The Contrarian's View

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 the full-price section there wasn't much worth buying. There was only book, after book, after book, touting the incredible bull market and why one should buy and hold stocks forever irrespective of the prices paid. Arrgggh! Shades of the late 1920s and 1960s! And some of these books were well beyond their normal shelf cycle (a change in the tax laws a few years ago discourages publishers from carrying year-to-year inventories), yet there they were, still on the shelves, still "marketable", instead of in the discount bins where they belonged.

And what did I find in the discount area? The only "bearish" book in the store - Don Christensen's 1993 Surviving the Coming Mutual Fund Crisis, at $1.49 each. This book, in my opinion, is destined to become a classic. Christensen lays out in great detail the history and nature of financial bubbles, and why the public's current obsession with mutual funds is yet another bubble, and how such bubbles attract crooks, thieves and charlatans, any why it must all end badly. Indeed, events have transpired pretty much as he anticipated, except for his "final scenario" (which is not terribly different from my "final scenario"). But he (like Harry Figgie, Robert Prechter, Larry Burkett, James Stack, me, and many other soothsayers) was too early - he expected the bubble to pop in 1996 or 1997. It didn't, so his worthwhile early warnings became a "remainder" item, while the junk remains on the full-price shelves.

Sad, I thought, as I left the store with a few discounted gardening books, but nothing in the investment arena. Suddenly I realized, Wait a minute! At $1.49 each (plus tax), I can afford to make them available to my subscribers! So I went back to the store, hunted around, and located their last five copies, which I promptly bought.

So here's the deal for paying subscribers only (not the press, not Internet readers): If you would like a copy of Christensen's book at no charge, just send me a note. Here's the catch: If I receive more than five requests, priority will go to the five people who write the best original (that means your own thoughts, not cribbed from somewhere else) material on the current stock market bubble, and what you think the future holds, which I can incorporate into a future issue of The Contrarian's View. So, fire up those word processors, this book can be yours if you exercise brain cells in lieu of spending money. (E-mail entries from paying subscribers are also acceptable, of course.)

 Boy, do we need a bear market! Not so I can (finally) be proved right, nor so I can finally show a profit on short positions established long ago, nor just so I can finally get a cheap entry point back into stocks for my retirement funds. We need a bear market so all of that perpetually-bullish stuff on the bookseller's shelves will be tossed into the discount bins, where I can pick it up for a song and add it to my collection of "predictions" books that ultimately proved to be just so much baloney.

What a mishmosh. The article mixed the usual "nobody knows" what will happen with people making modest preparations with "survivalist nut-cases" (as they're known on the Internet) with "Scary Gary" North (as Time put it) with the apocalyptic visions of various religious sects. When I had finished reading it.... admittedly, it was a quick read, I was at the doctor's, after all.... I wasn't sure what Time's point was, except maybe they thought that anybody who took the problem seriously and was expecting more than a bump in the road in 2000 was a crackpot. (Yeah, $800 billion being spent worldwide to fix a problem that doesn't exist. Must be a lotta crackpots out there.)

Two days later my wife, noticing the Y2K cover and thinking I might be interested, brought home the issue for me to read and was disappointed when I said I'd already seen it. Where? At the doctor's office. Furthermore, it's junk journalism at it's worst. What a shame, when they could have done some serious research and written a really helpful article - but if you want to learn about Y2K, this story won't do it. Just the same, I said, this will give me a chance to go over it more carefully (and pick it apart, I thought to myself).

But before I had a chance to reread the article, our youngest dog got ahold of the issue and chewed it to shreds. A deserved fate - but I missed my chance to do my own analysis. Fortunately, on the Internet others have stepped into the breach - and what follows is one of the best:

Dear Time Magazine:

Your article about Y2K was so predictable it was alarming. I always thought TIME was above this type of journalism. There are consistently two themes that are discernable in this style of Y2K coverage; TIME is just one of many media sources using them.

THEME ONE: The magazine or newspaper articles always start out by talking about a family who "appears" to be normal. You know, wife, kids; regular job; middle America sort of folks. But, as the article goes on, the reader starts to see the signs that this family is just a tad bit "over the edge". For instance, in YOUR article:

You mention stockpiling food, making sure to note that they have cases of "Chop Suey". (The reader makes a note; nuts!)

You mention that the wife is taking a medical class so she can sew a small wound or fill a tooth. (Reader makes a note: nuts!)

You mention the guns; three different kinds. (Reader makes a note; militant nuts!)

You mention that the kids tell their friends on the school bus that the whole school system will fail when America's infrastructure collapses. (The reader makes a note; militant and totally nuts!)

SECOND THEME: Virtually every article quotes Gary North, right wing religious zealot. Why is that? Certainly not because he is the most expert and available source for Y2K information. No! Because he serves YOUR PURPOSE. You even mention how the government is concerned that the religious zealots will cause a panic. It's sad but interesting to note that Gary North, the least qualified expert [in programming, not in history, in which he is degreed - /Nick] is quoted (by far) by the mainstream media more than any other Y2K spokesman.

What is the purpose of your article? Certainly not to disseminate factual information to your readers. There was no effort to do that. Personally, I have printed 10,000 pages of information on Y2K from the Internet; government reports, audits, transcripts, UN meetings, utility 10Q's, corporate disclosures. Why is it that TIME does not access this type of documentation for their articles?

Why? Because TIME is not interested in investigative journalism. TIME is selling the sensationalism of this story and, at the same time, helping the US government keep the truth about the seriousness of Y2K from the public.

