This just in Koskinen going to war? It's the economy stupid?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Market trends ease Y2K worries, says U.S. czar
By Jim Wolf
WASHINGTON, Aug 23 (Reuters) - Financial markets seem to reflect growing confidence that U.S. computer systems will glide through the Year 2000 challenge problem-free, President Bill Clinton's top Y2K trouble-shooter said on Monday.
``I think the markets are giving an indication that the basic infrastructure systems are going to function just fine in January,'' John Koskinen, chairman of the President's Council on Year 2000 Conversion, said in an interview with Reuters.
Koskinen referred to a scramble by U.S. companies, reflected in bond and credit markets, to boost cash by replacing shorter-term securities, which often must be refinanced every seven to 28 days, with securities maturing next year.
This move to dodge a possible year-end, Y2K-related lull in credit markets, he said, is the reverse of what many experts originally predicted, ``when there were concerns about whether the systems themselves would work'' after computer clocks flip to Jan. 1.
``In that case, it was thought you would be better off refinancing in late December when the systems were running rather than (in) early January, when there might be some risk'' of Y2K-related disruptions, Koskinen said.
``So the fact that those spreads are reversed (from what had been originally predicted) seems to indicate that professionals are confident that systems are going to be available to roll over financings in the early part of January.''
What markets are focusing on now is whether investors will be ``taking to the sidelines in the last week or two of the year'' because of Y2K skittishness, he said.
Koskinen welcomed the markets' apparent vote of confidence in the clean bill of Y2K health his council gave earlier this month to basic U.S. infrastructure, including financial institutions, telecommunications, power grids and air travel.
``So if the professionals are basically betting that systems are going to run effectively, it seems to me that ought to provide great comfort and increased confidence to the general public,'' he said.
``If anything, there may be a few days of interesting market actions near the end of the year. But as a general matter nobody thinks the market itself is going to have any difficulty over the longer term,'' he said, referring to stock and bond markets.
Because of old coding shortcuts, older computer systems could confuse Jan. 1, 2000 for New Year's Day, 1900, potentially causing system-wide shutdowns.
Koskinen voiced confidence that Americans would not let themselves be stampeded into a Y2K panic if they had ample information about readiness and backup plans were in place.
Koskinen said it was self-evident that if millions of people all did something unusual at one time -- such as hoarding cash under mattresses or selling mutual funds -- ``they'll create economic problems independent of any underlying reality.''
``At this point, we don't see a rising level of concern -- yet,'' he said with a chuckle, but monitoring would continue.
``Our basic strategy is give people information. And they have a lot of common sense and they will respond appropriately,'' he added.
Koskinen referred to the ``battle'' of assuring public confidence in critical systems' ability to operate across the century change.
``If we're going to win this battle, we're going to win it with information. We're not going to win it with slick PR campaigns,'' he said.
Koskinen will travel this week to Iowa, Nebraska and Louisiana, bringing to 20 the number of states in which he will have taken part so far in ``community conversations.'' Those are talks aimed at letting people know what to prepare for.
Despite greater Y2K readiness at federal and critical infrastructure levels, people still wanted to know ``what's going to happen to them,'' he said.
-- no (email@example.com), August 23, 1999
To the top.
-- no (firstname.lastname@example.org), August 23, 1999.
No wonder the Navy report had him running scared!
-- (email@example.com), August 23, 1999.
"we're going to win it with information"
(Like--making certain everyone saw the Navy Master Utility list before it was yanked?)
-- bwahaha (firstname.lastname@example.org), August 23, 1999.
The market is going up and the Prez's man say's that this is a sign that Y2K=OK, does that mean if the markets start to go down that Y2K=NOT-OK?
Time will tell
-- helium (email@example.com), August 23, 1999.
