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Non-Tech : The Y2K Newspaper -- Ignore unavailable to you. Want to Upgrade?

To: C.K. Houston who wrote (95)	9/17/1999 1:58:00 PM
From: flatsville	Respond to of 198

wbn.com Fair Use/etc... How Y2K Is - and Is Not Already Discounted in the Market By Michael S. Robbins September 17, 1999 A great misunderstanding of Y2K on Wall Street is that pre-Y2K expenditures have any relative significance compared to the post-Y2K disruptions to come. This is because the former costs are easily quantified, unlike the costs to come from economic friction caused by the Millennium Bug in January. An example of the pre-Y2K economic effect could be seen on Sept. 13, 1999. Computer Task Group (NYSE:TSK) fell $0.31 to $15.19 on 845% of average volume, hitting its 52-week low in intraday trading, partially due to a negative Y2K spending impact. The company, a provider of information technology (IT) services, said Monday it expects revenue and earnings per share for the remainder of 1999 to be below analysts' current estimates. "The shortfall is attributable to an industry-wide reduction in both Year 2000 and non-Year 2000 IT spending. Like others in the industry, Computer Task is experiencing a decline in revenues as companies are deferring new systems development and integration work until the actual impact of Year 2000 on their systems can be assessed and resolved." Computer Task said it believes that this industry-wide slowdown is a short-term phenomenon and that the long-term growth prospects for its business remain very strong for 2000 and beyond. This Y2K market effect is one of several that has occurred in the IT industry due to falling earnings expectations for the third and fourth quarter of 1999. Traditional financial analysis can easily identify this lost revenue because it relates to corporate and government planned spending on correcting the Year 2000 Problem in 1999. Changes in spending on IT projects for the next 3 ½ months is a relatively easy figure to assess for the industry. However, the cost-to-fix does not include the economic impact of global business interruption from uncorrected Millennium Bugs on January 1, 2000, which may be much greater. Capers Jones of Software Productivity Research has estimated that for every dollar not spent on correcting the problem before Jan. 1, 2000, the cost of failure may be up to $20. Assuming a $800 billion global cost to fix and 70% completion of the project by January, the global economy could face up to a $4.8 trillion impact. That cost will also be compressed in a smaller timeframe than pre-Y2K remediation costs, which began as early as 1996. The effect of system failure, though potentially more significant, is not nearly as tangible as pre-Y2K cost-to-fix expenses. Thus much of the financial impact of Y2K reported in the media today usually indicates an immaterial cost because it addresses pre-Y2K expenses. Many Asian and South American governments and companies will not be Y2K-ready. There may be a significant erosion to next year's earnings caused by the temporary malfunctioning of computer systems, and that is a cost not being included in analysts' estimates. According to Karl W. Feilder, President and CEO of Greenwich Mean Time and acknowledged world authority on the Year 2000 PC problem, Japan is the biggest Y2K risk in the world today. Yet since January 1, 1999, the Nikkei is up about 33% and the Dow Jones is up about 18%. China Telecom (NYSE ADR: CHL) has a relatively high probability of experiencing Y2K problems compared to Sprint (NYSE: FON). Yet China Telecom, with approximately the same market capitalization as Sprint, has almost twice the price earnings ratio valuation. China Telecom has a price-sales ratio of 16.94, compared to Sprint's 2.54. On September 9, 1999, the Wall Street Journal reported a brief surge in Asian interest rate futures as investors speculated on the impact 9/9/99 might have on computers, even though most experts knew the Sept. 9 computer issue would be negligible compared to Y2K. Through July and August 1998, the Dow Jones Industrial Average lost 20 percent of its value from the perceived economic problems associated with the "Asian Flu." Perhaps Sept. 9 was a sure sign that the markets will be unable to withstand a correction before Jan.1, 2000. --------------------------------------------------------------------- I also recall the above bolded situation caused an overnight liquidity crisis as well. Though I follow the remediation news closely I thought the situation in Japan re: 9/9/99 was an uncalled for, senseless, over-reaction. Upon reflection the it belies their "nervousness" and highlights their misunderstanding of where the real risks lay. This is not good.

To: C.K. Houston who wrote (95)	9/19/1999 11:27:00 AM
From: C.K. Houston	Read Replies (2) \| Respond to of 198

"... it is likely* that one or more events may disrupt the Corporation's normal business operations."* BANK OF AMERICA'S LATEST SEC 10-Q FILING (August 16) Y2K Disclosure begins on page 30. RISKS Although the Corporation's remediation efforts are directed at reducing its Year 2000 exposure, there can be no assurance that these efforts will fully mitigate the effect of Year 2000 issues and it is likely that one or more events may disrupt the Corporation's normal business operations. In the event the Corporation fails to identify or correct a material Year 2000 problem, there could be disruptions in normal business operations, which could have a material adverse effect on the Corporation's results of operations, liquidity or financial condition. In addition, there can be no assurance that significant foreign and domestic third parties will adequately address their Year 2000 issues. Further, there may be some parties, such as governmental agencies, utilities, telecommunication companies, financial services vendors and other providers, for which alternative arrangements or resources are not available. Also, risks associated with some foreign third parties may be greater than those of domestic parties since there is general concern that some third parties operating outside the United States are not addressing Year 2000 issues on a timely basis. In addition to the foregoing, the Corporation is subject to CREDIT RISK to the extent borrowers fail to adequately address Year 2000 issues, to FIDUCIARY RISK to the extent fiduciary assets fail to adequately address Year 2000 issues, and to LIQUIDITY RISK to the extent of deposit withdrawals and to the extent its lenders are unable to provide the Corporation with funds due to Year 2000 issues. Although it is not possible to quantify the potential impact of these risks at this time, there may be increases in future years in problem loans, credit losses, losses in the fiduciary business and liquidity problems, as well as the risk of litigation and potential losses from litigation related to the foregoing [...] sec.gov ============================================================ FDIC STATEMENT - September 17, 1999 Excerpt Communicating about the Year 2000 readiness of financial institutions is all-important. Financial institutions need to communicate with their customers and business partners about their Year 2000 readiness efforts. In addition, the federal financial institution regulatory agencies are communicating with consumers to help ensure their confidence in the nation's banking system. We have formed an interagency team of senior level PUBLIC RELATIONS staff to coordinate communications efforts on an interagency basis. We have developed printed educational materials and announcements, such as "The Year 2000 Date Change" brochure, a financial institution Year 2000 "Statement Stuffer," and a "Year 2000 Customer Checklist" for consumers. These materials are made available to the public at no charge by the regulatory agencies and are provided to financial institutions for further distribution to their customers. Millions of copies have been distributed. And senior officials - Comptroller of the Currency Jerry Hawke, Office of Thrift Supervision Director Ellen Seidman, Credit Union National Administration Chairman Norman D'Amours, Federal Reserve Board Governor Mike Kelly, and myself - are meeting with the media and the public across the country to make sure that people get the information they need on the preparedness of the institutions we regulate . . . Information they need to make rational decisions ... The Internet will provide a fertile ground for spreading unfounded rumors ... We're telling the public to check out rumors before taking them seriously. And to contact a trusted source, such as their financial institution or a financial industry regulator, to help sort fact from fiction. In conclusion, the financial services industry is regarded as one of the best-prepared industries for the Year 2000 date change. The financial industry will be prepared for Y2K. And I am completely confident that bank, thrift and credit union customers will be able to conduct business as usual before, on, and after January 1, 2000 [...] greenspun.com Cheryl 103 days until 2000