I was actually thinking of starting this thread but didn't want to give away my ideas - well, screw it - here's what trades I'm certainly going to do and others that I had planned on doing and then rejected.
Firstly, the key to all of our trades is that the media is able to cause a signficant panic using doomsday scenarios as the millenium approaches - I believe they have the power to, but whether they will execute is another story. High-circulation periodicals and newspapers
and major TV networks may have already been politely asked by the Govt. to not crank out doomsday scenario after doomsday scenario - but the media cos. may be too greedy - they know that the doomsday stuff is what will sell - not stuff where the writer's view is that everyone will live happily ever after. Consider this - imagine that NASA annouced today that there was a meteor which would strike the earth and cause great damage exactly one week from today - the public would obviously prepare to varying degrees by digging shelters, buying canned goods, and a million other possible things. Then, suppose that NASA miscalculated and the meteor misses the earth and everything is fine. Is everything REALLY fine? - or will their be a large effect on society and the economy because of the precautions and preparations that every Tom, Dick and Harry took as they awaited the meteor? This is what will happen late this year. Even if the computer bug turns out to be a non-event, the effects of the mass-preparations for catastrophe by we citizens will have a significant impact on the economy. How significant depends on how scared shitless the public gets, and that in turn depends on the media. Thus, if by say, late summer I don't feel that the public is panicky, I will not place siginificant Y2K trades. If I do feel that it is panicky, i.e. the national consesus is to prepare in a serious manner, than I will conduct the following trades:
1. Short Utilities (Who would want to own 'em?) I've read that
mammoth Duke Energy is in deep doodoo, as they procrastinated and started way too late. Niagra Mohawk is another basket case.
2. Long Price-Club type stores (BJs, Costco, etc.) for obvious reasons.
2. Long Bridge CRB futures.
3. Long bottled water cos.
4. Short foreign telecoms
5. Long business computer makers - the company I work at needs to order new computers for everyone because the current ones are non-compliant. Most are just a few years old! I asked the MIS head of we can sue the boxmakers, and he said 'Have you ever seen a computer that comes with a warranty greater than 1 year?' Thus, I assume we are not the only company with this problem. The business computer longs are HWP, GTW and DELL. AAPL is not going to
notice higher sales on this tangent. I dont know any business that use Apples. Maybe a graphic-design company would.
6. The greatest Y2K long possible - and it blew up today - CPB - Campbell's Soup - I'm surprised that I saw it mentioned on the thread
already - I thought I was the only one wasting time with this evil
plotting. Campbells is the greatest Y2K long for a simple reason - If just 1 in 100 citizens goes all out in preparation, there will simply be no soup on the shelves. I can take $500 out of my bank right now, go to Waldbaum's, and surely have enough to buy all the Campbell's soup on the shelf. That's the key - it isn't unfeasible for one Y2K overpreparer to spend a few hundred and clean off the shelf. The question is whether Campbells is currently working at full capacity and if they're able to handle say, double or even
triple normal demand. I sent them an email a couple of weeks back but they have yet to answer.
I would not short the entire stock market in general because I believe that the Gov. may enact incentives for citizens to stay in if they anticipate a panic-selloff.
My other major Y2K trade was one that is not quite as savory as just a few months back - I planned on shorting the money markets as people withdraw extra cash. Banks have only 10% of assets in the vault, so they'd have to do mass-repos with the Gov. or be forced to sell secs. to meet demand. Same with MMFs. But very quietly, at the Nov. Fed meeting (where they last eased) the Fed lengthed the max repo duration from 15 to a whopping 60 days.
This leaves banks with almost 2 full months to have most of the money redeposited by the masses, which I personally think is quite feasible, as my own Y2K prediction is for scattered headaches but
nothing catastrophic. The previous 15 day repo did not allow for a couple of weeks of problems such as verifones being down, which would mean that the cash would not be immediately redeposited by we citizens. The Fed has saved the day once again, those clever bastards! They actually mention Y2K panic-withdrawals as a reason for
the new provision in the recently-released November minutes.
If everything is ok, there can be an incredible stock market rally in 1/00, so index futures are risky, especially if the Gov. announces sone sort of tax incentive or something to keep money in the stock market. |
