It seems to me that the DOW is starting to notice Y2K, since Monday anyone agree or disagree?. justthinkin

-- justthinkin com (y2kaok@justthinkin.com), May 27, 1999

Answers

Funny you should mention it - I just sent this to a colleague today:

"Is it possible well dip back below 10,000? And if so, how low? Just thinking confidence in the US and Wild Bill is slipping. One reason this slide started was a guy named Mayos examination of bank stocks and determining theyll be hit hard by Y2K. Couple that with our lavish expenditure in the Balkans and Chinese espionage. Just scratchin my chin here hmmmm

"Or itll be back up to 11,000 by the end of next week. The Balkans is not a problem, but a business opportunity for the savvy entrepreneur. Y2K? Hype. Whos this Mayo guy anyway? I put mayo on my sandwiches. And the Chinese? 1 billion software pirates... Let them fire their 20 nukes. Well make a nice parking lot east of Mongolia.

"Depends on how you look at it."

My colleague is very "Y2K is not big deal" and what I wrote in the second paragraph could have easily come out of his mouth. Though we see nearly eye-to-eye on just about everything in life, we couldn't be more polar on Y2K. Strange, where we get our filters for what we see.

-- Brett (savvydad@aol.com), May 27, 1999.

From today's CBS Markwatch: "U.S. blue-chip stocks were mired deep in negative territory Thursday afternoon amid nervousness over the interest rate backdrop. "There's a lot of fear that the upcoming economic news will be strong enough to push the Fed to move," said Tony Crescenzi, chief bond market strategist at Miller, Tabak, Hirsch."

This isn't Y2K, it's evidence of a booming economy. And besides, there was a sharp rebound yesterday.

-- Brooks (brooksbie@hotmail.com), May 27, 1999.

I can hear the spin now:

"US Stocks were mixed today with the Dow Jones average loosing some ground, but the Tech Heavy Nasdaq was up several points."

Keep the faith

-- helium (heliumavid@yahoo.com), May 27, 1999.

Then if thats the case would the bank stock not have moved up if they anticipated a move up in interest rates? Me thinks that the y2k comment on Monday as started a "stay tuned" position by investors. justthinkin

-- justthinkin com (y2kaok@justthink.com), May 27, 1999.

Dow closed down 235 today, down more than 400 for the week. <:)=

-- Sysman (y2kboard@yahoo.com), May 27, 1999.

This isn't uncommon for the DOW. Have you folks followed it at all for the last 1-2 years? It's been zig-zagging all this time. It's that zig-zag that encouraged me to get out of the market last July.

Of course after I got out, they went from almost 8,000 to 11,000, but that's just the way it IS with the market.

I doubt this has anything at ALL to do with Y2k.

Anita

-- Anita Spooner (spoonera@msn.com), May 27, 1999.

Nothing to do with Y2K?

CBS MarketWatch - Major banks get SELL ratings - Y2K reasons cited

-- Well (whats@this.then), May 27, 1999.

Anita may not be convinced until she's eating crickets.

-- Doug (douglasjohnson@prodigy.net), May 27, 1999.

I think Monday was just a flight to quality (get out of the bank stocks, but into other stocks). I don't think Y2K will have a real impact on the market until Y2K is seen as a universal enough reason to abandon stocks across the board.

-- Brooks (brooksbie@hotmail.com), May 27, 1999.

It's a BUYING OPPORTUNITY!!! Get those stocks now, while prices are low- you can never tell when you'll see PRICES LIKE THESE again!!!

(History lesson for newbies and those who don't "get" my admittedly obtuse sense of humor: The Dow was at about 400 in 1929, when it 'crashed' all the way down to about 40- that's four zero, as in four times ten. They didn't see PRICES LIKE THESE again until 1954, according to the Value Line chart I'm looking at. Will history repeat itself? Staaaaay tuuuuned.... .)

-- Lee (lplapin@hotmail.com), May 27, 1999.

Doug,

Why be so harsh with anitas' response? She never intimated that she did not think y2k wasnt a big problem, just that her opinion was the stock market was just going through it normal gyrations! I agree with anita and others that see the stock swings as purely financial, they could just as easily swing to 11,000 after Memorial day. I still maintain that no big panics can or will begin in our culture until something directly affects the masses and that should not happen until Jan.

