Y2K Financial Adjustments I

Throughout the year, I will address year 2000 (Y2K) financial issues. Economically speaking, it's highly unlikely the stock market will sustain the same performance it had for the past 4 years. To do so would require market conditions that currently do not exist. A lack of strength and momentum will subject the market to the negative influences of Y2K. The most dramatic influence will come from the "flow of money." Consumers are very finicky when it comes to money and usually overreact to anything negative.

As Y2K approaches, headlines will be inundated with Y2K issues. Considering the lack of computer intelligence to handle the conversion to the next millenium, the list of potential problems range from a temporary loss of local services to a total breakdown of global communications. As Y2K closes in and people face the reality of the potential consequences, consumers will react by moving their money to a "safe harbor," thereby having a negative impact on the market. As more consumers realize what's going on, they'll react as well causing a snow ball effect.

Companies may react by taking drastic measures to maintain profits and stabilize share prices. Banking institutions may be more selective in making loans and less compassionate to those having financial difficulties. As a result, personal bankruptcies may surge. According to the American Bankruptcy Institute, 1998 personal bankruptcy filings were 1,054,475 through September. These numbers may pale in comparison to Y2K results.

My first two suggestions are: (1) make debt freedom a priority in 1999, especially with collateralized debt, and (2) temporarily move all non-guaranteed investments into balanced portfolios, assuming your investment time horizon is 5+ years. Do not move out of the market, just relocate your invested assets. Do this before the end of the first quarter of 1999 and preferably when the DOW is above 9000.

Gary Ellis, MBA, CFP
Association Stewardship Director