'What Do I do with my money?
by Tony Keyes
Of all the questions I am asked, I hear that one
most often. When people deeply appreciate the
implications of the Year 2000 problem, they
immediately see its threat to their finances.
Surprisingly, it more often people just like you
and me that are able to "get it" quickly, while the more "sophisticated"
guru's of Wall Street don't. The reason is simple, they know too much for
their own good. Professionals who live in the world of high finance on a
daily basis are predisposed to discount the Year 2000 problem. Statements
like, "they would never let this happen" frequently emanate from their
lips. I don't know who "they" are, but I don not that its that same "they"
that have procrastinated us into this most dangerous situation. If their
trust is in the government, it is sorely misplaced for even by their own
admission, nearly half of our Federal agencies are currently on track to
miss the deadline. If it's the private sector in which they are placing their
trust, then that too is misguided as well. Recent surveys show that well
over 50% of small and mediums sized businesses haven't yet started work
and only 30% of the executives responsible for management of this
problem for the world's largest companies believe that businesses will
finish on time. Add to that these troubling facts.
1.As recently as March, only 29% of the developing
countries of the world knew what the Year 2000 problem
was. If one includes China, then the total group of "third
world" or developing countries represents nearly 50% of
the global economy. These same countries are also the
sole source for many strategic minerals and other raw
materials used in the West.
2.The US Department of State found that 26% of the world's
telecommunications companies were either unaware of the
problem or had not begun work. While 74% were working
on the problem, 29% expected to have problems.
3.We import 50% of the oil we consume in this country. Our
two major suppliers are Venezuela and the United Oil
Emirates. Both are severely behind in their efforts.
4.Senator Bob Bennett, Chairman of the Senate Special
Committee on the Year 2000 Problem, said he had little to
no confidence that the Health Care Finance Administration
(HCFA) would complete their work on time. HCFA
represents $400,000,000,000 worth of US spending
annually on healthcare.
5.Russia and Japan are severely behind, and it is openly
acknowledged that they will not be able to convert all of
their mission critical systems on time.
6.Europe is so distracted by the information technology
demands of implementing the Euro by January 1, 1999, that
they have been ignoring Y2K.
7.Congressman Steven Horn who chairs a Congressional
Subcommittee that has been overseeing the US Federal
government's Y2K progress recently found that more than
half were on track to miss the deadline set by the
President's Council on Year 2000 Conversion. Rarely does
anyone catch up on software projects. In fact, the Federal
government has a dismal performance record when it
comes to software development. Both the department of
Transportation (FAA) and the Department of the Treasury
(IRS) have wasted billions of dollars on software
development projects that were never completed.
8.Even if by some miracle we in the US were able to
successfully address this problem in our public and private
sectors, our economy would still be devastated if our
trading partners failed in addressing their Year 2000
problems.
When all of these facts are considered and in light of the current global
economic crisis, I believe everyone has the responsibility to prepare for
the worst and hope for the best. After all, preparing for the worst doesn't
necessarily have a significant price tag.
The following are some guidelines and strategies one should review with
their professional financial advisor. Everyone's risk tolerance and financial
conditions are unique and therefore it is always advisable to get personal,
professional advice before making any investment decisions.
1.Diversify, diversify, diversify - It's the single most important
element of a sound investment strategy.
2.Reduce your holdings in the stock market. If you haven't already
done so, take your bull market profits off the table and move them
into investments that are less sensitive to fluctuations in response
to events around the world. I have been recommending investors
consider this for some time now. Those who acted on my strategy
have been sleeping soundly over the past several nightmarish
months the stock market has undergone.
3.Liquidate vacation property, particularly if your ability to make
payments depends upon rentals. I owned two rental properties on
the beaches of North Carolina. I have sold one, and the other is on
the market. I do not want to own vacation rentals in the depressed
economy that lies ahead.
4.Overweight your investments toward cash and cash equivalents.
