|Illustration by Charise Mericle|
That's Y2K as in Year 2000 Bug, the global computer glitch that's either been (take your pick) understated or overhyped, depending on whether you think it will bring the world to its collective knees or pass as a minor data hiccup.
Stewart, a securities analyst and Y2K pundit whose home, business and yacht are anchored in Dana Point, is banking on the world-to-its-collective-knees scenario. And despite the obvious trauma that his forecast presupposes -- the fall of governments, the urban rioting, the economic depression -- he can't help but be a bit gleeful. "This is going to be the greatest transference of wealth in the history of mankind, period!" he likes to say.
In other words, in the true spirit of American enterprise, Stewart has discovered an "upside," as they say on Wall Street, to the end of the world as we know it.
That someone would come up with an investment angle on the techno-Apocalypse was inevitable. The big question, of course, is whether the worst will actually happen when the computers of the world roll over to 2000, a date that many of the world's mainframe computers -- because much of the complex tangle of code that runs them represents dates in just two digits -- are likely to read as 1900. The end result, according to Stewart and a handful of other quotemeister Y2K gurus, could be a spectacular digital crash and burn.
Up until recently, those warnings had been falling on deaf, or at least underwhelmed, ears. Stewart, along with Y2K doomsday consultants Kevin Schick and Peter de Jager, has been criticized for exaggerating the probable outcome of the crisis, fanning the flames of panic even. As early as 1996, Fortune magazine condescendingly dubbed him "the one most responsible for unleashing the Year 2000 problem on the investing public."
Still, an unmistakable tone of, shall we say, heightened concern has crept into recent government updates on the Y2K fix. Last week, for instance, Representative Stephen Horn (R-Calif.), who chairs the House Subcommittee on Government Management, Information and Technology, released his seventh quarterly report card on the efforts of federal agencies to fix the problem. Overall, Horn gave the 24 agencies a grade of C-plus, up from last quarter's D. The bad news was that a number of critical federal agencies are still far behind in their Y2K repair efforts. Bringing down the curve were the Departments of State and Transportation (home of the Federal Aviation Administration), which each got an F. The Department of Defense scored a C-minus.
And earlier last month, the state of California attempted to put the best face on its own mixed news. The good news, according to the Governor's Office, was that state agencies had completed 65 percent of their Y2K repairs on computer systems that have "some direct effect on life, health and safety." The not-as-good news, as Governor Gray Davis delicately put it: "Not all of our mission-critical functions are currently up to speed" and fixing everything "will not be easy." The Governor's Office declined to specify exactly what still needed repair (or precisely what "mission-critical" means), but mentioned traffic signals, fire engines and water pumps as technologies subject to Y2K dysfunction.
So it seems that Stewart -- who has been warning that the government and business are woefully underprepared for Y2K -- is at least somewhat closer to the mark than his critics have given him credit for.
NOT THAT VINDICATION BY AUTHORITY FIGURES seems to matter much to Stewart. He seems content as the classic outsider. Sun-bleached Dana Point is a long haul from Wall and Broad streets, and Stewart -- who favors a ponytail, goatee and extremely amplified classic rock from the '70s -- cuts an unlikely figure as a high-financier. His idols include pioneering mavericks from the world of high finance and sex, Warren Buffet and Hugh Hefner, respectively. (A near-life-size limited-edition Cibachrome print of the Marilyn Monroe centerfold from issue No. 1 of Playboy magazine, signed by Hef himself, adorns the wall in his office.)
Still, a well-heeled elite of Wall Street fund managers, stockbrokers and accountants (2,000 of them, of course) subscribe to his investment newsletter, which specializes in picking investment hedges against a potential Y2K meltdown. And no lesser an authoritative light in the Y2K world than Representative Constance Morella (R-Md.), chairperson of the Technology Subcommittee of the House Science Committee, takes Stewart's newsletter. (A number of erstwhile celebrities eager to hang on to their capital gains come what may are also subscribers, including Henry "The Fonz" Winkler, Chad "Medical Center" Everett and Tommy "not Cheech but the other guy" Chong.)
Stewart recently compressed his two and a half years of Y2K research into a book-length special report for his subscribers (and visitors to his Web site -- www.stewartreport.com -- who have $30 they haven't yet converted to bottled water and stockpiles of Spam). Rather luridly titled Date Rape 2000: Investing in the Crime of the Century, the book paints a spooky picture of the post-Y2K world, part Chuck Heston Omega Man, part Oliver Stone Wall Street.
So many computers, he writes, "will go down -- and stay down -- for a long enough period to create a sinister economic scenario. The kind of scenario that makes for ugly reading, but beautiful profits." He dedicates the book to his readers in hopes that "they might profit from the computer date-change problem rather than simply help pay for it."
Overzealous rhetoric aside, what the book does best is convey the boggling degree to which the Y2K-susceptible machines that now govern our daily lives on all levels, micro to macro, are intimately interconnected -- co-dependent, you might say. If one critical system crashes, the ripple effect can have broad consequences in the rest of the world.
As a textbook example of this, Stewart singles out the Detroit auto industry, which relies on an extremely complex chain of technologies and outside vendors to supply the parts necessary to build a car. Not only are the Detroit Big Three not going to fix their own Y2K bugs, he writes, neither are many of their parts suppliers, many of whom are foreign companies. And don't get Stewart started on the sorry state of foreign compliance.
Then there's the issue of transportation: Many automated activities in the world economy no longer have manual systems in place to handle the work should the computers fail. "The railroads are the scariest of all," he says, referring to the fact that piloting people and freight in the United States now relies on complicated computer-controlled grid-route switches, as the railroads have all dismantled their old manual switching systems.
"We don't have any switching yards!" says Stewart after lighting up another in an endless series of Marlboros. "We don't have any switchmen! It's a computerized activity. Without the computers nothing happens. Even if all the nations were Y2K compliant and if Detroit got all the parts, from all the nations," he shouts, "could they actually get the trains to get the cars to the West Coast, to sell the product? And with businesses going sour in a thousand similar ways . . . do you think there are going to be people with money to even buy these cars? Get real!"
NOT SURPRISINGLY, STEWART ADVISES HIS READERS to dump their blue-chip stocks -- ASAP. He predicts that as Wall Street and the public begin to understand the sheer scope of the Y2K problem, the stock market will begin to plunge, well before January 1.
And after the big plunge hits, in the early months of 2000, Stewart believes we'll be looking down the double-aught barrels of full-fledged economic depression. Which is why he's putting his home up for sale this April -- so he can buy it back at fire-sale prices next year, "When cash is king."
He also plans to unload his five vintage sports cars, stock a storage unit with bottled water and hunker down on his yacht until the millennial clouds clear.
"I'm going to go bargain hunting post Y2K!" he says. "That's the whole name of the game, to get liquid, to get really relaxed, to go have some fun. Wait for it to fall out of bed. Because whatever you buy in the Year 2000, you're buying at the bottom."