Financial Effects of the Terrorist Attack

The terrorist attack of Sept. 11th, 2001 on the Wall Street District of New York undoubtedly shook the country causing much despair in the lives of many Americans. What remains unknown is how the economy and the stock market will react.

Taking Toll:

I cannot even begin to understand the personal losses people are experiencing after losing a friend or family member from this sickening terrorist attack. I would, however, like to discuss some of the financial losses that occurred.

Approximately 50,000 people worked at the Twin Towers each day, with thousands of visitors daily. In April of this year, Silverstein Properties and Westfield America, Inc. signed a 99-Year lease for the World Trade Center for $3.2 billion. According to the World Trade register, many finance-related entities were stationed at the World Trade Center including:

• Morgan Stanley Dean Witter (occupied 25 floors of the Twin Towers)
• The New York Mercantile Exchange
• Cantor Fitzgerald
• Keefe, Bruyette & Woods
• Fiduciary Trust Company International
• Bank of Yokohama
• Bank of Taiwan
• Fuji Bank & Trust
• AIG Aviation Brokerage
• Oppenheimer Funds
• Alger Funds and Alger Management, Inc.
• Marsh USA
• Allstate Insurance
• Merrill Lynch
• American Express
• Complex 7
• U.S. General Accounting Office
• Bank of America
• Germany's Commerzbank and Deutsche Bank
• Thomson Financial
• AON Corporation
• Lehman Bros. Holdings
• Salomon Smith Barney (7 World Trade Center that Collapsed)
• Switzerland's Credit Suisse Group (5 World Trade Center)
• Banc of America Securities/Bank of America (HQ in North Carolina)

Among the death toll include David Alger (President Fred Alger Management, Inc.), Edmund Glazer (CFO MRV Communications), Daniel C. Lewin (co-founder of Daniel C. Lewin), Peter Gay (vice president and general manager Raytheon Co. plant), Bill Weems (Commercial Producer), Garnet "Ace" Bailey (Director of pro scouting for the L.A. Kings), Barbara Olson (T.V. commentator and lawyer), Leslie A. Whittington (Georgetown U. Professor of Economics), Nicholas Humber (Owner Brae Burn Management), Judy Larocque (founder and CEO of Market Perspectives), Ian Gray (President of healthcare consulting firm), Steven Jacoby (COO of Metrocall Inc.), Jeff Mlandenik (interim president at E-Logic), James Hayden (CFO Netegrity Inc.), and Thomas E. Burnett Jr. (Sr. Vice President and COO Thoratec Corp.) according to CNN Television.

Among the costs of the terrorist attack are the destroyed buildings and equipment, the lives of many workers, insurance claims, the crashed airplanes, emergency operations, delayed flights, and the ensuing court costs. Businesses across America shut down on Tuesday and businesses in New York may be shut down for much longer. The total financial cost of the terrorist attack may never be known.

The Market's Reaction:

Some fear that the terrorist attack will be the final straw for the struggling market resulting in a worldwide recession. The market was closed on Tuesday and opens Monday at the earliest. What will happen when the market re-opens?

As always, it is hard to say. We can say that futures on the S&P 500 were going down before the market closed. We can say that the dollar slid on Tuesday and markets across the world suffered losses on Tuesday due to this event. It is very likely that the market will drop when it resumes trading.

The Good News:

Despite what appears to be the "nail in the coffin" for the U.S. market, there is still hope. Many expect the FED to drop rates further which typically breathes life back into the market. Also, if you look back in U.S. history, most of the major crisis events result in a short term losses for a few weeks followed by short term gains and even strong long-term bull markets. Examples of crisis that were followed by strong recoveries include the Cuban Missile Crisis, the Kennedy assassination, the Gulf war, Watergate, the 1993 World Trade Center Bombing, and the Oklahoma City Bombing. Pearl Harbor resulted in short term loses followed by gains, but then losses occurred once again but the end result was a very strong bull market.

The terrorist attack left a permanent scar on the U.S. that will forever be remembered. Best wishes for quick recovery for those affected, and retribution on those who mean to harm innocent Americans.