After reading a few articles on Venture Beat and Yahoo! Finance I thought that I would write a quick blog about my opinion on why the financial meltdown is happening as well as what effect all this financial disruption will have on the tech space, in particular startup tech companies.
First and foremost, a quick discussion on why this all happened. Many people and news outlets have their own opinions and sometimes it’s not as comprehensive as it should be. First off, in 1998 Clinton repealed the Glass Segall act. This enabled investment banks and commercial banks to merge together, causing less oversight within the banking system. Secondly, Bush pushed for low income housing loans in 2002. This was part of his economic stimulus plan to re-instate growth within the economy. Over 5,000,000 subprime mortgages were given out to people that couldn’t prove that they had ANY income or ANY assets. We are finding out now that some mortgage brokers were listing welfare checks as declarable income… (Are you kidding me?) These new loans were chopped up into pieces and put into tranches; loans grouped together by rating depending on the credit worthiness of the people paying the mortgage. These, in turn, were put into larger groups called CDOs (collateralized debt obligations). These CDOs were sold to major institutional investors all over the world. Many investment banks also bought them, and due to the ‘magic of banking’ they were able to re-loan about 10x of the amount that the CDO was worth. Using modern day financial engineering, many of these CDOs, and other mortgage back debts, were the foundation for new derivatives (another story altogether) and leverage. Today around $500 trillion dollars worth of derivatives exist in the world and only $50 trillion dollars of currency exists worldwide. So when people took out loan shark interest rate mortgages and couldn’t pay them the system started to freeze up. We are currently facing the largest financial bailout in history and possibly one of the worst recessions ever.
Now that we have a grasp on the problem we can talk about the effect on tech. I think that there will be a large effect in the tech space in terms of user base speculative value play. The facebook style plan isn’t going to hold much traction and I think that web tech companies are going to need a clear path to dollars. Venture Capitalists are going to tighten up their belts and be even more risk adverse with investment due to the availability of money from high net worth individuals and institutional players who deem Venture Capital as high risk. However, on the flip side, startup tech is relatively insulated from the rest of the market and tech companies that get funded during rough times are more likely to continue to get money due to lack of new deal flow.
Anyways, that’s my two cents and I hope that Wall Street can lick its wounds and that the tax payers of America don’t have to hand over their wallets.
I’d love to hear your thoughts on the matter as well, so feel free to shoot me an email at bbilotta@dexrex.com.
Welcome!
Tuesday, September 23, 2008
Tuesday, September 16, 2008
March to the Sea
When I last wrote a post about the cross-country bicycle trip being undertaken by my brother Ed and his girlfriend Kira, I left off with them taking some rest at a friend’s house in Wisconsin. I will now pick up from there.
From their friend’s house they continued across Wisconsin towards Minnesota. One portion of their route took them along the Elroy-Sparta trail, a bicycle trail which, like many others, was created from an abandoned railway. This is convenient as these bicycle trails can take advantage of existing structures such as bridges and tunnels that are too expensive to otherwise be available to bicyclists.
Ed and Kira then crossed the Mississippi River to enter Minnesota. While they were not able to obtain an exact count, they found the land of 10,000 lakes to be aptly named. They also found a wooden buffalo statue on a hill while camping in a park.
North Dakota was the next state they had to traverse. The two important landmarks that Ed and Kira encountered were the geographic center of the continent and a huge statue of Earl Bunyan. The geographic center of the continent is fairly self-explanatory, but many people may not be too familiar with Earl Bunyan. He was the appropriately large brother of Paul Bunyan, and a rancher by trade. He is immortalized in statue form in New Town, North Dakota.
Montana was by far the widest state Ed and Kira went across. The Rocky Mountains in the Western portion of the state also signaled an end to the flat terrain they had been riding on since Wisconsin. It was also the site of a near-disaster when the crank on Ed’s bike snapped while riding up a steep grade for several hours. This occurred close to sunset, and it seemed like Ed might be in trouble as they were miles from the nearest town. Fortunately, there was only another half mile of uphill before a stretch of over twelve miles of downhill slope. Ed’s bike was able to make it to the camp site through the powers of coasting, and with the help of some locals they were soon back on the road.
After a quick jaunt through Idaho, Ed and Kira found themselves in Eastern Washington State. Here they went through a series of mountain passes in the North Cascades. From there they moved on to Anacortes and then to Seattle, and thus their amazing cross-country journey was complete. People said that it would be a bad idea to cross the country East-to-West, as the journey would be frontloaded with rolling hills and marked by constant headwind. People also said that if someone were hell-bent on making the trip anyway, it probably would not be a good idea to use 40 year old steel ten-speed bikes. But Ed and Kira just went out and did it, and on top of that they made pretty good time. Congratulations to them!
