Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : TAVA Technologies (TAVA-NASDAQ) -- Ignore unavailable to you. Want to Upgrade?

To: Jay Maitland who wrote (15891)	5/4/1998 6:20:00 AM
From: Jay Maitland	Read Replies (3) \| Respond to of 31646

2nd article from WSJ The Outlook WASHINGTON If you knew your house was going to catch fire at 3 p.m. tomorrow, would your children be inside? Would you alert the fire department? Duh! The ill effects of disasters are easier to avoid when they arrive on a schedule. And that applies to the Year 2000 computer bug. Rewriting software and replacing recalcitrant computer chips so the world's computers don't go wild at the end of the century will be terrifically expensive. But Y2K -- geek speak for "Year 2000" -- is unlikely to shut down the world economy or cause a recession. No one makes it on television news expressing calm caution about a costly nuisance. Edward Yardeni, Deutsche Morgan Grenfell's economist in New York, puts the odds of a Y2K-caused global recession at an alarming 60%. He predicts a yearlong recession that will match the 1973-74 downturn provoked by OPEC oil-price increases. He also has a knack for sound bites, and he gets lots of interviews. "Let's stop pretending that Y2K isn't a major threat to our way of life," Mr. Yardeni says. "This year the American economy is a supertanker, but next year it is going to be Titanic America." He adds, reassuringly, "I am not predicting the end of life on the planet Earth." Whew! Dennis Grabow, whose resume is sprinkled with Wall Street brand names, predicts a recession with certainty; none of this 60-40 stuff. And he is hardly in a position to change his mind. Mr. Grabow's investment-advisory firm, Millennium Investment Corp., seeks stocks in companies that will profit from the Y2K disaster. The Y2K doomsday scenario seems to be supplanting fear of nuclear annihilation. For $24.95, you can buy a digital clock that counts the seconds remaining till the dawn, or darkness, of the millennium. Initially, the maker wanted smoke to pour from the clock the instant 1999 ends -- just like the tape did on the lead-in to for the "Mission Impossible" TV series. But instead, the clock will flash zeros for 24 hours, and then become a regular clock. Only 606 days left! Fixing the world's computers will undoubtedly be expensive. In government filings, Fortune 500 firms anticipate spending about $11 billion on Y2K before the end of the decade. Based on that, Federal Reserve Gov. Edward Kelley last week offered "an educated guess" that the U.S. private sector will spend $50 billion. He said the mess could shave one-tenth of a percentage point off U.S. economic growth for each of the next two years. That's big, but it's not the deep 1973-74 recession. The gloomy forecast goes like this: Information is the life blood of the modern economy, as important as oil. If the flow of information were cut off, the economy would grind to a halt. Computers are crucial to the flow of information. All the computers won't be fixed by Dec. 31, 1999. Therefore, the economy will grind to a halt. Q.E.D. No one can be absolutely certain this forecast is wrong. "These horror scenarios have a certain plausibility," Mr. Kelley concedes in an interview. But disaster isn't inevitable. "By no means is it baked in the cake that this is going to be a severe economic disruption or disaster," Mr. Kelley says. Alarm bells are sounding, and companies are responding. The Y2K solution vendors are advertising. All the talk about millennial meltdown is spurring people to act. Indeed, that's one reason government officials are talking so much about it. "We're trying not to be Pollyanna or Chicken Little," Mr. Kelley says. No, but a little Chicken Little talk does encourage people to check their roofs. Not every computer will be fixed in time. But what matters are those computers that are vital to the economy. Modern global finance relies on instantaneous electronic transfers of money; if an expected transfer fails to arrive, as many did during the 1987 stock-market crash, the party at the other end fears its partner has gone belly-up. But if a transfer fails to arrive on Monday, Jan. 3, 2000, will financial firms panic? Or assume a temporary Y2K problem? "While not everything will go smoothly, common sense should prevail," argues Edward Kerschner of PaineWebber Inc. Even the consequences of Federal Aviation Administration computers are easily exaggerated -- though it's sobering that 63% of nearly 800 technology executives surveyed by CIO Magazine said they won't fly on Jan 1, 2000. But John Koskinen, the government's Y2K czar, says, "The contingency plan for the FAA is not that people won't fly. They'll space planes out farther. It'll take longer. The backup system is "Year 2000 compliant." " He'll be flying to Newark on New Year's Eve and back the next day. Some disruption of business is likely, but it takes more than that to cause a recession. Two years ago, the budget tussle between President Clinton and Congress shut the government for 22 days; no recession ensued. In early 1996, a storm paralyzed large parts of the country for a week; the economy rebounded when the roads were cleared. The United Parcel Service strike disrupted shipments last summer; the lasting effects were very small. If Y2K glitches occur, big problems result only if the glitches can't be quickly remedied or the paralyzed computers bypassed. Pessimists assert the remedies won't be easy; no one really knows. But if the captain of the Titanic had seen the iceberg approaching, he would have steered away from it. --DAVID WESSEL