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To: Road Walker who wrote (168679)	7/24/2002 10:36:24 AM
From: Robert Douglas	Respond to of 186894

One (minor) plus of the market decline is that the constant federal terrorist warnings have stopped. I guess the administration feels that the subsequent market decline would be worse for his job approval rating, than the intended support for his planned Iraq actions would be a plus. If the market decline keeps the U.S. from invading Iraq, it's a major plus IMO. I fear that the buildup to an invasion could knock the market down another 10-20%.

To: Road Walker who wrote (168679)	7/25/2002 4:15:25 AM
From: Amy J	Read Replies (2) \| Respond to of 186894

Hi John, RE: "the constant federal terrorist warnings have stopped" Before these warnings in May, the consumers and financial markets were starting to do better in April. I believe Bush's warnings had a huge psychological impact on consumers and investors in May and June. The public equities are in the tank, and it seems to have created a negative life of its own. His May negativity has created an uphill battle. I tend to believe the May warnings made companies much more conservative in their spending patterns. One person I know that has a lot of visibility on many privately held firms (I wonder if large companies will echo this behavior?) said in July, "things were getting better, but then all of a sudden the past two months just turned bad." A different person that has high visibility on a lot of private companies (say 100) said the same, that people were suddenly missing their targets in a huge way. I wonder how dependent large companies are on SMB for revenue? I went to an entrepreneur's party tonight and I didn't meet any new entrepreneurs (I didn't meet any existing ones either.) It's like they're all gone, which is too bad, because now is probably the best time to start a company. Labor is easier to find, money goes further, fewer competitors to be had, etc. I wonder how a lack of new startups will impact the public companies today and in the future? How much of large co revenues come from small companies? Probably small (?), so my bigger concern is: how will the lack of new companies impact the future, in the way of driving innovation and thus driving future revenues for large public companies? OTOH though one theory says, the outcome of any downturn is innovation thus, more revenue. Microsoft, Cisco, Compaq, and Intel were the result of a previous downturn. Regards, Amy J

To: Road Walker who wrote (168679)	7/26/2002 5:41:12 AM
From: Amy J	Read Replies (2) \| Respond to of 186894

Hi John, a WS Economist (Kaufman) has concerns over the economy as it relates to Public companies: "Federal Reserve and the administration take an "extraordinarily bifurcated" view of the relationship between the financial markets and the economy. But Kaufman said this view fails to take into account the "significant contractionary force that is bearing down on the economy from the bad financial developments" From: Message 17787611 To:ahhaha who wrote (4972) From: ahhaha Wednesday, Jul 24, 2002 12:48 PM INTERVIEW-Fed ought to cut rates soon--economist Kaufman By Ellen Freilich NEW YORK, July 24 (Reuters) - The Federal Reserve should consider cutting interest rates soon to cushion the impact of negative financial market developments on the economy, prominent Wall Street economist Henry Kaufman said on Wednesday. "The Federal Reserve should be considering lowering interest rates soon," Kaufman said. "The Federal Reserve should lower margin requirements on stocks. The administration should propose a reduction of the capital gains tax, corporate tax and some modest reduction in individual taxes in order to cushion this down-drag from the financial side," he said. Corporations are facing difficulties raising money, Kaufman said, and the way developments in financial markets are unfolding right now, chances are close to 50 percent that the economy will experience a double dip, revisiting the recessionary environment it encountered in 2001. ... But he said liquidity has been "significantly constrained" for corporations. "The high-yield market is virtually closed," Kaufman said. "The IPO market is pretty well closed. Commercial paper outstanding is contracting and is being paid off by forcing issuers into the banking system. Banks generally are becoming cautious in the extension of credit and market makers are holding down their position taking," he said. "Dealing with these many financial constraints is going to impinge and impinge and impinge on economic activity," Kaufman said. Conceding that his is now a minority view, Kaufman said the majority of private economists as well as the Federal Reserve and the administration take an "extraordinarily bifurcated" view of the relationship between the financial markets and the economy. A majority point to the rise in industrial production, the good level of housing activity, the good level of consumer spending, and low inflation and call the economy "fundamentally sound," he said. But Kaufman said this view fails to take into account the "significant contractionary force that is bearing down on the economy from the bad financial developments. "The mind-set of the monetary authorities and of the administration is not focused on how to deal with these financial contractionary forces," he said. "The view is that everything will be all right, that the so-called fundamental strength of the economy will prevail," Kaufman said. "My view is that it can't, and that there are no policy initiatives there to deal with this overwhelming negative force coming from the financial side." Kaufman said financial markets are currently flushing out into the open "many of the excesses of the last decade or so." Those excesses, he said, involved the shortsightedness of corporate chief executive officers and the failure of many boards of directors to really exercise their authority. "It involved the biased views of Wall Street analysts and the unwillingness of the supervisory authorities to really deal with the excesses that have been fomenting for some time," Kaufman said. "It involves lending institutions not performing adequate due diligence. That's the backdrop all contributing to this problem."

