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Wile E. Coyote, the Road Runner, and the Cliff

Why the Feeling of Flying High Will Not Ultimately Overcome the Consequences of Gravity

General Motors emerged from bankruptcy with one of the largest initial public offerings of all time, this November. This impressive show of investor optimism was heralded as just another indication that the economy turned around and that the U.S. is free and clear from recession. On the other hand, only weeks prior to the GM IPO, the Fed announced a second round of massive credit expansion (Quantitative Easing 2, or "QE2"), expressing the central bank's increasing concern over the economy's health and potential for falling back into a recession. Nevertheless, market pundits believe that QE2 will serve to only strengthen the markets and that we are off to the races again in another long-term bull market. To add fuel to the fire, it looks as if there is already talk of the potential of expanding the Fed's quantitative easing ("QE3") to help reverse recent increases in unemployment. The Bush Tax Cuts are anticipated to be extended to some degree before the end of the year.This extension is widely regarded as the only way to avoid a double-dip recession for next year, and the likelihood of passing this extension seems to be sending stocks much higher.

 

From a technical standpoint, I watched the market make three clear attempts to close beneath 11,000 (for the Dow) in the latter half of November, but on each and every occasion, the market rallied and had legs to carry it back above the important technical level before the close. There is no denying that this is a very strong short-term indicator of further market strength to come. Perhaps the fact that we are at extremes of investor optimism will not indicate an important top in the next few months? Perhaps the market will just ignore the major risks facing the U.S. and global economy? Perhaps the fact that the markets are showing clear signs of overvaluation across multiple long-term indicators does not matter, this time around? Is it time to ignore common sense and value investing to chase this market rally?

Bottom line: No! While I actually do expect a strong potential for a market rally that carries into the first quarter of next year, I believe that any rally will still be short lived, that the upside is relatively limited, and that we have not solved any of the fundamental issues of overvaluation that will eventually reconcile prices much lower to reflect true value. Chasing the last few percentage points of gains in a grossly overvalued market is a dangerous gamble. (And it is just that, a gamble--not an investment!) Risk remains extremely high for most markets. This is not an economy that will reward the "blind luck" approach made possible from 2001 through 2007. We see only a select few investments that make sense right now from a value investing perspective. More importantly, we see a whole lot of investments that make no sense whatsoever.

In this market, the bad investments you avoid are far more important than the good ones you make. With only a few investment exceptions,cash is king and should dominate one's overall liquid investment portfolio right now. The point is to remain patient, protected, and largely liquid so that you can take advantage of better valuations that will be revealed in this tumultuous economy down the road. If you insist on being exposed to certain markets, such as the stock market or bond markets, please at least maintain stops or, better yet, trailing stops  beneath current prices. Trailing stops will allow you to capture some of the potential upside, should the markets continue to forge ahead temporarily, while still protecting your profits and downside. Whatever mechanism is used, please do not be exposed to this market without the protection of stops!

For those of you who would like the specific timing and targets I have for the markets, as well as the economic updates behind the"bottom line," the rest of this newsletter is for your reading pleasure. The body of this letter will cover the goals and direction of this newsletter, the"Wile E. Coyote" effect, the stock market rally potential over the next 3-4 months, a resumption of the larger stock market decline soon thereafter, the "why"behind the potential decline, unintended consequences of quantitative easing, a potential path for the markets, and other economic signposts to help you navigate these difficult markets. Grab some fruitcake and enjoy.

A note on this newsletter and where it is headed

The goals of this economic newsletter are threefold: 1) I want to protect investors from the negative macroeconomic trends that could severely impact their wealth. 2) I want to help position investors to build wealth by taking advantage of the opportunities born from the negative macroeconomic trends as well as those that rise up from emerging positive economic trends. 3)I want to provide a valuable and interesting educational resource that equips clients to understand the reasoning behind our market views and helps them develop their own informed positions independent of our own (though not necessarily opposed to our own) in order for the first two goals to be achieved.

