SUMMARY - "PIG":
The Contrarian's View is published 11 times per year on a mostly-irregular schedule, and the views expressed are those of the author and editor, Nick Chase. Because nobody can predict the future, results of past suggestions or recommendations are no guarantee of future results. Material in this publication may be freely quoted provided proper attribution is given to its source. Subscription rate: Free on the Internet through the World-Wide Web service at Assumption College. Using your favorite Web-browsing program, Open URL http://nick.assumption.edu. Mailed paper subscriptions, one year for $39 to The Contrarian's View, 132 Moreland Street, Worcester, Massachusetts 01609. There is a limit of 50 paid subscribers at one time; please check for availability before sending any money. Sorry, Visa and Mastercard are not available. Overseas subscription rate, U.S. $54. Unsolicited material sent to us by UPS or by courier other than the postal service is refused and returned to sender! Phone: (508) 757-2881
I can personally verify that Senator [Jon] Kyl's statement: "that the day you turn 65 you have lost all rights as an American citizen to be treated by the doctor of your choice if that doctor doesn't operate in Medicare" is accurate. And, it isn't just the seniors who can no longer go to the doctor they have gone to for years because he doesn't take Medicare patients that is the whole problem. Doctors sometimes die, too, just like other people. Sometimes they move to another city. And, when that happens just as you turn 65 you may discover, as I did, that there is not another single doctor in your entire town that will take another Medicare patient.
Doctors on the whole want to, and traditionally have, treated a lot of people who either pay nothing at all, because they don't have it, or do not pay enough to cover their costs. However, they can't survive if the majority of their patients don't pay enough to cover their costs.
Medicare patients cost the doctor more money, because of the horrendous amount of paperwork required - often not for just Medicare, but also for Medi-gap insurance. Doctors lose money generally on every Medicare patient they have. So, they limit the number of patients on just Medicare. Some doctors, because of the amount of paperwork involved, also refuse to treat patients, or are unable to treat patients, who have both Medicare and a Medi-gap insurance plan.
It took me nearly two years, plus finding the right Medi-gap insurance plan, to find a doctor in my town after I turned 65. As luck would have it, during that two years, I got sick. I thought I might have pneumonia so I started trying to find a doctor to tell me whether or not it was pneumonia. No doctor in the entire town would see me - and all of them suggested I go to the Hospital Emergency.
I kept saying, "I'm not that sick and that costs too much money." They each assured me that, if I went to Emergency, Medicare would pay the entire costs. Finally I called the Medical Association for the County and they gave me the name of three doctors who were taking Medicare patients. The first two I called were no longer taking Medicare patients. The third one told me they could take me sometime in the middle of January. It was the middle of October and my question was: Do I have pneumonia?
I said, "By January I will either be well or dead and I won't need a doctor. How about you forgetting I told you I was sixty-five, you look at my throat and I'll pay you."
"Oh," said the doctor's receptionist, "we can't do that! The Doctor would lose his license! You should just go to the Hospital Emergency."
I said, "I don't have the energy to sit in a chair for eight hours or so waiting for someone to see me. (I'd been to our local emergency before.) I'm going to go to bed and take aspirin." And that's what I did.
Finally I did get Medi-gap insurance and found a doctor, after several thwarted attempts. On three different occasions new doctors opened offices in town, advertised that they took Medicare patients, but by the time I got around to calling for an appointment, 3-4 weeks later, they already had all the Medicare patients they would take.
Only government bureaucrats could have come up with a scheme as inefficient and unwieldy as Medicare. Once, after a series of diagnostic x-rays and tests, by a doctor who did not take Medicare, I received a flurry of papers from Medicare which was supposed to reimburse me. The bill was several hundred dollars, but, for one reason or another, all but 3 cents of the bill was disallowed - deductibles, tests Medicare did not cover, etc. Medicare actually sent me a check for 3 cents.
But, of course, I also had Medi-gap insurance, which pays some or most or at times all of what Medicare does not pay. They also have deductibles. They sent me a check for 1 cent.
By then I realized that I, and my doctors, were trapped in the vagaries of two massive, and very expensive, bureaucracies - the government's Medi-care scheme and the insurance company's overhead, which, like the doctor's overhead, was bloated due to Medicare requirements.
Why, if seniors are unable to find doctors that take Medicare, can't I just opt out of Medicare? Why can't I take the money I am now paying for Medicare, add it to the premium I'm now paying for Medi-gap, and pay for a private insurance policy, just like I did when I was a real person - before becoming 65 years old? Why should I be told time after time that I should go to the Emergency at the hospital and then Medicare would pay? How many millions or billions of dollars are being spent in Medicare because of the government's incredibly stupid rules?
