Nowwhat

Patrick Hines

Quantitative Solutions for Business / Family Wealth TransitionUnconflicted Investment CounselPragmatic Wealth Management &

Now what?Now what?

THE ECONOMIC STORM

The Rainier Group …complex analysis resulting in simple solutions … Strategic Investment Advice…

pkhines@rainiergroup.com

HIT !

So So

WHATWHAT was that ?was that ?

THE ECONOMY GREW ON DEBT THE ECONOMY GREW ON DEBT

Credit CardsTelevision

Creation of credit cards /easy credit Creation of credit cards /easy credit

SAVINGS RATE USA

BUT BUT

THE ECONOMY… THE ECONOMY…

DID NOT CRASH WITHOUT SAVINGS !DID NOT CRASH WITHOUT SAVINGS !

WHERE DID THE MONEY COME FROM ?WHERE DID THE MONEY COME FROM ?

BANK’S FOUND A WAY …BANK’S FOUND A WAY …

when the FED closed the window when the FED closed the window

BANKS hocked their mortgages …BANKS hocked their mortgages …

AND AND CREATED CREATED MONEY!MONEY!

FED CLOSES WINDOW

SECURITIZATIONSECURITIZATION

WAS THE ANSWER !WAS THE ANSWER !

FANCY WORD FOR HOCK

LENDING STANDARDS TAKEN OFF

LENDING TAKES OFF !

By The way By The way Where did the Banks Go ?Where did the Banks Go ?

They used to be consultative They used to be consultative Where did the Securities firms Go ?Where did the Securities firms Go ?

They used to be consultativeThey used to be consultative

THEY MORPHED INTO SALES THEY MORPHED INTO SALES

DRIVEN PAPER MILLS DRIVEN PAPER MILLS

And we ended up with the And we ended up with the

Great Great RecessionRecession

No illiquidity in the EconomyNo illiquidity in the Economy

Inability to repay debt Inability to repay debt

So So

Now whatNow whatLessons from history Lessons from history

DepressionDepression

Depth ‘33 over ‘36Depth ‘33 over ‘36

But double dip But double dip

Needed jolt !Needed jolt !

The CRASH

RESPONSIBLE SPENDINGRESPONSIBLE SPENDINGREALISTIC BUDGETSREALISTIC BUDGETSCULTURE OF AUSTERITYCULTURE OF AUSTERITY

Get the Nation Going Get the Nation Going

UNIFYING FORCEUNIFYING FORCE

How did we unify national How did we unify national interest ?interest ?

How did we Drive the Savings How did we Drive the Savings That created Capital ?That created Capital ?

Found a common enemyFound a common enemy

Increased Production Increased Production

Increased ECONMYS CashIncreased ECONMYS Cash

Maximised UtilityMaximised Utility

Accepted ASTERITY Accepted ASTERITY

We grew savings We grew savings

Foundation for growth of the economyFoundation for growth of the economy

Growth of GDP Growth of GDP

So where are we nowSo where are we now

Savings going upSavings going up

GDP GDP

Clawing back Clawing back

To Avoid the Double DipTo Avoid the Double Dip

Unify Unify Find common groundFind common ground

We repeat historyWe repeat history

Good will prevailGood will prevail

disciplinediscipline

Politicians Politicians Marion Zioncheck (D-WA) Marion Zioncheck (D-WA) Killed after he jumped or was possibly pushed Killed after he jumped or was possibly pushed

out a window in Seattle, WA while still in office. He was known to have been out a window in Seattle, WA while still in office. He was known to have been feuding with J. Edgar Hoover. feuding with J. Edgar Hoover.

Halsted Ritter (R) U.S. District Judge of Florida, impeached for secretly U.S. District Judge of Florida, impeached for secretly taking a $4,500 fee from a former law partner. Convicted of bringing the taking a $4,500 fee from a former law partner. Convicted of bringing the judiciary into disrepute (accepting free meals and lodging during receivership judiciary into disrepute (accepting free meals and lodging during receivership proceedings.) Removed from office. proceedings.) Removed from office.