I believe that all three goals are reached in the context of broad investor dialogue and the potentially friction-filled discussion and research of differing perspectives. Though I am strongly biased towards my own opinions, it is important to note that I, too, am a fellow investor who will benefit from the input of the collective group of investors. I intend to build platforms that will encourage this dialogue and the dissemination of the research I am so fortunate to deliver for a living.

With regard to that research, I spend, on average, over $1,000 per month and approximately 3 hours per day reading through the incredible volume of some of the best economic and financial information currently available. I regularly follow over 20 different economists and economic research companies. Believe it or not, I actually find this fascinating and fun! To put it another way, I am a financial analysis, due diligence, and economic nerd of the worst degree.

The benefit to our clients is that all of this information is filtered and digested on a regular basis and helps me form very strong convictions about the general direction of the markets that I cannot help but publish. I believe that I would go crazy if I did not have an outlet such as this letter, our conference calls, and daily client one-on-one meetings to synthesize the conclusions that eventually rise to the surface from all of these regular inputs of economic research. The result is that our clients are accessing synthesized conclusions and data from some of the greatest economic minds and research companies out there that we follow and source on a regular basis.

Finally, one of the most essential goals of this newsletter is to provide a consistent drumbeat of common sense and value investing principles to combat the siren call of human nature and the extremes of fear and greed as they are expressed in the financial markets, social mood, and the media. No amount of expertise or research will replace common sense, though the power of mass human emotion may often tempt us to believe otherwise. The housing crash was a fundamental common sense problem--not some kind of mysterious turn in "the markets." You simply cannot lend people money to buy something they cannot afford without repercussions. You might be able to delay the repercussions or pass them to someone else, but eventually, that fundamental lapse in common sense will blow up in someone's face--or, in the case of the housing crisis, everyone's face.There may be periods when we are early or when we look too cautious while everyone else seems to be enjoying themselves, but in the end, we will protect ourselves from the devastating, wealth-destroying consequences of abandoning common sense and the principles of value investing. If this newsletter succeeds in only protecting investors from getting caught in the irrational swings of human nature, we will all be extremely successful.

 

The Wile E. CoyoteEffect

Many of you are probably familiar with the Wile E. Coyote and Road Runner cartoons that ran sporadically from the late 1940s until the present day. The setup and plot are the same with each cartoon. Wile E. Coyote is always concocting grand schemes to capture the Road Runner, who has forever eluded its captor at the very last minute. In every case, Wile E. Coyote becomes the victim of the traps he sets up to catch the Road Runner. Most often and mos tfamously, Wile E. Coyote finds himself running off a cliff as the Road Runner successfully stops short of the edge. Wile E. Coyote always struggles desperately to reverse course as he pauses in mid-air for what seems like an eternity before finally succumbing to gravity and plunging to the ground to face painful, but always recoverable, injury.

 

I liken the current markets to that long moment of pause off the edge of a cliff before we are subjected to the consequences of gravity.While it may seem like all of our flailing (a.k.a. "bailouts" and "quantitative easing") may allow us to overcome the natural effects (a.k.a. "recession,""deflation," and "deleveraging") of our fundamental economic situation and the excesses of the past decade (a.k.a. "housing, credit card, corporate, student loan, and government leverage"), the fact of the matter is that we have run off the edge of the cliff and cannot avoid the necessary pain that lies ahead. The hard landing will be painful, but it will also be one from which we will eventually recover. However, the longer we put it off and the more debt we strap to our backs to attempt to avoid the consequences, the harder we will fall, the more painful those consequences will be, and the longer the recovery will take.


