Yardeni changes his tune-- SunTimes article

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Chicago SunTimes

Many foresee markets moving easily into Y2K

December 6, 1999


NEW YORK--The computers are ready, the trading desks are fully staffed, and last week, one of Wall Street's most pessimistic analysts suggested that 2000 might not be quite as catastrophic as he once believed.

The stock market made it clear that Y2K worries won't spoil its fun. The Dow Jones industrial average finished the week within striking distance of its first record close since August, and other broad indicators set new records.

So with less than a month to go, many market watchers are dropping their guard and calling for U.S. financial markets to sail easily into Y2K. The most surprising vote of confidence came last Monday from Edward Yardeni, chief economist at Deutsche Banc Alex. Brown.

Yardeni was one of the first Wall Street analysts to warn of major disruptions if the world's computers failed to recognize 2000 and instead read the date as 1900. Often ranked among the nation's best economic forecasters, Yardeni accurately predicted the beginning of the bull market's run in the early 1990s but turned decidedly bearish in 1997, largely because of his Y2K concerns.

Last Monday, Yardeni changed his tune--slightly.

"As we enter the holiday season, I am feeling more optimistic and bullish about the future beyond the Year 2000 problem," Yardeni said in a note to clients. "I'm not on Prozac . . . yet. But as I said, I am getting into the holiday spirit."

A day later, Yardeni said he still believes there's a 70 percent chance that Y2K will cause a recession. But he lowered his odds on a severe recession to 35 percent from 40 percent.

So maybe Yardeni doesn't sound ready to break out the confetti. Plenty of other analysts have become increasingly optimistic about Y2K.

"While Y2K is still having a certain amount of impact on financial markets, the impact is much smaller than most investors were expecting a few months ago," said Dan Bernstein, director of research at Bridgewater Associates.

That's largely because the government and U.S. companies have poured money into rewriting computer codes, buying new equipment and testing computer systems for potential glitches. The Commerce Department estimates that the government and private industries will have spent more than $100 billion by 2001.

"Year 2000 was taken very seriously by executives here in the United States, and there's a growing confidence that companies are prepared," said Jim Weiss, deputy chief investment officer for equities at State Street Research and Management Co. in Boston. Analysts remain jittery about preparations in other nations, particularly in emerging markets where technology may be less advanced.

Computer malfunctions aside, Y2K already has caused ripples in the stock market. Technology stocks, now on a tear, slumped earlier this year as investors anticipated a slowdown in spending on new computer systems.

IBM bore out those fears, warning in October that sales would slip because many potential buyers of its network and database server computers planned to delay purchases until Y2K concerns were resolved.

But investors ultimately determined that IBM, with its hulking mainframe computers, might be a rare casualty and the damage might be contained to a single quarter. Technology stocks roared higher throughout November and continued setting records last week.

Of course, Y2K isn't solely about computers. Many analysts expected shares of hotel companies, casino operators and cruise lines to soar this year as revelers booked extravagant parties.

"That's turned out to be a dud," said Alan Hoffman, senior portfolio manager at Value Line Asset Management. "For many people, it's turning out to be a stay-at-home, quiet affair."

Indeed, SFX Entertainment Inc., a concert producer and promoter, saw its stock plummet 19 percent Thursday after Goldman Sachs analyst Richard Greenfield cut his fourth-quarter earnings estimate, citing weak ticket sales.

"New Year's Eve 2000 has turned out to be somewhat disappointing to the entertainment, travel and lodging industries," the company said in a statement.

Last week, the Dow Jones industrial average soared 297.27 points. A gain of 247.12 on Friday left the blue-chip index at 11,286.18 and just 40 points below its Aug. 25 record of 11,326.04.

The Nasdaq composite index rose 72.82 during the week. The index rose 67.85 points Friday to close at 3,520.63, the 18th record in the last five weeks.

The Standard & Poor's 500 set a new record, too, rising 24.26 Friday to close at 1,433.30. For the week, the index rose 16.68


The Countdown Begins,

-- Deborah (infowars@yahoo.com), December 06, 1999


This is more of a statistical adjustment than a change of position. Reducing the odds of a severe recession from 40% to 35% does not constitute a significant reversal, just a little fine tuning.

-- Irving (irvingf@myremarq.com), December 06, 1999.

I wonder why you changed the headline of the article for this thread? Did you think it would attract more readers?

-- W (me@home.now), December 06, 1999.


I wonder why I highlighted some of the text in BOLD? Perhaps I thought that was what was notable in this article?

I wonder why you felt the need to ask that question?

Have a nice day.

