Headlines--- Economy grows in 4th quarter on back of big ticket spending,

              ---- economists predict recession is over

    Meet the Leasing Newsmaker---Mark McQuitty ( transcript )

      Merging Leasing Associations/Response to Bob Rodi's comments

        Friday –Odds and Ends

           Moo Bad News from Gateway (evidence recession not over) 

                  NetBank Shareholders Approve Mortgage  Group Acquisition 

### Denotes Press Release

 

	Economy grows in 4th quarter on back of big ticket spending, economists predict recession is over

By Jeannine Aversa
ASSOCIATED PRESS

WASHINGTON – The U.S. economy grew in the fourth quarter at its fastest pace in a year, powered by the biggest jump in consumer spending on cars and other big-ticket goods since 1986, the government reported Thursday.

The latest snapshot of the economy's health as measured by the gross domestic product suggests that the recession, which began in March, has probably ended and may turn out to be the country's mildest downturn ever, analysts said.

That's consistent with the economic assessment Federal Reserve Chairman Alan Greenspan provided to Congress one day earlier, though Greenspan cautioned that the recovery will probably be modest.

GDP, the total output of goods and services produced within the United States, grew at an annual rate of 1.4 percent in the final quarter of 2001, considerably stronger than the 0.2 percent growth rate first estimated, the Commerce Department said.

The better-than-expected fourth quarter performance came after the economy shrank at a rate of 1.3 percent in the third quarter.

"This is a recessionette, said Tim O'Neill, chief economist at Bank of Montreal.

Economists are estimating the economy grew in the current January-March quarter at a rate of 1.5 percent to 3.5 percent.

On Wall Street, the GDP news boosted stocks early in the day but that enthusiasm evaporated, and the Dow Jones industrial average declined 21.45 points to 10,106.13.

White House spokesman Ari Fleischer said the latest numbers are promising but Congress still needs to provide relief. "They are encouraging signs but they are not good enough for President Bush to say we no longer need to help America's workers," Fleischer said.

Because consumers, the lifeblood of the economy, kept buying throughout the slump, they will have less pent-up demand, meaning their spending probably won't rise as quickly as in past rebounds, thus making the recovery less robust than usual, Greenspan and other economists said.

"We won't get a sharp recovery because we didn't have the pullback that we normally see so there isn't the room for advancement that we normally see," said Carl Tannenbaum, chief economist at LaSalle Bank/ABN AMRO.

In the fourth quarter, consumers, whose spending accounts for two-thirds of all economic activity in the United States, ratcheted up spending on costly manufactured goods, including cars, at a rate of 39.2 percent in the fourth quarter. That was the biggest increase since the third quarter of 1986. Zero-percent financing offers motivated buyers and sent car sales soaring during the quarter, analysts said.

Total spending by consumers rose at a brisk 6 percent rate in the fourth quarter, the largest gain since the second quarter of 1998. The government had previously estimated consumer spending rose at a 5.4 percent rate in the final three months of 2001.

Another factor contributing to the stronger fourth-quarter GDP was more brisk government spending, which rose at a rate of 10.1 percent, compared with a 0.3 percent growth rate in the third quarter. Economists said the increase reflects a big rise in federal spending on the war in Afghanistan and to improve security at home.

The trade deficit in the fourth quarter was also less of a drag on the economy than the government previously thought. The deficit reduced fourth-quarter GDP by 0.35 percentage point, rather than 0.85 percentage point as initially reported.

Businesses continued to cut back on spending on new plants and equipment and in the fourth quarter they reduced such investment at a rate of 13.1 percent, one of the biggest reasons for the economy's weakness.

Based on the current GDP data, the drop in economic output during the recession is a small 0.3 percent, which would make this the mildest recession in U.S. history. That record has been held by the 1969-1970 recession, when GDP fell by 0.6 percent. Economists believe the National Bureau of Economic Research, the official arbiters of when recessions begin and end, will declare this one ended in December, January or February.

