It's a beautiful day here in this oceanfront neighborhood, but things can change drastically
with the onset of a storm.
Last winter, homeowners acted quickly when they heard El Nino was coming.
They built seawalls to protect their families and their property from the raging water.
There is a hurricane brewing that may cause major disruptions and could play havoc with
your life.
The Year 2000 problem, or Y2K, is a computer glitch that will impact the world's computerized
infrastructure.
Your personal finances, bank accounts, retirement plans, investments are all at risk.
Even the supply of basic essentials like water, power, health care and food could be severely
disrupted.
What do you do?
An advance warning of the likely impact gives you the opportunity to reduce the risk to
your family.
Or instead, you could experience the hurricane in full force without any warning.
It's up to you.
I think there's a significant risk of a global recession in the Year 2000.
It threatens our information infrastructure.
This is probably the first time in modern history that there's ever been a non-negotiable
in-date for a catastrophe that's going to happen.
You will be vilified by the American public for failing to have dealt with this problem.
You have lost sight of what is a very simple problem.
Y2K time bomb.
This is an inside perspective on how to survive the Year 2000 and how to protect your assets
and possibly even increase them.
Here what the world's leading experts on the Year 2000 problem are doing for themselves
and for their families.
The problem is ticking away simultaneously inside many computers, mainframes and electronic
systems all over the world.
This has happened because to save memory space, many software programmers recorded years using
the last two digits rather than all four, 98 rather than 9098.
That means obviously that they cannot tell the Year 2000 and the Year 1900 apart.
That is the essence of it.
It sounds trivial, but it means that any of these systems could fail.
There's some pretty nasty scenarios that are realistic, that are in the realm of possibility.
And I think we have to take them seriously.
We have to constantly assess how likely they are as we approach the Year 2000.
And if we become increasingly convinced that some nasty things can happen, we should prepare
for them.
Mentally, at least, just prepare for the possibility that while times have been great and very
good for most of us over the past few years, we could have a spell where things aren't
so rosy.
Some people may lose jobs, some businesses may just not function properly.
There may be a lot of inconveniences.
There may be some safety problems.
Let's start to think about all those possible risks and assess it along the way here.
And if we become more convinced that we've got some serious problems ahead, then we also
have potentials for creating some contingency plan, backup plans, maybe low-tech solutions
for running our lives and our businesses.
So if we prepare for worst-case scenarios, I think we could therefore hope for the best.
I think in general, people have compared the Year 2000 to a time bomb.
And we don't see that.
What we see is an impending hurricane coming in to the economies.
Now, those strong winds will start to hit home from the 1st of January 1999.
The eye of the storm will be a cross in the Year 2000.
What we don't know is the magnitude of the hurricane and its duration.
The reason we've used this is because we want to get a cross to the business community
and to the general public.
Now, they know what happens in a hurricane.
And we think that the type of endemic failure that a hurricane brings, there could be quite
strong parallels with the Year 2000.
So, for example, the hurricane may well knock out teleprompter occasions.
It could knock out power.
It could knock out water.
It's kind of getting late in the game here, and that's why I think we have to increasingly
focus on the possibility of failure.
I'm an optimist on the Year 2000 issue.
I think that many computer systems, and maybe even most computer systems around the world,
will be fixed just in the nick of time.
But there's just no way we're going to fix 100% of the computer network around the world.
There are going to be some systems that are going to fail, and there are going to be disruptions.
I think the individual has to start to seriously research.
We all have to seriously research the extent to which the computers we rely on in our businesses,
the computers that our customers and vendors rely on, are they going to be operational?
I think we all have to ask each other a lot of questions and start to assess the extent
to which we ourselves and everybody we depend on is going to be ready for the Year 2000.
If we discover in that process that we are exposed to some significant risk, then we
have to prepare for failure.
We have to maybe think of some contingency plans, or else we really just have to scramble
to fix the problem.
No one knows exactly what might happen on January 1st, 2000, but at least we know exactly
when it will happen.
We encourage you and those you care about to make whatever preparations are possible
in the limited time remaining.
I began a career of computing in 1959.
That was kind of the beginning of the digital processing.
Through the years I came through the vacuum tube generations to the beginning of the transistor
that turned the world on its ear, 1964.
It was the beginning of a generation of computers that was called IBM 360, and that's kind of
where the thread of the problem, the Year 2000, began.
I think what I would like to encourage personally is for people to think critically and rationally,
not mythically and cultically.
I think that's the problem that we confront in the 2000 problem.
People don't want to think skeptically.
They don't want to think critically, analytically, or scientifically.
To the degree that we can do that, you can solve the problem.
