The Family Firm

Speaker: Just a reminder, today’s conference is being recorded.

Mary Malgoire: Welcome, everyone, to the Family Firm’s investment conference call. We do these calls on occasion when it makes sense to be in touch and talk a little bit about what we see happening in the economy and the environment for investing. We also very much appreciate having an opportunity to communicate and discuss with you, hear your questions, and be able to respond to those.

Just a short note about the technology here tonight. Everyone on the call has been muted; and, therefore, we do not hear you. When we get to a point when we’ll open the call up for questions and answers, I will un-mute everyone; and we’ll all be able to hear each other. So until that time, just know that we don’t hear any interruptions from you and assume that you’re not having any trouble on your end.

Also, just to let you know, we will be posting the audio of this call on our website probably within the week. So if you know of anyone who you think this would be helpful for them to hear or if you’d like to review it again, please feel free to do that. If this is your first time with us on a call, the format really is: I’ll say a few things. My name is Mary Malgoire. I’m President of the company. And then we’ll turn it over to Nathan Gendelman, the Director of Investments. He will do a not-too-long presentation, which will, hopefully, get you thinking and inspire some questions. And then we’ll open it up and have a little bit of a discussion about things that are going on.

I want to start by saying that we are certainly very well aware of how difficult this past six to eight months has been for you. We appreciate how hard it has been to stay with the game plan, to steel yourself daily against discussions at work, to listen to friends who are wondering what to do and whether to sell everything, to watch as relatives or friends and neighbors are losing jobs, perhaps losing a primary source of income that will help them even keep their home, perhaps losing the bulk of their savings for the future, and to confront – we know how difficult it is to confront that even those who are supposed to be guiding us at this difficult time appear not to really know what to do or whether what they are thinking about doing is going to, quote, “work.”

We want to thank you for continuing to show confidence in us, especially when every day you are confronted with more and more scandals that imply that no one is out there that you can trust, especially in our business. We’re honoblue that you have confidence in us, and we know that you know we’re working hard trying to digest and consider the implications of the daily news and the daily gyrations in policy and in the economy and investment markets.

We certainly do have confidence in ourselves, and we plan to keep soldiering on. We feel strongly that the approach we are taking, which is to keep making honest assessments of what’s going on in the economy, to confront the bad news head-on and to be realistic about what needs to be done to shore up future security. But these are the right things to do and the right way to get through this and come out the other side, in other words, with our eyes wide open.

It is especially important to us that we know that this is what you expect from us, to make honest predictions and projections about your future and about the current and future financial landscape. We don’t tell you what we think you want to hear.
We’re trying not to pull anything over your eyes. We’re trying to be totally honest, and sometimes that’s a little bit painful. We are here to help you make good decisions about protecting your financial future.

So I just want to say that it’s been certainly a very intense several months for us. We know psychologically what’s happening on your end. We welcome your calls. We welcome if you feel that you would like to take a look at the numbers again, maybe an interim review. We do tend to meet annually, but we’re more than happy to try and accommodate that. We’re working overtime to, you know, keep on top of what’s going on and also be able to meet your needs and answer your questions.

So, with that, I just want to say thank you. There will be some e-mail from us shortly about a little bit of an administrative change, but I just want to let you know that that’s something that’s been on our minds as well.

So, with that said, I would like to hand this over to Nathan.

Nathan Gendelman: Thank you. Good evening, everybody. What we’re going to do in the beginning is just to quickly circle back on one or two things that we talked about in November and then quickly we can talk about how things played out since then and where we are today and what can be some catalyst perhaps for getting us out of this or at least alleviating some of this in the short-term.

As I said, looking back to some of the things that we talked about in November, we tried to put our finger on what was going on; and we ended up identifying the sort of short-term thinking mindset as really one of the primary culprits for this whole big financial predicament that we’re in now. We gave you the examples of Citigroup and Goldman Sachs trading against their clients and a system of ad hoc government bailouts, all of which little by little by little eroded trust. That sort of steady erosion really turned into a complete crisis of confidence over the past six, I would say, even more so in the most recent three or four months. That lack of confidence has really mushroomed and spread itself through so many economic activities that we used to consider routine: being able to secure a mortgage, a company funding its inventory.