You do the reader, your customer, grave disservice here. You and I both know that Y2K is a serious matter; a matter that warrants personal and community preparation. If you do not know this, you have not investigated; and if you haven't properly investigated it; don't write articles about it. There is a saying on the Internet; a Y2K pessimist is just an informed optimist.

The citizens of this country need to start contingency planning NOW. Two, three, six months down the line, they will not have the resources saved they can divert toward preparation. It is not the religious zealots that will cause a panic in this country. It is a government that refuses to tell the people the truth and media that perpetuate the lies.

 -- Meg Davis

I know that most of you are not paying any attention at all to what is going on.

The original estimate of mission-critical systems was 7,800 out of over 75,000 Federal systems.... Then, they skewed their progress by saying that they only had 7,300 mission-critical systems. NOW, they say that they have 60% of all mission-critical systems done. How did they accomplish this 60% percent? Simple, they lowered the number of mission-critical systems once again down to only 6,696 systems.

Look at the FACTS: Actual number of compliant systems:

March 1998: 7800 m-c systems, 27% compliant = 2106
September 1998: 7300 m-c systems, 40% compliant = 2920
January 1999: 6696 m-c systems, 60% compliant = 4017

The figures show that they have remediated 1900 more systems but have over 2000 to go. AND THAT DOES NOT EVEN INCLUDE TESTING. AFTER the coding is done the full-scale integrated testing could begin. But this schedule leaves NO time for such proper tests at all. They would be coding down to the wire with no year for testing, or any proper testing.

If you are paying attention at all you will see the number of mission-critical systems will shrink again down below 6696. They have now dropped the number of mission-critical systems down below 9% of the TOTALITY of Federal Government systems. Less than NINE PERCENT.

"The OMB had set Sept. 30 as the deadline for all agencies to have their mission-critical systems renovated."

 They missed that by a mile. Now the deadline is March.

 You tell me how, in less than 45 days, they do another 2000 systems in order to meet THAT deadline? Yet Koskinen keeps saying they are on track. Of course they are. Keep lowering the bar by reducing what is mission-critical and your performance percentages shoot up. Easy.

....And so you are left to believe that not only will the Federal government run properly on less than a laughable 9% of its systems but you are also supposed to believe that they will function properly without PROPER testing. This does not even include the fact that the operability of the government systems are wholly dependent upon the interfaces with the states, counties and municipal governments. And they are badly off track as a whole. Then there are the government vendors and other dependencies with which the Federal government is saddled.

AND it does not include the fact that the very best of remediation efforts will not come close to disclosing and remediating more than 85% of the defects in the code.

 Any way you slice it, the Federal government will not be able to function in ANY capacity like it now does. In fact, it will be incapacitated.

Geek to Supervisor -- I just don't see how we're going to finish this project on time. I can probably have the first pass of the code remediation done around October of 99, but that doesn't leave much time for testing the complete, integrated system. And I can't guarantee that I won't miss anything. Of course, that's just the critical systems; the rest will have to wait. We should have started working on this in 1996 instead of just reading about it in the industry rags.

Supervisor to Manager -- We're on track to complete the code remediation on our mission-critical systems. There may be a few glitches but nothing we can't handle in short order. Then we can tackle the secondary systems. You remember that article that you read about this in 1996? We probably should have started then, huh?

Manager to V.P. -- Our Y2K preparations are coming along fine. Hey, we've known about this since 1996.

V.P. to PR flak -- Take care of this Y2K thing with the media, will you? The IT folks say it's no problem. They've been working on it since 1996.

P.R. to the public -- The Bizmo Company has been working on its Year 2000 compliance since 1996. We are making excellent progress and are on track to have our internal systems Y2K ready well before the turn of the century.

[The] current rally will last for as much as two years without any major correction. This thing is beautiful. Buy! - Ralph Acampora [This quote is a candidate for the Irving Fisher PHP Award for 1999]

Mark my words, the destruction of capital in the Internet sector is going to be spectacular. Most of these stocks will suffer declines of 90% and many will disappear entirely. With the total market cap of the sector already a couple of hundred billion dollars, its collapse will have a profound effect on the entire stock market and economy. - Marc Sexton

Is there no end to stupidity? Stock markets are NOT the economy. They are gambling casinos. In one very very small sense they are part of the real economy, when a company goes public. Other than that, they are absolutely NO DIFFERENT than a craps table in Vegas. And the whole world is hinged upon this gambling.... The upshot is, though, that the gamblers are on the verge of destroying the world's real economy. - Paul Milne

What's more valuable? The bookseller Amazon.com, which has yet to show a dollar in profit and is dwarfed in several respects by several of its competitors, or the country of Norway? You guessed it. Do the math, folks, and according to the speculators now ruling the casino on Wall Street, the market capitalization of Amazon.com now exceeds that of the entire stock market of Norway.... I don't want to alarm anyone out there, but... RUN!!!!!!! - Bob Harris

....it is the worst kept secret in American economic history that the only thing keeping this country's marvelous economy going is the stock market bubble. It's just like Japan's wonderful economy before the bubble burst a few years back. - John Crudele

