How Bad will Y2K Be?: "We are about to start a great adventure."greenspun.com : LUSENET : Millennium Salons : One Thread
An interesting observation from Harlan Smith...
From: Harlan Smith
Subject: RE: if Yardini's scared.... (Boston Globe)
Date: Sat, 5 Dec 1998
My reaction was that [Ed Yardeni, Capers Jones] are telling people as much as they think they can handle right now. Nobody doing a prediction bases it on a detailed definition of the post-2000 scenario. I certainly won't offer any predictions as no basis for such has been defined by anyone. The scenario must be "modeled". Nobody has attempted that.
I believe the impact will be HUGE but that the situation will be more like a "war" than anyone currently admits. Wars don't create unemployment, people's jobs just change. How are we going to "attempt to" fight that war? Without any accurate scenario for how that will play out, we have no basis for any predictions.
Just like the SE Asia crisis, it will have positive and negative impacts on our economy. For instance, will oil prices go up or down in response to Y2K? I don't think that anyone would have predicted today's low oil prices yet, in hindsight, it's easy to see that reduced worldwide demand provides us with inexpensive oil.
I can think of domestic scenarios that would result in a buoying of our economy. Our services to help foreign countries with failed computer systems will be in great demand. There will be worldwide problems that will demand technological solutions, creating a great market for our technical capabilities. I'm convinced that a lot of systems will go into cardiac arrest and we will be amazed at nature of the resuscitation processes.
**Conceivably**, there might be a boom in foreign air travel to carry food, critical spare parts and fire fighting teams to deal with all sorts of dramatic problems (nuclear, medical, computer etc.) to foreign countries. Boeing might have a big market for all those unpaid for airliners they have sent to the Arizona desert.
You remember, I'm sure, the response to the post Gulf War oil fires in Kuwait. There were very dire predictions. Among these was an absence of capacity to deal with these fires in a reasonable amount of time. But somehow, substantial capacity surfaced, or was created, and the fires were dealt with rather expeditiously. The damage to the local ecology was, I'm sure, very severe, but not so severe that it is still prominent in the news.
I believe it's going to be a WAR, of a very unusual sort. When you begin to think about what dramatic things are likely to occur, it makes the current shallow thinking about heading for the hills to sit on a bag of beans grossly absurd. That's not what we do in a war. We never have and likely never will -- even when our lives are severely disrupted.
Interesting times we live in right now. Big layoffs are being announced (Boeing, Kellog etc.), yet the unemployment rate remains very low. My opinion is that an infrastructure fleshed out with 48,000 Boeing technical workers could immensely bolster our global efforts to deal with embedded systems problems. Task Boeing with helping there and they likely could keep these people busy during the period 1999 - 2001 and then put them back to building aircraft. Similarly, Kellogg should be tasked with producing emergency food supplies.
I don't assign much credibility to either Yardeni's or Capers Jones predictions, both being unsupported by any substantive model of the post-2000 scenario.
Shallow thinking will result only in totally erroneous predictions and inappropriate actions. In my view, most of the thinking and discussion, that occurred prior to the last couple of months, was _extremely _shallow. But just within the last few weeks, with the clear realization that large numbers of systems will _not be thoroughly remediated and tested, the thinking is getting much more serious and professional.
It's becoming "high drama". It will be extremely interesting to see how this problem will be "assimilated" into our very complex society and infrastructure.
We are about to start a great adventure.
-- Bill (firstname.lastname@example.org), December 11, 1998
From: Tom Atlee [SMTP:email@example.com]
Sent: Friday, December 04
Subject: if Yardini's scared....
A useful tool for promoting credibility. -- Tom
Y2K problem throws a scare into Wall Street's biggest bull
John Ellis, Globe Columnist, 11/14/98
For a moment you are Ed Yardeni, chief economist of Deutsche Bank Securities (North America). You are paid vast sums of money to make your wealthy clients richer, and you are very good at your job. Indeed, you may be the best economic forecaster of this decade, so prescient is your analysis.