I wonder if John Koskinen's comments are a response to articles like the following one. Are the rumors being officially denied?
http://infoseek.go.com/Content?arn=a1205reuff-19990817&qt=% 22year+2000% 22+bug*+glitch*+y2k&sv=IS&lk=noframes&col=NX&kt=A&ak=news1486
Y2K Fears Seep Into World Markets At Last
01:23 p.m Aug 17, 1999 Eastern
By James Saft
LONDON (Reuters) - A slew of financial market distortions and anomalies in recent weeks have at last provided hard evidence that international investors are moving to price in the risks surrounding the Y2K problem.
Years of hand-wringing by pundits and politicians about millennium computer problems have until recently caused only slight and arcane moves in market prices.
But recent sharp increases in bond market credit spreads, a fresh seller in emerging markets and the gloomy interest rate horizon implied by short-term futures market have all been at least partly spurred by the Y2K effect, analysts said.
``There is an avoidance of risk and a preference for liquidity,'' said Giles Keating, Credit Suisse First Boston chief economist.
``There has been a lot of discussion about Y2K over the last six months but nobody quite foresaw swap spreads, for example, being driven to such extreme levels.''
In the last two weeks, U.S. swap spreads have soared to their highest levels in a decade.
Benchmark 10-year dollar swap spreads now stand at 100 basis points, having touched 114 earlier in the month.
U.S. swap spreads reflect the interest rate premium a double-A-rated borrower would have to pay over U.S. Treasuries and are a key barometer of investors' overall appetite for risk.
Ballooning swap spreads are being driven in part by a glut of issuance by corporate borrowers eager to nail down financing before an expected Y2K-related year-end market shutdown.
The Y2K or millennium bug problem arises because many computers were allocated just the last two digits for the year in dates. Unless amended or replaced, computers may misread the year 2000 as 1900 or simply fail to work.
There is also evidence debt markets are increasingly anticipating a yearend scramble for cash as insurance against any potential millennium disruptions -- with investors steering clear of all bonds with coupons due in the first weeks of 2000.
A so-called ``millennium butterfly'' trade, under which investors buy December futures contracts while selling September and March, shows that Eurodollar markets are offering a 40 basis point premium to those willing to lend out money over the turn of the year, according to Steve Major of ING Barings.
On Euribor markets the premium available is 49 basis points.
Both figures are substantially higher than they were in May and have the potential to go higher, Major said.
``We are entering a surreal environment and as bankers we are paid to be prudent,'' Major said.
``Given that it is only August and we had this amount of dislocation, I would say would say the spread would go up.''
Other measures of bond investor concern around the millennium, such as a preference for more liquid ``on the run'' government bond issues, have so far shown only modest effects.
An overall measure of bond market Y2K sensitivity devised by ING shows investors are now only half as nervous as they were at the height of the Russia and Long Term Capital Management crises of late 1998, when euro conversion nerves added to uncertainty.
``We are at 50 percent of last years' peak in risk aversion, we think that it may get worse before it gets better.''
The steep central bank interest rate rises that are being discounted over the next six months in eurodollar and sterling interest rate futures contracts are also seen as at least partly a Y2K-rleated anomaly. Analysts said the strips are substantially driven by a demand for cash around the millennium rather than a prediction of central bank policy.
A selloff in emerging markets in recent weeks is also at least partly attributable to fears lesser developed areas will have difficulty hurdling yearend technical challenges and as investors who made money in these assets turn risk averse.
The MSCI-EMF benchmark emerging markets index is now about 10 percent below its recent peak and some Brady bonds have underperformed.
Even the recent run-up in oil prices has been partly explained by some as a dash to build up inventories ahead of any yearend logjams. Others say the recent surge of Japan's yen is related to a scramble for cash and the resultant repatriation of capital by the world's largest creditor.
Keating at CSFB said that the lower profile of hedge fund and bank proprietary desks after last years' LTCM fiasco has allowed price anomalies to grow.
``There is a more limited amount of arbitrage capital and that is perhaps removing the capital which would otherwise help to arbitrage the market,'' he said.
Copyright 1999 Reuters Limited. All rights reserved.
-- Linkmeister (firstname.lastname@example.org), August 23, 1999.
