The markets may be closed, but there are plenty of die-hard investors and traders who will use the time to plan for the inevitable re-open.
There are so many ways this can go. In some sense it is an election. The fearful will "vote" for despair by selling and the defiant will vote for optimism by buying.
The impact on the economy MAY be a short-term negative, but it's more likely that this "crisis" will inspire much more spending than the short-term cautious behavior.
If there is a big dip, it could be a once-in-a-lifetime buying opportunity. But if there is just a modest decline and a fair amount of dip buying, then you could geta "dead-cat" bounce effect with a further "down-leg" to follow. But once the short-term volatility has passed, the market will quickly get back to assessing the medium (six-month) outlook for the economy.
There will be a HUGE amount of additional money spent in New York alone. It will be very difficult to restrain Congress from spending since they will want to be seen as doing everything humanly possible to "help the American economy and American people get back on their feet".
The name of the game: Restore confidence ASAP. The Fed has already stated very cleary that they are "standing by" to offer the markets whatever "liquidity" (cheap money) they need.
Don't get too depressed if it seems like people take a go-slow approach over the next week or so. The long-term impact of a little economic slowness over the next few weeks will be minimal.
As I wrote yesterday: Be prepared for ANYTHING to happen.
And get ready to cast your "vote" when the markets re-open.
Jack Krupansky
Updated: September 12, 2001 08:44:18 AM -0400
Copyright © 2001 John W. Krupansky d/b/a Base Technology