Just so many of the routine things that we’ve come to take for granted have really wobbled in the face of this crisis. In times like these it isn’t surprising that many investors, business people, and really the population, look to government for a solution and a restoration of confidence.

That was always a tall order. Well, okay. Failing that, at least perhaps government could give us a roadmap for the future. Well, okay. Failing that, maybe at least if we could get some confidence that the government was looking for the solution. Okay. Finally, failing that, at least evidence that government was looking at the right problems to solve. At least they were looking in the right place. But as we’ve come to discover, it’s been a very, very disappointing few months for investors and for the economy overall. It’s really no surprise - we see it play out every day in the Dow and unemployment figures, and we don’t need a Gallup poll to tell us what the prevailing mood is among the business world.

When I mentioned that part about the government looking at the right problems to solve, you know, no one knows precisely. But we’ve identified four specific big-picture issues, all of which – they’re interrelated, and they all need to be addressed, and this is kind of what we’re all waiting for.

I’ll list them out. Each one of these could make a two-hour conference call in itself. But don’t worry, they won’t. The first I just wanted to mention is just the system of finance. That seems obvious. What will the government support intervention entail the ultimate expanse of its role. What will that be? We’re still waiting to know. We don’t know.

A second one is a system of regulation that can restore confidence in the market system completely trashed by subprimes, masters of the universe, and Madoff and Hollins Stanford. And the list goes on, unfortunately.

The third big picture area is a long-term budgetary plan, a credible one that can address the entitlement issue and inspire confidence in government debt and the stability of our economic system.

The fourth I’ll just call a global solution to a global problem. This is something that we’ve talked about for years: American overspending and, just to put it into ___ short phrase, Asian under-spending or over-saving. How to reconcile that. So that is the fourth leg of that chair. Just to reiterate, truly, the government’s response just hasn’t comprehensively addressed any of those situations. Again, we don’t need a poll to tell us that we can see it in our account statements and what’s happening every day when the government releases some economic statistics.

Now, looking ahead, when we think about, well, what kind of advances could prompt a turnaround; and perhaps as we’ve seen this week, when a turnaround occurs, it’s likely to be fairly abrupt. This is basically the answer that we focus back in on: Some sort of restoration of confidence which in the short-term is more than likely to come from a farsighted government policy or policies that finally address some of the root causes of the financial disaster.

Our belief is that would, indeed, jumpstart things for the short-term, which would feel very nice given what’s happened. But we have to berealistic and sobered by what’s happened. You know, we can’t really say anything more definitive about the short-term outlook. It’s hazy, again, given that we still have, again, short-term reliance on politicians and other officials to try to find a way out of this. Now, that’s the short-term.

Now, longer term, I think there’s much more grounds for optimism. Not to say that things can’t turn around in the short-term as well; but longer term, I think everyone’s on safer ground. I’m just gonna identify the two very broad trends that no one is gonna be able to read in the newspapers tomorrow. But when all is said and done, they’re the real drivers of our wealth.

The first one I’m just going to talk about is just technology. Technological advance is not gonna reverse itself because we’re in a recession, even if it’s a depression. Technology’s still gonna continue to advance. There’s progress that’s gonna be made in electronics, medicine, energy usage, transport. There’s no doubt that it’s irreversible. With that technological progress comes a richer society, and it’s gonna happen no matter how counterproductive the politicians are. This wealth will eventually be realized in higher stock prices. Again, I don’t know if that will be in 2012 or when; but that is the history of economics.

The second one, this is even more nebulous. Stay with me because I think it’s fairly unassailable. I think at times like this, we really – sometimes we have to kind of take a deep breath and sort of just think about ourselves for a second. Think about our parents, our grandparents.

What did they do during the 1930’s? What did they do when the Depression hit? What did we all do during other very bleak economic times? Did we quit? Did people just surrender hope for the future? Did people stop working? Did they stop believing in education? Did they abandon everything they’d worked for?

