Dear Clients and Friends,
This morning rescue workers continue to reach
trapped survivors at 4 collapsed buildings within the World Trade Center
Complex. The death count is approximately 266 passengers and crew on 4
aircraft, approximately 800 at the Pentagon, and several thousand killed at the
WTC including about 300 fire fighters and 80 police officers. Hospitals
have more than enough staff and supplies since, unfortunately, people either
walked away from the WTC or were killed outright. The injured number over
2000.
Stock and bond markets remain closed in New
York. It is our hope that markets remain closed through Monday, but
the exchanges are making the decision to reopen day by day. In terms of
the mechanics of the exchanges, most records and computer systems are in remote
locations not effected by the attack. However, businesses were ordered
closed today south of 14th street in Manhattan. The thousands of brokerage
firm personnel that work in that area cannot return to their offices, therefore
we cannot see how the exchanges can reopen for several days. After the
last WTC attack in 1993, many firms transferred their personnel to temporary
offices around the city and in New Jersey, the exchanges remained open
throughout. Obviously the current situation is much more
complex.
Yesterday's events have been compared to the attack
on Pearl Harbor, and evidence is rapidly accumulating that the responsibility
for the attack lies with Middle East extremists. Members of Congress have
called for a declaration of war against the people responsible and any nation
which offers shelter. International leaders have offered support to the US
and it seems likely that if the US did go to war, it would be a united response
similar to the Gulf War. In recent years, international respect for
sovereign borders has allowed terrorists to work with impunity within friendly
countries. In the current environment, those countries which offer shelter
to the enemy will be treated as the enemy.
The Japanese market fell 6% last night, hitting a
17 year low. European markets were flat to higher today after falling 2-4%
yesterday. The US markets, when they reopen, could well have a knee-jerk
reaction falling at most 6-10%. Already European Central banks are
pumping liquidity (increasing the amount of money available for short term
lending) which will drive rates lowers. The Federal Reserve bank is
doing the same, and banks remain open in the US. It would not surprise us
to see an inter-market rate cut from the Fed this week of 0.50%-1.00%
to give investors a quick confidence booster.
Airline, insurance and retail stocks will feel the brunt of selling,
while pharmaceutical stocks and bonds will gain from "flight to safety"
cash flows.
Consumer confidence will likely be lowered, so
retail sales through Christmas will probably be lousy. Economic growth,
which appeared to be ticking up from the recent low, may well tilt back into the
negative. However, not only will interest rates remain low, but there will be an enormous increase in deficit spending
to rebuild New York City and beef up US defenses. Ironically, the US stock market may do well in the coming
weeks. The events of yesterday are a human catastrophe, similar to
an earthquake or hurricane, but not necessarily an economic
catastrophe.
Our phones appear to be working again (the circuits
were overloaded yesterday) and e-mail has worked continuously. As always,
we are available to discuss clients' individual situations.