Do you think this weekend's new Y2K media awareness, especially "60 Minutes", will raise concern within the stock market? Could the Dow stay above 9000 for the rest of 1998?

The irony about Y2K is that the kind of media coverage that will get the public to prepare, is exactly the same coverage that will take the market down.

Here's an article I saw about financial conditions through the end of this year. It's called, "Liquidity crunch could cause scare".

http://detnews.com/1998/biz/9811/29/11290040.htm

Do you think the stock market is about to "get it" with respect to Y2K? How easy could Asia, Russia or South America crash the market before January if Greenspan keeps cutting interest rates?

Or will it take news coverage of early Y2K problems in January of 1999 for the market to...maybe not panic...but at least "get it"?

-- Kevin (mixesmusic@worldnet.att.net), November 30, 1998

Answers

My guess is that the 60 minutes story will have "0" thats (zero) effect on the markets.

Remember, greed is a very powerful force, more powerful than fear. ww

-- WAYNE WITCHER (WWITCHER@MVTEL.NET), November 30, 1998.

This isn't really an answer but -- Didn't they do a good job covering the subject? I was impressed.

-- Ben Dair (not@aol.com), November 30, 1998.

I think that the 60 Minutes episode may signal the beginning of some very strange times in the financial market. A fairly large group of people still trust in 60 Minutes. The episode, quite controversial in the forum, was negative enough that it might cause a few people to take action. Gold prices are as low as they have been in a very long time. The combination of even a little doubt about the security of financial institutions and the prices of precious metals should cause, at least a small trend. As far as Russia goes, projections are indicating that they may lose millions of people this winter due to the cold and the inability to purchase food. They haven't paid their teachers over there for more than a year. I find it hard to fathom the possibility of there NOT being a revolution. Are we ready for Communism to make repeat performance? If any of this happens, it would have a rather large impact on the economy. I hate to nit pick, but fear is a primary motivator. Greed is a far second to the primal instinct that fear raises in all of us.

-- Kilgore Trout (ktrout@fakeurl.com), November 30, 1998.

Probably not - until last quarter 1999. Too many people want it up, not as a realistic value of th evarious companies.

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), November 30, 1998.

I just checked the DJIA (Noon, eastern time) just for the hell of it.

It's down 127 points. All other indicators are down too.

-- pshannon (pshannon@inch.com), November 30, 1998.

San Jose Mercury -- Breaking News http://www5.mercurycenter.com/breaking/ Stocks fall sharply on profit-taking NEW YORK (AP) -- Stocks fell sharply this morning in the heaviest bout of profit-taking since the market's record-setting rebound began in early October. At noon on Wall Street, the Dow Jones industrial average was down 117.40 at 9,215.68, threatening to post its first triple-digit loss in two months. The Dow, which gained 173.53 points last week, set a closing high of 9,374.27 last Monday for its first record since July ... [More]

And ...

Tokyo stocks fall, dollar higher

TOKYO -- Japanese stocks fell today as investors stopped buying to await more signs of economic recovery and details on the ruling party's new alliance with an opposition party. The dollar rose against the yen ... [More]

-- Diane J. Squire (sacredspaces@yahoo.com), November 30, 1998.

Ron Insana (cnbc) just interviewed Dr. Yardeni - 2p.m. est about the market and also Y2K. Yardeni said he wasn't concerned that much about the high p/e multiples, but that the analysts expectations consensus for next years earnings are 18%, and he feels this is "wildly delusional"...qualified with a smile and "but I could be wrong".

Y2K - the most bearish thing he said was not everything will get fixed. When Ron asked him should we take money out of the banks his answer was that he wasn't giving that advice... that we should have two or perhaps three checking accounts in case our bank has some problems. My opinion, which I've posted before, is his public remarks don't even match what he has on his own web site regarding Y2K. Read through it and then listen to him. See the differences for yourself.