It is.... instructive to look back at Japan at the top of its financial and economic boom. Back then, the government was running a significant budget surplus, consumer confidence was high and retail sales were growing at nearly 10%, corporate profits were expanding at double-digit rates, the economy was growing at about 5%, and consumer price inflation was nonexistent. It truly looked like an economic miracle. At the time, few citizens, economists or government officials would have believed that the bubble was soon to pop and that the coming decade would see the Japanese stock market and economy collapse with government deficits reaching today's 8% of GDP. Unfortunately, the great Japanese prosperity of the 1980s proved in hindsight to be but a seductive creation of massive debt, a stock market bubble and massive unproductive investment.... today here at home, the perception is that the economy could not be healthier and, supposedly, stocks are still to be purchased despite the S&P 500 trading at 33 times earnings and the NASDAQ 100 with a P/E of 107. And somehow, the President can claim that the government should now buy stocks to protect the social security system. This is crazy. - David Tice

Americans believe that they are richer than they have ever been, that they are getting richer by the minute and that the good times are here to stay. They are being encouraged by a host of economists, politicians and journalists whose careers depend on the great spending spree continuing until the world gets out of intensive care.... Let me concede it: Mine is a sense of deep foreboding. Our world is sunk in debt. The vast foreign debts of Africa, Russia, Indonesia, Mexico and Brazil will never be repaid. Dollar-denominated debts owed by companies in these countries will never be repaid. Their income and savings have been decimated by these devaluations. To prevent formal defaults, dollars will have to pour out of America in endless streams of foreign aid, IMF loans, private bank loans and U.S. trade deficits all the way to the horizon. Eventually, the dollar will begin to lose its value and sink. We have postponed the day of reckoning; we shall not evade it. - Pat Buchanan

No matter what the puppetmaster central bankers do, they cannot UNDO the ridiculous credit expansion that unleashed a mountain of debt that makes the Himalayas look like a zit. They are, now, no more than Chinese acrobats spinning plates on poles, running back and forth trying to keep too many up all at once. - Paul Milne

The total number of Indonesians now living in poverty has reached 130 million.... Two years ago, the number of the poor.... was only 20 million.... Indonesia's annual inflation rate is running at 80 percent and millions have been put out of work as debt burdened businesses close. - news item

Brazil is in the toilet and the economic effects on the other Latin countries will start kicking in, in a lovely new round of devaluations on this side of the pond. Now we have the 'Latin Flu'. Actually, physiologically speaking, it is more like economic AIDS. Fiat money and fractional reserve banking is like HIV. It does not kill you in itself. It merely allows for 'opportunistic' diseases to kill you, by suppression of your immune system. In this case the opportunistic disease is the desire for virtually unlimited credit expansion and the profitability it seeks. It suppresses good business and banking practices. Then, as if that weren't bad enough, you have a doctor prescribing hot compresses as a cure - that is, Greenspan and other central bankers utilizing specious Keynesian monetary policy. The mere rattles and drums of economic shamans. - Paul Milne

Just give a drunk a shot of tequila and hand him the keys to the car. That is all the IMF does. - Paul Milne

The IMF is the main culprit in the spreading of all this misery. Just more damnable bankers sticking their noses where they do not belong. The underlying financial problems are NEVER addressed. They violate the sovereignty of the countries by forcing them to bow to fiscal severities that the countries NEVER ultimately adhere to, guaranteeing failure in case after case.... They just pour in money and hope to buy their way out of trouble. All they do is exacerbate the situation, in country after country. Fiat currency and fractional reserve banking give rise to wildly inappropriate levels of credit. And inevitably the collapses come. Then the IMF pours good money after bad down a rat hole. - Paul Milne

The economic situation is utterly untenable, Y2K or not.... A hundred times I have said that the single biggest fault is the mountain of debt brought about by easy credit in a world of fiat money and fractional reserve tom-foolery. It can NOT be overcome by laughable Keynesian shifts in monetary policy. That's like trying to put out an oil rig fire with a squirt gun. - Paul Milne

However, to preserve the fiction that Social Security is insurance, federal government interest-bearing bonds.... have been deposited in a so-called trust fund. That is, one branch of the government, the Treasury, has given an interest-bearing IOU to another branch, the Social Security Administration. Each year thereafter, the Treasury gives the Social Security Administration additional IOUs to cover the interest due. The only way that the Treasury can redeem its debt to the Social Security Administration is to borrow the money from the public, run a surplus in its other activities or have the Federal Reserve print the money -- the same alternatives that would be open to it to pay Social Security benefits if there were no trust fund. But the accounting sleight-of-hand of a bogus trust fund is counted on to conceal this fact from a gullible public. - Milton Friedman

What's just has been debated for centuries but let me offer you my definition of social justice: I keep what I earn and you keep what you earn. Do you disagree? Well, then tell me how much of what I earn belongs to you -- and why? - Walter Williams [in All It Takes Is Guts]

Journalism is in a parlous state. Media in general have opted for the slippery slope of entertaining rather than informing. Consumers of news are turned off by an overdose of superficial coverage of a world increasingly hard to comprehend. - Arnaud de Borchgrave [President and CEO of United Press International]

I suppose I could have blown up a few trucks, put bad food back on the deli counter or accused the military of nerve-gassing deserters and kept my journalistic integrity throughout. But I realized early on, it is easier to sleep at night if you can say at every step that you reported the truth as you knew it. - Matt Drudge

Why, listening to [Clinton] you would think that the average American would get lost going to the bathroom if it wasn't for one of his initiatives. - Joseph Farah

Fifteen more minutes and he would have demanded new government departments to oversee the abolition of the common cold and road accidents! - Steve Myers

The impeachment provision of the Constitution was obviously written with rotten eggs such as Bill Clinton in mind, and yet we appear to be unable to apply it in a rational manner. - Edward Zehr