Stock Market Rally Potential and Other Forms of Gambling

Human nature is a very funny and forgetful thing. Many mainstream economists (a.k.a. "full-time market cheerleaders") are openly declaring that stocks are overvalued right now BUT that there is a high likelihood that the markets will continue to rally despite their overvalued state. Their advice? Ignore valuation, invest anyway, and don't miss out on the potential upside! I am pretty sure that was their same message to investors back in 2007 before the markets began their 57% plunge. We are still approximately 20% below those market levels of 2007. That advice did not workout too well then, and it is not going to work out too well now.

That being said, I do believe that the stock market will benefit from the momentum of investor optimism that believes the only direction for the markets is up. As depicted in Figure 1 below, the stock market made four clear attempts to pierce back below 11,000 on the Dow, but in each instance, the market rallied back and closed above 11,000. Regardless of valuation, this is a short-term bullish sign for the markets that portends an extension of this bear market rally possibly through the first quarter of next year. It also provides us with a nice line in the sand to indicate more clearly when markets will resume their larger bear market downtrend that started in late 2007. Should the markets close decisively below 11,000 on the Dow, it maybe a strong indication that we have seen the near-term top in the market.

LEAD Technologies Inc. V1.01

Figure 1

Technical analysis pointing to rally potential says nothing about value. It is important to note that despite the near-term rally potential, the markets carry significant downside risk. While there may  be another 10% or so of near-term upside left in the markets (carrying the Dow up to the mid- to upper-12,000 range and the S&P 500 up to the mid 1300s) throughout the first quarter of next year, there is significantly more room on the downside. I expect to see the Dow eventually at 8500 at the very least and am confident that we will still see the Dow overtake its former low and dip below 6500 in the very long run if we have an all-out deflationary collapse. That's another 25-42% of downside from where we are now. Chasing another 10-20% potential gain while risking 25-42% of your capital is a terrible risk-to-reward and is more akin to gambling than investing--but at least with gambling, your risk-to-reward can be more evenly matched. Therefore, I do not encourage investors to participate in this market at this time. It will be time to start building stock exposure when we finally reach much lower prices for the markets. Preserve capital for now so that you can take advantage of those values down the road.

 

Why the Markets Will Eventually Resume Their Larger Downtrend

Consumer Sentiment: Ultimately, as I have discussed before, I believe that the markets are driven by extremes of mass investor emotion--particularly fear and greed. You have probably heard market commentators or economists refer to this as the "animal spirits" of the markets, or, in more specific terms, as a derivative of "consumer confidence."Whatever its label, it is the expression of investors' optimism or pessimism as displayed in market prices, volume, measures of sentiment, and volatility.

When the market is at or near an extreme of optimism (which always coincides with at least a near-term top in the markets), investors are willing to pay a premium to own stocks. They ignore valuation and invest so as not to miss out on the potential profits. Dividend ratios (meaning the dividends paid to investors divided by the prices they pay for stocks) go much lower as investors are willing to pay more to receive potential price appreciation and receive less actual dividend income. The price-to-earnings ratios (P/E = stock price divided by company earnings) go much higher as investors expect earnings to go up indefinitely and are willing to pay a premium so as not to miss out on the potential earnings increases. At the highest extremes of investor optimism, investors focus on "potential" rather than actual earnings.Book value (the net asset value of a company) becomes traded for "potential value," and investors are willing to pay much larger multiples in stock price above the actual value of a company's net assets. All the while, volatility is driven lower as investors become more complacent about the general direction of the markets--expecting them simply to continue rising without pause.

As the markets rise and valuations stretch, this is rationalized as caused by exogenous circumstances (like the "improvements of the economy" or the "slowing of economic decline") when, in reality, it is the raw investor optimism that drives the circumstances and interpretations thereof as the "reasons" why the markets march higher. This investor optimism eventually reaches a peak and is unsustainable at its extremes. This positive sentiment eventually turns and begins relieving its extreme condition by beginning the long path to the other extreme, pessimism. The transition from optimistic to pessimistic extremes may take a long time (as it is currently),but eventually, investor sentiment will turn, and everything that received the benefit of the doubt under strong market optimism will be subjected to a "guilty until proven otherwise," fearful pessimism that will drive stock prices much lower. I believe that we are right at the beginning of one of those turns, and I believe that we will see evidence of a more-pessimistic general sentiment after this last gasp rally and within the first half of 2011.

