I suspect that this is it, the beginning of the end, but I’ve been wrong before. In any case, part of what’s happened over the past few days (Dow down 500 points) is that investors are suddenly noticing that the housing crash and sub-prime meltdowns aren’t the “contained blips” that the bulls initially assumed, but are in fact “contagious.” And that is leading them to recall that private-equity firms borrowed quite a bit of money in recent years to fund all those takeover deals–and borrowed it from, among others, investment banks, who may now suddenly be left holding the bag. And then of course there’s that $80 oil again.
If history is a guide, this market meltdown could be a major train-wreck, one that lasts far longer and is far more severe than most people expect. Why should this matter to digital media folks, most of whom aren’t employed in the financial services industry? Because, ultimately, everything is contagious. Money is flowing freely right now, both on the revenue side (lots of advertising) and investment side (as in the late 1990s, everyone and his/her brother is now a venture capitalist). If the public market craters, it will take much of the free-spending enthusiasm down with it, which will mean harder times for Alley companies and entrepreneurs.
The good news is that the fundamentals in this still-young industry are real: Everything’s going digital, and the rapid adoption and innovation will continue, no matter what happens on Wall Street. If we are headed into nuclear winter in the stock market, though, prepare for life to be harder and a bit less fun for a while (Unless you revel in watching your overpaid friends at hedge-funds, private-equity firms, and investment banks squirm, in which case you should be set up for plenty of schadenfreude). And take the money while you can.