Separately, the Labor Department said the four-week moving average of new claims for unemployment benefits, which smoothes out weekly fluctuations, fell to a six-month low of 373,250 last week, another sign the economy is improving.

"The recovery is now," declared ClearView Economics President Ken Mayland.

––

On the Net:

GDP: home.doc.gov/

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Meet the Leasing Newsmaker---Mark McQuitty ( transcript )

 

It was like “old home week” as many ex-Republic Leasing of Anaheim salesman logged in to talk to their
old boss. During the two hours, over 125 entered the chat room to speak with Mark McQuitty, co-founder of Republic Group, Inc., who we commonly call Republic Leasing of Anaheim.  He and Jim Raeder

formed Capitalwerks, then took over the assets of Preferred Leasing, moving

their company from Anaheim to the “snow” country.

 

“I hope you are doing well, how have the debt sources received you and Capitalwerks? “

[ Mark McQuitty ANSWERS ]

“I remember some of you boys from the old chat board...good to hear from you...tough year, but
volume's up and you know that's all the lenders want to see as long as the credit's good.”

 

There were other personal questions, too, about his soccer team, beer at Fritz’s,

and McQuitty recognized many of the internet log on names, seeming to

enjoy hearing from them.  There were also a lot of other questions, such as:

 

I have seen our old friends at Amex buy some real dirt lately. Do you think this will bite them later on?

[ Mark McQuitty ANSWERS ]

It already is...what does a travel services company know about equipment leasing?...Rockford?.

 

 

Most of the questions were about business today, although it started with

the top of the three part series.  Here is an abridged copy of the “Meet the

Leasing News Maker” transcript:

 

“Given your experience at SierraCities, do you feel that a roll up strategy can actually work? You seem
to advocate a decentralized approach but can you control costs and write-offs this way? “

[ Mark McQuitty ANSWERS ]

It does work....1998 saw retail origination at FSF generate net income of $20mm....that was
before mgmt lost the plot!

 

 

 

“What and why did the First Sierra Financial melt down happen?”“

“It clearly spelled out in Kit's article.... basically what went for mgmt got away from fundamentals.”

 

“Given your experience at SierraCities, do you feel that a roll up strategy can actually work? You seem
to advocate a decentralized approach but can you control costs and write-offs this way? “

[ Mark McQuitty ANSWERS ]

“It does work....1998 saw retail origination at First Sierra Financial generate net income
of $20mm....that was before mgmt lost the plot! “

 

 

“What is your view of small ticket leasing--long term in light of the significant departure of major
funding sources? “

“I'm aware of 5 new lenders coming on line shortly...I'm very excited about our prospects as an industry. “

“How long do you think it will take until we see significant improvements in our industry.”

“It's happening right now.... credit drives marketing...all our competition has gone...quality credits can't
get bank funding...pick up the phone!! “

 

“How has the leasing industry changed since you got into the business in the early 1990's? “

“The basics haven't...but with credit scoring there isn't any story 'd credit that a gullible credit officer will buy...credit
evolved to more of a science, which is good for our industry.”

 

 

“What about the regional and community banks wanting to fund leases? Do you see that trend? “

“They're popping up all over the country.... one of my reps just secured a $1mm application from a bank in
the Midwest I've never heard of....this is a common occurrence now, again, they just want good credits.”

 

Mark, do you remember a time where so many in the industry have been laid off?

NEVER....the first company to realize the valuable reps with all their relationships and gets first to
market...wins this...and we're working hard to be that company

 

“We've seen things picking up since mid-Dec, though we force pounding the phone the old school way.
Have you found the market improving as of late as well? “

“Yes....the market place will always reward hard work....this is not a marathon, it's the Iditarod...whole
teams of dogs still have to fail”

 

“ ‘Iditarod.’, what is that?

“The grueling cross country race in Alaska with dog teams.”

 

 

“Do you see the market coming back soon, or do you think the leasing industry is in a slump for the long haul?”

“It's coming back now...institutional memory is short...the multiples will be back and the market will again respect bottom
line generators of NI...stick to the fundamentals.”