My advice is still: Take the crisis in Washington very seriously, even if the bubble-heads on Wall Street don't. There is a very good chance Bill Clinton will be removed from office but it won't be quick or neat. Certain Senate Republicans already have stuff on the President that could sway enough Democrats to vote Mr. Clinton out of office.... the bombshell information exists, and it doesn't have anything to do with illegitimate children or other women. - John Crudele

I have come to the conclusion that there are probably enough Democratic senators who would refuse to vote to convict Clinton of a high crime or misdemeanor if he committed murder on national television. And that conclusion is scary. They will use any excuse to avoid following the law and objectively evaluating the facts in evidence. Nothing rises to the level of an impeachable offense for men and women who put their party ahead of their country and ahead of the rule of law. - Joseph Farah

Through all of this mess, Bill Clinton's popularity remains incredibly high. Each revelation of another misdeed brings not public condemnation, but more approval. He could be caught buggering a nun on the steps of the Capitol and his approval rating would go up another five points. Just before year's end, the annual Gallup Poll asking Americans who they admired most ended with Clinton as the nation's most admired man and First Lady Hillary Clinton as the most admired woman. Just how the hell does something like this happen? A married man cheats on his wife with a White House intern young enough to be his daughter, lies about it under oath, uses the full power of the White House to obstruct an investigation, sells technology secrets to the communists, puts a "For Sale" sign out in front of the White House and still ends the year as the nation's most admired man. And his wife, a conniving, scheming bitch who goes to any length to protect her husband (along with the power, which is the only thing she really loves) is the most admired woman? Forget what this says about Bill and Hillary Clinton. What does this say about the state of this country? If immoral, crooked politicians are the most admired people in the nation, why should we bother trying to teach our children about what is right or wrong? - Doug Thompson

Of course, all Clinton needed to do was to tell the truth at once, instead of listening to the advice of his double-crossing ex-consultant Dick Morris. It was Morris, immediately after the scandal exploded a year ago, who explained to Clinton that America would never forgive him for his escapades with Monica. I had warned Clinton from the beginning about the bad influence of that man, who cares only about opinion polls, bends with the wind of the moment, and doesn't give a damn about moral and political principles. - Leon Panetta

We got rid of Monica and Jossie not only because of 'extracurricular activities' but because they couldn't do the job. - John Podesta [memo to Evelyn Lieberman, October 16, 1996. Nick's questions: Who's "Jossie", and was her "extracurricular activity" the same as Monica Lewinsky's?]

It has become brutally clear that any former object of [Clinton's] lust who threatens his presidency should be put into the Witness Protection Program. - Nat Hentoff

I know it's his! He's the only white man I slept with that month. - Bobbie Ann Williams [former prostitute and mother of Danny Williams, insisting that Bill Clinton is the father. Mother usually knows best, but not in this case: DNA samples from Danny, matched against the information on Clinton's DNA published in the Starr Report, prove that Bill is not Danny's father, assuming the published description of Clinton's DNA is accurate.]

Several years ago, I met a reporter, I'll call Charlie. He is now investigating for CNBC's Geraldo Rivera -- running down fraudulent activities of "right-wing conspirators." Charlie contacted me last summer when he found my name all over the expense account of one Tom Golden, an investigator for Richard Mellon Scaife. Golden claimed several dinners with me in Houston, Dallas, and Hot Springs and a breakfast in a high-dollar hotel in Dallas. The fact is, I talked with Golden twice on the phone and never met him. While I am offended by Golden's lying and cheating, I am sickened by the amount of money thrown away by Scaife to dig up dirt on Clinton, irrespective of the credibility of his sources. If Linda and I had a fraction of Scaife's money and resources, the "train deaths" [in Mena, Arkansas, of Don Henry and Kevin Ives] would be solved, George Bush and the CIA would be labeled the gun-running/drug-smuggling operators they are, and Bill Clinton would be defending himself against irrefutably impeachable crimes for his participation as the protector of the Mena operation. - Jean Duffey [former Arkansas deputy prosecuting attorney]

I once bought a used car sight unseen for my son over the phone from David at R&D Automotive in Freeport, Maine. I figured I would do far better that way then I would in any used car lot in the Washington metropolitan area. The car made four and two thirds round trips across the United States and was still worth enough that when it finally gave out in Moab, Utah, it paid for the bus and train tickets my second son needed to get to San Francisco. I did not make this decision on religious or philosophical grounds; rather it was -- as subsequent events indicated -- highly pragmatic. I simply took advantage of one of the places left in America where a person's word is still considered worthy bond. Washington, in my time at least, has never been such a place. One of the most distressing aspects of living here has been dealing with people incapable of relationships without intrigue, hidden agendas, and exploitation. The Clinton affair represents these defects at their worst. - Sam Smith

He who is void of virtuous attachments in private life is, or very soon will be, void of all regard for his country. There is seldom an instance of a man guilty of betraying his country, who had not before lost the feeling of moral obligations in his private connections. - Samuel Adams [letter to James Warren, November 4, 1775]

One third of the children today are born into homes without families. - Dan Quayle

You know the one thing that's wrong with this country? Everyone gets a chance to have their fair say. - Bill Clinton [May 29, 1993]

I worked so hard all my life to get us where we are, and that idiot husband of mine has ruined it for us. - Hillary Clinton [to a friend, as reported in the tabloids]

