Vol. 9, No. 12 621 N.W. 53rd Street, Suite 400, Boca Raton, FL 33487, www.hcmmarketletter.

com December 1, 2009

Available By Paid Subscription Only Copyright 2009 The HCM Market Letter, LLC All Rights Reserved

God’s Work
“In those first years the roads were peopled with refugees shrouded up
in their clothing. Wearing masks and goggles, sitting in their rags by
the side of the road like ruined aviators. Their barrows heaped with
shoddy. Towing wagons or carts. Their eyes bright in their skulls.
Creedless shells of men tottering down the causeways like migrants in
a feverland. The frailty of everything revealed at last. Old and
troubling issues resolved into nothingness and night. The last instance
of a thing takes the class with it. Turns out the light and is gone. Look
around you. Ever is a long time. But the boy knew what he knew.
That ever is no time at all.” 1

Cormac McCarthy, The Road

The Road

On November 25, 2009, the film version of Cormac McCarthy’s Pulitzer-prize winning
novel The Road was finally released. The Road tells the story of a father and son struggling for
survival in a ravaged American landscape that has been rendered a post-Apocalyptic charnel
house by a nuclear or environmental conflagration (the precise cause is not identified). Most of
the film was shot near Pittsburgh, Pennsylvania, a beaten-down part of the country that features
deserted coalfields, run-down urban scenery, and windswept dunes. No doubt there are many
more such landscapes throughout America in the wake of the financial crisis and the collapse of
the housing and automobile industries.

The Road is ultimately about the love between father and son, the only humanity that
remains after technologically-advanced man has destroyed the world and left behind a gray and
ruined landscape. At one point in the novel, we listen to the night-thoughts of the father:

“No list of things to be done. The day providential to itself. The hour.
There is no later. This is later. All things of grace and beauty such that
one holds them to one’s heart have a common provenance in pain.
Their birth in grief in ashes. So he whispered to the boy. I have you.”2

Perhaps it is my early literary training, but when I read about the deteriorating fiscal situation of
the United States and the abject failure of our political and business leaders to make responsible
decisions about the future of our country and our society, I keep returning to Cormac McCarthy’s
great but desperately sad novel. Others may not see a connection between a post-apocalyptic
road novel and the current economic challenges facing the United States. As someone who spent
a significant part of his early life studying literature and history and the last twenty years as an
active participant in the financial markets (and the last ten as an active commentator on those
markets), the connection could not be more obvious – or more urgent. In the great novelist’s
words, “There is no later. This is later.” Late at night, when my children are sleeping upstairs
and I am reading in my study, I keep asking myself whether it is not already too late to avoid the
terrible consequences of how we have been managing our society.

1
Cormac McCarthy, The Road (New York: Alfred A. Knopf, 2006), p. 24.
2
Ibid., p. 46.
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The HCM Market Letter December 1, 2009

Governments Drowning In Debt

On November 23, 2009, The New York Times published one of the most alarming articles
concerning the United States’ fiscal situation that have appeared in a long time. Entitled “Federal
Government Faces Balloon in Debt Payments,” the article described that the White House is now
forecasting that the annual cost of servicing the national debt (currently topping $12 trillion and
projected to reach $20 trillion by the end of the next decade) will exceed $700 billion in 2019, up
from $202 billion this year. To place this in context, “an additional $500 billion a year in interest
expense would total more than the combined federal budgets this year for education, energy,
homeland security and the wars in Iraq and Afghanistan.”3 This is only part of the story,
however; it does not include the costs of funding $350 billion collective deficits that individual
states and local governments will run in each of the next two years.4 Zimbabwe’s got nothin’ on
us.

The obvious truth is that such a debt burden is unsustainable. While the U.S. economy
will undoubtedly grow by 2019, such growth is likely to be modest and fall far short of producing
the types of tax revenues that could meaningfully reduce the deficit. Moreover, U.S. tax policy is
so completely misguided that nothing less than a radical restructuring of the tax code would allow
the tax laws to be used as a productive source of economic growth and stability (HCM discusses
one controversial proposal later in this issue). Accordingly, the U.S. government will have little
choice but to monetize the debt through further debasement of the currency and/or inflation and
will inevitably face increasingly higher costs for selling its debt. While the current arrangement
of mutually assured destruction with its largest creditors (currently China and Japan) is allowing
America to delay the day of reckoning, reports like that in The New York Times are increasingly
calling attention to the coming storm. Nobody can say precisely when the tipping point will
come, but investors need to begin preparing well in advance for what is likely to be an extremely
ugly denouement for the U.S. currency and U.S. dollar-denominated assets. It is hardly a
coincidence that the price of gold, which is the anti-fiat currency, has been inexorably rising as
concerns about the unsustainable U.S. fiscal posture have been growing.