Now, without knowing the specifics of everyone out there, I’m really gonna guess that the answer to all those questions is no. Think about just ourselves today, you know, those of us who are still working. But even if you’re retired, what you would be doing? Would you still be going to work every day? Would you still be doing everything you could to be productive and contribute to a better world by your efforts? Of course. That’s what I do every day. That’s what Mary does. That’s what we all do here.

Really, when you cut through a lot of this, that is what’s gonna get us out of this – not a stimulus package, not an interest rate cut, not even a revitalized Securities and Exchange Commission. I find that very comforting for the long run that, you know, we’ll get out of this; and it will be ours, society’s effort that does it.

Now, it’s true that we are uncomfortably dependent on the government right now to come up with an answer for the short-term. But in reality and in the long-term, which is what we are living for and investing for, that’s not where our wealth is going to come from and where our success will come from.

Well, thank you for listening to that. As Mary said, we are very excited about your questions.

Speaker: All participants have been un-muted.

Mary Malgoire: Let me just throw open to the audience here any questions, anything on your mind.

Okay. We’re gonna need you to get closer to the phone and speak up.

Female: Thank you, Mary and Nathan. It feels so good to hear your words.

Mary Malgoire: All right. You’re going to have to take your time, I mean, take turns.

Next person.

I have a question. How’s everybody feeling out there?

Male: Poor.

Female: Hey, Mary.

Female: Hey, Mary, it’s Ginny and Carolyn. How are you?

Mary Malgoire: Hi, Carolyn. Great. Any questions? Any –

Female: Yes. We wanted to ask a question.

Mary Malgoire:> Yes.

Female: We wanted to get a feel for what signs will you see before we see ‘em? What signs should we be looking for before we see ‘em, start to see that the recovery is – things are starting to click in? Because we all know that, you know, the stimulus has passed; and there’s a lot of bills and activity in government and activity in private sector to try to get our economy pumped up and going again. But it’s gonna take awhile for the implementation of these things.

So what little signs will we see, or where should we be looking for the early trends?

Mary Malgoire: Good question. I’ll throw it over to Nathan. (Laughter)

Nathan Gendelman: I think – I don’t know. There could have been one on Monday because that was really the first time – and what I’m referring to is the Chairman of the Fed just making a private speech. But he laid out five or six pretty – some people would say common sense, but it’s never really been done before – common sense approach to how regulation is going to look going forward.

Wouldn’t you know that the market went up by a lot that day. So I don’t know if it, you know, how directly related they are. But I do think that that – those are gonna be the kind of triggers. When people in power come out with long-term plans that make sense, that aren’t just a lot of bailouts because I don’t think those are going to be the kind of things that catalyze the turnaround.

Female: No, I understand.

Mary Malgoire: I think that it will be important. I think the markets would respond really well to anything that is crafted to stimulate business activity. You know, there are certainly tax incentives that can be put forth. You know, there’s any number of very creative ways to give businesses incentives to hire more people, to create more alternative lines of work. I mean, by giving bigger deductions for investing in plant and equipment and so forth. So that can stimulate business activity, I think, would be also very helpful.

Mary Malgoire: So I think – you know, I think what Nate was also saying in part of his presentation is that the markets are anxious for a little bit of detail. There was a very interesting sort of letter – it wasn’t a letter to the editor. It was in the op-ed area of the Post today by Andy Grove, who is, as you may know, the former President and CEO of Intel. He basically talked about chaos in management, how a company, how an organization manages change. Basically, the idea was that you allow the chaos of trying to figure out what’s going on, coming up with new ideas and so forth, to run rampant. But at some point in time, the leadership has to cut that discussion off and say, “Okay. Here’s what we’re gonna do” and then be very detailed about what we’re gonna do and how it’s gonna work, what you’re gonna feel like, what your experience is gonna be when you go shopping.

I can spin it out in any number of ways and that exact piece that we’re missing and why the markets are so unresponsive to what’s going on. So I’ll just stop there.

Female: Do you really see anybody even thinking in that direction? All I see is people thinking about entitlement.

