I have been studying and preparing for Y2K for 8 months. I have also been trying to get others to research and prepare. In coversations with many people (including our local paper's publisher and the CFO of our city's largest bank) I often get the response "If what you say is true, why isn't it reflected in the stock market. All the news you're telling me is known by the market and therefore is taken into account. The market is high, so it obviously disagrees with what you are saying. Since the market is high, you must be wrong. The effects of Y2K will be small."

I'm beginning to believe that the stock market has coopted anyone's ability to think or reason. Last summer I believed that Y2K would affect the market, probably by last fall. It now appears to me that the reverse is true. The market is affecting Y2K, that is, what people believe about Y2K and how they will prepare for it. I think the belief in our market is now so strong, that the average person will only recognize Y2K as a personal threat AFTER some other cause has sent the market falling.

-- Kevin Lemke (klemke@corpcomm.net), January 27, 1999

Answers

Yes. Good post. The Fed will put a floor under the market to prevent Y2K panic (for the reasons you cite, because the market is defining psychology at the moment, not reacting to it) NO MATTER WHAT.

However, Y2K WILL be the cause that sends it falling eventually. I predict 02/2000 for a 50% fall, with a further 30% slide through 09/2000.

And, of course, putting a floor under this market bubble is one more evidence of Y2K idiocy ........

-- BigDog (BigDog@duffer.com), January 27, 1999.

Agree.

Crowd psychology more than ever rules the markets. Everyone waiting for everyone else to sell. Computer-trading programs ready to join in. When it goes, it goes faster than you or I can respond to.

I crossed a denial threshhold and took some long-procrastinated y2k preparation steps last July 12. But I did not short (put options) the market, and it peaked about a week later. As it plummeted, I was sure the leading edge of y2k awareness was driving the move, or would soon accelerate it, and I had known and I had missed a 10-20k boost to my preparation piggybank! (I was deep in procrastination remorse then anyway.)

As the market swung back up (and we moved to our new home on a small farm) my y2k anxiety greatly lifted. It was HARD to get myself to do any more prep. steps! Still is, as a matter of fact.

I don't believe in the stock market bubble (missed all 17 years of it, actually), and I thought I knew something that others didn't (y2k) and could be a step ahead of them. I'm really suspicious of my own psychology now in many regards, attempting to finesse various aspects of y2k and 1999's shaky public confidence. I've really got to keep it simple and leave off mixing in other people's games like Wall Street. "Lie down with dogs, you get fleas."

I believe public will slough off y2k denial at various levels in different waves (two steps forward, one step back?), but how many cycles can they fit into one 11-month period?

1999 is a year to really SIMPLIFY our lives. That may have been a cliche for some of us before, but now it is for the preservation of SANITY. (Now to print this out and sticky-note it on my monitor.)

-- (Jor-el@krypton.com), January 27, 1999.

If you've never read it, everybody needs to go to the library or order the paperback version of the old standby, "Extraordinary Popular Delusions and the Madness of Crowds" reciting in great detail psychological bubbles of all kinds from Tulipomania to the South Sea Bubble and numerous others. It's fascinating. The year 1999 will have to go down in a later edition of that book. Probably all long investors and the neophyte "day traders" will be included in the later edition. I hope all of us on this forum go down in history as "overreactors", if so those who've bugged out will be included in the book's footnotes as an example of nutty crowd behavior. If the forum's y2k fears are substantiated, then the "bug out" view will be seen as being pitifully obvious and the resulting catastrophe will be seen as one of the defining examples of the pathological thought processes of a maddened crowd.

-- Puddintame (dit@dot.com), January 27, 1999.

401K's and the like are driving the market. Think about it. Isn't everything on the market basically over-valued? As long as we're all working, everything is hunky-dorey. As long as 97% of the population are DGI's, that money just rolls in week after week after week. What else are all these folks like Vanguard going to do with it? Until we get scared, or people start losing jobs, I think the stock market won't tell us much.

-- margie mason (mar3mike@aol.com), January 27, 1999.

Too bad for them. Good for our procrastination.

-- b (b@b.b), January 27, 1999.

Let's face it, the market today is nothing more than a "wheel of chance" that doesn't care about the economic basics of the shares it's trading in. The Y2K and the markets situation we're seeing is akin to the gamblers in the Hilton Casino fire in Vegas a few years back. And to prove it wasn't a fluke, it happened again in San Juan.

Those people at the tables who died all thought: (1)This is a big-name casino, we're safe in here cause it's built safe. The hotel around us can burn down but THEY took safety precautions for us in here, 'cause we're THEIR business. (2)It's no big problem, if it was THEY would come and get us out of here. (3)So it's getting smokey in here, I'll stay for another hand or spin 'cause I feel lucky and I wanna leave with as much as I can carry. (4) I've gotta stay and earn back my losses, no matter what's going on here!

Think of the Y2K analogies of every one of these kinds of comments and reflect them on modern human nature. Through every market upheaval there have been those who left early when they first smelled smoke. And while they were going out the doors, they've met people going in who ignored the smoke and went inside. People who are getting into the markets now are ignoring more than smoke, it's getting hot and there are crackling, roaring sounds behind the walls.

WW

-- Wildweasel (vtmldm@epix.net), January 27, 1999.

Merrill Lynch has said y2k fixes will cost more than every war except WWII. $600-1,000 billion worldwide (I think they are low) Yet earning continue to drive the market, and if the company can't produce the expected earnings this quarter, they will next. PE ratios are higher than ever, hell internet stocks don't even post earnings yet they continue to soar. This market will continue to amaze everyone here, but once the lights go out, the party will be over.

-- Bill (y2khippo@yahoo.com), January 27, 1999.