SUMMARY - "PIG":
The Contrarian's View is published 11 times per year on a mostly-irregular schedule, and the views expressed are those of the author and editor, Nick Chase. Because nobody can predict the future, results of past suggestions or recommendations are no guarantee of future results. Material in this publication may be freely quoted provided proper attribution is given to its source. Subscription rate: Free on the Internet through the World-Wide Web service at Assumption College. Using your favorite Web-browsing program, Open URL http://nick.assumption.edu. Mailed paper subscriptions, one year for $39 to The Contrarian's View, 132 Moreland Street, Worcester, Massachusetts 01609. There is a limit of 50 paid subscribers at one time; please check for availability before sending any money. Sorry, Visa and Mastercard are not available. Overseas subscription rate, U.S. $54. Unsolicited material sent to us by UPS or by courier other than the postal service is refused and returned to sender! Phone: (508) 757-2881
In May of 1982, while the bear market in US stocks was in its deepest throes, and the epic bear market in US bonds was still completing its base, I was called to advise on the greatest stock market bubble of all time --- the Souk al Manakh in the Persian Gulf.
Kuwait had an organized stock market for some time. The great wealth created in Kuwait by the rise in the oil price in the 1970s led to seemingly endless appreciation in Kuwaiti stocks. In the Arab states in those days, only sheiks could grant corporate charters, and only corporations could become publicly-traded companies. The royal family of Kuwait did not freely grant corporate charters for companies that might become vehicles for stock speculation, so there was a shortage of stocks to trade. This shortage and the new unparalleled wealth that was looking for vehicles of speculation gave rise to an over-the-counter market in Kuwait city where shares in companies domiciled elsewhere in the Gulf --- principally Bahrain and the United Arab Emirates - - were traded. Housed in a converted air-conditioned parking garage, this market was known as the Souk al Manakh --- the camel market.
I was asked at the time by the government of the United Arab Emirates to advise on the creation of a stock exchange in the Emirates. Great fortunes were being made in shares of companies domiciled in the Emirates at the time. Why not bring all this wonderful new stock market activity home?
For six weeks I worked out of an office in the UAE central bank in Abu Dhabi. The city was modern, laid out along a crescent beach at the end of a promontory into the Gulf. The central bank was a modern glass building behind severe cement columns that met in graceful Moorish arches. From a great glass window of this modern building, I could see along a turquoise backwater old tanned fisherman working on brightly painted ancient fishing dhows that were beached on the blinding sands. The Sheik of Abu Dhabi was the richest man in the world then. Only a few decades earlier his brother, the former ruler, was afraid to walk the streets of what was then a small sandy seaside fishing village for fear of his creditors.
Being a macro-oriented, top-down man, I set about to see how great a supply of stocks had been made available for trading on a formal market in the UAE. The results were simply unbelievable. The market capitalization of the Kuwait exchange and the Souk al Manakh combined ranked third in the world, behind the US and Japan. It was greater than that of the UK with all its foreign listed companies. How could this be? I asked, for both geographically and economically speaking, these few countries --- Kuwait, Bahrain, and the Emirates (the former Trucial States under British domination) --- were only postage stamps of sand on the globe. Oil had brought wealth to these small countries but their combined economies were still very small compared to those of the US or Japan or the UK.
More striking was the fact that most of the visible wealth was not reflected in these companies. The rulers of these sheikdoms owned the oil wealth. The hugely expensive real estate was privately held, as were the extremely lucrative import franchises. What assets and income underpinned these multi-billion dollar market caps?
We did a bottoms-up study to find out. In Bahrain, a financial center, there were banks, seemingly of substance. There was a raft of companies that made cement and clinker. These companies were domiciled in five former Trucial states whose names you never heard of that, alas, had no oil. There was a company or two that imported sheep and goats for slaughter. And then there was a handful of other companies whose principal activities were not at all obvious.
The Sheik of Abu Dubai was the richest man in the world at the time and the Ruler of Dubai was also quite well to do. The five other sheiks who had no oil were poor cousins. For founders shares these oil- poor sheiks granted charters for corporations that could be traded on the Souk al Manakh. I can remember driving one day to a small derelict town that was the capital of one of these oil-poor sheikdoms to analyze a company with a high-flying stock on Kuwait's OTC market. For the life of me, on the balance sheet of this company I could find no assets of any kind. It dawned on me that, behind most of this third-ranking stock market cap in the world, there were only a few cement and clinker plants, a slaughterhouse or two, and quite a few shell games.
How do you tell your host government that the stock market they want to bring home is a shell game? I pondered this diplomatic quandary for weeks as I looked out my office window at those ancient painted dhows in the desert sun. In the end I mustered the courage to tell the truth. "It is all a bubble," I told my client. "And it will burst." To my relief and amazement, I was greeted, not with displeasure, but with laughter. "You Westerners have been coming here for five years", they told me, "and to a man you all have predicted a crash. Don't you understand, there has never been a place on earth like the Gulf with such unprecedented wealth? You will never understand that the Gulf market cannot crash."
I had a long-time friend in London. His name was Ali. He was one of several Anglo-Arab investment bankers that flourished in London in those years. When I passed through London on my way back to the US I stopped to tell him about my trip. Speculation on the Souk al Manakh was financed with a curious type of informal margin financing by way of postdated checks. So rapid was the rise in the Gulf market that postdated checks paid an interest rate of 100% per annum. Ali was financing speculators in this market. He listened and he smiled.
At the beginning of August I had completed my report for the government of the UAE. I told them that the market they wanted to organize was a bubble and that it would crash. Some weeks later I heard from Ali. He called to thank me for my advice on my recent visit. He had called in all his postdated checks. "Did you hear what happened to the Souk?", he asked. "No", I replied. "Well, it topped quietly at mid summer after you left, with no provocation. One can't quite say it declined or it crashed; it has just stopped trading."
The Souk al Manakh was the greatest speculative mania of all time. One could not even speak of valuation. Margin financing reached unimaginable extremes; one speculator, who had been a customs clerk two years earlier, had at the peak $14 billion in stocks financed with $14 billion of margin debt. The people involved believed that the oil-rich Gulf was truly a "New Era". It did not take a trigger to burst this bubble; it simply crested sometime in the dreadful heat of the Middle East's summer. Its decline was so discontinuous it cannot be called a crash. There were simply no bids.
Veneroso Associates is a global investment strategy firm.