Mary Malgoire: Well, that’s a good point. I think we’ve got folks all throughout government right now who have never handled – I mean, the only person I can see that has ever been in this kind of a difficult situation has been Paul Volcker, who as you may recall, for those of you –

Male: Yes.

Mary Malgoire: – who are old enough like I am, who was the Federal Reserve Chairman in the late 80’s when we were – I’m sorry, the late 70’s – when we were under extremely high inflation rates and did a tough thing. So, you know, somebody with a little bit of background.

But I think, you know, this is unprecedented for the people that are running things.

Male: Mary, I’m concerned about the 2010 outline, budget outline that contemplates significant increases in taxes plus over ten years _____a trillion dollars of capital trade taxes on the economy. What is that gonna have – what impact are those tax increases gonna have on the economy as a whole?

Nathan Gendelman: Again, we’ll have to see. I don’t know. I mean, so far, it hasn’t - it’s not been received enthusiastically.

Now, that kind of depends how fast things can recover between now and then, how well we’ll be able to endure them or else they’ll have to be changed or it will be easier to have blueistributive taxes and other very forward looking programs and taxes when there’s a lot of wealth around.

When there isn’t, it becomes a little bit more problematic. So I think, you know, even though I know that the budget is projecting out for what’s going to be the tax rate in ‘10, ‘11, and beyond that. I think it’s all so very fluid because, first, I think the question needs to be addressed, you know, how big is the pie. Don’t worry about the pie right now. You know, we do have a little bit of time to do that but not very much. You know, basically, I agree with you that it’s not – that’s not the first direction that we should be going down.

Female: I have a question with respect to the strategy of diversification with Family Firm. You know, even in the best of times when investments were being made, you guys had the foresight to stress diversification and being in many, many different facets to kind of ensure that if the bottom fell out of something, it wouldn’t fall out of everything.

Are you finding, generally speaking – and I know each client has customized strategies – but are you finding, generally speaking, that that strategy is making us better off than those that didn’t have somebody like you guys looking over the money?

Nathan Gendelman: Well, I don’t know about that, but the diversification answer is: There’s two answers, one of which is positive; one’s negative. I think I’ll do the negative first. And that’s spreading the risk among the different risky assets, the different types of stocks, the international stock, the real estate-focused things, the energy-focused things. That has failed. There has been no benefit from that. Everything has moved in unison So there’s nothing – there really isn’t very much positive to say about that aspect.

The other aspect – which is really the more important and is the real cornerstone – is the bond versus stock aspect. And that one, on a fundamental level, it has worked. As stocks have gone down, bonds have gone up. Last year, for a point, it was only treasury bonds that were going up. And that’s become a little bit broader now. It’s back into a wider realm of fixed income.

Again, like you said, Carolyn, everybody’s got different amounts in there. But that basically has worked. Bonds have moved against the stock. But in a year where the stock market is down by 40 percent, the bonds can only do so much.

Female: Right.

Nathan Gendelman: _____ failed completely and certainly it keeps the losses at a – some percentage of minus 40. But, you know, it’s a very bad year for the equity.

Female: I appreciate your honesty on that, Nate. I really do. You know, we do have all the faith in the world in you guys.

Mary Malgoire: Well, thank you. Thank you. I mean, it was interesting. That was an interesting observation about diversification because I know all of you will remember at your investment update, your annual update meeting in the past, let’s say, two to three years, Nate has been saying, “Gee, this is really strange. Diversification isn’t working. Everything is up.” You remember, real estate was up; natural resources were up; international was up; even the U.S. market, even though everything else was better than the U.S. market.

And it was like, there’s something wrong here. This is quite odd, I should say, not there’s something wrong. But it’s quite odd. And now the same thing is happening on the downside. Everything is down. So we are really in a very – and I can only say that some of the folks who do what I do are – nobody’s saying anything ‘cause they’re trying to figure out: What does diversification mean and where does it fit in a portfolio. I mean, how do you approach it?

I would say that we are not one – we are not a group to throw out the baby with the bath water, and we would certainly want to think and study and come out of this very extraordinary time before we thought any differently. And it’s basically that equity six split that is working very well.

