Mr. Holland: I agree. I think the individual basically has been smart through all of this, even though I think that most stocks have basically been in the bear market. Generally speaking, if you look at small stocks, the Russell 2000 index and/or other small stock indices, in most of them the declines are comparable to what they were in '87 and 1990. Eighty-seven was a little worse, but generally speaking they're comparable.
P&I: Let's go on to the next question, which is a little bit related. We have the millennium problem coming along at the end of next year and a lot of people are expressing concern about this. I'd like to get your sentiments about how serious this is going to be and is it going to affect, A), the economy and, B), the markets?
Mr. Hansen: I call it a big wildcard. I think we all are aware and looking at it, and I think there will be some impact both on individual companies and sectors, etc. I guess the one thing I would add to what has already been said on year 2000 is I think we're going to look at the euro and it's going to greatly influence our view of the year 2000 come early next year.
If euro goes better than expectation, I think that we may then not view the year 2000 as disturbingly. If euro would go worse than expected, I think there will be in the first quarter a pretty major look at the year 2000 that would impact both the markets and the economy. I think that's going to be an early indicator for us as to where we're headed. But other than just doing the homework and trying to keep our eyes on it, this to me is a wildcard as we enter 1999, and I think we have got to keep our eyes open and react accordingly.
Mr. Sit: I think so much has been printed on the subject and the gloom and doom. I think at least for America, for the U.S., I am probably more optimistic about Y2K. On the other hand, I would be more worried about some of the developing economies, because they have had to fight the financial contagions and so on. I think we're going to probably be all right. Some of us will be inconvenienced come New Year's Day 2000, but I think overall we're going to be fine.
Mr. Holland: When we first started talking about it at our company, I was very casual about it, thinking this is not important and what-have-you. And then I started rooting around, and I started getting letters from vendors and what-have-you, all the disclaimers about things, and I said, "Oh, my goodness, I could have a problem here." So the attorneys now suddenly have made this a big deal at our company, meaning that we're not spending money, the attorney is reviewing the letters. We just sent out a letter that we had to get out by Dec. 3 in order to qualify under some new law that was just signed in, this Omnibus Bill or what-have-you.
So I think that the attorneys are going to make this a big deal, and I suspect that there will be an impact on smaller entities, small banks and other institutions who may not be able to get there. I think there could be some negative impact with regard to government in terms of getting out the Social Security checks and all those kinds of things.
So I think the problems will be there, rather than in the larger, more sophisticated entities who have lots of money to throw at the problem. Attorneys and legal fees will probably be more expensive than getting ready from a compliance point of view.
Mr. Paulsen: I would agree with Gene. Someone once told me earlier in the business that what you have to worry about is what no one has worried about. I think this one's quite broad and I think we'll probably win at it. What I do like about it, though, is it's another great fear to throw into the hopper.
One of the things that's made these markets keep going is we have perpetual fear: white collar layoffs in the early '90s were going to destroy us. And then we had the 3% dividend yield breach; then we had the Asia blow; and now we've got Y2K.
Mr. Hansen: If I had one specific thing to be worried about concerning year 2000 and the markets, it would be some people believe that M&A activity will subside later on next year. And if you think that what's been driving this market in here, if that were to occur, I think that would negatively impact the broad market. I'm not predicting that, but I can see where that might happen.
P&I: This decline in activity is because the parties don't know what the exposure is to Y2K.
Mr. Hansen: That's right.
Mr. Sit: As a sideline on the euro, my international people tell me that the bank transfer agents have said to us that we cannot trade beyond Dec. 15 as they prepare for the conversion, so we're already seeing some of these signs. Maybe we're going to have the same sort of problem, the market's going to be closed in the last two weeks of December of 1999.
P&I: Let's turn now to interest rates for the next year. We have got a pretty good picture on inflation, so what are we looking at in interest rates? Jim, why don't you give us your thoughts on interest rates?