Yachts bob elegantly on crystal clear, calm waters while harbour-side restaurants buzz with activity. The early summer sun glistens on a vintage Rolls-Royce and a Mercedes. Carefree day trippers mingle happily with the residents of this pretty Californian town.
It is a picture of affluence and opulence. But all is not as first appears in Sausalito, Marin County, the bayside resort where rich San Franciscans play. A climb up the steep path to the top of the town finds the estate agent open on a Sunday afternoon. The boat broker is also plying for trade. Advertisements for yachts - the ubiquitous rich boy's status symbol - are pasted to the window, selling at big discounts.
This is typical of life in post-dot.com bubble California. Just 30 miles to the south of Sausalito in Silicon Valley, house prices are falling and unemployment is rising. The San Jose Mercury News estimates that up to eight homes are now for sale for every home sold - compared with just one or two last year. This micro-economy - the world's fifth largest economy in its own right - started to feel the pain of the new technology meltdown first. And the omens do not augur well for the outside world.
The creep is just beginning. The jobs axe that began chopping in California six months ago is now being used freely across the globe by Britain's Marconi, Canada's Nortel, Germany's Siemens and telecoms icons Ericsson and Nokia.
Lights out
It is a state that can prompt fads: when all was looking good just as new Labour swept to power for the first time, one of Tony Blair's favourite thinkers and an associate of political think-tank Demos, Charlie Leadbeater, argued that Britain should mimic its technological advances.
Even the lights are going out. The state of power supply is forecasted, just like the weather, on local television. A chain of delis in San Francisco's financial district is levying a 10% tax on purchases to deal with the electricity crisis.
John Chambers, the iconoclastic multi-millionaire boss of Cisco Systems, is doing his bit to save energy. The firm that last year made untold riches for its employees by manufacturing internet products is encouraging staff to wear Bermuda shorts. Chambers is doing his best to keep preaching, evangelically, that it is not all doom and gloom in the valley.
It is difficult to believe his message. In his smooth West Virginia drawl, the tanned Chambers repeats his mantra that the internet will change all our lives and boost productivity.
But times are tough. Cisco's share price is down from $52 to $18. The company has fired 8,500 staff - a fifth of the workforce - and Chambers has cut his salary to just $1. The offices on Cisco's campus are littered with the empty booths that now characterise working life here.
Overall, unemployment has jumped in Santa Clara county, the heart of Silicon Valley, for five consecutive months, taking jobless levels to their highest in two years, according to government statistics. May figures show unemployment was 3.2% - which, albeit below the US national average, is higher than locals are used to.
It is a stunning slowdown, matching the breakneck speed at which the internet craze took off, causing stock markets to surge and employment prospects to rise. Now Highway 101, the artery connecting Silicon Valley to San Francisco, once clogged and congested with youthful dot.com entrepreneurs in their flash new cars, is suddenly, quiet.
A native San Fransician financier sums it up. "The commute has always been horrendous. Now it's not so bad at all."
An entrepreneur more typical of the new wave of residents who raced to California to cash in on the boom is blunter. "This is recession," he says. "Look at the restaurants. They are empty."
Anonymity is important here now, as few are prepared to really admit that things have changed. Yet there are hundreds of people in the same situation as Jason, a twentysomething professional who joined in the equivalent of the 20th century's gold rush. Half of his closest friends have been laid off by their dot.com start-up companies. He fears for his own job - in a dot.com eager to rebrand itself as a "new technology firm".
He is suffering what Caren Mayer, banking analyst at Bank of America, describes as a "white collar recession" - one in which the job losses are felt among the better educated and more entrepreneurial workers.
They are also among the most mobile, a fact reflected by Craigslist.org, the local listing bible - online, of course. Rooms are now available, some 3,500 of them, compared with just 200 last month. There is a waiting list to hire vans to move out of California as the young entrepreneurs go back home - to eastern states or even Europe. Many are trying to find careers in their real areas of interest, far removed from the internet and new technology.
Surprisingly, Jordan Shlain, a local doctor looking for a new round of funding for his technology healthcare business, is upbeat. "As a San Franciscan, I love it. Now you can't go anywhere without seeing a 'for rent' sign," he says.
Six months ago, houses sold for twice their asking price. Local financiers know whom to blame. "The dot.commers were coming in here, saying, I'll pay $1.5m for a $800,000 home. Another would then say I'll pay $1.7m. That was the norm," says one long-time resident who works in the San Francisco financial district.
"We saw all these folks in their Jaguars, these are top of the range cars here. It was all borrowed and all leveraged. But it was so pervasive a year ago," he says.
Yet the entrepreneurs have not given up com pletely. In Palo Alto, the spiritual home of Silicon Valley, the University Cafe is alive with talk about technology. Two twentysomething men are pouring over spreadsheets. This is the place to come to find financing for your business, sitting alongside Stanford University where many of the new technology ideas - including Cisco - were born.
Revell Horsey, Bank of America's head of corporate and investment banking for technology, is still inundated with requests for financing. "A lot of people - more than ever - are looking for finance because the sources of finance have dried up," he says.
Pumping stocks
Instead of chasing after any dot.com idea, venture capitalists are now more choosy. This is why, according to Horsey, new ways of financing dot.com companies are being designed. Once, every self-respecting entrepreneur wanted a stock market listing - which has now left many big investment banks in hot water, facing accusations of pumping stocks.
Now it is long-term, stable financing they are seeking, particularly as the longer established firms such as Cisco and Lucent cease providing financing for the smaller firms they wanted to supply their hi-tech switchers and routers.
Tanned and relaxed, Martin Gagen, the chief executive of the new US operation of venture capitalist 3i, jokes that he is accosted by strangers in the Palo Alto Blockbusters video store looking for financing.
Just off Palo Alto's main street, the cinema is showing the latest release, Startup.com - an irony not lost on the locals. The subtitle beneath reads "pink slip party headquarters", a reference to the networking parties at which unemployed dot.commers meet to console each other and find new work. The "pink slip" itself refers to the US equivalent of a P45.
These are the same fresh-faced graduates who, only weeks ago, were touting for the financing for their now failed businesses over drinks and canapés at parties. The dot.com party may be over, but these revellers are just waiting for California's next big gold rush.