Why, many of my peer group have told me, don't you just join an HMO? That's what they do. Well, most of them are in HMOs 30-50 miles from our small town. If they need to be hospitalized, the hospital is also that far, and sometimes farther. They can't go to the very fine small hospital in our own town. They are retired and, when they need to go to the doctor or are sick and need special tests, it is an all-day excursion. Often someone else has to drive them the 100+ rmiles ound trip and spend the better part of the day sitting in the HMO waiting room waiting and waiting and waiting.
And, if they need a specialist, they may, or many not, be allowed to see one. It is not the patient's decision. Today, often it is not the doctor's decision. It is the decision of some data entry operator who has to check out the insurance coverage first. I have a son who is an orthopedic surgeon who tells me he has spent 20-30 valuable minutes on the phone with minimum-wage data entry people at HMOs and insurance companies who argue with him about whether or not a seriously injured patient really needs to go to the crisis center.
More and more of my friends are discovering that the much-touted HMOs are just wonderful, as long as you are not sick. They are great for healthy people. However, if they need expensive operations or time consuming medical diagnoses, new, costly, medications for unusual medical problems, their HMOs often will not provide the needed specialist, operation or medication. The administrators of the HMOs, who usually make a lot more than the medical doctors, can't make lots of money by going around and actually treating sick people.
Because I am a healthy senior, and I want to stay that way, I want to be able to choose my own doctor. In fact, I may even want to try out, at my own expense some sort of alternatives to standard medicines - i.e. chiropractors, vitamins, acupuncture, diet, etc. Once upon a time, as an American, I had that right. Suddenly at the magic age of 65, I lost that right, because I didn't die soon enough. Now my medical care is not my problem. It's your problem.
So, Senator Kyl, keep fighting. There is a lot at stake here. It's not just a matter of convenience. The very essence of good medicine is at stake. If Medicare as we know it were abolished and seniors were able to purchase their own insurance - as would be the case with Medical Savings Accounts - medical care for seniors would improve and the cost of medical care would go down. Just getting rid of duplicate red tape and overhead would reduce costs for seniors' medicine.
Medicare was supposed to be, originally, for indigent seniors. If Medicare were abolished, and indigent seniors were given vouchers to purchase insurance freely, they would be taken care of while seniors who have higher incomes would simply use funds they are currently using from their social security and pension funds to pay for medical insurance.
We've abolished welfare as we know it. [Don't count on that, Mary! - /Nick] Let's abolish the wasteful Medicare welfare system which has forced everyone over the age of 65 to be on Medical Welfare. It doesn't work any better than the old Aid to Dependent Children in the welfare system. Some of us don't want government welfare - which is all Medicare is - but we don't have any choice.
Mary Mostert is Editor of the Michael Reagan MONTHLY MONITOR and Information Interchange. Reprinted with permission.
Another problem that has not been widely addressed in public yet is the fact that many of the programmers needed for the Y2K fix feel absolutely zero loyalty to the system they are serving. They have long been disrespected by an administrative culture that viewed them as expendable nerds doing pedestrian technical tasks, and expended they were when it came time for corporate restructuring and downsizing. Nor have they ever gotten any breaks from tax collectors, with more of their income going to the government instead of into their own pockets. With your typical code-head being treated like an unwashed techno-serf over the past twenty years, should it be any surprise when they decide that the Y2K is not so much a problem as it is an opportunity to screw a bunch of technophobic executives, lawyers, bureaucrats, and other parasitic life-forms?
Now mind you, I'm not advocating that anyone sabotage his employer's code; I'm just noting that there is a volatile combination of wounded pride and subversive libertarian sentiments among programmers that make it dangerous for management to cavalierly hire a bunch of strangers to come in to deal with their Y2K crisis for them (assuming, of course, they can find enough technical competence in the first place). With men of intelligence having been objects of contempt and governmental extortion for so long, does anyone really think they will be eager to sustain an uninterrupted flow of funds to the Internal Revenue Service and kiss up to the management?
Of course, we also have to consider that even the most servile order-obeying type will think twice about finishing the project he is working on. Once he realizes that he has a big enough pile of money to take care of his needs, he won't stick around major urban centers waiting for doomsday to strike even if his employers offer him $300 per hour. What good is putting more paper money in a bank account when most of the banks are going to turn illiquid in the near future? Anyone with any sense at all will convert his assets to gold and useful survival items and, if he can afford it, head for the hills. Indeed, a friend of mine who owns a coin shop in the San Francisco Bay Area reported to me that he already has codeheads coming in to buy gold from him. One of these customers was an employee of a major west-coast electric utility. Do you begin to see the picture yet?
Primal Scream
On December 1, 1979, I saw a date problem take down five mainframes. I heard the CEO and the CIO screaming at each other. His exact words were, "GOD DAMMIT, THIS COMPANY IS IN TROUBLE." I eased down the hall. He sounded like a crazed, terrified, wild animal.