 

“I appreciate your optimism about our market, but have you ever personally seen credit windows this bad?”

“It's all relative...this is an awesome market compared to when Jim and I started in 92...our buy rates were
18$ to 22$ and app only was $35m at Denrich...thanks Wing! “ ( Mike Wing, director of FSF, formerly Denrich. )

 

“The year has definitely gotten off to a rough start. With the economic stimulus (low rates). How long do you think
it will take until we see significant improvements in our industry  “

“It's happening right now.... credit drives marketing...all our competition has gone...quality credits can't get bank
funding...pick up the phone!! “

 

“How do you compare the middle market to the small ticket? What makes small ticket better...if so? “

“More deals; less aggravation; less groveling to MBA'S with titles; higher margins.”

 

 

“How many sales folks does Capitalwerks/Preferred have now? are they hiring?

62currently...we are aggressively hiring and looking for elite reps.” ]

“ Do you work exclusively  through vendors...or end users?

60 % vendors; 20 % marketing out of the preferred database.... the rest miscellaneous...we
get the vendors through the "transactional" deal.” ]

 

“How much revenue do you expect annually from each of your reps?”

“I train my reps not to limit themselves....I've got some that do (gross margin) $10,000/mo and
one "master" that has done $200m/mo”

“Any advice for salesman still at first sierra/amex? “

“AMEX is forcing the reps to be vendor flow specialists...this is not for everyone...I couldn't work like
that...my commitment to my reps is that we will try to find a home for every credit worthy deal.”

 

“What would you advise a new salesman entering the leasing business today?

..come and learn the business from the best...I'm currently hiring!! “

 

“Mark with the margins compressing and focus from debt sources being shifted to vendor driven business,
is capital werks shifted focus from "Structured Finance" to vendor originations.”

“There's certainly some truth to your observation, but as I said we find our vendors by focusing on the
individual transaction....every time I fund a vendor, the next question is can you set a program up for me.”

 

“Is GE a serious competitor in small ticket? “

“If they hook up with Capitalwerks they will be...seriously though, GE stands for "got everything", but
fortunately
they have never really had a small ticket retail presence...it's too expensive...and that's where we brokers
can get them the business without the "high touch" headaches that invariably is part of the small ticket landscape. “

 

“What do you say to these Lessees who think that anything over 7-8$ apr is a bad deal? “

“I assume I've lost the deal and adopt the role of a financial consultant to ensure they're not getting taken
up the garden path.... and you know they are, so invariably they always come back and thank me for my 15$. “

 

 

“What happened to Jim Raeder? “

“He's an integral part of the CapitalWerks front office working on Treasury functions et al. “

 

“Another Rumor, Republic was in a desperate situation and Depping came in and gave you enough cash
to make payroll and that is why you took all stock. “

“Incorrect, we had $2.5mm in cash in the bank and a line of credit with Sanwa for $5mm....FSF sold us on
the low cost of funds and all the technology we could use.... it never happened! “

“Did you look into an IPO prior to selling to FS? “

“No....we wanted a strategic partner and had 3 offers on the table.”

 

“What happened to the old owners FSF stock they had when Sierra Cities sold to AMEX? “

“Most of the branches cashed out and were cash deals. We were one of the few that took a stock deal. We
really wanted to become partners. “

 

 

“What did you and Jim do between FSF and CapitalWerks?

“May 31st '98 was my last day at FSF.... June 1st, I began writing a business plan...there was no in-between.”

 

“Tell us what it was like to go from 210 salesmen to 70 to 10? And you could do nothing about it? “

“This was devastating to me and to all the reps who had been on a leasing E ticket ride for several years...for us to
watch mgmt fall under the "techno-spell" and start gambling was really tragic...what could have been???”

 “Did many of the sales force that FSF told you to fire believe that you were letting them down by letting them go?”

“In the end they were disgusted and quit before I even had a chance to fire them...they walked across town to all the
competitors shops.”