Moreover, the U.S. is left with few politically viable choices to deal with its fiscal
problems. The White House is considering forming a bipartisan commission to tackle the deficit,
and certainly any solution is going to require bipartisanship in Congress and stronger leadership
than we have seen thus far by the White House. President Obama’s inclination to leave the
details of legislation in the hands of Nancy Pelosi and Harry Reid is, like the deficits themselves,
unsustainable if real solutions are going to be found. Much of the federal budget remains
contractually locked in: debt service; Medicare and Medicaid; and Social Security. Absent
radical reform of entitlement programs, which no elected official can achieve without being
thrown out of office (unless the American voter starts to think more intelligently than he has in
the past), this leaves the military budget as the most likely candidate for reduction. In particular,
the cost of the war in Afghanistan is exorbitant and going to come under extreme political
pressure in the near future. Other social programs are also going to be starved for funds because
so much of the budget is devoted to debt service and other entitlement programs. Finally, support
to states and cities, which are suffering from their own fiscal calamities, are going to experience
cutbacks that effectively pass the buck to local governments that have been raising taxes and fees
to plug gaping holes in their own budgets. The budget outlook is as bleak as we can remember,
and this will ultimately have an extremely negative impact on equity and credit markets.

3
The New York Times, November 23, 2009, “Federal Government Faces Balloon in Debt Payments,” page
A1.
4
Wilbur Ross reported this figure during his appearance on CNBC’s Squawk Box on December 1, 2009.
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The HCM Market Letter December 1, 2009

The Economy Today

Third quarter GDP was adjusted downward from 3.5 percent growth to 2.8 percent
growth, bursting the bubble of those who are counting on a strong expansion. With all of the
huffing and puffing of record stimulus plans in the U.S. and around the world, 2.8 percent growth
is disappointing. It certainly represents the poorest recovery from a recession in recent memory,
but is consistent with the thesis that we did not suffer a garden-variety recession but a depression.
A depression is associated with deflation and debt destruction, and that is the dynamic we are
experiencing. This is far more noxious than a mere decline in GDP.

We are a long way from the type of strong sustainable growth that the stock market
seems to be discounting. What we saw in 2009 was a rebound off lows that were based on a
justifiable fear that the system might fail. Because the levels to which the market fell were so
low, the rebound was very strong in percentage terms. In absolute terms, however, we are still
well below pre-crisis highs on the stock market while valuations are fair to full. The question
remains whether the market deserves a reasonably robust valuation in the eye of so many
economic headwinds or rather should more appropriately be trading at lower levels. Ultimately it
will be the market that answers this question, but there are abundant warning signs that all is not
well in the Wonderful World of Oz.

Housing is not recovering in any meaningful way although it is no longer declining.

Even where activity is increasing, prices are soft. According to Goldman Sachs Group, Inc.,
household wealth is down by $11 trillion from its highs, with household balance sheets suffering
from the obvious decline in real estate wealth and the fact that the equity market has only
returned to 2005 on a nominal basis and 2003/4 on a real (inflation-adjusted) basis. There was
some relief when job losses during the week of Thanksgiving dropped to 466,000 (still a large
amount) until it was revealed that “seasonal adjustments” added 78,000 jobs to the tally and the
raw number was a loss of 544,000 jobs. The truth is that nobody really believes the figures that
the government publishes anymore. The New York Times published a front page article on
November 29, 2009 describing the soaring use of food stamps throughout America (“Food Stamp
Use Soars Across U.S., and Stigma Fades”). According to the paper of record, the program now
helps feed one-in-eight Americans and one-in-four children. The fact that twenty-five percent of
America’s children require food stamp assistance should send shivers down the spines of every
American.

Fourth quarter GDP growth will likely struggle to exceed 3 percent, and early 2010 is
shaping up as a similar slow slog even with continued government stimulus. In the face of this
grim economic news, the stock market continues to stand its ground. It is certainly true that most
S&P 500 companies beat their earnings estimates, although most of them reported lower
revenues. Those numbers translate into sustained lower employment, which will continue to
weigh down consumer markets. Equity investors should tread carefully in the months ahead as
Mr. Market waits for evidence of which way the economy is going to move. From where HCM is
sitting, sideways is a far better result than we should expect or that we deserve. As much as HCM
would like to find a silver lining behind the clouds, the color keeps coming up gray – dark gray.

