Home > Uncategorized > 2012/10/30: Hurricane Sandy classically perverse economic influence

2012/10/30: Hurricane Sandy classically perverse economic influence

© 2012 ROHR International, Inc. All International rights reserved.

As we noted in the previous post’s mention of this aspect, there is a typically somewhat perverse influence of a major storm like Hurricane Sandy. It is so counterintuitive as to not be as clear cut as most folks would like to think. Anyone except serious market students who have been there before (like Irene and especially Katrina, etc.) are not necessarily prepared to look at all the carnage presented by the media and consider it is anything negative.

The only question now is whether this storm is the norm or a new form? And by that we mean the extensive damage (even more so by a major factor than last year’s Hurricane Irene) that is being incurred not just along the entire Northeastern seaboard, but the entire Northeast region. It is one thing for New Orleans and the Mississippi Gulf coast to be slammed by Katrina. Might it be another matter altogether for the highly concentrated Northeast (as well as regions as far west as Pennsylvania and even Ohio) to be shut down for an extended period?

Maybe. But it in the final analysis it shouldn’t actually be an economic drag over horizons like 90-180 days because…

…more will be spent in the rebuilding than the business lost through the extended shutdowns of local and regional businesses during the tragedy. And just to be clear, it is a human tragedy. All of the disruption and even limited number of deaths (of which we have thankfully not heard as yet, and hopefully not in future) are a major burden on people’s lives and livelihoods.

However, the rebuilding and refurbishment spending will outstrip that by a very major amount. Is the money in the pockets of the electrical and construction workers instead of those local businesses? Indeed. Yet, with the assumption they will spend at least part of it in the local businesses as they reopen; or even those remaining open now which can provide food, shelter, other forms of enjoyment or sustenance.

The issue arises over the payment for all that major rebuilding and short term support for those engaged in those activities. Isn’t that money that the business and residence owners will need to divert from other disposable income or savings? In a word… NO!! It will come from the balance sheets of insurance companies and US federal flood insurance programs. The insurance companies’ stock price might suffer in the near term (yet soon to be bolstered by the higher premiums they will demand), but the federal payments are just the next notch in an already out of control spending ‘process’ (such as it may be.)

So while there is carnage and suffering, there is also (as noted previous) a net ‘GDP-positive’ event in progress. Now the next question is whether the powers-that-be in Washington DC will decide that a fair election cannot be held by next Tuesday, and delay the US general election for a week or two?!! That’s a reasonable prospect in spite of the concerns it will create on both sides of the political divide…

…and stay tuned for our assessment of what may be as big a Political Perfect Storm as the historic meteorological one (even more massive and destructive that the one made famous by the movie) we have all just witnessed!!

Thanks for your interest.


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