The only difference between a gambler in a casino and an investor in mutual funds is that the gambler knows there is a possibility of losing money. - Steven Jon Kaplan
If you want to buy low and sell high, the first thing you have to do is buy low. - Christopher Holton [Vice President of Marketing, Blanchard and Company]
This is the biggest stock mania on record ANYWHERE, ANYTIME. We passed the Nikkei's run in the Dow mid-8000s as I calculate it. It's bigger than the South Seas Bubble. The only bigger speculation we have on record is the Tulipmania of the 1600s and Beanie Babies. - Bob Prechter
One of the chief hallmarks of stock market bubbles (as we are presently experiencing) is the prolific rate at which publicly traded companies attempt to enhance their bottom line through mergers and acquisitions.... And for every.... success story of merged companies, there is the horror story of a merger deal that didn't quite live up to expectations. A prominent example, of course, is the merger between Union Pacific and Southern Pacific railroads. The newly-merged company is now responsible for the worst rail gridlock in U.S. history. Across the Southwest, rail traffic logjams, lost or side-tracked railcars, and train delays have become commonplace on account of this ill-conceived corporate marriage between two large and totally self-sufficient companies. The damage to the entire U.S. economy has been estimated at more than $2 billion and counting due to the UP/SP fiasco, and shippers across the country have been forced to find alternative means of shipping their goods because of it. - Clif Droke
The bulls are rampaging on Wall Street, just as they were in 1928. At that time, there were those who anticipated the crash and positioned themselves in land and cash equivalents. There were many who wrongly assumed the market climb would continue inexorably upwards, even in the face of record price/earnings ratios. Many of those were window-jumpers on that day in October, 1929. The same is recurring in 1998. With a DJ of 9000, there are still analysts who say it will continue upwards, even though P/E ratios are at an all time high. There is an intoxicating effect at work in the marketplace right now, an almost drunken stupor expecting continued prosperity. It has always been thus: just before the crash. Negative news is simply ignored and anyone who spreads it is regarded as a party-pooper by those who are drunk on their recent paper profits. Can those in charge of Fortune 500 companies be so stupid? Yes, they are human and therefore have the capacity to be lemmings. - Stephen L. Bening
Derivatives have turned the financial markets into a hi-tech, international, 24-hour casino.... Right now you have a small number of banks sharing a very large risk. But this could turn out to be a serious problem if these banks are in the wrong place at the wrong time. - Richard Thomson [former merchant banker and author of Apocalypse Roulette: The Lethal World of Derivatives]
Credit-card issuers earn about 75% of their revenues from people who don't pay in full each month.... Lenders especially like customers who pay the minimum -- typically, 2% of the bill. If you owe $3,000 at 18 percent interest, and pay only the minimum each month, it will take nearly 31 years to clear that debt. - Jane Bryant Quinn
Does anyone recall President Roosevelt's Proclamation 2039 which began, "Whereas there have been heavy and unwarranted withdrawals of gold and currency from our banking institutions for the purpose of hoarding...." The purposes of hoarding? The gold belonged to individuals. They were withdrawing the gold because they didn't trust the banks. The proclamation provided that anyone violating the presidential order by withdrawing their own money from the bank "would be fined not more than $10,000 and jailed for not more than 10 years." In 1933 a $10,000 fine was equivalent to at least $100,000 in today's money. Ten years in jail is a greater sentence than given today in many cases for murder. And for what reason? For withdrawing their own money from the banks. - Mary Mostert
Why bother making special, expensive, paper, and elaborately printing it with special inks and holograms, when blips in a computer can do as well? The answer lies in human nature. If you are giving your life, or at least forty hours of it weekly, for something, then it is satisfying, as well as just, that you get something. Some thing. Something you can hold and evaluate, weigh, and measure. If you had to perform certain tasks according to certain standards to get your money, isn't it reasonable that the money itself correspond to the standard for money, whatever that may be? Isn't it at least disconcerting that your life's work could be obliterated by a short circuit, or a bolt of lightning? - Paul Hein
Whoever controls the volume of money in any country is absolute master of all industry and commerce. - President James Garfield
We are grateful to The Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years.... It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the world is now more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries. - David Rockefeller [from a speech given at a meeting of the Bilderbergers, June 1991, in Baden-Baden, Germany]
What will the future bring? Predictions are always risky, but we'll risk it: a single world-wide bank, with many branches, financing a single huge corporation, with many subsidiaries, operating under the aegis of a single world government, called different things in different places. Human freedom? Gone, except for the freedom to conform, for otherwise is to starve. - Paul Hein
The resources of the IMF are dangerously low as a result of the recent financial crisis in Asia... we have seen both an erosion of the traditional bipartisan basis for international economic engagement in recent years, and at the same time, a re-ignition of one historical strain in American thought, a rejection of the outside world. - Robert Rubin [U.S. Treasury Secretary. Nick's translation: Taxpayers no longer want to pour money into this secretive black hole.]
Japan has far worse immediate problems than Y2K. Japan will not last another year. By this time next year it will be smoldering in ruins. Indonesia has just begun the 'bad' things that are going to happen. Korea is sunk. 3000 companies PER MONTH are going bankrupt. Hong Kong. Crashing real estate values and the Hang Seng holding on by its toes. China. Don't make me laugh. They are in such bad shape that if they don't devalue the Yuan, they are dead meat. And if they do that, they torpedo the rest of Asia. Only a matter of time. It is only going to take just a little more...... and off the edge they go. Like an enormous anchor with the chain tied to the rest of the world's ankles. For a number of years I have been very closely watching the enormous debt balloon inflate. It can not stand much more. More and more 'money' has been pumped in. The underlying problems have NEVER been addressed. Good money after bad. And now, the jig is up. As the Yen sinks in value it makes their already impossible debt situation even more difficult to pay off, taking more and more Yen and therefore more and more labor to pay off a debt that can not be repaid. Just sinking further and further into financial oblivion. This is why I bugged out in the first place. It will happen before Y2K hits. - Paul Milne
The West simply does not have enough money to stave off the inevitable explosion that is coming in Russia. - Eric Margolis
During my quarter of a century as an insider I was always struck by the startling difference between the reality of the so-called war on drugs, and the fraudulent way it was presented to the world through easily-manipulated media coverage. What I came to realize was that both the federal and state bureaucracies receiving a drug war budget, nations receiving our taxpayer dollars under the banner of drug war, and the mainstream media vendors of drug war "news" have a common customer, or as we say on the street, "mark" -- the American taxpayer. The media uses alarmist drug stories to sell their product and the bureaucracies use the media to project their need for more tax funds. This tacit agreement.... is all about money, not truth. - Michael Levine [author of The Big White Lie and Deep Cover]
We [the U.S. and China] are trying to build the same kind of world in the future ... a very different kind of world. - Bill Clinton [press conference, April 30, 1998]
Communism is dead, socialism (whether democratic or not) is on the ropes, and while idiosyncratic dictatorships still abound, the one coherent political philosophy closest to what is being done in the name of the "market" and post-liberalism is that of the fascist. In fact, one could fairly describe current American foreign policy as being in no small part aimed at turning incompetent communists into competent fascists, with China the potential jewel in the crown. - Sam Smith
No, I really don't want to know [the truth]. ... Knowing the truth means that you have to tell the truth. - Mike McCurry [White House press secretary]
From every hint that I'm picking up from sources, the report that Independent Counsel Ken Starr will deliver to the House Judiciary Committee is only weeks away. It was scheduled for delivery in May, but was delayed. Ho hum, says Wall Street. What if the report accuses the president of racketeering? Of essentially being a gangster. A well known financial broadcaster once said to me, "I want to be on the floor of the exchange the day they accuse Clinton of racketeering." - John Crudele
For several weeks... Linda [Tripp] was going to Starr's office every day. She was working with them cataloging and transcribing the tapes. They were meticulously going over every line of the tapes. That's where this book thing came from with all this shrieking about the First Amendment. They don't care what she [Lewinsky] reads. These books that Starr went after were mentioned on the tapes. Clearly what they're doing is getting second sourcing for everything that's on the tapes. They're just getting it airtight. - Lucianne Goldberg
The talking points are the click of it.... Monica has always thought, because Bill told her, that after he leaves office Hillary is going to leave him, and she thinks if she saves his Presidency, they're going to be together walking into the sunset.... I understand this as only a 62-year-old woman who has seen it all does. I've written five novels about women. She has a Cosmo girl in her head to this day. - Lucianne Goldberg
I am still confined to prison and was a friend of Jim [McDougal] as long as he was here.... Let me tell you the real story of what happened to this HIGH PROFILE inmate at the Federal Medical Center in Fort Worth, Texas, just before his death. On last Saturday.... at about 6:00 p.m.... Jim was called to the Lieutenant's office. Upon his arrival there, he was immediately handcuffed with his hands behind his back and delivered to the "HOLE". This was to be his punishment for not being able to urinate on demand. The temperature in the "HOLE" is kept at a constant 60 degrees supplying much discomfort to those men who have the misfortune of being thrown in the "HOLE". Jim hated the cold because of the blood thinner medication the Medical Department was requiring him to take. THE "HOLE" IS A VERY COLD PLACE. In the "HOLE" the inmate is free to do what he will, but in my experience, his biggest job is just to keep warm. He receives little or no attention from the Guards except at meal time. Now the "HOLE" is no place to send an older man or a man with a history of heart problems.... Jim lay down because he felt ill. He was flushed and nauseated but still could not urinate on demand. At about 10:20 AM on Sunday morning at Count Time, Jim was found face down on the floor of his cell. He was totally unconscious. Medical Emergency was called and Jim was rushed to the Medical Center from the "HOLE".... Many inmates and others witnessed that Jim appeared to already be dead as he left the prison "HOLE". - Fort Worth federal prison inmate, anonymous at his request
