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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
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.

Tuesday
May022017

Jeffrey Sweeney Chairs Landmark Conference on the Future of MedTech

Chairman and CEO of US Capital Partners Inc. hosts and presides as panel chair at innovative digital health conference in San Francisco’s Financial District.

SAN FRANCISCO, May 2017 – US Capital Partners Inc. hosted a thought-provoking conference in San Francisco on Tuesday, April 25th on leading MedTech trends in 2017. Held at WeWork’s Embarcadero Center in San Francisco, the event focused on trending topics in MedTech, including the drive toward precision medicine and the shift to sophisticated data management platforms.

Provia Labs Conference

US Capital Partners Inc. is a full-service private investment bank headquartered in San Francisco. Through its affiliate broker dealer, US Capital Global Securities, LLC, the firm provides private placement services and has wide distribution for debt and equity private placements. The firm has a successful history of backing highly promising MedTech companies.

Presenters at the San Francisco event included Howard Greenman, CEO and Co-Founder of Provia Labs; Karleen Seybold, CEO and Co-Founder of DermSpectra; and Aron Rachamim, CEO and Founder of Orphidia.com.

The event showcased Provia Labs, an innovative stem cell processing, manufacturing, and bio-storage company with a leading position in dental stem cell storage and related services. Jeffrey Sweeney, Chairman and CEO at US Capital Partners, presided as panel chair and adopted a “Shark-Tank” style to investigating the business founders’ stories and their enterprises.

“We are hugely looking forward to growing these events across the US and beyond, through only topical, impact-focused companies, panels, and showcase events,” said Zee West, Events Coordinator at US Capital Partners. “We will be inviting selected crowds to attend, so please let us know if you want to hear more about this year’s upcoming highlights.”

About US Capital Partners Inc.

Since 1998, US Capital Partners 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.

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

Tuesday
May022017

And the Survey Says...

Every week for the past thirty years, the American Association of Independent Investors (AAII) surveys its membership to measure if investors believe the stock market will be higher (Bullish), the same (Neutral) or lower (Bearish) over the next six months.  With the exception of the two and half weeks following the presidential election, investors have felt below-average bullishness for the past two years. 

In last week's AAII sentiment survey, bullishness measured at 25.7% fell outside of one standard deviation below the long-term average bullish sentiment of 38.35%.  Over the full 30-year survey period (1,552 weeks), the reading fell below one standard deviation (25.7%) 162 times.  87% of the time when the reading was below this level, the S&P 500 had an average positive return over the next twelve months of 13%.
 
The investment case becomes even more compelling when the AAII bullish reading drops below 20% (the three most recent cases marked with red circles on the chart above).  This has happened in only 29 weeks out of 1,552 measured with the subsequent twelve month return in the S&P 500 being positive 93% of the time.  The average advance was roughly 23%.  The survey and subsequent positive stock market results support a contrarian investing strategy based on the notion that widespread pessimism offers a buying opportunity.
 
Surveys can be an important source of information for investors.  This newsletter reaches thousands of active subscribers. This week, we ask two questions about the U.S. stock market.  The more respondents, the more interesting and potentially accurate our survey results will be.  Next week, we will publish the results and let you know what we conclude. 
Will the stock market have a -30% or greater bear market in the next FIVE years
YES         NO
We look forward to sharing the results with you next week.  Please take the time to indicate your answers to the questions above so our survey results are broadly representative of a significant number of investors.

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:

4/28/2017: 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 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

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

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