Money will no longer chase fools.

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Money will no longer chase fools.

In theory, money is always in short supply. At least there are always a million ideas that are not pursued for want of enough money to pay for them.

Most people think inflation is bad. But most people like a form of inflation called "asset inflation". When the "value" of our houses and stock portfolios is forever on the rise, we feel rich.

Asset inflation has created a large profession of investment advisors and portfolio managers, and all our friends tell us we are stupid not to have some of our 401k in stock portfolios.

The banks will survive (in some form) because we will all need a way to make payments over distance and methods to establish trustworthy credit relationships.

But in the post y2k environment, it may be hard to "attract investment". Since we live in a period which has seen much asset inflation, if y2k significantly deflates the value of houses and stock portfolios, many pools of money which provide investment for new developments may dry up.

The ability of any sector to recover should be evaluated based on the need it has to attract ongoing investments, and the time horizon for the tangible results of the investments.

-- Thom Gilligan (thomgill@eznet.net), August 14, 1999

Answers

Thom,

We live in a "disposable" society today, because it's easier (and often cheaper!) to buy a replacement whenever something breaks. Obviously, that could change in a serious recession, particularly if Y2K disrupts the supply chain of the replacement items.

Hence, you might see an upsurge in home-repair, auto-repair, PC-repair, TV-repair and other such industries. Sales of new cars could go down, sales of used cars could go up. Many families might decide to buy a couple books and figure out how to add a new room to their existing house rather than "trading up" to a newer and bigger house. Etc, etc, etc.

Ed

-- Ed Yourdon (HumptyDumptyY2K@yourdon.com), August 15, 1999.


It may well be that money will be available for GOOD investments during the coming recession/depression. The problem is how many people will want to go out on a limb to borrow money...and to repay it, when money will be hard to make. What business will do well in a recession? Depression? My money is on basic commodities and entertainment.

-- Mad Monk (madmonk@hawaiian.net), August 15, 1999.

The reason so much stuff is disposable is that it is literally impossible to fix.

I still have a 1960s Heathkit AR-15 stereo AM-FM receiver/amp where the tuner preamp crapped out about two years ago, and the power amp (which can [could] run a tape deck, CD changer, and a phonograph) crapped out about 3 months ago. I almost tossed it -- but not gonna, for at least a year. Why not? Because most components were DISCRETE. Individual resistors, capacitor, inductors, diodes and transistors. And an old-fashioned slide-rule dial with a tuning know that turns a variable capacitor. This might be fixable. On the other hand, I have a five year old all-in-one tuner/amp/tape deck/CD player. CD player has been crapped out for a year. Tape deck still works. Tuner works, but the tuner DISPLAY has crapped out. So this is sitting unused. I'll probably toss it before I toss the old Heathkit, because the new one is even more high-tech and therefore more UNFIXABLE.

Then take your automobiles. I am seriously thinking of seeing if I can pick up one or two old VW bugs. Your modern cars with all the smog shit, the on-board computers, etc. The only way you'll keep them running is if there is a big die-off so there is plenty of spares parked around your neighborhood, and some mechanic who is genius can somehow find some way to get the engine running on impure gasoline, and retrofit carbs or whatever it takes.

-- A (A@AisA.com), August 16, 1999.


Tom...what interests me in whomever you talk to today, in reguards to Y2K, they are all at a certain level of technical awareness of the real problem. They also exhibit an unquestionable amount of assumption. Now because of my assumptions after considerable technical study on how difficult it is to fix, large complex code systems, with there endless connections and seemless intergrations, I cant help but assume the bigger they are the harder they fail. Tom I bet your a petty savie guy when it comes to investments, but you also assume with your statment, and I quote (The banks will survive ( in some form) because we will need a way to make payments over distance and methods to establish trustworty credit relatioships) un-quote ) without knowing all that has to take place in remediation, in the INTERNATIONAL BANKING SYSTEM, between now and 01/01/2000 you cannot assume any of your forcast for next year. The banks have what appears to be at this late date, a verturially impossible problem to solve. How do you successfully exchance infomation with all of the international banks you speak of without running into non-compliant data, and just so you no tom NEVER THE TWO SHOULD MEET. And if you put up firewalls, filters, etc etc. you still dont get the info your so timely looking for. Not saying that they cant somtime in the future get it all iron out, but that now brings you into a fracture tolarance of the banking system of systems. You tell me Tom , how long can the International Banking System be shut-down next year before it cannot be use as a system anymore? 1 week, 3 weeks, 3 months pro,s in every field try to put there spin on the way Y2K will change or not change there world next year. I submitt that if you need any pro imput from anything relating to Y2K you go only to the hardware, and software engineers that got us in this mess to begin with, try and find one that dosent have his blinders on. Then ask him/her why they cant survive...sorry on the spelling