I was the first-level manager of the area that had just inherited the application and read the dump. [A "dump" is a printout of the contents of a computer's memory, typically as octal or hexadecimal numbers. - /Nick]
I've been thinking about this problem since.
In the 1980s I worked on a billion-dollar system written in assembly language and PL/I. The system is not Y2K compliant, and it took five years to go from specs to production. Hundreds of programmers worked on it.
In the late 1980s and early 1990s, I saw the software engineers who built that system laid off. They [the management] wanted to save money for the handwavers. I had to take a job as a C/C++ programmer to make ends meet. Some of the others were not as fortunate. Some very talented programmers were unemployed for months. One guy was out for a year.
Every day during the period from 1988, I thought, this is nuts, this is the mission-critical application, but they are canning the specialists who keep it running.
I know what's inside that system. It's full of two-digit dates.
The question has been, when will denial end and when will the screaming start again?
It's started. August 1997.
Lots of other systems and companies are in the same situation. I wonder about IBM, DEC, Amdahl, DG, etc. They must have lots of internal systems that need Y2K fixups. I expect them to pull their consultants back to work on their internal systems. Will they publicize it when they do it? Will they cancel their contracts? Can I step in and take the work at their rates, $350/hour? Could I collect a subsidy from the vendor, another $100/hour to keep them from hitting liquidated damages?
August 1997 - Denial is over. Maryland and New York are now on record as fighting for survival. The Feds have increased their cost estimate by 30%.
Any denial-heads still around?
Come here, I want to rub your nose in it and hit you with a rolled-up Washington Post. - Cory Hamasaki
Military Preparedness
My best contact works at a Washington, DC DoD [Department of Defense] facility. He says that their single most important system is not being worked on and that they are hoping that another government agency will come up with a replacement.
This guy is eager to work on the code but they are not doing code correction yet. I know others who say the same thing. No, no code fixes yet, some talk, some requests for an inventory.
When they say inventory, they don't mean modules, source language, lines of code per module, numbers of files, bytes in a file. They seem to mean, Payroll, DoD has Payroll, OK, we have one system inventoried. Medical records, OK, two systems inventoried. Personnel, OK, three systems, hey this isn't so hard, we'll be done soon. Electrical power, OK, four systems; Phones, OK, five systems, all the handsets are Y2K compliant? Great, we've got five systems in the inventory and one is Y2K compliant, we're 20% Y2K compliant, the General will be pleased. - Cory Hamasaki
RFC From The Gestapo Agency
I just recently read IRS's "Request for Comments (RFC)", which solicits comments for modernizing the IRS's tax systems. This document is the first information I've seen that shows just how desperate the IRS is and how complex the IRS tax systems are. Their systems are literally incomprehensible.
I won't even attempt to describe this document in any type of detail. My comments are merely those taken from the document that "caught my eye" upon my first reading of this document (RFC). To truly appreciate the gravity of what the IRS wants to accomplish, you'll need to read the entire document. Keep in mind, also, that the modernization effort is intended to proceed as a separate project from the Year 2000 correction effort.
The document, which I will refer to as the RFC, begins with a cover letter from Arthur A. Gross, Associate Commissioner/Chief Information Officer at the IRS. Mr. Gross acknowledges that "the IRS assumed primary responsibility for managing both systems development and integration with less than acceptable results". This statement sets the tone for the IRS's direction of creating a "partnership" with the private sector "stakeholders" to modernize the IRS. Mr. Gross further indicates that it is "myth" to believe that the private sector alone could modernize the IRS, since IRS possesses the necessary "knowledge of tax administration" to build a new system.
For all intents and purposes, IRS wants to turn over all of the project management, re-engineering, systems engineering, design and development and integration expertise to the private sector.
I always knew the IRS was extraordinarily complex, but it is more complex than I could have ever imagined. The RFC indicates that the complete Modernization Blueprint consists of seven volumes -- count them -- seven volumes. It may be a simpler system, but it will inevitably end up being yet another complex monster.
The RFC continues to say that "during the 1980's and early 1990's, effort focused on delivering taxpayer services and compliance functionality together with limited on-line development of stand-alone 'stovepiped' systems with stand-alone data bases utilizing the principles of distributed computer processing, an approach to computing en vogue during the late 1980s and 1990s. Overall, the IRS computing environment evolved into an extraordinarily complex array of legacy and stand-alone modernized systems with respect to both connectivity and interoperability between the mainframe platforms and the plethora of distributed systems."
In other words, the IRS succumbed to "fashion technology" solutions which did nothing but complicate their previous efforts to modernize.
To give you an idea of how large the IRS's information system are, consider these statistics from the RFC:
There are three computing centers, with sixty (60) mainframes in ten regional service centers. NONE OF THE MAINFRAMES ARE CENTURY DATE COMPLIANT. There are 62 million lines of code in the IRS core business systems. Duplicate distributed networks have interoperability and connectivity problems and are largely not century date compliant.
