The Fed Lends A Hand

The Fed continues to do a great job, when in
addition to their massive, unprecedented release of dollars into the system,
they cut interest rates 50 basis points. We should see the ECB do the same
forthwith. Foreign markets turned around immediately, and we saw money
flowing into battered sectors such as airlines, insurers and the like.

Americans need to remember that trading isn’t life or death. A decline of 3%
– 6% isn’t going to change anyone’s life and many of us expect
selective buying to provide a significant boost. We’re not saying that boost
will push us back to last Monday’s levels, but America has led the world
markets for most of the last century and we expect the markets to follow our
lead this century as well. That said, our brokerage firm,,
has been flooded with buying orders below last Monday’s levels rather than
sell orders.

We expect volatilities to surge regardless of how far
down we go, or how much we
rally back. Pay particular attention to September options, as they expire
this Friday. Premium sellers are likely to sell September options, but are
expected to be wary of selling October and further out options, as those are
likely to hold their expanded levels. What to Watch: The market doesn’t like uncertainty, and right
now there is lots of that.


Pre rate cut:

Global Markets (as of 5:30 a.m. CT)

London down .6%

France down 1.2%

Germany down 1.4%

Japan down 5%

Hong Kong down 3.4%

Post rate cut, most of these countries were rebounding strongly.

Airline Stocks

AMR Corp.’s American Airlines, United Airlines, British Airways Plc,
Japan Airlines Co. and other carriers face costs of as much as $10 billion
this week as a result of the terrorist attacks in the U.S.

Financial Stocks

Our securities industry generated more than $300 billion of revenue in
the United States last year, and an additional $110 billion overseas.
If there are 220 trading days in a year, that’s nearly $2 billion
per day. Thus, our three-day closure could cost $6 billion.

A slowdown in investment activity, such as reduced consumer purchasing
on credit cards, would hurt American Express and Citigroup the most.

Insurance Stocks

The attack will easily surpass the $775 million in claims caused by the
1992 Los Angeles riots, which ranked as the most costly man-made U.S.
disaster to date. Claims resulting from the worst assault ever on the U.S.
are likely to exceed the $19 billion in damages caused by Hurricane Andrew
in 1992.

General Electric, the largest company by market value,
said Friday profit this quarter will fall short of analysts’ forecasts
because of an estimated $400 million in insurance losses.

MetLife Inc., the No. 1 insurance company, said Friday
its losses from the attacks may reach $300 million.

Package Delivery

Companies such as FedEx, UPS and DHL Worldwide Express could
be hard hit. For example, domestic package volumes represent about 80% of UPS’ business.

Anti-terrorist, Defense Stocks

The $20 billion to combat terrorism may boost Lockheed Martin
Corp., Raytheon Co. and other defense contractors.

On "60 Minutes", Warren Buffett, chairman of
Berkshire Hathaway, said he and his companies may buy if stocks fall

General Electric Co.’s former Chairman Jack Welch said he too will
likely hold his stocks

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