Tuesday, March 9, 2010
Things are looking up...
Consumer credit increased by $5 billion or 2.4% as reported by the Federal Reserve on Friday, March 5th. This is the largest increase since July 2008. The stock market has increased for the sixth day in a row, Treasury’s fell, thereby increasing the yield. The unemployment figures that were released on the 5th were ugly, but positive. The country only lost 36,000 jobs, which is down from some anticipated estimates of 60,000. This is not great news, but Wall Street saw it as a positive sign. When a negative is smaller than anticipated that is a positive.
Credit card debt fell by $1.7 billion, which is the 16th straight month of declines—the longest on record. Automobile loans, home loans and other non-revolving debt increased by $6.6 billion. Consumer spending rose by 1.7% in the fourth quarter of 2009 and retail sales climbed 4.1%, which is the sixth straight gain and the biggest in 27 months.
If the consumer can continue to feel confident in their situation then spending will continue. This is an important statistic because 70% of the U.S. economy is comprised of consumer spending. So many positive signs are very exciting. If we can get the banks to begin making small business loans, sustain consumer confidence, monitor interest rates to fight off inflation without stifling growth, employers will begin employing, the economy will continue to grow and we can begin to study the bad dream of the previous two years with the hopes of not reliving it.
Credit card debt fell by $1.7 billion, which is the 16th straight month of declines—the longest on record. Automobile loans, home loans and other non-revolving debt increased by $6.6 billion. Consumer spending rose by 1.7% in the fourth quarter of 2009 and retail sales climbed 4.1%, which is the sixth straight gain and the biggest in 27 months.
If the consumer can continue to feel confident in their situation then spending will continue. This is an important statistic because 70% of the U.S. economy is comprised of consumer spending. So many positive signs are very exciting. If we can get the banks to begin making small business loans, sustain consumer confidence, monitor interest rates to fight off inflation without stifling growth, employers will begin employing, the economy will continue to grow and we can begin to study the bad dream of the previous two years with the hopes of not reliving it.
Monday, March 1, 2010
Venture Capital in the 4th Quarter and 2010
The Venture Capital industry, like other financial service industries was hit hard during the “Great Recession”. This past year marked the lowest level of investment in over 10-years. We haven’t seen levels this low since 1997. This past year represented a 37% decrease in terms of dollars invested and a 30% decrease in deal volume from 2008. It was the second year in a row of deal and dollar declines. I could focus a lot of time on the downward trending figures in the past 24 months, but there is some good news and I would prefer to focus on that.
In looking at Thomson Reuters data, which was reported on by Money Tree, PriceWaterhouseCoopers and the National Venture Capital Association, the fourth quarter of 2009 had some bright spots. Seed Stage companies receiving investments increased by 2% in terms of dollars invested in the fourth quarter. The number of Early Stage entities receiving investment increased by 32% and 26% in terms of dollars invested. Expansion Stage companies receiving investment increased by 19% and the number of Late Stage entities receiving investment increased by 5%. Now some of these segments saw the dollar amount invested decline, but the number of entities receiving investment is on the rise.
The Biotechnology Industry became the largest investment sector in the fourth quarter of 2009 with $1.0 billion being invested in 108 deals. This is a 10% increase in terms of number of deals. Software investing increased in the fourth quarter with $959 million going to 177 companies. It was the largest segment in terms of deals and the second largest in terms of dollars invested for the quarter. Internet specific entities saw an increase in investment in the fourth quarter with a 20% rise in the number of deals and a 14% rise in the amount of dollars invested.
It’s too early to say if the fourth quarter of 2009 was the start of a trend and the third quarter marked the bottom of the trough, but the statistics are worth noting. Raising capital should be a difficult process, (not all ideas and management teams are equivalent and capital is limited), but the process over the past 24 months has been more than difficult—it’s been close to impossible. I’m hopeful that 2010 will be a better year for both those seeking investment and those looking to invest. Nothing could be worse to our long-term well being than stifling our innovators and entrepreneurs with a lack of funding.
