day below 10 and only 12 days when it has closed below 10.  The average is 19.6. This year, the VIX has traded below 10 on six occasions (Feb.1, May 1, May 5-10) and closed below 10 twice (May 8th and May 9th).  
 
Instead of looking at the glass half empty and thinking of the VIX as a fear indicator, we should be looking at a low VIX as sign of business strength, improving consumer confidence and good liquidity. A low VIX has accompanied bullish markets in the 1990s and mid-2000s.
 
Parting Shot
 
In this newsletter, we strive to deliver a simple message to help you understand the financial markets and your investments.  We are humble enough to know that the financial markets and investing are extremely complex and prey on emotions. 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 this bull market extends and stock valuations rise, the importance of being prepared and adaptive to negative trends also rises. 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.
 
Happy Mother’s Day!
 


Stock Market Dashboard
 





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

5/12/2017: Slow Growth in the Age of Acceleration
5/5/2017: 
Living Well in Retirement – Make Good Decisions Now
4/28/2017: And the Survey Says...
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 
3/3/2017: Velocity Pivot Good for Stocks
2/17/2017: Climbing A Wall of Worry
2/10/2017: Value Shopper - Europe on Sale
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
May162017

US Capital Provides Multi-Million Dollar Financing for Focus360, LLC

Private investment bank structures and provides financing for leading media and radio advertising company.

Focus360


SAN FRANCISCO, May 2017 – US Capital Partners Inc. has provided financing for Focus360, LLC (“Focus360”). Headquartered in New York, NY, Focus360 is a leading media and radio advertising company.

Headquartered in San Francisco, US Capital Partners is a full-service private investment bank that makes direct debt investments, participates in debt facilities, and has wide distribution of debt and equity private placements.

“We approached US Capital Partners to obtain working capital which would allow us to better manage our resources and leverage our accounts receivables. Due to the complex nature of receivables in the media industry, we sought US Capital Partners’ experience and assistance to structure a flexible and scalable facility that would fit our business model,” said Phil Brown, CEO of Focus360.

“We are very pleased to have closed this financing for Focus360”, said Jeffrey Sweeney, Chairman and CEO of US Capital Partners. “We appreciated working with Phil Brown and his team at Focus360 in structuring and closing this credit facility.”

About Focus360, LLC

Based in New York City, Focus360 is a multi-platform solution business in the media industry. The company is a reseller of media for specific network radio programming and producers. Focus360 develops and executes targeted advertising campaigns for national advertisers, serving Fortune 500 clients.

About US Capital Partners Inc.

Since 1998, US Capital Partners has been providing well-structured, custom finance solutions to private and public companies with up to $250 million in top-line sales revenue or project size. Headquartered in San Francisco, US Capital Partners is a private investment bank that makes direct debt and equity investments between $500,000 and $100 million, participates in debt facilities, and has very wide distribution for debt and equity private placements. The firm also offers financial advisory services for buy-side and sell-side engagements and for capital formation, including early-stage financings requiring equity or debt. For more information, visit www.uscapitalpartners.net.

Tuesday
May092017

Five Reasons to Refinance Your Business

What drives small and medium-sized businesses to seek refinancing, and why US Capital Partners is able to provide optimal refinancing for your company quickly and efficiently.

Refinancing existing loans or equity is one of the main reasons businesses seek funding. According to a recent survey by Pepperdine University, refinancing was the number one reason among smaller businesses indicating high or extremely high expected demand for new external financing in the coming six months.

Provia Labs Conference
Please click to enlarge

Five Reasons for Refinancing

What prompts small or medium-sized businesses (SMBs) to refinance existing loans? Here are a few common reasons:

  1. The bank decides unilaterally to call in a business loan early or reduce availability, even if the business is doing quite well. This may be part of an effort by the bank to shrink its commercial loan portfolio, often as a result of increased regulations in bank lending.

  2. The bank’s terms simply become less favorable for a business (about 11% of small businesses reported this last year).

  3. A company’s existing loan structure prevents the enterprise from being able to secure additional financing to fund growth or pay its rising bills (see example).