Currently, investor optimism still rules the day. We are seeing very low measures of volatility that display a strong level of complacency for the general investing public. Long-term stock valuations are stretched toward extremes across the board (P/E, dividend, book value ratios)as investors are willing to pay a premium for potential upside despite all of the major issues that could derail the rally and send prices much lower. If we deconstruct the "reasons" why the markets have experienced such a strong rally from the March 2009 lows, we should have a clear grasp of the transient nature of this rally and why it is so highly probable that it will fizzle out and return to a major downtrend sometime next year.

Quantitative Easing...to Infinity and Beyond: I thought that I misread the headline published on December 6th: "Gold prices reach for record high on QE3 talk." QE 3 talk?? Can't we at least get QE2 out of the way before we consider QE3? The Fed's Quantitative Easing (a.k.a."creating credit out of thin air to buy stuff so prices will stay higher") has been heralded as one of the strongest reasons why the markets will continue to go up. However, despite the shorter-term market spikes caused by the Fed's actions, I think that the effect of the massive bailout ($787 Billion) and original Quantitative Easing (to the tune of $1.7 Trillion) that attended the original market decline of more than 50% should be a clear indication of the longer-term impotence of the Fed to overcome the general market direction. As we are still 20% below former market highs after the government announced the first Stimulus Plan and the Fed originally announced QE1 and QE2, I am not holding my breath for QE3, 4, or 26 to have much of a long-term impact.

Since the original problem that started this entire recession and downturn was the fact that consumers, businesses, banks, and governments had too much debt, I am convinced that creating more debt will not solve the problem. Perhaps, that is just the "common sense" speaking. Will Quantitative Easing #37 involve providing more debt to insolvent banks? If it will (and it will), then I can use my "common sense" crystal ball to forecast that it will also not work. Instead of the crystal ball, we can put "history"to work and ask Japan how all of its quantitative easing served it for the past 20-30 years.

The point is that the Central Bank can create credit all it wants, but it cannot ultimately reverse the course of consumer sentiment, a massive deleveraging cycle, and deep recession. We can delay the consequences,but we cannot ultimately avoid them. Adding more debt to a situation that requires less leverage will not work. As the markets come to terms with the reality that we are not solving the core issues at the heart of the recession,investor sentiment and stocks will reverse and head much lower.

Housing and the Markets: Supply, Demand, and Demographics: The "Greatest Generation"(composed of 50 million people born roughly between the turn of the 20 th  century and 1945) lived through the Great Depression and World Wars 1 and 2. This generation was followed by the "Baby Boomers," a massive boom in population (80 million) that grew up in a more privileged time, sheltered from many of the economic and geopolitical struggles that caused their parents to be cautious spenders. As the Baby Boomers came into their own and started families and careers, they kicked off one of the largest housing and stock market bull markets in history. This growth was driven first by having an extra 30 million productive consumers and also by the fact that this generation was accustomed to a higher level of spending and consumption. Add to that the fact that the Boomers experienced the additional productivity gains driven by women entering the work force en masse and it is not so difficult to understand why this generation had so much expendable income and made up such a large portion of total U.S. consumption.

According to Third Age, a marketing company focused specifically on Baby Boomers, "78 million Baby Boomers alone, those born between 1946-1964, control over 80% of personal financial assets and more than 50% of discretionary spending power. They are:

* Responsible for more than half of all consumer spending, buy 77% of all prescription drugs, 61% of OTC medication, and spend $500 million on vacations per year and 80% of all leisure travel.

* The highest earners...median household income is 55% greater than post-Boomers and 61% more than pre-Boomers.