IRS mentions "risk" many times in the RFC. "While the risks inherent in Phase III may be nearly incalculable given the aged systems, the absence of critical documentation, dependency on Assembler Language Code (ALC) and the inevitable turnover of the IRS workforce supporting these systems, it is essential to plan and execute the conversion of the Master Files and its related suite of applications".
IRS seems to know that it will not be able to retain its technical expertise, who will probably bail for better paying jobs.
The IRS's goal is to canvas "any reasonable strategy to move forward on modernization" while, at the same time, managing the immediate crisis (Y2K) to "stay in business". Given the complexity of IRS, its past modernization failures and the Year 2000 problem facing them, you would have to be insane to believe these goals were obtainable.
While searching for executive and senior information technology managers, the IRS received in excess of 800 applications from the "not faint of heart". IRS has an interesting way of describing what kind of job is in store for these people. They'll be lucky to keep any of them around long-term.
IRS indicates that staffing levels have sunk to less than 30 percent of the minimum industry standards, and is one of the highest priorities with IRS. The RFC indicated that today, major tax systems changes are not subjected to comprehensive testing prior to being migrated to production. Moreover, the Century Date conversion will place an extraordinary addition-al burden on the Product Assurance Program. I think what IRS is saying here is that they don't have the staff for a Y2K remediation effort and have obvious-ly only partially completed the inventory phase.
The IRS indicates that "it must undertake and complete major infrastructure initiatives no later than June 1999 to minimally ensure century date compliance for each of its existing mainframes and/or their successor platforms. At the same time, the IRS must complete the inventory of its field infrastructures as well as develop and execute a century date compliance plan for the conversion replacement and/or elimination of those infrastructures." How in God's name is this possible by June 1999 when they haven't even started? Notice how they used the words "minimally ensure century date compliance". What is that going to accomplish? Either you're compliant or you're not.
Basically, the IRS admits it was "wrong-headed" to modernize the legacy systems instead of creating a brand new system. Considering the spaghetti code and systems in place, I would have to agree. On the other hand, the IRS is indicating that contractual agreements may be extended for up to fifteen (15) years for the modernization effort. The new system will probably be obsolete before it ever gets off the ground.
The last thing I will point out in the document stood out to me as the most profound of all, for obvious reasons. This is the way IRS describes itself:
"The Information Systems (IS) organization of the Internal Revenue Service (IRS) is a huge enterprise -- employing in excess of 7,500 personnel across the United States, budgeted in excess of $1 billion annually and responsible for the design development and ongoing support of a highly complex and vast array of technologies which, taken together, comprise the technology-based engine that powers the IRS. A $1.4 trillion Financial Services Program, IRS business enterprises are unprecedented in size and scope - a Fortune One company - with service centers, district office and regional office operations, staffed by more than 100,000 employees, largely dependent on highly automated process as well as the currency, comprehensiveness and availability of vast storehouses of computerized data.
"The latter half of the last decade of the twentieth century presents IS management and staff with unprecedented challenges: fraught with risks and potential for failure; yet filled with opportunity to serve the nation's taxpayers, while contributing to the creation of the largest and most sophisticated technology-based program in business or government".
The above two paragraphs may well be the IRS's epitaph.
In my opinion, the only way the Federal Government can secure its tax revenue collection system is to completely repeal the current United States Tax Code and replace it with a very simple one like a flat tax. Any attempt to fix (Y2K and modernize) is impossible.
The IRS is a classic example, and sets the standard for systems which are too complex to automate. This level of complexity should be limited to scientific endeavors. I truly believe that it will be easier for NASA to put a man on Mars more easily and quickly than to continue on with the current IRS and tax code currently in place.
This amazing document can be found at: http://www.ustreas.gov/treasury/bureaus/irs/prime/primerfc.htm Then select Request For Comment No. TIRNO-97-H-0010.
It is a 116-page Adobe Acrobat document. I had great difficulty printing the document because of the complex diagrams. I have an HP Laserjet/4 with 4 megs of memory. The only way I could print it was to use a Laserjet/III driver. It worked at the high resolution, but not as well as the Laserjet/4. Leave it to the government to create a document that you can't even print easily!
Happy Reading! - Mike Dodas
No Silver Bullet
Over the past few months I have been besieged by queries... 'Peter! What do you think of the report that a 14 year old has found the solution? What do you think about this idea that has not yet been made into a product?' etc. etc.
At first I declined to comment, but the trend in the media is to report on these things, so I guess I'm forced to comment... but before I do I need to put things into perspective.
