Life As We Know It Is Over?
Exaggeration? Only time will tell. As we all are well aware Tuesday will go down in history as a day of infamy even greater than the attack on Pearl Harbor, the bombing of the Federal building in Oklahoma and the Kennedy assassination. There is no precedent to the events that occurred on Tuesday morning. The death toll is likely to be well over 10,000 and it will be months before the pile of rubble that was once the center of the world financial markets is cleared. We may never know exactly how many people were killed or who actually gave the go signal but the impacts of those airliners will be felt for many years to come.
The financial impact of course is inconsequential compared to the loss of life but it is going to be enormous. Not only did the World Trade Center house major offices for dozens of brokers and banks but also commodity exchanges, legal firms, trust companies, financial publishers, mutual funds etc. Almost a square mile of Manhattan real estate was demolished. The collapse of the twin 1300 ft tall towers showered concrete and steel for a block in every direction damaging dozens of surrounding buildings and setting them on fire from the 100,000 pounds of jet fuel that was consuming the WTC. Late news announced that World Trade 7 collapsed around 5:30 from this damage and several other buildings in the 20-30 story range were also in danger of collapse. At least a dozen buildings have been rendered unusable and will be demolished in the cleanup.
Life as we know it is over? I think that is a pretty good bet. If you have ever traveled overseas you will understand what I am talking about. Citizens/travelers in other countries have no civil rights. Police and military openly carry machine guns and randomly stop and question civilians. The rules are different. Unruly, obnoxious, impolite or just plain uncooperative individuals are quickly and roughly dealt with. They have learned long ago that terrorists and hijackers must be dealt with aggressively and without mercy and that sometimes means innocent individuals and/or bystanders are caught up in the fray.
When four, count them, four, state of the art airliners, fully loaded and leaving from three different airports, are hijacked by multiple terrorists armed with knives, guns and grenades on the same day, it is a wake up call for American security. Heads will roll on these security errors but it will be little comfort to the families of the victims. Americans will soon be seeing increased security, higher visibility for security forces and untold complications for lawful travelers. All of this will have little impact on stopping true terrorist activities. With the Mexico and Canadian borders wide open any real terrorist can simply walk in and setup shop. Because the terrorist war is likely to escalate on both sides Americans will be quickly rethinking their current open society as well as travel plans abroad. The FAA has grounded all flights in the US until at least noon on Wednesday. They are closing Manhattan for Wednesday and they are saying that nobody will be allowed into the area until the danger of other building collapses has passed and buildings farther away can be inspected for damage from falling debris.
In Denver Colorado today the panicked public were quickly filling food stores and stocking up on nonperishable food. Lines were out of the parking lots of many filling stations as panicked drivers were filling up the vehicles. Banks around the country were reporting a run on ATM machines and several banks quickly programmed a limit on cash withdrawals on a daily basis. Fears of lost account records were cropping up everywhere prompted by CNBC showing burned account records from companies like Cantor Fitzgerald, Chase and Morgan Stanley, that were picked up on the street blocks from the WTC.
Morgan Stanley quickly went on air and squelched the rumor that all the records were lost when their 50 floors of corporate office space and complete trading floor in the WTC were destroyed. They said they maintain complete copies at remote locations as do most brokers. Still, you can bet that there are tens of thousands of accounts that were not so lucky simply due to the numbers of financial firms destroyed. What will this do to the markets? How are these types of disasters handled in the financial community? We will be producing a complete range of articles today and tomorrow on how this will impact everyone. We will do our best to cover every aspect of the financial impact to our readers.
The US markets never opened but the European markets still open dropped from 4-7% before closing. The German DAX fell almost -9% before a bomb threat stopped trading. US exchanges will be closed at least through Wednesday and quite probably even longer once the magnitude of the damage to the infrastructure is determined. There is a precedent for this since the markets were closed two days when Kennedy was assassinated. The US markets will not crash. Surprised? The world economy cannot afford to let the US markets crash. Even though the confidence in the strength of the US has been broken the world banks and governments have all come out in support of the US. They have pledged to inject whatever liquidity needed to insure that all market needs are met. There is a very good chance that the Fed will make an intermeeting rate cut the day the market reopens to show support and prop up the markets.
Historically the markets will dip on major event but quickly rebound as bargain hunters rush in to fill the gap. Did JNJ change its product line? Did Cisco announce it was getting out of the router business? Of course not. This is a news event that will rock the markets but the basic economy has not changed. It still stinks but it is still the best economy in the world. In reality the fall out from this event could actually provide a jump start once the initial shock has passed. There are going to be major problems in several sectors, banking, brokerage and insurance, see our special report for the details, and major gains in sectors that will benefit from the reaction to this event. Defense is the number one area which is likely to receive hundreds of billions of dollars in windfall contracts and projects. New security devices and new technology will be called on to prevent recurrences in the future. Hundreds of thousands of new security personnel will be hired, trained, equipped and put to work over the next year. Out of every catastrophe rises a stronger country.
The different security agencies are now saying there is better than a 90% chance that Osama bin Laden was responsible for the highly coordinated attack. There have been several warnings of prior attacks that never appeared for reasons unknown. He has declared war on the US in the past and has been traced to numerous prior attacks. He has eluded attempts to catch him for years. The last time he bombed US embassies the US tossed a couple cruise missiles at his headquarters and called it even. I doubt that will be the result this time. Regardless of who actually did this he will likely become the highly visible target. There will not be a rock big enough to hide under or a cave deep enough to protect him. George Bush is facing a test that has no precedent. He now has a blank check and a clear directive to silence open terrorism on a global scale. The US and its allies will declare war on terrorism and it will probably be a scorched earth policy.
The biggest problem for the markets next week will be the consumer. Historically terrorist attacks cause people to stay home, restrict spending and worry about the future. The keyword here is consumer confidence and it took a serious hit on Tuesday. The government will be working to put forth a strong face with a kick butt attitude and the Fed will move into aggressive mode with Fedspeak on every news outlet that will attempt to soothe fears. The panic buying across the country today will ease. OPEC said they will keep the oil markets stable. The stock market will go back to business as usual at least by next week. It has to happen. The longer markets are closed the more uneasy investors will become. As morbid as it may be the markets must reopen immediately to relieve the pressure even before they recover the bodies.
What an event like this brings into focus is our mortality and the quickness of unexpected death. Each day we get up and go to work without ever considering the possibility that something outside our control could end our life and leave our families in shock. This was brought home to me especially in this event. I was in Washington DC on Monday for business. I drove by the Pentagon. I flew a United 757 out of Dulles at 10:PM last night. I came very close to changing that flight to a Tuesday morning flight to do some sightseeing. In the lottery of life my number did not come up. My flight was uneventful and I completed a book I had been reading. Hundreds of travelers today were not that lucky. Their families and the families of the office workers now number in the tens of thousands that have been horribly changed.
We lost many subscribers today. How many we will not know for weeks but 183 readers have email addresses that can be traced to the WTC in a very quick search. To the families of these readers our prayers go out that your loved one was in the group that was able to escape. To those families whose loved ones lives were senselessly ended our prayers are with you. No amount of good words or well meaning intentions will help you today. Just like the Oklahoma bombing there is no way to apply reason or rational thought to those who did this. It will never make sense and it will never quit hurting. God bless you and keep you.
With my deepest sympathy,