WHAT SHOULD INVESTORS DO ABOUT THE YEAR 2000?

• Position: Brief Article

It's the sort of plot only "The X-Files" fans could love. At the stroke of midnight, at the turn of the century, the world comes to a screeching halt, like an engine that has just lost its oil. The villains are the computers that interlink the world's economies and financial markets, as well as many other aspects of our lives. They simultaneously stop working at midnight like a vast conspiracy.

The conspiracy in this case is really a simple, non-alien issue. Many computers and software programs won't be able to read the year 2000 date because, to save limited and expensive memory, programmers over the years shortened four-digit dates to two digits. Computers and software operating on those two-digit dates won't know whether it's 2000 or 1900. Systems that aren't fixed in time won't function properly--or at all. That, warn some people, could cause a worldwide financial disaster.

How serious is the potential problem? What will it mean for you as an investor? Should you make portfolio changes in order to prepare for it? According to the Institute of Certified Financial Planners, Denver, Colo., the financial impact is anybody's guess at this point, but lots of people are guessing. On the one hand, some predict a worldwide recession--perhaps as deep as the 1973-74 U.S. decline which knocked 45% off the value of the stock market and took investors years to recover from. They see a collapse of essential government services, including Social Security and Medicare payments, as well as banking and financial systems. It's enough of a concern to some investment managers and advisors that they factor in a company's readiness for 2000 when studying whether to buy or sell its stocks or bonds.

Other experts dismiss the Y2K issue as empty doomsday rhetoric. They agree there will be interruptions due to limited computer failures, but this will occur only in isolated pockets with minimal impact. Some think the world and U.S. economies might suffer a downturn, but not a widespread interlinked meltdown plunging the world into a long-term depression. Their worst-case scenario is that...