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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
Mar062017

Velocity Pivot Good for Stocks

During the greatest bull market in history from 1987- 2000 when the S&P 500 gained 582%, the velocity of money increased steadily (arrow 1 below).  Increasing velocity has coincided with most expansionary periods. Not the case in this bull market.  Since 2010, the velocity of money has fallen unceasingly (arrow 2 below) and is resting at the lowest level since 1959.  From the third quarter of 1997, the velocity of money is down 35%.

What is the Velocity of Money?
 
The U.S. Treasury infuses dollars into the economy.  A new dollar spent on a good or service is often reused to buy another good or service.  The same dollar keeps buying goods and services until either it wears out or is held in savings.  Measured over a period of time, the number of times a dollar changes hands is defined as the velocity of money. It is a gauge of the economy’s strength.

 
During recessions (shown by gray bars), the velocity of money tends to decrease (the exception being 1974), since the amount of transactions in an economy decreases. Consumers tend to save more and firms tend to invest less—that is, they hoard cash. In general, the velocity of money starts to increase after a recession, when confidence is restored.  

 
Why is velocity falling while the economy is expanding?
 
Economic relationships are complex and there is no single, simple answer. One reason the velocity of money is so low currently is because many dollars are never making it into the hands of consumers.  Banks have tightened lending standards and are stockpiling dollars at the Federal Reserve. We wrote about this in last week’s newsletter, How Safe Are the Banks? As a follow-up and in response to several comments, we will use the same chart again to drive home the point.  The chart below shows the currency in circulation (orange line) has been steadily rising since 2007 but bank deposits at the Federal Reserve have jumped from $20 billion to roughly $2.3 trillion.  

 

The dramatic decrease in interest rates is another reason.  Short term rates have been at or near zero for a large part of the past eight years. Extreme low rates caused investors to hoard cash instead of spend it – an unintended consequence.  Below is a chart of historical treasury rates for short term (1-month) bonds.

 

Banks will migrate from survival mode the further we move away from the financial crisis to a growth mode whereby they will increasingly make loans to drive profits.  Individuals will put money to work as interest rates rise. The huge reservoir of capital available to enter the economy and a velocity pivot have the capacity to extend the growth cycle for years.  From such a low velocity level, there is plenty of room to run. We end this week with a continuation of our bullish view on equities.
 
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 previous editions are available as PDFs:

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
1/13/2017: I Gotta Feeling
1/6/2017: Finally, A Case for International in Your Portfolio
12/30/2016: Predicting the Future -2017
12/23/2016: Bullish New Year
12/16/2016: All I Want For Christmas is Financial Independence
12/9/2016: Debt Trap
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.

Wednesday
Mar012017

US Capital Advises on Multi-Million Dollar Equity Transaction for AgPro Exchange, LLC

AgPro

Private investment bank supports expanding big data company serving the agriculture industry.

SAN FRANCISCO, FEBRUARY 2017 – US Capital Partners Inc. has advised on a multi-million dollar equity transaction for AgPro Exchange, LLC (“AgPro”), an expanding big data and analytics company serving the agriculture sector. Based in Lubbock, Texas, AgPro has developed a data platform for growers that offers storage, secure access, and analytics.

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.

David Lundgren, CEO at AgPro, said: “US Capital’s advisory services were integral in helping AgPro secure investment. USCP’s approach in structuring the offering was crucial to AgPro’s successful capital infusion and has put us in a great position to increase our capabilities and broaden our reach.”

“We are extremely pleased to have advised on this transaction for AgPro,” said Jeffrey Sweeney, Chairman and CEO at US Capital Partners. “It was a pleasure to work with an innovative company such as AgPro, and to advise them on their capital needs in order to optimize their growth strategy. US Capital performed market analysis, provided strategic advisory, and structured AgPro’s equity transaction, which resulted in the company being able continue its product development and expand in the US market.”

About US Capital Partners, Inc.

Since 1998, US Capital Partners (www.uscapitalpartners.net) has provided structured, custom financing solutions to private and public companies in the United States and abroad. Headquartered in San Francisco, US Capital Partners, operating with its subsidiary 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 of equity and debt.

Sunday
Feb262017

How Safe Are The Banks?