God’s Work

In a comment that he probably came to regret the moment it escaped his lips, Goldman
Sachs CEO Lloyd Blankfein recently told the Times of London that his firm was “doing God’s
work.” Shortly thereafter, Goldman pledged to invest $500 million in small business and
charities while setting aside more than $20 billion for staff bonuses. Goldman Sachs’ is in need
of a serious reality check and a radical reordering of its priorities. If a firm that earns 80 percent
of its revenues from proprietary trading and leveraged transactions is doing God’s work, there is
little hope for God or the rest of us.
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The HCM Market Letter December 1, 2009

On November 17, 2009, the Office of the Special Inspector General for the Troubled
Asset Relief Program (SIGTARP) released a report entitled “Factors Affecting Efforts to Limit
Payments to AIG Counterparties” (the “Report”). The Report described the AIG bailout that
occurred in September 2008 that has thus far seen $185 billion of taxpayer funds invested in or
otherwise used to support what was once considered an insurance giant but should now rightly be
thought of as the pygmy that almost swallowed Wall Street. The Report concludes, in so many
words, that the way in which the bailout was handled was profoundly flawed. The Report was
issued at a particularly awkward time for Treasury Secretary Tim Geithner, who was facing calls
for his resignation from some right wing Republican Congressmen during a hearing. Actually,
one Congressman from Texas called for his resignation while another disagreed, saying he didn’t
think that Mr. Geithner should have been appointed to his post in the first place! The Report
suggests that the second Congressman may have the better part of the argument. Without
question, Mr. Geithner has done everything humanly possible to stop the U.S. from sliding into
economic oblivion on a short-term basis since entering office. But the Report raises deeply
troubling questions about how Mr. Geithner handled the AIG bailout in his role as President of
the New York Federal Reserve Bank. It lends credence to the belief that Mr. Geithner tends to
consistently favor Wall Street interests over Main Street interests based on his belief that saving
Wall Street is the only way – or the best way – to maintain financial stability. Such a view
becomes a necessity when a public official is called upon to make difficult judgments after years
of advocating policies that contributed to financial instability, as Mr. Geithner has done. But
such a policy bent, which began with Robert Rubin’s tenure in government, has left in its wake
nothing but a string of disasters.

The controversy arises from the fact that AIG’s counterparties, which included Goldman
Sachs and a number of large foreign institutions, were made whole by the Federal Reserve on
tens of billions of dollars of credit default swap obligations they had entered into with AIG.
According to the Report, the Federal Reserve Bank of New York was not prepared in advance to
deal with the failure of AIG. It had not developed a contingency plan in the event a private sector
financing plan fell apart, nor did it conduct an independent analysis regarding the appropriate
terms for government assistance (ostensibly lacking the time to do so in the midst of the crisis).
Instead, FRBNY simply adopted a failed private sector plan that required the extension of tens of
billions of dollars of loans to the company. FRBNY then tried to convince AIG’s counterparties
to take a haircut on their CDS positions but had little prospect of success since, under the
leadership of Mr. Geithner, it adopted the following negotiating position:

 It was ethically constrained from threatening to allow AIG to go

bankrupt when it knew it could not do so.
 It was afraid that threatening to let AIG go bankrupt would cause
market doubt about the government’s commitment to support
financial stability.
 It was concerned – this is pathetic really – about the reaction of
the rating agencies.
 It was uncomfortable with violating the principle of sanctity of
contract.
 It believed it needed to treat all counterparties – domestic and
foreign – equally.
 It did not have a legal mechanism to deal with the situation.
 It was not willing as a policy matter to use its leverage as the
regulator for the U.S counterparties because it was acting as a
creditor of AIG in the negotiations, not as the U.S.
counterparties’ primary regulator.

4
The HCM Market Letter December 1, 2009

In other words, FRBNY pursued a policy of form over substance that tied its hands and left it
with little choice but to crack open the U.S. piggy bank to hand over $27.1 billion of cash to
AIG’s counterparties in addition to making money-good $35.0 billion of collateral payments they
had previously posted. According to the Report, “by providing AIG with the capital to make
these payments, Federal Reserve officials provided AIG’s counterparties with tens of billions of
dollars they likely would not have otherwise received had AIG gone into bankruptcy.”

