Monday Opening

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

The markets will open next Monday. The word is out that there is a
gentleman's not to short the market.  This is admirable as a sentiment
of solidarity in times of stress.  Yet a higher principle is involved:
that of market fundamentalism, the inviolable principle of
neo-liberalism.  This principle has been deemed inviolable when emerging
markets collapsed with widespread human sufferings.  The question needs
to be raised whether faith in the free markets' ability to handle shock
is justified, whether collective manipulation in the form of artificial
price support can be justified under any circumstance.  Economic data
collected immediately before the tragedy continue to be disappointed,
from unemployment to capacity utilization.  Hedge funds are cautioned
not to profit from the situation, an attitude very different from when
Soros broke the Bank of England.

Some visible impacts are beginning to be discernible.  The Manhattan
real estate market has lost millions of square feet, resulting in a
sudden shortage of first class office space.  Major firms are already
signing long leases in New Jersey and Connecticut. This will give
further impetus to electronic markets which has been growing despite
resistance from traditional practice.

The political pressure on the government to tighten security is
producing distortions.  Yesterdays snafu on renewed airports closing in
NY is revealing.  Legitimate passengers and pilots with suspicious
circumstantial traits that set off alarms were detained and airports
were categorically closed.  As experts know, it is almost impossible to
screen well trained terrorists.   To placate public concern, procedures
are now in place to give the public assurance by creating a superficial
image of safety through inconvenience.  Air travel now is expected to
add three more hours to all flights.  That means a trip from New York to
California will now take over 8 hours.  The economic cost of this is
very high.

Congress has promised $40 billion to help NY recover.  It would be
interesting to see how this money is distributed and how the
beneficiaries are selected.   In a way, the whole nation has been
victimized.  There is also talk of tax relief for the survivors and the
estates of victims.  Supplyside sentiments are on the defensive.

Interesting observation:  even in Manhattan the mood varies greatly from
district to district.  The further north it gets from the WTC, the more
normal life appears.  On Tuesday afternoon, the chic sidewalk
restaurants on Madison Avenue and the mid 60s were full of the usual
"beautiful" people, while the column of smoke downtown was clearly
visible.  By Thursday afternoon, much of the city north of 14th Street
were operating normally except the traffic was unusually light.

Henry C.K. Liu