A stable banking sector willing to lend is critical to the growth of the U.S. economy.  The near failure of many of the largest banks in the U.S. in 2008 brought the economy to the brink of depression.  Since the presidential election last November, the S&P 500 financial sector ETF (XLF) is +24% and the SPDR KBW bank ETF (KBE) is +30%.  The continued growth of the economy and stock market is contingent on a healthy banking sector.

In 2016, five FDIC insured banks failed.  This was the lowest level since 2007.  Shown below is a chart of bank failures by year since the founding of the FDIC in 1933.

  

For historical perspective, in the years before the FDIC became operational, it was common for more than 500 banks to fail every year.  From 1930 through 1933, over 1,000 banks failed per year with 4,000 banks failing in 1933 alone.  The creation of the FDIC radically reduced the incidence of failed banks (the chart above begins in 1934).
 
Although the total number of banks/thrifts to fail in the 1980s and 1990s (dubbed the S&L Crisis) was greater than the Financial Crisis fallout (2007- 2014), the most recent crisis in the financial industry was far worse.   Some of the largest banks failed and were bailed out/acquired versus mostly small banks in the ‘80s and ‘90s and the Federal Government had to pump trillions of dollars into the economy. 
 
From a bank safety standpoint, the two major changes since 2008 have been 1) an enormous stockpiling of cash reserves by banks and 2) a significant tightening of lending standards.
 
Depository institutions (banks) hold capital at the Federal Reserve.  Before the Financial Crisis of 2007-2009, banks held about $20 billion in reserve capital with the Fed.  Lately, banks have held about $2.3 trillion at the Fed.  This is an increase in capital reserves in the banking system of about 115x.

  

While banks have amassed huge cash reserves, they have simultaneously tightened their lending standards.  The average FICO credit score to obtain a mortgage loan is now roughly 750, up from an average of about 680 during the housing boom years from 1996 through 2006.

  

On the commercial side, banks have migrated to larger/higher credit quality borrowers. Rating agencies S&P and Moody’s lowered their default rate estimates for high-yield corporate borrowers from 5.1% and 4.5%, respectively, to 3.9% and 3% for 2017.
 
Measured by capital reserves and tight lending standards, it appears there is a tremendous stockpile of liquidity available to fuel continued economic growth.  Growth over time drives profits.  Profits drive stock values.  We end this week with a continuation of our bullish outlook for stocks.

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.
.


UPCOMING SPEAKING ENGAGEMENTS AT AAII CHAPTERS
New York City: March 1st




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 previous editions are available as PDFs:

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
1/13/2017: I Gotta Feeling
1/6/2017: Finally, A Case for International in Your Portfolio
12/30/2016: Predicting the Future -2017
12/23/2016: Bullish New Year
12/16/2016: All I Want For Christmas is Financial Independence
12/9/2016: Debt Trap
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.

Wednesday
Feb222017

US Capital Launches $250M Texas-Focused Real Estate Fund in Partnership with Noble Capital Group

Click Tombstone Below for Offering Details

Noble Capital

Newly launched private investment fund aims to offer accredited investors consistent returns through senior secured, first-lien mortgages on residential real estate in Texas.

SAN FRANCISCO, FEBRUARY 2017 – US Capital Partners Inc. is pleased to announce the launch of the US Capital / Noble Capital Texas Real Estate Income Fund, LP (the “Fund”), in partnership with Noble Capital Group (“Noble Capital”). US Capital Investment Management, LLC will serve as the General Partner of the Fund, and will leverage Noble Capital’s extensive experience and track record in the Texas market to originate and service investment opportunities.

For over 10 years, Noble Capital has successfully operated a number of real estate and real estate service companies in Texas. In this partnership, Noble Capital will be responsible for all aspects of the small balance real estate lending business, including originations, structuring, servicing, disposition, and work-out. Founded in 2002 and based in Austin, Noble Capital has grown to become a leading private moneylender in the Texas single-family real estate market.

“We have been developing our lending platform in the Texas market for years, and we are excited to be working with such an experienced firm like US Capital Partners in order to expand our lending capabilities within the State,” said Chris Ragland, Chief Operating Officer at Noble Capital. “The Fund will allow our sales team to close loans expeditiously, and our construction control and quality monitoring teams to provide draws to our clients in a timely manner, a critical requirement in our marketplace.”

