The Dow dropped 513 points today. The second worse day in the history of Wall street. Billions of dollars vaporized. The American public lines up at the British Consulate to leave flowers for princess Diana. Are we mad? Are we stupid? How many Americans lost everything today? How many retirements and college funds? I am starting to think that we deserve what we will surely get. While we sleep, the tokyo market will open. They will see our loss. They will react accordingly. Their market will fall even further. When Wall Street wakes up they will react on what happened in Tokyo and on and on. Tonight I saw investment pundits saying that this is just an overdue adjustment. All will be better in 3 or 4 years. I am happy that I have much rice and beans. I wish you all an abundance of beans for the comming months. This may become the salutation of the future: May you have many beans, how is your rice supply? Have you eaten today? This from the most advanced society in the world. By the way, Yelsin advisors have already said that Russia may revolt. North Korea has fired a two stage missle over Japan, The Arab nations will not turn over terrorists, South America will soon fall and the remediation efforts in this country, both private and government will fall short. Will someone with a more optomistic view please tell me that I am all wet?

-- Bill Solorzano (notaclue@webtv.net), August 31, 1998

Answers

No optimism in this climate and this is what is driving down the market. Sad situation for everyone. Market corrections happen. This market was too optimistic. People in the news looking for unreal returns forever and this is a good indicator what was going to happen when a belief is in place of unending positive momentum. What is scary is the belief that having a back to the land mentality is the way to go. For a short period, sure. But I do not want to live on wheat and beans. How many people do? Living to subsist is not a noble experience. Provide as if a storm is coming. But what if the storm goes on and on? Pretty soon the supply chain dries up. Sporadic to non-existant goods. Living in the woods gets old. I do not think enough of us have thought this through to the end. Most people spend 1 week in the cabin on vacation and the dream of back to the land starts. Subscription to Mother Earth News. Get real . It is real work. I for one grew up in farming and have no desire to go back to that life. I enjoy a low consumption life style, but appreciate air-conditioning, food stores and hot showers. I will prepare for the storm, but not by taking off for the country. The only positive thought I have is to hold out for the longer term. There are cycles in life. This country is still an economic engine and safe haven. Money flows here and so do people. Let us hope the economy and living conditions do not tank. We will all pay the price. Whether it is Y2K total breakdown, global warfare or a massive earth shifts causing land changes, the resulting living conditions will not be pleasant for anyone. Not my kind of life!

-- Greg Uhles (anon@anon.com), August 31, 1998.

Isn't it funny that when the market goes up, it's "growth", but when it goes down, it's an "adjustment". Someone said that economics is the greatest profession in the world. You get paid twice. Once, for telling people what is going to happen, then again for explaning to them why it didn't.

-- Lon Frank (none@thanks.com), August 31, 1998.

I've posted my economic opinions in the past so why stop today? 1. When the experts start talking about "all of the gains the individual investor have enjoyed over the last several years" then turn around telling everyone to hold the line, get worried. It means they are shorting the hell out of the little guy and making a bad situation worse. 2. Latin America is in much worse shape than anyone can imagine. Everyone sees Mexico as the towns along the U.S. border, Cancun, and Cozumel. There is a civil war in Southern Mexico as we speak. Columbia has lost over 50% of it's lands to the Communists. Venezuela's government is teetering. The problem with most investors is that they tend to listen to these morons on TV but never look at the news outside of this country. ASSININE! We are the largest investors in many of the countries now in trouble. Think about the implications of a Chase or J.P. Morgan defaulting!!!! 3. Russia. That says it all. Remember the Beatles song "Back in the U.S.S.R."? Klinton may get to do that too before he leaves office. The Communists will seriously get support if they promise the military a role in the government. When our rank amateurs in the foreign policy arena decided to expand NATO and open our arms up to Iran (I call this the "warm-fuzzy-feeling" approach to diplomacy) it was considered a slap to the Russians and an attempt to complete the encirclement of their country. 4. False idols. It was the honest belief that we had defeated the business cycle. But no one has answered the critical questions. What happens when this more debt than the wealth being created in an economy? What happens when consumers get cold feet and bail out? What happens to a service-biased economy in a depression? The Harvard model might work to a point, but it created a booby trap of land mines and we're in the middle of that field now. WE as a nation owe over 2 trillion dollars today. IF we every delay or reschedule a debt payment, what would happen to the world then? Worse, what happens if we try to refinance large debts(especially Klinton's 1 & 5 year notes) and there are no buyers? Do you see my point. Y2K will only aggrevate a bad situation. And our grip as the world's policeman and superpower will slip away. If you ever get a chance, before TSHTFW(orse), go to Mexico City and see our country 5 years from now. But don't go out at night. And travel with a group. AND definitely do not move about alone.

