The Real Deal on Y2K: Fears Dim as 2000 Approaches

Much to the chagrin of the doomsayers, intense preparations have helped ameliorate fears of massive Y2K glitches.
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What if the new year arrives, and the world doesn't end? That could be the fate awaiting year 2000 doomsayers.

After the hype, the passionate debates and the outlandish cost estimates, it looks very likely that Jan. 1 will pass without any major fallout from the year 2000 computer bug, thanks to a lot of work. The sensationalists had warned that chaos would reign thanks to the computer glitch that represented dates with only two digits, meaning that computers would construe 01/01/00 as Jan. 1, 1900.

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Most major publications ran breathless stories on the horrible apocalyptic doom as computers stopped working, banks lost all their records and planes fell from the skies. Their message: Forget about high tech and buy pencils and erasers.

A March 1998

Business Week

warned: "Zap! How the Year 2000 Bug Will Hurt the Economy." The weekly business magazine warned that Y2K would slow the nation's gross domestic product growth by 0.5 percentage points.

It wasn't just journalists who were throwing wild numbers around. Adding to the fear was Ed Yardeni, a Y2K hawk and the chief economist at

Deutsche Banc Alex. Brown

. Back in 1997, Yardeni warned that the Y2K glitch would doom governmental agencies and send the world's stock markets reeling. He gleefully prophesized that there was a 70% chance that Y2K would cause a mighty recession.

Today, it seems safe to say that all will be well -- more or less. Sure, there'll be small problems here and there, but there's no need to hide in the basement. In fact, far from being scary, the Y2K bug is now part of the cultural zeitgeist: Both Korean carmaker

Kia

and

General Motors'

(GM) - Get Report

Saturn

have been running ads poking fun at Y2K survivalists. Standup comedians now quip that the only casualty of Y2K is likely to Vice President

Al Gore

.

To be sure, computer experts warn that companies shouldn't be complacent. If the domestic scenario is reasonably rosy, there are concerns about problems overseas which could affect the U.S.

"Most people on the Street are generally ignoring the issue at their own peril," says Dennis Grabow, CEO of the

Millenium Investment

, a Y2K-focused money-management firm based in Chicago. He says global and capital-goods manufacturing companies and the automotive industry should be monitored for some post-Y2K trouble.

That said, there are strong indications that the Y2K problem will be fixed. In late August, global positioning system, or GPS, satellites switched their timing system back to zero without any hitches. The rollover was necessary because the system, which uses radio signals from satellites to provide navigation data, was designed to ignore calendar dates but to keep precise time measured in seconds and weeks. The GPS rollover is considered to be a small-scale rehearsal for what might happen when computer clocks worldwide reach the year 2000.

A few days later the nines came and went quietly. The nines is shorthand for Sept. 9, 1999. Y2K scaremongers claimed 9/9/99 was used as a computer-memory trick to mean "disregard." It was feared that once a program came across 9/9/99 it would roll over and stop. And this was just a prelude for Y2K. Yet nothing happened. Nada. Zip.

Just last week, the U.S. government switched to its new fiscal year on Oct. 1. Again, only small glitches.

Now the biggest fear is fear itself. Even

Alan Greenspan

, the

Federal Reserve

chairman, is warning people not to panic. "Consumers should prepare for the century date change as they would for any long weekend or any expected hurricane," Greenspan told the

President's Council on Year 2000 Conversion

in Washington. He dismissed the threat of massive computer disruptions after midnight Dec. 31 as "negligible."

The bigger concern, Greenspan said, is that too many people may have taken the Y2K threat too seriously.

Other government and industry officials are also keen now to downplay the doomsday scenario. Just to prove that planes will be safe to fly, head of the

Federal Aviation Administration

Jane Garvey will be in the air at midnight, flying to

San Francisco International Airport

on an

American Airlines

flight. Even the White House is on board with the plan. "While we don't want people to become complacent, people should expect the problems that develop to get solved quickly," says Jack Gribben, spokesman for the

President's Council on Y2K Conversion

.

The stock exchanges also seem to have their houses in order for Y2K.

New York Stock Exchange

Chairman Richard Grasso has said he sees no reason to worry, especially when the exchange will be allowed to make a post-Y2K test run on the weekend because Jan. 1, 2000, falls on a Saturday.

Andrew Neff, a computer analyst with

Bear Stearns

, doesn't expect much market reaction. "With hurricanes and tornadoes we get no notice, with Y2K we have had five years' notice," Neff says. "The world will still function and we will adapt and people will move on."

Even utility companies, with their ancient computer systems, are confident that Y2K-related problems will not be too disruptive. "One thing I have noticed by reading the 10-Qs of utility companies is that the language is much more positive in August than it was in January," says Mary Calhoun, a former programmer who runs the Boston-based

Calhoun Consulting Group

.

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will be running a series of articles about the level of international preparedness, last-minute investing opportunities, the activity on Wall Street on the eve of the new millennium, currency arbitrage opportunities, and whether it still makes sense to buy gold.