What, us worry?

If the recent sell-off of technology shares was bad news, you’d never know it by talking to local investment professionals and economists. Nearly all of them are placing a positive spin on the crash.

Finally, goes the mantra, there will be less focus on a company’s sexy brand name than on whether it makes any money. Perhaps now, less sophisticated investors will realize that what goes up does in fact go down, and this reality check will be good for the long-term health of investors as well as the market.

“I’ve joked for a long time that you could tell the market was getting frothy if you were getting stock tips from your barber and your dentist,” commented Rick Hartnack, vice chairman of Union Bank of California. “The market has been frothy for the past two years.”

The recent sell-off “shows that things like interest rates and P/E ratios do matter,” added Tom Lieser, executive director of the UCLA Anderson Forecast.

But the factors that contributed to the sell-off, namely rising inflation and higher interest rates, matter to the local economy as well. And here too, there is a sense that at least some slowing is both inevitable and not necessarily a bad thing.

Cooling inflation fears

The national economy continues to grow at a pace an annualized rate of 7.3 percent in the last quarter of 1999 that U.S. Federal Reserve Chairman Alan Greenspan maintains creates a high danger of inflation. With recent data showing inflation jumping, most market participants expect another interest-rate hike when the Fed meets in May.

As a result, businesses are going to find it more expensive to borrow money, and construction of new houses will likely slow. This is already happening. Amid a healthy economy, home prices in Los Angeles County last month were higher than any previous March on record. But at the same time, national housing construction in March took its biggest dive in six years down 11.2 percent from February.

Greenspan hopes that tighter credit will make people think twice about spending too much for such big-ticket items as houses, slowing consumer spending, which accounts for two-thirds of the nation’s economic activity.

“The Fed’s policy of gradually guiding interest rates higher will curtail borrowing,” Lieser said. “And it will lead to a volatile but deliberate reduction in consumer spending.”

That’s another reason why some economists view the recent sell-off as something of a blessing. A cooler stock market means less danger of inflation.

Without question, the recent turmoil on Wall Street has helped alter the economic outlook for many. With more U.S. families invested in the stock market than ever, either directly or through mutual funds, the recent fall in share value will mean a very real difference in the pocketbooks of some Angelenos.

Good news for manufacturers

While higher interest rates may indeed slow L.A.’s construction industry and domestic consumer spending, it comes at a time when many of our overseas trading partners, especially in Asia, are on the rebound. Such a scenario would suggest a slackening of import growth and increased demand for locally produced goods for export.

“The regional manufacturing employers are likely to see some improvement after a tough couple of years,” said Joseph Magaddino, professor of economics at Cal State University Long Beach.

That in turn could be good news for the Long Beach and Los Angeles ports, through which much of the country’s trade passes.

None of this, of course, means much for L.A.’s technology companies trying to battle through this tumultuous period, especially those that will live and die on the Internet. Some of the recent sell-off was due to fears that e-companies are burning through their cash reserves too fast to survive, and the higher interest rates and lower stock prices will make it even harder for them to stay afloat.

As a result, many of the young, hard-working employees who have flocked to these companies excited by both the novelty of the work and the promise of significant quick wealth may be looking for work. As will the so-called day traders who invested in these companies and lost huge sums of money trading on margin.

“A lot of public investors around here were jolted by the wipeout in margin accounts,” said Edward Wedbush, president of Wedbush Morgan Securities. “It’s one of the things you don’t see numbers on, but those people got shocked out of the market.”

Whether enough people were shocked enough to significantly change the speculative practices that have dominated the market over the past few years is far too early to tell. But people are clearly paying closer attention to the data showing prices and interest rates going up, and closer attention to the daily movement of their stocks.

“I noticed the other day walking to work that everybody walking by the Charles Schwab brokerage on the street was looking at the ticker,” Hartnack said. “I’d never seen that before.”