A contractor agreed to pad my monthly construction bill by $2,000.... The contractor put the figure on his invoice as a cost for gravel or culvert work. After I paid the full amount ... the contractor reimbursed me the $2,000. I turned the money over to Henry [Hamilton] to give to Clinton.... Once, after I handed Henry his latest consignment of 20 hundred-dollar bills to relay to the governor's office, he turned the bills over and over in one hand, like a magician.... Henry grinned. `You know,' he said, `Caesar had his Brutus, Charles the First had Cromwell. Clinton could profit from these examples if he crosses us'.... There was never an explicit agreement, just a general understanding.... If I kept up my connections with Clinton, I would never encounter any bureaucratic roadblocks. - Jim McDougal [posthumously, in Arkansas Mischief: The Birth of a Scandal]
The president and the attorney general have authorized surrogates to publicly condemn the independent counsel as incompetent, as a bunch of raving lunatics, affiliated somehow with very partisan right-wing politics, which is very untrue. The statute . . . doesn't seem to have any spokesperson for it. There is a very compelling case to be made for it.... We were not investigating the president. But if Tyson [Foods] did give cash to public officials, then that would be relevant to our investigation.... First of all we had [Rep. Jay] Dickey [(R-Ark.)] running around, saying I'm crazy. . . . Now we have the attorney general allegedly saying I can't investigate anything about Tyson, all right? Now you add those things up and you try and bring witnesses forward. It doesn't work. - Independent counsel Donald C. Smaltz
Well, they [the Independent Counsel investigators] asked me if I ever seen anything
else that was illegal or strange, and the only thing that I said was the times that I
had taken envelopes of money to be delivered to the Governor [Bill Clinton]. And I mean
Smaltz - I remember because he was sitting across from me turned away - he turned
around. It was like his jaw almost fell open.... It was several incidents over several
years.... I probably remember the first one the best, to tell you the truth.... As a
matter of fact, I wasn't even flying the trip; two other pilots were. I don't know who
actually delivered it, but I remember staying out by the airplane waiting for them to
go, and they [were] all looking at it. It was a big joke. It was obviously a lot of
money in the envelope.... the pilots who were taking it down had been told that this
was a package for Governor Clinton. Absolutely.... Like I said, again, we would hold it
up under direct sunlight and you could see, if you pressed against the paper, you could
see the hundred dollar bills in there.... - Joe Henrickson [former private pilot for
Tyson Foods]
Like many others.... I've become something of an evangelist on Y2K and run into a brick wall among most people. I tried to talk to my own wife about it last night, using Robert Samuelson's apologia in Wednesday's (5.6.98) Washington Post as a starting point, and her major comment was, "Don't tell me this. I don't want to be depressed." After listening to me for a few minutes, her next comment was "But they'll fix it, won't they?" Denial is still running strong and true among most people, and I think it will continue right up until it affects them personally -- the lights go out or their bank closes or the train that carries their bread flour doesn't arrive because the computerized rail switching system won't work. I'm trying to take an optimistic stance -- a catastrophe named is a catastrophe avoided and all that -- but I still think there will be serious, if temporary, disruptions come 00. Nobody wants to hear that, though, much less any concerns about economic problems. - J.D. Clark
When the subject came up or when I brought it up with friends, family and coworkers, I ran into the same spectrum of reactions. A few responded constructively while most, unfortunately, faded the subject. You see, I live in sophisticated, well-off, liberal, Hi-tech Massachusetts and the level of complacency and arrogance is pretty high - at least in eastern Massachusetts around Boston. I am a data communications technician and have a few computer languages under my belt as well. I work in an I.S. department where they feel as long as they successfully implement S.A.P. software, track down all vulnerable embedded code and root out all legacy executable files (they have just started looking into the embedded code and executables!) everything will be just fine. When, at a meeting, I asked how we would enforce Year-2000 compliance with suppliers and vendors, the manager had no ready answer. I am not going to continue to nag those I have already apprised of this situation. It is like talking to a brick wall. It is so sad, but that is human nature. - John D. McClure
When I was a child we lived in Hawaii at Hickam Field. On December 7, 1941 planes swarmed over our house for over an hour as bombs fell in the runway and giant towers of black smoke rose from Pearl Harbor a mile or so away. My father, a very intelligent civil engineer, stood and watched with his young son, and marveled at how realistic was the airshow he was watching. His mind just refused to accept the reality of what he was viewing. I honestly feel we are seeing the same syndrome here [with Y2K]. People just are not going to believe this can happen until a bomb falls right on top of them. - Ron Kuhnel
My grandmother was a German Jew who came to this country in '37. Living at that time, anyone with a brain could see what was happening with the Nazis and Hitler, and the deadly threat posed to Jews and others. But virtually everyone ignored the problem. Just lived for the day, lived in denial, until one day doom descended on them. And then, of course, it was too late. We're no different. It will always be a small minority who recognize and plan insurance for events of this type. - Jennifer Jocanter
I have a wife and two grown sons. For the past year they have politely listened to my ravings on y2k and I thought they were quietly planning to have me certified and committed. It came to be kind of a joke in the family. All of a sudden, one boy says he does not want to go back to school, and the other says he will go AWOL from the military upon being ordered to mobilize for any domestic action. What the hell do I do now? The ball has been placed squarely in my court. Do I have the strength of my convictions? Do I allow them to ruin their lives? Do I encourage them? I found myself telling them to "wait and see" That mobilization might only mean directing traffic, or controlling looters for a while. That school might only close for one semester. It is a lot easier to plan for yourself and your dependents than it is for other people. Moses led his people from bondage, not from good paying jobs and bright futures. His decision was a snap! Not only that, but his boss gave him a direct order. - Bill Solorzano
What we've noticed is that the longer someone works on the Year 2000 problem and the more involved they get and the more research they do, the more concerned they become. - Bruce Webster [chair, Washington, DC Year 2000 Group]
What we do know is that every company, every government agency, and every organization that has looked into the problem has found that it is more complicated, more serious, and more costly than originally estimated. - William E. Kennard [Federal Communications Commission chairman]
As with so many other things in life, the first step is usually the hardest. For me, it occurred at the beginning of last summer, when I began working on our "Time Bomb 2000" book; it dawned on me that if I believed what I was writing about, and if I was serious, I should acquire a stockpile of emergency food. It wasn't the cost that made me hesitate, but rather the psychological commitment and the realization that friends, neighbors, inferiors, superiors, etc, might well label me as a kook. But having made the first commitment (a three year supply of food for four people), the second step was a little easier. And the third step was a little easier... I still have moments of hesitation, because there are still some pretty big decisions to make (e.g., do I really want to leave my IRA/Keogh funds locked up in such a way that they could become impossible to liquidate as we move into 1999?). But one thing has made all of it easier: the noise level about Y2K has been steadily increasing, and there have been more and more "respectable" people and media articles suggesting that maybe, possibly, this stuff really could be serious. Last week, my mother told me that one of our relatives commented to her, "Maybe Ed isn't such a kook after all..." - Ed Yourdon
Here's what worries me: The Y2K problem turns out to be manageable. There are lots of little glitches, but power stays up, transportation is OK, the phones work. People work around the problems using good old human relationships, keeping some paper records, calling suppliers directly. They get by. But - there's so much fear about Y2K in late 1999 that people panic. They pull their money out of banks and out of the stock market. The result - what would have been a manageable problem becomes a terrible economic crisis. Banks fail, markets crash. Not because of the Y2K bug, but because of FEAR of the Y2K bug. If this happens, the Yourdons are going to have a lot more to feel bad about than a bit of embarrassment when their predictions don't come true. If you yell FIRE in a crowded theater because you imagine the smell of smoke, and hundreds of people are killed in the panic, you've got blood on your hands. - Pat Smith
There is no indication at this time that there will be major disruptions for the American people. - John Koskinen [federal Y2K czar, June 2, 1998]
Would we do better if I stood up tomorrow and said this is a national crisis? - John Koskinen
I know that some of our top policy makers in charge of the government's Y2K efforts are minimizing the risks of significant Y2K disruptions to avoid panicking the public. These officials know that a great deal is at risk, and they know that some vitally important computer systems will probably fail in 2000. I think they are wrong not to share their concerns with the public. I doubt that the public will panic a year and a half before Y2K hits. They will be alarmed. They will demand that the government and businesses work harder and spend more to minimize the impact of Y2K on our lives. Alarm now is far better than panic in a year and a half. If alarm now yields lots of information that there is nothing to worry about, then there won't be any panic at all. If an alarmed public discovers that Y2K will have a major impact, then they will prepare for it and reduce the magnitude of any panic reaction. By keeping silent on the potential deep disruptive impact that Y2K may have on the public, government officials are increasing the odds of a panic reaction.... - Ed Yardeni