To the degree that you give up your rational mind to these cult leaders, to this millennial
fever, to these apocalyptic visions, you have lost sight of what is a very simple problem.
Defining the problem in the Year 2000 can both be very complex and it can also be defined
relatively simple in simple terms.
It's the process that as the year changes in two digits from 99 to 00, that causes computers
to do something that is illogical.
And if a computer does something illogical, then the computer can't be trusted and the
results may be erroneous.
And if they're erroneous, then that begins a trail of events that can be from simplistic
things to something catastrophic.
What we're confronting here is a purely human problem.
We're not confronting a cosmic problem.
We're not confronting a theological problem.
And it's sad that people want to twist it into a religious issue.
It's a human invention and it has a human solution.
The supply of water and electricity as well as shipments of food, medication, fuel, and
other goods could all be affected by computer failures.
Prepare as you would for a hurricane, a blizzard, a flood, or an earthquake.
If you're already well prepared for any of these natural disasters, you won't need to
do a lot of extra preparation.
My concern is that some of the utility companies are not taking the issue as seriously as they
should be.
There's not enough work being done inside the plant looking at what's going on.
And if I had any advice to the industry that is supplying our electricity, that is a very
important issue.
Plants that are checking are finding problems.
And so I would encourage all utility managers to actively, actively look at what's going
on with their facilities.
Because if we need one thing, it's electricity.
These days, even a low-tech product like soup has a high-tech process.
This small soup company in England is at risk because of its just-in-time manufacturing
process.
So this is a small company, obviously, but it's tremendously important for them because
of the way that they work.
And obviously the soup's got to be fresh and everything.
But they're fully compliant with the year 2000.
Otherwise, the whole system would fall apart.
The thing about the year 2000 is very complicated.
Most people think of it only as a mainframe issue.
And until you look at the embedded systems and see what's happening on the factory floor,
the production facilities, you won't clearly understand the issue.
And that's why we're advising our clients that in particular we're concerned about small
and medium companies.
I'm talking literally companies that might be as much as $500, $800 million in sales,
multi-plants in the United States.
They typically don't have all the resources in the back of the shop and the factory floor
to remediate all these problems.
And we're concerned that there's not enough people out there.
So we're advising them to really take the issue seriously.
It's not just information processing, unfortunately.
It does affect production control equipment.
The American Red Cross says that an ample supply of clean water is a top priority in
an emergency, with more water needed for children, nursing mothers, and ill people.
They suggest storing at least one gallon per person per day and recommend a two-week supply.
It's best to store water in clean plastic containers, such as soda bottles or food-grade
plastic buckets.
If the year 2000 problem does in fact unleash a significant recession in the year 2000,
the stock market may start to anticipate that, even in 1999.
And I know a lot of people have been investing most of their funds in the stock market, and
the stock market has been a tremendous place to invest.
But let's give it a rest a little bit.
People have made a lot of money over the past three, four years in the stock market.
Let's not get too greedy here.
I think reducing some exposure to the stock market, maybe putting some more money in just
cash or CDs or treasury bills.
And then I would be more aggressive in the bond market as well.
In 1999, I don't know that I really would want to own an airline stock.
I think there have been lots of news reports that the FAA may not be fully ready.
A couple of airlines have said they make or tell flights.
I think we're also going to have to look at banks real carefully.
The Federal Reserve will have the banking system operational.
I'm not trying to tell anybody to take their money out of the bank, because the Federal
Reserve is going to make sure that banks that aren't ready for the year 2000 are going to
be taken over.
So I'm not terribly concerned about that.
But when you invest in bank stocks, some of these banks may find that some of their loans
go bad if they've lent it to companies that just can't function in the year 2000.
So there's all sorts of issues like that that investors need to be concerned about.
If nothing else, even if you don't buy the notion that the year 2000 problem is going
to be a serious problem, I think it does definitely increase the uncertainty we face as we approach
that date.
You know, I can't be absolutely certain that it's going to be a calamity.
On the other hand, I don't think anybody can guarantee that we're not going to have some
serious issues.
We actually manage money for our customers, and our primary focus is to preserve their
wealth and then to attempt to grow it.
And we looked out over the last couple of years and saw the year 2000 coming and see
it as a very major transfer of wealth issue.
It will affect shareholder values.
I guess in my investment portfolio, I've become less aggressive in the stock market and more
aggressive in the bond market.
People aren't used to thinking that bonds are an aggressive investment.
But actually they are.
If we have a recession and interest rates come down, bond yields will come down, but
that means that the price of those bonds will go up.
So I think you can actually get a very nice return in the bond market in the next couple
of years.
