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Technology Stocks : Y2K (Year 2000) Stocks: An Investment Discussion
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To: Patrese who wrote (11376)5/5/1998 2:56:00 AM
From: P. Ramamoorthy  Read Replies (1) of 13949
 
Re.: DOW at 12,000 in 1999 and the role of y2k

In last week's Barron's (May 4, 1998), Tom Galvin (previous colleague of Ed Yardeni) predicts
- "earnings recovery will be sooner for S&P 500 than expected in spite of the Asia currency problems."
- "expanding multiples from 23 to 25 (hence DOW 12,000) in spite of the possibility of
(a) interest rate going higher about 0.25% or so
(b) inflation creeping up from 1% to 2.5%"
- "profit margins, free cash flow after the dividends and capital spending have never been higher"
Given three crises: Asia Currency problem, Japan's depression, and the y2k, he would have bet on the first two, not y2k. Expects some glitch, not enough to cause a global recession. (He may be underestimating the global nature of y2k problem.)
- " ...a potential golden lining with the feared y2k glitch is: because of y2k, have been forced to compress a lot of technology spending into a short period. 2 out of 3 companies are replacing 'legacy' systems rather than 'Band-Aiding' the problem. These upgrades are where the next Holy Grail in profit margins are..."
- " ... a year from now, a lot of more companies will talk about how this conversion not only fixed the y2k bug but also changed the entire dynamic of their business and improved return on investment."

What does it all mean to the y2k sector or the y2k stocks? May be not much. Ed Yardeni's prediction of global recession due to the y2k glitch may not happen. If S&P 500 thrive, they will pay their bills promptly to y2k companies and the y2k sector will have earnings to report, after all. May be y2k companies will even succeed in growing business after year 2000. Ram
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