The question was raised on another thread about the possiblity of making money out of Y2K.

I'm one of those people who is concerned about my investment portfolio. I've worked hard to get where I am, and, at 58, I want to hang on to it. Since I'm actively involved in a Y2K project, I look forward to the best and worst of worlds in the next 2-3 years.

There are two parts to the investment puzzle. The first is keeping what I have, which means (a) staying alive, and (b) hanging on to my retirement fund. First I intend to provide for the survival of my wife and me, and for my 16-year-old daughter who lives 1600 miles away with her mother. I plan to do this before 2000 by (a) getting as far away from Toronto as possible, and (b) getting out of the market, with the exception of precious metals and some software companies involved in Y2K projects, and some gold and cash. I've already started (b).

I also hope to profit from Y2K, and I don't feel I should apologize for this. If I have knowledge about a pending apocalypse that others cannot or do not want to recognize, don't blame me. Can you imagine having financial knowledge about a "sure thing" and not capitalizing on it? I can't. Isn't this the "American way?" If others choose not to come to terms with Y2K, why shouldn't I take advantage of their shortsightedness or ignorance? It certainly isn't for lack of persuasion on my part, but I'm tired of people's eyes glazing over when I talk about it.

As my broker says, "Go with what you know." I finally "know" something others don't -- even my broker doesn't , since she's still too busy trying to push the Dow to 10000 -- and I plan to use it. I am not wealthy. There is no easy money in this. There is large risk in any kind of investment right now. It is no picnic, but I hope to make money.

Is this ethical? Steve Francis

-- steve francis (sfrancis@sympatico.ca), May 29, 1998

Answers

Steve has asked, "Is this ethical?" This is in regard to making money from the ignorance of others. As long as there is no intent to deceive or withhold any information that is necessary for the well being of any other person.

The Benevolent thing to do, from the Christian perspective, is to Love others better than yourself. Meaning that you take their well being into account, before your own.

There are a few questions still unanswered regarding personal wealth:

1) Will there be any access to any form of monetary retirement assets? Will there be any redeemable, stocks, bonds, and securities?

2) What form of monetary exchange will survive and be useful on the street, for everyday use.

3) Will you be able to save all of your of your material worth? If not then you will have to come to grips with the anticipated losses.

4) If you should decide to "Cash Out" your present resources, what form of medium will you choose, (Gold, Silver, Cash, etc.)? How much of this resource can you safely have in your personal possession? Where will you store this resource?

Having a great deal of cash around, will be a problem many will have to deal with. Having Gold or Silver "Collectable" coins may prove inadequate for every day exchange. Barter, (goods and services) may be more valuable than cash and as necessary as cash.

-- Dave Jones (dfj@fea.net), May 29, 1998.

Steve,

It's perfectly ethical, as long as you don't do stuff like buy a bunch of generators and then sell them at triple their cost to a bunch of desperate single moms with shivering children. But IMO making money off of Y2K will require crackerjack timing. Let's say we think that gold will increase in value so we buy some gold. Gold does increase in value in late 1998 and all of 1999. So, we sell the gold and buy......what? Or we hold the gold, the crisis happens, panic flows then subsides, and people get back to making their lives as normal as possible. Will they still want gold? Probably not.

For me and my family's part, we are seeking strictly to preserve our capital, not to make a profit. I think that is sufficiently tricky.

Best regards,

David

-- David Palm (djpalm@compuserve.com), May 29, 1998.

Why don't you people who are worried about your money JUST TAKE IT OUT OF WHEREVER IT IS AND SIT ON IT!!! Why are you seeking financial advice from complete strangers???? The only SAFE thing to do is have it in YOUR possession. I listen to those blabbermouths on TV giving financial advice and could vomit. IT's your money! They don't know squat! Who do you think has more money...you or your broker?? I will never understand why people seek advice from these leaches. Ask a question and you will get 50 different opinions from them. AGAIN...IT'S YOUR MONEY!! Use your instincts!! GEEEEEEEEEEZ!!

-- Annie (anniegaff@mailexcite.com), May 29, 1998.

Dearest Annie, Next time, share with us how you *really* feel...no more holding back.

Lighten up, this is a critical issue for most working people who have saved a little through various retirement mechanisms. The fact is, no one has the slightest idea where any of the markets will wind up -- and collecting opinions can be no worse than guessing on your own in the dark, which is where we are. Like none before it, this is a time of Great Unknowns -- no one can claim a sense of deja vu over Y2K, "'cause it ain't never been like this ever before." Forgive us our insecurites when it comes to our nest eggs... like the rest of us, he needs all the input he can get.

-- T.J. Roberts (tj1234567@aol.com), May 29, 1998.

Ugh! Earth to this forum! I just don't understand what is so difficult about this decision. Get your money before it is too late! At least put it in a safe (if there is one) place like a money market. Sure would beat losing half or all of it in the stock market if the SHTF. The least of my worries now is how I can make a buck from this impending disaster. Yes Steve, it is the American Way.....GREED!

-- Annie (anniegaff@mailexcite.com), May 30, 1998.

Steve,

It's all about choices, like everything else. Fortunately where money is concerned you don't have to have it all in one place. Diversification is still a good idea within reasonable limits. In the past year or so Warren Buffett's bought about $10 billion in bonds and 110,000,000 ounces (yes, one hundred and ten million- look at this week's _Forbes_) of silver that the world knows about. No one seems to be calling him a lunatic. He simply says that he doesn't feel comfortable with much of the current stock market, and he's moving money elsewhere. He's maintaining stock positions he's comfortable with.

