Y2K CATATROPHE OR BUNCH OF BALONEY ?

- In a speech at the Air Force Information Technology Conference in Nov. 98, Lt. Gen. William Donahue, Air Force director of communications and information, sharply dismissed concerns that Year 2000 data code bugs could have a catastrophic impact on the service's systems and operations. "The concept of Armageddon [due to Year 2000] bugs is a bunch of baloney, the worst possible thing is just not going happen." Donahue said.

- More than 50 percent of technology professionals recently polled by Chief Information Officer magazine said that they would not fly on a commercial airplane on January 01, 2000. Another survey conducted by the Gartner Group found that 38 percent of computer industry executives are thinking about withdrawing their personal assets from banks and investment companies.

- Ed Yourdon, author of the popular 'Time Bomb 2000' book, has actually accelerated plans to move his family from New York City to New Mexico in order to "make damn sure my family isn't there when the clock rolls over to January 1, 2000". He predicted that "a significant percentage of the Year 2000 problems will be serious enough to last for a month."

Given forecasts like these, it would be wise to plan for failure even when you're doing your best to avoid it. The likelihood that Y2K will cause a total economic meltdown is probably small. Prudent steps should be taken however, to prepare for this eventuality. Because the Year 2000 computer crisis has no precedent in human history, the level of uncertainty is very high. No one knows for sure what will happen but the range of possibilities is quite severe.

Just look at a single computer glitch The following news item that involved Smith Barney, the well-known stock brokerage and investment banking firm, was carried on CNN on June 5, 1997. According to CNN, "A computer glitch at Smith Barney overnight briefly put $19 million into each of hundreds of thousands of customer accounts, the brokerage said Thursday morning. ... At some point overnight, ... roughly $19 million appeared in separate entries for each Smith Barney financial management account. The brokerage has 525,000 such accounts." The computer programmers who created this error were making Y2K repairs to a database. The repairs had been successfully tested off-line, so the team decided to conduct a live test in conjunction with the firm's main software. The result was an accidental deposit of $19,000,000 into each customer account. The total amount in error was nearly TEN TRILLION DOLLARS. This isolated incident points to the subtle dangers of the Year 2000 Problem: fixing the computer code that processes the date is the easy part; locating the code that needs to be fixed is significantly harder; but testing is, by far, the hardest part of all. Testing typically takes half or more of all the time and budget reserved for the whole repair process. As we move through 1999, many agencies and businesses will be running out of time to thoroughly test their Y2K fixes and the incidence of Y2K accidents will increase dramatically.

PREPARING FOR THE YEAR 2000 BUGS

You can take precautions to prepare for the new millennium. Bottom line, Y2K is a massive information corruption problem: some of the data will be accidentally disrupted, corrupted or lost in Federal or State government computers, some is maintained by private businesses such as banks, merchants and credit reporting bureaus and some is kept by institutions such as schools and hospitals. Unfortunately, some of the data that is at high risk is vital to your well being.

One of the most important steps you should take in response to the Y2K problem is to protect and preserve the integrity of vital data. To accomplish this you must start building up a "Vital Information Portfolio," consisting of hard copies of the information that is most critical to you. Start by making a list of your vital data and then systematically obtain and keep paper copies of everything. Your financial future may depend on it. Having the paperwork in your portfolio will strengthen your case in the event of dispute with the various agencies over your assets and eligibility for benefits.

- Get a Statement of Earnings and Benefits from Social Security Administration. (Toll free number 1-800-772-1213. Ask for a copy of SSA Form 7004). The aim is to create a running, hard copy record of your Social Security account. This will help in building up a sequence of documents which are consistent and show your account over time. Do this every six months. If you currently receive Social Security checks, keep a copy of your checks in your Vital Information Portfolio or if they are direct deposited, keep a copy of your bank statements and the deposit slip you receive in the mail.

