Stock Market, Y2K & Advice--J.P. Morgan, Horowitz & Company, Merrill Lynch (AP)greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
For release anytime
VIVIAN MARINO, AP Business Writer
Wednesday, October 20, 1999
[Fair Use: For Educational/Research Purposes Only]
(10-20) 08:44 PDT NEW YORK (AP) -- Get your shopping done early -- and avoid the lack of crowds.
That's the advise some financial consultants are giving investors who may have some last-minute business to wrap up before year's end, whether buying or selling stocks, bonds and other securities.
``Our overall goal is to avoid much trading later in the year and early next year because we expect thin markets and more volatility,'' said Nick Sargen, global market strategist for private clients at J.P. Morgan.
``Do your Christmas shopping early ... (and) you're likely to get more favorable pricing.''
Financial markets are typically on the thin side toward the end of the year anyway, as many individual investors take time off from trading during the busy holiday season and institutions close out their books.
But many financial experts expect trading to be quieter than usual this year -- and therefore, price fluctuations more exaggerated and volatile -- as the world braces for the new millennium and the remote possibility of some glitches caused by the Y2K computer problem. In fact, some professional traders have been instructed not to make transactions that settle during the so-called ``red days'' -- Dec. 31, 1999 through Jan. 7, 2000.
The fear among some investors is that computers may mistake ``00'' for 1900 instead of 2000, leaving financial accounts in disarray, although the financial institutions and the federal government say that's highly unlikely. Most financial professionals think computer systems will suffer at most hiccups rather than breakdowns over the new year.
``At this point in time we feel confident that our entire technological infrastructure ... is prepared for the year 2000,'' noted Louis Stafutti, J.P. Morgan's vice president for asset management services responsible for Y2K preparedness.
With a few weeks to go before the new millennium, 99 percent of the nation's federally insured banks, thrifts and credit unions successfully completed Y2K preparations, while the same percentage of brokerage firms and securities transfer agents were Y2K compliant.
With that being said, the real millennium bug isn't digital, it's psychological, many financial experts believe.
``Any insanity is created through investors' minds,'' said Andrew Horowitz, president of Horowitz & Company in Weston, Fla. ``This is a man-made event.''
Horowitz advises clients to stay a bit more liquid in the weeks ahead, with more money placed in cash and Treasuries than earlier this year, and to refrain from any major strategic changes in their investments, though he also sees some future buying opportunities in stocks.
``We believe the smart people will look at that (Y2K fears) as an opportunity, truly an opportunity, as a place where the people who have money available can really take advantage of other people's insecurities.
``Some time in mid-January people will wake up and say, 'Hey this wasn't so bad.'''
Sargen also believes that investors may want to keep an extra cash cushion while also being prepared to deploy funds as opportunities arise. However, he cautioned against trying to ``time'' the market or selling solely over Y2K fears.
``The markets could turn around and you would be left out in the cold, plus there are tax consequences in the form of capital gains,'' he said.
``We encourage investors to focus on fundamental factors that influence the market (such as) ... interest rates and the potential for further tightening. Of course, we won't invest in companies not well prepared for Y2K.''
Joseph Grunfeld, first vice president of investments for Merrill Lynch, agreed that ``the bumps and grinds are going to happen'' from now through the new year.
``The real advise ... is to take a long term strategic view of what you're doing with your investments.''<
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-- Diane J. Squire (firstname.lastname@example.org), October 20, 1999
Just as I suspected---it is all in the timing.
This has been and will continue to be a very interesting thing to watch. (stock market) They are obviously jockeying for the best position before the big pull out. Man its going to be a real shock when one day in Say Nov. or Dec. they take their marbles and go home!
"""he cautioned against trying to ``time'' the market or selling solely over Y2K fears.""""
Now why on earth would he caution this--unless he expected the possibility of it??
-- David Butts (email@example.com), October 20, 1999.
Here are some more financial storm clouds on the horizon:
Wednesday 20 October 1999 Posted at 0130 hrs IST
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'Some of Asia's banking systems beyond repair'
Singapore: Government and bank regulators across much of Asia have been trying to fix banking systems that, in many cases, are arguably beyond repair, a leading banking analyst said Tuesday.
"Efforts to date amount to little more than creative accounting techniques designed to mask insolvency," Thomson BankWatch President Philippe Delhaise told some 700 economists and businessmen at the second day of the East Asia Economic Summit.
"Banks are being restructured Asian-style ... with all sorts of tricks being used to hide the fact that most banks outside of Singapore, Hong Kong and the Philippines are bankrupt," he said.
At the same time, the head of the international bank rating agency said governments were "making a terrible mistake" in trying to restore solvency, or capital adequacy ratios, in floundering banks.
Instead, he added, liquidity should be the key concern, to alleviate a two-year-old credit crunch that has crippled corporate sectors across the region.
"Is solvency important? No," Delhaise said, adding that banks in China, India, Vietnam and Pakistan have been bankrupt, but lending, for years. "For a bank to operate and lend to people, it needs to be liquid, not solvent."
Delhaise said many Asian banks have been busy creating an illusory banking landscape, where non-performing loans are given to asset management companies, and weak banks are merged with other weak banks.
"I have yet to see two rotten banks merged to create a bank that isn't rotten," he said. "Such mergers are simply a way to conceal problems -- to buy time or a grace period."
He also said much of the credit still being extended in the region is done so under the guise of restructuring or rescheduling debts that can't be paid. In other words, giving a company funds to pay back an outstanding loan, meaning the bank doesn't have to take provisions and can count the interest paid as interest earned.
"That's why some bankrupt banks are still posting positive results," he said.
-- Homer Beanfang (Bats@inbellfry.com), October 20, 1999.
Horowitz says we should focus on fundamentals. What about the 800,000 small and medium size businesses which refuse to remediate for y2k?
-- Earl (firstname.lastname@example.org), October 20, 1999.
I think that first author couldn't sit more squarely on the fence than that. Message: don't panic, but lock and load because you will get some great buying opportunities. (But of course you must first figure out how to raise lots of cash without selling any stock.)
One of my favorite Wall St. quotes:
"Today is a great buying opportunity. I just don't know if tommorrow will be better."
2nd place goes to Joe Kennedy: "I'd rather get out of the market two months early rather than one day late."
-- Dave (email@example.com), October 20, 1999.
I think they are afraid of "that great big sucking sound."
-- no talking please (firstname.lastname@example.org), October 20, 1999.
"...liquid, not solvent."
That describes most of us!
The Chinese curse... "May you live in interesting times..." may well become an understatement!
-- Diane J. Squire (email@example.com), October 20, 1999.
* * * 19991020 Wednesday
HEY! EARL!! ... THAT'S 8,000,000 (8 MILLION!!) SMALL BUSINESSES.
THE K-MAN GOOFED!
Regards, Bob Mangus
* * *
-- Robert Mangus (firstname.lastname@example.org), October 20, 1999.