Other than that, you know, it's kind of a very freaky kind of issue.
I mean, none of us have experienced what we might potentially go through in 1999 as people
start to take this problem more seriously.
And in the year 2000, I'm not planning on going away on any vacations in late 99 into
2000.
I'm going to stay home.
I am concerned that flights will be canceled.
I mean, this nonsense about planes falling out of the sky is just total nonsense and
discredits the serious issues in the year 2000 problem.
I plan on going to work in January 2000, but we may have some disruptions in the supply
of electricity.
We may find that many companies say only vital employees related to fixing the computer system
should come in for a couple of weeks.
But other than that, I'm really spending most of my time trying to alert others that this
is a serious problem we need to deal with.
If I could just get people a little bit more panicked about it now, then I'd be less concerned
about it because then I'd have more confidence that people are actually taking it seriously
and doing something about the problem.
I guess my primary message is to the consumer and a concern for the consumer and individual
investor because this is something they're going to have to do for themselves.
The government is just not going to come out and tell them, look, we're headed for a crisis.
We can't tell you what the outcome is going to be.
They will tell you that they're doing the best job they can and that they've got all
the appropriate resources on the problem.
I don't happen to agree with that.
There are a lot of folks that don't.
In fact, there are members of Congress who have investigated that situation and don't
believe that's true.
Public companies certainly aren't going to give you the true status of their year 2000
exposure program unless they're forced to because if it isn't perfect, if all the news
isn't good, then their stock, of course, would be vulnerable, as it should be because an
investor would lose confidence in that company.
What it means is it does put the onus on the individual.
They're going to need to write their bank.
They're going to need to write the companies that they intend to stay invested in if they
do and demand details on their program and their intention and what's the viability of
this company actually getting there on time and make some personal decisions and preparation.
Eventually this information is going to come out, but it will come out more as a surprise
and through events.
I'm a student of history and history shows that it's kind of like the Bible.
Good times are sometimes followed by bad times.
If you prepare during the good times emotionally, psychologically, and also you actually make
some physical preparations to minimize the disruption to your life and to those you care
about, then it doesn't have to be all that bad.
Then bad times will be followed by good times.
I'm not saying that the year 2000 problem is going to be a catastrophe for us.
I'm just saying it's going to be a very nasty recession.
We just haven't had one for a long time and many people will feel pretty discouraged by
the whole experience.
There will, on the other hand, be great opportunities for those who are ready.
Those companies and businesses that have their computers fixed will have great opportunities.
Businesses that maybe keep a little cash on hand, maybe put more money in the bond market
will have great investment opportunities in the stock market.
So there will be opportunities.
It's not all going to be terrible.
The Red Cross also suggests a two-week supply of food.
Foods that will keep well are ready to eat canned meats, fruits, and vegetables, canned
juices, milk, and soup, staples like sugar, salt, and pepper, high-energy foods like peanut
butter, jelly, crackers, dried fruits and nuts, granola bars, trail mix, and vitamins.
Keep your food sealed and covered in a cool, dry spot and rotate it periodically to make
sure it stays fresh.
And don't forget a non-electric can opener.
It's really people like you and me that are concerned about those things, banked on them
for retirement.
Don't consider ourselves maybe investors.
As you mentioned, my book is entitled, The Year 2000 Computer Crisis and Investor's Survival
Guide.
I really wrote it for a consumer, for the average consumer, but I found that people
don't consider themselves investors, even though they do have a 401k or an IRA or a
pension plan that's based on the stock market in some way or bonds.
And because they don't, they tend to discount things like this.
If they don't have a computer, they say, well, I'm glad I don't have a computer.
I don't know what those people that have them is going to do, or gee, if the stock market
crashes, that's going to be really bad for some people, but I don't play in that, so
it's not going to harm me.
And it's those people who just don't understand that, in fact, this is going to impact everyone
and that they are, in fact, investors with an equity stake in the economy.
They're going to be hurt the most.
And so, the threat to your 401k plan, assuming that it's maybe filled with a couple of mutual
funds and maybe a bond fund or two, initially it will be threatened by disruption in the
marketplace in anticipation of what people perceive will be these future events or conditions
brought on by the year 2000 problem.
The actual events won't take place probably until January 1st, 2000 that will directly
impact it.
But through this problem, there is a real threat, a real potential for your records
to be lost, for your account information to be unavailable or wiped clean.
Because to a computer, it's 1900, your account hasn't been opened yet, you just can't figure
this out.
You know, you opened your account, it says, in 1994, it's 1900, and basically it just
sort of gives up on something like that, says, this doesn't make any sense.
I'm shutting down on this account.