-- Deborah (infowars@yahoo.com), December 06, 1999.

Oh great Yardeni is now a polly.

-- Butt Nugget (catsbutt@umailme.com), December 06, 1999.

Let's put his numbers into perspective.

What he's saying is that it's like playing russian roulette, but with *two* chambers loaded.

I don't find those odds particularly soothing.

-- Ron Schwarz (rs@clubvb.com.delete.this), December 06, 1999.

Go to www.yardeni.com/y2kreporter.html

Ed Yardeni clarifies his latest stance with his Nov 30 article titled 'Final Answer'. He dropped his fear of a Y2k induced recession from 40% to 35% because of government and big business' insistence that they are ready. He has doubts about their word, but is willing to give them something what with their consistent insistance that all is well.

Further, he is optimistic about the future, but not Y2k. He said in a letter that was sent sent to his suscribers that he has been misquoted by newspapers and magazines re: his latest essay about Y2k. This article is another example of this.

I think his overall assessment is too rosey anyhow, however it is nice to have such an esteemed individual in the doomer camp.

-- Mark (markmic@kynd.net), December 06, 1999.

Yardeni is not a polly yet...

He is also RAISING the odds of a moderate recession from 35% to 40%.

-- G (balzer@lanset.com), December 06, 1999.

I hope he's right. But maybe he's suffering from an attack of "avoidance" of the erectus + systemic nature of the problem. Tis a fragile vase that carries the fate of our future... huh?

-- spun@lright (mikeymac@uswest.net), December 06, 1999.

There were at least three threads on this topic last week. Here's one: Dr. Yardeni issues clarification

He comments that some reporters got a bit confused by the Dow Jones Newswire item about his small adjustment of his assessment of Y2K scenarios. It appears that this AP reporter was numbered among the confused.

In the blue-skies-and-green-lights world of the current stock market, for an analyst to take a stance that a moderate recession is at all likely will lead to them being labelled an "alarmist" and a "doomsayer". That's what happened to Dr. Yardeni.

We'll know soon.

-- Mac (sneak@lurk.hid), December 06, 1999.


I hate spin, even subtle spin.

-- W (me@home.now), December 06, 1999.

Yardeni = Wallstreet DOUBLE SPEAK.


-- Ray (ray@totacc.com), December 07, 1999.


Think about how you feel when you talk to pollys. They think you're nuts. Most of you have no particular expertise beyond what you've taught yourself. Nonetheless, you feel like you've put your sanity out on the table for all to see. You know you can't win cause either you're right and life starts sucking soon or you're wrong and you realize how very little you understand the world we live in. Now put yourself in Yardeni's shoes. The only Wall St. economist out on a very big limb in profoundly public view. Don't you think you might do a little second guessing? I can't win by going doomer any more. Y2K is firmly hung around his neck already.

-- Dave (aaa@aaa.com), December 07, 1999.

Yardeni is clearly going Polly. It's disgusting and sad. Paul Milne was right about him.

-- (brett@miklos.org), December 07, 1999.

Maybe Yardeni has changed back now that HIS bank has computer problems...

Deutsche Bank hit by day-long computer shutdown By William Lewis in New York

Deutsche Bank has been forced to apologise to many of the world's leading financial institutions after its worst-ever computer problem.

Last Wednesday a systems problem at the German bank's central site outside Frankfurt meant it was unable to participate in the international clearing of interbank payments.

-- eubie (eubie@where'smystatement?.com), December 07, 1999.

Back in the 1980s Ed Yardeni stated that a recession was likely not possible anymore. Either he forgot or never knew history.

People like Yardeni prefer to think of themselves as making the world move. WRONG. They do still not realize that economic laws are immutable. They think they control events, when actually events control them. About all anyone can do now is watch their posturing until the bell tolls on this pyramid of debt paper.

-- earl (ejrobill@pcpostal.com), December 07, 1999.


.... perhaps we'll "sail into the new year" with stock markets' high - I too am surprised at the market's general optimism - but I'm less sure how we'll sail out of the January/February time frame....

-- Robert A. Cook, PE (Marietta, GA) (cook.r@csaatl.com), December 07, 1999.

earl -

Possibly you have not read or listened to Ed Yardeni very much. He has always come across to me as someone who knows what he does NOT know.

I recommend a scan of his Website: Dr. Ed Yardeni's Economics Network

Have a listen to some of the "Y2K Action Day" sound files. Ain't nobody at those events who sounds like they think they make the world go 'round, least of all Yardeni.

-- Mac (sneak@lurk.hid), December 07, 1999.

Moderation questions? read the FAQ