In looking at Thomson Reuters data, which was reported on by Money Tree, PriceWaterhouseCoopers and the National Venture Capital Association, the fourth quarter of 2009 had some bright spots. Seed Stage companies receiving investments increased by 2% in terms of dollars invested in the fourth quarter. The number of Early Stage entities receiving investment increased by 32% and 26% in terms of dollars invested. Expansion Stage companies receiving investment increased by 19% and the number of Late Stage entities receiving investment increased by 5%. Now some of these segments saw the dollar amount invested decline, but the number of entities receiving investment is on the rise.
The Biotechnology Industry became the largest investment sector in the fourth quarter of 2009 with $1.0 billion being invested in 108 deals. This is a 10% increase in terms of number of deals. Software investing increased in the fourth quarter with $959 million going to 177 companies. It was the largest segment in terms of deals and the second largest in terms of dollars invested for the quarter. Internet specific entities saw an increase in investment in the fourth quarter with a 20% rise in the number of deals and a 14% rise in the amount of dollars invested.
It’s too early to say if the fourth quarter of 2009 was the start of a trend and the third quarter marked the bottom of the trough, but the statistics are worth noting. Raising capital should be a difficult process, (not all ideas and management teams are equivalent and capital is limited), but the process over the past 24 months has been more than difficult—it’s been close to impossible. I’m hopeful that 2010 will be a better year for both those seeking investment and those looking to invest. Nothing could be worse to our long-term well being than stifling our innovators and entrepreneurs with a lack of funding.
Tuesday, February 23, 2010
Usually positive, but always optimistic.
Today I was going to write about how consumer confidence has fallen to a 10-month low and the markets have fallen with it, but I have decided not to. Lately the economic news has been so bad that I feel the Financial Minute has started to take on a tone of negativity. This is going to be a year of recovery and there will be plenty of days with bad news. So, I thought I would try a more positive approach this week and present some statistics in a positive way. Did you know...the United States economy is the largest in the world at $14.2 trillion? Our GDP in 2009 was three times the size of the world’s second largest, Japan. We have historically run at a low unemployment rate and still do compared to most of the world, 91.3% of our eligible workers are employed. And we are home to the largest financial market in the world.
We can achieve a certain sense of pride by comparing ourselves to the rest of the world, but it is not relevant. Historically, if we think of ourselves as a great nation because we compared favorably to others then we would never have put a man on the moon and 200+ years of sacrifice and service would be lost. We have always achieved greatness by challenging ourselves, not comparing ourselves. What we have is tremendous, what we need to do is make it better. How do we raise the number of employed from 91.3% to 96%? How do we get loans into the hands of small business when some banks have cut back on their small business lending by 90%? How do we increase our savings rate, when 71% of our GDP is based on consumer spending?
Answering economic questions is only part of the equation, why have we had a recession every 8 -10 years over the past 30 years is equally as important. A growing economy will hide a multitude of sins and cause the American people to forget their current suffering, not because we are shortsighted, but because we are optimistic and when the pain is over we feel it won’t come back. However, it does and the next episode is only 10 years away if we continue on the same path. Recently, we have spent too much of our future generations money not to focus more of our energy on understanding how we got here and how we’ll prevent it from happening again. Let’s compete with ourselves and remember that making the impossible possible is what we do best.
We can achieve a certain sense of pride by comparing ourselves to the rest of the world, but it is not relevant. Historically, if we think of ourselves as a great nation because we compared favorably to others then we would never have put a man on the moon and 200+ years of sacrifice and service would be lost. We have always achieved greatness by challenging ourselves, not comparing ourselves. What we have is tremendous, what we need to do is make it better. How do we raise the number of employed from 91.3% to 96%? How do we get loans into the hands of small business when some banks have cut back on their small business lending by 90%? How do we increase our savings rate, when 71% of our GDP is based on consumer spending?
Answering economic questions is only part of the equation, why have we had a recession every 8 -10 years over the past 30 years is equally as important. A growing economy will hide a multitude of sins and cause the American people to forget their current suffering, not because we are shortsighted, but because we are optimistic and when the pain is over we feel it won’t come back. However, it does and the next episode is only 10 years away if we continue on the same path. Recently, we have spent too much of our future generations money not to focus more of our energy on understanding how we got here and how we’ll prevent it from happening again. Let’s compete with ourselves and remember that making the impossible possible is what we do best.
Thursday, February 18, 2010
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