Dick Morris has named Hillary Clinton as the mastermind of Filegate in a candid moment, in the diary of his girlfriend, Sherry Rowlands. We know that Hillary Clinton was in on meetings involving the Travel Office. We know that Linda Tripp saw FBI files of Billy Dale and the Travel Office people. We know through Secret Service logs we have obtained in our case that Craig Livingstone had frequent access to the White House living quarters. We know that the log of FBI files he kept when he took them out of his office has an 18-month gap. We know that, according to Linda Tripp, he was hired by Hillary Clinton. A memo also confirms an interview by FBI agent Sculimbrene of Bernard Nussbaum, where Nussbaum says Livingstone was highly recommended by Hillary. I can go on and on, but you take all of the evidence and put it together and it points directly at Hillary Clinton. - Larry Klayman [president, Judicial Watch]

The People's Republic of China have tried to penetrate America since they became a nation. Sometimes they have been successful, sometimes not. But it has been massive [under the Clinton administration]. Johnny Chung, who was paid by Colonel Liu, penetrated to the oval office. I mean Johnny Chung, Colonel Liu--a senior spy! You can't characterize it in any other way. I mean, she went to the spy academy! She is the daughter of a senior general. She set up a sham corporation called Marswell and gave Chung money to buy her way in to see the president. He [Chung] admits that, he has been found guilty. They have been penetrated to the highest level. - Edward Timperlake [co-author of Year of the Rat: How Bill Clinton Compromised U.S. Security for Chinese Cash]

 Besides wearing out our military, we've spent enough dough battling Saddam since 1990 to give every American a new four-wheel drive Jeep Cherokee, a high- definition TV and a desktop computer. Yet we're still on first base with Saddam totally in control of the pitcher's mound. - Col. David Hackworth

An important conference called the "Year 2000 Systemic Risk in Financial Institutions and Markets: Contingency Plans and Risk Management" took place in Manhattan last week [ third full week of January 1999]. As you might well expect with a title like this, it was not a conference for the faint of heart nor the casually curious about Y2K. Participants - high level Y2K remediators and top managers from banking, securities, and insurance industries - take Y2K very seriously.... The good news is that high levels of confidence were being expressed based on the increasing numbers of the systems now internally compliant or nearing compliance.... The FDIC spokesman said that there were less than 400 smaller and medium-sized banks that were not on schedule. (That's 400 out of 12,000 or less than 4 percent).... The not-so-good news is that there are serious concerns for financial systems as a whole expressed by several speakers: 1) While unitary systems within businesses are in advanced stages of remediation and testing, a great deal remains to be done on testing the inter-operability of all systems within those enterprises - large and small. 2) The tests for inter-operability of systems between financial institutions are still in the design stage. The securities industry's test last year involved 35 organizations. Larger tests are scheduled for the US later this year. How the international electronic data interchanges will be tested is still in the early stages of planning. 3) The fact that many foreign financial institutions, and the power and telecommunications companies upon which they depend are months behind and that they often have little or no funds for Y2K was mentioned several times. 4) The lack of Y2K progress by businesses and governments to whom large loans and investments have been made was a widespread concern. 5) The slowly growing public uncertainty, the possibility of bank runs, and a liquidity crisis is at the forefront of industry concerns. - Victor Porlier

Multiple, parallel national bank runs are a possibility. Your bank president screaming "Nobody panic!" will be drowned out by CNN, CBS, and the radio talk shows. In the recent DeeCee area ice storm, power failed in Montgomery County and ATMs did not dispense cash. Some stores and restaurants attempted to stay open but couldn't take credit cards. We've already had a taste of what happens when electronic money fails. Because of the risks, the government IS printing fifty billion dollars in cash.... Note: I am not predicting the event; I am reporting that the presses are running.... This is about having enough cash for a functional economy if electronic money breaks for ANY reason.... 1/4 inch of ice paralyzed Montgomery County and a half million to a million people shivered in the dark for 2-5 days and all the wishing really, really hard didn't make the ATMs work; sorry sir, we understand that your family is hungry but please step aside so we can seat the people with cash. It's the government's contingency to print the fifty billion in cash. This might be what we call "a clue". - Cory Hamasaki

I'm no Y2K apocalypse freak. I'm going to party my ass off in New Orleans or New York, maybe San Francisco or just Vegas. But I've noticed that virtually everybody I've ever talked to about it says they're withdrawing their cash in about August or September. Most of these people are system administrators. - Chris Gattman

I have first-hand experience that while the systems are in very bad shape, as I read the status reports bubbling up the management structure, the news gets progressively better. In one striking case, the organization's CIO reported to the press that they had "solved the Y2K problem" but in reality, they had only recognized that there was a Y2K problem. That organization is still mulling over how big the problem is. In the last week, they ordered a full court press on remediation for a soon-to-be replaced system. A few days later, they canceled the remediation because the contractor building the replacement system scammed the CIO into thinking that the replacement system was "absolutely going to be ready on time". It's still about money, clueless management, wishing really, really hard, and we're about to pay the price. - Cory Hamasaki

I have over 35 years of project management experience and am currently working on a major Y2K project. I can tell you with a high confidence level that we (the collective we) are not going to make it. I believe the Federal Government is trying their damndest to keep the masses calm, and at the same time, trying to deal with it, on a low key basis. I would love to be a fly on the wall in some of their planning meetings.... In addition to working as a Y2K project management consultant, I've spent over 500 hours researching Y2K. I strongly suggest others do their own research and then make their own conclusions. This issue is way too important to take anybody's opinion as fact. - Bill Watt

A local firm had their deathmarch meeting last week. The geeks were told that the deadline was end of summer and if they wanted Saturday and Sunday off, they could work 11-hour days (paid). The other choice was to work 8-hour days, 7 days a week but they could come in at 10 on Sunday. - Cory Hamasaki

