Much has been felt, said, and written about the barbaric terrorist acts that took place in the U.S. yesterday. Nothing we write here today can make the grief and sorrow disappear as though waived off by magic wand, and we can cover no new ground on what has transpired in the last 48 hours. Accordingly, tonight we will try to turn our focus back to the markets.
As a nation, we are now faced with a choice between self-pitying frets that things will never be the same, or laying plans for the future from this moment forward. Terrorists thrive on the notion that they have psychologically defeated, worn down, and demoralized their enemies. The terrorists are mistaken. While they may be elated at scoring a bulls eye yesterday, they no doubt feel an uneasiness themselves having discovered that we will not take an act of war lying down, and they can only be disappointed by the outpouring of support from around the world.
This ordeal has served to galvanize the American public in the common goal of bringing these thugs to justice while simultaneously showing the world that we will not be defeated or ground to a halt over terrorist acts. Our factories still run, our businesses still function; our defense still operates. Commerce in a free country cannot be stopped. The people who run them, from President to corporate CEO to the nightshift custodian are seeing too it, and in so doing, are re-creating the trust that assures all of us we are in good hands with each other - all that we have worked for, safe from destruction for now.
Just a matter of record, Merrill Lynch, Charles Schwab, and Morgan Stanley all had disaster plans in place and you can be sure your data and accounts are safe and insured against loss. For that is the beauty and original purpose of the Arpanet, precursor to the Internet with its redundant multiple-petabyte per second capacity. All records have been backed up off-site in multiple data centers for easy access. That's just standard operating procedure.
That said, I do not think the world has changed forever. Terrorists, their threats and violent acts, have always been around, but they happened in other countries. Yesterday, we became the "other country". Yet the world has not changed. Only the way in which we in the U.S. think of it has. The destruction, devastating to the people and their families as it may be, was of roughly 11 million square feet of office space out of hundreds of millions across the country, a very small amount in the grand scheme of things. Commerce will go on. And where it cannot, it will resume just as soon as humanly possible.
Nonetheless, the only thing preventing the equity markets, both worldwide and at home, from trading full steam ahead is the damage suffered at the NYSE, and the need to clear debris piece by piece during the rescue attempts currently taking place at the main thoroughfare entrance to the financial district. The NASDAQ building while in danger of immediate collapse should not prevent NASDAQ trading because it is an electronic market that can be duplicated with backup servers and data. Member firms, the NYSE, the NASDAQ, and the SEC are all interdependent upon each other. None can effectively trade without the other without causing potential harm to the investing public. Just as soon as the NYSE can be restored to full functionality and the road is cleared of debris following the continuing rescue attempts, the NYSE and NASDAQ will reopen.
Dick Grasso stated just seconds ago (4:50 pm ET) the NYSE will reopen no later than next Monday, and perhaps as early as Friday. It appears the NYSE, and thus the NASDAQ will remain closed tomorrow, Thursday. However, the Chicago Mercantile Exchange and the Chicago Board of Trade are planned to open tomorrow for regular hours trading all bond, agricultural, metals, commodities, and indexes, excepting only equities.
The only exception in the equities market will be the Nikkei 225 index, which will be traded in Chicago. All other equities and indexes will open for trading as early as Friday, but no later than Monday next week as noted above.
Hats off to the leaders of the SEC, NASDAQ, NYSE, Merc., and CBOT. They are truly a resilient bunch, as they should be.
European exchanges including the FTSE, CAC, and DAX were all open last night, which, contrary to popular belief, actually saw gains instead of the surmised big selloffs. Part of that may be due to the fact that no trading of U.S stocks took place. The exceptions were the Heng Seng and Nikkei, which both had losses.
As for the markets, Jim, Eric, Jeff, and Jon did an excellent job of outlining exactly what is likely to happen going forward. Jon in particular showed the history of cataclysmic events on the market, most of which had no affect, except in the time periods immediately following those life-changing moments, which had markets down. Even so, markets recovered in short order and moved up from there.
I see no reason for this disaster to be any different. In fact, given the resilience of the European market, we could very well see a "patriotic rally" as a show of strength and resolve not to give in to terrorism. Furthermore, on the fundamental side of the equation, cash or liquidity has gone through the roof. The G-7 nations have increased liquidity by as much as one-third in some cases while reassuring financial markets that there is more if needed in order to prevent bank runs and other such negative charged economic behavior. It is not unreasonable to expect government spending to increase in the security and defense industries going forward either.
But bulls take note. The immediate response of consumers, both on the business side and personal side is to halt or substantially slow their purchases. That applies to software, cars, vacations, business travel, etc. An immediate spending slowdown could be accelerated by these recent terrorist events, which would obviously show up as lower than anticipated revenue numbers. That is not good news for those sprouting horns, as it will likely spark more earnings warnings than originally thought in the coming weeks.
The fact of the matter is that there are two so-called markets. One market is the American economy, which will see a blip in economic activity figures, a natural result of such a substantial terrorist attack. This is not unexpected and has likely been mentally accounted for in the minds of investors by now. But that will not stop the progression of an economy already in slowdown.
The second market is that of stocks, and while related to the economy, acts independent of it. Stocks are oversold and likely to bounce up temporarily. The spur to the side of the bull could easily be a patriotic buying spree born of conviction not to let terrorists win the game.
But Austin will cover those points tomorrow or perhaps over the weekend edition prior to the reopening of the markets on Friday or next Monday.
In the meantime, I want to leave you tonight with a quote I found today from one of the original architects of the World Trade Center as he conceived the building. His name is Minoru Yamasaki. "The World Trade Center should, because of its importance, become a living representation of man's belief in humanity, his need for individual dignity, his belief in the cooperation of men, and through this cooperation his ability to find greatness."
It is no wonder that a band of thugs who stand for its exact opposite sought to destroy it. While they succeeded in their mission to destroy the symbol of Yamasaki's words, they will never destroy the minds of great men and women who seek daily to cooperate to build and rebuild symbols of man's greatness for all of humanity.