The Elephant (Or Is It A Bear?) In The Room: Will The Housing Crisis Affect The Tech Boom?

August 10th, 2007

I can be such a pessimist at times, and this SF Gate article asks many questions I have, and pretty much lays out a domino effect of bad news that could sink the housing bubble and drag the economy at large with it.

Blackfriar’s Marketing provides a pretty good overview about a looming hedge fund crisis could be the equivalent of Katrina hitting Wall Street.

Marc Andreessen seems particularly enthralled with this hedge fund stuff as of late.

Jason Calacanis wonders about the possibility of a recession, too.

Bascially, an impending credit crunch sank the Dow nearly 400 points on Thursday. The days of Dow 14,000 are already looking like a distant memory.

Even if you’re not in hock, a credit crunch surely means it will be harder for people and companies to borrow money in the future, including those with decent credit. How this could affect the tech boom should be fairly obvious — many companies borrow money while they’re getting started, acquisitions will be looked at more carefully, who has time for technology when you’re losing money hand over fist, and lastly, if the market keeps tanking you can kiss tech IPOs goodbye.

Anyhow, I have mixed feelings on this. As a fiscal conservative I think the rampant borrowing on the part of the American consumer for the past few years has been totally reckless, and I have no sympathy for folks going massively into debt for a McMansion via an interest only loan that they have no intention of ever paying off. But hey, it’s their money, not mine. But when borrowing threatens to throw the whole nation into a recession and kill a technology boom, I obviously feel terrible about that.

I’m still keeping an eye on a handful of boom-busting signs (that some may notice, I’ve been watching since the start of the year):

• Dollar crash. Many countries hold trillions of our debt. They can easily hang us out to dry.
• Stock market crash. I mean –10% in one day.
• Terrorist attack. The last attack seemed well-timed to take advantage of the .com crash and knock the country down when we were already on our knees.
• War with Iran. Evidence is mounting.
• Housing continues to sink. Several years of house price declines, Japan style, and banks failing left and right.

Still, am I actively selling stocks? No. Being in my thirties I still have several decades until retirement, and the only thing I know about investing, really, is the advantage of time. Second, holding tight through the horrible days of 2001 — 2003 where the market looked like a toilet bowl, constantly flushing, rather steels you for down times. That said, I don’t recall the seventies or the Great Depression. So I will personally freak out out if any of the above four items comes to pass.

Just to leave you with some really depressing stuff, here’s last week’s James Cramer Armageddon video, and some dark comedy links to bear-o-rama websites:

• iTulip.com
• Daily Reckoning
• Housing Bubble