When I think back to the Big Iron days, and look at what has happened since, and where we are now, I am not encouraged. So much is still the same. Sure, the technology has grown, and continues to grow, and at a frenetic pace. But projects are almost invariably late, still, even with reduced functionality. Good people remain hard to find, still, and harder to keep. Code still breaks. Systems still crash. User is still a four-letter word. Programmers still do stupid things like leave documentation for last, that is, when they bother doing it at all. Even when they do, it quickly becomes out of date due to the ever present requirements changes. In many cases, programmers have been asked to do Y2K in addition to whatever they were doing before, as a result of budgetary constraints. So they are doing their "regular" work, and are working longer hours to do Y2K. Many feel overloaded, and they are. Regardless of if it is panic or Y2K itself, failures we will have. Prepare to the maximum extent that you reasonably can.- Rob Michaels

The Y2K problem has been exaggerated by people who don't understand computers, and by computer experts who don't understand how the free market works. - Harry Browne

Suppose, now, that Y2K were to take out a large part of the power grid. There would be no crews braving ice-covered poles alongside the roads. The job of turning the lights back on would fall to a bunch of programmers in a windowless room somewhere, subsisting on pizzas and Jolt cola while searching for the elusive bug, then, trying to exterminate it. There are no satisfying front page newspaper photo-ops here. Worse, no one would be able to predict how long it might take to fix the system. It might happen quickly; however, it might not. Psychologically, this "not knowing" will be different from anything we have experienced in our recent past. For a society used to predictability and to a copious flow of update information, it may be a very unsettling time. - R. H. Wheatley

I can tell you today that if year 2000 hit today, the electric grid that serves South Dakota would go down. It would not stay up, and don't believe anybody that tells you it would. Now, by the year 2000, it might, but today it will go down. Year 2000 doesn't come in the middle of June when the temperature is decent. It's coming on December 31 in the middle of winter. - William Janklow [Governor of South Dakota]

I'm optimistic, but I'm also realistic. I'm not going to say that there won't be any local blackouts. But there won't be any bulk power system blackouts. We won't lose the whole Eastern Seaboard.... There will be isolated pockets throughout the US, but hopefully it's nothing to worry about. We're experienced at putting things back together once something happens. - Tony Elacqua [New York Power Pool engineer]

I talked to a friend who works at a power company in Florida yesterday. He is on the Contingency Planning Committee for y2k at the power company. He said electricity throughout the nation looks pretty good for the year 2000. There will be minor shortages at first, but nothing like week-long or longer electricity disruptions.... The idea that the nuclear plants are to be shut down is not true. The nuclear plants, I'm told, are more y2k compliant than anything. So who do we believe? ....My friend wouldn't deceive me in a matter like this. He was instructed to have all emergency systems ready to be put in place, as if we were hit by a hurricane, just in case. They know there will be problems, but are daily ruling out the doomsday scenario we might envision. - Alan Mostert

Seventeen percent of the utilities which responded to the NERC November [1998] survey estimate they have completed 10% or less of their fixing and testing of critical systems. Sixteen utilities have not done any remediation or testing yet. Are they at the starting line or still trying to get to the field? Just 34%, or one-third, of the utilities have completed more than 50% of critical systems remediation and testing. Two thirds (66%) have completed 50% or less of their remediation for critical systems. - Bonnie Camp

In the Northridge earthquake in CA in 1/94, just after the shaking stopped, I was clinging to a door frame looking out into the 4:30am "night." (Every siren, building alarm, and dog in the city making massive noise, not counting buildings creaking and people screaming.) And then it went totally black, black beyond what a city girl has ever really known. (Psychologically disturbing, to say the least.) And then green and blue lightning lit up the sky -- really bizarre and amazing and frightening. That was the transformers blowing out. Gee, I thought, it knocked out our power. No. It knocked out a lot of power, even a long way away. It knocked out power to most of the West Coast, to 10 states and part of Canada. That was just for one earthquake way over in southern California. I'd like someone to try and convince those people in Canada who lost power that the grid isn't fragile. That transformers overloading and blowing out halfway across the continent can't affect them. - P.J. Gaenir

Our government is not going to get all of its critical systems fixed in time for the century change. The evidence for this is overwhelming.... State and local systems that process Federal benefit checks are not likely to be fully remediated. - Robert Bennett (R-UT) [chairman of the Senate Special Committee on the Year 2000 Technology Problem]

There are two hundred countries, more or less. They depend upon each other economically. The United States is utterly dependent upon the rest of the world, economically. When they go under, so do we. But the pollyannas refuse to address this. They see Russia in isolation. So Russia goes under, so what? Japan is not going to make it. Neither is Germany, France, Italy, Spain, Portugal, Greece, South Africa, Brazil, Mexico, Venezuela, Argentina, Saudi Arabia and on and on and on. But nothing at all will happen to the United States. It will just be a speed bump for us. Just some ATM inconveniences, while the entire world's banking structure collapses. The only effect it will have on us is through ATMs. Out of the other few countries that are 'allegedly doing well', Canada has been preparing for full scale deployment of military personnel, England has recently announced that 405 of their biggest 1000 companies have not even begun assessing their embedded systems and that their biggest companies are NOT getting the job done according to the party line. Australia is a mess. Where are ALL the companies that promised to be engaged in a full year of testing? Slipping schedules, that's where.... 11 months to go. The vast majority of all companies should be in full scale testing, yet not a fraction of that actually are. - Paul Milne