* The largest homeowner group...80% of Boomers vs. 69% of the general population own a home and 25% own at least one property in addition to their primary residence."

The Baby Boomers held most of their wealth in 401(k)s and in the equity of their real estate (their primary residences, second homes, and rentals). Many Baby Boomers consumed beyond their typical means throughout the last couple of decades as their stock portfolios and real estate holdings seemed to forgive their excessive spending and leverage with consistent appreciation.As they are now nearing retirement age, the Boomers depend all the more on their savings, which have been devastated in the housing and stock market crashes (see Figure 2). The majority of their retirement is dependent upon markets and assets that cannot be supported at the same levels by the next generation (see Figure 3), nor by interest income from banks in the 1% range.

LEAD Technologies Inc. V1.01

Figure 2  

Generation X followed the Boomers and numbered only 65 million.This was a problem from the start as this drop in population resulted in a de facto lack of productivity, earning power, and consumer demand by approximately 15 million fewer people as compared to the Boomers. Add to this the fact that real productive output potential was cut as the Baby Boom generation oversaw the largest export of our major manufacturing industries to other countries throughout the last several decades. The few remaining major manufacturing industries that we had left primarily serviced the excesses of the Baby Boom'sand Generation X's insatiable demand for houses and cars that were funded almost entirely through leverage. The retail boom that we experienced simultaneously through the early-to-mid-2000s was driven by this same excess, only the leverage mechanisms were credit cards and home equity (so leverage upon leverage in the case of the latter). The Boomers and Generation X plowed leveraged funds into homes and into the stock market, and both investment vehicles faced significant crashes through 2008 that left the Boomers, Xers, and the generations to follow in a very serious predicament.

LEAD Technologies Inc. V1.01

Figure 3

 

Boomers are largely unprepared for retirement, and many are nearing the point where they have little remaining earning potential to make up for their losses. Much of the excess wealth that retailers, car manufacturers,and consumer discretionary-oriented companies were banking on will disappear as the Boomers pull together what wealth they have left to just scrape by, with no real safety net to catch them if they can't. With a sure-to-be-lowered or non-existent social security in the not-too-distant future (or near-bankrupt pensions), the Boomers will have to be much more conservative than they were before to get by. The fact that the Fed is creating more credit to make stock portfolios go up a little bit is not going to motivate this group to play the "leverage and spend" game again. Instead of leveraging and spending, a good majority of the 80 million Baby Boomers are going to be in the process of downsizing in the very near future, conservatively dumping an average of approximately 2 billion square feet of housing on the market annually (that's the size of one San Francisco per year).

Generation X is handicapped by size (being only 65 million in population) and by pocketbook (they have their own homes already and may be forced to downsize with widespread foreclosures and bankruptcies facing this demographic), and they will not be picking up the slack in the already oversupplied residential real estate market. Generation X still has time before retirement, but they have been plagued by widespread unemployment as well as wage and benefit deflation. Many people who still retain a job have found that they are making 50-75% of what they used to make, and this without many of the benefits they used to receive.

Unemployment benefits have been extended and re-extended,but at the end of this year, more than 2 million people will run out of unemployment insurance. By the end of next year, that number will climb to more than 7 million if there are no more extensions. That is 2 and then 7 million people, respectively, who will have been unemployed for more than 2 years. Generation X wanted access to the same life they saw the Boomers enjoying, and they leveraged up to do so. They carry tens of thousands of dollars of mortgage,credit card, student loan (for their kids), car, and other retail debts. As this generation stretched themselves thin to make it into homes at or near the peak in prices and as a high percentage of these homeowners currently face negative or near-negative equity (see Figure 4), they are in no position to leverage up and spend. They borrowed the American dream, and many of them are having to hand it back now. Think they are going to bear the consumer burden simply because of a slightly higher stock market?

