Yardeni & Company?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
I am going by a slightly degraded memory here and I may have the whole thing wrong but something has been bothering me.
A month ago, listening to PBS, I heard a bit about a German bank that was having difficulty succeeding in the world market, because of a lack of expertise. This bank recently bought out an American bank, making the combined conglomeration, the world's 8th largest? In this way, the German bank hoped to improve its ability. To insure the acquired personell stay with the new organization, it has set aside 400 million dollars as incentive money. Individual officials are to receive up to 10 million dollars, just to remain on the job. It was said to be doubted, by some experts, that even this major effort would be enough to solve the bank's problems; enough for it to reverse its downward trend.
I may be mistaken but I believe they mentioned Yardeni's name. That it was *his* bank PBS was talking about.
If true, what should one make of it? How does it play out regarding any aspect of y2k, Yardeni himself, the banking industry's positioning, etc.
-- Floyd Baker (firstname.lastname@example.org), December 27, 1998
Dr. Yardeni works for Deutsche Morgan Securities, which was formerly known as Deutsche Morgan Grenfell.
The "Deutsche" is from Deutsche Bank, the "Morgan" is either "JP Morgan" or "Morgan Stanley," and I believe that "Grenfell" (if it is still affiliated with the organization) is one of the larger UK financial institutions.
As for the acquisition: I believe it was Deutsche Bank that acquired Bankers Trust.
I have no idea exactly who owns whom or what. My guess is that Dr. Yardeni had no involvement in the acquisition, and is probably relatively unaffected by the outcome of the acquisition. But you might want to visit his web site at www.yardeni.com and find whatever mechanism is available there to drop him an email note and ask him directly.
-- Ed Yourdon (email@example.com), December 27, 1998.
I remember reading about that merger. Say, If the American taxpayer foots the bill for the FDIC and foreign banks set up here, does that mean we will have to bail out foreign banks too to protect American depositors? There sure seems to be a lot of down sides (for Americans only) to this new free trade global market scam. When are Americans gonna wake up and realize we've been had by this 'don't cover your national ass, it's a global village' crap?
-- Ann Fisher (firstname.lastname@example.org), December 27, 1998.
If a foreign bank owns an American bank, FDIC coverage applies only to the American bank, not the foreign one.
-- No Spam Please (email@example.com), December 28, 1998.
Deutsche Bank Securities, for which Ed Yardeni is the chief economist, is the securities division of Deutsche Bank, Germany's largest bank. (Yardeni himself is a Wall Streeter and perhaps our best economic forecaster over the past 10 years, according to the likes of "Barron's.") If the acquisition of Bankers' Trust goes through, Deutsche Bank will become the world's largest bank.
I'm more interested in the Y2K progress of Deutsche Bank and other German banks. Last summer Lou Marcoccio of the Gartner Group stated that German banks were, on average, 1 year behind their American counterparts in Y2K work. (Work on the euro has slowed up German work on Y2K generally.) When I relayed this news to Dr. Yardeni (firstname.lastname@example.org), he replied, "00, das es nicht gut."
I suppose the good news is that the larger German banks are in better shape than are their smaller brethren, but it does appear that the German banking system (the largest in Europe) will have some Y2K problems come 2000. Germany itself is sufficiently behind in Y2K work generally that a few months ago some other members of the EU were raising a howl about the situation.
-- Don Florence (email@example.com), December 28, 1998.
The deutsche/bankers trust merger had nothing to do with y2k. Instead, bankers trust had/has SERIOUS capital problems as a result of the ltcm fiasco. Rumor has it that this merger was hastily arranged by the FED and by other central banks.
-- dave (WOOTENDAVE@HOTMAIL.COM), December 29, 1998.
The PBS report did explain the US bank having a situation which made acquisition easier and so, beneficial to each for their own reasons.
-- Floyd Baker (firstname.lastname@example.org), December 30, 1998.
Y was just on Cnn. Any one see it?
-- Moore Dinty moore (email@example.com), December 30, 1998.
Missed Y on CNN but caught him in an old tape on C-Span Tuesday where he referred to a NUT programmer friend he knows who moved to New Mexico. Sound familiar. Not exactly a ringing endorsement. Probably won't get to write the foreward in 2Ed. of ED
-- Jimmy Bagga Doughnuts (firstname.lastname@example.org), December 30, 1998.