Don't forget special foods for infants, elderly persons, or any other special diets.
And comfort foods like cookies, candy, cereals, coffee, and tea will help your mental attitude.
I'm concerned about the real estate sector because I think there's hidden capital expenditures
that will have to be made there.
I'm concerned about real estate as it relates to leasing and small businesses, their ability
to use the facilities for a while.
So I have some concern about that, so I would not be purchasing real estate at this point.
I think unfortunately that area, that asset class, will have some difficulty.
Traditional assets that you have may not have the same worth after the year 2000 that they
do today.
My wife and I had long dreamed of having a beach house, and so finally we were able to
have it.
We built it, basically designed it, decorated it, put a lot of emotion into it, and became
attached to it, but realized that this was just not something we wanted to have after
January 1st, 2000.
It's rental property, and goes for about $5,000 a month, or excuse me, a week in peak season.
And we just can't imagine that anyone's going to be doing that after the first of 2000.
So even though that hurt, we sold that.
And there are other hard choices like that.
If shipping is disrupted, it may be difficult to get medical supplies.
Set aside a two to three month supply of any medication you need, such as heart medication,
insulin, or other prescription drugs.
What we're finding from our research is the fact that countries such as Denmark, Sweden,
Brazil actually produce critical produce to the American market.
What we're seeing in Denmark is that pharmaceutical companies such as Nova Nordisk actually supply
a majority of the world's insulin.
Now what we have to do is assume that if there is breakdown in infrastructure within Denmark,
that it will have an impact on the lives of diabetics if we don't do something in time.
At the moment there are probably eight million American diabetics, of which probably around
three to four million are insulin dependent.
You should also have a first aid kit, toilet paper, feminine supplies, baby supplies, and
plastic garbage bags.
And since there may be blackouts, have a battery operated radio, flashlights, and extra batteries
for both.
We think over the next couple of years that cash is king to put some liquidity back into
your portfolio and to re-examine equity positions.
As far as making changes to your specific investments, everyone's situation is different.
They should work with their professional financial advisor.
For my own part, what I'm doing is moving into what are called hard assets.
Traditional hard assets are precious metals.
And the reason for that is that we have a couple thousand years of history to demonstrate that
precious metals have always held their value in times of crisis, financial crisis, or political
crisis.
And so in my view, this in fact is the mother of all political, economical crises.
Make sure to have plenty of gas in your car before New Year's, and you may want to fill
up some extra gas cans and store them in a safe place.
If you're in a cold area, make sure your heating fuel tank is full and have extra firewood
since this happens in the dead of winter.
I come to the year 2000 problem from two aspects.
One as the publisher of Westergaard 2000, which is generally I think viewed as one of
the leading sites, channels if you will, on the internet covering this problem.
The URL is www.y2ktimebomb.com.
And also as counselor to Senator Daniel Patrick Moynihan of New York, to whom I discussed
this matter first in January of 1996.
The Senator was as skeptical as anyone, but he moved to have a congressional research
study done in the spring, and it authenticated what I was saying.
And we proceeded then to draft and send a letter to the White House to the President
in August of 96.
The scope and the causes and the effects of the year 2000 essentially are vested in companies
that began processing maybe 1960 to perhaps the late 60s.
And that would include governmental agencies, private enterprise, foreign and domestic.
The scope of the problem would be anywhere from non-eventful programs that might not
work without anything other than local problems to those that governmental computers that
quit working, that begins a circle of problems that manifest themselves into perhaps events
that of Wall Street outage to banks and municipal organizations that no longer can function.
My concern, the Senator's concern obviously is what is the situation in Washington vis-à-vis
this problem.
And you know we've heard some excellent talk this morning about what the status of that
is.
I would say that I think Congressman Horn and the ranking member, Carolyn Maloney, are
doing an outstanding job over in the House.
The Senator has been trying to get some action in the Senate, including the legislation.
In terms of Washington, among the agencies, the only one that I know of, well I shouldn't
say that, clearly the Federal Reserve is on top of the situation.
And the Comptroller's Office I think vis-à-vis the banking system certainly is on top of
it.
And I would have to commend Arthur Levitt at the Securities and Exchange Commission
for his efforts with respect to what he's been doing.
And other than that I think there's just a real very complete lack, or not complete,
but largely a lack of responsibility with respect to this issue.
You may be worried about your home computer.
I hope I don't have a lot of problems with my computer.
Come 12 o'clock we could lose everything.
There are three things to be concerned about.
First, is your computer's real-time clock year 2000 compliant?
Macintoshes have no problem with this, but you should check your PC out with a diagnostic
tool such as Y2000RTC and repair it if necessary.
