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The Train They Call the City of New Orleans (part 2 of 2)Whiskey & Gunpowder Previously, we discussed the good and the stupid aspects
of Hurricane Katrina and the City of New Orleans. A very quick
synopsis is that there is nothing good at all about it, but plenty
of stupidity could easily be found. More important however, is
how this impacts us now looking ahead. Before we address that
critical idea, let's first discuss the bad and the ugly. Looting: "Some officers
joined in taking whatever they could, including one New Orleans
cop who loaded a shopping cart with a compact computer and a
27-inch flat-screen television. "'We don't have enough cops to stop it,' an officer said. 'A mass riot would break out if you tried.' "Inside the store, the scene alternated between celebration and frightening bedlam. A shirtless man straddled a broken jewelry case, yelling, 'Free samples, free samples over here.' "Another man rolled a
mechanized pallet, stacked 6 feet high with cases of vodka and
whiskey. Perched atop the stack was a bewildered toddler. "'The police got all the
best stuff. They're crookeder than us,' one man said." "Lines at Atlanta area
gas pumps grew along with prices this afternoon as word spread
of possible fuel shortages.
Utilities see wide damage to systems: "Utility systems torn apart by Hurricane Katrina continued to assess damage to power lines in the Gulf region on Wednesday and warned of extensive damage. "Some utilities have begun to make progress returning power to customers but said the hardest hit areas are still likely to face weeks without electricity and predicted vast repair efforts. "Estimates of outages
calculated from reports by major power companies in the region
were still near 2 million on Wednesday, and officials indicated
these figures remain fluid." Gas supplies in Florida: "At least four of 17 suppliers in Florida told local stations to expect less frequent deliveries of fuel... "Florida ports have about 159 million gallons of fuel on hand -- enough to last about seven days under normal circumstances, said Cragin Mosteller, spokeswoman for the state Department of Environmental Protection." Let's now get to the heart
of the matter. According to the U.S. Coast Guard, "20 Oil
Rigs Missing in Gulf of Mexico": "According to the latest tally on Wednesday from the federal Minerals Management Service, a total of 561 platforms and rigs have been evacuated in the Gulf of Mexico, which accounts for a quarter of U.S. oil production. "Over 91% of normal daily crude oil production in the Gulf -- 1.5 million barrels -- is now shut down, and more than 83% of natural gas production, the MMS said. "Among the firms reporting missing rigs was Newfield Exploration Company, which said an aerial survey of its operations in the eastern Gulf showed that one of its platforms at Main Pass 138 'appears to have been lost in the storm.' "'As of this morning,
boats and helicopters are mobilizing to better access damages,
identify any environmental impacts and begin the repair process,'
Newfield said in a statement." According to The New York Times, "Carriers Are Stricken by Cancellations and Lack of Fuel": "The airline industry felt the brunt of Hurricane Katrina yesterday, with some airports running low on jet fuel and carriers canceling hundreds of flights. Meanwhile, Wall Street feared that the financial problems of the sickest airlines could grow worse. "And with gasoline selling for upward of $3 a gallon in some parts of the country, versus $1.88 for jet fuel, airlines were worried that refineries might choose to produce gasoline rather than jet fuel, which would be less in demand." As of Aug. 31, here is a status of key energy facilities: On the human side of things, The Guardian is reporting, "Katrina Refugees Will Go to Astrodome": "A slow exodus from the smelly and sweltering Superdome began Wednesday as bedraggled refugees boarded giant trucks and then buses for a trip to more comfortable surroundings in the Houston Astrodome. "The evacuation was kept almost secret to avoid a stampede. People were taken a few at a time through a garage, then to trucks that plowed through 4 feet of water and delivered them to the buses... "With no air conditioning and little electricity, the heat and stench inside the Superdome were unbearable for the nearly 25,000 refugees housed there. As the water pressure dropped lower and lower, toilets backed up. The stink was so bad that many medical workers wore masks as they walked around... "'These conditions are atrocious,' [Dr. Kevin Stephens Sr., director of special needs at the dome] said. 'We'll take trucks, planes, boats, anything else, I have to get these people out of here.'" "By midafternoon, medics were hauling people off one after another because of heat-related problems. Even as the evacuation was going on, people walked through waist-deep water to get to the Superdome. "Tempers flared in the crowd. One woman yelled: 'You're just lying to us! You had us standing all day in this heat, and you're lying to us. You're not taking us anywhere!' "The officer yelled back,
'Look, ma'am, do you think I'm in charge? Do you think I'm making
decisions? I told you what they told me.'" OK, Mish, where to from here? Bernie Schaeffer had this to say in Schaeffer's addendum on Wednesday, Aug. 31, after a huge stock market rally in the face of this disaster: "Now I get it. The markets have become invulnerable to 'nonrecurring events.' Presumably, such events would also include a hedge fund blowup that leads to a derivatives meltdown, a major terrorist attack on a large U.S. city, or an event that takes down a large portion of worldwide oil production capacity. An old adage on Wall Street was 'Never confuse brains with a bull market.' These days, it might go something like this: 'Never confuse a market that is structurally supported by complacent derivatives players and by abnormally high liquidity that is threatened by a tightening Fed and an inverting yield curve with a market that is invulnerable to external shocks.'" Thanks Bernie, I could not have put it better myself! In the meantime, 1 million people or so are displaced, without a home, without a job, without any money or clothes, and, in many cases, without any hope. In the face of that, homebuilder stocks staged a big rally today, as if any of those people will be buying a home anytime soon. Who cares? After all, lower interest rates might prolong the housing party for a few more months. Unfortunately, for those displaced by Katrina, it is going to take months, if not much, much longer, for things to get back to normal. We've now got a million new homeless and currently jobless people from New Orleans. There are another million without power, bankrupt airlines unable to buy jet fuel, a lack of refining capacity, and looting by police in a major city. We were headed for a recession anyway, but rest assured it will all be blamed on Katrina, rising oil prices, or both. Wall Street has its "out" now, and that is all that matters. Any excuse is good enough for Wall Street, but this upcoming lie is perfect simply because it will be so believable to so many. No one will blame the real cause: rampant credit growth and speculation, with falling loan standards on top of it, all supported by a bubble-blowing Fed. It will be interesting to see exactly how the BEA handles the upcoming jobless numbers. The job losses should be staggering. That said, it gives "someone" a very, very easy out. All the government has to do is over-report the job losses to make the reports that follow look good. I expect huge "one-time" over-reporting of job losses, conveniently blamed on Katrina. Rest assured, anything that can be blamed on Katrina, will be...and then some. No doubt there are those who think this is inflationary. Rest assured it is not. One million people suddenly put out of work with no income and destroyed houses is simply NOT inflationary. Rising gasoline prices without rising incomes is not inflationary, either, regardless of what anyone tells you. This is going to cut into consumer discretionary spending big time, and, unlike Sept. 11, there is NOT going to be a big housing boom to bail us out. The train they call The City of New Orleans just wrecked. More cities will follow. Let's close with a song: "Good night, America,
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