The next step of their trip was to hop a train to San Fransisco and then to Mountain View to bring the message to Meebo. More details concerning how that went will be posted soon.
From their friend’s house they continued across Wisconsin towards Minnesota. One portion of their route took them along the Elroy-Sparta trail, a bicycle trail which, like many others, was created from an abandoned railway. This is convenient as these bicycle trails can take advantage of existing structures such as bridges and tunnels that are too expensive to otherwise be available to bicyclists.
Ed and Kira then crossed the Mississippi River to enter Minnesota. While they were not able to obtain an exact count, they found the land of 10,000 lakes to be aptly named. They also found a wooden buffalo statue on a hill while camping in a park.
North Dakota was the next state they had to traverse. The two important landmarks that Ed and Kira encountered were the geographic center of the continent and a huge statue of Earl Bunyan. The geographic center of the continent is fairly self-explanatory, but many people may not be too familiar with Earl Bunyan. He was the appropriately large brother of Paul Bunyan, and a rancher by trade. He is immortalized in statue form in New Town, North Dakota.
Montana was by far the widest state Ed and Kira went across. The Rocky Mountains in the Western portion of the state also signaled an end to the flat terrain they had been riding on since Wisconsin. It was also the site of a near-disaster when the crank on Ed’s bike snapped while riding up a steep grade for several hours. This occurred close to sunset, and it seemed like Ed might be in trouble as they were miles from the nearest town. Fortunately, there was only another half mile of uphill before a stretch of over twelve miles of downhill slope. Ed’s bike was able to make it to the camp site through the powers of coasting, and with the help of some locals they were soon back on the road.
After a quick jaunt through Idaho, Ed and Kira found themselves in Eastern Washington State. Here they went through a series of mountain passes in the North Cascades. From there they moved on to Anacortes and then to Seattle, and thus their amazing cross-country journey was complete. People said that it would be a bad idea to cross the country East-to-West, as the journey would be frontloaded with rolling hills and marked by constant headwind. People also said that if someone were hell-bent on making the trip anyway, it probably would not be a good idea to use 40 year old steel ten-speed bikes. But Ed and Kira just went out and did it, and on top of that they made pretty good time. Congratulations to them!
The next step of their trip was to hop a train to San Fransisco and then to Mountain View to bring the message to Meebo. More details concerning how that went will be posted soon.
Wednesday, September 10, 2008
Herb Kohl is the MAN
While checking all the updates in my google reader today I noticed this little nugget of goodness - http://www.engadget.com/2008/09/10/senator-opens-inquiry-into-rising-text-messaging-rates/.
Thank you engadget for the article, and thank you Herb for slingin' big ones.
We've been talking about this for a LONG time and I am glad someone is finally asking the question out loud - How can texting cost so much?! We started archiving SMSs for users a couple months ago and I gotta tell ya, an SMS is tiny. Like, SUPER tiny. I cannot imagine the storage cost is the reason some cell phone companies are chargin' 20¢ a text now. Its ludicrous.
Now, there may actually be a logical explanation for why the cost has doubled in the last 3 years, but I cannot seem to wrap my head around what that reason may be. Even unlimited plan prices are staggering where you look at how much information is actually sent/received.
I will be keeping a close eye on this story. Apparently, Sprint is "looking forward to responding to the Senator's inquiry". I am looking forward to it too.
Till next time, cheers all.
The contents of this post are from the mind of its author, and may not reflect the opinion of Dexrex.
Thank you engadget for the article, and thank you Herb for slingin' big ones.
We've been talking about this for a LONG time and I am glad someone is finally asking the question out loud - How can texting cost so much?! We started archiving SMSs for users a couple months ago and I gotta tell ya, an SMS is tiny. Like, SUPER tiny. I cannot imagine the storage cost is the reason some cell phone companies are chargin' 20¢ a text now. Its ludicrous.
Now, there may actually be a logical explanation for why the cost has doubled in the last 3 years, but I cannot seem to wrap my head around what that reason may be. Even unlimited plan prices are staggering where you look at how much information is actually sent/received.
I will be keeping a close eye on this story. Apparently, Sprint is "looking forward to responding to the Senator's inquiry". I am looking forward to it too.
Till next time, cheers all.
The contents of this post are from the mind of its author, and may not reflect the opinion of Dexrex.
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