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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (33853)	11/20/1999 11:15:00 AM
From: McNabb Brothers	Read Replies (2) \| Respond to of 99985

L3, Just heard on Headline news this morning where the gov. is paying $20,000 bonuses to people to sign up for the armed services. They said it was an increase of 67% over previous bonuses, but since it is the gov. having to pay up big time I guess it will not be counted as wage inflation! Hank

To: Lee Lichterman III who wrote (33853)	11/20/1999 5:51:00 PM
From: Jon Tara	Respond to of 99985

(Somewhat OT) Here's an alternative Y2K scenario that I think may have some trading opportunities. Most of the discussion I've read about "Y2K cash" (the cash that individuals are expected to withdraw at the end of the year) focuses on the probability that people will ultimately spend that cash on goods that would not otherwise be bought. The argument goes "do you know anybody who ever put cash BACK into the bank?" What I think may be more likely, though, is that people will just spend the cash in January in lieu of using credit cards. Let's assume for a minute that the odds are 50/50 that the vast majority of people would splurge. That is - we just can't predict the outcome - whether most people will splurge, or will simply use the cash to pay ordinary expenses. (Yes, I do agree that it's unlikely they will put it back in the bank!) Now, consider the banking system disaster scenario. Let's assume, again, that there is a 50/50 chance that the banking system will falter. (I think it's much less likely than this, but let's use 50/50 to start with.) If the banking system has significant Y2K-related failures, and people are unable to use credit cards, checking, ATM cards, etc. that means that they will be using their "y2K cash" to pay for ordinary expenses. So, it seems to me that, combining the odds, it is quite likely that we will see a reduction in the use of credit cards, checks, and ATMs in January in any case, due to the excess cash floating around that would be used - "disaster" or no "disaster" - to pay for ordinary expenses. So, the question is, what implications does this have for the economy, over-all, and how significant might the benefit or harm be to specific industries? For example, might this mean a significant reduction in first-quarter revenues for certain banks or other financial firms that rely heavily on credit-card income? While I hardly think that the odds of a financial Y2K "disaster" are anywhere near 50/50, I think they may be sufficently high to tilt the odds away from the "wreckless spending" theory and toward the "less use of credit" theory. Now - here's the rub, or perhaps the proof. I just got a letter from my credit union offering "Y2K loans". No interest until February 15, 2000. I wonder if other financial institutions are doing this, and if they are doing it because they forsee a temporary reduction of interest income, and so they are being proactive and trying to convince people to borrow their "Y2K money" from them, rather than to withdraw it? (Which brings up the OTHER effect of this on the financial institutions, which is the loss of income on deposited funds.)