-- David Butts (dciinc@aol.com), May 27, 1999.

Doug, you are a butt head. thats why you have that last name.. please refrain from participating unless you can say something you didn't pull out of 'yer asshole.

-- ladw@anfas.net (sloopie@net.net), May 27, 1999.

The market will SOON start a slow inexerible dive to the bottom.

-- FLAME AWAY (BLehman202@aol.com), May 27, 1999.

I would suspect that the DOW would be last impacted by Y2K...because many might want to put their money there in a flight to quality. I would expect to see the risky, low-cap stocks hit first...by Y2K. I wouldn't expect the main market to be seriously hit until somewhat later this summer...but it could just as easily drop another 3,000 in the next month or so...

-- Mad Monk (madmonk@hawaiian.net), May 27, 1999.

From USA Today

Fearing a Y2K-triggered market meltdown, many investors say they're planning to move money out of the stock market in the coming months. Some are moving it into bonds and money market accounts; others are stashing it in coffee cans and sock drawers. A USA TODAY/Gallup Poll earlier this year found that 55% of those surveyed believe it's likely banking and accounting systems will fail because of Y2K- related problems. For that reason, financial analysts are warning that the fourth quarter - historically a bumpy period for stocks --could rattle even the most stalwart of long-term investors

-- GeeGee (GeeGee@madtown.com), May 27, 1999.

IMO, I don't see a sudden stock market plunge until a heinous catastrophe makes the grasshoppers panic. Until then, it's zig-zag- zig-zog-zig-zug-zippity-doo-dah-my-portfolio.

-- dinosaur (dinosaur@williams-net.com), May 27, 1999.

It could be a momentary flight..followed by a summer rally...but you can be sure that the masses will be caught unawares when October comes......when it tanks then......there will be no rebound anytime soon....

-- rick shade (Rickoshade@aol.com), May 27, 1999.

I think that the final plunge will come when we least expect it. The panic will set in over some weekend, and come Monday, Katie bar the door. I got out of the market in March because I was sure that Y2K would really start to rear its ugly head with the April event horizons. I was wrong about the timing, but I am certain that the crash will come. Clinton may be speeding it up with his Yugoslav adventure.

-- Incredulous (ytt000@aol.com), May 27, 1999.

Mayo's Y2K-related "SELL" recommendation earlier this week for shares of Citigroup, J. P. Morgan, and Bank One probably did rattle some investors, but most of the current market turmoil is caused by the usual suspects: fears of a Fed rate hike, worries about overvaluation (esp. in Internet stocks), increased international tensions, etc. I note that as of the market's close today (May 27th), the S&P 500 index was still overvalued by 32.9%, according to the Federal Reserve's own stock valuation model (developed for Greenspan a few years ago). I presume that the DJIA is similarly overvalued. This valuation model, also used heavily by Yardeni, depends primarily upon the cost of capital (in this case as reflected by the yield on the 10-year Treasury bond) and on the I/B/E/S bottom up consensus estimate for average S&P 500 operating earnings for the next four quarters. (See www.yardeni.com for a better explanation and the actual calculations involved.) I mention these points because the latest I/B/E/S estimate for operating earnings for this year is that they will grow at 15.6%! To me, that is wildly optimistic, considering that S&P 500 operating earnings actually fell by 1.6% last year, though you'd never know it by the way stock prices rose! Yardeni's estimate that earnings growth will be only 3.2% this year seems much more reasonable to me. I haven't done the math (by the way, Yardeni's site has a calculator that lets you plug in your own numbers), but obviously if operating earnings grow at much less than the presumed 15.6% this year, then current share prices are much more overvalued than 32.9% (since the Fed was using the 15.6% I/B/E/S number in its calculations).

As for Y2K itself, who knows? I really don't know how bad it will or will not be in the U.S. insofar as actual computer disruptions go, but stock markets traditionally abhor uncertainty of any kind, so it seems likely that Y2K fears will hit share prices significantly later this year.