You have impeccable credentials. You completed your PhD dissertation under professor (and Nobel laureate) James Tobin at Yale University, taught at Columbia University's Graduate School of Business, served as an economist with the Federal Reserve Bank of New York, and held positions at the Federal Reserve Board of Governors and the US Treasury Department in Washington. In private life, you served as chief economist for C.J. Lawrence, Prudential Securities, and E.F. Hutton.
In the late 1980s, when everyone else was moaning and groaning about the coming recession and the size of the deficit, you looked around and saw a world transformed by the end of the Cold War, the technology revolution, and scientific discovery and announced that a ''new economy'' was being born. Fasten your seat belts, you told your colleagues and clients, the Dow Jones Industrial Average is going to take off like a rocket.
You even put a number on it - 5,000 Dow. Your colleagues said that might be a tad optimistic, which in their view was just two steps removed from out of your mind. But you had the courage of your convictions. You saw the big picture, and the big picture was almost limitless investment opportunity.
And you were right. The Dow did take off like a rocket. Soon enough (1993) it punched through the 5,000 figure with fuel to burn. What next? Ten thousand by 2000, you said, figuring, why not? Ten thousand Dow seemed mighty optimistic, maybe only one step removed from lunacy, but you were unfazed. The productivity revolution, the technology revolution, the genomics revolution, the political landscape, demographic trends, 401(k) plans, and mutual fund mania all pointed due north.
Sure enough, the Dow ramped just as you said it would. By that time, the press was eating out of your hand. ABC News called you the best economic forecaster in the country, Barron's sang your praises at every turn. And all the while, the Dow just kept moving up.
There was only one problem. You were not only smart, you were intellectually curious. Smart was fine; eggheads were in on Wall Street. But intellectual curiosity was, let's be honest about it, problematic. It took you to unexpected places.
But you're Ed Yardeni, and you don't care, so you begin to consider the implications of the Year 2000 (Y2K) computer problem. The problem is simple. In much of the embedded memory of the global economy are computer chips and computer programs that think the year 2000 is really the year 1900. A weird glitch, to say the least, but an interesting glitch, given that the new economy runs on computers.
You begin to really study this problem, and the more you look into it, the more freaked out you become. Before long, you transform your website (www.yardeni.com) into a Y2K Red Alert bulletin board. There, you post articles and provide links on how the Y2K computer problem will affect every aspect of economic, military, and social life in the developed and underdeveloped world. You realize that air travel, electric utilities, telephone service, Medicare, just-in-time production capabilities, and ''mission critical'' national security operations might be rendered dysfunctional by the glitch. And that's just for starters. It makes your head spin because you know that nothing much is really being done about it.
But you're Ed Yardeni and so you become, as New York Magazine's Jim Suroweicki called you, a Y2K Jeremiah. This summer, you go before some big shot group and announce that the chances of a Y2K-induced global recession (on the order of the post-OPEC 1973-74 global recession) is 70 percent. In your heart of hearts you probably think it's more like 99 percent. Because the more you learn about this Y2K computer problem, the more immense it becomes.
And then, this week, you walk into your office and scan the morning papers. There on the front page of Tuesday's Financial Times is the following headline: ''Too late to defuse millennium bomb, software group warns.'' The story is based on a comprehensive report by a leading European software consulting firm on the Y2K problem, and its conclusions are grim.
You're Ed Yardeni, Wall Street's greatest bull through much of the 1990s and, because of the Y2K computer glitch, you have become the King of the Bears. With each passing day, you grow more concerned and wonder why more is not being done. You're Ed Yardeni. You know you're right and you hope you're wrong.
John Ellis is a Globe columnist.
This story ran on page A19 of the Boston Globe on 11/14/98.
Tom Atlee * The Co-Intelligence Institute * Oakland, CA
http://www.co- intelligence.org * http://www.co-intelligence.org/Y2K.html
-- Bill (firstname.lastname@example.org), December 11, 1998.
Date: Tue, 08 Dec 1998
From: Ed Yardeni [email@example.com]
Subject: New Y2K Study On Dr. Ed's EcoNet
In my latest Y2K REPORTER (http://www.yardeni.com/y2kreporter.html), I examine corporate progress by studying Y2K budget data available in some of the third quarter SEC filings. I found 315 of the 415 S&P 500 companies currently showing a third quarter report on the SECms Edgar database, which reported the total estimated cost of the Y2K project and also how much has been spent so far.
