IP: TheStreet.com: The Coming Year: Countdown to Y2K's Future

[Dave Farber <farber () cis upenn edu>]

Date: Thu, 7 Jan 1999 21:25:13 -0700
To: farber () cis upenn edu
From: "Spencer E. Ante" <seante () earthlink net>

Hi Dave,

This is my first Y2K article for TheStreet.com. It sets the stage for an
eventful year.

best,
Spencer

http://www.thestreet.com/tech/y2k/584470.html

The Coming Year: Countdown to Y2K's Future

                    By Spencer E. Ante (sante () thestreet com)
                    Staff Reporter
                    1/7/99 5:49 PM ET

 SAN FRANCISCO -- For the year 2000 problem, 1999 promises to be a year of reckoning. Indeed, GartnerGroup predicts 
that more than 90% of Y2K problems will not strike on the signature date of midnight 2000, and many problems will hit 
in 1999. Some of the pointiest heads on Wall Street and in Silicon Valley agree that Y2K is for real, but it's not, as 
some of the more extreme survivalists would have it, TEOTWAWKI (the end of the world as we know it). Despite this lack 
of certainty, investors should monitor these dates, events and data points in 1999 to glean the severity of the problem.

SEC Releases Y2K Disclosures for Money Managers: Mid- to Late January

The SEC already requires publicly traded corporations and broker-dealers to file reports on their year 2000 readiness. 
Now, they've upped the ante again, requiring most money managers to do the same. The reports are designed to identify 
all investment advisers who "pose a significant risk to their client and shareholders." Since the SEC estimates that 
these people manage approximately $15 trillion in assets, including more than $5 trillion in mutual funds, these 
reports should be closely watched by both individual and institutional investors. A Y2K-induced breakdown could 
interfere with the day-to-day management of fund portfolios, delay shareholder transactions and compromise 
record-keeping. The first round of forms that were due on Dec. 7 is slated to go online in mid- to late January. A 
second round of updated forms will hit the Web in July. "One thing you might see is possible enforcement actions 
against firms that don't file the reports," says Robert Plaze, associate director of the SEC's division of investment 
management.

Y2K Systems Integrators Release Earnings Reports: Late January/Early February

The real Y2K action is in tracking the preparedness of corporate America, but some market watchers are trying to make a 
buck off the handful of companies that are providing Y2K solutions. The top pure Y2K plays to watch are IMRglobal 
(IMRS:Nasdaq), Computer Horizons (CHRZ:Nasdaq), Viasoft (VIAS:Nasdaq) and Keane (KEA:AMEX). The danger in betting on 
these companies, of course, is that earnings will dry up after Y2K blows over. But software providers are hoping that 
they'll be able to leverage their Y2K contracts into new businesses such as networking design and integration and 
application development and management. Brian Maimone, a senior analyst with ING Barings Furman Selz, rates IMRS and 
CHRZ a buy, with respective six-month price targets of 35 and 36.

Weiss Releases Y2K Ratings: Late February/Early March

Current government regulations prohibit banks from releasing their federal year 2000 examination ratings. Martin Weiss, 
chairman of Weiss Ratings, a Florida-based financial ratings firm, says the prohibition fans public fears, creating a 
black hole that is often filled with misinformation. Sensing a financial opportunity and a social need, Weiss Ratings 
last year began publishing Y2K ratings for savings associations and insurance companies. The ratings of banks and 
thrift associations are available to the public for $15 per query or $149 for the complete list.

"If companies haven't made adequate progress by the end of the year, then they're in trouble," says Weiss president 
David Lackey, who estimates that 25% to 30% of the banks and insurance companies it rates are publicly traded 
companies. "The survey is designed to assess what has actually been done as opposed to what companies say they are 
going to do." Bank ratings go live in late February, with the insurance ratings to come two weeks later.

FDIC Releases Loan-Loss Reserve Bank Data: End of February

The Federal Financial Institutions Examination Council -- a group that includes representatives from the FDIC, the 
Office of Thrift Supervision and the Federal Reserve Board -- has issued Y2K guidelines requiring federally insured 
banks to create credit blacklists. These blacklists, sometimes referred to as "leper lists," are like a vaccine 
designed to protect savings institutions from unprepared clients, customers and suppliers. Banks are also taking other 
measures to protect themselves from the millennium bug. First Union (FTU:NYSE) bank, the sixth-largest commercial bank 
in the U.S., recently increased its loan-loss reserves, citing the probability of loan defaults due to Y2K.

John McIsaac, president of Market Partners, a Chicago-based risk-management firm, argues that loan-loss reserves are 
one of the most revealing data points of the year 2000 problem. "If the loan-loss reserves went up, then the bank is 
perceiving an increased risk due to Y2K," says McIsaac, who correlates the reserve data with financial ratings and 
other publicly available info. "If the data isn't correlating, then it tells me that the bank doesn't get it."