“We are delighted to be adding this important income-generating real estate fund to our expanding family of private investment funds and vehicles,” said Jeffrey Sweeney, Founder and Managing Partner of US Capital Investment Management, LLC and Chairman and CEO of US Capital Partners Inc. “The opportunity to participate in the US Capital / Noble Capital Texas Real Estate Income Fund is now open to eligible investors through our digital investment platform, available at www.uscgs.com, as well as TD Ameritrade, E*TRADE, and State Street trading platforms shortly.

About the Fund

The investment objective of US Capital / Noble Capital Texas Real Estate Income Fund, LP is to preserve principal, provide current income with an 8.25% hurdle rate, and achieve consistent returns primarily through senior secured first-lien mortgages, to small business residential real estate developers to acquire, renovate, or construct single-family residential homes. The Fund will invest primarily in the Texas market, focusing on core markets such as Austin, Houston, San Antonio, and Dallas/Fort Worth. US Capital Investment Management, LLC, the General Partner of the Fund, will leverage Noble Capital’s existing platform of integrated real estate companies to originate, structure and service the investments.

About the General Partner

US Capital Investment Management, LLC was founded by Jeffrey Sweeney as an alternative asset manager that leverages a significant track-record of successful fund management and of debt and equity investments in small and medium-sized businesses. The firm offers both independent investors and institutional investors an opportunity to invest in a variety of carefully managed funds designed to be appropriate for the different risk tolerances and investment objectives of accredited investors.

Friday
Feb172017

Climbing A Wall of Worry

Market Insights
February 17, 2017

One of the great adages of the investment business is that bull markets climb a wall of worry. "How can the stock market be hitting new highs when so much is wrong in the world?" “Isn’t the market riskier now after a nearly 8-year bull run?” “Aren’t we in the 8th or 9th inning of this bull market?” “Aren’t stock valuations rich?” These are all good questions. The truth is we would be more worried if we were not fielding these questions.
 
This bull market is the second longest in history at 2,902 days or roughly 95 months. Certainly, relative to the average bull market of 54 months, the current advance is old, but don’t call it over yet as it still may eclipse the longest bull market (3,452 days) - only another 18 months away. 
 
Corporate Tax Reform

Investors are looking at the new administration and the new Congress for potential tax reform, fiscal expansion and deregulation. Below is a look at how the United States stacks up on corporate income tax rates with other nations.  It would appear the U.S. needs to level the playing field.

Over the past 10 years, Germany, Japan, Canada, Korea and the UK have all cut tax their corporate tax rates – the UK by 33%!  All countries are lower and the UK’s corporate tax rate is essentially half! Lower corporate income taxes in the U.S. would translate into higher corporate earnings (and make valuations less rich).
 
Low Volatility Market
 
On November 9, the morning after the US election, the US stock market was set to open down 2% - well off the -6% lows in overnight trading, but still down. The Japan Nikkei was trading -5.4%. The VIX (a measure of market volatility) was elevated at 21 – it would deflate by a third to 14 by the end of the trading day and the S&P 500 closed +1%. 

Since November 9, the S&P 500 has climbed 10.3% and the VIX has been range-bound at a low level. Although 40% of the days have been negative over the past 67 trading days, not once has the index closed down more than 1% (-0.83% the worst daily performance on Dec 14 and Dec 28). The intra-day change (high-low) has only been greater than 1% three times since November 10. 

Financial Health Check-Up

Households and corporations are looking solid.  The household debt service ratio at 10% is near the lowest level over the past 37 years and household net worth is at an all-time.   

Corporate bond issuance had a record year in 2016 and has started 2017 with the strongest start, ever.   What does that mean for stocks and equity investors? More stock buybacks! More M&A! And more dividends!
 
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.
.


UPCOMING SPEAKING ENGAGEMENTS AT AAII CHAPTERS
New York City: March 1st




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 previous editions are available as PDFs:

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
1/13/2017: I Gotta Feeling
1/6/2017: Finally, A Case for International in Your Portfolio
12/30/2016: Predicting the Future -2017
12/23/2016: Bullish New Year
12/16/2016: All I Want For Christmas is Financial Independence
12/9/2016: Debt Trap
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.

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