 

There were three interrupted sessions as the internet connection between

Mark McQuitty was lost, and he had to log in perhaps four separate times,

losing many of the questions, having to start over again.  There was one

session where Kit Menkin was reading the questions from one session,

McQuitty was answering over the telephone, and Menkin typing out

the answers for the chat room.

 

If questions were not answered, it was because of the technical difficulties

on the internet from the CapitalWerks server.  Perhaps an indication of

of why the Newsmaker was not fond of new technocracy.

 

Over two hours and 32 remained on line, but Mark McQuitty said:

“Time to get back to work.”

 

Mark McQuitty MMcQuitty@preferredlease.com

 

A full re-cap of the three part series will appear as a “Top Story” late Friday

morning and also in the Leasing News article section.

 

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Merging Leasing Associations

 

Response to Bob Rodi's comments:

 

 

Bob Rodi's on the mark when he suggests that there is no logical reason

why UAEL, EAEL and NAELB should not merge. 

 

Not only would the combined entity be a real force in the industry, it would

be a much better value for all concerned.  Leasing companies would benefit

from better education, much better networking potential and a much more

interested assembly of funders.

 

The service providers would absolutely LOVE not having to be members of four

or more associations, not having to be constantly on the road to make sure

they make each of their conferences, etc.

 

The funders would also save a lot of time and money concentrating their

efforts into one formidable association. 

 

Lobbying could concentrate on legislation concerning the small business

owner which may be overlooked by ELA. 

 

But it would never work, it makes too much sense.

 

Kevin F. Clune

kclune@clune.net

Clune Equipment Leasing

 

---- 

 

I must take issue with my good friend, Bob Rodi. I go to the ELA meeting every year (I am a member)
and make many contacts, new and old.  In my first year in business independently I can say that I have
met and formed relationships with at least five lenders who are buying one-off deals, generally
$100K - $1 Million, which fits  in that segment of my marketplace.  I find it a valuable meeting.
I have never missed one meeting, going all the way back to the meetings that were originally held
at O'Hare 20 years ago almost.

 

Steve Geller

geller44@optonline.net

 

----

I have been in the leasing industry now for nearly 15 years.  I say this

only to qualify my opinion.  My family has been involved in the industry for

over 35 years. 

 

In 1968 leasing was virtually an unknown.  Many people were just getting use

to the idea and the industry was really beginning to form.  People like Jim

McFeeters, Joe Woodley, Jim Harris and Chuck Thorn were finding it

challenging yet rewarding to sell leasing services.  Associations were

starting to form to collaborate and unite to address the needs of a

burgeoning industry.

 

These associations developed different core competencies and served

different segments of the growing market.  These associations continue to

serve different needs in the industry.  I believe it would be a mistake to

merge these organizations. 

 

The broker market has much different needs than the independent lessors and

funding source markets.  Funding is tight right now.  Brokers are being

squeezed.  The digital age is upon us and is still a mystery to many as to

how it will continually change our environment. Funding the necessary

technology is still out of reach for many of us.  Disintermediation is a

reality.  Our offering has become a commodity.  Those that survive will do

so because they figure out ways to add value.  The traditional funding

sources for small ticket leasing are feeling the crunch.  Profit margins are

shrinking and will continue to shrink unless the value issue is addressed.

 

It is no different for these associations.  The ones that provide value will

survive.  The ones that don't will go away.  ELA, UAEL and NAELB deliver

completely different solutions.  There is not a good match for a merger or

an acquisition.  The cultures are too diverse and the integration would be

difficult at best.  How many of the 1200 members would fade away and or

start new associations to counter what was phased out from their former

organization.  I believe many would. 

 

Times are tight.  What is the first thing that gets cut in times like these?

Those things that we can live without are the first things we throw over the

side.  ROI calculations become primary.  If our investment does not yield a

suitable return then we stop investing.  This is the problem with some of

our associations.  They have stopped providing value.  The cost at some of

these events amounts to a very expensive beer or round of golf and nothing

else.  