I've been involved in this Year 2000 'project' since 1991 and have been aware of it since 1979, when I reported to IBM on my first night as a novice computer operator. My activities recently have placed me, rightly or wrongly, at the centre of this turmoil. In the last 2.5 years, running the homepage and the mail list, I've received information from around the globe on the progress in 'solving' this problem. I do little else besides 'Year 2000' work at the moment.
During the past 2.5 years, people have contacted me about 2-3 times per month telling me about their 'solutions'. 50% of these are tossed aside as viable solutions with about 3 minutes worth of discussion; of the rest, another 75% are already used as the core part of an existing vendor's product, and the remaining handful are 'interesting' ideas, which would require a tremendous amount of effort to even determine if the benefits they offer exceed those provided by existing tools. NOTHING to date has been uniquely worthy of fanfare.
Unless of course I were to use the rather loose criteria being used by some of the press today. The reports I'm hearing about have no merit except for the context surrounding them. I will use only a single example to demonstrate my case, otherwise I'll be accused of a bias towards a particular type of solution.
In the story, covered worldwide, about the "14 year old boy applies for a patent for his year 2000 solution..." The news worthiness of the story lies not in his application for a patent... anyone can apply for a patent on anything, nor does it reside in his finding a 'solution' because zero details about the alleged solution are provided... the story is this... he's 14 years old. (It would be a much better news story if his computer had been located in the garage... but on a slow news day you take what you can get.)
Folks, I've not been given details about this alleged 'solution' but regardless... I will guarantee it is not a 'silver bullet'... at best he has 'solved' some tiny portion of the problem. How can I be so sure, especially since I DON'T know what he's 'discovered'? That's a fair question. Here's why.
The Year 2000 'problem' is not a 'puzzle' with a single answer. It's more like a huge ugly task than anything else. If you compare it to the building of the Panama Canal you can gain some sense of the complexity.
To 'solve' the Panama Canal 'problem' you must perform several hundred different tasks You must hire the people, create dwellings for them, build roads, ship supplies, create a hospital, deal with malaria, dig the ground, pump water, communicate, co-ordinate, drive trucks, sail ships, mix concrete etc. etc. All of this makes up the Panama Canal problem... What would be your response to a headline stating a '14 year old solves the Panama Canal problem?'
The same is true for the Year 2000 problem, it cannot be 'solved' by any tool or by any single individual. The tools ARE important to the solution, in fact they are crucial, but to claim some individual has solved the problem is at best naive. - Peter de Jager
Never On Time
At some point in most projects, a realization seeps into the hands-on effort, everybody knows it but nobody says it, and finally someone says out loud ... "No way we'll ever bring this in on time, is there?"
Depending on culture and mission, this may trigger a cascade of activity. Scope enforcement tightened. Success redefined. Sub-phases invented. Resources borrowed under the table. Long days, no vacation, no training. Documentation, testing, data integrity and exception-handling truncated. Parameters hard-coded. Exit strategies explored and marketable skills burnished. Excuses rehearsed.
The age-old question "What do we tell management?" percolates up level by level. Tracking systems bifurcate -- one for external reporting, one for internal tasking. Defensive perimeters are drawn to deflect management inquiry from crushing forward progress.
But in the Y2K matter, there's no exit, no extension, no excuse, and there really is no other project to go to.
I'll say it out loud. We will not bring this in on time. Not close. Not even in an ideal world.
Not with 100% awareness and realism. Not with vendor candor. Not if Assessment was already done. Not with unlimited budget. Not with an infinite pool of qualified coders and testers. Not with sharp tools, wise managers and sympathetic users. Not with zero competing agenda. Not if we all pull an all-nighter. Not even if pigs could fly.
The best models I've seen suggest absolute limits as to how far software work can be time-compressed by adding resources. Likewise, organizations have limited capacity to absorb change.
I can't imagine anyone who knows the problem, understands software work and group behavior, respects complexity, grasps the human capacity for self-deception, and realizes how dependent we are, could still imagine coding our way to a soft landing. [Others -- we know who you are, even if you don't, yet -- keep asking those reasonable questions and clambering up the realization curve.]
Impact? Minimal where it matters not, devastating where it does....
What to do? For now, I'll merely suggest:
1) Acting correctly depends on knowing the differ-ence between Project, Crisis, and Catastrophe, and what is required in each.
2) Most diligent best efforts of Y2K illuminati are ultimately not helpful, and may indeed be harmful....
Keep spreading the word, keep your attitude up, keep up the good work, but as swordmaster Musashi instructs, "Do nothing which is of no use." - Ron Kenyon
Geek Rumors
....My sources in the San Francisco Bay Area tell me that the Y2K fixes at the Bank of America are way behind schedule, and the management there is putting a happy-face on the situation for the benefit of the bank regulators and the stockholders. I haven't been able to come up with an independent hard confirmation of the story yet, but the source in question is reliable and is in an unusually good position to observe the Y2K programmers at the BofA, so I think the story is very likely to be true. In any event, it is alarming enough to see the Bank of International Settlements send out strongly-worded Y2K warn-ings. It looks like there'll be a hysterical panic in the banking community long before it spreads to the masses. - William T. Coleman
The word on the street, the super-geek's rumor mill, is that BankAmerica is hosed, done for, going navel up. This has been the word for at least six months. I am eagerly awaiting official word setting the record straight.