Even in a printing press economy it's mostly a zero sum game- for one person to make (earn?) money someone else has to lose (spend?) it. Profiteering is unethical- profiting isn't. Everyone out there essentially has access to the same information you do. If they choose to interpret it differently (or ignore it), that's not an ethical problem for you. Let willing buyers deal with willing sellers and there is no ethical problem.

A couple of my family members are pretty unsure about some of the things I'm doing in case y2k is a problem (likewise moving money into other places than the stock market, etc.) but they question my wisdom, not my ethics. If I'm wrong it may cost missing the runup to a 10000 DJIA. Big deal. Looking for more than 40% return in a calendar year IS greedy, especially considering the current risk.

The good thing about it is that if I'm right I'll be in a much better position to help take care of them, and others as well. That's the ethical choice I want to be in a position to be able to make.

Good luck,

LPL

-- Lee P. Lapin (lplapin@hotmail.com), May 30, 1998.

Thanks for the feedback. It's easy, living in a large city in this latest decade of excess (remember how, in the early 90s, we reminisced about how "greedy" the 80s were?) to forget the Christian values we learned when we were kids. Perhaps the idea of keeping just what we have is the best idea after all.

Annie, Annie, Annie. Try to remember that "greed" is also called "self interest" by economists. Sure it drives the market economy, but without it, the world would be even more unpredictable and untidy.

Steve Francis

-- steve francis (sfrancis@sympatico.ca), June 01, 1998.

I worked ten days in the tent city in Homestead, FL following Hurricane Andrew in 1992. The only place generators could be purchased within 100 miles was from the back of pickup trucks. The going rate was $2,000. I am quite certain that those who purchased them were glad to get them for their families.

Was it unethical for those to profit in such a way. I don't think so. The essence of capitalism is a willing buyer and a willing seller and that was present. Yes, the profit margin was $1,700. Is that excessive? Probably so. We might think that Microsoft and Intel have been profiting excessively too if we knew the underlying numbers.

Whenever someone has something that has huge demand and limited supply the potential for profit is astronomical. The trick now is to accurately forecast just how bad the Y2k situation will become. The person who forecasts accurately and prepares accordingly deserves to profit. If that person is a Christian, I would hope that his desire to profit would be matched by a desire to bless those less fortunate and to be charitable. There is nothing contradictory about being profitable and Godly.

-- Rev. Stephen L. Bening (Gammadim@AOL.com), June 01, 1998.

Annie,

You need to chill out. There's nothing greedy about wanting to preserve one's hard-earned savings. Despite your easy-breezy remarks about taking your money out and sitting on it, or putting it into a money market, it's not that simple. It's a perfectly legitimate and helpful exercise to brainstorm on where assets might be placed to preserve them. I welcome the mutual brainstorming that takes place here. Your flames are less than helpful.

David

-- David Palm (djpalm@compuserve.com), June 01, 1998.

Annie, I was tempted to "tell you off," but I care too much about you to do that! You're essentially correct and, indeed, "The love of money is the root of all evil." I'm wondering if you're really "snowing" us, Annie, and playing "devil's advocate" in order to get us to really think about our true motives????

-- Holly Allen (Holly3325@juno.com), June 01, 1998.

I believe that anyone who does not convert all of their "financial-market assets" to something tangible and take possession of them is making the wrong decision. If care is taken in choosing what tangibles to acquire, they can be sold in the event of a non-event at 1/1/2000 or used if the event is a catastrophe.

This causes severe dislocation for those with 401K plans since it requires quitting or retiring to access the assets. Nevertheless, having something is better than having nothing, and I believe (and will believe until someone shows me different) that there will be a multi-year bank holiday after 1/1/2000.

As an additional caveat: do not be in debt on 1/1/2000, for after that date you will likely have no way to earn the payments required to service that debt. If you cannot pay what you owe, sooner or later, someone will foreclose or otherwise confiscate what you have since it will them be theirs and they will be tired of your holding it.

Now, if you would like to try to make some money on y2k, I'd recommend buying one or two very far out of the money puts on the Standard and Poor's index, oex puts I think they are called. they usually last for three months or so. Say you buy one with a premium of $1.00, your cost would be $100.00 plus fees. If at any time before it expires the index drops far enough for you to make a profit, you can sell the put for whatever the $current premium times 100 is less fees. This is a play that assumes that the market will go down, and I don't think it can avoid it over the next 18 months. That is, some time during that time frame I expect to see a *massive* drop in all of the market indexes (indices for the purists). The trick is to have your puts in place when the market does drop considerably, but since I expect a massive drop I think always having an active put will assure you of getting at least a modest profit, even though you may buy several that expire worthless before the drop actually occurs.

George

-- George Valentine (GeorgeValentine@usa.net), June 02, 1998.

George,

The put options are a good way to go. (The oex are S&P 100 options, you can also get spx, which are options on the S&% 500).

You can also but leap puts, which expire in either December 1998, or December 1999. With the S&P 500 now just below 1100, the Dec99 800 options are about $2300.

Is it wrong to buy these options in the hope of making a profit? It's a zero sum game. The guy who sells them does so in the belief that the market is going to go up and that he will make money. He has access to the same news you do......this isn't about trading on insider information that's not available to the public. y2k has been a known factor for years now. It's just that people on this forum pay more attention to it than others.

For the same reason, if you choose to buy gold or silver, and you profit on it, you have gotten into a game where that gold or silver can go in either direction. If you pick the right direction, good.

If you choose to buy the stocks of companies doing y2k work and they go up, you've bought them, on the open market, from people who believe they'll go down -- or at least have no use for them, or want the money for something else.

-- Rocky Knolls (rknolls@hotmail.com), June 02, 1998.