When the Government mouthpieces come out and say that they are on track, they are lying. They are not merely looking at the same data and coming to a different conclusion, honestly. They are lying. They are lying through their respective teeth.... The only thing that they are trying to do is prevent panic, which is hysterically funny, because the effective end result will be just the opposite. If they told the truth now and people had time to prepare, Jan. 1, 2000 would be a lot easier to get through. But by lying their ass*s off now, they are going to prevent effective preparation, touching off far worse panic by an ill-prepared public. If they spoke the truth now, there would be some degree of panic, yes. But, the infrastructure would be intact. It could be managed. These people in government are not serving the people. They are serving themselves. They have an obligation to tell the truth, the whole truth and nothing but the truth to the American people, not follow some misguided bureaucratic policy of obfuscation that will result in the death of millions. - Paul Milne
Overall, the Federal Government earned an 'F.' Underlying this dismal grade is a disturbing slow-down in the Government's rate of progress. For the quarter ending February 15, the Government brought mission-critical systems into compliance at a rate of 9.4 percent; for the quarter that ended May 15, the rate of progress slowed to 7.9 percent. This would be discouraging in any context. Less than a year before the March 1999 deadline for Y2K repairs, a reduction in productivity is deeply troubling.... The Department of Defense earned a 'D' and is still not on track to complete Y2K compliance efforts until two years after the date change. "The Department of Transportation merited an 'F.' This grade includes the Federal Aviation Administration, which provides crucial services to the flying public. Without dramatic improvements, the nation's air traffic could face serious disruptions for an extended period after December 31, 1999. The Department of Health and Human Services also earned an 'F.' The Medicare program, among others, depends on the smooth functioning of its computer systems.... SSA's outstanding performance may be for naught: Social Security checks are actually issued by the Treasury Department's Financial Management Service (FMS). This is a potential bottleneck of dramatic proportions. The Treasury Department earned a 'C' this quarter, held back by a dismal performance by FMS.... With January 1, 2000 a year and a half away, we must not panic. - Stephen Horn (R-CA) [June 2, 1998]
As the tax laws get more complex, each new change is like putting a patch on an inner tube. Now we are at the point where we are patching the patches.... I believe that as different citizens discover there is no way they can be sure to comply with an arbitrary and capricious law, they'll begin to ignore it. The most affluent will look for more hospitable places to live. Those who won't or can't leave the country and don't want to risk jail time by engaging in overt evasion will simply go on strike. They will quit working or they won't work as hard. More and more economic activity will move into the underground economy.... It seems to me that we are well on our way toward a breakdown of the U.S. tax system. I can't predict when a massive breakup will occur, but I suspect that January 1, 2000 is a likely time.... the IRS is the most vulnerable to this problem. They have hundreds of absolutely huge programs that are based on old design concepts. They still have vast numbers of old computers that simply don't have the memory capacity to run the programs if the programs are fixed. If the IRS were to implement a massive upgrade from their old computers to the newer ones, they would still have an impossible task of converting all of those old programs into the kind of programs that will run on the newer machines. The critical issue is a shortage of the kind of programmers who have in-depth experience with those old programming languages, many of which are no longer in use except for those older programs. I could go on about this at great length, but I'll just say that ice cream will freeze in hell if the IRS fixes this problem in 27 months.... If you think the IRS computers are screwed up now, it's a picnic compared to what we will have in January, 2000 and for some time afterward.... I can only speculate, but the range of choices is from the extreme of a financial Armageddon to a few years of enormous confusion and constant problems between taxpayers and tax collectors. Good will and voluntary compliance with a fair and sane tax system isn't going to be an option, as far as I can tell. - Vernon K. Jacobs
Once, we had a country (USA) that had an appreciation of what liberty meant. No one knows what it means anymore. The government has run amok. It has become the EXACT opposite of everything that it once stood for. THE EXACT OPPOSITE. It became that way because the people themselves forgot..... Do I want the perversion that call itself the 'government' of the US to be dismantled? Yes. Peacefully? Yes. Will that ever happen? No. Will Y2K dismantle it? I sure hope so. After it happens, Washington DC should be buried in salt so that nothing can ever grow there again. - Paul Milne
Put these dates on your 1999 calendar: April 1st, New York State rolls over to fiscal year 2000, the results will be on the evening news. June 30th, lots of other state governments roll over to fiscal 2000, they will be on the evening news. August 22nd, GPS satellites roll over to week "zero", any non-compliant GPS receivers will give unreliable information, and unprepared banks that use GPS time signals will have some surprises, also on the evening news. Sept. 9th, or "9999" which could mean lots of things to mainframe computers except Sept. 9th, 1999. By October 30th, when the federal government rolls over to fiscal 2000 we will probably see Bill and Al invoking all kinds of executive orders to deal with this "unforseen" national emergency. Yes, before 01-01-00 the masses will understand and fear the Year 00 problem, and with good reason. Their cry will be: "Why didn't somebody warn us last year"? - Douglas V. Dorsey
The timing of the Euro is one of the worst public policy decisions in human history because it pits the world's second largest software project (the Euro) against the world's largest software project (the year 2000).... the whole idea of trying to accomplish both of these on the approximately the same schedule is going to cause major economic problems.... The timing of the Euro is going to teach politicians a very painful lesson: they are no longer in control of many national events. In the pre computer era when political directives were implemented by human beings, politicians could set arbitrary dates and expect to have their decrees implemented more or less when they wished. In the computer era, political decisions which trigger massive software updates can no longer be scheduled using arbitrary end points determined by political processes, treaties, or government decrees.... Thus the Euro will not be implemented as planned no matter what politicians say or think, because the necessary software updates will not be ready in time. - Capers Jones
We won't be seeing a miserable New Year 2000.... Despite what others say, Japan has the basics under control.... The problem lies more in small and medium-sized companies, whose delay in Y2K compliance won't have an immediate global impact, but will nevertheless affect businesses of major companies. - Masanori Yoshida [of the Information Processing Promotion Division at the Japanese trade ministry]
Y2K is a discontinuity in technology. The really odd thing about it is, this is one time that the religious who believe in millennium-esque apocalyptic disasters are correct.... I've surveyed all the experts I personally know. These are people with more than 20 years on large complex systems (programmers, system architects, systems programmers, real experts, not narrow specialists in COBOL reports only); to qualify for this group, they also need an understanding of the theoretical mathematical underpinnings of Computer Science, set theory, combinatorics, state engines, graph theory, predicate calculus. The 90% consensus of this group is, this is a hard problem. These are careful thinkers with decades of experience on large systems, and academics.... Similarly, the phrase, "this is not a technical problem, it is a management problem" is misunderstood. This doesn't mean that the solution is to write mission statements and hold long boring meetings, which is what some people are reporting as progress. The management problem is to select the 10-20% of the systems without which people or the organization dies, allocate 150% of the resources required to fix those systems, and work on the problem, focus on getting the job done, concentrate on the goal to the exclusion of all else. Do what it takes to fix and test the systems. This is clearly not what is happening. Instead, we have press releases that claim that the problem was solved because, "we have a schedule" or "we have a plan". Give me a break. - Cory Hamasaki
I am certain that the large-enterprise systems cannot be fixed in the time left. This is my area of expertise. I'm not guessing about this or basing my statement on something I read in a pop-biz magazine or a software engineering journal. I build complex systems for a living. I've done this for almost thirty years and have focused on technology and technical management. I know that the remediation work is going badly, I'm wired into the DC-area superprogrammer grapevine; in the loop in a big way. The systems will unravel. - Cory Hamasaki
I'm a programmer analyst who did the original Y2K assessment for a mid-sized insurance company in Overland Park in 1996, and I eat lunch daily with a bunch of programmers who are scared to death of the problem.... We are convinced, almost to a man, that things are far worse than the happy-faced press releases are saying. - Bill Hoyt
The.... overwhelming majority of the [software professional] respondents [to the DC Y2K Group's survey] believe that the United States will experience a significant economic impact from the Year 2000 issue.... 84% believe that it will trigger at least a 20%+ drop in the stock market.... Two-thirds (66%) believe that it will cause at least an economic slowdown, a rise in unemployment, and some isolated social incidents.... Over half (56%) believe that it will at the least result in a mild recession, isolated infrastructure and supply problems, and some runs on banks.... One-third (34%) believe that it will at the least result in a strong recession, local social disruptions, and many business bankruptcies.... One-fourth (26%) believe that in additional to all the above, the Y2K problem will at least result in political crises within the United States, regional supply and infrastructure disruptions, and regional social disruptions.... One-tenth (10%) believe at least that the United States will suffer another depression (or worse), that financial markets will collapse, that the national infrastructure will be crippled, and that martial law will be declared in some local areas. - Bruce F. Webster
17 years in software development, watching large projects fail over and over, seeing that people wait until the absolute last minute to admit that deadlines will not be met, makes it obvious to me that many if not most Y2K projects will go the same way. What really amazes me isn't that my family and friends won't take it seriously, but that the people I work with are not in the same state of panic that I am. Everything in our collective experience indicates catastrophe, yet I have not been able to find a single person who is losing sleep over this besides myself. I have no explanation for this. - Deborah Barr