 

One item of particular concern is the state of membership records.  These

records are so inaccurate, (and they are kept online) that it is impossible

to find out who is still in the marketplace without referring to the list.

I don't call anybody without checking the List to make sure that they will

be there yet many companies are still listed as possible funding sources for

me to approach.

 

How difficult is it to purge a digital directory of dead wood?  If my

associations want my dollars they at least ought to be able to deliver a

current list on their web site of who is a member or still alive.  This of

course is only the beginning of small things that each organization could do

to add value to their member companies.

 

Maybe some need to go away or new ones need to be formed so that we can get

value.  Some are definitely better than others, but there is always room for

improvement. 

 

As far as meeting people or attracting the attention of capital partners at

any of these functions, that is my responsibility.  My job is to deliver a

high quantity of high quality business.  If I can do this, then I will have

plenty of people willing to invest in the business I originate.  If I can

not do this, then I do not deserve the investment.  The associations can

only bring the people together.  What happens next is entirely up to me.  I

like it that way.

 

Andrew Thorn

athorn@nowlease.com

 

 

Friday –Odds and Ends

 

Bob Fisher   Firerock Leasing

 

Both the new and old e-mail addresses are not working.  When we learn

that it is up and running, will let readers now. editor

 

 

  ( this title from Internet.com, not Leasing News )

Moo Bad News from Gateway

by Beth Cox, Internet.com news

Not withstanding all those clever moo-cow ads, competition-hindered
computer maker Gateway Inc. (NASDAQ:GTW) says it expects to post a
first quarter pre-tax loss, excluding special charges, of between $100 million
and $120 million.

The special charges are expected to be $75 million to $100 million, associated
with the restructuring actions (2,250 jobs cut from its current headcount of 14,000)
announced in January.

And although Gateway attempted to put on its game face at a meeting with financial analysts,
the company said that for all of 2002, it expects revenue in the range of $4.5 billion to
$5 billion and will record a pre-tax loss, excluding special charges, of $200 million to $250 million.

The Poway, Calif.-based company said it expects return to profitability, excluding special
charges, in fiscal year 2003. But for the first quarter of this year, it projects revenue of about $970 million,
down 52 percent from $2.03 billion a year earlier.

Price wars and intense competition in the PC market have left Gateway's shipment of units in fourth
place behind Dell, Compaq and Hewlett Packard, according to a recent Gartner Dataquest
survey.

"We've regained value leadership in our core products since we went to our new pricing
strategy and are bucking seasonal sales trends," Gateway Chairman and CEO Ted Waitt said in
a statement. "... This year, our objective is growth -- we'll continue to drive growth rates
that are better than the industry average and as a result, Gateway will return to long-term,
sustainable profitability and gain share in our target markets."

Gateway said that in addition to driving growth in its core PC business, the company is
advancing its digital solutions capabilities and will alter the mix in its order-for-delivery
focused stores by stocking them with more PCs for immediate sale, along with software,
digital cameras and wireless devices.

 

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NetBank, Inc. Shareholders Approve Proposed Acquisition Of Resource
 Bancshares Mortgage Group, Inc

ATLANTA, / -- NetBank, Inc. (Nasdaq: NTBK), the holding company for the world's 
first profitable and largest independent Internet bank, NetBank(R) (http://www.netbank.com ),
 Member FDIC and Equal Housing Lender, announced that its shareholders have voted in favor 
of the proposed acquisition of Resource Bancshares Mortgage Group,
 Inc. (Nasdaq: RBMG) (http://www.rbmg.com ), a wholesale mortgage banking company 
focused on the purchase, sales and servicing of residential, single-family mortgage loans
 through a nationwide network of mortgage brokers and correspondent lenders.  RBMG

shareholders approved the acquisition in a separate meeting.

    "The acquisition represents a great opportunity for both companies," said

D.R. Grimes, CEO.  "By combining the core competencies of our complementary

businesses, we can serve customers better and create additional value for

investors.  Employees of both companies are excited about the potential ahead

and look forward to working together to achieve success."

 

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