Nathan Gendelman: Yeah. I should throw out there that, quite a few of our peers and, of course, some of the people who are considered the elite asset managers like the California Pension Fund, the Harvard Endowment, where they emphasize a lot of their diversification is in, quote, unquote, “alternative assets,” which are hedge funds and private energy deals and sort of those things, things that a regular individual can’t buy.

They failed. And I’m still waiting for some of the final numbers from Harvard and some other folks to come out. But, I’ve read that the Harvard endowment was down by 23 percent in three months. So it’s not working. It’s extremely difficult to find things that can stand up well in this sort of financial tumult, but I think it’s really put to bed the theory that if you could just find five or six, quote, unquote, “smart guys” who could run a hedge fund and protect you from this.

Male: Question.

Nathan Gendelman: True protection is from spreading your risk out from some safe investments and some risky ones; and, just as always, there’s no one with a crystal ball that can rescue us.

Male: Question.

Mary Malgoire: Certainly. We don’t have a crystal ball, nor do we pretend –

Male: Don’t need one.

Mary Malgoire: No, we don’t. You don’t need one.

Male: The question: Nathan, in the last X number of months since the rate of change got really negative, have you gone through any rebalancing of our portfolios; or have you let it ride?

Nathan Gendelman: Well, that’s a difficult one. Some people have; some people haven’t. I can tell you that across every portfolio, no one has ever gotten up to their, quote, unquote, “long-term equity target.” So even if we rebalanced up by a nominal, you know, by a percent or two, that would still end up leaving someone eight or nine points short of, you know, what the piece of papers said to do.

You know, knock wood, that hasn’t been a mistake. It has admittedly been a little bit of substitution of our judgment as to trying to assess how uncertain things were versus remaining completely disciplined to the plan. But, as I said, it seems like discretion was the better part valor of many of those decisions. And it –

Male: ___________

Nathan Gendelman: Even if we learned rebalancing per se, we’re still, of course, monitoring the portfolio and trying to do smart things on the fixed income side. Treasuries got too expensive to move to corporate, that sort of thing.

And, of course, to try to extract a little bit of a silver lining and do things from a tax perspective that could benefit us all down the line to just do that, do tax loss selling, reinvest the proceeds into something similar and to just try to extract some sort of benefit from where we are but without, you know, radically changing the plan or from the positioning of it.

Male: As a corollary to that, what about the thought of being more into just cash while everything seems to be going down? Do you anticipate any turnaround quickly enough that that would be unwise?

Nathan Gendelman: Well, the thing is: As we saw a couple days ago, it could happen really fast; and there’d never be a chance to get back into it.

I’ll give you a quick discussion. There’s just no right answer about this because sometimes the answer just has to come from if it’s psychologically killing us, you know, to be invested and to be losing. Then you know, a big change like that, it can make sense just for health. We have to admit that.

But here’s the problem from a non – this is gonna get into psychology, too – but from a non-psychological viewpoint of the going into cash decision, it doesn’t work because right away you’re crushing your expected return. You can’t make any money from cash right now.

I would assume it’s always a temporary decision. Let’s make that assumption. As I said, is this gonna be possibly for a few months. Now, while that seems like it might be buying us a lot of peace of mind, because we say, “Ah, phew. Now I don’t have to care.” It’s actually the exact opposite. Now you really have to care a lot about every day because every day you’ve got to be thinking, “When do I go back in?” Every day, you’ve got to be thinking, “When is the bottom? Is it today? Is this it? Is this it?”

And you’re trying to do something that’s impossible; and it ends up, you know, being torture. And that’s kind of in a good case scenario that the market goes down and your decision is a good one.

Now, if it goes back up, you’ve got psychological problems on the upside because, again, it’s the same thing. “Well, do I go back in?” And what we found – and we don’t have a lot of our own experience with that; but just talking with some other firms and investors, that decision to get back in when things have gone up, that’s excruciating because, really, when you think about it, what you end up doing is validating a bad decision because, you know, you sell at 7,000. You buy back in at 8. You’ve locked in a loss. You’ve locked in an unproductive move.

