HCMI Client Letter - July 7th, 2005
Dear Clients and
Friends,
In London this
morning at about 9AM local time, 4 explosions occurred, three in the Underground
system, one on a bus. Casualties are not yet known, but should be
comparable to the Madrid training bombing of March 2004, which claimed over
200. A preliminary claim of responsibility has been made by the "Secret
Organization of al-Qaeda in Europe", and certainly this attack has much in
common with the Al-Qaeda's previous attacks in Madrid, Bali and New
York.
Asian markets were
already closed for the day and recorded no reaction. European markets and
US stock futures fell 3% on the news; US stock futures are now down
1.5-2%. Oil, which hit a new record over $62/barrel earlier in the day,
fell to $57/barrel, before recovering to $60. Hardest hit stock market
sectors in Europe are, not surprisingly, airline, hotel and travel
stocks.
As we commented
after the 9/11 attacks, "The events of yesterday are a human catastrophe,
similar to an earthquake or hurricane, but not necessarily an economic
catastrophe." We expect US stock prices to fall today, perhaps
through the end of the week, as knee-jerk reactions by investors cause them to
dump shares. We haven't owned airline or hotel stocks since 9/11 because
these are the most vulnerable companies. However, we have no intention of
selling stocks today because stocks in all likelihood will be higher a month
from now.
As always, we are
standing by to answer your questions.
Yours sincerely,
David Edwards, President
Heron Capital Management, Inc.
(800) 99-HERON
http://www.HeronCapital.com
The Heron Capital Management client letter is published immediately following quarter end and 1 or 2 additional times per quarter. The views expressed in this letter represent HCMI opinion and strategy as of the date published and can change at any time upon receipt of new information. Data quoted in this letter are from sources deemed reliable, but no guarantee of such data is implied.