A new normal?
That's what one financial services guru says America consumers can expect now that the housing market has collapsed and people are losing their jobs in droves.
"The worst is yet to come," adds Howard Davidowitz, chairman of Davidowitz & Associates. He thinks that the once lofty American's standard of living is undergoing a "permanent change" - with key financial assets gone that aren't coming back; such as . . .
-- An $8 trillion negative wealth effect from declining home values.
-- A $10 trillion negative wealth effect from weakened capital markets.
-- A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."
"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone." That doesn't necessarily mean we'll all be churning our own butter, he says. We're merely transitioning, if painfully so, from a debt-fueled economy to a savings-based one - just like our grandparents did.
Correspondingly, the pace of layoffs in the technology sector is at its fastest rate yet. TechTicker's "Layoff Tracker" says that in the last four months, it took tech four months to shed 100,000 jobs, five weeks to get to 200,000 lost jobs, and just three weeks to hit 300,000 lost jobs. The brunt of the hurricane has landed hard in Silicon Valley. Says Tech Ticker "An annual report from Joint Venture Silicon Valley and the Silicon Valley Community Foundation said that the local economy held up for most of 2008, until November. December saw a 1.3% drop in employment and the Valley's per capital income fell .8%-- the first time the region has seen such a drop since 2003. Not everyone is hurting: The percentage of households earning more than $100,000 per year has risen to 42%. Still, the percentage of households earning less than $35,0000 also inched up, creating a big economic gulf between the rich and the poor in the Valley. The fear sweeping high tech and the Valley: Now that we've finally been hit hard, things get far worse before they get better."
On to the stimulus bill, which some Wall Street observers could lead to buying opportunities in large-cap technology stocks. Says Greg Merlino of Ameriway Financial Services "I think the bill will help to get us out of this economic mess, but, let's face it, it's not going to be a silver bullet here," he told CNBC. "I think what investors need to do is dollar-cost-average into this market; if you've got some money on the sidelines, now's a great time to put it to work."
If you do decide to get back into the market, do so gingerly, and buy large tech companies like IBM, Apple, Google. "Stay with the industry leaders," he told CNBC viewers. "That's where the value is right now."
Larger technology companies will be at the top of the list of private enterprises who benefit from the largesse of the American taxpayer. Big public service projects like light rail lines, new schools, and green energy initiatives all will need technology infrastructure to become reality. Consequently, big Democratic Party donors like Apple and Google are about to be handsomely rewarded for their backing of President Obama and Speaker of the House Nancy Pelosi.