I believe that there must be a good direct correlation between the percentage of budget spent and progress in Y2K remediation. If this assumption is correct, then many companies have a great deal of work to do in a very short period of time before the Y2K ldreadline.n Indeed, all told, the companies in my sample collectively have spent only 42% of their budgets as of the end of the third quarter. Here are some of my other findings:
1) On average, the S&P 500 industry that is at the top of the spending-to-budget progress list is the financial sector, with a ratio of 53.3%. It is followed by capital goods (45.6%), health care (42.2%), consumer cyclicals (41.8%), consumer staples (41.5%), transports (40.0%), energy (39.9%), technology (36.9%), basic materials (36.0%), communications (35.3%), and utilities (31.4%). Utilities are at the bottom of the list of S&P industry sectors! If they donmt work, nothing else will.
2) No industry is uniformly ahead of the others. There are laggards in every major industry. Even in the leading financial sector, 36% of the sample has spent less than half of their Y2K budget through the third quarter of 1998.
3) There are a disturbing number of laggards. Fully 33% of the companies I surveyed spent less than one-third of their budgets so far. And 14% of the companies spent less than 20% of their projected Y2K budget through the third quarter of 1998.
4) Only 8 companies claim that they are nearly finished, having spending-to-budget ratios of 80% or more.
5) In the utility sector, only five of the 34 companies in my survey claim to have spent more than 50% of their budget. And 10 of these have spent less than 20%!
Y2K Home: http:// www.yardeni.com/cyber.html
Y2K Reporter: http:// www.yardeni.com/y2kreporter.html
Y2K Netbook: http:// www.yardeni.com/y2kbook.html
Y2K News Fax: http:// www.yardeni.com/y2knews.html
Y2K Action Day Conferences: http:// www.y2kactionday.com
Y2K Corporate Disclosure: http://www.progsys.com/yardeni/y2kfind.asp
-- Bill (firstname.lastname@example.org), December 11, 1998.
"Shallow thinking will result only in totally erroneous predictions and inappropriate actions. In my view, most of the thinking and discussion, that occurred prior to the last couple of months, was _extremely _shallow. But just within the last few weeks, with the clear realization that large numbers of systems will _not be thoroughly remediated and tested, the thinking is getting much more serious and professional."
That's very funny, Harlan, considering that you are one of the people who didn't realize that large numbers of systems will not be thoroughly remediated and tested. I've known that for a couple of years, and so have Paul Milne and a lot of others on comp.software.year-2000, whom you have either ignored or dismissed as "doomsayers". Guess what? We were right all along about the failure of remediation; now the only question is how serious the consequences will be.
-- Steve Heller (email@example.com), May 21, 1999.
Note to Steve Heller
You miss the most important point. These large numbers of systems will reside in foreign countries.
Even though a significant number of systems will not make it in the USA, in most cases remediated competitors to those failing will be able to step in and take up the slack.
The flight to the hills was ridiculous and remains so.
-- Harlan Smith (firstname.lastname@example.org), May 21, 1999.
Harlan, I see you have your crystal ball polished and clear.
Of course large numbers of systems reside in foreign countries, and of course large numbers of businesses, both in and out of USA, relying directly and indirectly upon those systems will be adversly affected, the depth of which depends upon the degree of systemic and interactional failure.
You are saying that significant number of systems in USA won't make it, yet remediated competitors will take up the slack. Y2k hasn't happened yet and any forecasting such as you are now doing is conjecture based on our common hope.
"The flight to the hills was ridiculous and remains so."
First of all _very few people fled to the hills, as of yet. Second of all, your statement is inflammatory. Based solely upon your take and personal worldview of appropriate responses - ie highly personal and totally relative to _you - your views are not necessarily appropriate for other's circumstances.
It might become appropriate to say this statement in June 2000, but last I checked it was 21May99 and y2k hasn't happened yet.
-- Mitchell Barnes (email@example.com), May 21, 1999.