-- Les (yoyo@tolate.com), August 16, 1999.

Glad to see such interesting answers from folks and ready to make a few comments.

First, I agree with Ed and A@AisA that it is almost crazy they way our production methods have driven us to throw away many useful things..yes, the cost of repair labor and parts for many electronic things is more than the new replacement value of a better model. It is also rather frustrating to see how the trend in manufacturing towards integrated design and manufacturing of subsystems often leads to a situation where a small part breaks which should cost $5 to replace but it is only available as a larger part which costs $50+. Ed has asked us to keep our sights on a bandwidth of scenarios for recovery. I would say in the "serious problems" side (7,8,9) that the flow of spare parts could collapse for a while and for some products never recover. In that case, people who are clever enough to fix things in ways that don't need spare parts should be quite successful.

I would like to respond to yo-yo regarding the banks. First of all, I would like to point out that the person who calls themselves yoyo is using an E-mail address which hides their identity. I understand that some people prefer to be anonymous on the web, but it is my opinion that this should not take away their obligation to behave in a manner as requested by the moderator. Yoyo's comments are aimed at trying to convince us that the banks are definately going down and there is no hope of recovery (at least he doesn't believe my comments that the banks will survive in some form.) If the banks collapse and do not recover, this is scenario 10. Ed has purposefully created this forum to hear discussion from people who are willing to discuss recovery from more mild scenarios than 10.

In this spirit, I will expand my reasons for believing that the banks will survive in some form. First of all, one of the greatest aspects of the y2k tragedy will be that many people will still be alive and many will remember all the good things we had. There may be a great discussion about which things we want back and at what new cost to society. Even if banks are totally bankrupt and many people have lost trust in them, it is important to understand that as the world strives to reestablish international activities, they will have to develop some type of monetary system with which it will be possible to pay for goods over a distance. It is pretty obvious that the Fractional Reserve method, as well as the "monetization of debt - for interest payments", coupled with a massive but almost completely unregulated market for "financial derivatives", have made a very vulnerable international banking system. If this system falls hard, a lot of decent honest folks are going to lose their life savings. The new mantra of the small guy will not be "where can I get a better interest rate". The new mantra will be "show me that my money will really be safe".

The title of this string is that money will no longer chase fools. The point that I was trying to make is that there are plenty of fooling things being done with our savings and our investment advisors encourage us to join in the game. But that with the amount of paper wealth which could be destroyed by the y2k bug, only the very wisest use of money will still attract investors. And there are ALWAYS investors. Maybe a lot less for a while.

-- Thom Gilligan (thomgill@eznet.net), August 17, 1999.



Tom the only point I was trying to make is that folks every were are trying to analyze and speculate on Y2K from there professional stand point. They make ASSUMPSTIONS on what THERE world will be like after rollover, totally predicated on there lifes prior experences without any indepth study of what the real Y2K problem, really is. I believe in the finale analyse, that it is not that hard to define technically what Y2K will do. However it may be personally very hard to deal with the emotional exceptance of what that simple technical end result would be. Y2K threatens large complex systems now because of the late date, theres simply not enuff time to complete. The world got a wake up call when the adoption of mission critical systems was so well accepted as to what should be worked on. (to late) Now were starting to here of most mission critical systems. That being said you also asumme that Y2K will be a 10 if the International Banking System fails. I say it may be a 10 for some, but I think it wont be a 10 for most. The big questions for most will be food, not Banking Thankyou

-- Les (yoyo@tolate.com), August 17, 1999.

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