Figure 4

 

Generation Y (also known as the "Echo Boomers" or "Millennials")faces the highest levels of unemployment (closer to 20-25%) and tremendous amounts of student loan and credit card debt. They certainly do not have the purchasing power to step in to rescue the housing market. They are primarily college students, graduate students, and a younger working class struggling to break into a job market that is heavily guarded by Baby Boomers (who are delaying retirement to increase depleted savings with last-minute earnings) and that is being aggressively fought for by more experienced and desperate Generation Xers (who have much more to lose with families and crushing house payments to support). Since Generation Z (otherwise known as the "Internet Generation") ranges in age from 1-9 years old, we can also safely count them out for any major housing purchases in the near future.

It is important to note that Generation Y and some portion of Generation Z have also been scarred by the devastating effects of foreclosure and bankruptcy on their families, so their spending habits may be quite different from those of the generations that preceded them. Expect that these two generations will be renters by necessity as well as choice for much of their life--or at least until home prices correct significantly enough for mortgage payments to fall more in line with rent and realistic earning potential.

For these and many more reasons than I have room in this letter to cover, residential real estate is down and will remain sideways to down for many years to come until the excess supply is burned off and until the echo boomers of Generation Y (80 million in population) have enough money to significantly increase demand to chase prices on the heels of a housing market tailored to the diminished demand of Generation X (65 million in population). Once that occurs (a healthy 15-20 years from now), we can possibly expect the next major national boom in housing prices. Until then, don't hold your breath.

Effect on the Economy/Markets

So, in the mean time, those who have their wealth tied to housing will not see relief any time soon. The economy that depended so heavily on consumer spending driven from homeowners pulling out spending capital from home equity lines of credit will not see a resurgence of the home ATM for a couple of decades. Banks will remain heavily undercapitalized for some time (a.k.a."basically insolvent but allowed to exist because the Fed is willing to print money and congress and the regulators are willing to turn a blind eye to common-sense accounting standards"). The Fed will continue to promote bailouts, stimulus spending, quantitative easing, and any other means of recapitalizing the banks in the face of declining home prices. This will be viewed as bullish for the stock market until it is eventually exposed as ineffective in stimulating the consumer back to spending for the long run. The near-term surge in the stock market is and will be due to heightened investor sentiment based on the expectations that the Fed's quantitative easing will work. The market updates will seem strong at first, as it will be compared to the lackluster results of 2008 and 2009. Once it becomes apparent that the markets are stalling near 2008 and 2009 levels and not recapturing the levels of consumption or growth enjoyed in 2005-2007, I believe that investor sentiment will plunge and take market prices along with it.

Unintended Consequences

The consumer is the real intended target of the bailouts and quantitative easing. The hope is that the consumer will feel confident and start spending again (regardless of whether or not that consumer should spend is not the concern of the Fed or of Congress.). If the consumer starts spending, businesses may feel confident enough to start spending, which might lead to hiring. This in turn should make the newly employed consumers confident, and then they too should start spending, which should be a positive feedback loop and eventually lead to a complete recovery. The only problem is that the bailouts and quantitative easing are not reaching the consumer or addressing the essential problem. The consumer is faced with too much debt and not enough income to service that debt. The consumer is not sitting on a pile of cash, ready to spend but just needing a little confidence to do so. The consumer is sitting under a pile of debt , ready to declare bankruptcy .While attempting to "jumpstart" the consumer by keeping prices elevated through quantitative easing, the Fed is actually hurting the consumer by making that which the consumer needs more expensive and harder to obtain. This, in turn, drains the consumer's savings and pushes him closer to the brink of bankruptcy or foreclosure.

