In the past few months your advisors have been exposed to many seminars related to the so-called Y2K problem at our professional meetings and on-line. Y2K, which means Year 2000, refers to the problem associated with computers that don’t understand the difference between 2000 and 1900 because their programming only gives them two digits with which to identify the year. So at 12:00:01 AM on 1/1/2000 these computers are going to shut down and await further instructions, stumped about the ‘when’ questions in their software.
Sounds silly, but it isn’t. The reason it is serious is that there are now computer chips embedded in nearly everything. Recent railroad train car purchases in some cities have shown in tests that they won’t work with the old cars because of Y2K incompatibility. Computerized electronic prison doors when tested in some prisons have shown problems, too. What’s scarier, the government is way behind in fixing Y2K flaws in government computers. Due to potential domino-type problems associated with FAA air traffic computers, some Y2K experts believe flight scheduling and traffic control problems may occur. Many very savvy computer types are admitting that they will not be anywhere near an airport on New Year’s Eve and the days following the turn of the century. Some conservative groups are publishing lists of household goods and survival gear that you should have in your house or communal church storeroom. See the problem? Since the market is at least 75% psychology on any given day, there could be some disruption. If you want to know more, enter Y2K on any Internet search engine.
Will these Y2K problems affect your investments? There are two areas of potential importance. The first is BWFA software and hardware. We can’t manage the information in our office without functioning computers. Regulated by the Securities and Exchange Commission (SEC), BWFA has complied in filing a compliance plan on Y2K issues as a regulatory requirement. We have checked all mission critical software and queried both software and hardware manufacturer’s about current and future compliance. Waterhouse Securities has completed the same procedures as well as those required by the NASD (National Association of Securities Dealers), another quasi-governmental regulatory body. So, we anticipate no problems in our software or hardware and believe we will experience no diminution in ability to trade securities. The second area of potential difficulty is what happens in the public and private sectors of our vast national and global economy. We have no way of knowing the degree of potential difficulty that may be experienced. We are attending seminars on these issues and we participate in a daily Internet dialogue within the community of financial advisors, examining steps that may be prudent for us to take later this year. At this time we know of none that seem certain to be implemented.
What could these steps be? There is some concern among advisors that we may need to ask you to increase your personal cash reserves later this year. AARP has suggested that it’s members increase their cash by at least $1000 near year end. If all AARP members take that advice, there will be a cash shortage in the banking system which the government has already anticipated. Other issues include disruptions in what is called “in-time” inventory systems. If the bumpers don’t arrive, for example, the rest of an auto assembly line will stop, which will affect the market price of common stock shares of the company.
In upcoming issues, we may have more to say on Y2K and suggestions about how to respond to it.