|
Ed Yardeni is the one well-known economist who has forcasted a recession based on y2k. Well, he says there is a 60% chance. Even this mild prediction has not persuaded his peers.
The issue still does not interest those in authority. At a November U.S. Senate hearing where Yardeni testified, only the chairman showed up.
Yardeni has gained no support from other economists.
This is from Canada's GLOBE & MAIL (April 27).
* * * * * * * *
Edward Yardeni, the influential chief economist of Deutsche Morgan Grenfell Inc. in New York, dutifully expressed his own views. . . .
He is convinced that his fellow panelists, and just about everybody else who makes a living forecasting the direction of the markets, are missing the single greatest threat to the current age of euphoria -- the coming year 2000 computer problem and the grave consequences it bears for the global economy.
Mr. Yardeni, who knows a catchy metaphor when he sees one, compared the current economy to Titanic, the "unsinkable" ocean liner that was done in partly by defective rivets and steel.
"Think of the computer as the rivets of our economy," he said, warning that it will be as easy to fix the year 2000 bug "as trying to change all the rivets on Titanic while it was going full speed ahead in the middle of the Atlantic."
As he fully expected, not one of the other strategists agreed with him. . . .
"It's a very poignant picture that he paints," said Joseph Battipaglia, an executive vice-president with Gruntal & Co. LLC and one of the panelists. "It sounds appropriately ominous and it's also something that you can't get your hands around."
Bruce Steinberg, chief economist with Merrill Lynch & Co. in New York, who was not part of the panel discussion, said his basic advice for people is not to worry about it.
"Obviously, the millennium bug is going to be somewhat disruptive, but somehow I think we'll manage to muddle through and I doubt that we're going to have a year 2000 recession because of it." . . .
"I don't mind being a little early on this subject," Mr. Yardeni said in an interview from his car during a break in his typically hectic schedule. "There's so little understanding and belief in this thing that if I can get my client base aware of it soon enough, then I've done my job."
Coming out of the 1987 market crash, Mr. Yardeni was one of the first and most vociferous bulls on both the economy and the coming equity boom. He remained a steadfast optimist until last summer and even now still believes the Dow will hit 10,000 before the year 2000.
He began his dance with the bears last June when he undertook his annual summer research challenge -- this time to learn all he could about the year 2000 problem, known in the computer world as Y2K and by many others as the millennium bug. . . .
The more he learned -- and the more the clock ticked away toward century's end -- the more pessimistic and obsessive he became.
By November, when he testified before a congressional committee (to which only the chairman bothered to show up), he raised the probability of a recession to 40 per cent. And now, after carefully studying the latest government progress report on Y2K, he has boosted his gloomy prediction to 60 per cent. What's more, he believes the situation will be far more serious than during the oil crisis because so many more people and industries will be adversely affected.
Making matters worse still, he said, many companies and government agencies are not admitting how bad the situation is -- at least partly out of fear of massive lawsuits. . . .
His nightmare vision is supported by a barrage of fresh evidence and ominous warnings from respected government and industry executives that arrives in his office daily by fax, E-mail and the daily newspapers. He conducts endless conference calls and devotes an entire portion of his busy web site, www.yardeni.com, solely to the Y2K problem, where he advises: "Prepare for the worst. Hope for the best."
He points to the latest press reports and asks: "Am I the only one reading this stuff? It's not like I'm inventing it."
Last week, Internal Revenue Service commissioner Charles Rossotti warned that if the computer dating problem at his agency is not resolved in time, 90 million Americans might not get their refunds and 95 per cent of the U.S. government's revenue stream will be in peril.
Given the vast number of computer systems employed by the IRS, Mr. Yardeni said people should already be preparing for a monumental computer failure.
Mr. Battipaglia of Gruntal likens Mr. Yardeni's approach to that of a conspiracy theorist who turns one person's problem into everyone's headache.
Mr. Battipaglia, who is widely known for his bullish market sentiments, said there is still plenty of time to fix the problem. "We have companies that have been attacking it aggressively. I think the solutions become evident and will be put in place well ahead of the catastrophic event."
Unlike most of his colleagues in the forecasting game, Israeli-born Mr. Yardeni, 48, had early schooling in computers. His father was a computer systems manager with International Business Machines Corp. His and other parents organized a computer club for students in San Jose, Calif., where young Ed got his first exposure to the information age when he was only 13 and Silicon Valley did not yet exist.
He later learned computer programming, which he worked at in England during one summer's break from university. Three years ago, his summer project was to design his own web site. . . .
Because of his early training, though, he knows there is no quick fix on the horizon, no magic solution that can be pulled out of a hat.
|