Has the screaming started at the bank? Someone there must know. You can't hide this kind of thing for too long. Eventually someone will overhear a VP screaming in terror and the word will get out. - Cory Hamasaki
[The point of these last two messages is not to trash the Bank of America, which may or may not be ready by the year 2000; I have no way of independently knowing which will be true. It is to point out the enormous discrepancy between official statements emanating from organizations.... if any.... and what is purportedly the true state of affairs, as posted on the Internet by the programmers who are actually doing the remediation, or by friends of these programmers. - /Nick]
All you young people think this great boom in the stock market is normal, that you're entitled to 15% a year. These expectations cannot be met.... the economy is growing 2% to 3% in real terms.... What are you going to do when you find out there's a big downswing in stocks? Or five years of no increases? What happens then? - Paul Volcker
"Circuit breakers" will cause more panic, not less.... Cycles will have their way regardless of any tinkering with market mechanics. You could close the markets entirely and still values would fall (in people's minds) to the level to which they would have reached anyway (or lower, due to the market's disruption). There just wouldn't be a visual record of it. - Robert Prechter
If central banks and governments could control things, then why is the Japanese economy falling apart? Why did we have the highest interest rates in U.S. history in the early 1980s? The Fed does not control interest rates. It follows the shortest term rate set by the free market.... You can't convince people of this, as one of the widespread fantasies of today is that the Fed is god-like in its power. The coming bear market will blow this dream to pieces. - Robert Prechter
Virtually no one sees the market's potential for a major change before it occurs. Is there anyone who said in 1982 that the Dow would be at 8000 in 15 years? The answer is an unqualified no. Was there anyone in 1929 who said the Dow would drop to 41 or anywhere near it, much less, in 3 short years? Again, an unqualified no. For people to say that they "see no rational fundamental reason" is to say what they have always said at major turns. In fact, it is essentially a requirement of major turns almost by definition.... I contend that the social scenarios from 1929 to 1933 or from 1982 to 1997 (which included the dissolution of the Soviet Union) were similarly inconceiveable at the outset of the trends that produced them. [If] the scenarios in Elliott Wave Principle (1978) and At the Crest (1995) do provide a perspective that describes the future, ....it is based on something far more fundamental -- repeated patterns of human behavior -- than current political or monetary trends, which provide no reliable clue as to coming changes. - Robert Prechter
I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world -- no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. - Woodrow Wilson [on the Federal Reserve Act of 1913]
Experts are concerned that many of our information systems will not differentiate between dates in the 20th and the 21st century. I want to assure the American people that the federal government, in cooperation with state and local governments and the private sector, is taking steps to prevent any interruption in government services that rely on the proper functioning of federal computer systems. We can't have the American people looking to a new century and a new millennium with their computers -- the very symbol of modernity and the modern age -- holding them back, and we're determined to see that it doesn't happen. - Bill Clinton
The Year 2000 problem is an enormously exaggerated problem. As a crisis it's trivial. It harkens back to the days when everyone was worried about $100-a-barrel oil. - Peter Schwartz
People are afraid of the rare, the exciting, the flashy, smoke and loud noises, and the different. The big killers are coronary heart disease, strokes, pneunomia, automobiles, cancer but these are quiet, common, and not as exciting.... Y2K is like the real killers, it's coming, you can't do anything about it, everyone will get hit somehow.... It's gonna get all of us. - Cory Hamasaki
One of my favorite anecdotes from the runaway inflation of the Weimar Republic is the story of the fellow who left a wheelbarrow full of banknotes unattended for a moment and returned to find the cash on the ground and the wheelbarrow missing. The take-home? Make sure you have the basic commodities that even cash can't buy when scarcity abounds. Gold has its place in your Y2K portfolio, but its nutritional content is on the low side. - Jeff Baker
Investors' Business Daily (August 27) reports that the American Society of Newspaper Editors is to spend $1 million over three years to find out why the public doesn't trust newspapers. Now, try to keep a straight face. These folks are serious! We'll gladly save them the time. As Isaiah said: "The watchmen are blind, they all lack knowledge; they are all mute dogs, they cannot bark, shepherds who lack understanding; they all turn to their own way, each seeks his own gain." (56:10-11) Or, in four simple words: bias, trivia, nothink and doublethink. Now, gentlemen, about that million dollarsŠ - Steve Myers
Michael Espy was recently indicted on 39 counts -- including charges that he accepted $35,458 worth of gifts such as lodging, entertainment, and tickets to sporting events. Under the law applied in Espy's case no reciprocity on the part of the donor had to be proved. Bill Clinton, his boss, recently spent several weeks at the home of a multi-millionaire developer with major matters before the federal government. The home at which he stayed is near one that was recently rented for two months at the rate of $19,000 a week. There is no information available on whether any entertainment or sports tickets were provided, but the gift was worth at least $60,000. Bill Clinton has not been charged with anything. - Sam Smith
OK, you want to know, when do we start counting the weeks to the crash? I would say, not yet, as it's not clear that we're past the all-time highs. If the Dow peaked in August, then adding eight weeks would give us a crash by mid October.... without much warning, as "Timer's Trend" is still bullish. But other averages are still hitting new highs, making the arrival of a crash unlikely before mid-November under the best.... oops, my bias is showing, I mean the worst circumstances.