Coming to Iowa is he? I hope he's at the meeting we are having tonight as I have my list of questions. Anybody have any new questions you want me to ask him? Let me know as my email is real.
-- y2k dave (email@example.com), August 23, 1999.
Ask him if he knows anything about meatbees....
-- King of Spain (firstname.lastname@example.org), August 23, 1999.
Well let's see now, the Dow is up 124 points and the NYSE Advancers over Decliners are 1595 to 1304, anemic to say the least!!
I think the K-Man ought to stick to what he knows best, BS. Of course that is what he was doing with his comments regarding the stock market!!
-- Ray (email@example.com), August 23, 1999.
How funny, almost ha ha. <<``I think the markets are giving an indication that the basic infrastructure systems are going to function just fine in January...'' >> Because of the market psychology, that means the systems themselves are okay. Oh well, he's just doing his job.
I ordered some vitamins from a California company today. My sales rep is prepping and she says a lot of people there are worried. Of course she was trying to be the smooth professional saleswoman, since she earns commission so she didn't want to go into it too much.
-- Mara Wayne (MaraWayne@aol.com), August 23, 1999.
And, in August of 1929, the Dow_jones was a) weak and flip-flopping
b) relatively strong and going up
c) in a rapid plunge that alarmed everybody.
This administration's only grasp on its power is the media and the perfromance of Wall Street: through those two, they "poll-beat" the impeachment, and are maintaining their current popularlity (in all issues: taxes, health care, welfare, census, and judicial measures on this economic expansion that began with Reagan's tax cuts, and only just barely survived Bush's budgets in the late 80's/early 90's....)
So, he is now going on another slick PR campaign: except he can't it that can he?
<<``If we're going to win this battle, we're going to win it with information. We're not going to win it with slick PR campaigns,'' he said.
Koskinen will travel this week to Iowa, Nebraska and Louisiana, bringing to 20 the number of states in which he will have taken part so far in ``community conversations.'' Those are talks aimed at letting people know what to prepare for. >>
Amazing that the press can't see a lie between two sentences, separated by only by a period.
-- Robert A. Cook, PE (Kennesaw, GA) (firstname.lastname@example.org), August 23, 1999.
Let's see, now. I'm dumb as a turnip when it comes to stock markets and money, but maybe I can understand:
1. The stock market stays strong because the Govt says Y2K is no big deal.
2. The Govt. says Y2K is no big deal because the stock market is staying strong.
Copy numbers 1 and 2, above and repeat as necessary for treatment of stampede-itis.
-- Lon Frank (email@example.com), August 23, 1999.
Ask him where he is spending the roll over because we all want to be with him to celebrate his genius and foresight.
-- R (firstname.lastname@example.org), August 23, 1999.
I posted the article on our site, with a prominently posted dissenting article link...
-- Scott Johnson (email@example.com), August 23, 1999.
Scott, LOL - great job. Enjoyed seeing the dissenting link repeated both at the beginning and end of that article.
-- Cheryl (Transplant@Oregon.com), August 23, 1999.
He finally spit it out: Info Wars. Except the battle will actually be won only by code remediation and the resultant NO interruption of utilities, infrastructure, services, manufacturing, shipping -- no disruptions at all.
When did tenuous perception become hard reality to the Spinners?
They've spun themselves into a surreal limbo and wouldn't recognize the truth if it shook 'em up hard and slapped 'em awake -- they're permanently zombified asleep. Sad.
-- Ashton & Leska in Cascadia (firstname.lastname@example.org), August 23, 1999.
Things were really going good in earily October, 1929.
-- rambo (email@example.com), August 23, 1999.
Markets depend on accurate information to work correctly. If businesses and investors make bad decisions based on false information, that's how you get economic crisis.
-- robert waldrop (firstname.lastname@example.org), August 23, 1999.
The market is always right. Except when it is wrong.
(Lessee -- what does the Kondratieff cycle say?)
-- Tom Carey (email@example.com), August 23, 1999.