And what are the chances that this technological apocalypse will actually take place and send us back to the age of the slide rule and the abacus? Oh, about the same as the odds that an asteroid from space will hit Godzilla and save New York from destruction. - Bill Schadewald [Houston Business Journal editor]
The 12th Annual Government Technology Conference: I found that no one -- speakers or listeners -- was dismissing the seriousness of Y2K as hype or scaremongering. But, most of the speakers were more optimistic than their audiences. I spoke to a couple dozen attendees. All were sufficiently disturbed at the Y2K prospects to say that they would not be coming in to work on Saturday, January 1, 2000, because they planned to be far out of town. - Victor Porlier
It is patently clear to all but the self-deceived that the US government has not a prayer of making it. Not a prayer. Neither does the business community have a prayer of making it either. At first they said it was a technical problem and then a business problem, but actually it is neither. It is an exercise in human nature. It is pure unadulterated human nature to respond to Y2k as the masses have. Not enough will get on the stick in time for any part of Y2K, neither in remediation nor preparedness for the consequences. The momentum is turning. Realization of the magnitude of the failure is dawning. But it will still be too late for most. It's human nature. Human nature alone. - Paul Milne
The problem with y2k now is that it has been seized by the paranoid fringe and made to be the latest conspiracy theory. Funny how those who predict the breakdown of civilization as we know it are secretly happy that they will be ready in their rural redoubts with M-16s to fend off the hordes who are starving to death due to food distribution system breakdowns. Of course, Clinton is to blame for it all. I expect the hue and cry to reach greater and greater intensity as the date nears and it probably will have an impact on the market and create some financial panics, but hopefully all those with their assets in gold and rare coins will find they are not as valuable as they thought when the 2000 timebomb is defused or proves to be a dud. Then I want to watch them return to the still-functioning cities to try to get their jobs back. - Andrew Dungan
I'm the electronic engineering manager at a company that manufactures hydraulic valves and embedded electronic control systems. My own expertise is in software development; I have written a lot of code (all of it Y2K compliant, I'm happy to say).... I know firsthand just how difficult it is to work on somebody else's poorly documented, badly written, ancient, code -- especially when you have management breathing down your neck and screaming that you better finish on time. It's an experience not unlike being crushed to death.... I never get my group's software projects in on time. I suppose you could say that makes me a bad manager, but the industry statistics show that it simply makes me normal. The idea that all of these government agencies, banks, businesses, etc. are suddenly going to get brilliant and finish their work on time is ridiculous. They never have before; why should we believe they will now?.... You always, always, always put in a great number of bugs when you try to "fix" software. I have worked on programs that were so convoluted that I just had to look at them funny and they would break down. Any change I made, no matter how seemingly small or innocent would set up a wave of bugs that themselves needed to be fixed. So unless you've spent a LONG time understanding exactly what the program does and then make your fixes very carefully, you will have a fallout of bugs that you introduced. This leads to a round of testing, then a round of fixing, then another round of testing, ad nauseam. There is simply not time for this between now and 2000. - David Palm
I can't believe people are yapping about "investment portfolios" at a time like this. I am so damn sick of the Yuppie greed in this country. Pave a park and put up a parking lot....or how about another shopping mall? I don't even think a Yuppie would know what gold is! Plastic is about the only thing they recognize. Thank God I was raised in a family that grew our own food and knows how to survive off the land. Good luck with your "portfolio" when the grocery stores are empty. - Annie Gaff
As I watch the unfolding of the end of the [stock market] mania I have come to the conclusion that the first wave of negative mood will coalesce around the Y2K problem. It will enhance the feelings of fear that are rampant under the surface. I believe that it will be blamed for the depression that is coming. But it is clear to me that the flood change in social mood will drive the depression, not Y2K. Y2K is merely the convenient "seed crystal" around which the fear will crystallize. - Greg Wolff
One of the most disturbing things about this whole Asian crisis is the way the mainstream media has attempted to do spin control. The same way they ignored the Savings and Loan crisis until it blew up after the 1988 election. 18 months from now, when both the Asian crisis and the Year 2K "bug" have swamped the US economy, people will want to know why they weren't told the truth. - Doug McIntosh
There is a big difference between Y2K causing a major snafu (billing problems, scheduling, etc.) and an apocalypse. Yourdon predicted a similar apocalypse with the American Programmer and he couldn't have been more wrong. He is simply exploiting and playing on people's fears in order to sell books.... God, are there not enough disaster scenarios present in the world today (US debt load, nuclear, natural, etc.) that people routinely ignore but Y2K causes you to buy dehydrated food? If we survive Y2K and enter the age of e-commerce I fully expect Ed will write another apocalypse is imminent because of the security failings of our new systems and how they are vulnerable to attack from cyberterrorists. I guess we should just go back to pencil and paper.- Reg Smith
Ed [Yourdon], I promise never to say "nyah, nyah, nyah" or even "I told you so" to you. Ever. Period. You see, I was once thought you were an alarmist reactionary when you wrote in "Decline And Fall Of The American Programmer" that a lot of programming work was going to move off shore to India, especially to places like Bangalore. Guess who I am contracting with to do a large chunk of my new payroll system implementation, and who my company had do a significant part of our mainframe-based Y2K work? InfoSys Technologies out of Bangalore, India. You know what? These people are GOOD, not to mention cheap. I would use them again in a heartbeat. Besides, as I make it further and further through "Time Bomb 2000" I find more and more food for thought. Yes, I'm gonna stick it out in Boston (actually about 30 miles northwest, but that's close enough) and hope for the best. But I'm probably going to have money stashed in the house, more canned goods in the pantry and more firewood piled in the side yard than normal. I might even buy that generator I've been eying since that December, 1996 snowstorm left me in the dark for three days. - Paul Neuhardt
I do distinctly remember a New York Times article of about two months ago concerning companies that were sending their remediation work overseas to India. Apparently there are multiple cases of "corrected" programs being returned with new and illicit back doors added to allow unauthorized entry after the programs were reinstalled. I haven't seen anything more about it since. Wonder what the going price for a back door to the R&D files at Exxon or du Pont would be worth? - J.D. Clark
If the fatal flaw of communism is that no one can assume a gods-eye view of an economy and dictate what it should do, then the fatal flaw in capitalism may be that it encourages short-termism, because if you don't cut corners now someone else will, and you'll then be out of business. It's this short-termism that's caused this problem, and it's an intrinsic part of our system. In this sense, either nobody or everybody is to blame. - Nigel Arnot
After reading through hundreds of corporate Y2K statements, I believe that most of them were either written, or very heavily edited, by lawyers. The corporate attorneys' main job in this case is to protect their companies from lawsuits. Unfortunately, this parochially commendable goal is not in the best interest of the public or even their own companies. I am amazed at the similarity of so many statements. Clearly, corporations have violated the SEC guideline requiring specifics rather than boilerplate. - Ed Yardeni
You cannot discern anything meaningful about the progress of half the top 250 U.S. corporations from those SEC filings. - Steve Hock [Triaxsys CEO]
....at last night's DC Y2K [meeting] I got a lead on someone who worked code on the other end of the freight switch problem. They've been watching the Union Pacific situation and.... They said that rail freight overall will be a mess and have worked up some death projections.... their world-wide death numbers are in the millions.... After hearing the mega-death projection (worldwide), I became very interested. They went on to cite JIT, inventories, long supply lines, starvation, food riots, civil disturbances. - Cory Hamasaki
We got lots of surprises.... Nobody could get out of the plant. The security system absolutely shut down and wouldn't let anybody in or out. And you obviously couldn't have paid people, because the time-clock systems didn't work. - Robert Eaton [Chrysler Chairman, after Chrysler Corp. shut down its Sterling Heights Assembly Plant last year and turned all the plant's clocks to Dec. 31, 1999]
It is an absolute certainty that the accounts-payable and accounts-receivable systems used by my company will catastrophically fail by October '98 due to Y2K issues. Multi year cyclicals have already failed. It is possible that we can fix it. It is possible that we can remediate. But failure is certain if we do not act. Given what I have already looked at for other companies, I am fairly sure that most are in similar situations. Some have only begun to take a real look. I know that several banks are in situations as bad as the one I face. The interbank payment system is thus in trouble. To plan based only on certain knowledge would be shortsighted. Plan, at least partly, on the possible and probable impacts. Take the prudent classic risk management steps that all project planning would suggest is appropriate. DO NOT ASSUME it won't happen if you don't have proof that it will. Pray to God for help and take all prudent action to prepare. Something very bad is about to happen. - Philip G. Wolff
Here is a true story from a Y2k conference in Portland, Oregon held on May 4, 1998: An elderly woman drew $200,000 in cash out of a bank recently and was asked by the bank manager "Why are you drawing out your money?" She said "My daughter is a Y2k programmer specializing in banks and she told me to withdraw all my money". - Del Ball
