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[TTHQ Staff]

BEING STREET SMART
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Sy Harding

Refugees – in America? September 2, 2005.

A million displaced American refugees; out of homes, jobs (many having lost businesses), without their medicines, with little food or water, in danger of serious infections and illnesses, pleading for help, searching for missing relatives, crowded into holding areas for five days with not even the basic necessities for life. No information being provided to them. Not knowing where they will wind up or who will take them in. Wondering what is taking so long. Tired, out of patience, and tempers understandably short. By Friday 45,000 had arrived in Baton Rouge, Louisiana. Others had reached Tennessee, Georgia, and Florida. Still others, perhaps as many as 100,000, lacking transportation, were still huddled on porches, in attics, on curbsides, surrounded by trash and the dead and dying, waiting for rescue. Already 25,000 in the process of being transported temporarily to what will be another overcrowded sports stadium in Texas. Refugee camps! In America.

It is a reminder of how very fortunate this country has been over the years by comparison to the rest of the world.

On Wednesday, with very few other rescuers yet on the scene, hundreds of local police were ordered to leave their search and rescue operations to crack down on looters. Things are more important than people? I'll tell you one thing for sure. If I and my family were in that situation, with no food, water, or place to live, only the dirty and wet clothes on our backs, and desperate, I would be first in line kicking in store windows to grab what they need.

This is not business as usual. This is survival in its most primitive form. So, some poor people also grab TVs, stereos, tires, beer, in the process. In the overall picture, so what?

Five hundred volunteers from Florida with airboats capable of carrying food and water in, and refugees out, remained encamped on the outskirts of the disaster area for four days, growing increasingly furious because the Federal Emergency Management Agency (FEMA) would not allow them to begin rescue operations “for their own safety”.

But enough. I’m supposed to be writing about business, the economy, and markets.

So okay, it’s my opinion that the major store and restaurant chains missed out on a great opportunity to do what is right, and obtain priceless goodwill and favorable nationwide publicity in the process. The WalMarts, Targets, and Starbucks of the world, with a handful of affected stores in the area (out of the many thousands they have), should have used the media and the police to tell the desperate people to break into the stores and help themselves to whatever they need. They could have even apologized that they couldn’t get their people into the area to open the stores and hand the stuff out. The publicity and goodwill would have cost them next to nothing, since the stuff was going to be taken anyway, and what is left, including the stores themselves, is destined for the scrap heap due to water and other damage.

On Thursday, the FDIC said that banks will be understanding and arrange for easier payment plans for those whose homes were destroyed. Huh? From what we are seeing of thousands of totally destroyed homes (40% of which were uninsured), either piles of splinters or 15 feet underwater, and even the remaining residents of New Orleans being ordered to evacuate the city, to return who knows when (or if), do they really expect many of those people to be making any further payments at all?

But the stock market remained unruffled, closing up fractionally for the week. Gasoline above $3 a gallon; heating oil headed for another 25% increase this winter; higher energy and transportation costs for corporations as well as consumers; agricultural crops threatened; important oil wells and refineries closed, some unable to even locate or contact employees that used to live in the area; a national economy that is 65% dependent on consumers spending, traveling, eating out, now seeing still more money taken from their pockets by even higher energy, food, and building costs.

And the stock market was unruffled. How could that be?

From all indications, investors, or at least traders, are hopeful that the threatening economic aspects of the catastrophe will force the Federal Reserve to call a halt to its interest rate hikes of the last 14 months, and that might be an offsetting positive for the economy.

The Fed might have that reaction. But the inflationary effect of the catastrophe on already scarce building supplies like lumber, shingles, and cement, as well as on food, travel, and transportation costs of all products, and energy costs in general, may also make the Fed quite reluctant to give up its fight to ward off inflation. It wouldn’t be the first time the Fed was more concerned about inflation than the economy.

In fact, it could be a particularly bad sign for the economy if the Federal Reserve becomes so concerned about it that it bails out of its determination to try to fight off inflation, by halting its rate hikes, even as significant new inflationary pressures erupt.


Sy Harding is president of Asset Management Research Corp., DeLand, FL, publisher of The Street Smart Report Online at www.streetsmartreport.com and author of 1999’s Riding The Bear – How To Prosper In the Coming Bear Market.