Kyle and Economic Crash averted this time, but the threats are still with us

I will say this for not only the economic sector of the United States, but also the hurricane; I am beginning to believe this country is like the cat with nine lives. Once again, what could have been with Kyle will not be as bad as thought due to it staying east. Maine will certainly have a wet and windy day, but Cape Cod and nearby areas were spared—this time.

With each “near miss”, whether New England, North Carolina, Florida or New Orleans; there builds a mistaken assumption that the “really bad one” will ever hit. This is exactly what led to the whole Katrina debacle and perhaps the Ike disaster in Galveston. When it comes to nature, one must respect that as humans, we do not control it.

If a few meteorological details would have been slightly different, the two storms (Kyle and the unnamed storm) which flirted with the country the past few days could have resulted in a much worse scenario. The headlines would be quite different today if a category 1 hurricane had ripped into Wilmington, North Carolina on Friday and a category 2 hurricane tore across Long Island last night. Just as most people do not have any idea how close we came to total economic meltdown this week, so they don’t know how close we came to two hurricanes hitting the coast within two days of each other.

Congressional action prevented the economic hurricane from crushing the United States economy. Atmospheric changes in winds and pressure prevented the two hurricanes from buffeting the coastline. The economic mess is still there and after the initial hoopla over the accord reached by Congress and the White House, the underlying problems will result in another crisis down the road. Weather conditions still favor the development of tropical systems over the next few weeks.

The moral to the story is simply that we must not become complacent either in regards to the financial mess or the potential for future storms. Perhaps there is cause for rejoicing that the world’s financial markets will not crash tomorrow, but there is no reason to sit back and think “all is well” either. There is good reason to rejoice in that Kyle snubbed Martha and her vineyard and decided to check out the sights in Nova Scotia. But, Laura is bound to pop up somewhere soon and where she goes, at the moment nobody knows.

Perhaps, if we are still around to talk about it, down the road we can look back on the last weekend of September of 2008 as NOT the weekend of devastating economic storms and double hurricanes; but rather as the weekend we were temporarily spared, as a country, from the pain and suffering of three storms hitting at the same time. However great the rejoicing is today, I pray it does not lend itself to apathy in the future.

Ike and Wall Street; 2 Days, 2 Places, 2 Equally Devasting Storms

This just in–water is available in Liverpool, 30 miles from Galveston!

In less than 72 hours, two hurricanes slammed into America. The first one hit Friday night at Galveston, Texas. The second one hit in New York on Monday. In both cases, millions of people were dramatically affected by the storm and hundreds of thousands were devastated by the storm surge.

When Ike hit, everyone knew he was coming and had days to either leave or prepare to stay. If staying, provisions had to be obtained which would allow survival for days if not weeks. If leaving, a place to go had to be established as well as the means necessary to get there and stay for as long as needed. There was no way of knowing ahead of time how bad the storm would be or how long life would be disrupted.

The storm which hit Wall Street on Monday was not unexpected. Watches had been posted on Friday and warnings were flying on Sunday. The actual storm which hit yesterday was intense and for those who never prepared for it, devastating. Even today, there is no way to know if the storm which hit the markets yesterday was a category 1 or a category 5.

The general effects of Ike were felt by millions of people in Texas and Louisiana. At this time, there are still millions without electricity, very few gasoline stations opened, long lines at distribution centers to obtain water and ice and nowhere to find food and other supplies. There are still vast areas unreached by rescue personnel and only now is the true strength of Ike being seen in places wiped off the face of the map by the storm.

The general effects of the storm on Wall Street yesterday were felt all through the economy by anyone owning stocks in a mutual fund, IRA or investment package. With the general loss of around 4%, everyone in the country who invests in the stock market found themselves 4% poorer at the end of the day than at the start. Whereas the vast majority of people will simply “weather the storm” and hopefully see their portfolio bounce back later; for some, yesterday was equivalent to living in West Galveston.

Ike slammed ashore Friday night. By Saturday night Ike’s remnants were pounding Arkansas with deadly tornadoes and flooding rains. By Sunday, Ike was swamping St. Louis, Missouri with worse flooding than in the great 1993 flood. Chicago, Illinois was inundated with upwards of 9 inches of rain and major flooding was occurring throughout the city. Places in Indiana and Ohio received hurricane force winds, doing in some cases as much damage as in parts of Houston. Truly Ike’s power was felt thousands of miles away from his epicenter.

People who do not even own stocks will feel the effects of the storm which hit Wall Street yesterday. As everyone’s money tightens, they are less willing and able to buy things and give to charities. The ripple effect of so many people losing so much money in one day will be felt from the retailers to the Salvation Army. In fact, the effects could produce more problems than just the obvious loss of worth felt by those owning stocks.

Where Ike came ashore, the damage is unimaginable. Only yesterday did rescue crews finally make it to “ground zero”. Just as in any major hurricane, the damage exceeded anyone’s expectations. Where the storm surge was greatest, there is nothing left of what once was houses, businesses, churches and schools. The surge came in and took out everything in its path. Those silly enough to have dared defy the power of nature paid the ultimate price, whether they ever officially are counted as a fatality or not.

Those either working for Lehman Brothers stock or who worked for the company were at ground zero of the storm yesterday. An associate of mine who works a block from the building that housed Lehman Brothers, said the line of workers stretched for blocks as they waited to enter and clean out their desks. All these people had jobs Friday and come Monday they were unemployed. Those who owned stock in Lehman found their “investment” worth 18 cents by Monday afternoon. Truly anyone closely involved with the company had the equivalent of a category 5 hurricane go over their house.

This week will determine how much of the rest of this fall will go both in Ike effected areas as well as the stock markets. Depending on what the Fed does today, they may opt for a “quick fix” by way of lowering interest rates to stimulate more borrowing at the expense of the dollar, or may continue their hands off policy and allow the markets to naturally shake down. Depending on what they decide, Wall Street will either rally or tank; and the effects on the economy will flow behind.

This week is the week when either Ike victims start to see genuine disaster relief or we find yet another gigantic FEMA boondoggle. So far, using the government’s socialistic approach to relief, those who have deeply affected by Ike remain in a state of hunger, thirst and growing frustration. I will save my scathing editorial opinions of FEMA for another post; but suffice it to say, I am not a big fan of the government hijacking the disaster relief and recovery operations away from the private sector. I fear that is exactly what is happening in the economic sector even as I write this.