GV, RE: "During the week following the 11.9.01 attack, the Fed added an average of $75.3 billion per day. The only time in history that the weekly average was higher was when the Fed modestly panicked at Y2K, adding an average of $93.1 billion in the week ending 05.01.00."
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75.3B/day vs 93B/week, means 75B/day is incredibly huge.
Btw, it's rare to see the use of international dates in the USA, at least in high-tech. Does the financial community use this?
RE: "Draining a big piece of this liquidity will be necessary."
Don't you think the bust drained sufficient amount of money from the system? 1.4T (if that's the correct number) vs 93B/day.
RE: "dollar will tank"
If so, does that mean stocks tank too?
RE: "But the Fed doesn't want to drain so fast that it inhibits capital movement."
Yesterday's SJMN business section had an article about, "Venture Capital Nearly Stalled." If they think VC $ is stalled, which by comparison to Angel $ it's not, they should look at Angel investors in the high-tech industry. I'm glad we're making revenue and also have relatively solid backing of some investment, I would not want to be in a situation where we didn't have either. This market is the kiss of death to those that don't, kiss good bye some good innovation on any early, early stage firms.
RE: "There isn't enough demand for capital right now to put those funds to use."
I have a question for you, but it's not related to INTC or the economy, but more personally related to our startup. We have a situation where our customer payment terms are net 30 days, and component payment terms are net 45, which means we have a buffer of extra cash for about 15 days. A good thing.
However, because it takes more than 15 days to build product at the moment, that means we have a gap where we have to cover this liability (it's net 30 from the day product is shipped & invoiced, which is later than the day we receive the Purchase Order.) The more volume we do, the more risk is involved in juggling this two week+ period, essentially it creates the potential for a cash flow risk. Currently, the formula we're using is: don't exceed what investors can pay to cover this risk. But at some point soon, I would expect (and actually hope, if the ramp goes as planned) we exceed the safety net provided to us by our investors on this.
Having said that, while I'd like to exceed that safety net, on the other hand I'm not comfortable with exceeding it either. We need to have some type of financial structure in place as back up, just in case, or we could stipulate a build-to-order-only, pre-payment policy. I would guess there's always going to be a certain % of customers that won't agree to pre-payment terms or miss their payments, which means we would need to somehow cover this, but how?
Given the economic conditions, I think it would be a bad idea to raise equity in this market, wouldn't you agree?
The short of my question is: with the equity market in the dog house, why would anyone raise capital through equity, rather than a loan, assuming that loan rates are lower than the cost of equity? Are loans less costly than equity? How does a person calculate this? What are the going rates for factor loans if the Fed Funds rate is .06%?
RE: "OPEC has little control over the price of energy now"
I was of the impression they did. I didn't know they didn't. How has this changed? Why do they have little control over price of energy?
Regards,
Amy J |
