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Y2K relaxation Yardeni backs off from earlier predictions

Friday, March 12, 1999 Inman News Features

When it comes to the now-infamous Y2K bug, most of us fall into three groups -- the doomsdayers, the naysayers and the relatively or utterly clueless.

Good news for the clueless came today, as one of the most noted experts on the millenium computer problem backed off his earlier estimates that a global Y2K recession was likely to occur.

Ed Yardeni, chief economist at Deutsche Bank Securities and a keynote speaker at last December's Real Estate Connect conference, now says the programming quagmire has a 45 percent chance of causing a long global recession.

Yardeni earlier predicted a 70 percent chance, but awareness, testing and progress made towards fixing the bug have been greater than expected.

"I would be happy to back off entirely," he recently told the Los Angeles Times.

The Y2K problem dates back decades, when computer programmers used two-digit year dates in systems. When 2000 comes, such systems may process 1/1/00 as the year 1900.

The concern with Y2K in the mortgage industry is that loan-servicing software may not be able to process four-digit year data, and that software and systems with different programming may not be compatible with each other, possibly causing accidental loan defaults.

The issue is also important to the mortgage-trading arena, since mortgage-backed securities play a strong role in the availability and cost of U.S. housing. Other Y2K-threatened areas in the real estate industry include building systems with imbedded chips and MLS software.

Despite the more optimistic outlook, Y2K pessimists and fearmongers are likely to persist.

Other self-proclaimed Y2K experts have already criticized Yardeni's upgraded forecast, calling in "spin control" affected by recent government studies that show little or no major Y2K affects on U.S. banks, markets and power grids.


-- moderate (, March 12, 1999


I've always thought his "70%" was pretty brassy. 45% is a much smarter prediction. Not necessarily more accurate, just politically smarter. Can't ever be called a chicken little if you're under 50%. On the other hand, 45% is pretty scary in itself. A no lose proposition for the doctor. All the macro quantification is just word games anyway. No one has invented a TEOWometer the last time I checked. There a known risk. You can quote me on that.

-- Puddintame (, March 12, 1999.

Puddintame --- Gee, a TEOWometer. What a great idea! I'll get right to work in my lab .....

-- BigDog (, March 12, 1999.

It's time to be observant...


Posted at 6:21 p.m. PST Tuesday, March 2, 1999

Y2K may spark unrest, economic pain -US Senate

WASHINGTON (Reuters) - The year 2000 computer bug may set off civil unrest in poor countries, undermine economic growth in Asia, Latin America and Africa, and disrupt global trade in oil and other commodities, a Senate panel said Tuesday.

While there was a low probability of an accidental nuclear weapons launch, the committee said missile systems and other high-tech weapons in other countries could malfunction. The Senate was also warned that terrorists might strike against U.S. targets next Jan. 1 to take advantage of weakened security.

``I have a nightmare of CNN cameras in villages or cities where there is no power, no telecommunications, the banking system is broken down, widespread rioting,'' said Utah Republican Sen. Robert Bennett, chairman of the Senate's Special Committee on the computer problem.


For the United States, Y2K disruptions should be manageable, the Senate panel concluded.

``The committee has no data to suggest that the United States will experience nationwide social or economic collapse, but the committee believes that some disruptions will occur, and that in some cases Y2K disruptions may be significant.''

Bennett said the U.S. military might experience some minor computer glitches, ``but its mission-critical, war-fighting capability will not be compromised.'' U.S. intelligence services would also be ready in time.

The U.S. health care industry may be the least prepared, according to the panel, which said the nation's Medicare system was in ``serious trouble''.

The committee complained that U.S. airports started preparations too late, and warned that shipments of goods by sea could be disrupted because the maritime industry was running behind. But it said a prolonged nationwide blackout was unlikely, although local and regional outages were possible.

In case vital services were temporarily cut off, the committee said Americans should stock up on bottled water, canned goods and other essentials, as they might to prepare for a winter storm lasting two to three days. People should also keep copies of their financial records in case banks run into unforeseen problems.

The committee said the most serious computer problems were likely to strike other countries next Jan. 1, because many of them started preparing too late or not at all.

The report singled out Japan, Mexico, China, Germany and Taiwan for falling nine months to two years behind schedule in preparing for the year 2000 bug. The committee also said that major oil producers Venezuela and Saudi Arabia were 12 to 18 months behind schedule.

``Disruption of flights and global trade between some areas and countries may occur,'' the committee said.

In a closed-door briefing for senators, Bennett outlined the Y2K threat to national security.