- Protect your income tax records The Internal Revenue Service is probably the single government agency at the greatest risk from the Y2K problem. Your records at the IRS might become either corrupted or lost. So maintain hard copies of your personal and business income tax returns. Keep at least five years worth of back returns. For greater protection get copies of your tax returns from the IRS by filing IRS Form 4506, "Request for Copy of Tax Form". Do the same with your State income tax returns as well.

- Get the proper credit It takes lots of pain to rectify an inaccurate credit report; bad credit will prevent you from obtaining credit cards and home mortgages. So be diligent in protecting yourself from Y2K problems in this sector. Credit-reporting bureaus are notorious for poor performance in correcting errors in their files, and your proof of credit history may be in jeopardy. Compounded with the Y2K problem, their performance can get worse. It is recommended to collect a sequence of credit reports from each of the big three national credit reporting bureaus. Get one report every six months from now until past the year 2000.

- Protect against Bank Failures The information in your bank's computing system might be inaccurate in the year 2000. Your account, for example, might show the wrong balance. Maintain a hard copies of all your banking records: all statements, checks, deposit slips, etc. These will provide a basis for reconstructing your records if the bank's computers fail.

- Protect your home: Real Estate records The Y2K glitch at your county courthouse could put you into the position of having to prove that you are the owner of your home and that you actually paid your property taxes. To prevent this kind of challenge . Ensure that you keep the loan document, and the deed of trust which conveys the property to you from the previous owner. Get a copy of the deed of trust that is recorded at the courthouse. . Another important document is the "PLAT" which is a map of the subdivision where your house is located showing the property lines. Keep a copy of a survey of your home. . Finally, get a copy of your property tax records for the past three years.

- Protect Your Home: Mortgages When mortgage payments are made, the funds transfer is done electronically through the Automated Clearing House. This is a nationwide network of 38 regional computing systems which processes 3.5 billion transactions per year totaling $11 trillion. Many of these transfers will also involve one or more Federal Reserve Banks. There is a risk that one of these computing systems either does not credit your payment, or credits it in the wrong amount. Another possible error is that your historical records could become corrupted due to Y2K. You should start building a complete paper trail. Keep all canceled checks and all bank statements from your bank. Additionally, retain the monthly mortgage statement you get from the bank that receives your mortgage payments.

- Get your military records If you are a veteran of the armed forces, it would be a good idea to obtain a hard copy of your military service and medical records. At this point, it is unclear whether the Veteran's Administration will be Y2K compliant. (Write to National Personnel Records Center, 9700 Page Boulevard, St. Louis MO 63132-5200). Another quick way to verify your basic status with the Veteran's Administration is to inquire about your eligibility for a VA loan by simply filing a form with the VA called "Request for Determination of Eligibility and Available Loan Guaranty Entitlement" VA Form 26-1880.

- Avoid Year 2000 Expiration Date: Do not accept anything that expires in the year 2000. Credit cards are the most obvious but this precaution should also include debit cards, ATM cards, check cashing cards, identification cards, driver's licenses, passports, memberships in organizations, parking passes, security access passes, electronic toll devices for your car, magazine subscriptions, library cards and anything else that you can think of.

- Watch the Fiscal Year "99" Problem: Double "00" is not the only two-digit year that could cause computer malfunctions. Double "99" is also a problem but is typically confined to older mainframe databases and does not affect personal computers or embedded processors. The basis of the problem is that "99" has been used to represent something other than actual data: for example, it has commonly been used to mark the place in the database where the real data ends. (September 9, 1999 is a date that many people worry about, because some programmers used the nasty "four 9s" such as 9/9/99 to indicate an Invalid date field. Others worry about the 99th day of 1999 that is April 9, 1999). In general, double "99" will not cause computers to crash or to make easily detectable calculation errors; the computer will seem to be operating normally. October 1, 1999 might be a special problem because that is when the Federal government makes the FISCAL YEAR (FY) transition from FY99 to FY00, at that time Federal government computers perform calculations to deal with the fiscal year "00". For State governments the most severe date will occur on July 1, 1999, when 46 of the 50 State governments reach the FY00 threshold. The state government of New York will be the first out of the FY00 gate on April 1, 1999. So, avoid registering cars, boats or planes or file your tax return or pay property taxes close to FY00 transition date. Try to file or pay far enough in advance so that you may not fall into this kind of computer glitch. The Fiscal Year "99" Problem affects only financial systems.