Now HCM is the last person who would argue that the government should have allowed
AIG to fail. In fact, I recommended a government bailout in an article in The New York Times
during the midst of these events on September 16, 2009 (“Wall Street’s Next Big Problem”). The
way in which the bailout was structured, however, turns out to have been nothing short of a
disaster from both a policy and political standpoint. Among the criticisms that have been levied
at those who structured the bailout is the fact that most of AIG’s exposure was to non-U.S. firms.
Since when did the Federal Reserve get in the business of insuring non-U.S. financial institutions
against losses? Of the total $27.1 billion of payments made by Maiden Lane II, the entity set up
by the government to effect the bailout, only $10.1 billion, or 36.5 percent, went to U.S.
institutions (Goldman Sachs, Merrill Lynch, Wachovia and Bank of America). Foreign
institutions received $17 billion of cash from U.S. taxpayers in addition to being made whole on
another $23 billion of collateral they had already posted. While there is no mention in the Report
concerning whether foreign central banks were consulted and asked to contribute to the bailout,
one has to question why the U.S. picked up 100 percent of the tab. There is a difference between
exercising global leadership and being made a chump.

Furthermore, it has always puzzled HCM that the rating agencies were permitted to
dictate what occurred with respect to AIG and other institutions (i.e. the clueless bond insurers
MBIA Inc. and Ambac Financial Group Inc. were fully capable of bankrupting themselves
without a push from Moody’s and S&P) during the financial crisis. By the time AIG was on the
brink, these credit agencies had been completely discredited. Yet they were still vested with
5
The HCM Market Letter December 1, 2009

enormous power by regulators (and therefore by investors). The rating agencies were also a
major concern when the credit markets began questioning the viability of Bear Stearns & Co. and
Lehman Brothers Holdings, Inc. HCM has yet to hear a satisfactory explanation for why the
government did not approach the credit rating agencies and ask them to stand down during this
period. After all, these agencies’ had already shown themselves to be not only highly conflicted
but intellectually compromised in their work. The institutions in question were highly complex
and opaque and there is little reason to think that the rating agencies were capable of forming any
more meaningful opinion about their credit quality than they were about the quality of mortgage
bonds and other securities they so badly mis-rated. After all that had happened, why was their
imprimatur required with respect to any systemically important companies?

Finally, the government would have been much better served to guarantee AIG’s debts
rather than to ship boatloads of cash to its counterparties, effectively paying them upfront and
delivering them an enormous gift in present value terms at a time when cash was at a premium.
This would not have been as immediately advantageous to Goldman Sachs and its cohorts, but
would have saved the U.S. taxpayer a great deal of money. HCM would like to hear a
satisfactory explanation concerning why this approach was not employed. The market was
willing to accept U.S. government guarantees on other failed institutions such as Fannie Mae and
Freddie Mac, so it certainly would have been happy with one on AIG. Even if specific statutory
provisions were not in place to deal with the failure of an insurance company (as Mr. Geithner
continually reminds us), which is generally regulated by the states and not by the federal
government, the Federal Reserve would have been well within its emergency powers in stepping
in to guarantee AIG’s debt. Such a solution would have been far simpler and far less expensive
to implement than the plan that was finally adopted.

The role of Goldman Sachs in the AIG matter will likely haunt Wall Street’s leading firm
until it is no longer Wall Street’s leading firm. Goldman Sachs received the largest cash
payment, $5.6 billion, in addition to being made whole on $8.4 billion of collateral it had already
posted. It is therefore reasonable to believe that Goldman Sachs stood to lose at least $5.6 billion
and as much as $10 to $12 billion (depending on the ultimate value of the collateral it posted) had
AIG been forced into bankruptcy. Goldman Sachs has gone on to earn record profits in 2009 due
to a combination of its trading and risk management skills and the low interest rate policy that the
government has implemented in response to the financial crisis. The firm was a full participant in
the financial practices that led to the crisis and as such bears its share of the responsibility for
contributing it. It also bears responsibility for failing to exercise reasonably sound credit
judgment with respect to surveillance of a major counterparty, AIG. In other words, the firm’s
credit judgment was hardly invincible yet it was still able to save itself by means of the bailout. It
is safe to say that without the direct and indirect financial assistance of the government, Goldman
Sachs would be in far worse financial condition today and would not be enjoying the profits and
balance sheet strength of which it boasts. Accordingly, the firm’s offer to contribute a paltry
$500 million, which represents a couple of percent of its bonus pool, suggests that the firm is
either politically deaf or morally adrift. If the firm wants to do God’s work, it has an opportunity
to do so by making a meaningful contribution to charity or the U.S. Treasury in an amount
commensurate with the amount of money that the U.S. government saved it when it bailed out
AIG and lowered interest rates to zero. Something on the order of $5 to $10 billion would be
appropriate.

