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The Quake,the Valley and the Nerds

April 4, 2008

One seemingly innocuous news.
One extrapolation.
One assumption.
And one devastating conclusion.
This is one time, I don’t want to be right. But if I am by any chance then, God help us!

On 3rd of April i.e. yesterday, Bloomberg carried this news. [A snapshot of it from ET-Chennai edition has been given for those who find clicking on that link troublesome]
I will save you the trouble by translating the mumbo-jumbo. Auction Rate securities (or ARS) are ways for an investor to auction off his bonds.But when in February, the banks stopped buying the bonds, what happened was a ‘freeze’ in the system. Although people with asset more than $10 million have apparently been spared such a rude joke, the lesser people are still living a ‘milk shake gone sour’. So what do you do?

Nothing. Go to home and hang your pants. And if you can, sleep with all bond papers under your pillow and a shot gun nearby[lest somebody dares to steal ’em, but given the situation I am pretty much sure this won’t happen] . For the not so wealthy people, the apparent freezing of the system has induced a liquidity crunch.

My extrapolation: Wall Street is getting impatient, frenetic and even panicky. And while this panic was present for quite some time, but off late this has started to take on monstrous dimensions.

Now, if I am to assume right, then this panic is only bound to grow and not wither away with the coming days. In short, the tremors have just arrived, baby.The quake is yet to come. Now if they keep getting panicky like this, then can they call on personal loans and credit cards? Thats a question, which we will be hearing a lot in the coming days. And I am sure the answers will not be pleasant. With liquidity being a huge issue in the system, common sense says, the economics can get really bloody.

I am thinking and thinking hard, and by all shots, only one thing is getting clear to me. E-commerce. The very backbone of internet: E-commerce. If the personal credit system comes under attack then I am sure, a huge implosion of sorts will take place, which indeed will leave a huge body count. Present Web2.0 lives and thrives on e-commerce which breathes on due to liquidity in the market, personal credit cards and personal loans. So you take one out of the equation the others up in the hierarchy crumbles. You take the base out the entire pyramid crumbles.

Already Google in the first time in its history has laid off. It has even gone one step ahead to sell off Double Click. So whats brewing, you tell.[one place even quoted, its the time to either buy Google’s stock or sell it]

If Big G with 69% of online ad share in its pocket is tottering, then can the end be too far?

Now with the tsunami rising so high, will the ever blissful ever oblivious tech guys in the Valley sleep over the storm?

I don’t think so. This quake is directly headed towards Silicon Valley. Sometime back, Michael Arrington of Techcrunch talked about a controversial piece of news[it was about this ARS but the numbers were skewed :Moral of the story, when it comes to economics: Dont go to tech guys, go to fin guys. or better yet go to techno-financial guys like me :D]. Although I don’t believe he is seeing the right numbers but I think, if the present recession is going to anyway affect the nerds in Valley then this will be it!

So no more, all those flash ads on your Y! mail, no more of those ads by Big G on your favourite blog, and no more of advertisements on Fox TV either.
I don’t know which sucks more… to watch Lost without any ad breaks or no blogging.

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