I saw an ad in the paper from my bank about a meeting for their customers . It was at 8:00 am at the local hotel. I went to see what kind of crap they were going to feed us. I was shocked!!! They had an outside company come in and do a program about what Y2K is all about. Now, they stated that the bank's money was going to be 100% OK.... This was what I had expected them to say ,"we will be fine ", but what I did not expect them to say was that, as for the rest of us out there, and I quote, "there is a real possibility that we could lose between 10 and 50 percent of all business in this county". I looked around the room and I saw the expressions on all of the suits and ties. I almost wanted to laugh. These were the same people who not more than 20 minutes earlier were calling me a doomsayer.... The talk quickly changed to a triage session with lots of people trying to figure what they were going to do next. Real scary, soon the mainstream people will know and if you are not set before then you are surely lost. - Ronald C. Cash
I checked with my bank, they said they JUST appointed an executive to look into it. I checked with my utility and they said ..... just about zip....we are working on it...... Of course, when I tracked down one of their computer techs and talked with him privately I got a real horror story. Quote: "Nobody around here knows how serious this is". - Art Welling
Quite honestly, I think we're no longer at the point of asking whether or not there will be any power disruptions, but we are now forced to ask how severe the disruptions are going to be.... On New Year's Eve 1999, let me suggest three places you don't want to be: in an elevator, in an airplane, or in a hospital. - Christopher Dodd (D-Conn.)
....if a group of Y2K-aware, computer-literate folks like us can't reach a consensus on the threat to utilities, why should we expect the general population to reach a consensus? All of this requires far too much thought and attention; it seems to me that it's much more likely that they'll ignore all of this and focus instead on the titillation-du-jour until (a) 1/1/2000 passes without any problems, or (b) the lights go out.... The situation is far too complex, and we have no historical data to fall back on -- i.e., there's never been anything like Y2K in which a pervasive, ripple-effect kind of failure might (or might not) occur. So, at the end of the day, we're all going to have to make our own personal assessment of the situation.... My plan is based on the assumption that we're going to have serious outages for at least a month, followed by intermittent failures, brownouts, and "dirty" power for several months after that. I may be wrong, and indeed hope that I AM wrong ... but the more I study the situation, the more I think I'm right. If Y2K turns out to be a serious mess, I don't expect to profit from it; I don't even expect that my family will be completely comfortable. But I will have taken what I now consider (with full understanding that my knowledge is incomplete and imperfect) to be the prudent decisions to maintain my family's safety. They won't freeze, and they won't starve, and I hope they won't be subjected to the kind of anarchy that I think will take place in our major cities. - Ed Yourdon
I'm the Network Operations Manager of a regional ISP in one of the three largest metropolitan areas in the U.S.... I can only speak for the area in which I live.... one of our clients is a major electric utility -- in fact, the electric utility that serves the entire northern half of my state. In my job capacity, I got to know the head of IS/IT for the nuclear division and asked him what he thought the chances of the lights going out were. He told me -- off the record, remember -- that their Y2K staff is small, that they don't know how many lines of code they have to fix, and that even if they found them all, it was embedded systems that were the killer. To catch them all before Year 00, they would have to check every single black box in their inventory, including those from half a century or more ago. He absolutely guaranteed me that they wouldn't make it. He didn't know what that would mean in terms of specific power failures, but he didn't deny that there would be failures. Basically, he said they'd find out where the problems were when they broke. - "John Smith" (pseudonym)
I just returned from a Y2K conference sponsored by the Electric Power Research Group.... Of those organizations that had completed significant testing, they were finding failure rates in the 10% range. The good news is that for embedded COMPONENTS, not a single "fatal" failure was found. Zip. Zero. Nada.... the smart field transmitters still measured properly, the digital trend recorders still plotted trends, and the digital meters still displayed correct numbers (except for the date). Nothing at this level just froze up, so far. It is starting to appear that it takes a fairly high level embedded SYSTEM to really screw up and lock up.... Even if 50% of all high level digital systems have a Y2K problem (i.e. one of their many components is not Y2K compliant), it is starting to look like only one in ten will fail so bad as to trip a plant, whether it is a electric plant or a refinery. While the facts are just starting to come in, this seems to mean that most electric plants will only have a few systems that must be fixed before 12/31/99, so that they can still keep on producing power.... If the Y2K problem is going to cause worldwide hardships, it will happen with (most of) the lights on. - Fred Swirbul
If y2k hit tomorrow, there is a 100% chance that the [power] grid would fail. With 18 months to go, we may be able to get this down to 40%. That is what Senator Robert Bennett said in a press release on June 9.... Why am I dismissed as an alarmist, while Sen. Bennett is made the head of the U.S. Senate's Year 2000 committee? Why am I regarded as an apocalyptic, while Sen. Bennett is considered a reliable source? Answer: because I sold my home in the city and now live on a property with its own natural gas wells. I can generate my own electrical power. The difference between how the media perceive Bennett and me is simple: I have acted in terms of what he has said. He is holding hearings. I am buying deep cycle batteries. - Gary North
Utilities have failed to be ready and have failed their shareholders.... Utilities should have 60 percent of their testing completed and be putting those systems back into production. If you are not fixing and testing and putting back into production, you are going to be late for the year 2000. - Lou Marcoccia [a consultant on year 2000 issues]
I'm an IT professional. I have known for some time the ramifications of the Y2K problem. Recently, a friend (his brother is working on a solution of the [power] grid problem as part of an IBM team) told me to start stocking food, fuel, and ammo. - Tom Flook
The state of Year 2000 readiness of the utility industry is largely unknown - James Hoecker [Federal Energy Regulatory Commission chair]
Year 2000 poses the threat that common mode failures...or the coincident loss of multiple facilities could result in stressing the electric system to the point of a cascading outage over a large area.... I must stress this possibility is extremely low, but conceivable. - Michehl Gent [president, North American Electric Reliability Council]
If the power grid goes down because of connections in the computers or because of embedded chips in certain power plants that shut those power plants down because of bad software somewhere, then it is all over.... It doesn't matter if every computer in the country is Y2K compliant if you can't plug it into something.... I had anticipated that I would be able to provide a positive report on the Year 2000 status of these public utilities.... Instead, based on the results of this survey [of 10 of the nation's largest electric, oil and gas utilities], I am genuinely concerned about the very real prospects of power shortages as a consequence of the millennial date change. - Robert Bennett (R-Utah)
The thing I find scary is that a lot of the utility companies that are working on year 2000 are working on their mainframe systems -- they want to make sure their billing systems are OK -- and they haven't thought about their embedded systems. It really is very frightening. I've started getting e-mail correspondence from some Deep Throat style informants about a couple of the bigger telephone companies that are way far behind. - Ed Yourdon
I am a computer scientist. Previously, I was the Senior Programmer Analyst at The Children's Hospital in Denver, CO (5 years), Providence General Medical Center (Everett, WA), and most recently Senior Programmer Analyst at BHP Building Products, USA.... My experience, understanding, and observation of the applications and situations in the health care industry has led me to the understanding that A LOT of people will be... to be blunt... dying. Anyone with any knowledge about epidemiology knows that the main reason you treat 'social' diseases (like influenza) with antibiotics is NOT to make you feel better. Rather, it is in the social concern of stopping the disease from spreading to epidemic proportions.... If a community, city or society's health care delivery is compromised, it implies that fewer and fewer people are being treated adequately. At some point, you reach a threshold where the disease spreads faster than your efforts to stop it. Plain and simple. Given all of the issues surrounding Y2K (embedded systems, power failure, etc), my technical understanding of Hospital Information Systems, and my understanding of the politics within the health care industry, there is absolutely no doubt in my mind that that threshold will be compromised. From my view, disease will run rampant. We speak of social unrest and violence as a main concern. But let me be the first to suggest to you that disease will be the number one killer by far if Y2K is not addressed adequately. And quite frankly, I believe we are too late to address it now. I have a friend who works for the city (sewage). With all the talk about power outages, I asked him "how does sewage get from my house to the treatment plants?" I thought... I hoped... it was a gravity feed system. WRONG. Wishful thinking. Think pumps instead. Think electricity. Think about power failures again. Just three weeks without power. The sewage lines are backed up. You cannot use your toilet. How long can you hold it? An hour? A day? A week?.... This is a serious question, folks. Where will the sewage waste go when the power goes out? ....When the weather warms .... the flies will find numerous and massive breeding grounds. Disease will have an avenue to migrate. We talk about the "outbreaks" of E. coli in our foods today. E. coli is a naturally occurring bacteria in our feces. Think of flies as honey bees... think of us as flowers.... - Kenneth J. Boettger
The facts are that the job is not getting done, whether we like that or not.... The Dilbertization of corporate America assures its deserved demise.... The most critical problem, by far, is the embedded systems problem and its surface has not even been scratched. - Paul Milne
Only in the last year have people begun to understand the magnitude of the number of chips out there that may have difficulties. It's a small percentage of chips. We shipped, give or take a little, 5 billion chips in 1996. Nobody knows for sure, but the estimates are that of the billions of chips out there two to three percent have a date sensitivity. But you know, two percent of 5 billion is 10 million chips. They're all over the place. They're in manufacturing processes, oil refineries, waste treatment plants, power plants. - John Koskinen [Nick's note: Koskinen's math is defective. Experts estimate that there are 25 to 40 billion chips in use, and 1/2% to 2% are date sensitive and will do the wrong thing in 2000. That's between 125 million and 800 million faulty chips.]