The government of New Brunswick has shifted the Christmas holiday schedule for the province's schools in order to ease fears of computer chaos following the arrival of the new millennium.... The move followed a request from parents and teachers, the department of education said.... Schools will now close for the holidays on Dec. 23, 1999, and reopen Jan. 10, 2000. - news item

 Fears of Y2K panic have prompted the federal government to begin quietly preparing a media strategy designed to assuage public fears of blackouts or other potential infrastructure failures. John Koskinen, assistant to President Clinton and chairman of the White House's Y2K council, has entered into discussions with a public-relations firm.... The firm has recommended conducting awareness surveys and honing a "stay-calm" message based on the results. - Declan McCullagh

Fearing that they might inadvertently cause a flight of capital and destabilize some large developing countries, [Global 2000 Coordinating Group,] a group of international banks, securities companies and insurers is weighing a retreat from plans to publicly rate the readiness of more than 30 nations to avoid major Year 2000 computer disruptions. - news item

[Nick's comments on these last two items: If satisfactory progress were being made on Y2K remediation, it would be necessary only to report the truth to avert public panic. A public-relations campaign to "assuage" the public is felt to be necessary only if the truth is unpleasant. Even so, if successful it virtually guarantees panic as January 1, 2000 approaches and arrives and the public realizes it's been duped.... much the same as the Federal Reserve's efforts to keep the stock-market bubble inflated guarantee that the dénoument, when it finally arrives, will be much more painful than it would have been without the intervention.]

"This means the long-awaited meltdown will arrive mid-to-late February - or possibly sooner, since the Fed's successful reflating of the bubble last fall only deferred the inevitable. Will the Fed try to blow up the balloon again? Of course.... but I think it will come too late in the game, since the Fed's job is to keep the banking system solvent, not investors' expectations in the stratosphere.... and this time, the Fed will fail. The Brazilian deflation changes invest-ors' perceptions about the future.... the seed for a panic.... but does not (yet) threaten world financial stability. Add Brazil, and the rest of Latin America, to the IMF casualty list, and kiss their economies goodbye. And remember.... we're at the end of the line."

Now, I could have written new commentary for this issue, but why bother? My view has not changed much since then. (Rate me A-1 for consistency, if not accuracy.) The technical divergences between the behavior of most stocks and the favored few.... the ones that keep the weighted NASDAQ and S&P averages way up there.... are widening to the point of being ridiculous; this won't last much longer, so I would say that February is shaping up to be a really ugly month (if you're a bull, that is). The situation in Brazil is even messier now, and apparently I'm not on Alan Greenspan's radar screen; so far, he's only compared Internet stock trading to winning.... or more accurately, not winning.... the lottery.

The Fed is still aggressively expanding the money supply (though the pace slowed in January), so there is still a slim chance.... I repeat, a slim chance.... that we could see yet another round of new Dow highs before panic strikes. It's also possible the Fed could directly intervene (again!) when stocks look like they might free-fall, and defer the meltdown one more time. But, for the moment, I'll stick to the original schedule: If January 8 at Dow 9643.32 was the final high, then 6 to 8 weeks out puts us into the last week of February as the most likely time for the meltdown. If the late-in-the-month new highs in the S&P 500 and NASDAQ averages do portend new highs in the Dow in the first few days of February, then the meltdown will more likely arrive in March. (If new Dow highs lie down the road, then we'll reset the clock and start counting anew.) Regardless, it looks like we won't have much longer to wait.

 A. "Phoenix" -real portfolio, begun on October 1, 1995.

SUMMARY - "Phoenix":

             Original cost:         $ 8,090.45
             Present value:         $ 5,946.02
             Increase:              $-2,144.43  [-26.51%]

 COMMENT on "Phoenix": No change from the last issue. (Cash balance is not up to date.)

 B. "Professors' Investment Group (PIG)" - investment club portfolio.

SUMMARY - "PIG":

             Original cost:         $ 8,675.00
             Present value:         $ 8,421.72
             Increase:              $ - 253.28  [-2.92%]

 C. Roth rollover IRA - real portfolio, includes commissions:

SUMMARY - IRA:

             Original (1983-86) cost:  $ 8,326.19
             Present value:            $10,958.79
             Increase:                 $ 2,632.60 [+31.62%]

COMMENT on IRA: There is no change from the last issue.

 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, 23Dec98: stock, 174.42; MM, 18.43; bond, 52.70; inflation-indexed 
bond, 27.35; TIAA current yield in SRA, 5.75%

E. Current unfilled portfolio good-til-cancelled orders: None.

COMMENT on "Timer's Trend": We're still on the SELL signal from January 12. Further new highs in the popular averages are possible.... as is a meltdown with virtually no warning. This is a mania..... watch the "computer warmline".... treat all sell signals with the greatest respect

