Curtesy of John Mansfield:
"We are very, very worried about the Year 2000
problem," said Mary Schapiro, president of NASD
Regulation, the self-regulatory arm of the National
Association of Securities Dealers, which oversees
the nation's brokers.
ÿÿÿÿÿWhile the major brokerage firms "are in pretty
good shape" with their preparations, many smaller
firms are not and will need to step up their efforts,
Schapiro said.
ÿÿÿÿÿTime is against them. The experience of many
who've dealt with the issue is that the Year 2000
problem cannot be fixed quickly.
ÿÿÿÿÿTake Vanguard, the nation's second-largest
mutual fund group. The company, which is already
running new "2000 compliant" computer code,
began working on the Y2K problem with a handful
of workers in late 1996 and now has more than 100
employees and outside consultants assigned to the
project.
ÿÿÿÿÿ"We knew it would take the time and that's why
we started as early as we did," said Brian S.
Mattes, a Vanguard spokesman. "And we are very
glad we did. . . . If somebody hasn't started yet, it is
very doubtful they will be able to finish in time."
ÿÿÿÿÿThat's one of the biggest challenges of the Y2K
problem -- the deadline cannot be pushed back.
ÿÿÿÿÿAnd we've already seen a sneak preview of
some of the possible havoc -- credit cards that
expire in 2000 have been rejected by many store
computer systems, and some systems have
crashed trying to process multiyear contracts that
extend beyond December 1999.
ÿÿÿÿÿNow imagine, beginning in 2000, that computers
refuse to spit out checks, including tax refunds. That
electronic deposits, including Social Security and
dividend payments, are never made. And buy and
sell orders for stocks, bonds and mutual funds are
not executed.
.......
ÿDennis Grabow, an investment banker with 25
years of experience who last year founded the
Millennium Investment Corp., a Chicago firm that
runs hedge funds for wealthy clients, also expects a
major recession.
ÿÿÿÿÿ"People who dismiss this out of hand are
generally the people who haven't done any study of
it," Grabow said of the Y2K problem. But as
investors begin to understand the magnitude of the
problem, stock price-to-earnings ratios will shrink
and stock prices will end the year 25 percent lower
than where they started, Grabow predicts.
ÿÿÿÿÿThrow in the Asian economic crisis and Grabow
sees the start of a global recession in mid-1999
that will run for a couple of years. "It's deeper and
longer than we originally estimated," he said.
ÿÿÿÿÿBefore you panic, consider that predictions of an
economic collapse are far from universally shared.
The opposing argument is that the corporate and
government spending needed to correct the
computer bugs will give the economy a boost and
keep it humming.
ÿÿÿÿÿ"Y2K is a problem that has been clearly
identified and can be solved by money, and there's
a willingness to spend whatever it takes to get a
solution," said Stephen Leeb, editor of the
newsletter Personal Finance in McLean, Va.
"History teaches us that these kinds of problems
offer opportunities far more than they do risks."
ÿÿÿÿÿCounters Leo Hood, editor of the newsletter
Ripples in the Waves, based in Gainesville: "Money
is not a non-issue, but this is not an issue of money.
This is an issue of time and resources."
ÿÿÿÿÿAnd we are not giving this issue the proper
attention, and instead are trying to deny reality, he
said.
ÿÿÿÿÿ"In my research I've found that the people who
are closest to the problem -- the technicians and
programmers -- are the most frightened, but they
would say only so much on the record," Hood said.
"The people who are saying everything is OK are
the PR [public relations) types."
ÿÿÿÿÿHood said he began researching the Y2K
problem after he recommended in late 1996 and
early 1997 that investors "short" the stocks of
several highly touted companies that supposedly
could solve the Year 2000 problem.
ÿÿÿÿÿOvereager investors had bid the prices of some
of these companies to very high levels -- 50 and 60
times annual earnings. Hood said his subscribers
"made a killing" by selling these stocks short -- that
is, selling borrowed shares and buying them back
at lower prices.
ÿÿÿÿÿ"By looking into these stocks, I started getting
well-versed on the Y2K problem," Hood said. "It is a
very serious problem that is not being treated
properly."
ÿÿÿÿÿNext month Hood is expected to begin editing
another newsletter, the Y2K Report, which will
include excepts from articles published by other
financial newsletters about the Year 2000 problem.
ÿÿÿÿÿ"We are starting to see more write-ups about it"
in financial publications, said Steve Halpern, who
will be the publisher of the Y2K Report. Halpern's
flagship publication, the Fort Lauderdale-based
Dick Davis Digest, distills what the editors consider
the best and most interesting advice from the rest
of the newsletter industry.
ÿÿÿÿÿHalpern said the new publication and an
accompanying site on the World Wide Web will
seek to provide "much more balanced" coverage of
the Year 2000 problem. He said it will have none of
the "scary, promotional" approach the financial
planners criticized, but will give the subject the
attention it deserves.
ÿÿÿÿÿ"We are seeing a lot of people who are very
much in a state of denial about this being a
problem," Halpern said.
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