Recently there has been more and more discussion on financial and market reaction to y2k. Most that I have seen assume a severe negative impact. As a matter of fact I have not seen any positive stories.

http://www.stlnet.com/POSTnet/News/pdtoday.nsf/Business/590da772a6b3b1dc8625670f000f72c2?OpenDocument

-- Mike Lang (webflier@erols.com), February 05, 1999

Answers

Y2K just makes the current stock market that much more surreal to me. I was surprised by the complacency earlier this month on the devaluation of the Brazil real - a mere two day blip on the stock market, and then it was shrugged off. Meanwhile, exceptionally high earnings reports from 4Q 1998, intensive consumer spending, market passes 9600... Don't they know the global economy is collapsing?

I think maybe I "know" too much about Y2K. My timing is all off. I expect the stock market to react accordingly, but most of the investors are still asleep. I understand that a majority of investment money is from overseas, that it exceeds Boomer 401k investments. I assume we are going to crash by the middle of next year, but perhaps we'll first have a monster run as the last available safe haven for international dollars (but then we'll crash, right??). I understand that consumer spending is what is currently bootstrapping the market. If Y2K panic hits, then people will start buying lots of stuff, so 1999 might still be a very good year. So maybe the market doesn't tank until next year (even though it should know better and be on the way down now...)

Maybe you can guess that my greatest Y2K angst is the financial prep dilemma. (I'm pretty much out of the market now, and sleeping better for it, but still very confused by what I'm seeing.) Food, water, heat - that's a no-brainer!

BTW, when Yardeni was interviewed last month by Wall Street Week, he said his basis for a global recession was impacts on the supply chain.

-- Brooks (brooksbie@hotmail.com), February 05, 1999.

Brooks commented:

" I understand that consumer spending is what is currently bootstrapping the market."

This is a LIQUIDITY driven market. It does not care about fundamental values. We have long past this point. It only cares about how much money is being provided by the sheeple. When the sheeple awake it will be to late.

BTW Brooks your post has all the markings of MAJOR disinformation.

Ray

-- 007 (ray@totacc.com), February 05, 1999.

Sorry Ray, I tried to word my post in a way that would make it clear it was intended as an example of my own very amateur take on the market playing against my angst at having to re-evaluate my long-term financial planning. I never intended any of it as advice or fact, but simply an example of my continuing difficulty in trying to reconcile very disparate opinions I hear from the "experts" and what I intuitively expect to occur as a result of Y2K. (I guess I'm also unsophisticated enough not to see a difference between "consumer spending" and "money...provided by the sheeple", if that was one of the intents of your post.)

To me, the financial decisions required by Y2K prep are the hardest because I see so much potential to make exactly the wrong decision. I'm generally very late in recognizing economic trends, so it makes me nervous that things seem so clear this time but the market is reacting in an opposite fashion.

I'm very tired today and probably still not getting my point across, so if I am still striking a nerve, please ignore my ramblings. Aside from the article that Mike posted, I have seen very little on Y2K's financial impact (other than Yardeni's lone crusade), although it appears to be picking up steam. I know I have seen a couple relatively positive articles (Boston Federal Reserve from a couple weeks ago), in which the projected impact on Y2K was really minimal. I expect the bulls to be very active on Wall Street Week tonight and, once again, to ignore Y2K altogether. I would certainly appreciate more analysis from the financial experts on Y2K, but I'm not personally expecting any consensus from them for some time.

-- Brooks (brooksbie@hotmail.com), February 05, 1999.

Well Brooks let's dig a little deeper here. Your comment:

" I assume we are going to crash by the middle of next year, but perhaps we'll first have a monster run as the last available safe haven for international dollars.........

Leads people to believe that there will not be any problems until next year in the stock market. Is this what you would like them to believe? It also infers that y2k will be of no consequence. Is this what you would like them to believe. More to come.

Ray

-- Ray (ray@totacc.com), February 05, 1999.

.....click

-- Cleanup crew (washing@wax.floor), February 06, 1999.

Are these 'HTML collectors' attorneys or do they just want us to believe they're attorneys?

-- (obser@watch.org), February 06, 1999.

I expect the bull market to make one final, and perhaps successful, run at 10,000 sometime in the next three months based on soap bubbles. Barring bad news (see below), it will bump along between 9200 and 9700 through July.

The smart money will begin hedging Y2K (even if they believe it is likely to be a bump) in August, because they hedge as a rule of life.

September through November will be very nervous months, with Y2K anxiety becoming greater. The market will try to find a landing spot around 8400 and will trade within 8200-8600 providing the Fed can keep a floor under it by more rate cuts. Since the rate cut stuff can't be overdone without losing its effect, I doubt we'll see any rate cuts before September and maybe one small rate jump if the market touches 10,000.

Beginning in December, the market will head downward, trying to anticipate the Y2K effect and price it in. I suggest 7800 by Jan. 1, 2000.

Because I predict the utilities will (mainly) stay up in U.S., I foresee January largely flat (premature sighs of relief), with a depression market beginning in mid-February as the supply chain starts to break. The Dow at 6500 by the end of February; 5500 by end of June and 4500 by end of October, 2000. I see that as a miserable floor with a trading range of 4000-5000 thru end of 2003.

"Barring bad news": if one or more authentic Y2K disasters take place in 1999 (fiscal year 2000 stuff, etc) that can't be hidden from the herd, the drop will begin taking place earlier.

I personally believe the motivation to keep Y2K news below the market noise threshold is so enormous on the part of all players (governments, corporations, etc), that there is a good chance they will succeed until embedded systems failures on top of software failures end the game.

This was intended as a serious post, guys, and I am genuinely interested in your feedback, pro, con or otherwise.

-- BigDog (BigDog@duffer.com), February 06, 1999.

Big Dog

I am short the market in the fall. Perhaps the happy faces on the Street can keep the pretense up for a while. However, my belief is y2k will begin to assert itself in the late summer. There is a great deal of talk about it everywhere that I go these days and many people are thinking of safety for their money. I expect many to pull out of stocks and ride through in bonds. I also expect much capital inflow from overseas into the bond market. The smart money will stay away from the stock market. Also, many people, like me, will begin to short the indecies(?) and or individual stocks. This will become a feeding frenzy. This time the market will not bounce. By the way, thanks for your assessment of Dow ranges. I think along the same lines but I do not think it will take as long to begin. The shorts are already pricing some index futures at a high level.

Anyway..just some thoughts.

-- Mike Lang (webflier@erols.com), February 06, 1999.