Watch the last half hour of trading to see if the PPT (Plunge Protection Team) comes in buying. Right now, DOW down 165, Nasdaq down 41, decliners beating advancers two to one.

p.s. Hang Sang lost 3% overnight.

-- Rob Michaels (sonofdust@net.com), November 30, 1998.

Correction: The interview on CNBC was just before three o'clock, not 2. DOW now down 191, NASDAQ down 54... Looks like the PPT is still eating turkey.

-- Rob Michaels (sonofdust@net.com), November 30, 1998.

the DJIA dropped 216.53 today, (2.3 percent) and all other indicators were down.

Why today?

-- pshannon (pshannon@nch.com), November 30, 1998.

Profit taking supposedly. The averages have gone up what? 20%? or 25%? in six weeks or so. Watch Asia for an early lead to see if it continues or reverses.

-- Rob Michaels (sonofdust@net.com), November 30, 1998.

Bonds didn't do too badly

-- Anna McKay Ginn (annaginn@aol.com), November 30, 1998.

Come on guys, one day does not a trend make....yet.

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), November 30, 1998.

Yeah, let's wait until it falls again tomorrow, then we can panic!

More on the economic scene-- here is a bite-sized tidbit from Nikkei Net, dated Monday, November 30, 1998:

Japanese Economy Continuing To Weaken, BOJ Governor Says

Osaka (Dow Jones)- The Governor of the Bank of Japan said Monday that the Japanese economy is still worsening, despite rising public spending from the government's economic stimulus package released earlier this year.

"Private sector capital spending is still weak, while the weakness in individual consumption is very conspicuous, " Masaru Hayami said at a meeting with business leaders in Osaka.

Corporate earnings have been deteriorating, and the employment situation is also getting worse, he said.

"It's pretty clear that production, earnings and spending continue to decline," he said.

Japanese Economy Continuing To Weaken

-- Max Dixon (Ogden, UT USA) (Max.Dixon@gte.net), November 30, 1998.

Kevin:

There are so many very serious global problems of an economic and political nature that even without Y2K the markets are vulnerable. You and I and others on the forum have discussed some of them. The stock market is considered to be a 'leading indicator' or barometer of the economy, while Y2K is on the fringeof the streets 'awareness'. The market reacts on a minute by minute basis to news. Y2K news is a day late and a dollar short. So, I just don't see the market about to 'get it' with respect to Y2K until Y2K IS the news.

"How easy could Asia, Russia or South America crash the market before January if Greenspan keeps cutting interest rates?"

Some analysts have stated that another 25 basis points lower has already been factored into the market. Regardlessof if Greenspan lowers rates, stays put, or tightens, the markets will react to all of the other political and economic news that is happening. Japan, the second largest economy, as well as the rest of Asia, is the biggest threat to bringing down the debt house of cards, next Brazil/S. America, and Russia more from a political standpoint.

-- Rob Michaels (sonofdust@net.com), November 30, 1998.

The Dow down over 200 points today? Maybe I shouldn't have started this thread. I didn't take my own advice on public awareness:

"Watch out what you ask for. You might just get it."

-- Kevin (mixesmusic@worldnet.att.net), December 01, 1998.

More news from Japanthe Tokyo Stock Exchange installed a new computer system in November and this is the result:

Computer Problems In Tokyo JGB Futures Trade Fuel Worries

TOKYO (Dow Jones)-Computer problems again halted trading of Japanese government bond futures on the Tokyo Stock Exchange Tuesday - the fifth such malfunction since last week.

Traders said the uncertainty created by the repeated glitches had become a significant factor in the market and may have contributed to its recent volatility; 10-year JGB futures have plunged to three-month lows in recent days.

Computer Problems In Tokyo

-- Max Dixon (Ogden, Utah USA) (Max.Dixon@gte.net), December 01, 1998.

The Tokyo Stock Exchange is not an early indicator for the NYSE. The Tokyo Exchange basic purpose for existence and function is not the same as as NYSE. It is not a vehicle to create corporate capital. It is subject to forces that are not translated in the English version of the Nekkei Net site.

