SCM Missive | September 15th, 2008

William Smead
Chief Executive Officer
Chief Investment Officer

Dear Clients and Prospective Clients:In an 11-month stretch of 1978-79, Oil nearly tripled in price to $34 per barrel, inflation and interest rates skyrocketed and the U.S. Embassy in Iran was taken over by Shiite Fundamentalists for nearly a year. Panic, fear and pessimism ruled the day. From 1980 to 1989 I worked for the most profitable private company in the U.S., Drexel Burnham, which specialized in the so-called “Junk” side or below-investment grade side of investment banking and trading. During the Savings and Loan debacle of 1988-1992, Drexel Burnham entered Chapter 7 bankruptcy for liquidation in February of 1990.

Why do I share this? In 1979-1981 we were told by respectable experts that our economy would never again be the powerhouse of the world. In 1992, experts told us that banking would never be as profitable in the future because of the S. and L. debacle and the closing of 1000 of the 8000 banks that existed in 1988. A young governor from Arkansas argued in the 1992 election that “it was the economy, stupid.” This cleansing we are going through currently is powerful and difficult, but not new. While Merrill Lynch is no longer independent as of this morning, we are still “Bullish on America”

Call us today for reinforcement or join us tomorrow at our Roadshow Event in Seattle to review our discipline and consider which Northwest stocks deserve our affection.

Warmest regards,

William Smead

SCM Missive | September 15th, 2008

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