Nobody knows for certain what is going to happen to the stock market but it certainly seems probable that Y2K could have an adverse effect. Forrester Research indicated that 15% of the fortune 1,000 would not be able to repair most of their mission critical computing systems and would probably fail as a result. Capers Jones has estimated that 1% of large companies and 5-7% of medium size companies could be expected to fail. These levels of business failures would have negative impacts on the stock market. Well-known Wall Street analyst Ed Yardeni of Deutsche Morgan Grenfell feels that Y2K will have very negative market consequences. Yardeni estimates a 60% probability of a major recession in the Year 2000. Has your mutual fund manager or financial adviser calculated the risk to your investments of potential market gyrations? We cannot speak for your financial decisions but we feel that phasing out of the stock market for a while is the safe thing to do.

Be proactive and send a letter to each of the entities you have financial dealings with and ask about the status of their Year 2000 compliance efforts. Find out risks to bank accounts, mutual funds and other finances. Ask your brokerage or bank about its progress in reprogramming computers that could miscalculate savings or close accounts. Smaller firms may be less prepared than large national companies. Is there a contingency plan if systems fail? Ask your utility and phone companies if they're ready to handle year 2000 bills. Have your insurers fixed computers that could mistakenly cancel your policies?

Home computers bought in 1995 and before may process a wrong date. This is not a big problem for occasional PC users, but people with home offices could get spreadsheet and other errors. You can buy or download free test programs over the Internet, such as Survive 2000 (www.sbhs.com), or call the manufacturer.

This step should be taken within the last quarter of 1999. The main purpose is to protect against the worst things that could happen. It would be wise to store necessities such as food, water, energy and medical supplies. - How much? A good storage program should be able to provide all the members of your family with three months worth of necessities. In the event that the primary breadwinner in the family becomes unemployed due to the Y2K crisis, three months would likely give basic protection while alternative income arrangements are made. - Of what? Your personal storehouse should consist of all the things that are critical to your well being and even some things that would add to your comfort. Here are some of the things you should consider: . Food: store bulk staples such as grain, rice and beans. These can be kept for a long time. Canned foods of all types and freeze-dried (or dehydrated) meals such as those used by campers and hunters are excellent but should be rotated through usage. Also include a range of vitamin supplements and don't forget to include food for your pet. . Water: store bottled water for drinking and cooking and plain old tap water for washing. . Medication: keep a supply of off-the-shelf medications and any prescription medicines you might need. Work with your doctor to set up a way for you to rotate prescription medications. . Emergency supplies: include items such as batteries, candles and matches, a lantern, flashlights, a small radio, a basic toolbox and a first aid kit. . Commodities: include such things as toilet articles, clothing, critical auto parts such as spark plugs, spare tires, etc. . Cash: include sufficient cash to pay three months bills. Do not keep this money in a bank safe deposit box. Its purpose is to protect you against economic disturbances that might interrupt your normal cash flow. Some of these disturbances could include difficulties with the banking system so this emergency cash should be kept on hand where you have control of it.

The Y2K problem could disrupt many critical goods and services, the most important of which is electrical power. Because Y2K arrives in the middle of winter, the greatest danger is the loss of the capability to heat your home, especially, if you live in a northern area. Protection against a loss of heat can be achieved in a number of ways: . Keep enough candles, extra firewood, kerosene lanterns or . Consider a small generator sufficient to maintain electrical necessities and of course, sufficient fuel supply. (By the way, verify that your generator's controller is Y2K compliant because most types use an embedded processor) or . Install a wood stove or a fireplace and stock up firewood or . Conversion to a liquid natural gas powered system with a storage tank.

Protect yourself against all eventualities, it's wise to stay on the safe side.

Baltimore, MD.  Sun, 15 Nov 1998
VACETS Column