The recent announcment by Mr. Miyazawa that he would resign the financial portfolio is a sign of his resignation that the Japanese financial crises (there are separate, discrete threats) are unrecoverable. He is giving up. He is still faced with the same political and systemic challenges that will never allow the situation to improve. Japan is in "Decession." The five D's will swallow Japan. The world will feel the massive overload of financial burden and the effects of y2k at about the same time. Remember, most aircraft accidents are attributed to "pilot error." In addition, most accidents are the result of multiple failures that distract, confuse and overwhelm the pilot or pilots. Rarely does a single system failure cause an accident.

DEBT- The true debt is over $2,000,000,000,000. There is still no plan to resolve this debt. DEFLATION- The deflationary price spiral is the leading and cutting edge of a depression. DEFAULT- The Japanese domestic bankruptcy rate is equal to the Great Depression. The interest payments from massive yen loans due this month and the first 3 months of 1999 from Asian nations wil not be paid. DEREGULATION- The Japanese banks are overwhelmed with fear and completely distracted by the influx of foreign banks. The "convoy" system is crumbling and they have far too many things on their plate. They couldn't even properly manage their banks during the "best of times." DEMOGRAPHICS- The aging population will discover next year that their pension money is gone. Mismanaged and spent by their companies in the desperate attempt to hide operating losses. The government recently announced a 20% reduction in benefits coupled with a 10% rise in premiums for public pensions. Spitting in the ocean.

I hate repeating myself, but...what you read and the reality of Japan are not the same. Beware of applying your rationality and analysis to a place that functions on a different rational plane. It is almost as if the phyisical laws of nature are different here. It is like another planet.

-- PNG (png@gol.com), December 01, 1998.

Decession - sir? Rolling from recession into depression?

Are their armed forces still capable, or also hurt?

Is North Korean "waiting" then until 2000 crisis to invade S. Korea? Or can they "wait" that long?

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

PNG is it time to come back here while you can still fly? No place to run, no place to hide, and Y2K hasn't even hit Japan quite yet. * Sigh*

Then again, if Greenspan keeps cutting interest rates, pretty soon he'll bottom out and will have to give the money away like the IMF. Will that work?

What still works, pre-Y2K?

-- Diane J. Squire (sacredspaces@yahoo.com), December 01, 1998.

I second the motion, PNG. From what you're saying, you should be booking a flight out of Dodge, and soon.------------

On another note, the Dow dropped 100+ points in the first hour today, then climbed steadily back into (slightly) positive territory. Was this the plunge protection team at work, trying to stem Monday's damage? Must have shaken some folks to see more than 10 percent of the recent comeback disappear in seven hours Monday.

-- JDClark (yankeejdc@aol.com), December 01, 1998.

The PPT ususally comes in on a big down day during the last hour or half hour of trading. The posters over at Kitco get credit for the term PPT (and it's a great site if you follow metals).

-- Rob Michaels (sonofdust@net.com), December 01, 1998.

I think "Decession" is a fair description - one foot in the grave. Financial momentum behaves similar to classical momentum. There simply are no opposing actions or forces to change the path of the Japanese financial direction. You must pull back on the stick or turn the wheel to change the path of an aircraft or ship. No action has been taken. Nothing. The cultural disposition is getting in the way of sanity.

I also think it is fair to say that the U.S. stock market thinks only 6 months ahead. So, my take is it will be 3Q next year before any serious consideration of y2k will affect the NYSE. Let's not forget that this month will tell "us" the truth. All of the companies and organizations who claimed they would be "finished" December, 1998, with 1999 left for testing, will have to face the music. There will be no way to rationalize a failure to meet the schedule. The idiotic middle-management trap of promising to make up the time later will not work. December sure came quickly, didn't it? I suspect some y2k project managers will have some terrifying private thoughts next month.