``There is a low to medium probability of terrorist exploitation of Y2K. However, we must remain vigilant in case some of our security systems malfunction,'' Bennett said afterwords.

But he added: ``There is a medium probability of economic disruptions that will lead to civil unrest in certain sectors of the world, particularly where their economies are already fragile or there is political uncertainty.''

He told senators there was a ``high probability'' that widespread computer glitches would compound economic problems in Latin America, Africa and Asia.

``In some countries it will be more serious than others,'' Bennett said. ``The unknowable question is what will be the impact on the United States.''


-- Kevin (, March 12, 1999.

I think there's a 70% chance of a recession in the U.S., even if we could fix every single Y2K problem here. Why? A global recession is a near 100% certainty, and the U.S. is part of the global economy.

-- Kevin (, March 12, 1999.


Are you an economist? Or is that your presonal opinion?

-- moderate (, March 12, 1999.

typo, personal.

-- moderate (, March 12, 1999.


It's my informed opinion based on the information I've read. What's your opinion?

-- Kevin (, March 12, 1999.


I've followed Ed Yardini's work very carefully. He used to be a voice in the wilderness voicing his Y2K concerns. He appeared with Senators Dodd and Bennett on Face the Nation right after the senate Y2K report was released. I noticed that his manner and speech were very subdued. He apperared to be apolagetic (sp) because he differed with the Government "Bump in the Road" view. This was the first change I noticed in him. The second was a few days later when he released a press release that he felt things were not so bad because the embedded chip problem was not as bad as he expected. The next thing you know he reduces his chance of a recession from 70% to 45%.

Ed Yardini is very much part of "the establishment". I'm surprized that it took this long for him to roll-over. IMO someone had a heart to heart talk with Dr. Ed. I look for him to slowly become much more opotismic(sp). Meanwhile the bad news contines to flow.

-- Watcher (, March 12, 1999.

Moderate & Watcher; Please post your source for the purported Yardeni decrease in prospects of Y2K recession. Website: gives no indication of any decrease in his concern. In fact his web book reaffirms his 70% opinion in March 1999. Your further advice will be most welcome. Thanks,

-- Watchful (, March 12, 1999.

Watcher...I believe the quote or statement attributed to Yardeni is from Sanger's Review.

-- Lobo (, March 12, 1999.


One thing is certain. There will not be a shortage of articles, interviews, theories or scholarly papers by economists to explain to you why things happened.

-- PNG (, March 12, 1999.

I listened to most of the sections from Ed Yardeni's 300 day countdown web conference. It is at:

Capers Jones and Michael Hardin brought up that Europe was way behind because of their concentration on the Euro. Ed said that he had talked to many top leaders in Europe and they said that Y2K was not much of a problem there. They said that they fixed it while doing the Euro conversion.

Given that Ed based his 70% figure partly on his concern that other countries are far behind the U.S., these assurances from Europe may have caused him to reduce his estimate to 45%. I believe that the people that he spoke with were incorrect or lying. He may sincerely believe that they are much further ahead than they are.

-- Incredulous (, March 13, 1999.

I believe that during the furor over the Euro conversion, there was an article in Newsweek discussing the intensity of the effort. Something to the effect that over 80% of the programmers were facilitating the conversion to "the exclusion of everything else". This was in an article relating to the lowered productivity of IT firms and departments thruout Europe. My question is: If 80% of the programmers were concentrating on Euro, who the heck was working on y2k? I don't believe that you could do one and fix the other simultaneously. Different thoughts, etc.

-- Lobo (, March 13, 1999.

Yardeni is only protecting his own skin. He has many wealthy investor clients in the investment company he works for. At 70% most of his investors would pull their money out and he would be without income. Yardeni wants business as usual until the end like everybody else! In two more months he'll drop it down to 25%!!!! By September it will be 10%!!!!!

-- Whytokay (, March 13, 1999.

Here's the
Sanger Summary (Ashley Dunn,
and link to this story:

Awareness Is Helping Cool the Y2K Fever (Ashley Dunn, Los Angeles Times)

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."

-- pshannon (, March 13, 1999.

Before you all start celebrating, think you better research this better. I read somewhere that he hasn't changed his 70% at all, just that some reporter said 40% which was only his US evaluation. Also he added a 5% chance of depression which is something economists never stick their necks out to predict.Know I read it this morning,right on this board, but after a few hundred posts my mind is boggled to remember what thread it was under.

-- Sue (, March 14, 1999.


The thread is here...

"Ed Yardeni Still at 70%"

-- Kevin (, March 14, 1999.

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