When all of the efforts of the Fed and congress are exposed as ineffective and as merely adding trillions to our debt levels to accomplish a delay of this inevitable recession and deleveraging process, the markets will likely resume their larger downtrend. All of the talks of stimulus, quantitative easing, bailouts, and consumer confidence are masking the heart of the issue. The incredible growth we experienced as a country from 2001 - 2007 was almost entirely based upon a massively overleveraged population that is now left with the all of the leverage but only a fraction of the assets that were acquired in the debt-binge spending spree. Until this debt is dealt with (bankruptcy, foreclosure, credit write downs, etc.), the U.S. economy will return to the growth and productivity levels pre 2001, but with much greater burdens of debt service that will weigh down our GDP growth, employment, and ultimately our capacity for consumption. This will not go well with the markets in the long run.


A Potential Market Path

This next chart is, by no means, a sure path, but it was sent to me by one of the premier market cycle theorists and economists I follow. He believes that we may be repeating the market path experienced from 1936 through 1938 whereby the market ended up shedding about 50% of its value from peak to trough and remained sideways thereafter until 1942. While I have no idea what the specific path will be, I can say that the general market characteristics do seem to fit that potential scenario quite well.

  LEAD Technologies Inc. V1.01

Figure 5


Tax Cuts and Conclusion

Now, with this newsletter, I had room to cover only the good news. We will be covering the bad news in the next edition, published in January.

Just kidding! I covered much of the worst news so that you would not be subjected to many downside surprises. That is the nature of a true analyst. Hopefully, I am wrong, common sense can be suspended, and the markets will go up indefinitely, enriching all who dare to participate. Life is easier for everyone with a robust stock and housing market. However, if I am not wrong, you will be well protected and well situated to benefit from the opportunities coming in the market turmoil. I also hedge investors such that if I am wrong, they are already positioned in inflation-hedged, value-oriented investments with a portion of their wealth so that they benefit from any market upside while providing themselves with significantly more income and value to protect them in a protracted market downturn.

One downside surprise I did not cover would be if congress fails to extend the tax cuts. That will be a recession and a half. We are already slated to slip back into deflation with the tax cuts in place, so probabilities of a severe economic decline and potential depression rise exponentially, should we fail to accomplish that small feat. I really do expect that congress will pass the extension before the end of the year, but watch out below if it doesn't! You can completely count out any rally potential if the extension is not passed before the end of the year.

Given that the biggest near-term threat is still deflation, our strategy remains the same: We want to protect our wealth by keeping a good majority of it in cash and using this current deflationary period to steadily build positions in tangible, value-oriented investments that have a longer-term hedge against inflation. If you would like more information on the types of value investments many of our clients are currently investing in, please seethe insert attached to this letter or feel free to contact us at (626) 564-1031 ext. 112 or via email at clientservices@jrwinvestments.com .

JRW News and Updates

The latter half of this year has been extremely busy for us,and it looks like we will continue this pace right into January without so much as a pause. Since the last letter I published, JRW gained direct access to a number of banks that are unloading foreclosed commercial assets at discounts of 60-80% of recent market value. This is an opportunity we have wanted to deliver to our clients for the last couple of years, but it has been very difficult to break into that small, tight-knit circle. We are happy to report that we already closed on two assets with clients and are lining up several more along the way.

We recently hired Nicole Garfield, Suzanne Wright, and Nick Saiben to oversee transaction coordination, client services systems, and account management. They are each an incredible fit with JRW, and we are happy to have them aboard.

It is our joy to serve our clients, so please let us know if there is anything we can do to better serve your needs. If you have any particular questions about this letter or other related topics, please feel free to contact me via email at jungerecht@jrwinvestments.com  or on my office line at (877) 564-1031 ext. 112. If you would like to set up an appointment with us to go over specific investment opportunities, or if you would like one of my past newsletters or PowerPoints, feel free to contact Susana Dryden, our Director of Client Services, at clientservices@jrwinvestments.com  or at her office extension of 144.

Have a wonderful Christmas and holiday season!

Best Regards,

LEAD Technologies Inc. V1.01

Joshua Ungerecht

CEO and Chief Investment Officer

 

Written By: Joshua Ungerecht
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