Well folks, I've done it. I am a software engineer by trade, living in a major metropolitan area. Yesterday I quit the best job I've ever had to take a less-than-career enhancing position in a more rural part of the country. We sold our house; we're out of debt. We're out of the stock market and into at least slightly more crash-proof investments (if there is such a thing). Now, to find a country spot to develop into a mini-farm in the time remaining.... I am the last person on earth many would have expected this from; I'm your classic "trustworthy guy". I have no doubt that many of my colleagues think I have flipped. But I have taken the action I believe is necessary in the face of a threat to my family. I can live with the consequences of my actions. I sleep much, much better these nights. - Franklin Journier
The most prepared element of society is the legal profession.... They are massing the forces at the border. - Brian O'Hara [president and chief executive of Exel Ltd.]
We know the date, we know the reasons for the failures, we know that with 571 days left, the systems cannot be fixed.... We know what it takes to fix these kinds of systems; it's not happening, the systems will unravel. This is a 100%, bank on it, probability.... fixing these systems will take years, some entities will not rise from the ashes... and the lawyers will tear the rotting flesh from their bones. ....I am not convinced that failures of the computing infrastructure will lead to a widespread civil disturbances. It might, but the good news is that if everyone uses the remaining months of our 7 fat years to prepare for the 7 lean years, we'll get through this. - Cory Hamasaki
Between now and Jan. 1, 2000, the kind of mobilization, like the Manhattan Project will happen.... The only question is are we smart enough to do it sooner rather than later. - Peter de Jager
In the year 2000, every incumbent will be scrambling to evade blame for y2k, and every challenger will be doing his best to pin the failure on the incumbent. The incumbents have remained silent for too long. They will not be able to evade responsibility. Their silence will testify against them. This is why y2k will lead to a total overhaul of politics, along with everything else, all over the world -- the most widespread political housecleaning since the Great Depression. It is time for the "outs" to begin preparing to replace the "ins." The Year 2000 Problem will be THE issue in 2000, all over the world. Today's "ins" will not still be "ins" in 2001. I don't mean just in politics. I mean in every nook and cranny of society. Those who today wield power by means of computers will not be in power in 2001 and beyond. In education, in business, in the media, in religion, in every area of dominance by "the best and the brightest," there will be a great housecleaning. The Establishment will soon be into a long period of forced retirement. Get ready for a wild ride. A great transformation is coming. - Gary North
....if the US monetary system did NOT use fiat currency, NOR fractional reserve
banking, there would ZERO discussion about financial panic, collapse, etc. Y2K is
merely exposing in high relief the flaws in our society. It is simply yelling, "the
emperor has no clothes" very loud and it won't/can't be shut up. - Ken Seger
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Present value: $ 7,216.99
Increase: $- 873.46 [-8.54%]
The performance of this portfolio and its predecessors ("Hedger's Delight", "Present and Future Income", "Crapshooter's Folly") from January 1987 to the present is +1.15%, for a compound annual rate of return of +0.09%. COMMENT on "Phoenix": As mentioned on the Friday June 12 "warmline", I had finally decided that the odds that even the blue chips have finally tipped into the bear market were high enough that it was time to commit more cash to the bearish side. I did this on Monday the 15th (as shown in the portfolio), and immediately after I entered my order the market went into freefall. Not a great execution on my part (mutual funds are bought at the day's close), but the commitment is now made. The Prudent Bear Fund appears to have a beta somewhat greater than 1; that is, it will go up faster than the market averages will go down. Part of the reason for acting this month is in anticipation of holding the shares just beyond January 1, 2000, for the 18-month lower-rate capital-gains holding period as Y2K hits (assuming the tax laws are still relevant then). (Note: cash balance is not up to date.)
B. "Professors' Investment Group (PIG)" - investment club portfolio.
SUMMARY - "PIG":
Original cost: $ 8,075.00
Present value: $ 7,142.10
Increase: $ -932.90 [-11.55%]
COMMENT on "PIG": The PIGs expect to buy 50 shares of Genzyme (GENZ) at 22 or better. The PIGs' Web page is at
http://www.assumption.edu/HTML/Faculty/Kantar/WPigs.html
C. Fidelity IRA - real portfolio, includes commissions:
SUMMARY - IRA:
Original (1983-86) cost: $ 8,326.19
Present value: $13,130.39
Increase: $ 4,804.20 [57.70%]
The performance of this portfolio (including its predecessors) from January 1, 1987 to the present is +19.72%, for a compound annual rate of return of 1.59%.
D. CREF Pension plan; I switch between indexed stock/bond/money funds:
Date Sold Bought
13Mar92 stock @ 56.65 MM @ 13.41
29Apr92 MM @ 13.48 bond @ 31.19
19Jun92 bond @ 32.14 MM @ 13.55
29Jun92 MM @ 13.57 stock @ 56.74
24Jul92 stock @ 56.76 MM @ 13.61
29Oct92 MM @ 13.72 stock @ 58.61
23Dec92 stock @ 61.48 MM @ 13.78
16Jan95 MM @ 14.83 equity-index @ 26.44
20Jan95 eq-index @ 26.19 MM @ 14.84
30Oct97 MM@ 17.24 bond@47.56 (27.17%)
30Oct97 MM@ 17.24 i-i bond@26.12 (27.17%)
11Feb98 bond@ 48.84 MM@17.52 (27.17%)
11Feb98 I-I bond@ 26.23 MM@17.52(27.17%)
16Jun98 MM@ 17.84 TIAA Traditional (45.87%)
Values, 18Jun98: stock, 154.95; MM, 17.84; bond, 49.94; inflation-indexed bond, 26.57; TIAA current yield in SRA, 6.25%
Gain, 1988: 18.91%; 1989: 14.48%; 1990: 8.28%; 1991: 27.93%; 1992: 10.20%; 1993: 3.08%; 1994: 4.07%; 1995: 4.80%; 1996: 5.28%
Gain, January 1 through December 31, 1997: 5.38%
Total gain since January 1, 1988 (10 years): 159.20%
Compound annual rate of return: 10.00% (My long-term target: in excess of 15%)
Gain shown excludes the impact of additional monthly cash contributions.