-- John Galt (jgaltfla@hotmail.com), August 31, 1998.

Yes all of the above is true, but on the otherhand, um... um... er... ah...

-- Uncle Deedah (oncebitten@twiceshy.com), August 31, 1998.

So, what about y2k? Not the biggest problem around, is it? Just another symptom of what ails us. I think it's time to start visioning a new future, a new economic system, a better way of living on the planet. I think that those who make it through what's coming at us will be those who have a vision of a future that is worth living for.

-- Joseph Danison (JDanison@aol.com), August 31, 1998.

And what might that be? It's really out of our hands at this point to do anything to help what is happening economically or socially. What goes up must come down. The most important thing to have WTSHTF is water, food, shelter, ammo, barter items, and cash. It won't matter anymore if your debts aren't paid, because anyone with debt including corporate America will be bankrupt. I heard that Bill Gates lost $4 billion today. Layoffs in the computer and semiconductor industry are happening already. It will be a global melt down, and it's happening very quickly. I'm glad I sold my mutual funds a month ago. Some investor guru said today that if you had stuck all your money that you put into the stock market at the beginning of the year under your mattress, you would be further ahead today and then some.

-- Bardou (bardou@baloney.com), August 31, 1998.

The party may be over, but no one will want to face the hangover that is going to follow. Look for a year end Dow 5000-6000. Fourth quarter earning (losses) all down. Asia, Russia, Clinton, Consumers, Imports, Exports..... No Y2K. That is the big storm of the economic coast that will head for land in second quarter 99 earnings (cost to fix) and hit home fourth quarter 99 (problems) Lights out 1/1/00. Where is Ross Perot, king of mainframes, now? Hiding from lawyers is my bet! Don't wait for a bounce, there won't be one. Can't you all see, the emperor is naked.

-- Bill (bill@mailexcite.com), September 01, 1998.

Ross Perot if laughing all the way to the bank. I think his biggest chunk of money is in government bonds! It's going to be interesting to see what happens the next few days. Don't forget, Monday is a holiday...........

-- Bardou (bardou@baloney.com), September 01, 1998.

The really interesting thing is that Y2K does not appear to have figured in the reasons for this crash. Therefore expect a (large?) "sucker" rally at some point in the near future, then another crash to still lower levels when the market finally wises up to Y2K. NB I'm not suggesting it's better to hold now than sell; I've really no idea if this rally will be from 7500 or 6000 or lower, you'll have to form your own view on that.

BTW, am I allowed to say "I told you so?".

-- Nigel Arnot (nra@maxwell.ph.kcl.ac.uk), September 01, 1998.

You know, you people seem to be getting awfully jazzed up over a couple of missing digits. Missing digits don't cause economies to collapse. Economies collapse because of bad political decisions or infrastructure collapse. Oh, you're saying, oh, I see your point.

Seriously, my favorite quote about the stock market (and I'll have to paraphrase) goes something like this: "In 1925 the Dow was at 1000. In 1945 the DOW was at 1000. In 1983 the Dow was at 1000". I won't explain it, I think you get the implication.

-- Amy Leone (aleone@amp.com), September 01, 1998.

If a drop of some 512 points in the Dow is described by brokers as a 'correction' does that mean that the Dow at its current level is wrong?

