If the turmoil on Wall Street winds up crippling the economy, as many experts fear, the impact won't just be felt in headline-grabbing bank failures or dramatic swings in the Dow.It could be felt in quieter, less sensational fashion, too.Dampened retail sales and a slower holiday season as consumers retrench. Downward pressure on a housing market that's been slowly regaining its footing. A potential slowdown for venture capitalists, "angel" investors and the young companies they bankroll.The effect is partly psychological: The wild mood swings in the financial markets, accompanied by predictions of a global economic meltdown, have put a serious dent in consumer confidence.Ward Smith of J. Smith & Sons Inc., a home-entertainment business in Natomas, Calif., said business already was slow because of the soft housing market. Then, when the stock market faltered, things came to a near complete halt."The phones became eerily quiet for no good reason," he said. "Well, maybe there is a good reason. Everyone's (saying), 'We'll wait and see until we know what's really going on.' "Jadoo Power Systems Inc., a fuel cell technology company in Folsom, Calif., has seen customers rethink purchases in the past few weeks. The 7-year-old company, which employs 24 workers, has held a series of meetings to get a handle on the sudden chill in the market."It is the atmosphere of uncertainty that is having the greatest effect," said chief executive Leonard Devanna. "What's going on is not abstract. It's very real and impacts us day to day."The most obvious effect is on investment portfolios, whether it's an individual's 401(k) or the multibillion-dollar pension and endowment funds.In California, for example, big public-sector investors as California Public Employees' Retirement System, California State Teachers' Retirement System and the University of California have seen their portfolios diminish in the past month, with the losses running in the billions.Even with that drop-off, these institutions said their nest eggs remain intact and beneficiaries have no reason to worry. The CalSTRS, for example, said its "investment portfolio is strong and built to withstand any fluctuations in the financial markets."But when big institutions' portfolios shrink, that can reduce the flow of dollars available for investing in things like venture capital.Organizations like the CalPERS plow billions into venture funds. While CalPERS and others said they don't plan to curtail their venture investments, leaders of Sacramento's venture capital community said they think the volume of capital could slow in the coming months.Tony Sica, founder of the Sacramento Angels -- a group of well-heeled investors who fund startups -- said dollars are still being poured into companies that show promise. But the angels are growing more cautious."When the entrepreneur comes in, he's going to have to be realistic," said Sica, a former Intel Corp. executive. "I think there's going to be a lot more scrutiny."Bruce Dravis, a Sacramento attorney who works with startups, said one of his clients - an area technology company - put its excess cash into some financial securities to earn extra interest. But all of a sudden the market for those securities froze up, and the firm wasn't able to sell them.Prominent real estate broker Mike Lyon also knows what it's like when the phones stop ringing. The president of Lyon & Associates said things got very quiet when the stock market went into its downward spiral."It was kind of like 9/11, to be honest with you," he said.The saving grace was that there was a slew of deals already in the pipeline -- mostly bargain hunters snapping up foreclosed properties -- and none of the buyers backed out, Lyon said.Steve Galster of the Galster Group, a Fair Oaks real estate firm, said activity dropped off considerably for a few weeks but has just started getting better. One reason for the improvement: Some investors would rather put their cash into real estate than stocks.The commercial real estate industry, which already was struggling, got even slower when the Dow Jones industrial average started dropping."We're not seeing a lot of new activity in the last week or two, and I think it's going to get worse," said Garrick Brown, research director in Colliers International Inc.'s Sacramento division.E-mail Sacramento Bee reporter Dale Kasler at dkasler(at)sacbee.com.(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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