Silicon Valley executives gathered for a pep rally on Friday last week, with distinguished speakers dismissing fears about the Asian or Brazilian crises, Y2K, or overvalued Internet stocks.
The San Francisco Bay Area Council held its annual Outlook Conference in San Jose on Friday, with the consensus being that another year of solid growth lies ahead.
The most upbeat of speakers was Wall Street analyst Abby Cohen, known for her bullish views on the stock market. Asked by a member of the audience whether she did not see a danger in the current valuation of some Internet stocks, Cohen responded that the current valuations based on market share and revenue predictions were "fair".
These fair valuations include loss making online bookseller Amazon being valued at more than all the bricks and mortar bookstore companies in the United States combined, according to one count.
Cohen made a list of reasons why US economy and stock prices would continue to grow, despite global economic upheaval. Domestic growth would more than compensate for decreasing exports, she predicted.
Robert Parry, president and chief executive office of the Federal Reserve Bank of San Francisco, was almost as optimistic.
Parry pointed out that, though the Asian crisis has turned out to be more profound than expected, its effects on the US economy have been modest.
The recent upheaval in Brazil, "adds to the uncertainty on global markets," he conceded, but said Brazil only accounts for 1.7 per cent of US trade. He added that there are just as many factors of 'upside' uncertainty that might boost the US economy.
Parry pointed out that, for the past three years, actual economic performance has outstripped most forecasters' predictions and he suggested the same might happen in 1999.
The potential effects of the Y2K problem were also played down by Parry. "It is conceivable that there will be some bumps in the road", he acknowledged, but added that the Federal Reserve would make sure there were $50 billion in additional cash reserves to accommodate consumers wishing to hold more cash on 31 December.
Parry acknowledged that the Asian crisis did affect Silicon Valley especially strongly, but concluded that the Valley was, once more, "positioned for solid growth" in the coming year.
About the only cautionary note during the one day conference came from Sun president Scott McNealy, who issued a warning to Silicon Valley executives and legislators not to, "shoot the goose".
McNealy urged legislators not to limit the "pooling of interests" accounting method for mergers. "It's going to slow down the dynamic of the market, and that's not a good thing," said Ellison.
McNealy also called for a legal framework to limit liability in potential Y2K related litigation.
"If we have a big snowstorm in January 2000, people are going to sue because they are going to assume it's because of Y2K," McNealy joked, "If we don't get the legal framework set up and don't do it fast, we'll be struggling out of the morass forever."
Another way of 'shooting the goose', said McNealy, would be to continue to impose limits on the use of encryption. Last year Sun pulled back from exporting its Elvis+ encryption software outside the US because it did not want to upset the US government. (see Newswire 30 April, 1998)
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