While I have pegged this fall as the most likely time for the meltdown, that is not a guarantee. With the Federal Reserve still being generous with newly-minted money, and absent any obvious pinprick, the stock-market bubble can just keep getting bigger and bigger (although at a slower rate) until, like the rupture of a bubble-gum bubble, it exceeds its "natural" limits. Since we have no way of knowing in advance what those limits are, we have no choice but to just wait and see.
Of course, for me the point is not to guess when the stock market is about to head south and bail out just before; the point is not to be in stocks at all when they are grossly overpriced. At a recent retirement seminar I attended, the presenters offered some interesting statistics from a Morningstar survey of mutual funds. While the funds reported an average 13%-per-year gain over the past five years, the average investor in these funds lost about 2% per year. Why?.... because people rushed in chasing the prior year's (or quarter's) success story, just in time to catch the very top and ride the downward wave for a fund as the momentum from whatever fad had propelled it upward expired. (If the average mutual-fund investor does this poorly in a bull market, it does make one wonder how he or she will do in a bear market!) I'm not a fan of buy-and-hold-forever, but as a strategy it sure beats the windmill-chasing in which, apparently, a great number of "investors" indulge.
Then, I wonder about all of the people who have chased stocks above Dow 4000. It's worked pretty well for three years now.... so far. If you're still in stocks and hoping to get out just before the bear begins in earnest, you'd better hope that "Timer's Trend" will not fail. I offer no guarantees that this signal will give adequate warning.
I received so many favorable comments about my closing comments in the most recent "computer warmline" that I've decided to reprint them here for those of you who are Internet-impaired:
I have a fantasy. It is: Half a million investors check my website regularly. (After all, such a bargain for the price!) Someday in the not too distant future "Timer's Trend" actually gives a sell signal, which I dutifully post. The next day half a million Internet-savvy, plugged-in mutual-fund switchers use their computers to switch all of their holdings into "cash", driving the Dow down 700 points in extremely heavy trading. This sends the indexes right through all of the less-sensitive moving averages.... 200-day, 39-week, etc.... that the majority of investors follow, and the day following everybody tries to sell, creating "meltdown day" with the markets mostly closed. The media scramble to pinpoint the cause of the crash, and eventually locate me. I am in heavy demand.... interviews on TV, in the WSJ and Barrons, in Newsweek, Time and Fortune. (I even get a call from the "plunge protection team" in Washington, asking me what the hell I think I'm doing, and promising to investigate me.) I am the guru of all gurus.... I can make tha markets move with my calls, just as Joe Granville did in the 1970s and Bob Prechter did in the mid-1980s....
Well, dream on. As a practical matter, when the signal does finally come, you will doubtless be among an extremly tiny minority to get the warning. Use it to your advantage.
Original cost: $ 8,090.45
Present value: $ 7,077.50
Increase: $-1,012.95 [-12.52%]
The performance of this portfolio and its predecessors ("Hedger's Delight", "Present and Future Income", "Crapshooter's Folly") from January 1987 to the present is -0.80%, for a compound annual rate of return of -0.06%. COMMENT on "Phoenix": There is no change from the last issue. (Cash balance is not up to date.)
B. "Professors' Investment Group (PIG)" - investment club portfolio.
SUMMARY - "PIG":
Original cost: $ 7,580.00
Present value: $ 8,668.99
Increase: $ 1,088.99 [14.37%]
COMMENT on "PIG": The PIGs' Web page is at
http://www.assumption.edu/HTML/Faculty/Kantar/WPigs.html
C. Fidelity IRA - real portfolio, includes commissions:
SUMMARY - IRA:
Original (1983-86) cost: $ 8,326.19
Present value: $15,714.38
Increase: $ 7,388.19 [88.73%]
The performance of this portfolio (including its predecessors) from January 1, 1987 to the present is +43.29%, for a compound annual rate of return of 3.40%.