Next, is your computer running a compliant operating system?
Mac OS is OK.
Microsoft has stated that Windows 3.1, Windows 95, Windows 98, Windows for Workgroups, NT
4.0 and MS-DOS 5 and 6 are all compliant with minor issues.
For more information, go to their website at www.microsoft.com slash year 2000.
Finally, you need to make sure any Mac or PC applications that you use are year 2000
compliant.
Look at your software manufacturer's websites or call them directly to obtain more information.
Tools such as Norton 2000, McAfee Toolbox 2000 and Greenit's Meantimes Check 2000 may
help you with this.
The year 2000 problem by its very nature is a systemic problem and it in fact affects
the entire globe.
In this case, this problem, when it becomes a problem for Europe, that's our problem.
If it's a problem in Asia, that's our problem and our problem is everyone else's.
We are inextricably tied together in this information infrastructure that we've built.
Not one we designed, it's just one that grew up to purpose, link by link.
And so now when it's threatened, we find ourselves in the same boat and we are not going to get
out of this situation or crisis alone.
This is not a problem we can solve here in the US and then kind of wipe our brow and
say shh, boy, dodge that bullet.
We need to be as concerned about everyone else as we are about ourselves because survival
here in the US means nothing if our trading partners aren't healthy as well.
So this is a problem that will have a global impact.
It threatens our information infrastructure.
Prior to anything happening on January 1st, 2000, we'll begin to have minor events building
up September 9th, 1999 will be a trigger date for some major events and those events along
with things that governmental bodies will do, large corporations, steps they'll take,
that will alarm the investor community or alarm maybe isn't the right word.
The investor community will finally internalize what a threat this is.
This is going to be a setback for globalization, especially the prosperity that we've been
enjoying.
I mean in combination with the Asia crisis, if the Asia crisis kind of persists, it kind
of could be a pretty nasty environment for the next couple of years.
And in Asia, particularly the resources to fix the year 2000 problems are not going to
be quite as ample as they had been before the crisis.
So I think this could create a global recession and globalization, the whole concept there
is we all kind of prosper together, there's lots of consumption, lots of demand for everything
we make.
Well, I think we're going to have a couple of years where that's not going to be the
scenario.
It's going to be not quite the happy scenario that I think most of us hoped globalization
would be.
But you know, in the grand scheme of history, two, three years of setbacks is not that terrible
scenario.
A couple of things that I recommend before we even get to the financial aspect is that
people begin to write and habitually collect hard copy records of any information that's
stored electronically that's important to them.
So here in the U.S. you'd want to write for your social security records.
You would want to write for your medical records, military records if you served in the military.
You want to write the IRS and have them send you copies of your returns for say the last
three to five years.
You want to do that because when they send them to you that certifies that's what you
filed.
Your records don't do that.
So that hard copy documentation will be very important.
Then you want to write the companies that you're dependent upon, your banking institution.
Have them write back to you and tell you in detail what they're doing on this problem.
And if you don't like the answer, you're not comfortable with it, then take your account
elsewhere.
Move to a national bank for instance.
If you don't know your neighbors very well, get to know them.
Make sure that if there are problems you can all help each other out.
When floods strike, the people who try to sandbag their own homes fail, but the ones
who sandbag together as a community hold off the waters and save their homes.
Become friends with your local law enforcement officials and your community leaders and help
them to understand the importance of this problem.
A strong community of family, friends and neighbors working together will make all the
difference in the world.
I advocate that professionals need to be there.
In that situation, we need people that can make decisions or help understand the macroeconomics.
Now if all the key decision makers are selling themselves in Mexico or the Caribbean, then
we'll be in serious problems.
If I were to say anything to the people as we come to the year 2000, that America is
great at helping one another and pulling together.
And so I believe like any other event that we've gone through in history, although this
is most unusual, we'll come through it, we'll help one another and we'll get through it.
And I'm quite confident of that.
The most important thing is to remain flexible and be willing to adapt.
Don't be attached to a certain way of doing things because a lot could change.
Don't rely on one route for a solution since we don't know what is going to happen.
A good rule of thumb is to simplify your life.
The key thing is everyone can make a difference.
From our organization, from literally nowhere, we have been able to get in front of the Prime
Minister of the UK's office and we've been able to tell them what we think.
The people can tell their banks what they think, the banks should be communicating back,
but the important thing is that consumers have a lot of power today and they should
use that power to help resolve the situation.
They should demand higher standards from the people that provide them with services.
We're all in this together.
The year 2000 is closer than you think.
There will be disruptions.
Be prepared.
Flat the bulk, bite you.