For what it's worth, the Princeton Economic Institute predicts a 14-23% market correction later this year; Yardeni's estimate is more in the 30% range. I think that PEI's $60 million computer must be getting some whiskey on the side: some weeks ago PEI predicted that the DJIA could fall as low as 3700 by 2002; now they are predicting that, on the basis of a continued strong dollar and future foreign investment in U.S. financial markets, the DJIA could push to as high as 20,000 by 2003 (after some significant corrections along the way, of course). That easily surpasses Yardeni's prediction that the DJIA will hit 15,000 by 2005. PEI evidently recognizes that this is a bubble market, but they think that for the reasons noted above it may continue to inflate for several more years.

I've great respect for PEI's track record, but really, their last two forecasts are difficult to reconcile--and the latest prediction (that the DJIA might hit 20,000 by 2003) is hard to fathom when you factor in that PEI also thinks that both the U.S. economy and corporate earnings will gradually decline over the next few years. PEI suddenly seems to be staking a tremendous amount upon a very strong dollar. As I said, perhaps their computer is getting drunk. How about we just say that come 2003 the DJIA will be somewhere between 3700 and 20,000! A fearless forecast, that.

A few other interesting PEI notes, for whatever they are worth. The Fed has to worry about Y2K-related demands for greenbacks not only at home but also abroad, where the strong dollar is the currency du jour; consequently, for the first time in history, the Fed has established two currency vaults abroad: one in Europe, the other in Asia.

Capers Jones was right: the Euro exchange system is having major problems, though this is being kept from the press. Some transactions are taking up to 4 weeks to clear (though 3-4 days is more common), whereas banks normally expect such transactions to clear by day's end; this delay is causing many banks to discount the Euro. This, in turn, is a major reason why the Euro has steadily declined in value vis-a-vis the U.S. dollar since January. This note is included in the PEI article "Fed Rate Hike, DOW Crash?" at www.pei-intl.com

Finally, PEI, which the Japanese respect the most among all international forecasting units, is not giving the Japanese economy any respect. PEI says flatly that the Japanese economy, and the Asian economy generally, is not improving; China will have to devalue the RMB. As noted above, PEI thinks the dollar will steadily strengthen in the next few years; PEI predicts that by 2002 or thereabouts it will trade at 200 yen. Somebody revive Peter Gauthier.

The global economic situation seems unnerving enough without Y2K.

-- Don Florence (dflorence@zianet.com), May 28, 1999.

A 10% swing would take it back to 10,000. That's to be expected in any stockmarket every few years.

A 15% drop isn't so very uncommon either. The panic line probably lies somewhere south of 9000. Maybe as low as 7500, since that became a strong support level during the Asian crisis not so very long ago. (October 1987 was a 30+% drop, but hardly TEOTW).

Of course, anyone reading this list is out of the stockmarket by now (aren't they?). If not, find out about 1929, bubbles, Kondratiev, and the greater fool theory.

-- Nigel Arnot (nra@maxwell.ph.kcl.ac.uk), May 28, 1999.

"Of course, anyone reading this list is out of the stockmarket by now (aren't they?)."

You don't pay off a 4,500 sq ft. home by being a chump and listening to dumbshit knownothings about the market. Do you have any idea the level of wealth I have attained because I *IGNORED* the dumbass prognosticators like you?

-- Insanely Wealthy (filthy@stinking.rich), May 29, 1999.

Insane --

You said you "paid off" your 4500 s.f. house? Or just made the first few payments on it, so far? Personally, I hope it's the latter.

Notice that wonderful tax bill on your mutual fund "profits" reported as dividends? You'll get another one next year (if there's an IRS) on the overvalued stocks they managed to sell for you when the redemption orders came in. Your stocks go down, you still pay tax. Smart, eh?

Cussed your way to the top, huh? I'll bet LOTS of people got out of YOUR way, at work, your family, the market, so far. Me, I'm leaving now, too. Bye!

(Sorry, fellow Y-ites; I'm not a frequent flamer, but I couldn't resist this one.)

-- moi (not@thistime.moi), May 29, 1999.