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ARCHIVED  December 3, 1999

Stock market on steady course for Y2K

The possible scenarios are easy to construct:

  • It’s late December, and speculation over the stability of domestic investments with interests overseas leads to a last-minute selling frenzy reminiscent of 1929.
  • Dec. 31, 1999, clicks over to Jan. 1, 2000, ushering in both the new millennium and a glitch in one of the major stock exchange’s tracking systems — the market topples with the investing public’s loss of confidence in its accuracy.
  • It’s early January, and high-tech firms around the world are falling victim to an unforeseen Y2K complication that is propagating like the plague; stock market investors are the first casualties.

    Panic and market distrust would appear to be the safest commodities of the new millennium, but investment consultants and industry experts overwhelmingly report otherwise.

    “I’m telling my clients that Y2K will probably be the biggest bust in history,´ said Richard Barton, president of Personalized Portfolio Management in Loveland. Although he admitted that there may be a few surprises and some problems overseas, Barton believes that the people who are gearing up for a disaster of historic proportions will be sorely disappointed, and in the long run, few investments will be affected at all.

    “I’m telling my clients to stand firm,” he said.

    Barton’s clients will not be the only stock players adventuring into the new year without any major adjustment in their investment schemes.

    Margaret Draper, assistant vice president of corporate communications with the Securities Industry Association in New York, reported that the SIA “did a survey that showed 88 percent of investors are not concerned about the transition.”

    “Basically we’re finding that the majority of investors are not concerned and are not planning to take any special Y2K-related actions,” she said. “The SIA has done everything possible [to prepare for Y2K] and will be at the ready over the weekend to handle whatever problems may occur. But we fully expect it to be business as usual.

    Draper said that the company has tested the whole process of a trade as it goes through clearance and settlement, and the potential for any interruption in the securities-exchange process has been reduced to nil.

    “We’re recommending that if investors have concerns, they should call the investor-relations area of the company,” she added. “If [publicly traded] businesses feel Y2K is going to have a material impact on their company, they have to report that on their balance sheet. A good company is a good company, and any problems related to Y2K typically will be very small and will not be long-term.”

    Kay Copley, a certified financial planner with 18 years of experience and branch manager of LPL Financial Services in Greeley, offered a similar assessment of the Y2K threat and similar advice: “Ride it out,” she said.

    “The crash of 1987, that was the worst thing anyone could think of,” she recalled. “We had a 20 percent drop in two days, but people who stayed the course were back to hull and even above hull after 12 months. The message is, you buy quality, you buy domestic with a decent allocation but not hefty allocation overseas, and you ride it out.”

    Copley noted that the brokerage business has been selling bonds in 2003, 2020 for years.

    “A lot of systems have been Y2K-compliant for a long time because of the maturity dates of paper we deal with,” she said, adding that in terms of which industries might be more vulnerable, the consensus is that industries that are more dependent on computers overseas are ones to watch.

    “They’re not as compliant as we are here, and might be more suspect,” she said. “People want to take a real hard look at companies with reliance on sales in underdeveloped countries.”

    Jim Sprout, president of James Sprout & Associates in Fort Collins, agreed that the biggest danger to investors lies outside the United States.

    “If [my clients] normally have 12 percent of their portfolio invested internationally, I’m suggesting they just do 10 or maybe 8 [percent],” he said. “I’m in a general way advising my clients to have more cash on hand, as high as 20 to 25 percent of their portfolio. I’m advising them to take some profits to get more in cash, shorten maturities in their bond portfolio and reduce their international investments.

    “But most of my clients are not panicking about it,” he stressed. “We’re staying invested, we’re just taking a little out of the market in case there is a correction because of Y2K, but we’re taking it out so we can put it back into the market. And we still have money there — it’s more of a moderate position.”

    Sprout doesn’t see Y2K as a long-term problem, he said, but doesn’t know how severe it will be, either.

    Overall, the message from stock-market specialists is good. Some uncertainties in the market’s immediate future remain, but as all were quick to acknowledge, uncertainty and speculation encapsulate the very essence of the investments marketplace.

    There are no guarantees in the stock market,” Copley concluded. “But in times of chaos and uncertainty, money flows from the weak hand to the strong hand, and that has nothing to do with geography. It has to do with not panicking.”

  • The possible scenarios are easy to construct:

  • It’s late December, and speculation over the stability of domestic investments with interests overseas leads to a last-minute selling frenzy reminiscent of 1929.
  • Dec. 31, 1999, clicks over to Jan. 1, 2000, ushering in both the new millennium and a glitch in one of the major stock exchange’s tracking systems — the market topples with the investing public’s loss of confidence in its accuracy.
  • It’s early January, and high-tech firms around the world are falling victim to an unforeseen Y2K complication that is propagating like the plague; stock market investors are the first casualties.

    Panic and market…

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