George English (D) George English (D) U.S. District Judge of Illinois, impeached for taking an U.S. District Judge of Illinois, impeached for taking an interest-free loan from a bank of which he was director. Resigned before his interest-free loan from a bank of which he was director. Resigned before his Senate trial. Senate trial.

Warren G. Harding (R-OH) Warren G. Harding (R-OH) President His administration was marred by President His administration was marred by scandals stemming from men in his administration who followed him from scandals stemming from men in his administration who followed him from Ohio who came to be known as the Ohio Gang.Ohio who came to be known as the Ohio Gang.

Albert Fall (R-NM) Albert Fall (R-NM) Secretary of the Interior who was bribed by Harry F. Secretary of the Interior who was bribed by Harry F. Sinclair for control of the Teapot Dome federal oil reserves in Wyoming. He Sinclair for control of the Teapot Dome federal oil reserves in Wyoming. He was the first U.S. cabinet member to ever be convicted; he served two years was the first U.S. cabinet member to ever be convicted; he served two years in prison. in prison.

Politicians continuedPoliticians continued Edwin C. Denby (R-MI), Edwin C. Denby (R-MI), Secretary of the Navy: resigned for his part in the Secretary of the Navy: resigned for his part in the

Teapot Dome oil reserve scandal. Teapot Dome oil reserve scandal.

Hiram Bingham Senator (R-CT) Hiram Bingham Senator (R-CT) Censured for hiring to his staff aCensured for hiring to his staff a

lobbyist employed by a manufacturing organization. lobbyist employed by a manufacturing organization.

Harry M. Daugherty (R-OH), Harry M. Daugherty (R-OH), Attorney General: resigned on March 28, 1924, Attorney General: resigned on March 28, 1924, because of an investigation about a bootlegging kickback scheme by his chief because of an investigation about a bootlegging kickback scheme by his chief aide Jess Smith. Found not guilty. aide Jess Smith. Found not guilty.

Jess Smith (R) Jess Smith (R) aid to Attorney General Daugherty (R) who destroyed aid to Attorney General Daugherty (R) who destroyed incriminating papers and then committed suicide.[270] Charles R. Forbes (R) incriminating papers and then committed suicide.[270] Charles R. Forbes (R) appointed by Harding as the first director of the new Bureau of Veterans appointed by Harding as the first director of the new Bureau of Veterans Affairs. After constructing and modernizing VA hospitals, he was convicted of Affairs. After constructing and modernizing VA hospitals, he was convicted of bribery and corruption and sentenced to two years in jail.bribery and corruption and sentenced to two years in jail.

Thomas W. Miller (R-DE), Thomas W. Miller (R-DE), Head of the Office of Alien Property: convicted of Head of the Office of Alien Property: convicted of fraud by selling valuable German patents seized after World War I for far fraud by selling valuable German patents seized after World War I for far below market price as well as bribery. Served 18 months.below market price as well as bribery. Served 18 months.

tTean ptTean p

Oil businessman Edward L. Doheny (second from right, at table) testifying before the Senate Committee investigating the Teapot Dome oil leases in 1924.

Teapot Dome Teapot Dome

He took the fall He took the fall

Or Or

He was the “Fall Guy”He was the “Fall Guy”

Took the fall Took the fall

Senator Albert B. Fall, the first former U.S. cabinet official sentenced to prison.

Warren G. HardingWarren G. Harding

We survived them…We survived them…

But the banks are gone !But the banks are gone !

Yes Yes

And that is good because you And that is good because you have the capital and characterhave the capital and character

There are positive signsThere are positive signs

We did it beforeWe did it before

We will do it again We will do it again

But But

We are going We are going to have to do to have to do it together it together

Unconflicted investment counsel Quantitative Wealth Management

pkhines@rainiergroup.com

415-407-0228