You Can Bank On Most Financial Institutions Surviving Y2K

Plus, our columnist shares his list of Y2K preparations for the Seymour household.
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A week and a half to go, and the rest of the world will just have to take care of itself. You've got yourself and your family -- and your investments -- to look after. What are you going to do?

(Readers know I don't really espouse this kind of "I've got mine, Jack" attitude. But after you've read the hundredth "What does all this mean?" Y2K piece -- and you can tag

mine yesterday that way -- you've got to finally


something. Or, by doing nothing, make a similarly profound choice.)

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Yesterday, I left three items hanging: What about the banks and financial institutions? What about international problems? And what exactly should



I think U.S. money center banks are going to be fine. I think the regionals are going to be fine. I think the

Federal Reserve

system is going to be fine. I think major brokerage firms, investment bankers, the exchanges and the back-room shops are going to be fine. A few bobbles here and there, inevitably, but no one wiped out, no investors and depositors hung out to dry.

Abroad, I think the situation is going to vary widely, from generally OK to good in most first-world countries to very bad indeed, in some cases, in other nations. I think some of the countries with trouble, maybe big and lingering trouble, will surprise a lot of Americans: I count Italy, Russia and Brazil on that list, for example.

As a consequence, as I wrote here in

September, I would not keep a dime in a foreign bank this month and next, nor would I maintain positions in any companies with primary listings on such foreign exchanges as Brazil's


, the

Borsa Italiana

or Russia's



Harsh? Yes. Overkill? Maybe. But hey,

this is my money


(This is also a lot easier for me than for many others, certainly including bigger investors who have built a substantial international investing strategy -- and portfolio -- over the years. To each his own.)

With U.S. financial institutions and foreign-investment risks out of the way, what to do this week and next?

First, you've got to decide your basic strategy for dealing with Y2K-related fluctuations in the value of your investments over the holidays and into January. This is, of course, complicated by such things as the current bull run, the upcoming January effect, any impact of last-minute inflows of foreign ("frightened") money into U.S. markets -- and the big bear, tax considerations.

I can't tell you what to do because I don't know your personal situation. I can tell you what I'm doing and what other savvy investors I know are doing. See these as guideposts, not a checklist.

On taxes:

I hear ideas across a spectrum from "Do nothing" to "Take it all down to cash." The former is, I think, shortsighted, and the latter is just plain nuts. The tax consequences of selling everything and going 100% cash are truly Draconian. Not only do you disrupt -- almost certainly unnecessarily -- well-laid investment plans, perhaps very long-term strategies (college-fund money, for example, and retirement money), you subject yourself to potentially awful taxes, come April 15, on your unexpected but very real gains.

My answer:

It's a good year to be especially mean about weeding out losers in your portfolio and taking the resulting losses to your tax return, and also to be hard-headed about getting out of positions in stocks that have had a nice run-up, but now seem likely to wander into the woods for some substantial period.

But dumping everything is way wrong. Especially if, as I expect, we have a roaring bull market in January, after the passage of a not-very-eventful rollover to Y2K, it could be very costly to re-establish amid that trading frenzy positions you closed out this year because of Y2K fears. Be tough with yourself, but be rational: Hold on to the good stuff.

On markets:

As I've said here often, I think this bull will continue to roll through the rest of this year into January and through at least the first part of next year. Do you want to risk Y2K exposure, or do you want to sit out this time of potential market disruptions?

My answer:

Given my latest assessment yesterday of the likelihood of domestic Y2K problems, I'm worried more about being out of the action (during what I expect to be a substantial move upward) than about getting skinned because of problems in the market arising from Y2K failures.

I'm in, and I'm going to stay in -- unless something


big pops up at the very end of the year.

On other Y2K preparations:

The list is not long, nor, I think, alarmist or disruptive.

  • My family has socked away a modest quantity of dry food, which doesn't require heating or refrigeration, plus a cache of bottled water.
  • We bought extra supplies of the short list of drugs upon which we rely. We checked our first-aid kits and restocked -- overstocked, probably -- critical supplies for do-it-yourself medicine.
  • We have bigger-than-usual stacks of books we've been wanting to read. We got a few extra board games and puzzles.
  • We stocked up on extra batteries, a few more flashlights and a wind-up radio -- a great idea anyway in areas like ours, which suffer frequent brief power outages in the best of times.
  • We decided we already had plenty of blankets and warm clothes in the event of a power outage. We laid in a supply of heavy-duty trash bags, in which we can stuff and maybe store trash for an extended period, as well as any food that goes off in the refrigerator or freezer if we're without power for long.
  • We bought an ugly, but functional, camping potty. Our faithful, old two-burner Coleman camping stove is ready, in case there's no power and our craving for a hot cuppa becomes overwhelming.
  • We don't expect serious civil disturbances in our area, and we haven't picked up assault rifles or bazookas or laid in extra supplies of ammunition, though we're probably pretty well prepared for problems of that sort anyway, Y2K or no.
  • We spoke with the police and fire chiefs in our small, semirural area, so we're plugged into their emergency plans. We've talked with almost all our neighbors about ways we can help one another if there are interruptions and shortages.
  • I made doubly sure I have trade-by-phone backup arrangements in place with the brokers I usually use online, in case my PCs, Web connections and ordinary phone lines are out, and I have my usual, several extra charged-up cell-phone batteries. (Of course, if things go haywire, I'm going to have higher priorities than getting some trades done.)
  • We've gotten all the paper printouts of our bank and securities accounts we can dredge up. (A couple of days before the end of the year, I'll download another, last-minute round of that paperwork to make sure it's current as of Dec. 31.)
  • We have our usual modest cash stash locked up, though to tell the truth, I don't think a handful of currency is going to be all that helpful if things do go blooey.
  • We're keeping our cars' gas tanks closer to full than usual these days and will fill up again as close to the end of the year as practical. We've also got enough antifreeze in their radiators to see us through an Ice Age. (I do suspect to see a lot of last-minute shortages, including service stations with no gas or antifreeze to sell.)

That's about it for us. And truth to tell, that's stuff we should have done anyway, should have on hand anyway, whether we're facing a millennium or a locked-in ice storm (this week's big threat in our area) or a hurricane. It didn't cost much in dollars or effort, and we've all agreed that whether we touch any of that stuff or not on Jan. 1, Jan. 2 or Jan. 3, it feels good to have it around.

And to have gone through this exercise together.

Our 8-year-old has been an integral part of our Y2K-readiness planning, and we've been immensely proud of how seriously he's taken it, and how the process has drawn out of him a maturity and a sense of responsibility we didn't know he'd developed.

Now: On to Christmas! The heck with this

Why Too Que

? stuff!

Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are current or recent consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites your feedback at