Last week, the most evil act in our history was perpetrated on the citizens of the United States. It is crucial for our future peace and prosperity that our leadership in Washington and throughout America respond to this inhumanity decisively, immediately, and, for those responsible, without mercy. As New Yorkers, we have intense personal feeling about his horrifying series of events.
However, setting our emotions aside as best as we can, we thought it important to communicate to you what broad course our investment effort is likely to take next. In all likelihood, the ferociousness of the selling that we see this morning will abate with remarkable speed. America seems always to demonstrate its phenomenal resiliency at a time like this. Proof may already be at hand, as the American market is down less at this writing than any other exchange around the world, and we were the ones struck. Although nothing of the magnitude of this act has ever struck us before, other gut wrenching events of the past have produced responses that foreshadow what we can expect soon.
The Federal Reserve is both lowering interest rates and creating money with a will that was wholly lacking a week ago. In just three days of operation, they have reportedly expanded banking reserves by an amount greater than 7% of the money supply, and that was before today’s vigorous action. Who can doubt more will follow.
Concern over the sanctity of the Social Security trust fund, and the “lock box” foolishness that was threatening to consign us to long term constrictive fiscal policy, is gone in the smoke. America will pay what it costs to defend and restore America, and that, at the moment, looks to be a lot of money. The weakness in the economy is being addressed much more rapidly than a week ago, and the dust is likely to settle on the recession of 2001 even more quickly than we can appreciate now.
We wish to minimize in no way the evil cruelty of what just happened. It would be distasteful in the extreme. War is thrust upon a people and a society that wished nothing to do with it; indeed a people who wished the populations of the nations harboring this evil nothing but well a week ago.
The issue for us, as stewards of your money however, has to do with how well your investments will fare as businesses in the coming days, and whether cash or bonds wouldn’t be better choices. On the latter score, if we suspected inflation before, we fear it now.
Lest we end on a note of fear, may we point out Winston Churchill’s observation in other dark days. “The American people can always be counted on to do the right thing, after they have exhausted all other possibilities.” It is not often that you get to do the profitable and the patriotic in one act, but in not panicking today, perhaps we are finding the way to contribute that we all so long for.
Sincerely,
Edwin A. Levy
Michael J. Harkins