Congressman Horn Releases Government Report Card: Early March

Rep. Steve Horn (R., Calif.) is a Y2K warrior. As chairman of the House Subcommittee on Government Management, 
Information and Technology, Horn has championed Y2K, transforming an obscure assignment into a high-profile platform 
advocating for Uncle Sam's Y2K preparedness. His cudgel: quarterly Y2K report cards. Horn has been publishing these 
report cards for the past two years, and the news has been less than encouraging. His latest report card, published 
Nov. 23, slapped the government with an overall D, the same grade it earned in the previous quarter. Even Wall Street 
superhero Robert Rubin is behind the Y2K curve: Horn gave Rubin's Treasury department a C. Horn estimates that nearly 
one-third of government's mission-critical systems will not be compliant by March 30, 1999, the deadline established by 
the president.

[...]

U.S. Securities Industry Association's Release of Industrywide Test Results: April 29

Last July, the Securities Industry Association conducted a beta test of Wall Street's computers. And while the test 
came off without any major hitches, it was still a dress rehearsal for more extensive testing that will take place over 
four consecutive Saturdays in March and April. The beta test involved 10,000 trades a day from 28 brokerage firms, all 
the major stock exchanges and the corporations that clear and process trades for them. The industrywide test will 
encompass a larger quantity of firms, including many of the smaller players and Internet stock-trading firms. "We're 
seeing a definite shift in the smaller firms to a higher level of awareness," says Margaret Draper, spokeswoman for the 
SIA. Draper says the $270 billion securities industry doesn't expect Wall Street to encounter any significant problems, 
but concern exists about areas that are beyond its control such as telecommunications, overseas trading and power.

Brainstorm Group Year 2000 Symposium, San Francisco: June 28-30

Run by Greg Rock, the former producer of SPG's Y2K conferences, this series of Y2K symposiums is produced by the 
Brainstorm Group. The conferences bring together many senior-level managers with hands-on experience rooting out the 
millennium bug. The seminars tend to be focused on vertical industry sectors like retail, telecom, power, health care 
and government. The June conference will focus on contingency planning, euphemistically referred to in Y2K circles as 
continuity planning. "We'll have extended workshops on crisis preparation and preparation for small businesses, 
communities and county governments," says William Ulrich, conference co-chairman and president of Tactical Strategy 
Group. There will also be Brainstorm conferences in New Orleans on March 29-31 and in Chicago on Sept. 13-15.

[...]

GPS Rollover Problem: Aug. 21

The Global Positioning Satellite system reaches the end of its built-in calendar at midnight, Greenwich Mean Time, on 
Aug. 22. At that point, the system will roll over and start at the beginning of the calendar, again, operating for 
approximately 20 years (1,024 weeks, to be exact). The rollover has never been tested live before, and the U.S. Coast 
Guard, the government liaison to the civil sector for GPS, says accuracy of navigation may be "severely affected." 
Available for limited civilian use since 1984, GPS technology has become a mission-critical component of the network 
economy, used for such commercial purposes as mapping delivery routes, tracking products and monitoring the whereabouts 
of mobile workers.

But the hell with them! What about our money? Turns out GPS has become a crucial component in securities trading. The 
Nasdaq trading system, for example, relies on a master clock kept in synch by a Connecticut-based satellite dish, which 
allows every Nasdaq trade to receive an official time stamp. Other commercial examples abound: Federal Express 
(FDX:NYSE) has installed GPS units on its 1,600 long-haul trucks and Wal-Mart (WMT:NYSE) has deployed a similar system 
on its 100,000 trucks. Finally, John E. Chance & Associates, a division of Fegro in the Netherlands, moves its floating 
oil rigs using GPS signals.

Wild Card: Sen. Bennett Holds Second Round of Y2K Hearings: Late January-June

A former CEO of Franklin Covey (FC:NYSE), Sen. Robert Bennett (R., Utah) is the Senate's point man on Y2K and perhaps 
its most vocal advocate on the Hill. Last year, he made waves by holding a series of high-profile hearings on Y2K, 
goading the SEC to require Y2K disclosure and stewarding his Year 2000 Information and Readiness Disclosure Act into 
law with blinding speed. This year's second round of hearings -- which will concentrate, like last year, on critical 
sectors such as health care, energy, telecom, transportation, financial services and litigation -- hold blockbuster 
potential. Whereas last year's hearing focused on gathering information, the senator vows to take a tougher stance this 
term, demanding more accountability as the deadline approaches. One explosive possibility: subpoenaing CEOs who stood 
up Bennett's invitation last year to testify. "That is a power that the senator has at his disposal that he may be 
willing to use if he feels CEOs are not forthcoming," says Bob Meyer, spokesperson for Bennett. "You can't rule it out 
for the upcoming year." That's just what Washington needs -- more subpoenas!

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