September 2010 Presented By: ITR Brian Beaulieu

itreconomics.com 2 US Industrial Production to Gross Domestic Product 3/12 Rates-of-Change

itreconomics.com 3 Global Industrial Production Indices 12/12 Rates-of-Change ITR Trends Report

itreconomics.com 4 Consumer Loan Delinquency Rates 3MMA and 12MMA 4.6% 4.7%

itreconomics.com 5 Delinquency Rates for C&I Loans 3/12 &12/12 Rates-of-Change 25.0% 77.8%

itreconomics.com 6 Corporate Profits, $ Billions

itreconomics.com 7

8 President Obama’s 10-Year Deficit Projections (Baseline of Current Policy) Billions of Dollars

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itreconomics.com 10 Example: Revenue 12MMT Monthly

itreconomics.com 11 ANNUAL MOVING TOTAL (12MMT) AS OF 8/10 ANNUAL MOVING TOTAL (12MMT) AS OF 8/09 = 1/12 3-MOS MOVING TOTAL (3MMT) AS OF 8/10 3-MOS MOVING TOTAL (3MMT) AS OF 8/09 = 3/12 = 12/12 ACTUAL MONTHLY DATA AS OF 8/10 ACTUAL MONTHLY DATA AS OF 8/09 RATE-OF-CHANGE ITR Trends Report

itreconomics.com 12 US Industrial Production Index to Foods Production 12/12 Rates-of-Change

itreconomics.com 13 Food Production N311, 2002=100 12MMA 3MMA 3/12 12/12

itreconomics.com 14 US Industrial Production to Pet Food Expenditures 12/12 Rates-of-Change

itreconomics.com 15 US Industrial Production to Plastics Products Production 12/12 Rates-of-Change

itreconomics.com 16 US Industrial Production to Medical Instruments Production 12/12 Rates-of-Change

itreconomics.com 17 Pharmaceutical Production N3254, 2002=100 12MMA 3MMA 3/12 12/12

itreconomics.com 18 Computer & Electronic Products New Orders to Americas Chip Shipments 12/12 Rates-of-Change

itreconomics.com 19 Nondefense Capital Goods New Orders to Electro medical, Measuring, and Control Instruments New Orders 12/12 Rates-of-Change

itreconomics.com 20 Trends 10 ITR Trends Report

itreconomics.com 21 Mortgage Rates to Federal Funds Raw Data

itreconomics.com 22 Short-Term Interest Rates to US Gov’t Long-Term Bond Yields Annual Data Trends

itreconomics.com 23 M2 Money Supply Trillions of 82$ 12MMA Actual 12/12 1/12 ITR Trends Report

itreconomics.com 24 US Industrial Production to Corporate Bond Prices 12/12 Rates-of-Change ITR Trends Report

itreconomics.com 25 U.S. Composite Leading Indicator 1996 = MMA Actual 12/121/12 ITR Trends Report

itreconomics.com 26 Purchasing Managers Index ISM ITR Trends Report

itreconomics.com 27 Stock Prices Index S&P 500,1941 – 43 = 10 12MMA Actual 12/12 1/12 ITR Trends Report

itreconomics.com 28 Retail Sales Excluding Automobiles Trillions of 82-84$ 12MMT3MMT 3/1212/12 ITR Trends Report

itreconomics.com 29 Personal Savings Billions of $, Annual Data Trend SAAR Source: Bureau of Economic Analysis

itreconomics.com 30 Higher Education Expenditures to Retail Sales excluding Autos 12/12 Rates-of-Change

itreconomics.com 31 Housing Starts Millions of Units 12MMT 3MMT 3/12 12/12 ITR Trends Report

itreconomics.com 32

itreconomics.com 33 Four Phases Bankrupt Expansion ITR Trends Report

itreconomics.com 34 Phase Management Objectives TM : Phase Late D – Recession Early A - Early Recovery 1.Prepare training programs 2.Negotiate union contracts if possible 3.Develop advertising & marketing programs 4.Enter or renegotiate long-term leases 5.Look for additional vendors 6.Capital expenditures & acquisitions considered in light of market-by-market potential 7.Make acquisitions – use pessimism to your advantage 8.People will be scared – lead with optimism and “can do” attitude ITR Trends Report

itreconomics.com 35 Phase Management Objectives TM : 1. Positive leadership modeling (culture turns into behavior) 2. Establish goals: tactical goals which lead to strategic achievement 3. Develop a system for measurement and accountability re: #2 4. Align compensation plans with #2 and #3 5. Process standardization 6. Judiciously expand credit 7. Check distributions systems for readiness to accommodate increased activity 8. Review and uncover competitive advantages 9. Invest in customer market research (know what they value) 10. Improve efficiencies with investment in technology and software Phase Late A - Recovery: ITR Trends Report

itreconomics.com 36 Phase Management Objectives TM : 11. Start to phase out low margin work 12. Add sales staff 13. Build inventories, commoditized items (price) 14. Introduce new product lines 15. Capital equipment orders 16. Begin advertising and sales promotions 17. Hire to fill skill gaps 18. Implement plans for facilities expansion 19. Implement training programs Phase Late A - Recovery: Part 2 ITR Trends Report

itreconomics.com 37 Phase Management Objectives TM : 1.Accelerate training 2.Check the process flow for possible future bottlenecks 3.Continue to build inventory 4.Increase prices 5.Consider outside manufacturing sources if internal pressures becoming tight 6.Find the answer to “What next?” 7.Open distribution channels (your own or outsource) 8.Use improved cash flow to improve corporate operations 9.Use cash to create new competitive advantages 10.Watch your debt-to-equity ratio and ROI 11.Maintain/pursue quality: don’t let complacency set in Phase Early B - Growth: ITR Trends Report

itreconomics.com 38 Phase Management Objectives TM : 1. Stay in stock on A items, be careful with C items 2. Consider selling the business in a climate of maximum “goodwill” 3. Penetrate new selected accounts 4. Develop plan for lower activity in traditional, mature markets 5. Freeze expansion plans (unless related to “what is next”) 6. Spin off undesirable operations 7. Consider taking on subcontract work if the backside of the cycle looks recessionary 8. Stay realistic – beware of linear budgets 9. Begin missionary efforts into new markets 10.Communicate competitive advantages to maintain margins Phase Late B Early C - Prosperity: ITR Trends Report

itreconomics.com 39 Find a way to do business in the “counter-cyclical” or largely unaffected areas:  Energy  Green  Water  Canada / Exports  Higher Education  Health Care Practices  Food/Leisure  Pets  Funeral Services  Alcohol  Security  Legal Services (Diversified)

40 Demographics Winning Demographics USA ~ 300 Million grows to 400 – 500 Million India Indonesia Australia Brazil Negative Demographics China Europe Japan Russia Source: United Nations

itreconomics.com 41 GDP, Bils of US $, Current Prices Percent of World GDP United States Australia Mexico India Canada Brazil United Kingdom Italy Russia Spain Germany China Japan France S. Korea

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