Print Services andDistribution Association January 5th, 2009

Today’s Business Landscape – An Economic Intelligence Report for 2009

To:

Presented by: Morris Segall, President SPG Trend Advisors

THE ECONOMY

Gross Domestic Product2001Q1 – 2008Q3

Source: Bureau of Economic Analysis

Contributions to GDP Growth by Component

2007Q3-2008 Q3

Source: Bureau of Economic Analysis

Corporate Profits (before tax)2003Q1 - 2008Q3

Source: Bureau of Economic Analysis

Industrial Production January 2007-November 2008

Source: Federal Reserve

Net Change in U.S. JobsJune 2005 – November 2008

Source: Bureau of Labor and Statistics

National Nonfarm Employment by Industry Sector Groups

December 2007 – November 2008

Source: Bureau of Labor Statistics

Source: (Left) Census Bureau (Right) Federal Reserve

Retail Sales Less Food and Fuel April 2007- November 2008

Consumer CreditQ4 2005 – October 2008

Existing Home SalesSeptember 2001-November 2008

Source: (Left) National Association of Realtors, (Right) Census Bureau

New Home Sales Units Sold vs. Length on Market

December 2005-November 2008

S&P/Case-Shiller Home Price Index 2006 – September 2008

Source: Standard and Poors

Commercial Mortgage Delinquency Rates among Major Investor Groups

2005Q4-2008Q3

Source: Mortgage Bankers Association

THE GOVERNMENT’S RESPONSE

Money Supply (M2): August 2007- November 2008

Source: Federal Reserve System

Source: (Left) Federal Reserve, (Right) British Banker’s Associations

Federal Fund Rates, January 2008- December 22nd, 2008

3-month LIBOR rates lent in US dollars, January 2008-

December 23rd, 2008

Source: Energy Information Administration

NYMEX Crude Oil Future Prices in U.S. Dollars

January 2001 -December 23th 2008

How do I get through it?Manage business on cash flow basisIncrease efficiency of asset turnover; increase liquidity Intensify customer service initiativesBecome innovative in controlling costs

Outsource where appropriate

Join Co-ops to spread costs over larger group

Look for new ways to leverage existing employees and infrastructure by investigating new sources of revenue from new products and marketsSecure access to bank credit; firm up bank lines

How do I get through it? (cont.)Spend to increase productivity and market share

Take advantage of accelerated equipment write offs as part of government’s economic stimulus packageTake advantage of soft demand in economy to build for future by aggressive bargain purchasingIf access to capital and liquidity are not detriments, look to acquire troubled companies and/or strategic assets of other companiesTrain employees to be more productive and increase their value by enabling them to do more tasks

Increase networking and take advantage of trade associations for additional contacts and leadsPartner with other firms

What’s on the other side? 2009 - Recession Bottoms with Housing and Unemployment

Housing bottoms late this yearBank loan losses peak late this yearUnemployment peaks in second half of this yearLower Energy Prices alleviate pressure on consumer spending – but virtually no economic growth or recovery

New Obama Administration Increased economic “bailout” and middle class spending programs Increased federal budget deficits

What’s on the other side? (cont.)2009 – Business

Cost of goods declines from current levels as commodity prices decline but business is facing zero consumer and business demand. Corporate profits in decline for most of this year despite easy year/year comparisons.Subdued consumer spending but pent-up demand building

2010 – Economy Makes Gradual Cyclical Recovery

Increased employment = increased consumer spendingIncreased Corporate Sales = increased corporate profits = increased capital spendingIncreased interest rates and rising prices from higher demand and continuing federal budget deficits

Where are the opportunities?Healthcare – National ProgramEducationAgricultureEnergy ConservationEnvironmental Solutions Electric PowerTransportation – Increase Mass TransitExports

Water Conservation – New Supplies and RecyclingU.S. Government Procurement and Outsourcing – Base Realignment Program (BRAC)Real Estate – Recycle and Rehab Existing Commercial and Residential Property

ConclusionsWe are in a deep and protracted recession that began in the fourth quarter of 2007. It began in housing and has spread through the entire U.S. and overseas economies. Economic weakness has intensified through 2008 and will worsen through the first half of 2009. Increased near term economic and market pressures include:

stubbornly high inflation in food and basic serviceslower corporate profitsincreased unemploymentcontinued weak levels of corporate capital and consumer spending

Conclusions continuedSevere reductions in State and Local Government spendingWeak exports as overseas economies fall into recessionContinued credit pressures in residential housing and consumer lending spreading to commercial real estate markets and corporate lending

Conclusions continued

However, a bottoming of the housing cycle and an abatement in bank credit losses in the second half of this year, could set the stage for cyclical capital markets and economic improvements in 2009 and 2010. After an expected cyclical recovery in 2010-2012, we believe the longer term socio-economic issues facing this country will result in slower future economic growth for the United States. The availability and cost of credit, particularly to consumers, will be more restricted and expensive in the future.

Thank You

You can always reach me at msegall@spgtrend.comAlso, if you need us in a hurry, we are at 410.522.7243 Please contact us when you require economic and capital markets research & policy analysis.Further information available at www.spgtrend.com