Y2K: Not Just a Bad TV Movie
SAN FRANCISCO -- Judging by the action in the
, which strode haughtily back into record territory
today while its older counterparts progressed far more gingerly, tech stock investors care nary a wit about Y2K.
If anything, there's a sense that some corporate spending on information technology has been restrained this year because of the much ballyhooed turn of the calendar. Investors are expecting that logjam to be lifted in the New Year/era and are thus glomming into tech names
Perhaps that's why the tech sector continues to shun goings-on in the bond market while blue-chips seem a bit more concerned. En route to potentially its worst year ever, the price of the 30-year Treasury bond fell 24/32 to 96 15/32
today, its yield rising to 6.39%, a new high (and not the "good" kind) for 1999.
In the midst of that dismal action comes evidence -- albeit anecdotal -- that bond market participants are shying away because of Y2K.
"Certainly, there's no inflation out there
so there's got to be a reason this bond keeps backing up," said Brian Gilmartin, portfolio manager at
Trinity Asset Management
in Chicago. "That led me to Y2K."
You can certainly argue with Gilmartin's contention that inflation is AWOL (refer to numerous columns by the
evidence to the contrary). But let's for a minute take Gilmartin's point at face value, remembering that inflation staying subdued is central to the bullish forecasts of such market seers as
Joseph Battipaglia of
Thomas McManus of
Banc of America Securities
Jeffrey Applegate of
Mormon Tabernacle Choir
Abby Joseph Cohen of
Gilmartin recalled that during their third-quarter conference calls, big securities firms such as Lehman Brothers, Goldman Sachs and
Morgan Stanley Dean Witter
"essentially said they'd be out of the
fixed-income market" at the end of the year. Also,
-- who took a more scientific approach to the issue of Y2K and the bond market in early
November -- notes a large quotient of the Treasury market's primary dealers have Nov. 30 fiscal year-ends. Some market players are concerned about whether they'll be less inclined to provide liquidity this December -- normally a time of slowing activity in the bond market anyway -- than in the past.
All that jibes (vs.
all that jazz) with the experiences reported by a bond trader friend, whose name and employer must, alas, remain anonymous.
"In my business at the front end
of the yield curve, people are not buying securities because they want to be liquid," he said, referring to the dealer community (vs. "real" people). "There's a waterfall effect on the front end clobbering the entire
bond market. I'm buying securities cheaper against
than ever before. It doesn't matter, no one wants 'em. That's disconcerting."
To be fair, my bond trading bud believes the realization by investors that the U.S. economy is a "freight train" is having more of a deleterious impact on bond prices than Y2K.
But we who believe in the mantra of higher stock prices now, higher stock prices tomorrow (and a
Red Hot portfolio in every kitchen) know that's not true.
And Another Thing
One more snippet of information that Y2K matters (to somebody,
) comes from the futures markets.
Chicago Mercantile Exchange
is considering a plan to extend trading hours on the
futures contract on Dec. 31. The
New York Stock Exchange
(a.k.a. "the cash market") closes early on Dec. 31, at 1 p.m. EST, but the Merc wants to ensure there's "no liquidity concerns" and that investors "aren't left with awkward positions" at the end of the year/decade/century/millennium, according to sources familiar with the developments.
An announcement of just such a proposal could come as early as tomorrow, The TaskMaster has learned.
A CME spokesman declined to comment.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at