Yardeni predicts Wall Street impact

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Wall Street

Y2K could eat into Wall Street

By Sheryle Bagwell, Davos

What could bring Wall Street crashing down to earth during the next 18 months? Not even the more pessimistic tech-heads at the annual meeting of the World Economic Forum in Davos thought it would be the bursting of the internet stock bubble. But a few pointed to another technological conundrum as having the potential to wreak havoc on world markets in less than a year -- the millennium bug.

The chief executive of Sun Microsystems Inc, Mr Scott McNealy, set the dark tone on Monday when he urged businesses to start stockpiling computers ahead of January 1, 2000.

Mr McNealy said his company had discovered that key computer component suppliers in Asia were so "disastrously behind" in fixing their year 2000 problem that there was likely to be a shortage of hardware at the start of the next millennium.

"We have done some quite scientific surveys of our supply base and Asia is statistically way, way behind in terms of their preparations for Y2K," he said.

But Mr McNealy's warning was dismissed by others as self-interest -- his company, after all, supplies the world with computers.

Sun Microsystems' major foe, the dominant market player Mr Bill Gates, of Microsoft, had already predicted at this international conference of the world's elite that the millennium bug would not be as big a problem as anticipated.

This view was shared by the chief executive and founder of online book supplier Amazon.com, Mr Jeff Bezos, who described the Y2K issue in one forum as "overhyped".

But Mr McNealy's concerns did win strong backing from the influential chief economist and managing director of Deutsche Bank Securities in the US, Mr Edward Yardeni.

He warned that the world's unpreparedness for Y2K might be the event "that sets us up for a major correction in the US stockmarket" in the first two months of the next millennium.

When it came to fixing the millennium bug, "there are still an enormous number of countries in the 'clueless' category".

Everyone at the conference agreed that internet stocks were overvalued. But Mr Yardeni and others believed more fundamental causes such as a rise in US interest rates and falling corporate profits -- not to mention the millennium bug -- were more likely to puncture the irrational exuberance of the US stockmarket.

Mr Yardeni thought that puncture could come as soon as the second half of 1999."

-- Brooks (brooksbie@hotmail.com), February 03, 1999


Hmmmmmm. Sun might be a better investment than Microsoft later this year.

-- Vic (Roadrunner@compliant.com), February 03, 1999.

The emporor has no clothes.

-- me (justme@aol.com), February 03, 1999.

Or as the title of a report I saw somewhere put it:

"The Clothes have no Emperor"

-- Lewis (aslanshow@yahoo.com), February 03, 1999.

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