Buying CREF stock on January 1, 1988 and holding it gained 341.21%, for a compound annual rate of return of 16.01%.
On Tuesday June 16, as I advised on the previous Friday's warmline, I switched the
portion of my retirement funds that's in the "supplemental retirement annuity", or SRA,
from the CREF money-market fund to the TIAA traditional annuity. The SRA allows TIAA
money to be switched back to any of the CREF funds at will. (This is not the case in
the RA, where TIAA funds can be switched back to CREF only over a ten-year payout
period.) This strategy was originally suggested to me by a subscriber, who had been
switching back and forth for some time, and he wondered why I didn't take advantage of
the higher TIAA yield (currently 6.25%). Ignorance, I told him; also, I wasn't sure
when TIAA interest was credited (only quarterly?). Plus, for the benefit of subscribers, there is no "unit value" for TIAA, which made it difficult to calculate current
worth.
Finally, what drove me to re-examine the strategy was my search for a way to protect my retirement funds in the Year 2000 recession/depression/collapse/whatever. The CREF funds are strictly market-based - there is no guarantee of return of principal; even the money-market fund could "break the buck" (that is, suffer a decline in unit value) if corporations reneged on their short-term commitments during a failure in the derivatives markets or because of the Y2K chaos. But the TIAA traditional anuity is backed by the creditworthiness of the TIAA-CREF organization, the mother of all insurance companies. It guarantees your principal, plus a 3% annual return; rates of return exceeding 3% are declared semiannually and accrued/paid daily (according to the rep I spoke to over the phone). Believe me, if TIAA/CREF were ever to default on this obligation, a Federal government default would be right on its heels, in which case the status of your retirement funds would be the least of your worries.
Obviously this option is not available to all subscribers; a good substitution (safer, even) would be medium-term U.S. government bonds, or a government-only medium-term bond fund, if either is available in your retirement plan.
E. Current unfilled portfolio good-til-cancelled orders: None.
COMMENT on "Timer's Trend": We're still on the May 6 SELL signal, which appears to have been a very good early-warning indicator for getting out of blue-chip stocks before they fell into the clutches of the bear.
______________________________ TIMER'S TREND _________________________________
Mon 23 Feb 98 . | . # | 8410.20 | . + *
Tue 24 Feb 98 . | #. | 8370.10 | . + *
Wed 25 Feb 98 . | . # | 8457.78 | . + *
Thu 26 Feb 98 . | . # | 8490.67 | . + *
Fri 27 Feb 98 . | . # | 8545.72 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 2 Mar 98 . | . # | 8550.45 | . + *
Tue 3 Mar 98 . | . # | 8584.83 | . + *
Wed 4 Mar 98 . | .# | 8539.24 | . + *
Thu 5 Mar 98 . |# . | 8444.33 |~*~+~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 6 Mar 98 . | . # | 8569.39 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 9 Mar 98 . | .# | 8567.14 | . + *
Tue 10 Mar 98 . | . # | 8643.12 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 11 Mar 98 . | . # | 8675.75 | . + *
Thu 12 Mar 98 . | . # | 8659.56 @| . + *
Fri 13 Mar 98 . | . # | 8602.52 | . + *
Mon 16 Mar 98 . | . # | 8718.85 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 17 Mar 98 . | .# | 8749.99 | . + *
Wed 18 Mar 98 . | . # | 8775.40 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 19 Mar 98 . | . # | 8803.05 | . + *
Fri 20 Mar 98 . | . # | 8906.43 |~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 23 Mar 98 . | . # | 8816.25 |~.~*+~~~~~~~~~~~~~~~~~~~~~~~~
Tue 24 Mar 98 . | . # | 8904.44 | . + *
Wed 25 Mar 98 . | .# | 8872.80 | . + *
Thu 26 Mar 98 . | . # | 8846.89 | . + *
Fri 27 Mar 98 . | # | 8796.08 |~.~*~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 31 Mar 98 . | . # | 8799.81 | . + **
Wed 1 Apr 98 . | . # | 8868.32 | . + *
Thu 2 Apr 98 . | . # | 8986.64 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 3 Apr 98 . | . # | 8983.41 | . + *
Mon 6 Apr 98 . | .# | 9033.23 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 7 Apr 98 . |# . | 8956.50 | . + *
Wed 8 Apr 98 . I # | 8891.48 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~
Thu 9 Apr 98 . | . # | 8994.86 | .+ *
Mon 13 Apr 98 . | # | 9012.30 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 14 Apr 98 . | . # | 9110.20 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 15 Apr 98 . | . # | 9162.27 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 16 Apr 98 . I# . | 9076.57 |~.~+*~~~~~~~~~~~~~~~~~~~~~~~~
Fri 17 Apr 98 . | . # | 9167.50 | . + *
Mon 20 Apr 98 . | .# | 9141.84 | . + *
Tue 21 Apr 98 . | .# | 9184.94 | . + *
Wed 22 Apr 98 . | .# | 9176.72 | .+ *
Thu 23 Apr 98 . I# . | 9143.33 | .+ *
Fri 24 Apr 98 . #I . {| 9064.62 | + *
Mon 27 Apr 98 * . #I . | 8917.64 | +.~~~~~~~~~~~~~~~~~~~~
Tue 28 Apr 98 . #I . | 8898.96 |-.~~*~~~~~~~~~~~~~~~~~~~~~~~
Wed 29 Apr 98 . I # | 8951.52 | - *
Thu 30 Apr 98 . I . # ]| 9063.37 |+~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 1 May 98 . | . # }| 9147.07 |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 4 May 98 . | . # | 9192.66 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 5 May 98 . I #. | 9147.57 | . + *
Wed 6 May 98 . I# . {| 9054.65 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~
Thu 7 May 98 . & . | 8976.68 |~+~~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 8 May 98 . I .# | 9055.15 | + *
Mon 11 May 98 . I #. | 9091.52 |+. *
Tue 12 May 98 . I #. | 9161.77 |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 13 May 98 . I #. | 9211.84 |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 14 May 98 . I# . | 9172.23 | + *
Fri 15 May 98 . #I . | 9096.00 *|+.~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 18 May 98 # I . | 9050.91 |*+.~~~~~~~~~~~~
Tue 19 May 98 . I# . | 9054.65 + . *
Wed 20 May 98 . I# . | 9171.48 |-.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 21 May 98 . & . | 9132.37 |-. *
Fri 22 May 98 .# I . | 9114.44 |-. *
Tue 26 May 98 #. I * | 8963.73 |-.~~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 27 May 98 # . I . | 8936.73 |~.*~~~~~~~~~~~~~~~~~~~~~~~~~
Thu 28 May 98 . & . | 8970.20 | .- *
Fri 29 May 98 . & . | 8899.95 |*.-~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 1 Jun 98 .# I . | 8922.57 | .- *
Tue 2 Jun 98 . #I . | 8872.30 |~-*~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 3 Jun 98 .# I . | 8803.80 |-.~~~~~~~~~~~~~~~~~~~~~~~~~~
Thu 4 Jun 98 . & . | 8870.56 |-. *
Fri 5 Jun 98 . I # | 9037.71 |-.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 8 Jun 98 . I #. | 9069.60 + . *
Tue 9 Jun 98 . & . | 9049.92 + . *
Wed 10 Jun 98 # I . | 8971.70 + . *
Thu 11 Jun 98 # . *I . | 8811.77 |-.~~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 12 Jun 98 #. I . | 8834.94 | .- *
Mon 15 Jun 98 #* . I . | 8627.93 |~.~~-~~~~~~~~~~~~~~~~~~~~~~~
Tue 16 Jun 98 .# I . | 8665.29 | . - *
Wed 17 Jun 98 . I #. | 8829.46 |~.~-~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 18 Jun 98 # I . | 8813.01 | .- *
Fri 19 Jun 98 #. I . | 8712.87 *~.-~~~~~~~~~~~~~~~~~~~~~~~~~
========================================================================
"Timer's Trend" is based on 4% and 10% exponential moving averages of the New York Stock Exchange advance/decline line (that is, the ratio of advancing to declining stocks). There are many symbols shown above, but the ones that count are the braces: {, } = "Timer's Trend" (4% exponential confirmed by 10% exponential) SELL ({) or BUY(}) signal.
NEXT ISSUE - will appear about July 29.
/Nick Chase