Wondering about Yardeni? Here's your answers :) :)
Economist Bucks Y2K Trend
Economist Bucks Y2K Trend
Wall Street Not Worried About Millennium Bug
By Justin Lahart, The Street.com
N E W Y O R K Although hes deeply worried about the Year 2000 problem, Ed Yardeni has done none of those things some folks have done, like stocking up on canned goods and filling up tanks of kerosene. (Never tell anyone about the supplies youve laid in thats inviting the riot to your door.)
Nor has the chief economist with Deutsche Bank Securities Ed Yardini is convinced the Y2K bug will take a bite out of the global economy.made plans to be anywhere at the dawn of the new millennium but at his home on Long Island. (Dont discuss your Y2K plans with strangers.)
Yet Yardeni believes the Y2K computer problem will significantly slow the worlds economy. Thats important because not only is he apparently the sole economist on The Street who thinks that, hes apparently the only one whos putting in much time worrying about its broader economic effects.
Do you get the sense that theyre even researching it? Yardeni wonders. I dont mind if economists say its a nonevent, but they should study it.
One reason why other economists shy away from studying how Y2K will affect the economy is that its impossible to model. Its not like trying to figure out the impact of a hurricane or an earthquake or a plague of frogs these have at least happened.
Discussing the Y2K economic hit is an exercise in pure conjecture, Yardeni acknowledges. But his best guess is that gross domestic product will decline 4 percent, and theres a 70 percent chance the world will drift into a decline comparable to the 1973-74 recession, the one brought on by the oil shock.
Put it like this, says Don Fine, chief market analyst at Chase Asset Management. If you can foresee a problem in this area right now, you can probably fix it. The problem that nobody foresees is what we have to worry about. We simply dont know about the potentiality of the problem.
Better to Go With the Flow
In general, economists surmise that the economy will take some kind of hit. If nothing else, they say the money and time companies throw at Y2K could have been spent boosting productivity. But the effect on GDP should be muted.
The average response of 33 economists in a Philadelphia Fed survey last month was that the problem will shave 0.3 percent off the economy in 2000.
Im amazed that theyre so casual about it, says Yardeni.
As Yardeni sees it, the problem is not about allocation of resources. Its about the importance of global information flow. The Y2K turmoil does to our economy something akin to what, in another time, a disruption of trade would have done to Venice. Can you quantify it? No. Will it be bad? Absolutely.
So, who is right?
If we judge by the same light thats shone on economists retail-sales and inflation forecasts, Yardeni is almost certainly wrong.
In a 1996 analysis titled Rational Basis in Macroeconomic Analysis, New York Fed economists David Laster, Paul Bennett and In Sun Geoum discovered that the consensus pick was most accurate in all but one of 38 firms GNP predictions from 1977 to 1995.
The authors explanation of why some predictions were so out of whack with the consensus (and so wrong) may have some bearing on the accuracy of Yardenis Y2K predictions.
Whats Right Got to Do With It?
If accuracy is what economics is all about, then the best thing for a forecaster to do is to follow the consensus pretty closely. But thats not the only thing that Wall Street economics is about. Its also about publicity.
If youre on the fence about whether the Fed will cut rates when most people think it wont the best thing to do is say it will. If youre right, the glory is yours. The Wall Street Journal and The New York Times will interview you and CNBC will wheel its cameras into your office.
If youre wrong, people will soon forget about it.
Yardeni has already gotten a lot of ink for his stance on the Year 2000 problem, and as the millennium approaches, he will no doubt be awash in it.
Indeed, one of the complaints you hear about Yardeni from other economists is that hes flashy and publicity-hungry, suggesting, of course, that his view on Y2K is merely a ploy.
But if publicity can be a factor in forecasting, what about envy? One wonders whether some economists decline to delve deeply into Y2K because that would be like beating Yardenis drum.
Clients who have asked other economists about the effects of the problem have been told, Thats Yardenis issue. Why dont you ask him? says Yardeni.
Its not my issue, you know. This is something that we all have to deal with, he insists. The bottom line is Im not looking for a fight or a debate with other economists. Im just looking for more and more analysis. Its amazing how the entire profession is willing to assume everything will be all right.
-- Leska (email@example.com), December 31, 1998.