The Impending Danger Of Being Cash Flow Positive

Hey Jessavers

The crypto world is abuzz with the news that micro strategies have taken a half a billion dollars on their books and are now holding in in Bitcoin. MicroStrategy is a cash flow positive business making a net income of over $30 million a year and having a massive half a billion in cash on hand to improve their business. Sitting with that amount of cash in a world where inflation is going to run hot means they relative safety of their savings is under threat.

In a debt-based monetary system, as I've said for individuals and its the same for businesses, the savers are losers and running a profitable business sees you punished by tax and inflation. While consumers can do very little about it, companies tend to increase their debt burdens and use creative accounting to do things like stock buybacks to avoid the tax and inflation tax.

This drives malinvestment and why I feel the current economic system has a perverted incentive structure.

There's no point in making a profit

When you run a business to make a profit and have cash reserves you A need to pay tax, pay divident to shareholders and pay the inflation tax by keeping your company in a healthy footing.

So why do that if I can just run on debt instead? If I always have a debt to service I never have to meet those obligations, and I can continue to grow and promise I'll meet those obligations sometime in the future, which is what zombie companies tend to do.

Punishing prudence and profits

So if we're punishing the last few companies that are cash flow positive and run a tight ship and can survive pandemics and lockdowns then what hope is there for them. If eventually their fiat reserves are worthless and their investment opportunities to maintain purchasing power requires taking on more risk.

This means taking on debt is the more sound option to capitalise your company.

While many companies will opt for the smart move to go and raise capital in debt markets or public markets as investors will buy just about anything that offers a yield these days.

The smarter money will look to divest into something like precious metals or Bitcoin. At this point, it's not about trying to make a profit with your current capital and treasurer but to protect it so you can make moves for additional growth and profitability in the future.

Capturing the market

I have a little company and we own some crypto on our balance sheet, now think about this, in debted companies may seem smart under the current system but indebted companies have obligations and can't stack Bitcoin. Cash flow positive companies can, as this thing unfolds the way I think it will, the Bitcoin is worth more improving the balance sheet of the company.

Instead of having the company work harder to earn income, we save smarter increasing capital. Capital we can use to capture years of growth in an instant, to expand the company, caputremarker share both upstream and downstream and effectively outcompete zombie companies in my niche.

It sounds crazy now but eventually, balance sheets and fundamentals will have to be the measure of a company once again. We may be living in a financial fantasy now but those who have remained realatic and captured reserves in crypto.

I feel will be far better suited to expanding in the future once markets begin their correction and these new contracted markets with more competition for less demand will begin to weed out anyone with the slightest weakness.

Have your say

What do you good people of HIVE think?

So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."

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