Male: Well, maybe you buy back in at 6.

Nathan Gendelman: Yeah, well, that can be done.

Male: Or maybe this is part of the diversity strategy. Maybe you don’t do this with your whole portfolio; but you just say, “Okay. I’m gonna hedge my bet.”

Male: There’s an old maxim called, sell to the sleeping point. I think that addresses the psychological then. Another thing that I’ve noticed over the years is that these – these getting into cash decisions tend to work best in hindsight and then don’t do so well going forward.

Nathan Gendelman: Yeah. I mean, that strategy – lots of things work very well in hindsight.

I just think it’s very difficult to set rules about when to go back in. And in the absence of rules, then I just think that the psychological benefit that we think that we’re getting, it ends up just, rebounding back on us and just ends up causing more angst than it was worth. It’s not the solution, I believe, for almost all of our clients in the long run. They sacrifice so much to lock in a very low rate of return for the rest of their lives.

Male: Along similar lines, Nate, would you recommend revisiting and perhaps changing asset allocation? I’m not talking diversification. I’m talking equity ____fixed income allocations.

Nathan Gendelman: Well, I guess if you looked across the portfolios now, you then would say, yes, we have adjusted them down” –

Male: Oh.

Nathan Gendelman: – and are kind of waiting and seeing if we’re gonna have some more stability, more confidence in what the environment will be. But, again, you know _____ don’t want to make the same kind of mistake and be making big radical changes –

Female: Yeah.

Nathan Gendelman: – based on what’s happening in the short run because we really just want to be very careful not to be chasing the market down or rushing after it when it goes back up.

Female: Are there any rating agencies that are worth the powers that hold ‘em up? (Laughter)

Nathan Gendelman: We’ll take that as rhetorical.

Female: No, it’s serious. I mean, something is triple A one day; and the next day it’s worth nothing.

Mary Malgoire: Well, that’s a good point, Marilyn. I think it adds to this whole lack of confidence –

Male: Yeah.

Mary Malgoire: – in the system. And it’s what is driving a lot of the pricing ‘cause nobody can figure out what things should be priced at.

Male: But the bankers say they never make a bad loan. They’re all good at the time they’re made, so they claim.

Mary Malgoire: Right.

Male: Except the FHA, yeah.

Female: All right.

Male: Mary and Nathan, I’m sorry, this is Gary. I appreciate all the questions that have been asked so far. They were things that were definitely on my mind.

Speaking of rules and mechanics in the market, Nate, I wanted to ask if you knew about and could explain this proposed change in the FTC regulations on the trigger points for short sale orders or short sales that will prevent these guys from sort of buying on the downside and force more money into the upside of some of these companies.

Mary Malgoire: Well, I’m not sure that this is what you’re referring to, but a couple of months back, they stopped all short selling.

Male: No, just on financials.

Mary Malgoire: Nate’s shaking his head and saying that’s not what he’s talking about, so I’ll leave it to Nate.

Male: Yeah, that might just be on financials. That might be true.

Nathan Gendelman: What you described was something called the uptake rule that said you couldn’t do a short sell if the market, if the last trade was down.

Male: Right.

Nathan Gendelman: _____ might do a short sell if it had gone up. They threw that out because the hedge funds didn’t like it. It’s part of how they’ve captured the regulatory agency. It would be great if they put that back – to be honest, I haven’t seen a regulation yet. But it would be a good thing to go try to reign them back in again so they couldn’t destroy companies.

Female: Nate?

Mary Malgoire: Yeah.

Female: It’s Linda here. I have a question. You know, everybody talks about the bottom and when we’ve reached the bottom. But the market’s not unilateral. So we could have a bottom in one sector and a rise in another, theoretically. Is that correct? How do you address that? Could health be going up and, you know, retail be going down? How do you know not really when you reach bottom? How do you know when something’s moving up in one sector versus something going down in another? Does that make sense, that question?

Nathan Gendelman: I’m sure if people knew that, they would make lots of money. (Laughter)

_____ thing is, Linda, that usually what goes down the most is what comes back up the fastest.

Female: Okay.

