Waterbury Financial Strategies Inc CEO \/ Founder Rahim Thawer post this week: The US Banks: Carry Trade?<\/p>\n
A comparison of the investment strategies amongst the major banks versus smaller clearly indicates a dichotomy in various lending models. The US Economy is still in a financial turbulence and it may take a number of years for certain sectors to recover as the banks are not lending due to various internal factors. Lack of liquidity in the marketplace has simply incapacitated the national economy and the tremors are felt throughout various different industries and sectors. The question most entrepreneurs are asking, can our savings and cash flow sustain our current operations and how long will uncertainty last?<\/p>\n
The major US Banks are taking advantage of the very low interest rates, near zero and using to capitalize their investment and portfolios by purchase of stocks, bonds, other securities rather than lending those funds to the smaller banks. The marketplace is very sensitive to the data and press releases and can elicit in adjustments in the lending arena. The rules of lending have clearly changed and free market maybe a term that barely exists anymore. A number of smaller banks are tied up and restricted to so much that they can do as the new underwriting guidelines are more regulated.<\/p>\n
Lack of lending into smaller communities will eventually lead to closing of number of businesses and add burden to the tax payers and create a domino effect resulting into closing of other businesses as well. Looking at the fundamental swell of the lending arena; there was relative little the banks can do which results into closing of many financial institutions and this may very well be a start. We have already seen a wave of residential default and just starting to see the commercial side.<\/p>\n
My Thoughts: cut all your expenses and renegotiate with all the vendors and lenders. It is critical that the small businesses survive as they employ most of the citizens of this country. Diversify your risk by making sounds investments for the future, look far on a global scale. Think of new concepts and get creative to build your business.<\/p>\n