-- Uncle Deedah (oncebitten@twiceshy.com), September 01, 1998.

I'll bet the DJIA hits 10000 by August 2000. Sound far-fetched? We'll see.

-- Buddy Y. (buddy@bellatlantic.net), September 01, 1998.

Buddy

Are you putting your money where your mouth is? If so I have some Dutch Tulip Bulbs that should rise in value very nicely. Oh, I can also hook you up with a charming fellow named Ponzi, who has some real estate for sale in Florida.

-- Uncle Deedah (oncebitten@twiceshy.com), September 01, 1998.

In the process of preparing for the (reasonable?) worst, don't forget to keep hoping for the best.

Unfortunately I can't bring myself to tell you that you're dripping. But I think you'll be OK nonetheless.

LPL

-- Lee P. Lapin (lplapin@hotmail.com), September 01, 1998.

Uncle,

Yes, my money is where my mouth is. I lost some yesterday, but I'm letting it ride. When the Y2K thing blows over, whatever happens, there will be a hi-tech explosion like we haven't seen yet. The computer/internet industry is still in its infancy. Have you seen the prices of PCs lately?

-- Buddy Y. (buddy@bellatlantic.net), September 01, 1998.

Have you seen how Internet businesses like Yahoo, etc., have dropped dramatically in the stock market? I heard one "expert" say many of them will be out of business by the third quarter.

-- Bardou (bardou@baloney.com), September 01, 1998.

I think a lot of what happens on the internet is hype! I consider our family to be a typical family, spending habits, etc. A lot of these internet businesses are not going to make it simply due to the fact that the novelty wears off. We used to fight over who could use the internet. Now, other than Y2K issues, it barely gets used. I don't really trust handing out our charge card number here either. I agree that sites like Yahoo and others could go belly up before long.

-- Dave (dave22@concentric.net), September 01, 1998.

Okay guys (and Ami) I'm going to cheat and do the ctrl-C -> ctrl-v thing here. I sent this last Saturday to the "Motley Fool" web site (they have a good stock advice program, focusing on the long-term investment cycles. Here's a target: give me your ideas.

As a professional nuclear engineer, and a former power and systems control engineer, and being a current software testing and design expert, I work very tightly inside the "fixing it" side of the Y2K problems.