The Japanese "Self -Defense" Force is formidable. However, the Japanese consider the U.S. to be the vendor for this service. The Japanese have paid the U.S. to defend Japan. The U.S. could never afford to keep the bases, people and equipment here in Japan without the financial support of Japan. This protection service is a business and the Japanese expect the Americans to deliver, if necessary. The U.S. miltary has just as much interest in "defending" Japan or South Korea. They will be all to happy to justify their existence by having a good fight. The miltary leaders realize that the 100,000 military people here are excess and unaffordable baggage, should there services not be required.

I don't think anyone can predict the actions of the North Koreans. They are absolutely the craziest, most looney-tune people on the face of the Earth.

Robert, interest rates here are not that low for corporate borrowers. The 0.25% discount rate is necessary to keep all the excess banks appear to be solvent. It seems as if there are ten banks on every corner and the next corner is only 10 minutes away --on foot! The Japanese consumer is the one who suffers the most. They are gouged at every turn. The current interest rate for a savings account is about 0.3 %. The bank fees for transactions exceed any interest income. Starting yesterday, the banks began offering mutual funds (called investment trusts here). The average Japanese consumer has zero knowledge of financial vehicles. Even Citibank here offers U.S. and European mutual funds in the traditional Japanese style--offer the consumer the shocking return of 3% to 5% per year, and keep the excess earnings from the funds. Many Japanese people think the 5% return is too good to be true and won't invest for fear it is a scam. Ohhh, the power of information and information control.

I don't think I can get out of Dodge. I thank you and appreciate your concern. There are some great people on this forum...you are my link to the "real world." I've been in Japan over 6 years and would have great difficulty starting over in the U.S. again...I'm 45 years old and the opportunities are limited. I think the future will be more clear in April, 1999. I could be wrong about the future of Japan. Unfortunately, my batting average has been pretty good.

-- PNG (png@gol.com), December 01, 1998.

I agree with Peter Gauthier's (PNG) posts on Japan and the threat the global economy. While the official figure usually put forth is that bad loans on the books of Japanese banks total about $1 trillion U.S., (about 40% of Japan's annual GDP) the real figure is probably closer $2 trillion, because of "off the book" bad loans to the Japanese Mob, govt. officials, etc. (It's a corrupt and incestuous system.) Some weeks ago, the governor of Japan's central bank, the Bank of Japan, tried to suggest to U.S. officials that the Japanese banking situation was much worse than anyone over here realized; other Japanese officials quickly shut him up. (Yes, that's an accurate description of what happened.) Every day more Japanese bank loans turn sour. This is an enormous disaster in the making. "Nightline" recently did a program on the Japanese banking situation and noted that virtually all the big Japanese banks (and they are HUGE) are technically insolvent; the only thing preventing bank runs is the assurance by the Japanese govt. that it will stand behind the banks come hell or tsunami. Still, it's enough to make you throw up your sushi. Last spring I corresponded with Ed Yardeni about Y2K, the Asian situation, and the growing Japanese banking problem; I speculated that if the Japanese banking system were to collapse, it would spark international financial panic and a global depression. (Japan is the world's largest creditor and supplier of capital; Japanese investors hold many of our T-bills and bonds. Asians generally are servicing much of our $5.8 trillion national debt that we've conveniently forgotten about.) Yardeni's email response? "I agree with everything you've stated." Everyone who has taken a hard look at this situation knows the enormous stakes involved. As of now, what nobody knows is whether the situation can be salvaged or not. If it can be salvaged, nobody knows how long it will take; "Nightline" quoted an estimate of five years, but nobody really knows. Japanese banks are in such sorry shape that most will currently loan money only to a few blue chip Japanese industrial giants and to the U.S. government (i.e., where there is no credit risk). Throughout Asia, banks have done a poor job in the past of analyzing loan risk; that didn't matter when Asian economies were growing at 8% or more a year. Now it does matter, big time, and there is a growing credit crunch across Asia. Incidentally, Chinese banks made the same mistakes; you just haven't heard much about that yet.