One news report suggested that Goldman’s management was concerned that shareholders
would revolt if such a large payment was made to charity. This argument seeks to shield
management under the specter of fiduciary duty, which unfortunately requires corporate
management to favor shareholder financial interests above other interests that are every bit as
deserving of protections, such as labor, the environment, community welfare, etc. In response to
this concern, HCM would point out that Goldman’s shareholders have seen their stock increase
from a low of $52.10 per share on November 10, 2008 to more than $170 per share today.
6
The HCM Market Letter December 1, 2009

Accordingly, they have already benefitted sufficiently from the bailout and should be thanking
the government for its support and urging management to do the right thing. Second, the
shareholders have a legitimate beef with Goldman management that it continues to pay out too
much of the firm’s profits in compensation and that more should be returned to shareholders in
the form of dividends. The amounts of money being paid to financial executives continue to be
nothing short of obscene, especially executives of large firms who continue to enjoy
asymmetrical incentives that protect them from the risks assumed by entrepreneurs and other true
risk-takers. The reality is that Goldman Sachs does not only have a perception problem, it has a
cultural and moral problem that it needs to address before it threatens the firm’s hegemony.

A Tax on Speculation

A new bill to impose a 0.25 percent tax on the sale and purchase of stocks, options,
derivatives and futures is circulating on Capitol Hill under the title “Let Wall Street Pay for the
Restoration of Main Street Act of 2009.” Jim Cramer recently spoke out in favor of such a tax,
leading to sharp attacks on him. Mr. Cramer deserves approbation, not invective, for speaking
out on this subject. Leaving aside the idiotic name given to the bill currently circulating in
Congress, this type of tax deserves serious consideration. The government is badly in need of
revenue, but the types of tax proposals coming out of the current administration and Congress
would reduce economic growth and raise little revenue. Tax policy needs to create the correct
incentives and disincentives in the economy. If one agrees with the proposition that is often
sounded in this publication that a disproportionate amount of capital is directed by Wall Street to
speculative rather than productive uses, it is not unreasonable to think about imposing an
economic disincentive on speculative activities. Tax policy is a means of doing so. Current
proposals seem to have come to a consensus that 0.25 percent is the correct rate at which to tax a
broad range of financial transactions. It is hard to see how such a miniscule tax rate should raise
legitimate concerns about discouraging trading activity. The real question is whether we are in a
budget emergency and whether such a tax can be structured to enhance financial market stability
and economic growth. HCM believes that the answer to both questions is yes.

HCM would fine-tune such a tax proposal by imposing a “Speculation Tax” on the
following transactions:

 naked credit default swaps

 quantitative trading strategies
 high volume trading strategies
 large block trades
 debt and preferred stock issued by leveraged buyouts

The tax would be structured on a sliding scale with the tax increasing based on size. Moreover,
there would be a higher tax rate than 0.25 percent on activities that pose systemic risk, such as
naked credit default swaps. In that case, a 1.0 percent tax would be appropriate although hardly
sufficient to discourage speculators. Coupled with other measures aimed at the systemic risk
posed by credit default swaps (i.e. listing trades on an exchange, increasing collateral
requirements), such a tax would be a strong policy statement about society’s view of such
activities. Obviously, rules would have to be designed to prevent trades from being
disaggregated to prevent tax avoidance (for instance, daily, weekly and monthly trades could be
aggregated). The most legitimate practical obstacle to such a tax is that sophisticated traders
would shift their trading activity to markets where no such tax is imposed. If we want to be
serious about imposing such a tax, provisions would have to be included to prevent such forum
shopping by, for example, taxing certain types of investors (i.e. large securities firms, hedge
funds, etc.) on the total volume of their transactional activity of the types described above. This
should be far from an impossible task.

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The HCM Market Letter December 1, 2009

The common attribute shared by all of the types of transactions that would be taxed is
that they are primarily speculative in nature – they are not intended to add to the capital stock or
productive capacity of the economy. Taxes should not be imposed on long-term investors or
investors whose behavior suggests that they are looking to earn a return through the growth of
businesses. Frankly, in the amounts proposed, it is unlikely that such a tax would have much of
an impact on investor behavior. Nonetheless, it would raise significant revenue from activities
that are contributing to the instability of financial markets and the inefficiency of the U.S.
economy.