D. CREF Pension plan; I switch between indexed stock/bond/money funds:
Date Sold Bought
13Mar92 stock @ 56.65 MM @ 13.41
29Apr92 MM @ 13.48 bond @ 31.19
19Jun92 bond @ 32.14 MM @ 13.55
29Jun92 MM @ 13.57 stock @ 56.74
24Jul92 stock @ 56.76 MM @ 13.61
29Oct92 MM @ 13.72 stock @ 58.61
23Dec92 stock @ 61.48 MM @ 13.78
16Jan95 MM @ 14.83 equity-index @ 26.44
20Jan95 eq-index @ 26.19 MM @ 14.84
Values, 24Sep97: stock, 136.51; MM, 17.15
Gain, 1988: 18.91%; 1989: 14.48%; 1990: 8.28%; 1991: 27.93%; 1992: 10.20%; 1993: 3.08%; 1994: 4.07%; 1995: 4.80%; 1996: 5.28%
Gain, January 1 through June 30, 1997: 2.67% (5.42% annual rate of return)
Total gain since January 1, 1988 (9.5 years): 149.86%
Compound annual rate of return: 10.24% (My long-term target: in excess of 15%)
Gain shown excludes the impact of additional monthly cash contributions.
Buying CREF stock on January 1, 1988 and holding it gained 306.27%, for a compound annual rate of return of 15.91%.
E. Current unfilled portfolio good-til-cancelled orders: None.
COMMENT on "Timer's Trend": As noted before, still bullish.
______________________________ TIMER'S TREND _________________________________ Wed 23 Jul 97 . | . # | 8088.36 | . + * Thu 24 Jul 97 . | . # | 8116.93 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Fri 25 Jul 97 . | .# | 8113.44 | . + * Mon 28 Jul 97 . | .# | 8121.11 | . + * Tue 29 Jul 97 . | . # | 8174.53 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~* Wed 30 Jul 97 . | . # | 8254.89 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~* Thu 31 Jul 97 . | . # | 8222.61 | . + * Fri 1 Aug 97 . | # | 8194.04 | . + * Mon 4 Aug 97 . | . # | 8198.45 | . + * Tue 5 Aug 97 . | . # | 8187.54 | . + * Wed 6 Aug 97 . | . # | 8259.31 | . + * Thu 7 Aug 97 . | .# | 8188.00 | . + * Fri 8 Aug 97 . * . | 8031.22 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~ Mon 11 Aug 97 . | .# | 8062.11 | . + * Tue 12 Aug 97 . I # | 7960.84 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~ Wed 13 Aug 97 . I # | 7928.32 |~*~~~~~~~~~~~~~~~~~~~~~~~~~~~ Thu 14 Aug 97 . I .# | 7942.03 | + * Fri 15 A*g 97 . #I . | 7694.66 |~+~~~~~~~~~~~~~~~~~~~~~~~~~~ Mon 18 Aug 97 . I # | 7803.36 | + * Tue 19 Aug 97 . I . # | 7918.10 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Wed 20 Aug 97 . | . # | 8021.23 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Thu 21 Aug 97 . I #. | 7893.95 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~ Fri 22 Aug 97 . I# . | 7887.91 | .+ * Mon 25 Aug 97 . I .# | 7859.57 |~*~+~~~~~~~~~~~~~~~~~~~~~~~~~ Tue 26 Aug 97 . I # | 7782.22 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~ Wed 27 Aug 97 . I .# | 7787.33 | + * Thu 28 Aug 97 . I# . | 7694.43 |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~ Fri 29 Aug 97 . I #. | 7622.42 |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~ Tue 2 Sep 97 . | . # | 7879.78 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Wed 3 Sep 97 . | . # | 7894.64 | . + * Thu 4 Sep 97 . | . # | 7867.24 | . + * Fri 5 Sep 97 . | . # | 7822.41 | . + * Mon 8 Sep 97 . | . # | 7835.18 | . + * Tue 9 Sep 97 . | . # | 7851.91 | . + * Wed 10 Sep 97 . | # | 7719.28 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~ Thu 11 Sep 97 . | #. | 7660.98 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~ Fri 12 Sep 97 . | . # | 7742.97 | . + * Mon 15 Sep 97 . | .# | 7721.14 | . + * Tue 16 Sep 97 . | . # | 7895.92 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Wed 17 Sep 97 . | . # | 7886.44 | . + * Thu 18 Sep 97 . | . # | 7922.72 | . + * Fri 19 Sep 97 . | . # | 7917.27 | . + * Mon 22 Sep 97 . | . # | 7996.83 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~* Tue 23 Sep 97 . | .# | 7970.06 | . + * ========================================================================{, } = "Timer's Trend" (4% and 10% exponential) SELL ({) or BUY (}) signal
NEXT ISSUE - will appear about September 15.
/Nick Chase