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Strategies & Market Trends : Drillbits & Bottlerockets
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To: MulhollandDrive who wrote (7207)4/4/2001 3:07:33 PM
From: Jorj X Mckie  Read Replies (1) of 15481
 
Interesting, I disagree with many of the things that were said there.

I think that one of the main causes of what we are seeing today is a result of the policies and actions WRT Y2K. I believe that one part of this was unavoidable, but others certainly were.

The first thing is that many organizations (commercial and government) accelerated their technology spending in front of Y2K to avoid the spending lockdown. Much of this was from budgets that were earmarked for Y2K remediation, but were not really needed for that purpose. I believe that much of the slowing is due to the fact that there was an overbuild with the computer and communications areas (which of course reverberates into other sectors). But the other part is that I think that the risk associated with the Y2K bug was way overblown and that the Fed's reaction to it accelerated spending even further and caused further irresponsible spending in the market. In front of Y2K, the Fed was pumping money into the system and lowering rates so much that the surplus was bound to make its way to the stock market. Unfortunately, it was inevitable that the fed would want to pull the cash out of the money supply after the monster in the closet (Y2K) disappeared. I believe that the fed's first mistake was in not understanding the true risk of y2k (or lack thereof) and then not recognizing that they had overdone it on the rate hikes on the other side.
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