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Technology Stocks : Discuss Year 2000 Issues -- Ignore unavailable to you. Want to Upgrade?

To: Howard Clark who wrote (4719)	3/18/1999 12:58:00 PM
From: Howard Clark	Read Replies (1) \| Respond to of 9818

More mixed messages from Dr. Ed. y2ktimebomb.com "Before I spoke with Dr. Yardeni," Dunn said, "I assumed, as have many others, that he was holding to 70% since he states that on his web site newsletter. To my surprise, Dr. Yardeni had to correct me by explaining that he had toned down his estimate from 70 to 45% chance of severe recession. He classified the 25% six month recession as a 'mild' one." Dunn added that Dr. Yardeni made is clear there was nothing scientific about his estimates, that it was just a gut feeling and that he was trying to acknowledge that progress was being made while still maintaining a level of seriousness about problems overseas and with small businesses. In fact, Yardeni sent out his own qualifier in response to the story saying that although he still sees a 70% chance of a measurable global recession, he does agree with Peter de Jager who believes that doomsday will be avoided. Dunn said after the story was published he talked again with Yardeni, who, according to Dunn, was very comfortable with how the story appeared. "People are going to interpret everything you write and say," Dunn remarked concerning the article. But as for the Yardeni quote saying he'd "toned down his message," Dunn said, "I don't know how you interpret that any other way." ... Since the completion of this article, Y2K Today editor Scott Johnson published his commentary regarding the LA Times piece, saying the Los Angeles Times made a "major mistake," in saying that Yardeni had reduced the chances of a long term recession from 70% to 45%. "The Times did not include the first level (25%) in their calculations," Johnson wrote. Although this has been already addressed in the above commentary, it's important to note that Y2K Today claims to have received an email from Yardeni that says, "You (Y2K Today) got it right. The LA Times got it completely wrong." So one of these two gents is lying or Yardeni is sending mixed messages. It amazes me that people hang so tenaciously to each and every utterance and fluctuation in Ed Yardeni's stated recession probabilities. While the Famous Dr. Ed has formidable credentials, he admits that there is nothing scientific about his estimates, that it is just a gut feeling about the progress being made addressing the Y2K quandary. Thus the argument about whether the number is 70% or 45% is more a discussion on the state of Dr. Ed's innards than an actual assessment of anything external. Now it could be that dissecting Dr Ed's entrails might lead to a more accurate divination of the truth about Y2K than trying to digest all the reams of anecdotes, amateur analysis and actual information on all the scores of Websites and discussion boards dedicated to the issue. So lets review what Yardeni actually says straight from the horse's mouth: (www.yardeni.com/public/y_19990208.pdf) Y2K Economic Scenarios Probability 1. Minor disruptions. Business as usual. Only a few problems, which will be fixed rapidly. Stock market unaffected. (Probability 10%) 2. Same impact as natural disaster. Business as usual within a few weeks. Stock market unaffected. (Probability 20%) 3. Multiple problems will cause modest 6-month recession. Real GDP down 1%-2%. Stock market down 10%-15%, then soars. (Probability 25%) 4. Major global recession lasting 12-24 months. Real GDP down 2%-5%. Stock market down 30%-40%. Flight to quality. Deflation. (Probability 40%) 5. Depression lasting 2-3 years. Blackouts. Social and political upheaval. Stock market: you don't want to know. (Probability 5%) Scenarios 3 is what all the controversy is about. Personally, I could do a 6 month recession standing on my head. Stocks down 10-15%? That's less than the correction we had last summer. Lets call this scenario the "pothole recession". So even in Dr. Ed's gloomy view, there is a better than even money (55%) chance we will get out of this with a bump in the road or a pothole recession. This leaves a 45% chance of really severe economic consequences. Now 45% are significant odds but even in 4 and 5 I don't read anything that makes me want to load up on guns and gold and head for the hills. And of course Yardeni is far more pessimistic than most of his peers. (Of course some on this thread think Yardeni is a hopeless Pollyanna <g>). This confirms my view that guarded optimism, while taking some reasonable precautions, seems to be the correct stance here. P.S. I watched Yardeni on Louis Rukeyser's new years special in January. Lou asked him if he had plans to stockpile food for the new year, he said something like "not at this time".