TL, you ask what else? I know our glorious leader has said Y2K is a non-event, and he never lies, but here's part of a note that I imported from the P* BB. So far he's been proven wrong as to the market worrying about Y2K, but then I don't know of anyone who has fully appreciated the spin mastery BC has demonstrated, I know he continues to amaze me. Of course in this instance it doesn't hurt that the majority of the American people want to believe his rosy views, and it doesn't mean everything this fellow Tony says is wrong.
" Thread Closed
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Author Topic: CLUB DOOMSDAY
Tony
Member posted 11-04-99 08:12 PM
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Y2K Crisis Timeline:
What to expect and when to expect it
As you have probably guessed in the months you and I have spent together, analysis of Y2K consumes a huge portion of my life. I've spent thousands of hours studying the problem from a technical, economic and investment perspective. So I have a strong opinion on how this crisis is most likely to unfold.
No one can foretell the future with precision. But to help guide you through the worst landmines ahead, here?s my vision of the most likely scenario ;
Phase I
Y2K Fears Will Depress Stock Values Until Year-End
This is not just a prediction. It is already happening ? and can only get worse between now and the end of the year.
Airlines have already been clobbered. Bank stocks are getting hit by wave after wave of selling.
And throughout it all, even while the Dow Jones Industrials, the S&P 500, and the NASDAQ have held up, the broad market has continued to plunge.
Now, as we approach year-end, many conservative investors (like us!) are choosing the safe road ; shifting their savings and retirement funds out of stocks and into safe-harbor investments like Treasuries ... while many are going one step further, buying investments that will actually profit from the decline.
The most recent Zogby survey shows that a whopping 37% of all Americans plan to raid their own bank accounts for Y2K ; converting those electronic blips and bleeps that represent their money into cash prior to the deadline.
With American households now holding larger amounts in mutual funds and stocks than in banks, it would be foolhardy to assume they won?t do the same for these holdings as well.
This does NOT bode well for stocks for the rest of the year. To the contrary: It?s a clear warning of much greater declines on the immediate horizon.
Indeed, investor fears during far narrower crises ? the Russian debt default last fall or the near collapse of the Brazilian economy early this year ? were more than enough to send shock waves through the US stock market, plunging stocks by more than 20%. And just a 20% decline today would be a drop of over 2,050 points on the Dow. That?s no picnic.
The disruptions Y2K is going to cause worldwide ? in every company, every economy and every stock market in the world ? dwarfs the problems of Russia or Brazil. As investor fears intensify between now and New Year?s Day, you can expect a far deeper decline in US stock values.
Phase II
The Day The World Didn?t End
The date is Monday, January 3, 2000. Let?s take a peak at the scenario that unfolds ;
The most radical Y2K doom-and-gloomers are being proven wrong: The entire electric grid has not shut down ? airplanes have not dropped from the sky ? nuclear missiles have not spontaneously launched themselves. Civilization is not crumbling. The banking system and the stock market are open for business.
America?s news weeklies run cover stories with headlines like "The Sigh Of Relief Heard Around The World," and "The Great Y2K Dud." At offices everywhere, talk around the water cooler centers on what a spectacular hoax Y2K was.
Fear is replaced by hope. Doubts lingering from the second millennium give way to euphoric expectations for the third millennium.
Investors who stayed on the sideline in anticipation of the date change sheepishly swing back into the market ? not bit by bit and not cautiously testing the waters, but with enthusiasm and gusto.
Result: A sharp rally in stocks.
Wall Street is euphoric. But as in 1999, the rally is concentrated in the blue chips, primarily because of a massive flight to quality by foreign investors. In contrast, medium-sized companies, suffering the most from Y2K disruptions, are targets of relentless selling.
So while the blue chips rally, the broader market continues to sink. This is the first sign of trouble.
The second sign of trouble is overseas. Breakdowns in the infrastructure tear their financial markets to shreds.
The third sign is earnings. Nowhere in all of the rose-colored Y2K stories of the New Year do you see any mention about the long-term consequences of Y2K.
The media didn?t understand the true nature of software fixes in 1999. They still don?t understand it in the early part of 2000.
But in Corporate America, executives soon encounter ?
Phase III
The Revenge Of The Y2K Bug
It starts in February ?
Company insiders see the handwriting on the wall. They begin selling their own shares. And the stock market rally ends just as suddenly as it began.
Price action freezes ? like a cartoon character that runs off a cliff and then hangs in mid-air momentarily.
March ?
Early earnings reports begin to come out, missing expectations by a wide margin. There?s no explanation, no excuse. Except one ? Y2K.
"All of our Year 2000 Bugs weren?t fixed after all," they say ? or "The minor, temporary disruptions we told you about turned out to be not-so-minor and not-so-temporary" ? or just plain ? "Sorry, the fixes need fixing."
At a trickle pace initially, but then in great torrents ? the news pours out ? huge declines in productivity ? vendors missing shipments ? production lines shut down due to missing parts ? evaporating cash flows ? delayed payments ? and a massive bottleneck that is deadly for businesses everywhere.
It?s a chain reaction: Customers flee to new vendors. Vendors scramble to cut staff.
April ?
A raft of earnings reports for the first quarter are released, and management can?t hide the truth any more: Corporate revenues have been hammered.
Many companies take on a hunker-down mentality, cutting back on production or development of new products.
Remainder of Year 2000 ?
Thousands of small- and medium-sized companies go belly-up as the cumulative effect of Y2K hits the economy and drags down firms that are already weak financially.
Overseas, emerging market economies are at a standstill. Exports are not getting shipped. Governments are virtually paralyzed. Political turmoil rages.
Suddenly and without warning, the US is in a recession.
At some point in the year 2000, the market hits a bottom and enjoys another nice bounceback. (But it?s too soon to pinpoint exactly when. Nor is it clear if it?s a final bottom or just a temporary respite in the bear market.)
The year 2001 and beyond ?
The bulk of the economy?s decline is behind us. But the recovery is neither smooth nor widespread. Reason: Foreign economies are still reeling from the aftermath of Y2K failures, deflation, and a collapse of their debt bubbles.
There is a rash of financial failures, especially among banks, insurers and brokerage firms that took the most risks in the late 20th century.
These are the institutions that have the largest foreign loan portfolios, that fueled the worldwide credit bubble. As long as the US continued to act as the locomotive ? and lender of last resort ? for the entire world economy, all was fine. But as soon as the US itself plunged into a severe Y2K recession in the year 2000, it set off a chain reaction of events that are just now beginning to show up:
New loan defaults by Korea, Russia and Brazil. Massive dumping of steel and other goods from these countries in a desperate attempt to raise cash. More deflation ? and great buying opportunities in companies that have taken over huge segments of market share.
Back to the present ?
As you make your final Y2K preparations, please remember what I said at the outset:
? Every major Y2K study agrees that the majority of Y2K problems will appear over a period of many months ? not all at once in January 2000.
? Once those problems occur, it will take months ? and even years ? to sort them out.
? It will take still longer for the devastating economic impacts to end.
? To adequately protect your money and profit from Y2K, it is absolutely essential that you understand that its effects will be among the most dominant forces in the economy for the next 3 years!
We?ll see a chain of events that will begin in 2000, continue through 2001 and well into 2002: Computer failures, disruptions in the flow of crucial imported materials, and lower productivity.
That will affect corporate earnings and lead to job losses ?
a major displacement of labor which will not be easily absorbed by surviving companies..." |