On the European front, Gartner reported some months ago that German banks (which are to Europe what Japanese banks are to Asia and the world generally) were one year behind their American counterparts in Y2K work. (Big German banks are doing better than small and mid-sized ones.) Yardeni's response to that news? "00, das es nicht gut."

The U.S. stock market continues grossly inflated. For the first time since the sharp recession of 1991, average corporate profits Q3 (1997) to Q3 (1998) actually FELL, yet the stock market boomed up 1500 points. To quote Alec Guinness at the end of "Bridge Over the River Kwai": "Madness. Madness." Yardeni knows that projections of 18% growth in corporate earnings in 1999 are insanity. Look for growth in the 3-5% range, if we're lucky. As for P/E ratios, some internet stocks now have multiples of 1000 to 1. This is raw speculation of the sort that, whether in the South Seas Bubble of the late 18th century or the U.S. stock market of the late 1920s, almost inevitably leads to big trouble. The stock market has been powered up by the mistaken belief that the worst of the global economic crisis is over and, of course, by the three FOMC cuts in the Fed Fund rate. You can bet Greenspan is getting ulcers over Wall Street's manic reaction to those rate cuts, but he had little choice: the global liquidity crisis is much worse than most Americans realize. (U.S. banks have $18 trillion in exposure to hedge funds and other derivative-based investment vehicles, by the way.) LTCM, with its two Nobel Laureates in economics who were too stupid to see the coming economic collapse in Russia (apparent to analysts like Cohen, Friedman, etc., since last Dec.), played riskier games than most, but they are hardly alone in their woes.

An excellent source of economic info (besides Yardeni's site at yardeni.com) is the Princeton Economic Institute's website, at www.pei-intl.com. Their latest report suggests that, because of the recent run-up in U.S. equities, there now is serious risk of a full-blown crash next year. (PEI is considered one of the top economic forecasting units in the world; as they are fond of noting, Japan recently voted them #1. This is the outfit that the Reagan Administration consulted after the crash of 1987, which PEI had precisely predicted.) PEI's data for some months has been drawing disturbing parallels to what happened in the world in 1929, including the precipitous plunge in commodity prices.

As for when Y2K will start to kick Wall Street in the butt, Yourdon and others have suggested next spring as the time when Y2K awareness will grow dramatically. By then, some governments and corporations will have rolled over to the next fiscal year. But given Wall Street's madness and blindess, it is difficult to make any precise predictions.

Keep popping that Prozac.

-- Don Florence (dflorence@zianet.com), December 02, 1998.

"Decession - sir? Rolling from recession into depression?

Robert: Given the "cultural disposition" perhaps 'Repression' would be an appropriate term.

PNG: Thank you for your very informative posts.

-- Rob Michaels (sonofdust@net.com), December 02, 1998.

Don, PNG et al.

Thanks for the excellent info. We *are* in a mess aren't we?

-- Andy (andy_rowland@msn.com), December 02, 1998.

Andy: Mess is not the word. The economies of the world, according to Robert Rubin and the Fed, are in the worse shape since the Great Depression...all without Y2K too. This is mostly due to bad loans, massive debt, highly leveraged hedge funds, rampant speculation, and on and on and on. Once we see the London Financial Times and the Wall Street Journal with a serious Y2K article front page above the fold we will know it is Game Over.

-- Rob Michaels (sonofdust@net.com), December 02, 1998.

Who the h*ll is that fat lady and why is she humming that tune??

It looks to me as though the US market has both feet firmly planted in mid-air.

I would like to think that we will have the usual "Santa Claus" rally in the US market, but it looks kinda grim afterwards for everybody doesn't it? I'm glad that this is one thing that I can sit out on the side lines.

But, y'all remember now - Daddies, heros, and cowboys aren't allowed to cry.

Crank in y2k and it looks like a real mean brew is in the pot.

S.O.B.

-- sweetolebob (buffgun@hotmail.com), December 02, 1998.