Forget Dubai - Worry About Mexico

The collapse of Dubai did not come as a surprise to active observers of global financial
markets, and it should not trigger any type of significant global sell-off in risk securities.
Nonetheless, the desert kingdom’s inability to repay its debts is a stark reminder that the world’s
banks are still facing major write-offs in real estate and other speculative activities that date back
to before the 2008 financial crisis. Dubai is a study in speculation. The country has no real
economy to speak of and has carved a role for itself as a receptacle of excess capital from other
oil-rich Middle East nations. But at the end of the day (as the writer Gertrude Stein said of
Oakland, California), there is no there there. It is unlikely that Dubai’s de facto default will
trigger a cascade of defaults throughout the world, although the existence of credit default swaps
and similar financial instruments always renders that a possibility.

HCM is far more concerned about an eventual collapse in Mexico than the tawdry tale in
Dubai. Mexico was downgraded to BBB recently and its oil wealth is quickly being depleted.
Mexico poses a serious threat to stability on the southern border of the United States, and it is
likely that this Administration or the next will be asked to provide economic support to its failing
neighbor. The press has not caught onto this story yet, but readers should keep an eye on what is
happening south of the border. Mexico is likely to be a source of instability in the near future,
and markets are ignoring this possibility.

Year-End Thoughts

Unbelievably (at least to us), this issue of The HCM Market Letter completes the first ten
years of this publication. This would not have been possible without the support and
encouragement of our readers, for whom we are very grateful. With the publication of our
forthcoming book The Death of Capital in the Spring 2010, we will hopefully reach a wider
audience and participate in a broader discussion of the important topics in finance that are
shaping our world.

Year end is a time for reflection. Times are very tough for many Americans right now.
As we always do at this time of year, we encourage our readers to share whatever benefits they
may enjoy with those less fortunate during the holiday season. It truly is much better to give than
to receive, particularly for our readers who remain among the most fortunate in society. We also
encourage each of you to speak out and work to improve our political and financial system, which
continues to fail us. As Cormac McCarthy wrote, “There is no later. This is later.” We should
all remember those words as we make our way forward in the year ahead and try to make this
world a better place in whatever ways each of us can contribute. Each of us at Harch Capital
Management, LLC would like to wish all of our clients, friends and readers a happy and healthy
holiday season and New Year. Most of all, we wish you Godspeed!

Michael E. Lewitt
mlewitt@harchcapital.com

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The HCM Market Letter December 1, 2009

Disclosure Appendix

This publication does not provide individually tailored investment advice. It has been prepared
without regard to the circumstances and objectives of those who receive it. This report contains
general information only, does not take account of the specific circumstances of any recipient and
should not be relied upon as authoritative or taken in substitution for the exercise of judgment by
any recipient. Each recipient should consider the appropriateness of any investment decision having
regard to his or her own circumstances, the full range of information available and appropriate
professional advice. Harch Capital Management, LLC recommends that recipients independently
evaluate particular investments and strategies, and encourage them to seek a financial adviser’s
advice. Under no circumstances should this publication be construed as a solicitation to buy or sell
any security or to participate in any trading or investment strategy, nor should this publication or
any part of it form the basis of, or be relied on in connection with, any contract or commitment
whatsoever. The value of and income from investments may vary because of changes in interest
rates or foreign exchange rates, securities prices or market indexes, operational or financial
conditions of companies, geopolitical or other factors. Past performance is not necessarily a guide to
future performance. Estimates of future performance are based on assumptions that may not be
realized. The information and opinions in this report constitute judgment as of the date of this
report, have been compiled and arrived at from sources believed to be reliable and in good faith (but
no representation or warranty, express or implied, is made as to their accuracy, completeness or
correctness) and are subject to change without notice. Harch Capital Management, LLC and/or its
employees, including the author, may have an interest in the companies or securities mentioned
herein. Neither Harch Capital Management, LLC nor its employees, including the author, accepts
any liability whatsoever for any loss or damage arising from any use of this report or its contents.
All data and information and opinions expressed herein are subject to change without notice.

The HCM Market Letter

Michael E. Lewitt, Editor

The HCM Market Letter is published on a monthly basis by The HCM Market Letter, LLC. Offices
at One Park Place, 621 NW 53rd Street, Suite 400, Boca Raton, FL, 33487. Telephone (561) 226-
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