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No, the "new economy" techs don't use debt in the traditional manner.
Instead they get cash inflows (burn money as it called) from their
VC's/Angel's if they are not public or through initial or secondary
offerings of inflated, overvalued stock to "investors". The FED can't
reach them by traditional means. But if interest rates and the FED
engineer a 20-30% decline in the Nasdaq and these stocks dive, investor
appetite for more of their stock may temper (given that what they
already hold will be worth a lot less than it is now). Also, if VC's
find that they are not getting 50, 100 or whatever insanely large
percent of return (though buying in low and selling high) that they
expect, then they may take their money elsewhere. I would guess that
these companies will then try to borrow money in the regular manner from
banks and so forth to continue operations, but they won't get it since
they have no profits and their only asset will be stock paper of little
value. The resulting fallout will be huge...
JW
-----Original Message-----
From: listmanager@xxxxxxxxxxxxxxx [mailto:listmanager@xxxxxxxxxxxxxxx]On
Behalf Of Michael Ferguson
Sent: Thursday, March 02, 2000 6:18 AM
To: realtraders@xxxxxxxxxxxxxxx
Subject: [RT] Re: OIL has almost reached our upside target of
32.35--35.85
Good topic. My question concerns the disconnect between the nasdaq and
the
dow/sp. It appears that the techs are flying because they do not use
debt to
finance their growth and acquisitions. I can see how inflation and the
pressure on debt rates will hurt home buyers, credit card addicts, suv
gas
bills, etc., but how or when will this apply to jdsu or nt or intc or
msft?
These companies do not borrow to do business. So how can the fed reach
them?
Caterpillar gets killed, but who wants to own cat with their growth
potential instead of the independently wealthy growth stocks?
Hopefully someone will address this.
Regards,
Michael
----- Original Message -----
From: "Earl Adamy" <eadamy@xxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Thursday, March 02, 2000 06:45
Subject: [RT] Re: OIL has almost reached our upside target of
32.35--35.85
| I'm expecting to see an uptick in inflation in the next couple of
months
| which scares heck out of the markets. High energy costs will percolate
|