  4. A company undergoes some temporary difficulty and inadvertently breaches a loan covenant, prompting the bank to put the company into workout (see case study).

  5. Following several years of sustained growth, a company may be in a position to transition back from an alternative lender to commercial bank financing, with the aim of lowering interests costs and increasing availability (see case study).

Getting the Best Possible Refinancing

When it’s time for SMBs to refinance their loans, they may not always know where to turn to get the most suitable financing. In many cases such businesses fall outside the criteria for traditional bank lending. They may not always understand how they can leverage their tangible and intangible business assets to secure financing, or how to structure their financing in an optimal, cost-effective way.

As a direct lender, arranger, and co-lender, US Capital Partners is able to provide affordable refinancing for your business across multiple asset classes quickly and efficiently. Often, US Capital Partners is able to increase availability through the discovery of credit enhancers and ways to mitigate credit risks. As your smaller business grows, US Capital Partners can transition your company back to commercial bank financing, if this is appropriate.

To learn more about US Capital Partners, email Jeffrey Sweeney, Chairman and CEO, at jsweeney@uscapitalpartners.net or call +1 (415) 889-1010.

Monday
May082017

Living Well in Retirement – Make Good Decisions Now

Let’s assume you have to pick one of the options below:
  1. 100% likelihood of running out of money ten years into retirement, or
  2. 70% chance of losing 30% of your money in the next five years but a good chance of not running out of money in retirement for at least twenty plus years.
If your answer to the question above was option B, you may be unusual.
 
We spoke with one of the largest mutual fund companies this week.  They report 75% of their fund flows are going into their short duration income fund -- a “cash” type holding. 
 
Last week, we conducted a survey of our readership to determine the probability of a major bear market (greater than 30% market decline) occurring in the next five years and how investors are preparing to handle this potential challenge.
 
Roughly 70% of the respondents indicated the chances of a major market decline in the next five years is 70% or greater.  The most popular choice for how to prepare for the next bear market was to hold cash which received 40% of the vote.
 
To relate holding cash to the options A and B above, assume an investor has a $500,000 portfolio.  The investor is able to invest for eight years before withdrawing money for retirement.  The withdrawal rate starts at $50,000.  The withdrawal rate is increased by 2% annually to keep pace with inflation.
 
 
The near zero return on cash can be earned with a high degree of certainty.  Because the investment return is nearly certain, one may forecast with confidence that our example investor will run out of funds ten years into retirement.
 
What if the example portfolio was invested with a 5% and 7% average annual return?  In the case of this example, the 5% return provides 20 years of fully funded retirement.
  
At a 7% return, the example investor now enjoys 40 years of fully funded retirement.
 
Is a 7% return from investing in equities a realistic assumption?  Imagine that it is 2007 and you decide to put all of your money into the S&P 500 and reinvest dividends.  In 2008, the market lost -37% of its value.  What was your average annual return over the next ten years?
 
Even if you had invested your portfolio at almost exactly the wrong time (a year before the Great Recession) you still would have made a 7% average annual return.  Since 1928 when the S&P 500 index began, the average annual return is approximately 9.5%.
 
We don’t know anyone who wants to run out of money during retirement.  We also do not know anyone who wants to potentially lose -30% of their life savings sometime during the next five years.
 
Holding cash is not the answer.  Having equity exposure has been a successful approach much of the time historically; but not always.  Our advice is to:
 
  1. Invest in equities and have a plan for avoiding major bear markets.  If you establish clear-cut rules about what conditions will make you sell, it is emotionally much easier to invest today. This newsletter and its Market Dashboard (below) may play a role in your rules-based, non-emotional sell threshold.  You may want to consider working with an advisor experienced in avoiding major bearish markets and participating in bullish markets.
  2. Invest in assets that are not directly tied to the stock market and have an attractive balance of return versus risk.  Many of these assets may be offered as “alternative” investments in real-estate or commercial lending.
 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:

5/5/2017: Living Well in Retirement – Make Good Decisions Now
4/28/2017: And the Survey Says...
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 
3/3/2017: Velocity Pivot Good for Stocks
2/17/2017: Climbing A Wall of Worry
2/10/2017: Value Shopper - Europe on Sale
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.