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Should you
party hearty or hunker in a bunker? These are the two New Year's Eve
scenarios proposed by Y2K pundits. Where does the truth lie in the morass
of (mis)information? And what are the implications for your investment
strategy? These days almost every Web portal, general interest site, and online business has a Y2K page. The problem is not lack of information and advice, but a glut of it. You need is a guide to the often conflicting Y2K guides. The Year 2000 is especially crucial to coin and bullion investors, some of whom are betting fortunes on the outcome. Should you go long or short on precious metals? Let's step through the two scenarios to see what's out there. For ongoing, updated links to Y2K sites, click Links on this site...
Heads I Win For a calm, prudent look at the millennium bug, start with Yahoo's Full Coverage. This is a mostly sober roundup of news stories, government Web sites, and other news sources. The publications cited include The New York Times, Christian Science Monitor, and PC Week. A couple of articles suggest the tone. The Cincinnati Enquirer suggests that most businesses have prepared or are preparing contingency plans. Although work crews may miss the New Year's festivities, they'll be solving problems at companies such as Delta Air Lines, Proctor & Gamble, and Kroger Co. A survey of corporate system managers concludes that most major US businesses will experience "nothing more than minor annoyances that can be easily managed." Investor's Business Daily editorializes that "Americans will solve any problems that come along with their usual determination and ingenuity." It quotes Joel Willemssen of the General Accounting Office on the state of Y2K readiness: "Virtually all of the industry areas reported high awareness of the Year 2000 and its potential consequences....[A working group] is increasingly confident that there will not be large-scale disruptions in the banking, power, and telecommunications areas." The Boston Globe notes that the Federal Reserve may adjust the money supply to meet expectations about Y2K. The Fed is thinking about "whether to increase or decrease the $50 billion set-aside based on how seriously the public regards the threat of Y2K-related problems." The feeling is that the Fed will do whatever's necessary to soothe the market's jitters. Other government bodies are swinging into action. The President, Congressional committees, and agencies such as the OMB and SEC have issued measured reports. Clinton has signed a Y2K lawsuit bill to assuage a major fear in Silicon Valley and other centers of hardware and software production--not of computer crashes, but of lawsuits with unlimited liability stemming from such crashes. Behind the scenes, several deadlines have already passed without harm. Japan, Canada, and New York State are among large entities that did not drop off the map April 1, when they began fiscal year 2000. Computers are recording events that take place next century, such as credit card expiration dates. Many organizations have tested their computer systems successfully and say their preparations are complete or almost complete. Tails You Lose It's not hard to find dark tidings to counter these rosy views. Start with a survey (www.senate.gov~y2k/news/pr06149.html) showing that many small businesses, unlike major corporations, won't be prepared for the Year 2000. And realize that many of these small business directly or indirectly supply large corporations. Senator Robert F. Bennett (R-Utah) calls this "a potential disaster for small business employees and a serious threat to the strength of the US economy." The same Investor's Business Daily editorial that depicts American businesses as determined and ingenious points a metaphorical finger at American governments. It describes what happened when the Los Angeles Department of Water and Power conducted a Y2K test by setting its dates ahead. "Lo and behold, a faulty gate connection let thousands of gallons of raw sewage flow into a park." The digital version of Time Magazine (cgi.pathfinder.com/time/digital/y2k) carries some interesting and pointed articles. One chides the Federal Aviation Administration for misleading the public with "cozy reassurances and an ambitious timetable." A key problem is the computer backbone of the long-distance control system, an old IBM mainframe that IBM says no one can fully assess. That doesn't inspire one to fly on New Year's Eve. (Then again, why spend New Year's Eve on a plane in the first place?) For some really scary stories, visit www.y2knewswire.com. This site flatly declares the government is covering up the Y2K problem and discouraging preparations for it. Why? Either our politicians don't want to cause a panic, (wrongly) think we've fixed the problem, are incompetent, or want to take over the world. The real trouble is likely to be overseas. Other countries rely on older computers and don't have the technical know-how to debug them. Time Digital says Russian missiles won't launch themselves, but "the Russian military early warning system...is extremely vulnerable to Y2K-related malfunction." If the people with their fingers on the buttons panic....Time Digital writes, ironically, that things aren't so bad in China. That's because China's cash economy is so computer-unrelated that workers can still do everything manually. The media feasts on disaster. Approaching and during the last quarter of 1999, anything Y2K-related that goes wrong will be a feature story. So will preparations for Y2K problems, such as the Treasury printing millions of extra sheets of paper money. But "Company X passes Y2K compliance test" is unlikely to make the six o'clock news. At the same time, banks will be posting reassuring notices in their windows about Y2K compliance, and banks, brokerages, and utility companies will be sending letters to their customers about how Y2K-compliant they are. All this will keep the issue in public consciousness, and lead more and more people to take precautions, including purchases of bullion coins and common rare coins such as Morgan and Peace Silver Dollars and Saint Gaudens gold pieces. Given the number of people who file their income tax returns on or shortly before April 15, look for heavy Y2K buying toward the end of December 1999. Lee Clarke, an associate professor of sociology at Rutgers University, says the real Y2K problem is overconfidence. The situation is so huge and unknown that no one can predict its outcome. "Many Y2K compliance statements and a lot of Y2K contingency plans are fantasy documents," Clarke writes. "Fantasy documents are based on best-case assumptions, and overstate how much safety they can deliver." A Tossup? Despite caveats, Clarke's conclusions are firmly mainstream: "I think it is most likely that the relatively rich throughout the world will experience minor disruptions while the relatively poor are at a higher risk for serious suffering. That's generally how the world works anyway." Echoing Franklin D. Roosevelt, some pundits say we have nothing to fear but fear itself. "Anxiety and fears among many are rising," a spokesperson for the American Psychological Association observes. If people start hoarding food and other necessities, they may create the very shortages they dread. One psychologist says Y2K anxiety is worst among computer programmers, which somehow seems fitting. The rest of us should prepare--and invest--as we would for any emergency. In moderation. Rob Schmidt, who holds Masters degrees in Business Administration and Library Science, worked on four of our Spring issue's articles on coins and precious metals on the Internet. |
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