Market Saturation of a New Thing Driving The Bust?

Factual Questions
1

As I’m sure manny of y’all have noticed, we have an economic decline arriving. I could see it months ago and got in the habit of telling anybody who’d listen that no matter who was elected president, he’d have a recession to deal with. I’m not really sure how much the President can truly affect the economy anyway(I know Cecil treated the subject, but an archive search didn’t turn it up).

While there are a multiplicity of variables that tune (or detune) the economic engine, I wonder if the digital revolution has not been both the source of a lot of market energy that let us (North America) blow by the mid-to-late 90s financial disasters and/or malaise (I bet our professional writers on this board hate “and/or”) that affected manny national economies as well as being the source of the hole in the tire we now confront. I realize there are other sub-theaters working; energy prices would be one, another would be the world-wide collapse of communism.

If I think back to the mid-80s, I remember that I knew a few other folk who had computers, but the overwhelming majority of folks I knew did not, and were not even thinking about them. Manny small businesses existed without any computers. It seems like it was ~1990 when the wholesale conversion of all business finally rolled in (following on the heels of the late 80’s tide of “OK, I’ll get a fax machine.”) and it was soon followed by the rush of everybody else to get one in their home. And the World Wide Web came into being at about that time. And “dot.com” became lingua franca. All parts of the economy that did not exist a very little while ago.

Today I noticed Gateway announced 2100 layoffs - just another pearl in the string - and we’ve watched the collapse of the tech stocks and seen a rare unscheduled interest rate action by the Fed. OK, so I don’t need to convince you.

And, rereading what I’ve babbled so far, I can see the current downturn being the product of a confluence of events in several substreams of the whole mix.

So my question to all of y’all (prior to this becoming GD material) is: How much of a part of the economy has e-business become and is its apparent temporally local (we hope) collapse, blamed now on some sort of market saturation, driving the current economic downturn? I guess this begs the question of: how big a part of our economy had e-biz become?

2

First thing, you seem to be mixing your terminology. Are you interested in the tech sector, or just e-business? Because Gateway, for instance, isn’t considered to be an e-business.

But to the answer the question, just for e-biz: The companies themselves are not that big, in their direct role in the economy. Even the biggest e-biz companies are DWARFED by the standard old companies. Amazon sold a lot of stuff last year. They had revenues of $2.47B (and lost $500M). And they expanded into tons of new markets, and quickly became a leading presence in several of them. Sears sold a lot of stuff as well, in the same old way. Their revenue was $42.3B, with earnings of $4.75B. So Sears made twice as much in earnings as Amazon made in revenue.

OTOH the stock in the e-biz companies sure is worth a lot. The market cap on Amazon is currently around $6 billion. In March it was around $28 billion. $22 billion dollars is a lot of money to lose in 9 months, and I’m sure that had some effect on the economy.

So I guess my answer is… if the e-biz companies collapsed, it wouldn’t hurt all that many people directly, like the collapse of a biggie like IBM. But it would hurt a lot of people indirectly through the massive overvaluation and collapse of the e-biz stock.

(egad, I hope that made sense)