______________________________  TIMER'S TREND  
_________________________________
Mon 12 Oct 98        .# I  .       | 8001.47  |~.~~-~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 13 Oct 98     #  .  I  .       | 7938.14  | .  -    *
Wed 14 Oct 98        #  I  .       | 7968.78  | . -           *
Thu 15 Oct 98        .  |# .       | 8299.36  |~.-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 16 Oct 98        .  | #.       | 8416.76  |~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 19 Oct 98        .  | #.       | 8466.45  |-.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 20 Oct 98        .  |  #       | 8505.85  |+.                          *
Wed 21 Oct 98        . #|  .      }| 8519.23  |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 22 Oct 98        .  |# .       | 8533.14  |+.                       *
Fri 23 Oct 98        .# |  .       | 8452.29  + .      *
Mon 26 Oct 98        .  |# .       | 8432.21  +~.~~*~~~~~~~~~~~~~~~~~~~~~~~~
Tue 27 Oct 98        .  #  .       | 8366.04  |-.~~~~~~~~~~~~~~~~~~~~~~~~~~     
Wed 28 Oct 98        .  |# .       | 8371.97  + .      *
Thu 29 Oct 98        .  |  #       | 8495.03  +~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 30 Oct 98        .  |  #       | 8592.10  |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon  2 Nov 98        .  |  . #     | 8706.15  |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue  3 Nov 98        .  |  #       | 8706.15  | .+                  *
Wed  4 Nov 98        .  |  .  #    | 8783.14  |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu  5 Nov 98        .  |  .#      | 8915.47  |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri  6 Nov 98        .  |  #       | 8975.46  |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon  9 Nov 98        .  #  .       | 8897.96  | .+   *
Tue 10 Nov 98        .  #  .       | 8863.98  *~+~~~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 11 Nov 98        .  |# .       | 8823.82  |*.~~~~~~~~~~~~~~~~~~~~~~~~~~~
Thu 12 Nov 98        .  |# .       | 8829.74  |+.       *
Fri 13 Nov 98        .  |  #       | 8919.59  |+.                         *
Mon 16 Nov 98        .  |  #       | 9011.25  |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 17 Nov 98        .  | #.       | 8986.28  | +              *
Wed 18 Nov 98        .  | #.       | 9041.11  | +                         *
Thu 19 Nov 98        .  |  #       | 9056.05  | +                            *
Fri 20 Nov 98        .  |  . #     | 9159.55  |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 23 Nov 98        .  |  . #     | 9374.27  |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 24 Nov 98        .  | #.       | 9301.15  | .+    *
Wed 25 Nov 98        .  |  #       | 9314.28  | .+       *
Fri 27 Nov 98        .  |  .#      | 9333.08  | .+           *
Mon 30 Nov 98    *   .  #  .       | 9116.55  |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~
Tue  1 Dec 98        .  |# .       | 9133.54  |+.         *
Wed  2 Dec 98        .  #  .       | 9064.54* |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~
Thu  3 Dec 98     *  . #I  .       |          +.~~~~~~~~~~~~~~~~~~~~
Fri  4 Dec 98        .  |  . #     | 9016.14  +~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon  7 Dec 98        .  |  #       | 9070.47  |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue  8 Dec 98        .  |# .       | 9027.98  |+.           *
Wed  9 Dec 98        .  | #.       | 9009.19  | +       *
Thu 10 Dec 98        .* I  .       | 8841.58  |+.~~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 11 Dec 98        #  I  .      {| 8821.76  +~.~*~~~~~~~~~~~~~~~~~~~~~~~~
Mon 14 Dec 98     #  .  I  . *     | 8695.60  |~-~~~~~~~~~~~~~~~~~~~~~~~~~~
Tue 15 Dec 98        . #I  .       | 8823.30  |~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 16 Dec 98        . #I  .       | 8790.60  | .-
Thu 17 Dec 98        .  I# .       | 8875.82  |~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 18 Dec 98        .  I# .       | 8903.63  | -                        *
Mon 21 Dec 98        .  I  #       | 8988.85  +~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 22 Dec 98        . #I  .       | 9044.46  +~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 23 Dec 98        .  I  .#      | 9202.03  |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 24 Dec 98        .  I  .#      | 9217.99  | +                      *
Mon 28 Dec 98        .  I# .       | 9226.75  | +                       *
Tue 29 Dec 98        .  |  #      }| 9320.98  |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 30 Dec 98        .  | #.       | 9274.64  | +          *
Thu 31 Dec 98        .  |  .  #    | 9181.43  |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon  4 Jan 99        .  |  #       | 9184.27  | .+     *
Tue  5 Jan 99        .  |  . #     | 9311.19  |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed  6 Jan 99        .  |  .   #   | 9544.97  |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu  7 Jan 99        .  |# .       | 9537.76  | . +                *
Fri  8 Jan 99        .  |  .#      | 9643.32  |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 11 Jan 99        .  #  .       | 9619.89  | .+              *
Tue 12 Jan 99        .# I  .      {| 9474.68  |~+~~~~~~~~~~~~~~~~~~~~~~~~~~     
Wed 13 Jan 99      # .  I  .  *    | 9349.56  |-.~~~~~~~~~~~~~~~~~~~~~~~~~~     
Thu 14 Jan 99      # .  I  .       | 9120.93  |~-~~~~~~~~~~~~~~~~~~~~~~~~~~     
Fri 15 Jan 99        .  I  . #     | 9340.55  |~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 19 Jan 99        .  I #.       | 9355.22  |-.                     *
Wed 20 Jan 99        .  I #.       | 9335.91  |-.                 *
Thu 21 Jan 99        .# I  .       | 9264.08  + .    *
Fri 22 Jan 99        #  I  .       | 9120.67  +.~~~~~~~~~~~~
Mon 25 Jan 99        .  &  .       | 9203.32  |-.                     *
Tue 26 Jan 99        .  &  .       | 9234.58  |-.                           *
Wed 27 Jan 99        .# I  .       | 9200.23  | -                    *
Thu 28 Jan 99        .  &  .       | 9281.33  |-.~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 29 Jan 99        .  I# .       | 9358.83  |-.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*

========================================================================

NEXT ISSUE - will appear about February 28.     /Nick Chase