Nathan Gendelman: Depending on what _______ you’re on. So if you believe that and you think you’re at the bottom, you want to buy a lot of Citigroup and a lot of financial stock because that’s usually the way it works. When things make a real sharp u-turn –

Male: If you want to buy Citigroup, I’ve got a bridge I’ll sell you.

Nathan Gendelman: Yeah. Marilyn’s got some dynamite that she wants to sell. (Laughter)

Yeah. No, I think – what, of course, was very disconcerting about last year, to be serious, was that really every sector was down by, you know, over 20 percent. You know, health care did a little bit better; and Kellogg’s and Wal-Mart, they did better. But everyone was down.

My guess is that there’s a sharp V-swing up because they’ve come up with the magic glue to keep the flow of credit going. Everything will go back up because that’s just a big cloud that’s hanging over all businesses is: Will we be able to borrow money? If they don’t believe they can borrow money, they’re not gonna hire anybody. It just is that simple.

Again, the stimulus plan doesn’t touch that at all. Again, when we start to see the type of things that can give businesses reason to feel optimistic about the future, just the fact that if they buy something, they can use a credit card to buy it. That they can take out a loan. You know, things can turn around surprisingly quickly.

Again, we just have to see how things shake out. But at least I was cheered on Monday that at least someone was beginning to talk about a regulatory framework. Maybe that’s the first step. Maybe it can reinforce itself because there was just a cascade of horrible events over the past three months where somebody would say something dumb; the market would go down; people would lose confidence; and somebody else would say something dumber.

So maybe that can go in reverse, too. Maybe, you know, when something intelligent is said and it gets rewarded, maybe that will stir, you know, progress in that area.

Female: What is your reaction to the comments today from Congress about TARP money that’s being used to loan to Dubai and to China and industries there versus American industries? Do you think that’s gonna be a negative in terms of the response? I mean, business may like it ‘cause they make money wherever they loan. But how do you think the reaction’s gonna be of the American population and the political scene?

Nathan Gendelman: Yeah. Well, you know, this is it, Linda. This is trying to thread that needle of getting a government bailout but not having Congress dictate where the money goes or dictate how banks run. So it’s extremely difficult.

You know, I wish I knew how it’s gonna play out, but it’s –it’s not gonna work if there’s that sort of Congressional oversight over what banks do because every loan, you know, to have to sit in front of a Congressional panel and explain it, no one’s gonna make a loan; and we’re just gonna be back into the same mess again. So it’s gonna take some leadership to say we know we’re spending a lot of money to prop up these banks, and we hate it. And we’re gonna try to make sure that the shareholders aren’t unduly enriched in all of that. So we really need to be careful about having Congress or anybody micromanage the economy like that because we are really – that’s the path that we don’t want to go down.

Female: Thank you.

Nathan Gendelman: Thanks, Linda.

Female: What are we looking for at the G20 meeting, Nate? We need a global solution. That was one of our comments. ______ that things would be a positive. What do you think the market would be responsive on the part of that ____ a good _____ G20 meeting?

Nathan Gendelman: A commitment to free trade. That would be nice. Everybody’s renunciation of their own version of their “buy America.” Every country’s got their own little version of that. If everyone could just renounce that, that would be amazing. That would trigger a great reaction right away.

And also some sort of deal whereby we presented a credible plan for controlling our borrowing so that what debt we need to fund right now can get sold and our partners who are reliant on us like we’re reliant on them do what they need to do to stimulate their own economies rather than just keep relying on the American spender because that’s finished. And the sooner we can move beyond that and just think that it can be solved by propping up the American spender, that’s not the solution.

So, hopefully, there will be some commitment to free trade and some painful decisions made by many of the parties.

Female: Don’t hold your breath.

Mary Malgoire: Other questions? I think we’re about done. We want to thank you very much for joining our call, and we will notify you if we schedule another one in the next weeks and months. Thank you, and have a good evening. Have a good evening.

Male: Thank you.

Female: Thank you.

Female: Thank you. You, too.

Female: Bye-bye.

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