My question(s): > > 1. How can we find out (before investing in a stock, and on companies we > now own) whether that company (1) has noticed the Y2K problem, (2) has > funding, staff, and a plan to fix it (3) has finished testing its solutions > (3) has investigated (thoroughly) its suppliers, utilities and customers > about their Y2K problems, (4) has backups or safety nets for the first two > weeks/two months of 2000 to avoid bancrupcy/loss of > power/control/distibution networks/shipping/international markets/etc. > > 2. What companies have said they are Y2K compliant now, and how can we > build a portfolio to get stocks in companies that are/expect to be/will be > Y2K compliant. [If these stocks are identified now, then later (two-three > quarters from now] these stocks will be "only" ones preferred, then I can > sell these Y2K complient stocks, or will at least have protected my current > money when other (regular, stupid, short-sighted) company stocks have > declines/crashes/bankrupcies. > > 3. I believe there will be a massive sell-off (panic) of people trying to > get rid of stock investments in the last quarter of year 1999. This sell > off will be by people who aren't planning now, and who will be paniced by > others also frightened by others selling. > > There will be massive (but short-lived] problems in thousands of crucial > marketing and distribution services as networks of shipping, power, > control, and communication are lost in the first two weeks of 2000. These > problems will be world-wide. because no other country is as well-prepared > as we are. > > As these first tier problems in immediate distribution and power and > transportation are fixed, and lost businesses begin recovering and people > begin going back to work (mid-January mid-February) there will be large > financial/cash flow problems in these and other companies when billing and > accounts receiveable programs fail when payments are made in February and March. > These problems will be fixed, then in late March and April the federal > government will be figuratively "destroyed" as people realize that the tax > programs at the IRS either won't receive their payments (from businesses > and individuals) or won't be able to spot fraud and abuse (from cheaters.) > This will cause stocks to plument again in the early summer as the federal > deficit balloons, and some states and counties begin going bankrupt when > taxes and governemnt (school) budgets are "destroyed". > > But eventually, all the money now pushing the market up from baby-boomer > IRA/401K's > will have to go back into stocks and mutual funds. So this pressure will > lead back to a "relative" stock market boom through the last half of 2000. Problems > in early 2001 will be significantly less, but they will happen becuase of > "added" bugs from programming errors (5% - 15%) in the original Y2K bug > fixes. This trickle-down effect will probably not have a major impact > because the public will be shell-shocked by then. > > Oh by the way..... > > Wait until 2005-2015 for a real bear market when all this money now going > in from baby-boomers starts to go out to pay for their retirements and > their estates. Prices will return to their "true" level then of around > 4000-4500. That is real value of the stock in the companies that are being bought now. > Stcks won't recover to 9000+ until 2025-2030 when the current 1st-6th > graders (the baby-boomer grandchildren) begin investing in their 35+ to 40's > years. > > My take on Y2K: > Some of it will cause significant inconveneinces, and some of its problems > won't really won't affect things. > Many problems will exist, but simply won't ever be detected for days or > even months. (For example, with respect to the stock market, some problems > won't be noticed until March and July 2000, when quarterly reports can't be > produced due to various bugs.) Other quarterly reports will be printed and > issued, but contain all sorts of errors in facts and trends because proper > financial records can't be created or analyzed. In any case, lost business > (two-twelve days), lost earnings, lost wages, and > fraud+waste+abuse+theft+unrecoverable damages will cause 1st quarter > profits for everybody to be very poor. Then the lawyer's fees and damage > suits will start really increasing.) > > And quite frankly, parts and pieces of the problem scare the hell out of > me. > > The Y2K problem is already here -- my library card can't be renewed because the > present county computer program won't accept cards expiring past > 12-31-1999. ( They are trying to get a new program in place at the library, > but it isn't ready yet.) My ATM debit card works okay (in some states) as > a debit card, but can't be used as a credit card (unless manually printed > to the paper) because it expires in 2002. > > Remember the satellite that failed a few weeks ago? It affected ATM's > and pagers nationwide, but was caused by one program faiing for three days > in one computer for one satellite. Multiply its effect by 10,000,000 > computers running 100,000,000 programs affecting 250,000,000 people. Even > if only .0001% are affected by a Y2K bug, there will be millions won't > can't work -> can't produce products -> can't ship producrs -> can't buy > products -> can't get power/light/gas/gasoline/food/water/heat/fire > protection/police protection/money/etc..... > > > Robert A. Cook, P.E. > cook.r@csaatl.com >

-- Robert A. Cook, P.E. (cook.r@csaatl.com), September 01, 1998.

This was their reply to the above.

Hi Robert,

Thanks for writing. I enjoyed reading your letter and have forwarded it to our chief editor.

As for your questions: 1) The only way to find out about compliance, etc. is to contact the Investor Relations department of a company (even if you're not an investor -- we're all potential investors) and ask them your questions.

2) Here too, it's difficult to find a list or a single source of information. You could check the press releases (on the company Web site) to see if they've ever issued anything that refers to their Y2K status.

The rest of your remarks seem quite dire, and you may be right. We Fools invest for the long-term so even if there are problems at the beginning (as you predict), they should straighten out (as you also predict) so we tend not to worry about the situation.

We will be writing articles in the near future on the Y2K situation, so please stay tuned.

Keep Foolish and prosper, Judith Ames The Motley Fool TMFJudy@aol.com ****Become a complete Fool! http://boards.fool.com/Register.asp

-- Robert A. Cook, P.E. (cook.r@csaatl.com), September 01, 1998.

Uh, I always thought the best way to find out about a company was to read their annual report.