To: Road Walker who wrote (168679)	7/31/2002 6:37:43 AM
From: Amy J	Read Replies (1) \| Respond to of 186894

Hi John, RE: Kaufman's point More data related to this: Before the boom, approximately 350 companies went public, and they generated some source of revenue for large companies. (How much? Small?) Statistically speaking, before the boom, of 10 venture-backed early-stage companies started (not to be confused with "late-stage" startups), only 1 to 2 would be wildly successfully, the 3rd and possibly the 4th would be so-so (not great), and the other 6 would go bust. To generate innovation (which are some portion of revenue drivers for large companies) back to the levels before the boom, it appears we would need to see approximately 700 early stage deals per year (? not sure). But in Q2-02, VentureOne reports there were only 23 early stage deals (the rest/majority were late stage expansion phase about 750 of them.) So, that's a factor of 3.8 to 7.6 times less in early-stage-innovation than pre-boom times (if one believes the statistics folks tell me re: 1 or 2 out of 10 of early-stage venture-backed being successful). (7.8 = 700/23*4). But in the face of there being too many startups right now (around 10,000) (too many), this factor may not be too bad, it'll get rid of some of that. But it's actually the projected downward trend that might go too far, and has the possibility for concern as it relates to (whatever portion) that stuff makes up drivers for large companies revenue. (There's really no market/economic reports that estimate the impact of this to large company revenues.) Said another way, some industry experts predict the VC industry will enter something that it has never seen in 30 years: a deep depression expected to last until 2005. If true, that could impact innovation (or, the speed of innovation) to levels not seen in the past 30 years, and so, this leads to the question of what % is this kind of innovation acting as a particular revenue driver for the large companies? Worse case sounds like this has a duration of 3 years, so any impact is temporary. So, the bigger concern is, what's the near-term impact of a lack of liquidity for large companies (not startups) that could thus postpone for projects that would have generated revenues for other large companies? The large companies don't have a high-yield market to draw funds, they don't exactly have commercial paper, and banks are holding down their positions. AG, the Treasury, and the Bush Admin aren't addressing these contractionary forces on large companies' access to liquidity for growth. OTOH, I spoke with an Economist who felt confident about the economy (as Economists seem to feel, quite to the contrary of business people), and he said that the economy could indeed lead the country out of bad financials, that the financial side doesn't always lead the economy (though apparently over the past 25 years the financial market has generally lead the economy. (?) (Btw, I couldn't find that WSJ article. Wanted to read it too.) SJMN had a good article by a Stanford Economist who is not buying the gloom the business community is conveying to Economists. A business friend of mine, who has been around the block or two, said the kind of sentiment that's in the business community these days, will change when the stock market gets a solid footing. There's really no business sentiment indicator like they have with the consumer sentiment indicator, but the sentiment is there and it has a way of impacting spending plans and more importantly probably will get compounded by the lack of access to liquidity the large public companies may have and that's an equation for slow innovation and lower growth, for a bit. OTOH, a few good consumer reports in a row (representing revenues in the minds of consumer-businesses and thus confidence by non-consumer businesses in the consumer-businesses), and a stable stock market, and the business sector will change its sentiment. Glad Intel's strength is low-cost manufacturing. Perfect for today's market. It may need that more than anything else over the next year. Regards, Amy J