Every day that goes by without a rescue plan for the economy could trigger losses similar to Monday’s stock-market plunge, local experts warned.
Older investors could see their retirement savings shrivel. Businesses that rely on short-term credit could be forced to cease operating. And longer-term loans could dry up, further eroding hope for a quick recovery.
Here’s what else local experts say Central Floridians might have to contend with:
Investments
As the stock markets plunge, financial advisers are once again trying to calm the nerves of people whose investments are being gashed anew.
“Historically, it still remains true that, after all kinds of financial crises, the markets always regroup and always plow ahead,” said Dan Moisand, a certified financial planner in Maitland and former president of the national Financial Planning Association.
“At the same time, people have to realize that any money they put in the market shouldn’t be money they need to tap for a long time. Also, they can’t concentrate their bets in any one area, and should especially think twice about any money they have in their own company’s stock.”
Baby boomers on the verge of retirement are in a particularly tight spot, the experts said. They may have to consider working a while longer until the market recovers, said James Gilkeson, a finance professor at the Maitland.
“It is absolutely the worst thing to do — to pull your money out at the worst possible time, with the market down so dramatically,” he said. “People may have to sit back and work a couple more years until this is over so they are adding to — not taking away — their retirement funds.”
Housing
Slumping home markets in Central Florida and elsewhere across the country had begun to show some signs of bottoming out, but that could change if Congress fails to approve a bailout, said Hank Fishkind of the Orlando-based economic-forecasting company Fishkind and Associates.
“Housing, along with everything else, is going to get a lot worse,” Fishkind said. “Let’s hope they [lawmakers] reconsider their foolish actions, quickly.”
So far, most of the country’s home foreclosures have been because of bad loans, said Sean Snaith, an economics professor at the University of Central Florida. And as the housing market slid further, he said, credit markets began tightening and potential home buyers have had a tougher time getting mortgages approved.
But the next wave of foreclosures, he warned, would involve people with ordinary loans who would lose their homes after losing their jobs.
Tourism
Central Florida’s tourism industry was a source of strength for the local economy during the first half of 2008, but that could change if more consumers start worrying about their personal finances.
Abe Pizam, dean of UCF’s Rosen College of Hospitality Management, said consumer tourism might not slow for a few months, because many families might be reluctant, or find it too difficult, to cancel vacations that are already in place. But people these days are waiting longer and longer before booking flights and hotels, so the lag time may be getting shorter, he said. And business travel could decline much more quickly.
“Companies that might be canceling their conferences — that might have an effect in the next couple of months,” Pizam said.
Retail
Assuming the credit markets stay as tight as they are now, retailers that depend on short-term loans for things such as restocking shelves would be in trouble just as the all-important holiday-shopping season approaches.
Such loans have already largely dried up, said Britt Beemer, Orlando-based chairman of America’s Research Group, a national consumer-research firm. “You’re going to start seeing more store closings,” he predicted.
Local shopping centers’ overall vacancy rates are already expected to edge up to nearly 10 percent by the end of the year, according to study by real-estate brokerage Marcus & Millichap.
“It’s not a pretty picture out there,” Beemer said.
A continued financial crunch could also slow banks’ processing of credit-card transactions that would make it harder on retailers and others dependent on plastic, said Christopher Muller, a restaurant professor at the UCF Rosen College of Hospitality Management.
“What happens in a credit crunch is that cash will disappear,” Muller said.
Scott Powers can be reached at spowers@orlandosentinel.com or 407-410-5441. Mark Chediak can be reached at 407-420-5240. Richard Burnett can be reached at rburnett@orlandosentinel.com or 407-420-5256.
[via Orlandosentinel]