Simply put, this represents US currency and US bonds. In the
worst scenarios, the US can print money if it has to to pay on your
bonds, there is no chance of default. Granted, you may be repaid
in less valuable dollars, but there is no safer debt investment in
the world. Cash will be king in the Y2K aftermath and those who
have it will be able to acquire assets on the far side of the crash for
cents on the dollar.
5.Acquire or if you already own some, increase your holdings of
precious metals. We have thousands of years of history that
demonstrates the desirability of owning gold and silver in the
midst of a financial crisis. In today's world, where a country's
currency is only as healthy as its economy, there will be rampant
devaluation's and a massive flight to safety. Investors around the
world will be converting assets which have intrinsic value.
Precious metals have always represented the international
common denominator of value. Even though we are currently in a
deflationary cycle, it is inevitable, however, that in the depths of
the coming global depression, countries will ignite hyper-inflation
as they attempt to spend themselves out of their negative,
economic eddies.
Other steps to take NOW!
Write all of the companies with which you have financial dealings.
Demand a detailed explanation of their Y2K status. Ask for
management's opinion on the likelihood that their institution will
complete work on time and that all those who they depend upon
to do business will also be ready. If you don't like what you hear,
find another institution.
Don't forget your IRA's and 401K plans. Make certain that you
implement the necessary changes in asset allocation
recommended above. Most plans offer the ability to invest in US
government bonds. Although not all plans off the option, US tax
law recognizes US gold and silver eagles (bullion coins) as a
qualifying investment. You can discuss this option with your
Swiss America representative at: 800 289-2646.
Begin keeping monthly records of all your financial transactions
and statements from your accounts. You want to be able to
demonstrate your investment behavior if there is any question
about how much you have in your accounts, or what payments
you have made. If you have your paycheck automatically
deposited and you consistently write checks making payments to
the same recipients on a monthly basis, you will have a much
better cash to make.
Make a list of all of the information that is recorded electronically
somewhere on you and your family members (there is a complete
list in my book: The Year 2000 Computer Crisis - 1 (800) 247-6553)
and make sure you get hard copies of everything on your list. If
you don't have a passport, get one. If the one you have will expire
in the next three years, get it renewed now. Make copies of all
original documents. Keep copies in your (new if necessary)
in-home, fireproof safe and keep originals in a safe deposit box.
While I don't recommend draining your bank accounts, you may
want to have sufficient cash on hand to cover your needs for 30
days. You may also wish to move some cash into a safe deposit
box. Cash held in a safe deposit box is out of the institutions
pooled assets. Even though your institution may not be able to
open their vault on January 3, 2000, they will eventually. Do not
keep large amounts of cash in your home. I am not an advocate of
1st National Mattress. Its too dangerous. Get a PO Box and send
yourself some cash through the mail. Under normal circumstances,
its not advisable to mail cash, however, you would be surprised at
the reliability statistics of the US Postal Service. It will be there on
Federal property, immediately accessible to you, 24 hours a day.
Do not pay off your mortgage early. There is no benefit to doing
so. Don't stop making payments on your loans in hopes that your
creditor's records will be destroyed and you will not have to pay.
Even if they are destroyed, they will eventually straighten them
out. You will still owe the money, plus accrued interest. Don't fail
to pay your taxes for the same reason, you'll not only still owe the
money with penalties and interest, they can also put you in jail.
Make any changes in your will, necessitated by the changes you
make in your investment portfolio.
Don't discuss your financial arrangements with anyone who
doesn't need to know (such as your financial advisor and the
lawyer who prepared your will). Your financial dealings are your
business and the fewer people who know the details the lower the
risk that you will have any negative surprises.
I hope you find these ideas useful, but remember, they are useless if you
fail to act. Knowing what you need to do is not equal to doing what you
need to do. The Y2K problem was born of procrastination. Don't worsen
the problem for yourself and your family by procrastinating further.
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