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JW@xxxxxxxxxxxx wrote:
> Mark - Don't know where you are hearing doom & gloom about Y2K
> because all I read and hear is "No Problemo" from most all
> corporations and people that I talk to. There is no real fear at
> all of Y2K that I can discern, just a lot of complacency (we're
> ready for anything).
Heh. I think the response of the national electricity board of
Indonesia's is classic, and possibly an extreme picture of the
situation: "We'll just watch what happens in New Zealand and eastern
Australia. That will give us over SIX HOURS to plan." :-)
Not everybody is reporting "no problemo." As an example: Ed Yourdon
is a well-respected computer consultant, author, and industry expert.
He understands computers and their interactions pretty darn well,
and he's made a good living with that knowledge for over 20 years.
He's put his reputation on the line and has been trumpeting the risks
of Y2K for 3-4 years now. And about 6 months ago he basically said
"That's it, I can't do much more to get the word out, I'm outta here"
-- and he left New York and disappeared somewhere into New Mexico.
Where, you might notice, it's much warmer in January, and the place
isn't crawling with 8 million people who might suddenly be without
heat, food, cash, etc. Is he overreacting? Maybe. But it kinda
makes you wonder.
Looking at his site (www.yourdon.com) I see that he's resurfaced on
the Web again, apparently from his NM digs. But he's still very
definitely flogging the Y2K warnings. (Cynics will say he's just
flogging his Y2K books, and that may be partly true. But I doubt he
vacated his New York home and risked his reputation just to sell a
couple of scare books.)
See http://www.yourdon.com/articles/articlesummary.html for a listing
of Yourdon's Y2K articles. The "Open Letter to Alan Greenspan" is
recent and fairly interesting.
> I recall seeing something recently that said the US was 99% ready
> for Y2K but that the rest of the world would have problems.
Personally I suspect the 99% figure is high -- I think 80-90% might
be closer, but that's speculation on my part. (On the other hand,
some reports say that as many as 50% of "small businesses" in the
country have done absolutely NOTHING to prepare for Y2K. Do they
*need* to do anything? Don't know. But if they do, they haven't.)
But for the sake of discussion let's say the U.S. is 100% ready.
However, many Y2K types suspect that much/most of the rest of the
world is 12-18 months or more behind us. So what does that mean to
us?
> Of course, the rest of the world sources a lot of raw materials and
> finished products to us that drive our now service based economy
> forward. But what if the supply incoming lines stop working?
Bingo. I don't have the exact figures at hand, but the numbers I'm
using here are close. Consider just one scenario:
Back in 1974, the U.S. was importing roughly 25% of our oil needs.
Then OPEC threw an embargo at us. Remember what that did to the U.S.
economy? It helped to trigger a fairly nasty recession. And that
was just for a *REDUCTION* in our 25% imports. Maybe that translated
to a 10% cut in our oil imports?
Currently the U.S. imports roughly 55% of our oil needs.
There are many steps between "oil under the sand" and "gas in your
SUV," most of which require significant computer support: pumping
equipment, pipelines, refineries, tankers, etc etc etc. And most of
that is outside the U.S., where we know the Y2K issues are not
handled as well as they are here.
Let's say a lot of those operations are date-insensitive, and the
computers won't care what year it is. But remember it only takes ONE
link in the chain to bring the whole process to a halt.
Let's say we're lucky and 50% of the oil supply lines keep working.
That means we'd "only" see a TWENTY-FIVE PERCENT CUT in our energy
sources.
Imagine what that would do to supply, to prices, to the economy, to
the ability of truckers to deliver food to your local grocery store,
etc. Talk about a domino effect. And that's just ONE key commodity.
What happens if you add that on top of massive supply problems in
other areas, banking problems, etc, worldwide? What happens if this
event occurs in an economic environment that at least some observers
feel is vastly over-leveraged and over-extended?
And nobody knows how long it would take to put Humpty Dumpty back
together again.
Will it happen? Again, nobody knows. I fervently hope that Yourdon
and all the other Y2K doomsayers are 100% wrong, and 1/1/2000 is a
minor speedbump. But as traders, it's our job to assess probability
and risk, and act accordingly. The chances of everything working
perfectly are so slim that I personally have taken a few steps (not
nearly enough!) to reduce the impact on my family.
Gary
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