Friday, February 20, 2009

Alternative Views

Recently, there has been an increase in interest in our services within the financial sector, and that can have multiple reasons. But the root cause is that folks in this storage intensive business need to cut operational costs quickly and we can help them do that. Coincidentally, there is a clause in the new Stimulus bill which should help our business because it is going to make it harder for financial companies receiving TARP funds to hire folks with H1B visas. These companies may have to outsource these jobs to companies like Zerowait that can provide storage support services. With American jobs on the line I think it may be harder to reverse this clause than some folks think. I imagine that a lot of service companies and employees will be writing their Senators and Congressman to keep the clause without any changes.

No matter how you feel about the Stimulus package, it will have direct effects on the storage business overall because the cost of money is going to go up. As a significant portion of storage sales are financed, there will be a a increased cost for buying new equipment.


Here is an article that explains the potential problem pretty well.

With the US deficit soaring, Treasuries aren't a great safe-haven investment
Based on the cost of fiscal stimulus and the recently announced bank bail-out, the US federal government's debt to GDP ratio is heading much higher.


By Martin Hutchinson, breakingviews.com
Last Updated: 12:57PM GMT 19 Feb 2009

By 2011, it may even equal Hungary's current ratio, which skyrocketed due to profligate spending and remnants of centrally planned waste.

This suggests the credit quality of currently top-rated US Treasury debt may trend down more toward the quality of Hungary's government debt, which is nearer the bottom of the investment-grade pecking order. That's not a complete disaster. But it means treasury bonds won't really be a safe-haven investment either.


Assuming deficit projections by the Congressional Budget Office (CBO) for the 2009 and 2010 fiscal years are right, and adding in the costs of the stimulus package, the bank rescue plan and borrowing costs, US public debt would rise from 41pc of GDP in September 2008 to about 70pc of GDP in September 2011 - roughly in line with Hungary's December 2008 ratio.

... here is the issue stated at the end of the article

Finally, the projection assumes US interest rates remain low. With treasury-bond maturities now averaging only 48 months, higher interest rates would rapidly feed into higher borrowing costs and budget deficits.

Theoretically, this should cause more folks to want our support services. - Time will tell - : )

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