-- Amy Leone (aleone@amp.com), September 02, 1998.

Amy,

I suggest you do more research other than reading the company's annual report if you plan to make any investments.

-- Buddy Y. (buddy@bellatlantic.net), September 02, 1998.

Would anyone want to comment on Warren Buffett's purchase of a billion dollars worth of silver. Or his sale of Gov't Bonds? The SEC is pressing for y2k disclosure, but with disclosure comes liablity. The law firms a licking their chops. We can only hope that some sort of imunity can be granted for companies willing to come clean on y2k. Let the lawyers chase ambulances!

-- Bill (bill@mailexcite.com), September 02, 1998.

Buddy,

In reference to your suggestion that the market will reach 10,000 come August of 2000:

First they have to make software changes to handle 10K. When the software was written, they never dreamed the market would reach this heighth. In light of the problems with 2K, I do not think that this will happen anytime soon.

You might also want to check out Princeton Economics International's web site at www.pei-intl.com. Although they do not buy-in to the Y2K issue, they project that the market will continue to "correct" until it hits 6,000 around 11-6-2002. They also predicted that the market would peak 7-20-98. So they were off 3 days. Close enough for government work.

-- Anna McKay Ginn (annaginn@aol.com), September 07, 1998.

Buddy is not alone in his belief of a higher Dow. On day 500 I caught futurist author Harry S. Dent on "Market Watch". What he had to say absolutely floored me, "I am predicting a Dow at the 35,000 mark within 10-15 years". When questioned the host about how he came up with that figure he replied "I simply extended the current trend into the future". Now there is a novel approach.

BTW, Harry Dent is no dummy, he did in fact predict the current boom well in advance. His reasoning, with which I agreed at the time, was that with the 'Boomers' being in their prime earning years they would have the excess income to fuel a large boost in consumer spending, and they would also boost capital with retirement savings. These predictions turned out to be true.

His take on Y2K: bump in the road. Perhaps he is once again correct, but I have doubts, serious ones, deadly serious doubts. As in: if he is wrong, and I listen to him, I'm dead.

Hey Will, perhaps we should hold a "PP of the Year" contest, I nominate Harry S. Dent.

PS, Harry is also predicting a huge depression type downturn when the 'Boomers' retire. I think maybe they will be retiring early.

-- Uncle Deedah (oncebitten@twiceshy.com), September 07, 1998.

OK, I will hedge my bet a bit here. There are a lot of "ifs" involved.

If we can avert a global disaster and meltdown, which I am sure most here don't see happening, then the Dow goes through the roof rather rapidly.

-- Buddy Y. (buddy@bellatlantic.net), September 07, 1998.

Think about it: the only reason the Dow is so high is that the boomers are artifically pushing up rpices with their retirement funds. They will be retiring (maybe) on average between ages 55-70. Average it to 60-65. Assume they were born between 1945 and 1955, average around 1949. (I am just after them, coming in at 1955, figure on working until 70-75, maybe longer if I can find a good bicycle shop that needs an old fogey to turn nuts. So all this (for me) is hypothetical.)) That means they will be pulling all the money they are now deposting into the market from the market (in mass) between 2008 and 2015.

The reaal worth of the market is (inflation plus 3%)times 3000 points since real growth in the economy is about 3%. (3000 is about what the market was before they started screwing with it with their retirement.) The real value of the market is the value of the companies it represents: their employees, structures, and inventory, minus debt, plus their receiveables = The standard balance sheet of "what would it take to but/build this company"/number of shares = price of stock.

Anything above below that figure is speculation = tulips.

-- Robert A. Cook, P.E. (cook.r@csaatl.com), September 07, 1998.

Peak of baby boom (most babies born in one year)=1957

End of baby boom was not until well into the 1960s.

Baby boomers are having a baby boom.

When emerging markets stabilize again, US multinationals' income skyrockets.

Yeah, it's speculation, but so is Y2K doomsday.

-- Buddy Y. (buddy@bellatlantic.net), September 08, 1998.