From the e-mail recieved today.

"Unfortunately, I seem to have confused a few reporters recently about my stance on Y2K. On November 30, the Dow Jones Newswire posted a story headlined, "Yardeni Turns Upbeat About Effects of Y2K." It was based on a short e-mail I sent on Sunday evening to my Yardeni.com mailing lists with links to my latest commentary in which I said I was getting into the holiday spirit and feeling more optimistic about the future beyond the Year 2000 Problem. I've always been optimistic about the future BEYOND Y2K! Hey, I did have a happy childhood.

I promised in my last e-mail message to update my views on Y2K. My latest YEAR 2000 REPORTER titled "Final Answer?" is now posted at www.yardeni.com/y2kreporter.html.

Dr. Ed"

-- Brooklyn (MSIS@cyberdude.com), November 30, 1999

Answers

Thanks, Mr. Yardeni for the well written update. I hope you don't mind if I paste in a portion from page 2,3 here, to reflect your current position (from http://www.yardeni.com/y 2kreporter.asp:

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My final answer is that Y2K will be an event. I still assign a 70% probability to a Y2K-recession scenario. But I am a reasonable fellow. I cant ignore the fact that just about every IT pro and Y2K policy official is optimistic that it will be a nonevent. Im skeptical, but Im not inflexible. So I am moderating my outlook for the severity of the recession.
The following table shows the five possible economic consequences of Y2K along with my subjective probability. The only difference between this table and the one I showed in my previous Reporter is that I am raising the odds of a moderate recession from 25% to 30% and I am lowering the odds of a severe recession from 40% to 35%.

Y2K Economic Scenarios & Probabilities

10% Minor disruptions. Business as usual. Only a few problems, which will be fixed rapidly. Stock market moves much higher.

20% Same impact as natural disaster. Business as usual within a few weeks.
Stock market moves higher.

30% Multiple problems cause modest 6-month recession. Real GDP down 1%-2%.
Stock market down 10%-15%, then soars.

35% Major global recession lasting 6-12 months. Real GDP down 2%-3%. Flight to quality. Deflation. Stock market down 30%, then heads toward 15,000 by 2005.

5% Depression lasting 2-5 years. Blackouts. Social and political upheaval.
Stock market...you dont want to know.

I still expect most of the problems will occur in global just-in-time supply chains in manufacturing and petroleum production. In this scenario, publicly traded companies might start to preannounce, during January and February, earnings shortfalls caused by Y2K glitches. This would depress stock prices, which would depress consumer confidence and spending, thus exacerbating the Y2K recession effects attributable to supply disruptions. The worst of the forecasted recession should occur during the first six months of next year. It is likely to linger during the second half of the year, though there should be clear signs by then that the worst is over and lots of signs of a recovery.

[Footnote:]
Unfortunately, I seem to have confused a few reporters recently about my stance. On November 29, the Dow Jones Newswire posted a story headlined, Yardeni Turns Upbeat About Effects of Y2K. It was based on a short e-mail I sent to my Yardeni.com mailing list with links to my latest commentary in which I said I was getting into the holiday spirit and feeling more optimistic about the future beyond the Year 2000 Problem. Ive always been optimistic about the future BEYOND Y2K! The November 30 Globe and Mail in Toronto gloated, Wall Streets Y2K alarmist turns optimist. If they had read my Alarmist Shrugs, dated October 10, 1999, they might have more accurately observed, Wall Streets Y2K alarmist now just skeptical.

Page 3
Earlier this year, I expected that the public and investors would become increasingly concerned about Y2K during the second half of this year as we approached the century date change. I was wrong. Instead, theyve become increasingly complacent. So far, there have been virtually no Y2K blowups and lots of assurances that all will be well...

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-- GIjoe (hopefulbut@realistic.view), November 30, 1999.

Yardeni's guess is no better than anyone elses. I do give him credit for thinking about the subject. That he ever predicts a recession makes him rare among economists.

But remember a recession is two or more consecutive quarters with GDP declines. If Y2K caused three months of severe problems in first quarter 2000 before economic growth resumed, we'd have no official recession and set records for the longest period of economic growth in peacetime ... even with Y2K !

-- Richard Greene (Rgreene2@ford.com), November 30, 1999.