"Lull before the Storm"

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In response to an earlier thread and to Gary Norths post today about the Y2K LULL I point out the following from Sanger's Review:


Ed Yardeni reduces his estimate of the chances of Y2K-induced recession to 45%; others growing optimistic as well ... study finds that many products believed compliant are turning out not to be ..

We have already learned that Y2K expert Peter de Jager has become increasingly optimistic. Now Edward Yardeni, chief economist for Deutsche Bank Securities Inc. and another leading Y2K expert, "recently revised his estimate for a long global recession due to the glitch, from a 70% chance to 45%." He explained: "I've toned down the message partly because progress has been made. I would be happy to back off entirely." (This is big news for those who are following events about Y2K closely.) The article claims that these views of de Jager's and Yardeni's are only examples of a more optimistic mood in the U.S. "The alarms, at least in the United States, have begun to subside, replaced with a parade of repair statistics and completion percentages." But "many experts [not cited in the article] say the changing attitude is partly due to 'spin control' from companies and government agencies that have realized the panic and bad publicity that comes with poor repair reports." Consequently, the article says (citing some examples), we regularly get both good and bad news. Kazim Isfahani, a Y2K analyst for the Giga Information Group, comments: "Some of the stuff people are saying is just a load of hogwash. A lot of companies, associations and agencies have realized that putting a positive spin on the year 2000 is vital." Nonetheless, the article claims, "amid all the hype, there is a sense, even among pessimists, that things are actually getting better and that progress is being made." The article says that the Giga Group released a report in January that found that problems with embedded systems "will not have the crippling effect as originally thought," claiming that 3% of (all) microchips "have been found to have minor problems, typically requiring resetting the date or restarting a device." A Giga analyst says that the portion of chips that will experience outright failure is "so small as to be statistically insignificant." Both Isfahani and Lou Marcoccio, Y2K research director for the Gartner Group, say that in-depth research about Y2K has removed much of the uncertainty about the problem. "Marcoccio said most of the research points to little impact on most consumers and businesses, although small businesses and those with overseas connections continue to be vulnerable." The consultant firm has revised its original $300-600 billion cost estimate for Y2K to $2 trillion, Marcoccio says, "to account for the amount companies are spending on risk assessment and contingency plans." Ed Yourdon, another leading Y2K expert, differs (as we've seen), saying that if anything he is more pessimistic than ever; he also implies that the growing optimism the article describes is unsurprising (but wrong). "Typically, 15% of those [large software] projects do not finish on time. Repairs and new programming usually introduce about one new error for every 1,000 lines of software code, he said. 'This is what happens in normal projects,' he said. 'Clearly, we have a situation where people desperately want to believe that everything is on schedule.'" Yardeni adds that while he used to be concerned about the progress of the federal government, now his main concern is the situation overseas. The article concludes with more from de Jager, including this quote: "The Y2K problem was never the actual act of fixing code; it was the inaction and denial regarding a problem so easily demonstrated as real and pressing."


I personally consider this a Lull before the Storm... the spinners are trying to quiet the herd... Its not over untill "the fat lady sings" in 9 1/2 months....

-- helium (helium@avid.com), March 12, 1999


Check the previous thread where the Yardeni 45% is debunked. this particular quote apparently has floated to the top from somewhere. Sorry, don't remember the thread but it's from today.


-- Chuck, a night driver (reinzoo@en.com), March 13, 1999.

Yardeny has a problem, because he represents an investment company for the rich. If he is too alarming, all the rich will panic and pull their money out! He has no choice but to join the spin doctors. His company wants business as usual until the end.

-- Whytokay (whytokay@prepared.com), March 13, 1999.

One unfortunate habit that Gary North seems to have is that of posting old news as if it were current. On March 12, Gary posted the following comment:

Comment: It gets cold in Detroit in January and February. That's why electrical power is crucial to life in Detroit. It is the task of DTE Energy (Detroit Edison) to deliver the electricity.

Here is what DTE says in its latest Securities & Exchange Commission 10-Q report (pp. 21-22) on its y2k status.

To the extent that the percentage of budgeted money spent is indicative of project status, it does not look good for DTE.

"The Company and Detroit Edison estimate that Year 2000 costs will aggregate between $50 and $75 million, with $13 million expended between January 1, 1998 and September 30, 1998."

But that stuff is NOT the latest that DTE filed with the SEC! It is from a 10-Q filed back in October! DTE filed its annual SEC report, the 10K, on February 25, which included:

"The Company estimates that Year 2000 costs will approximate $80 million with $39 million expended between January 1, 1998 and December 31, 1998. Operating cash flow is expected to be sufficient to pay Year 2000 modification costs with no material impact on operating results or cash flows."

Surely Gary could put his trademark interpretation on the more recent report just as well as on the older one, or even on a comparison between them. It does seem odd that he simply refers to the old one as is it were the latest, when the newer one was filed weeks before his March 12 post.

Jerry B

-- Jerry B (skeptic76@erols.com), March 13, 1999.

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