Emory, let me take a stab at your question. Yardeni is very worried about the impact of Y2K, and it surprises me, since he is a "macro-economist". In terms of the macro economic impact, I think that Y2K will at worst be a non event and at best increase expenditure of corporations on final demand, thus increase economic activity. Sure, those companies that did not take Y2K into account few years back might have a negative impact on their bottom line, but this impact would be an expenditure showing up as a positive impact on other companies' (such as Keane) bottom line. On balance, I see a little additional economic activity which will be balanced, IMHO, by declines in commodities (the deflation theme), and thus almost a non event.
Where I disagree with Henry, is about the potential for a recession next year. If, as I expect, the final blow to the Asian markets is still to come (before Japan finally faces the facts of life and does something drastic to increase domestic consumption), then weakness south of our border will start to have an impact on our economy as well (a lot of our trade is in this hemisphere). Like Henry, I do not expect a "big" recession, but there is, IMHO, a solid chance of two consecutive declines in GDP. This will finally give the FED's the excuse they'll need to bring their rates in line with existing market rates, and serve as the "signal" for the resumption of a bull phase in the market.
Zeev |
